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  1. Wealth
August 31, 2008

Dada? Da, da!

By Spear's

Ivan Lindsay on the emerging class of ravenously art-hungry Russian collectors for whom money is no object and objects just cost money.

Moscow, Russia

I arrived in Moscow in late May for the 2008 Fine Art Fair to find the city slowly recovering from the huge influx of English soccer fans who had flown in for the Champions League Final between Chelsea and Manchester United. The Muscovites and English had had little contact before, were equally curious about each other, could only communicate with sign language, but got along well.

For anyone who hasn’t been to Moscow recently, I can report that it is booming, awash with oil and gas profits, and jammed with a gridlock of Porsche Cayennes and Bentleys shuttling between Prada, Gucci and Nobu-style eateries. The biggest change is perhaps that colour that has replaced the overriding sense of grey that formerly dominated the city. Perhaps Putin’s greatest achievement — and contrary to Western perception, there are plenty — is to have given Russians a private life and the ability to pursue Western-standard holidays and lifestyle.

The ten-day fair, now in its fifth year, was housed in the beautiful Napoleonic-era riding school known as the Manege, which sits under the Kremlin walls, around the corner from Red Square. The ground floor consisted only of jewellers and housed all the top brands, such as Chatila, Van Cleef, Harry Winston and David Morris. They brought their finest stones, as the Russians are now a force. On the first floor, there was a selection of international art dealers showing Old Masters, Impressionists, 20th century, contemporary and Russian pictures and furniture.

About 50 dealers attended the fair. It was like a small Maastricht, but with a distinctive Russian glamour. Moscow is all about ‘face’, and in true Russian style, someone had employed about 30 Amazonian Russian models. In their six-inch heels, wearing jewellery borrowed from downstairs and couture clothes, these goddesses walked very slowly round the fair in twos and threes. The eyes of my partner’s assistant, who is about 5ft 2in, were out on stalks.

Aurora Fine Art, the private art fund owned by Viktor Vekselberg which bought the Forbes Eggs a few years back for $120 million, had a non-selling exhibition at the entrance, where it showed fine Fabergé and objects. Andre Ruzhnikov, who runs the fund, invited me to see Aurora’s new offices, which take up a whole floor under the Ritz Carlton Hotel. Entry is from a lift in the Ritz, in which a guard takes you down.

It is like entering the UBS vaults in Geneva. The doors open underground to reveal a dazzling display of the finest craftsmanship from the Russian artisans of the past in an extensive network of showrooms, offices and vaults. Ruzhnikov says, ‘We are not interested in selling piecemeal, but if someone wants all the Fabergé or all the snuffboxes, for example… we can talk.’

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About 60,000 people came through the fair, 95 per cent of them Russian. Russians have been starved of culture for so long that they look hard at the art and ask surprisingly well-educated questions, very different from those asked at Palm Beach or in New York.

We took Old Masters, three major Picassos and some Russian Impressionists. Russians base their pricing on the Russian picture market, where it is hard to spend over $5 million, so in taking a few US$10 million-plus pictures I was challenging them. The Russian media made a fuss over our Madonna and Child by Andrea del Sarto, saying that it was the most important painting brought into Russia since before the 1918 revolution.

At one point, a couple of well-built men in suits checked out the stand discreetly, before taking up positions at each of the two entrances. Then, a tall blonde wearing Chanel, Prada, heels and a huge diamond the size of her knuckle came on to the stand, accompanied by a man in a black polo neck, jeans and trainers, staring at his BlackBerry. My Russian assistant called me over. The woman asked, ‘Which most expressive painting?’

‘Expressive? Well, I suppose that would be the Sebastiano Ricci over there,’ I said.

She looked dubiously at it and slowly repeated, ‘Eeecks…pin…seeef’, boring through me with pale blue eyes that looked as cold and dead as Siberian permafrost.

‘Ah, expensive… that’s the Picasso behind you,’ I said, pointing to a large painting of a nude woman looking nervously at a self-portrait of Picasso playing a flute and looking lecherous with strange dark eyes.

‘How much?’ she asked.

‘Nineteen million.’

‘Dollars or euros?’

‘Dollars,’ I replied.

She said something sharply to the man beside her who looked up from his BlackBerry with a neutral expression for about five seconds before starting to text again. He said something to her quietly and she said, ‘You have office in Switzerland?’

‘Yes,’ I replied.

‘We talk about this in Switzerland, OK?’ And with that they were gone.

There were several others who wanted to come and see us in Switzerland, including a Ukrainian who saw our major Picasso on Russian TV in Kiev and is threatening to buy that and the other two.

It’s early days for the Russian art market, but it’s developing fast. The Russians do not have much confidence yet, but they are fast learners and it will not take long. Abramovich’s recent poaching of Mollie Dent-Brocklehurst from Gagosian and his accelerating acquisitions of $30 million-plus pictures (including the recent Bacon and Freud for $120 million) will give the market a further push.

En route back from Moscow, I stopped off in Ibiza to catch up with the financier Jim Mellon and trade ideas on art, Russia and investments. Mellon has a knack of getting into markets early, collects Russian art and is a major investor in Russia.

Dubbed ‘The Bad Boy of Emerging Markets’ by BusinessWeek back in 1997, Mellon is increasingly diversified nowadays, with 43,000 property units in Berlin as well as being the largest property owner on the Isle of Man. Before you start thinking of Sangria-soaked afternoons and sundowners at the Café del Mar, I was in fact attending Mellon’s infamous training week, held annually at his secluded estate high up in the Ibizan hills. Mellon has completed 24 marathons and flies his personal trainer, the former boxer ‘Mad Frankie’ Dunne, from the Isle of Man to run proceedings, which kick off at 7.30 every morning.

Mellon is also the major shareholder in Charlemagne Capital, which in turn has a substantial shareholding in MMC Norilsk Nickel (capitalised in FT Global 500 2008 at $54 billion) and is therefore a crucial swing vote in the current power struggle between Russian oligarchs Mikhail Prokhorov, Alisher Usmanov, Vladimir Potanin and Oleg Deripaska.

A string of billionaires flew in to see Mellon and deals were cut around the water cooler between circuits. Apart from Norilsk Nickel, the major topic of conversation was solar power, which Mellon reckons will ‘be bigger than the internet within 5 to 10 years’. Mellon, who follows his own advice, has just listed Emerging Metals Ltd on AIM, and is rapidly acquiring deposits of the minor metals required to make solar panels.

While bullish on Russian art, Mellon is more neutral on Russia itself: ‘Sure, I am a long-term investor in Russia and I have been in from the beginning. It’s been a great run but most of the gains are already priced in to the stock market. I have concerns about the TNK–BP issue, the lopsided economy propped up by oil and gas, the falling population, and I need to see if Medvedev is serious about improving the rule of law.

‘There are only a few really good companies and I already have holdings in them. It’s a bit like Holland in the late ’70s when the Dutch gas boom was on and you couldn’t get a hotel room in Amsterdam. And how long did that last?’

Peter Simon, who was also working out chez Mellon, was more optimistic on Russia’s future and noted that his Monsoon store next to the Kremlin is one of the most successful worldwide.

I returned to Switzerland and arrived at my office to find a message from the blonde in Moscow who had shown an interest in the Picasso. They want to meet in Sardinia, not Switzerland. Their yacht will be moored off the Cala di Volpe later in the summer. Can I meet them there? Of course… if I still have the painting.

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