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By John Helmer, Moscow

Botanists can’t say for certain how many hoary old chestnuts, if planted in the right conditions, will turn into a stand of Castanea sativa; that’s the botanical name for chestnut trees.

It’s more certain that when Oxford University recently published a book of interviews with eighty wealthy Russians, conducted by a sociologist from Aston University in Birmingham, the outcome, entitled Rich Russians – From Oligarchs to Bourgeoisie,   is a “unique inside-look at the history and soul of the fabulously rich Russians…a must-read”. That is according to Derk Sauer on the book wrapper. Half of this certainty comes from the fact that for the past twenty-five years Sauer has been the paid mouthpiece for Mikhail Khodorkovsky, then Vladimir Potanin, and finally Mikhail Prokhorov whose wealth is oligarch sized.  A small fraction of their money made big sums in Sauer’s pocket and in his judgement,  of course.

The other half of the certainty comes from the fact that the new book’s author, Elisabeth Schimpfossl, is the first in modern sociology to replace standard sampling procedure according to which researcher selects subjects by a random or representational method.   In this case it was the reverse — the sample of 80 rich Russians picked Schimpfossl and told her what they wanted to read about themselves. Their reason was equally certain. Schimpfossl was their public relations opportunity. PR agents for some of the sample subjects were instrumental in setting up the interviews and the ground rules; some of the PR agents were interviewees themselves.

The ground rule Schimpfossl accepted as the precondition for her research was that she would never question her rich Russians about their business or their assets — where their money came from; how much of it was stolen by Russian or international legal standards; how much of it is owed to Russian or international banks, or to partners of the silent type who don’t give interviews, not even if promised, as Schimpfossl proposed, to disguise them with false names.  Just how false the disguise turns out to be starts with this conclusion of Schimpfossl’s on Russian politics in her introduction: “the oligarchs’ capture of the state in the 1990s was short-lived.” After that, the 75 rich Russians whom she quotes from her sample of 80 feed her their hoary old chestnuts — what they want everyone to think.

Schimpfossl (image copyrighted*) opens her book with a note of thanks to 44 mostly non-Russian names, plus the 80 interviewees, plus “hundreds of anonymous experts”.  The money for her research is identified as having   been paid by organs of the Austrian government and by a London trust created by theUnilever consumer brands corporation. The tabs for restaurant lunches, dinners, and cocktail parties at which Schimpfossl conducted her research appear to have been paid by her subjects. The most talkative of her rich Russians,  Schimpfossl’s favourites, can be gauged from her index. They include Pyotr Aven; Boris Mints; Ziyavudin Magomedov; Igor Tsukanov; the wives of Arkady Rotenberg (Larissa Rotenberg), Anatoly Sedykh (Irina Sedykh), and Ruben Vardanyan (Veronika Zonabend); and a 38-year old who claimed her great-grandmother had been an Armenian princess and her husband the descendant of the improbable combination of 17th century Polish aristos with 19th century Polish Jews.

Here  is a sample of their chestnuts:

  • “Jews didn’t have any choice” – Aven (Alfa Group).
  • “None of us has inherited anything except for education” – Mints (Otkritie Bank and O1 real estate).
  • “At first we tried to understand what money could do for us and what kind of opportunities it opened up. But now we don’t think about that any more” – “Arkady, one of Russia’s longest-standing businessmen”.
  • “We had a big library at home and I grew up on books. It’s a typical Soviet story. We had nothing else except education and books” – Tsukanov (CentreInvest brokerage and investment fund).
  • “Sometimes in meetings it’s necessary to let people see a phone like this, which is more expensive than the average car. This will put your opponent in the right place” – “Maxim”.
  • “A certain distrust toward money, respect for labor, respect for honest achievements…our values have always been to work a lot and to be honest” – Ilya Segalovich (Yandex).
  • “Artyom was socialized in the practices of the Russian business community in the 1980s and 1990s…being two-faced was a strategy for survival”.
  • “Magomedov said that he thinks that under the Soviet regime people had everything apart from private property: peace and friendship between the peoples, excellent Soviet education for all…a deeply ingrained social spirit to support those in need of help. He is keen to bring up his children in line with these values”.
  • “ ‘I want knowledge to increase in Russia’…. He has devoted many hours of his life to understanding how schools work” – Vadim Moskovich (Rusagro).

Because Schimpfossl omits to analyse the businesses of these individuals, she reports neither anticipation nor understanding of why Mints is now on the run in England   and Magomedov in jail in Moscow.

One of the ripest chestnuts Schimpfossl endorses is a hybrid of social Darwinism, eugenics, and the Chosen People religion, which many of her subjects express. Their idea is that the brains and the wealth of the Russian rich started in their genes. Although she doesn’t give percentages, she reports that a very large number of her sample are from Jewish families whose employment in the Soviet period had been scientific, academic, or professional. “Pavel”, for example, who was sampled “at a charity ball in London. He looked comfortable in his tuxedo, but he seemed rather bored. He told me that was born into an intelligentsia family from a Jewish background. His grandfathers were scientists… ‘The majority of Russians are totally different; I’ve got nothing in common with them’.”

According to Aven, “entrepreneurialism is a talent…Every society has a certain percentage of naturally born entrepreneurs. Whether they can develop and apply their skills depends on the environment in which they grow up and live in.” In his genetic version of capital accumulation, Aven  told Schimpfossl the optimum political leader is Augusto Pinochet, the military dictator of Chile installed by an American regime-change operation in September 1973.  “For a Pinochet to appear [in Russia],” the uninhibited Aven says, “there need to be some preconditions in society. First, the elite must not be corrupt. Second, a law-abiding spirit must be at a high level.”

For oligarchs to multiply in Russia and turn into a social class, Schimpfossl’s sample decorate their Jewish origins and bookishness with art collections and eponymous museums. “It is the businessmen-turned-art collectors and art patrons who most obviously embody the new bourgeoisie.” Schimpfossl was not encouraged to probe the Russian art market; she indicates no familiarity at all with the rates of return which Aven and others have generated from publicizing their collections in newspapers like the Financial Times.  Schimpfossl reports her conclusion about Aven as a  class on the make: “They have been trying to acquire a sense of noblesse oblige – the understanding that with wealth and power come social responsibilities – by devoting their time to art without using it for material goals.”

Philanthropy, Schimpfossl’s subjects tell her over and over – it’s the most proliferous item in her index —  is defined by the philanthropists themselves, so it includes Aven’s art collection which he has already advertised in the Financial Times;  Mints’s racket; and Tsukanov; he too has been touting his asset value in the Financial Times.

Schimpfossl advertises a gallery run by Lyudmila Lisina, wife of the steelmaker Vladimir Lisin, and the art museum business of Stella Kesaeva (image copyrighted*) wife of the cigarette and grocery store oligarch, Igor Kesaev. Until Kesaev’s money came along, she said in her interview, “there wasn’t a proper [sic] museum of contemporary art.” Kesaeva also told the sociologist she “spends only a couple of days per month in Moscow” because she divides her time between England, Spain, Germany and the Maldives. “Nevertheless [sic]”, “she loves her motherland”.  Schimpfossl quotes Kesaeva as explaining “for artists to become famous, someone needs to invest money in them so that people know about them”. Schimpfossl missed the significance of the term “invest”; she doesn’t report precise sums to distinguish between serious and play money; she doesn’t ask Kesaeva if the rate of return on her philanthropy has been positive or negative compared to her husband’s Megapolis tobacco and Dixy supermarket groups.

Just how mercantile this brand of Russian philanthropy turns out to be is explained by Tsukanov. He is quoted as telling Schimpfossl that Russian art collectors like himself have the same attitude towards his art as towards his cash and other assets. “[Russians] have only two choices. Bring it to Russia to be stored at some place, which is very risky, or do something here [in the West].” He says his aim is to keep his collection in London.  For more on the Russian practice of storing, making capital gains and laundering artwork sales free of tax through the freeports of Geneva and Luxembourg, read this.

Missing from Schimpfossl’s sampling are Russian ethnic groups far more numerous than the Russian Jews she concentrates on — Orthodox Christian Slavs, Russian muslims (ignored except for Magomedov), Tatars, Armenians, Georgians.

Because Schimpfossl agreed not to look at the usual dynamics of Russian money, her theory of oligarchs multiplying themselves into a bourgeoisie by genetic selection and philanthropy, she ends up drawing caricatures from a Russian version of Vanity Fair without the rise and fall of the Thackeray version, or the wit. Irina Sedykh (image copyrighted*), for example, identified as wife of Anatoly Sedykh, one of the control shareholders of the OMK Steel group, a steel pipemaker for the oil and gas industry, says “we want to unite people and encourage them to take part in other people’s lives. This is a way of helping develop civil society.” Mrs Sedykh also explains that “some of her philanthropic activities are aimed at compensation for the layoffs at her husband’s factory…’Nobody cares about will happen to the workers and their families. You mustn’t forget, if you make one worker redundant, there are at least two other people who are financially reliant on this one person.”

This ought to have been a cue for Schimpfossl to check the affairs of OMK. This isn’t easy, however, because OMK remains a private company which has published only two annual reports in the past decade; they omit audited financial statements. It is possible to see there has been a steady decline in pipe production and sales since 2014, but the Sedykh company keeps its revenues, costs, debts, profits and shareholder dividends – the money Irina Sedykh philanthropizes – top secret. Still, from OMK’s annual report for 2017,  it is possible to detect that since 2014 at least 10% of the OMK workforce has been sacked.   Their fates, like Sedykh’s wealth, are impossible to verify; the Forbes advertisement, which listed  Sedykh at $1.1 billion in 2014, acknowledged that he held his shares with “partners”. In the Russian steel industry it was always believed that Sedykh is their front man. More precise financial information is publicly accessible about Sedykh’s $100 million motor-yacht called Hermitage, and his $50 million jet plane whose fuselage number he named after his company, 9H-OMK.

The vessel is owned by the Aqua-Nautical Co. Ltd of the Cayman Islands and carries the International Maritime Organization number 101662. In the last fortnight it sailed between Nice, St. Tropez, and Genoa. The aircraft is operated by by a company called Avcon Jet Malta. The Coutts Bank report on the Sedykhs adds more advertising of wealth that isn’t verified.

The OMK report for 2017 reveals the company spent “over RUB 200 million [$3.5 million] on social and charitable activities”. The report    also reveals that since steel production started falling in 2014 OMK’s  smelters and mills have been releasing less waste water into their  workers’ environment but more polluted air for them to breathe. A total of Rb234.1 million roubles in pollution fines have been paid by OMK in that interval.

Schimpfossl appears to be unaware that this is the sort of reputational damage which most Russians recognize in the business practices of her sample of rich Russians. It’s a sentiment which is one of the reasons Tsukanov (pictured below) told her that storing his asset collections in Russia is “very risky”. It’s also the reason Aven told the Financial Times, as he escorted reporter, stylist and photographer around his Surrey home, that he’s “the Russian oligarch with an eye for art, not yachts”. The rest of the Schimpfossl sample want western audiences, especially their creditors,   to know they have both.

Natasha Tsukanova and Igor Tsukanov have displayed themselves and their artworks at home in Kensington, London (image copyrighted*).  In 2014 Simon Hewitt, a leading expert on the Russian art market, reported Tsukanov was “one of the world’s leading collectors of post-war Russian art”; read more.   For Russian investigation of Tsukanova’s involvement in the notorious state energy privatization schemes of Anatoly Chubais, read this.

In London Aven feels safe displaying the oligarch tag. But in Washington, DC, where Aven has twice sued for libel of his reputation, judges of the federal US courts have ruled that when the oligarchs go into print, they lose their right to privacy, and also public respectability. The judges have ruled that oligarchs who promote themselves in the media forfeit the reputational protections of private businessmen; they become fair game for   investigations of political corruption and asset raiding, whether the evidence can be proved conclusively or not.

For two judicial assessments of Aven’s reputation, thirteen years apart, read this one from US Judge John Banks in September 2005;    and the latest one from US Judge Anthony Epstein from August 20, 2018. Philanthropy isn’t mentioned by either judge. Instead, according to Banks, Aven has invited media coverage and paid for it, his banking group having “devoted millions to developing a public relations strategy that includes in-house press departments, an external public relations agency, a litany of press releases, and an English-language web site on which plaintiffs post their own articles as well as favorable press coverage.”

Two weeks ago Epstein ruled that “nothing suggests in the intervening decade [since the Banks ruling] a significant decrease in the fortunes of the Alfa Group or the role of Russian oligarchs.” The urge for Aven to continue advertising his virtue is explained by Epstein as a litigation tactic:  “The burden is on the Plaintiffs [Aven, Mikhail Fridman, German Khan] to show the [allegedly defamatory] statements were false, not on the Defendants to demonstrate their truth.”

This is legal advice to beware of oligarchs passing self-serving lies. Before publication, the lawyers  for Oxford University Press pronounced themselves comfortable with the litigation risk of Schimpfossl’s book.  Schimpfossl is comfortable and wants you to feel the same.

[*] NOTE: After publication,  Schimpfossl has complained that a photograph to illustrate her at a London charity ball, which she and the photographer placed on the internet several years ago, wasn’t complimentary enough. Lest her oligarch and bourgeois subjects, whose photographs have also illustrated this story, feel their vanity has been slighted likewise, they and their artworks have been removed.

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