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From poor orphan to billionaire oligarch: how Abramovich made his money.
Ascent to Chelsea owner was forged in transformation of Russia after fall of the iron curtain.
Roman Abramovich’s journey from an impoverished, orphaned childhood to Chelsea-owning billionaire was forged in the chaotic transformation of Russia itself, in the years after the iron curtain fell.
His elevation into an oligarch is unusually well documented, chronicled in painstaking detail in an English high court judgment of Lady Justice Gloster in 2012, when Abramovich succeeded in defending a lawsuit brought by his former mentor, Boris Berezovsky.
In the case, both men described their careers, and routes to becoming billionaires, as “a uniquely Russian story”.
Early Life and career
Born in 1966, Abramovich lost both his parents by the time he was three, and he was brought up by relatives in the Komi republic, in Russia’s freezing north.
After a brief period in the army, he studied as an engineer, and worked first as a mechanic.
In Russia’s perestroika period, when economic liberalisation allowed for small businesses, Abramovich ran a children’s toy manufacturer, famously selling plastic ducks from his Moscow apartment.
After communism fell, he worked his way up in trading and transportation of oil and other industrial products.
The court judgment records that at the time of his first, transformational meeting with Berezovsky, on a Caribbean cruise in December 1994, Abramovich was “a moderately successful businessman”.
Creation of Sibneft
The creation of the vast state oil concern Sibneft, whose formation and sale to Abramovich made his fortune, was an idea he conceived and suggested to Berezovsky, the court judgment noted.
Already rich from his dealings in the automotive sector, and politically connected, Berezovsky was the ideal business partner for Abramovich.
Obsessed with opposing any prospect of Russia returning to communism, Berezovsky proposed Abramovich’s idea to the then president, Boris Yeltsin:
merging a crude oil producer with a refinery, and handing control of the enlarged business to Abramovich and Berezovsky.
In exchange, Berezovsky would use revenues from the new oil company to fund a TV station, ORT, to broadcast pro-Yeltsin propaganda.
Yeltsin created Sibneft by decree in August 1995, when Abramovich was still only 29.
Then, the judgment records, the new huge oil concern was sold to Abramovich in a series of auctions whose price in some cases is stated to have been rigged, with other bidders discouraged by various means.
Abramovich bought 90% of Sibneft for approximately $240m, using only $18.8m of his own capital, although Gloster said it was “possibly more”.
The judgment states that it was Abramovich’s own case that he had a deal to pay Berezovsky for political influence, that this deal was “corrupt”, and that Berezovsky’s political lobbying activities were “inherently corrupt”.
Abramovich’s barrister, Jonathan Sumption QC, “accepted that Mr Abramovich was privy to that corruption, but submitted that the reality was that that was how business was done in Russia in those times”.
‘Good relations’ with Putin
The court judgment also noted that Abramovich had “good relations” with Vladimir Putin, Yeltsin’s successor, and unlike Berezovsky and other oligarchs who fell out with the new president, Abramovich continued to flourish.
According to the judgment he made another fortune from the acquisition of companies in Russia’s aluminium industry, and in 2003 he sold a 25% stake in the RusAl aluminium company to another oligarch, Oleg Deripaska, for $1.9bn.
He sold a further 25% for $540m.
Abramovich emerged from this brutal environment, described in the court case as “the wild east”, to global fame and celebrity when he bought Chelsea in 2003.
He and his management team, some of whom have remained trusted associates throughout, improved Sibneft and modernised its operations.
Then in 2005, Gazprom, the huge fuel company majority-owned by the Russian state, bought his then 72% stake, paying £7.4bn.
Evraz
The billions Abramovich made from Russia’s privatisations funded his famously lavish lifestyle: grand houses, private jets, yachts and fast cars, the £1.5bn he pumped into Chelsea, and a portfolio of further investments.
The most public is a 29% stake in Evraz, a London Stock Exchange-listed industrial conglomerate with steel production plants in Russia, the US and Canada, which had revenues of $14bn in 2021.
The UK government cited Evraz as a reason for targeting Abramovich with sanctions, along with its assessment that he had “a close relationship for decades” with Putin.
Evraz was accused of providing services or goods to the Russian state, “which includes potentially supplying steel to the Russian military which may have been used in the production of tanks”.
The company denied that, saying it “supplies long steel to infrastructure and construction sectors only”.
The value of Evraz – £12bn in 2021 – has plummeted 86%, and trading in its shares was suspended after sanctions were imposed on Abramovich.
The oligarch has previously vehemently disputed reports suggesting his alleged closeness to Putin and Russia, or that he has done anything to merit sanctions being imposed against him.
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