Tuesday, 28 April 2009

Cash-strapped oligarchs forgo art and sushi

Financial News

By Jason Corcoran
27 April 2009

Letter from Moscow
The opening of upmarket Japanese restaurant Nobu this month on Moscow’s elite shopping drag of Stoleshnikov Lane is long overdue, but its timing may be suspect.

Sushi and sashimi have long overtaken borscht and blini as the preferred staple of moneyed Moscovites. In fact, local Mexican and Italian eateries nearly always provide an extensive sushi menu, along with the obligatory hookah water-pipe, to cater for the demand.

The Nobu chain, which was co-founded by Hollywood actor Robert De Niro, opened in Moscow a fortnight ago after three years of planning.

Both De Niro and his partner Nobu Matsuhisa flew in for the occasion and had to bat away questions about opening a high-end dining establishment during an economic crisis.

Some of the area’s previous tenants have fallen victim to the credit squeeze, with fashion boutiques owned by Alexander McQueen and Stella McCartney shutting up shop earlier this year. Moscow’s fickle restaurant trade has also been badly hit with sales plummeting by as much as 50% since the financial crisis began, according to consulting group Restcon.

Sushi is a saturated market and there is some evidence to suggest patrons are favouring mid-market chains Yaposha and Tanuki rather than splashing out in upmarket versions owned by the ubiquitous Arkady Novikov, who is Russia’s answer to Gordan Ramsay.

Sourcing huge volumes of fish for a land-locked city must also add to the expense and Nobu’s prices may put off some cash-strapped oligarchs.

US magazine Forbes says the economic downturn has wiped more than $500bn from the fortunes of the 100 wealthiest Russians in the past year. In its annual rating, Forbes estimates the combined wealth of Russia’s 100 wealthiest people is about $197bn. Last year, it was $720bn.

The crisis has hurt the Bolshoi Theatre, where budgetary constraints forced it to scrap a premiere of Othello and call off a ballet tour of Mexico. The audience at a recent classical performance in the Tchaikovsky Concert Hall was less than half full as spending on arts takes a hammering.

Over on Red Square, even the mummified corpse of Soviet leader Lenin is feeling the pinch. The founder of the Soviet Union usually has suits of the finest materials ordered every three years from Switzerland. Tough times mean he’s going without new clothes for his 139th birthday.

Demand for luxury yachts and private jets has collapsed, according to an industry source close to the situation. New car sales in Russia declined 40% overall in the first quarter, but a few luxury brands such as Hummer and Cadillac are bucking the trend.

Russia’s oligarchic class may be tempering their conspicuous consumption. Stories of outlandishly lavish birthdays and high-jinks in Alpine resorts have been thin on the ground at a time when many magnates are going cap-in-hand to the Kremlin.

But there are signs the Government has run out of patience with indebted oligarchs. The Kremlin has already frozen a $50bn facility at state corporation VEB to help refinance foreign debts after just $11bn was distributed.

Sergey Stepashin, chairman of the audit chamber, recently warned the wealthy to sell their jets, villas and football clubs to settle their accounts rather than asking for state help.

Russian businessmen owe about $500bn in foreign debt, with $130bn due this year. Many are in tough negotiations with western creditors and will be forced to take their medicine unless the state decides otherwise.

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