The Russian oligarchs have been reduced to begging—successfully (sort of)—the Kremlin for bailouts. But Putin is smarter than our government and has terms that, well, only an oligarch could love.
Times [UK]: Details of the financial bailout being offered by the Kremlin to Russia’s richest men have revealed that many could be stripped of power by next Christmas. The loans will last for one year only and will be collateralised against shares owned by the oligarchs.
Most are expected to struggle to repay the loans within a year, raising the possibility that the Kremlin is trying to engineer the renationalisation of the Russian economy.
The bailout could be a double-edged sword: it may save the oligarchs’ companies in the short-term but could reduce their power and wealth in the long run. According to Zina Psiola, a Russian fund manager at Clariden Leu in Zurich: “Some oligarchs will no longer be oligarchs. It’s extremely unlikely they’ll all be able to repay in a year.”
Considering that one of the men appearing fur-hat-in-hand was Roman Abramovich who owns the Chelsea Football Club, might that mean that the soccer players could have Putin as their owner? A steel company, Evraz, which Abramovich partly owns already received $1.8 billion from the government, according to reports. Another oligarch, Oleg Deripaska, once Russia’s richest, got a Kremlin bailout for $4.5 billion. The government’s lender helped him refinance a loan he had taken out in that amount for a quarter of Norilsk Nickel.
More than 100 businesses are thought to have asked for financial aid and about $78 billion is expected to be made available in the coming months through Vnesheconombank (VEB), a state-controlled lender. The bank will demand that one of its representatives sits on the recipient’s board.
VEB will also have a right of veto over any debt, asset sale or big investment decision made by the recipient, which will give the bank enormous influence over the companies controlled by the oligarchs. The loans will be collateralised against shares, assets and export revenues.
Russia’s companies have to repay an estimated $160 billion in loans to foreign banks next year. Falling revenue as a result of collapsing commodity prices will make refinancing with any institution other than VEB difficult.
See Also: Biggest Losers: Russian Oligarch Edition