Russia’s Buffett-Gates Follower Charts a Path to Charity

Bloomberg August 11, 2013 0

In his suite at the Four Seasons hotel in New York shortly before Christmas 2010, Bill Gates, now the world’s richest person, got some advice from the world’s No. 82. Russian billionaire Vladimir Potanin says he told Gates how the Microsoft Corp

Philanthropist Vladimir Potanin

In his suite at the Four Seasons
hotel in New York shortly before Christmas 2010, Bill Gates, now
the world’s richest person, got some advice from the world’s No.
82.

Russian billionaire Vladimir Potanin says he told Gates how
the Microsoft Corp. (MSFT) co-founder could persuade the wealthiest
people on the planet to hand over much of their fortunes to
charity under the Giving Pledge program organized by Gates and
Warren Buffett, Bloomberg Markets will report in its October
issue.

“I advised him to try and move this initiative from
American soil,” Potanin says during an interview in the offices
of his Interros Holding Co. across the Moscow River from the
Kremlin. “I said, ‘Bill, make it a real international
initiative.’”

Potanin is now leading the way in his home country. In
February, the 52-year-old nickel magnate became the first
Russian billionaire to sign up for the Giving Pledge, promising
at least half of his wealth to philanthropic causes. Potanin was
worth $12.3 billion as of Aug. 8, according to the Bloomberg
Billionaires Index
.

Interest in charitable giving is growing among the richest
Russians, according to data compiled by Bloomberg from 15 of the
wealthiest of the country’s billionaires and from annual reports
issued by their companies and charitable foundations.

Profligate Spenders

Many of these Russians prospered on assets they purchased
in the post-Soviet era of the 1990s. Some are now seeking to
throw off their reputations as profligate spenders more
interested in yachts than philanthropy, especially because, as
Potanin says, “The gap between the poor and the rich is so
huge.”

From Jan. 1, 2010, to Dec. 31, 2012, 15 Russian
billionaires who provided documentation to Bloomberg News
donated a total of $1.64 billion to philanthropic projects,
according to their submissions.

In acquiring data on 15 of Russia’s richest men — and they
are all men — Bloomberg News submitted surveys to 23
billionaires; eight declined to provide information. The
combined worth of the 15 was $155 billion as of Aug. 8, or about
8 percent of the Russian economy. The 15 philanthropists who
provided data gave away about 1 percent of their aggregated
fortunes during the three-year period.

Russian Largesse

On average, according to their submissions, they donated 40
percent more in 2012 than they did in 2010. Their monetary gifts
went to a variety of charitable efforts, including education,
sports, culture and health care.

The Russians’ largesse is small compared with the
philanthropy of Gates and Buffett. The Bill & Melinda Gates
Foundation, which is funded by Gates, his wife and Buffett, gave
away almost twice as much money in a single year as all 15
Russians did over three years.

The Gates Foundation gave $3.2 billion in grants in 2011,
according to its annual report. Gates and Buffett, the two
richest people in the U.S., have a combined net worth of $133.3
billion, or just $21.7 billion less than that of all 15
Russians.

Charitable giving in Russia remains among the least
developed in the world, according to the West Malling, England-based Charities Aid Foundation.

In December, a 2012 CAF survey ranked Russia 127th out of
145 countries assessed on the basis of their citizens’
charitable contributions and volunteer work. Russian
philanthropy is at least moving in the right direction, says
Maria Chertok, head of the CAF’s Moscow office.

‘Radical Change’

“Potanin’s promise puts Russian philanthropy on the world
stage,” she says. “It may not lead to a radical change of
attitude in Russia, but it will definitely encourage others.”
So will planned tax breaks for individuals and corporations, she
says.

Russia’s most munificent billionaire is Roman Abramovich.
The bulk of his $12.6 billion fortune is derived from his 1996
purchase of a controlling interest in oil company OAO Sibneft,
which is now part of state-run natural gas company OAO Gazprom.

During the three-year period examined, Abramovich, 46,
owner of the English Premier League’s Chelsea Football Club and
the 77th-richest person in the world, donated about $310 million
to philanthropic causes ranging from a nationwide program to
advance soccer in Russia to the art foundation run by his
partner and mother of their two children, Darya Zhukova.

State Assets

Abramovich’s trajectory from post-Soviet businessman to
charitable billionaire is in many ways typical of the other 14
in the Bloomberg ranking. With few exceptions, the billionaires
acquired some of Russia’s biggest enterprises at bargain prices
during Boris Yeltsin’s presidency following the collapse of the
Soviet Union in 1991.

Under a loans-for-shares arrangement, as it came to be
known, leading Russian businessmen lent the cash-strapped
government money in exchange for the right to buy state assets
cheaply when Yeltsin’s administration failed to repay the loans.
Abramovich purchased his share of Sibneft for $100 million and
sold it to Gazprom for almost $10 billion in 2005.

Potanin, the sixth-largest donor among the 15 billionaires,
was one of the architects of the loans-for-shares practice.

In 1997, together with Mikhail Prokhorov, his then-business
partner, he acquired 38 percent of OAO GMK Norilsk Nickel (GMKN), the
world’s largest producer of the metal, for $270 million; his
stake, now reduced to 27.9 percent, was worth $6 billion as of
Aug. 8.

Two Helipads

Potanin, who gave away $110 million during the survey
period, defends loans-for-shares as a salutary mechanism that
allowed for the privatization of an economy that was plagued by
inefficiencies and was in the grip of the Soviet-era
nomenklatura, or elite.

Ever since the stubble-bearded Abramovich bought Chelsea FC
a decade ago for 142 million pounds ($217 million), the U.K.
tabloids have focused on him less for his philanthropy than for
a lifestyle that contrasted starkly with the living standards of
the general population in Russia, where the average monthly
income is about $900.

Abramovich has residences in London, in Cap d’Antibes on
the French Riviera, on the Caribbean island of St. Barts and in
Aspen, Colorado. Equipped with two helipads, a minisubmarine and
two swimming pools, his yacht Eclipse was until earlier this
year the longest in the world.

The wealthiest Russians, including Abramovich, have
frequently made civic — as opposed to charitable –
contributions.

Brooklyn Nets

The superrich, for example, have been called upon by the
government of President Vladimir Putin to help build facilities
for soccer’s 2018 World Cup and next year’s Winter Olympics in
Sochi on the Black Sea. These expenditures, which aren’t so much
donations to charity as investments that may or may not pay off,
aren’t counted in the Bloomberg ranking.

Russia needs to change the culture of philanthropic giving
from a government-led, top-down system to one driven by rich
Russians making their own decisions, Irina Prokhorova says. She
runs the charitable foundation set up by her brother, Prokhorov,
48, the ninth-largest giver in the survey and an owner of the
Brooklyn Nets basketball team.

“It is important to let people of wealth support what they
want to support and not what they are obliged to do,” she says.
“We know of quite a lot of cases where rich people have to
donate money to institutions because they are asked to do it.”

Patriotic Giving

The changes that Prokhorova endorses seem to be under way.
During the survey period, Alisher Usmanov, who, with a fortune
of $19.9 billion, is Russia’s richest man and the second-largest
benefactor, gave away $247 million to institutions such as the
Moscow State Institute of International Relations and the
capital’s Pushkin Museum of Fine Arts.

Usmanov, 59, is the majority shareholder in OAO
Metalloinvest Holding Co., Russia’s largest iron ore producer.

Suleiman Kerimov, 47, the third-largest giver, whose assets
include a stake in Polyus Gold International Ltd. (PLZLY), says he will
plow all profits from companies he owns into his Lucerne,
Switzerland-based Suleyman Kerimov Foundation, which has built
schools in Russia and funded medical operations for indigent
Russians.

Some of the giving is markedly patriotic. Fifth-largest
giver Andrey Skoch, 47, a partner of Usmanov’s, donated $117
million; some of the money went into restoring monuments to
Russia’s war dead.

Cultural Relics

Potanin gave away $110 million, mainly to educational and
cultural institutions, including the State Hermitage Museum in
St. Petersburg.

Fourth-ranked Viktor Vekselberg, 56, has spent some of his
$14.9 billion fortune to repatriate cultural relics, including
18 pre-revolutionary Russian Orthodox church bells and a
collection of bejeweled Faberge eggs. Vekselberg gave away $160
million to support, among other things, a high school basketball
championship and the Jewish Museum and Tolerance Center in
Moscow.

The charity impulse is spreading to wealthy individuals who
made their fortunes more recently than during the spate of post-Soviet privatization.

Gennady Timchenko, 60, a longtime Putin associate who is
the 12th-largest giver, acquired much of his wealth through oil
trading during the 2000s. During the three years surveyed, he
spent $48 million on projects such as free housing for 36
Russian families who had adopted 110 orphaned children.

‘New Level’

Timchenko’s wife, Elena, says he may eventually sign up for
the Gates-Buffett pledge. She manages her husband’s
philanthropic activities from her 41st-floor office in the
Moscow building that houses Gunvor Group Ltd., Timchenko’s oil-trading firm.

“We, of course, are following this initiative closely,”
she says, wearing a diamond bracelet. “It takes the idea of
philanthropy to a new level.”

Usmanov says he believes it’s better to give the money away
now than to pass it along to future generations.

“It may happen that I won’t leave any bequest at all,”
says Usmanov, who has no children. “I would prefer to do
everything I can to make this world better myself and right now,
rather than someone else doing it after me, as I don’t know
whether he will do it better than me.”

Potanin, who has a daughter and two sons, shares that view.
Looking relaxed in a blue sweater, Potanin says the realization
that he could give large sums to charity first came to him about
a decade ago, when he saw that his children didn’t need a lot of
his money to achieve success.

‘Without Me’

At the time, his daughter, Anastasia, now 29, and son Ivan,
24, started to win medals at home and abroad in a Jet Ski sport
called aquabike.

“They became champions,” Potanin says. “I understood
they can do something without me.”

Potanin, the son of a high-ranking Soviet trade official,
says his heirs may get as little as $10 million each. He says he
will transfer the bulk of his wealth to charitable purposes in
seven years.

In a February 2010 interview with the Russian newspaper
Komsomolskaya Pravda, Anastasia Potanina said she supports her
father’s decision.

“My dad brought me up so that I wanted to achieve
something myself, to prove to myself and others that I can also
do a lot, so that I am not only seen as the daughter of an
oligarch,” she said. “My father believes that the society
which enabled him to achieve a lot has the right to expect
something in return.”

Potanin Scholars

The Vladimir Potanin Foundation dispenses $150-per-month
scholarships to 1,200 students a year to help cover living costs
at their tuition-free universities. Twice a year, it also
donates up to $6,600 apiece for student-run projects that have
social, educational or scientific value.

For a few days in July, Sergey Pereverzev and Olga
Sabylinskaya, who are enrolled at Belgorod State University near
the Ukraine border, joined about 350 scholarship winners from 28
universities across Russia at a summer symposium for Potanin
Foundation scholars outside Moscow.

Last winter, Pereverzev, 23, and Sabylinskaya, 21, got
$1,200 from the foundation to set up a blood bank at their
university. Having signed up 220 blood donors, the pair came to
Moscow to brief their colleagues on the project’s progress.

Suspicious Russians

“These schools give an opportunity to meet with clever and
interesting people,” Pereverzev, a law student, says. For
Sabylinskaya, a journalism student, the get-together was a
reminder of what counts in life:

“I understood that my diploma means nothing. Only my
ability to think matters.”

Pereverzev and Sabylinskaya say they’re grateful to
Potanin. Whether the rest of Russian society will ever come to
appreciate his and other billionaires’ generosity remains an
open question, Potanin says. Russians are suspicious of the men
they see as oligarchs.

“The problem in Russia is that philanthropy is not well
perceived by society,” Potanin says. “Many people think that
it’s not coming from the heart.”

It’s up to the richest Russians to prove their comrades
wrong.

To contact the reporters on this story: Alex Sazonov in Moscow
at asazonov@bloomberg.net; Henry Meyer in
Moscow at hmeyer4@bloomberg.net

To contact the editor responsible for this story:
Stryker McGuire at
smcguire12@bloomberg.net


Enlarge image
Philanthropist Vladimir Potanin

Philanthropist Vladimir Potanin

Philanthropist Vladimir Potanin

Max Sher/Bloomberg Markets Magazine

The nickel magnate is the first Russian billionaire to sign up to the Warren Buffett-Bill Gates “Giving Pledge,” promising give at least half of his wealth to philanthropic causes.

The nickel magnate is the first Russian billionaire to sign up to the Warren Buffett-Bill Gates “Giving Pledge,” promising give at least half of his wealth to philanthropic causes. Photographer: Max Sher/Bloomberg Markets Magazine


Enlarge image
Charity Manager Elena Timchenko

Charity Manager Elena Timchenko

Charity Manager Elena Timchenko

Max Sher/Bloomberg Markets Magazine

The wife of billionaire Gennady Timchenko says he may eventually participate in the Buffett-Gates initiative, which she says takes the idea of philanthropy to a new level.

The wife of billionaire Gennady Timchenko says he may eventually participate in the Buffett-Gates initiative, which she says takes the idea of philanthropy to a new level. Photographer: Max Sher/Bloomberg Markets Magazine


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The Top Donors

The Top Donors

The Top Donors


Enlarge image
Playing Catch-Up

Playing Catch-Up

Playing Catch-Up

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