By SPIEGEL Staff
Alexander Lebedev strolls into the reception room with a broad smile on his face. He is something of an oddball among Russian oligarchs, with his black jeans, black tennis shoes and a black leather vest over a white shirt. Lebedev, who Forbes estimates is worth $3.1 billion (2.26 billion), holds a stake in Aeroflot, has transformed the National Reserve Bank into a flourishing business that even appears to be liquid today, and owns the newspaper Novaya gaseta, which is often critical of the government. He has also invested in Germany, where he owns 48 percent of the airline Blue Wings and plans to buy a 76-percent stake in Öger Tours, a travel agency.
"We have a stock market crisis in Russia, but not an economic crisis," he says cheerfully. Lebedev attributes this to the relatively stable ruble, which owes its stability mostly to the 380 billion in foreign currency reserves that the Russian treasury has left over now that the government has spent 65 billion to bail out the country's banks.
Czarist aristocrats used to live in his palace when they were in the city. There are no folders on the desk in Lebedev's upstairs office, where he keeps track of plunging markets on all continents. The newspapers are reporting that two of his competitors among the oligarchs, Mikhail Fridman and Pyotr Aven, are having trouble servicing a $1.5 billion loan with Deutsche Bank. Oleg Deripaska, an aluminium magnate believed to be Russia's richest man, has been forced to return his debt-financed share of Canadian automotive supplier Magna, worth billions, to the bank.
Lebedev remains in good spirits. "The oligarchs have lost money in the stock market? No problem," he says. They are slipping a few notches down the rankings of the world's billionaires? Then, says Lebedev, they should reconsider their next purchase of a yacht, a palace or a private jet.
The world economic crisis? A piece of cake for the government and for Russia. Capitalism, according to Lebedev, is loud confusion in the markets in Europe, North America and Asia -- that is, other parts of the world. Things are different in Russia. The Kremlin has instructed the country's three leading television networks not to use expressions like financial crisis or collapse in their analysis of conditions in Russia.
It is disturbing to see a country like Russia act as though the crisis in the global economy were passing it by like a mild autumn storm. This strange ignorance probably has to do with the fact that Prime Minister Vladimir Putin truly believes that the country's abundant natural resources and vast foreign currency reserves have made Russia immune to this virus, which is jumping from continent to continent, bearing down on one country after the next, triggering plunging stock markets and causing the biggest banking crisis that the world has seen since 1929 and the world economic crisis.
The men who sought to fashion China into a world power, first economically and then politically, probably entertained similar illusions. But global capitalism means that a major crisis can pull everyone into the abyss.
Part of the irony of the free-floating crisis is the idea that economic systems are slowly becoming more alike. Government capitalism is already a reality in Russia and China, and now Great Britain and America, the birthplaces of free enterprise, are flirting with mixed economy models as they nationalize some banks and economic sectors. Meanwhile, other countries in the West are poised to perform similar emergency operations. The crisis has been especially dire in the small island nation of Iceland, where the government is taking over the financial sector and faces the prospect of national bankruptcy, a first in postwar history.
Wall Street brokers have a saying that aptly describes the reversal of conditions: "The West is down and the state is up."
The International Monetary Fund (IMF) offers an insight into this depressing trend. According to its assessment, the worst phase of the escalating crisis is still ahead. IMF experts predict that a number of industrialized nations will either experience minimal growth or fall victim to a recession. Even worse, says the IMF, the real economy -- the companies that produce goods or provide services -- will not feel the full brunt of the crisis until later on. No one dares to speculate what this could mean for consumption, unemployment and pensions.
Consistent with this gloomy picture is the fact that, by the end of last week, the desperate efforts of governments had been relatively ineffective. They had done everything but bring calm to the major securities exchanges in New York, London, Tokyo and Frankfurt. Global companies like Chrysler, Ford and Daimler were suddenly up for grabs for next to nothing.
The big unknowns in this frenzied game are the financially sound sovereign wealth funds in China, Singapore and the Persian Gulf. They can invest now or wait for prices to fall even further. They are the global players whose thoughts and plans could prove to be critical.
The crisis has unleashed a political revolution that is sending shock waves around the globe. With its economy weakened, the rate of the US's relative decline as a superpower is accelerating as the country gradually loses its dominant position. Should China, India and Russia emerge from the global crisis relatively unscathed, the center of the world economy will in fact shift to the East in the 21st century. Asia will become synonymous with growth and the West with debt.
Last week seven central banks, including those of the United States, the European Union and China, attempted to bring rationality into the careening financial markets, hoping to soften the effects on the real economy. They lowered interest rates to create confidence. A similar thing happened after Sept. 11, 2001. Just as the towers of the World Trade Center collapsed more than seven years ago, a few pillars of the world economy could be collapsing today.
The Gulf states are the epitome of a booming region. They produce about 25 million barrels of crude oil a day. The United Arab Emirates (UAE) is earning money hand over fist. In 2007, with an average oil price of $69 a barrel, UAE revenues amounted to $63 billion and, with oil currently at about $100 a barrel, 2008 revenues are likely to be even higher. The sovereign wealth funds in the UAE and Saudi Arabia manage about $1.2 trillion in combined assets. The Abu Dhabi Investment Authority controls a portfolio worth $875 billion, making it the world's richest sovereign wealth fund. Its headquarters are in a 38-story glass tower designed to evoke the gentle waves of the Gulf and the sand dunes of the Arabian Desert.
According to the financial blog Global EconoMonitor, it is hard to tell exactly what makes up these funds, which stock and capital markets they focus on and in which currencies they speculate.
The funds and financial institutions in the Persian Gulf region are oriented primarily toward the domestic market. Few banks had ties to the investment bank Lehman Brothers, for example. Nevertheless, stock prices have also dropped considerably on the Abu Dhabi and Dubai exchanges, as the bear markets in Asia, Europe and North America have spilled over into the Gulf.
The indirect consequences of the crisis are gradually becoming apparent. Foreign investors have withdrawn capital needed elsewhere. International banks are withholding the loans needed to fund the region's giant construction projects, which are either underway or in the planning phases -- and worth $2.3 trillion. An estimated $158 billion was lost in the stock markets throughout the Gulf. "The Gulf states have enough reserves to offset turbulence," says Eckart Woertz, chief economist at the Gulf Research Center. "Only Dubai is in a bad position. Dubai has no money and has to borrow."
Unlike Abu Dhabi, Dubai is financing its luxury high-rise buildings, shopping malls and new urban neighborhoods with loans, often using what a banker calls the "quick-flip model:" a 10 percent down payment before ground is broken, 10 percent when construction begins, 10 percent at the topping out ceremony and the rest when the project is complete. All of this is money borrowed from banks, and the loans are secured by other real estate built with similar funding. "The day could come when the sheikhs of Dubai turn up at the doors of their oil-rich neighbors in Abu Dhabi and ask for money," says Woertz.
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