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Guardian Weekend – He Won Russia Lost

Cutting through the ice-crystal air, a warning bell tolls and the drillmaster hollers, his body swaddled in wool, fleece and fur to protect him from temperatures that have slumped to minus 40°C. ‘Re-engage,’ he shouts into the dead calm of the frozen Siberian tundra as five members of the oil rig crew, wrestling with grappling hooks, attempt to steady a 50-metre-long pipe that thrashes above our heads.

‘Keep that steady,’ the drillmaster bellows,, as his men are dragged across the platform by the writhing pipe, their heavy felt boots losing grip on the frozen steel of the burovaya or screw-drill oil rig. There are 180 hours of labour ahead before these workers return home to Belarussia, a three-day journey southwest of here.

‘Concentrate.’ One momentary lapse and we could all be crushed by the hundreds of tonnes of steel suspended above us. Even if we could ring for help, how long would it take to reach us on the edge of absolutely nowhere, 600 miles south of the Arctic Circle in what Maxim Gorky called ‘the land of chains and ice’?

Finally the bucking pipe is gripped by the mechanical jaws of a massive clamp. Steel teeth engage, screeching and sparking, screwing the pipe into another below it that connects, segment by segment, two miles into the earth, down to the hardened bite of a screw drill that is grinding and sucking away at vast subterranean reserves of crude, black viscous Siberian oil.

Three thousand miles and five time zones away, in the directors’ box at Stamford Bridge, southwest London, a photographer snaps three young businessmen in a moment of jubilation as Chelsea score. On the right of the frame is Eugene Shvidler, the president of Sibneft, the Russian oil company that owns the burovaya in Western Siberia and 9,999 more oil rigs like it. Shvidler, his arms thrown up in joy, is now a board member of Chelsea Village thanks to an old college friend standing on the left punching a fist in the air. Britain’s richest man Roman Abramovich last year famously bought and restocked Chelsea for £250 million; coins in his pockets compared to the dividends paid him by Sibneft, Russia’s fastest growing energy company of which he and Shvidler are core shareholders. Cheering between them is Eugene Tenenbaum, another Sibneft shareholder, Chelsea Village board member and managing director of Millhouse Capital, a publicity-shy company registered in Weybridge, Surrey that marshals Abramovich and his partners’ interests in some of Russia’s most valuable former state enterprises.

On the formation of Millhouse Capital in 2001, Abramovich’s lucrative Sibneft assets sat beside his stakes in Russia’s national airliner Aeroflot (26 per cent), world number two aluminium producer RusAl (50 per cent), Russia’s second largest automaker GAZ, the Orsk-Khalilovsky Metal Combine, the Avtobank, insurance giant Ingosstrakh, a hydroelectric plant in Kraznoyarsk and the Ust Ilinsky pulp and paper plant. It is these investments among others that have made Abramovich the 22nd richest man in the world worth an estimated £7.5 billion, according to The Sunday Times Rich List. (As an aide to visualising the scale of this fortune it is worth noting that in March banking giant HSBC reported its annual pre-tax profit to be £6.82 billion thereby smashing all previous British records.)

No wonder the men photographed at the Chelsea match are cheering: three Russian lads, all from hum-drum Soviet backgrounds, millionaires many times over by their mid-thirties, now standing in the director’s box, in a stadium they own, watching their team charging up the English Premier League – and all because of the break-neck race in the 1990s to create a Western-style democracy and free market for Russia.

From the moment in July 2003 when news broke that a man almost unknown in Britain had snapped up debt-laden Chelsea the British public were intrigued by Roman Abramovich. It was quickly established that he was a member of the Mayfair club Annabel’s, bringing him into contact with the Rothschilds, Prince Michael of Kent and other influential aristocrats. Abramovich had spent a reported £12 million on a 450-acre estate at Fyning Hill, West Sussex, for Irina, his wife and their five children. He was rumoured to have put Arkady and Ilya, his two sons, down for Eton.

His unofficial publicity machine spat out a few Dostoyevskyian scenes: his mother died when he was 18 months old; his father was killed in a construction accident; the orphan was raised by an uncle in Komi, a Siberian province that was formerly a hub for the Stalinist gulags. However, by 1996, at the age of 30, Abramovich had become so rich and politically well connected that he was close to President Boris Yeltsin whose daughter Tatyana Dyachenko invited him to live at an apartment in the Kremlin. In 1999, and now a tycoon, Abramovich was elected governor of Russia’s remote far eastern province of Chukotka, and has since lavished £112 million charity, rebuilding the impoverished region. The identikit image being pieced together for us was of a self-made man who was not only powerful and wealthy but acutely aware of those who had done less well in the tumultuous Nineties when the Soviet Union fell.

In fact, little of substance is known about Abramovich’s wealth other than he is among 23 Russian entrepreneurs who took advantage of the privatisation of Russia’s state assets in the mid-nineties. This exclusive group now controls 60 per cent of the Russian economy and their combined wealth of £44.6 billion is almost equivalent to the annual US federal budget. Abramovich is the protege of Boris Berezovsky, a maths professor-turned car dealership tycoon who helped him secure a hold over Sibneft in 1995 – until Berezovsky fled to Britain in 2000. Russia’s richest oligarch Mikhail Khodorkovsky, a majority shareholder in Yukos oil, struck a merger deal with Abramovich last year – although it is now in the hands of lawyers after Khodorkovsky was jailed pending trial on fraud and tax evasion charges. Sharing the same social circle is Ralif Safin, who controls a £300 million stake in Russian energy giant Lukoil and who last summer was linked to a bid to buy Manchester United. Oleg Deripaska is Abramovich’s shareholding partner in RusAl and is said to be worth £820 million while Mikhail Fridman, another of Abramovich’s competitors, has recently made himself even richer by selling 50 per cent of Tyumen Oil to BP for £3.72 billion (in a deal said to have been brokered by Tony Blair).

But how did Roman Abramovich make so much money in such a short amount of time? How did one man come to control a reported £5.3 billion stake in Sibneft, a state energy provider that only 10 years ago was bequeathed to Russia’s citizens, predominately the tens of thousands of Soviet oil workers and managers who built the industry?

Abramovich is notoriously coy and has talked only in the vaguest terms about the source of his wealth. That is why we have come here, to the crow’s nest of an ice-encrusted burovaya out on the Western Siberian tundra, the start of Abramovich’s cash pipeline, to ask his workers how they lost their share in Russia’s oil billions.

And now that the team from Belarussia has reconnected the pipe above our heads, we can feel a pulsing as the rig comes back to life. The arrows on the LED flow-metre begin to flutter. Oil gushes freely once again: six barrels filled every minute, 375 an hour, 9,000 a day, grossing £150,000 every 24 hours for Roman Abramovich’s Sibneft that in the first half of 2003 posted a net profit of £770 million, an increase of 190 per cent on the previous year.

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