6 The Sunday Times April 3, 2022
BUSINESS
T
he chandeliers in Moscow’s
epicurean emporiums are
trembling as a new iron cur-
tain descends on the Russian
capital’s fabled high life.
Where once its anything-goes
bars, restaurants and night-
clubs were heaving with bil-
lionaires, bankers and celeb-
rities, since the invasion of
Ukraine, oligarchs, financiers, even Bol-
shoi ballerinas have been fleeing the
country, their livelihoods destroyed by
sanctions. There is shock at how quickly
the war has obliterated three decades of
economic integration with the West.
“Some of us who are left here are din-
ing on the bow of the Titanic, sipping
extortionately-inflated French cham-
pagne and snapping claws off Kamchatka
crab,” said Leonid Avdeev, an M&A
banker who was dining last week in the
half-empty Turandot restaurant. “The
good life is going to be over really soon, so
I must toast all of my many absent friends
who have recently left town.”
Despite the Moscow stock market
finally reopening, trading is at a trickle,
with foreigners still banned from selling
shares or rouble bonds.
Mergers and bond sales have disap-
peared, while investment bankers say it
may be decades before we see another
Russian stock market float. Many of the
remaining financiers in the city are busy
trying to wind down investment posi-
tions or offload loan books, but it is prov-
ing difficult due to the lack of buyers and
the fact that the country’s financial
plumbing has been disabled. Crippling
sanctions against the Central Bank, capi-
tal controls and exclusion from the Swift
payment system have combined to put
the financial system in a deep freeze.
Turandot, a two-storey premises
stretching across 60,000 square feet and
furnished in the late 18th-century Marie
Antoinette style, is located on the city’s
Tverskaya Boulevard, a stone’s throw
from Pushkin Square — the centre for
some of the recent anti-war protests.
Musicians costumed in powdered wigs
and gowns play chamber music while
Leonid, a 42-year-old executive at a US
bank, cracks the crustacean’s legs and
mulls his own possible escape.
Over at the Ritz Carlton’s Novikov res-
taurant, commercial property investor
Andrey and his wife Elena were con-
vinced the eatery had shut when they
turned up there for post-theatre supper.
“It’s a Friday and I had to ask the waiter if
the place was closed because it’s huge —
and completely empty,” said Andrey, 39.
Novikov is the eponymous high-class
pan-Asian dining destination of restaura-
teur Arkady Novikov’s restaurant
empire. There is a branch in London off
Piccadilly and a further 100 more across
Moscow, St Petersburg and other Russian
cities, employing 7,000 people.
Meanwhile, at Zhurvali Bar on Stolesh-
nikov lane, private equity partner Lucas
was sombrely sipping an espresso mar-
tini while surveying the shuttered
facades of Prada, Fendi, Dior and Chanel
on the elite shopping enclave. For him, it
is the hysterical political rhetoric that has
become the most unnerving aspect of the
new Russian life.
“Every morning brings some new
nightmare,” said the 46-year-old Cana-
dian, who has been doing mid-market
buyouts in Moscow for about 15 years.
“Some of them are simply kite-flyingLast week, all of Russia’s leading
banks, including VTB, Sberbank and Gaz-
prombank, received letters saying they
will be cut off from their Bloomberg ter-
minals in April. “The Bloomberg,” as the
screens are known, is the universal tool
of financial markets, used for everything
from trading to accessing the latest news
and sending messages to clients and col-
leagues. In the absence of Bloomberg
Messenger, Russian traders have started
switching to WhatsApp and Telegram to
communicate with their customers.
Despite the headline-grabbing news
about banks leaving, a senior executive at
a western advisory firm said that most of
the US and European lenders have kept
some boots on Russian soil in the hope
that a peace deal can be secured. “None
of the banks have worked out how all this
unwinding will go,” said the source.Flats are
being
bought
for cash
More than 100 years ago,
an estimated 2 million
Russian intellectuals,
aristocrats and military
officers fled after the 1917
Bolshevik revolution
triggered a bloody civil war.
They were known as White
Russians.
Now, middle class and
wealthy families are again
fleeing Moscow and St
Petersburg. They, too, have
become known as the
White Russians.
They are decamping to
Dubai, Istanbul, New York,
Mexico, Yerevan, Tbilisi. The
new émigrés include the
Bolshoi’s prima ballerina
Olga Smirnova, who went
to the Netherlandsdeclaring she was “against
this war with every fibre of
my soul.”
An estimated 100,000
coders have packed their
bags amid reports that
“Putin’s chef”, Yevgeny
Prigozhin, was preparing a
bill to prevent IT specialists
from fleeing. Dmitry Peskov,
Putin’s official spokesman,
intervened last week and
dismissed the reports as
“fake news”.
But Microsoft, Google,
Russia’s tech giant Yandex,
Visa, Mastercard, Dell and HP
have all relocated Russian
operations to the Emirates.
Pavel, 41, a managing
director at an international
tech company, has moved
with some of his team to
Dubai before being
reassigned roles elsewhere.
“Some of us are working
remotely and some are on
paid leave,” said Pavel, who
mingles socially with other
Russians in Dubai’s Jumeirah
Beach Residence.to leave and set up overseas
by giving introductions and
help to draft job applications
for positions overseas. “It’s
the least I could do,” said
Gutbrod, 61, who has lived in
Moscow for almost 30 years.
Sergey Zverev, 33-year-
old founder of tech
firm Trood, got
lucky: his US visa
came through four
days before war
broke out. The
Muscovite flew to
New York.
His
businessincludes a team of
developers in the Ukrainian
Black Sea port of Odesa.
“Their main mission right
now is to stay alive,” he said.
Vitaly Dubinin, 42, and his
wife fled Moscow initially to
Mexico, although their plan
is to move to the US. His
company ID East, which is
involved in software
developer outsourcing, has
more than 200 employees in
Russia who are trying to
relocate to Ukraine, Turkey,
Montenegro and Cyprus.
“True Russian patriots are
against this war,” said
Dubinin, 42. “My Jewish
Ukrainian grandmother
would be turning in her
grave if she heard about
Putin’s ‘denazification’
crusade. She had to bury five
brothers after they were
killed by the Nazis during the
Second World War.”NEW BAND
OF ‘WHITE
RUSSIANS’
LEAD FLIGHT
Dubai, already a hotspot
for Russians, is booming.
Russian oligarch Roman
Abramovich, owner of
Chelsea FC, is said to be
seeking a house on the
luxury man-made Palm
Jumeirah.
The new arrivals are
opening companies, doing
banking and trading in
crypto, buying real estate,
putting children into local
schools and moving their
teams.
“Some new arrivals
were evacuated
in a rush by
companies and
those are a bit
lost,” added
Pavel.
A German
entrepreneur,
Max
Gutbrod, has
been
helping
business
contacts
in RussiaRoman Abramovich is in
Dubai; Olga Smirnova, top,
has left for the NetherlandsJason Corcoran exercises by politicians — such as a witch-
hunt to round up foreigners and put
them in concentration camps.
“Hopefully, that’s not going to happen,
but then again I thought I knew this place
and that it operated on some whacky
internal logic. The events of recent
months have indicated that I was wrong.”
For many, the decision to leave was
made easier when the Russian parlia-
ment, the Duma, proposed a new law
preventing bankers, insurance execu-
tives and pension fund managers from
fleeing the country.
Investment banker Pavel, 42, feels it is
“the last straw”, although he is reluctant
to uproot his children and leave his eld-
erly parents behind. He said: “In the cur-
rent climate, the Kremlin is haemorrhag-
ing too much talent. They need to keep
managers here to run things. We may
have to leave rather than be trapped.”
Pavel’s bank is one of several, includ-
ing Goldman Sachs, JP Morgan and Roth-
schild, which have partly relocated to
Dubai — a growing mecca for Russian
bankers, oligarchs and tech talent.BANKERS FLEE
While the Moscow stock market
reopened on March 23, the Central Bank
has banned brokers from selling shares
and OFZ rouble-bonds belonging to
foreigners, or paying out income from
dividends or bond coupons.
For most western fund managers, Rus-
sia is no longer investable since the coun-
try’s stocks were dropped from the FTSE
and MSCI indices. However, equity sales
trader Maxim says his team are receiving
some new enquiries.
“We are getting lots of questions from
vulture funds on how to buy, but they
can’t yet,” said Maxim, 34. “The big stra-
tegic investors from China and the Middle
East haven’t shown up yet.”
Traders say proprietary trading books
are almost dead but smaller non-sanc-
tioned banks are thriving as they attract
new rouble deposits after the Central
Bank more than doubled rates overnight.After three decades dancing with the
West, Russia’s business elites are feeling
the chill as bankers flee and shops close
“Last year was a major breakthrough
on the floats front,” said Phil, a native
Russian speaker who has spent almost
two decades in the capital. “We had the
most for 15 years — by a long way. The
bonus went some of the way to compen-
sating me for my recent divorce.” Now,
though, he anticipates it might be “dec-
ades” before he celebrates another listing
due to Russia’s current pariah status.
Moscow’s famous finance-driven days
of baccanalia in the 1990s and early
noughties have received blows before.
The global financial crisis in 2008, fol-
lowed by the 2014 war in Ukraine, killed
off many of the dens of iniquity.
Night Flight, Moscow’s first nightclub,
opened on Tverskaya street by Swedish
entrepreneurs in 1991, closed its doors a
year ago. Covid struck the final blow.
Bankers used to bring foreign investors to
the club — tag-line “Do it Tonight” — to
meet jaded high-class escorts who passed
boa constrictors around the busy bar.GOLD AND PROPERTY
Over at Moscow’s upscale shopping cen-
tre in Tsum on Petrovka street, footfall —
and business — has fallen by 50
per cent since the war. While
many western boutiques have
closed, those remaining are thriving
amidst the reduced competition and a
huge desire by Russians to find a store
of value for their plummeting roubles.
Marks & Spencer is surprisingly still
trading, although it is expected its Turk-
ish franchisee will soon run out of stock.
German investor Max Gutbrod, who
has an apartment on the elite Bolshaya
Bronnaya street, says property prices
have shot up in central Moscow by a third
since Russia’s invasion of Ukraine.
“With their currency in
crisis, Russians
would rather store
value in gold or bricks
and mortar,” said Gutbrod. “People are
cashing in their roubles and snapping up
apartments for cash. Jewellery and
watches sales have doubled.”
Gutbrod, 61, has just left Moscow for
Berlin after waiting for three weeks for a
ticket via Istanbul.
Vitaly Dubinin, founder of soft-
ware outsourcing company ID
East, recently splashed out on
a new pickup truck for his
parents. “Car prices have
gone crazy,” said Vitaly,
42, who has just left Mos-
cow. “Before, you could buy a Lexus for
3.5 million roubles (£31,000). Now it costs
that for the Russian-made Patriot SUV.”
Russian banks have started to lay off
staff in Moscow. Sanctions have forced
VTB Capital, the investment banking arm
of Russia’s second-biggest lender, to let
go of several British staff in the research
department, while an American analyst
for Sberbank, the nation’s biggest lender,
has relocated to the US. Andrei Chulak,
the Ukrainian-born head of Alfa Bank’s
investment banking operation in Mos-
cow, is also understood to have left his
role in the past week.
American banker Phil, packing up his
bags to leave Moscow, said that some of
his highly-educated Russian friends and
colleagues had become quite jingoistic
and antagonistic to western firms and
brands for abandoning the country.
“Russians have a world-class inferior-
ity complex,” he said. “Sometimes they
just need to lash out and show why they
are exceptional.”
Meanwhile, banker Leonid and his
date Daria were ending their evening at
the Bosco Café in the elite GUM mall over-
looking Red Square, mere yards from the
mausoleum of Vladimir Lenin, who
promised to destroy capitalism.
Bosco was the place where opposition
leader Boris Nemstov enjoyed his last
meal seven years ago with his girlfriend
before being gunned down nearby on the
Great Moskvoretsky bridge.
The couple are eyeing the complimen-
tary pasashock — a customary final shot of
hard liquor usually slammed back when
Russians are ready to leave somewhere.
“There are dangerous times ahead,”
said Leonid. “Never mind McDonald’s
and Starbucks leaving — wait until people
realise that they can’t replace their wash-
ing machine, take a holiday, keep a car on
the road or get urgent medicine for their
sick babushka.”
Daria is planning to flee Moscow. That
glass of pasashock could be their last
together for a long time.
Some of the names in this article have been
changed for security reasons. The author
has since relocated to IrelandDeutsche Bank left after ini-
tially hesitating, but not all banks
are throwing in the towel. Credit
Suisse, with a $1 billion (£760 million)
exposure, is staying put for now. Italy’s
UniCredit, one of the three biggest for-
eign banks in Russia by assets, is sitting
on the fence, saying a decision to leave
would not be taken “quickly or lightly”.
French bank Société Générale and
Austria’s Raiffeisen both have deep roots
in Russia and appear in no rush to leave.
Citi is also hedging its bets, although sev-
eral clients say it allows them to withdraw
only a fraction of their dollar savings.
Phil, a 43-year-old American banker in
Moscow, said the invasion had come after
Russia had enjoyed its best year for stock
market floats since the monster debut of
Rosneft, which raised $10.4 billion in its
London listing in 2006.ILLUSTRATION: TONY BELL‘We’re sipping
champagne
on the Titanic’