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Boris, Cyprus and the Curse of the Russian Rich

Monday, 25 Mar 2013 | 12:02 PM ET
Boris Berezovsky
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Boris Berezovsky

The Cyprus bailout and the death of Russian oligarch Boris Berezovksy this weekend might seem like entirely separate events. But they are deeply connected. And they share the same root tragedy: Call it the "The Oligarchs' Curse."

Cyprus, of course, is a tiny island with a huge banking system fueled by Russian wealth—billions of dollars in black money sent by oligarchs and Russian companies for sheltering, laundering and protection.

Cyprus was a banking system built on Russian fear—the fear that money kept in Russia could be taken away at any moment.

(Read More: Cyprus Clinches Last-Minute Deal to Secure Bailout)

Which brings us to Boris. Berezovsky was one of the original and most heavy-handed of oligarchs, using his ties to Boris Yeltsin to assemble a vast fortune of former state-owned assets and national resources. After a falling out with Russian leader Vladimir Putin, however, he was finished. A man once worth billions had dwindling assets and millions of dollars in legal bills and claims before his death.

As he told the Russian edition of Forbes a day before his death, "There is no point in my life." It marked a stunning turn for a man previously called the "evil genius" by Russian media and known for masterminding Russia's vast plutocracy and political violence.

In fact, Berezovsky helped create the very curse that led to his downfall. By forging the tight alliance between the super-rich and the Russian president, Berezovsky became dependent on the political whims of the Kremlin. And what the Kremlin giveth, the Kremlin can taketh away. Berezovsky joins Mikhail Khodorkovsky and other fallen oligarchs who have crossed Putin.

(Read More: Russia Loses Out as Cyprus Reaches Deal)

As a consequence, the Russian rich have been racing to take their money and their families out of the country for fear that their fortunes—or worse—could be taken away. Cyprus was the longtime favorite outpost for cash. But it pales next to the tens of billions of dollars the Russian rich have been putting into more global assets—from $88 million New York condos and $47 million Miami mansions to multimillion-dollar paintings in London and $60 million yachts in Italy.

Real estate agents in New York and Miami say more and more of the Russian buyers are families—wives and children who are moving to the U.S. full-time for safety reasons. "Before, they were just buying a house as an investment," said one Miami agent. "Now they're asking about the schools for their kids."

While Putin may be campaigning to attract more wealthy investors to Russia, many of the Russian rich are going in the other direction.

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  • A reporter and editor, Robert Frank is a leading authority on the American wealthy for CNBC.