A meeting with Roman Abramovich is like the scene in The Wizard of Oz when Dorothy draws back the curtain to find the great and terrible wizard is no more than an old man hunched over a microphone. Abramovich, colossus of Russia's tycoons, and now of British football, almost never gives interviews, so when he invites you to fly thousands of miles to see him in his far eastern state of Chukotka you accept. Chukotka is literally as far from Chelsea FC as it is possible to be - 12 time zones. Go any farther east and you start coming back.
When you land, you see that the only other plane on this stretch of windswept tarmac is a gleaming cream and white Boeing 767. Customised as a flying hotel, this is the transport of choice for the world's multibillionares. For maximum contrast, the plane, polished down to its wheel hubs, sits surrounded by the dull aluminium bodies of decaying Mig fighters with red stars on their tail fins.
Then you take a ferry across the bay to Chukotka's capital, Anadyr, a collection of buildings wedged onto an archipelago just south of the Arctic circle. Crumbling tower blocks and fish plants are here interspersed with gleaming new structures, all donated by Abramovich from his personal fortune: a new hospital, a sports hall, two museums, a university, nursery schools, even a four-star hotel. The landscape around is just heather and treeless hills. And then the governor's mansion swings into view - a villa sitting high on a rocky outcrop overlooking the bay below.
Up the steps, past the police guards, and you are ushered into a long room where a gleaming table is laden with sandwiches. A phalanx of immaculately turned-out suits files into the room. And then, from behind these men, slips the great and terrible wizard: oil baron, aluminium magnate, prince of Chukotka, the man who bought Chelsea FC with his loose change. Abramovich wears a T-shirt, sports jacket and jeans; medium height, medium build, he is everyman. You shake hands, trying to find something about him that betrays the steel of a man who, at only 37, has built a $5bn empire from nothing.
Life began badly for Abramovich. His mother died in 1968, when he was one and a half. When he was four, his father was killed in a construction accident. His father's brother adopted him, and Abramovich was raised in the Siberian region of Komi. His first stroke of luck was to have an uncle working as an official in the oil industry. Moscow was then opening up the vast Siberian oilfields, eager for hard currency earnings to prop up the ailing Soviet regime. After military service, Abramovich joined the game. He studied at Moscow's Gubkin oil and gas institute, and experimented with the new free market by selling plastic ducks from a market stall. After that, he worked as an oil trader in Omsk, the centre of the Siberian oil business. Then came his second big break: the old order collapsed. Central planning was replaced by private enterprise. A world of opportunity opened for him.
What began as freedom rapidly became a free for all as the canny scrambled to get their hands on state assets. For oilmen, there were fortunes to be made from a technique called transfer pricing: you bought oil from state companies at low official prices, then sold it on the world market for dollars. Abramovich did well, and largely kept his nose clean (although in 1992 police investigated him after a train with 55 fuel wagons destined for Moscow ended up in Latvia).
Then came yet another lucky break. Abramovich's success attracted the attention of Russia's top tycoon, Boris Berezovsky, a former mathematician who had made his fortune buying and selling cars. In 1995, the two men joined forces for what would be the biggest state giveaway in world history - the sale, for peanuts, of three gigantic companies, two oil and one metals. How did this happen? The state was in trouble. While a minority had grown rich, the average Russian was poorer under capitalism than under communism. The former communists regrouped, threatening to turn back the clock, and were heading for victory in the 1996 presidential vote. Boris Yeltsin needed help. He turned to the one group of people who could help him - a small band of tycoons nicknamed the oligarchs, which included the Berezovsky-Abramovich partnership. The oligarchs made a deal with Yeltsin. They would give him cash for his campaign. More importantly, as they controlled two of Russia's three television networks, they would throw their weight behind his re-election campaign. In return, he would give them the keys to the kingdom: specifically, a chain of gigantic privatisations.
Officially, these were not privatisations at all, merely loans to a sickly government. The scheme was named "loans for shares." Wealthy oligarchs would bid for the right to lend the government money in return for shares in huge state companies. In theory, when the cash was repaid, the shares would be returned. But this was a wink-wink deal. The money would not be paid back. The tycoons would keep the shares - worth far more than the price they paid for them. Loans for shares kicked off in autumn 1995. A comparatively small oil company, Surgutneftegaz, was auctioned in the Siberian city of Surgut. The local managers made sure there were no other bidders by closing the airport and using armed police to block the roads. Then in November came the first mega-deal. Vladimir Potanin bought the country's biggest nickel company for $170m - $140m less than the government's minimum asking price.
More audacious still was the next sell-off. The giant Siberian oil group Yukos was bought by another tycoon, Mikhail Khodorkovsky. Not only was Khodorkovsky the sole bidder, his bank ran the auction. And as a member of the government, he helped write the law for the auction. Khodorkovsky snapped up the multibillion dollar Yukos for $309m. Then it was Abramovich's turn. He and Berezovsky won the third privatisation in December 1995, pocketing the Siberian Oil Company, Sibneft, for $100m. Again, they were the only bidders. It was cynical, but it was not theft. They were no worse than Wall Street sharks. The real villain was the state, for letting them get away with it.
Abramovich, sitting in his big office, with a view of white-backed whales leaping in the bay below, explains: "In those days, that was a lot of money." Maybe, but the company he had bought was worth $1bn. All he had to do was cross his fingers and hope the communists did not win the following year's elections. When Yeltsin triumphed, Abramovich hit the big time. The fusion of wealth and power was complete. The oligarchs, together with Yeltsin and his daughters, were known as "the family." Abramovich moved into the Kremlin too, befriending one of Yeltsin's daughters, Tatyana Dyachenko.
Yet he took a different path from the other oligarchs. While some indulged every extravagance, Abramovich melted into the background. He got married for the second time, to Irina, an air stewardess, and bought a sprawling estate outside Moscow. Over the next few years they had five children. Meanwhile, most ordinary Russians continued to feel the pain of the radical transformation their country was undergoing. The structures that had supported hospitals, schools and collective farms crumbled. But the "family" had found a new way to make money. Having fleeced the Russian state of its riches, they discovered they could rake in millions more by borrowing, using the state as collateral. The favourite vehicle was short-term, high-yield government bonds.
By 1998, the Russian state had become ensnared in its own sales pyramid. It owed so much money that 90 per cent of the income from each new bond issue was spent paying back the cash owed on previous bonds. In August, Russia defaulted. The rouble crashed. With it went the fragile new middle class, whose savings were wiped out. Some oligarchs suffered as banks went bust. But others, like the Abramovich-Berezovsky duo, survived - the world continued to want oil. By now, Berezovsky and Abramovich, although partners, were taking different paths. Berezovsky was loud and brash, Abramovich the backroom man: always polite but private, hard to read.
In the chaos that followed the rouble crash, the oligarchs had a new worry: another election loomed and again Yeltsin was on the rocks. This time the threat was not from the communists but from a collection of centre-right parties. So in 1999, Berezovsky, self-appointed kingmaker of the oligarchs, reached for the one force that could save them: the KGB.
Throughout the 1990s the KGB (renamed the FSB) had been the ghost at the feast - skulking in dark corners, remembered as the oppressors of the Soviet state. But by 1999, they sensed a comeback. For ordinary Russians, hopes that democracy would mean prosperity had been dashed and, suddenly, the old order didn't look so bad. That summer, Berezovsky steered the sick, drunken, Yeltsin into appointing FSB chief Vladimir Putin as prime minister. Putin launched a war in Chechnya and his approval ratings soared. In the autumn, Berezovsky scrambled to assemble a brand new political party, United Russia, around the success. In December, United Russia triumphed. And in March 2000 Putin was elected president, to the cheers of the oligarchs. But Putin was his own man. The straight-laced president had something in common with Abramovich: he disliked excess. He dressed simply, drank little, kept himself fit and had a happy marriage.
Once in office, Putin started to remove the family, installing former KGB men in its place. Then he looked to make an example of an oligarch, and the target he chose was Berezovsky. Putin unveiled a new weapon: the law. All the oligarchs had murky pasts, and it took only a little probing into their business records to hurt them. In 2000, armed police raided the Moscow offices of the great and powerful. Berezovsky fled the country, along with fellow television oligarch Vladimir Gusinsky. Suddenly Abramovich was in the firing line; and investigators began sniffing around Sibneft's affairs. The quiet oligarch, however, saw all this as an opportunity, not a problem.
First, Abramovich snapped up the shares of his former partner in their joint businesses at fire-sale prices. As well as Sibneft, the television station ORT and shares in Aeroflot, the two men also held half of RusAl, the world's third biggest aluminium company. These all passed to Abramovich, who by this time was a very wealthy man, with assets priced by Forbes magazine at $5.7bn. Next, Abramovich made his peace with Putin. He gave him ORT as a present, saying he believed a television station should be in state hands. Putin was assuaged, and the oligarchs held a roundtable with the Russian president at which they promised to stay out of national politics if he would stay out of their affairs. Finally, Abramovich opted to quit Moscow, running instead for governor of Russia's most far-flung province, Chukotka, 5,000 miles and nine hours' flying time from the Kremlin.
Officially, he said he wanted a challenge, although it is possible he saw the governorship as a platform for a career in national politics. He had already, briefly, been an independent MP in the Duma; he was still a young man and Putin would have to leave office at the end of his second term in 2008. But most Russians believe the governorship was an insurance policy. Being a governor gives you immunity from prosecution.
Chukotka sits across the Bering strait from Alaska. It is at the far eastern end of the Russian mainland, but no road or railway connects it with the rest of the country. The ports are frozen for most of the year and blizzards can sever the air link for weeks. With the drying up of Soviet subsidies, the province was on its knees. The native Chukchis, a sort of inland Eskimo, were reindeer herders. For the locals, Abramovich was a gift from the sky. He restored their subsidies, and more. Anadry, with just one main street, now boasts a nursery school which looks like a Benetton advert - amid a sea of children's toys and crayon sets, dark-skinned Chukchi toddlers play happily with blond blue-eyed children of ethnic Slavs. The entire town is run by executives seconded from Sibneft.
On day two of my trip, I am whisked north in Abramovich's private helicopter. The big orange machine is soundproofed - so that the governor can watch the video and DVD installed in the passenger cabin. On the tundra below, the yarangas - tents made from reindeer skins - come into view. And so does a huge timber-framed school. A Canadian team is building it with Canadian timber (Chukotka has few trees). Abramovich has, by his own estimate, spent about $200m in Chukotka. He gets full marks from visiting Cambridge anthropologist Niobe Thompson, an expert on tundra communities. Thompson says the money is well spent, and praises Abramovich for spending time in the place to see that it is not frittered away. In Thompson's view, Abramovich's largesse has disproved the old saying that money can't buy you love. But it may not do so for much longer. Abramovich now wants to quit and has declared he will not stand for re-election in 2005. "Working here was harder than I thought," he says. "I am tired of it."
While Abramovich was tending to the Chukchis, back in Moscow Putin consolidated his position. His KGB men now ruled the roost, and politics had shifted back inside the Kremlin. At the same time economic reform galloped ahead. The heady days of the oligarchs may have been over, but in Putin's new framework, business thrived. A host of changes took shape, ranging from pension and tax reform to the cutting of red tape, and a shaky stability arrived in a land sick of chaos. But it was only temporary and by 2003, things had again begun to fray. A sky-high oil price kept the country's finances level, but the reforms were jammed. The KGB turned out to be good at security and bad at management. And then one of the oligarchs broke the golden rule - Mikhail Khodorkovsky started to dabble in politics.
The Yukos chief - the only Russian with more money than Abramovich - had established good corporate governance for his company and opened the books. He was fair to his shareholders. Much of the western press ignored the origins of his wealth and declared him a model businessman. But Khodorkovsky was also funding political parties. By some estimates, he was funding two thirds of MPs from across the liberal and centre-right spectrum, as well as various civil society bodies. He also began courting the Americans. He sank money into pro-Bush think tanks and began talks with US oil companies eager to get a piece of the action in Siberia, and the new fields in central Asia. Finally, in the spring, he announced plans to buy Abramovich's Sibneft and merge it into what would be the fourth largest oil conglomerate in the world.
This was a challenge to Putin. Khodorkovsky, it was clear, was risking Berezovsky-style treatment, possibly even deliberately courting political martyrdom. A new war loomed between the oligarchs and the Kremlin, and Abramovich may have decided that he had no future in Russian politics. Like most oligarchs, he is Jewish, and in Russia, antisemitism is still strong (although most of the hatred among Russians for the oligarchs essentially comes down to their money, and the ways they made it).
Abramovich began to sell up. First to go was his 26 per cent stake in Aeroflot. The Sibneft sale to Yukos came next. Then he sold his share of RusAl. Sibneft's entire profits were ploughed into a dividend to shareholders - with himself the biggest recipient. The announcement that he would not stand for re-election in Chukotka convinced most people he was leaving. And in early summer 2003, cash rich, he performed his master stroke.
On the last day of the 2002-03 football season, Chelsea chairman Ken Bates sat in the giant East stand watching his team beat Liverpool 2-1 to scrape into fourth place in the Premiership and secure a place in Europe's Champions League. For most of the fans, it seemed that the ?10m windfall this generated would save the club from its mounting debts. But Bates knew differently.
Chelsea had been here before. Building the East Stand in the 1970s had nearly bankrupted the club. In 1982, the debt from this project hung over the club like its marvellous cantilever roof. That year Bates, a self-made millioniare businessman, bought the club for a pound. The debts would cost him considerably more.
After some uncertain years, the club began to taste success. Charismatic managers such as Glenn Hoddle and Gianluca Vialli brought in foreign players. Football itself was booming. The new Premier league took over from the old first division in 1992, and television money was injected into the game - Rupert Murdoch's BSkyB paid £304m for five years' broadcasting rights in 1992, and then £670m for four years in 1997. However, few clubs actually made a profit - most of their cash went into buying players and ramping up wages - and in 2000, when the stock market bubble burst, football was unprepared. Television revenues dropped, and Chelsea found itself £80m in debt. Bates had also redeveloped the Stamford Bridge ground, and was struggling to find tenants. Chelsea was hit by a double whammy - too many players on high-wage contracts and property nobody wanted.
In May 2003, Roman Abramovich happened to watch a soccer match. The game was the quarter-final of the 2002-03 Champions League - a clash between the two biggest clubs in the world, Real Madrid and Manchester United. "It was an exciting game," Abramovich says. Some people think he was not watching the game, but the fans. After all, here is a business where the customers are not just loyal, but fanatical. Abramovich started to think seriously about buying a club. Britain was now his second home - Irina and the children spent a lot of time on his 450-acre estate at Fyning Hill, West Sussex (bought for £12m three years before). His London trading arm, Millhouse Capital, ran much of his business. So Abramovich came to England to find a team. Manchester United was his first target, but like Arsenal, the second choice, there was a problem: the fans have a small but significant shareholding - a supporters' trust. Taking control would have been messy.
So on 26th June, he travelled to west London, to his third choice, Chelsea. He met Bates at the Dorchester hotel. The two men sat and talked for over an hour, then, out of the blue, Bates signed over the club. Abramovich paid £60m - too much on most estimates - then paid off Chelsea's £80m debt. Next came a £110m spending spree to buy a galaxy of star players. Back in Moscow, most commentators were sure of the motive: Chelsea was, like Chukotka before it, a safety net. Should the Kremlin ever demand Abramovich's extradition, Britain would think twice with thousands of Chelsea fans picketing the high court. (A day after the Chelsea deal, Khodorkovsky's right-hand man Platon Lebedev was arrested in Moscow; two weeks later, Yukos's Moscow offices were raided by armed police.)
According to Jonathan Michie, a football expert at Birkbeck College, there are unlikely to be many more Abramoviches: "Chelsea was one of the few clubs still in private hands... it was an old-style club run by an egomaniac." As part of the Chelsea deal, Ken Bates was paid about £15m and allowed to remain chairman. But Abramovich was now a football giant. In a few short weeks he became Britain's most recognised Russian. For Chelsea fans, it meant salvation. And Abramovich seemed to understand the peculiar mores of owning a football club. The fans may forgive you poor results. They will not forgive boastfulness. Abramovich gave few interviews. He even agreed to wear a tie in the directors' box. Chelsea's most loved player, Gianfranco Zola, left in the summer for Cagliari, a second-rank Italian team. Abramovich tried to lure him back. When Zola said he wanted to honour his promise to his new employers, Abramovich offered to buy the club. The plan never took off, but the fans appreciated the gesture. They began to wear Russian hats and greet his arrival at matches by singing the Russian "Kalinka" ballad.
After a wobbly start, Chelsea travelled in November to Rome to play Lazio, one of the world's top clubs. They thrashed the Italians 4-0. Later, they beat Manchester United to go top of the Premiership. The surprise for Abramovich was the press attention. His wife was followed on shopping trips. Journalists camped outside his new £28m London home. The News of the World tracked down his first wife, Olga, who, inevitably, was quoted saying that Abramovich was a good lover. "We expected some attention, but the sheer volume of media interest was more than we anticipated," said Abramovich's spokesman, John Mann. "But football is nearly a religion in England, so we understand."
The effect of Abramovich on the British game has been dramatic. Chelsea could now break the duopoly of Arsenal and Manchester United, who between them have won the premiership every year but one since 1992 (Blackburn won in 1995). And on the business side he has given the transfer market another big push. Football academic John Williams, at Leicester University, says this has not been welcome at all the other top clubs, which had been hoping to start containing costs. "Just at the moment when people were beginning to talk seriously about financial constraint, in comes Abramovich and says 'sign whom you like, pay what you like.'"
And once again, Abramovich has found that money can indeed buy you love, and not just in London: in parts of Moscow, too, there is pride. A Chelsea supporters club was set up in Moscow in November. "When you see on television the 'Kalinka' being sung at Stamford Bridge you feel proud. It's so cool," says Yuri Saprukin, editor of Afisha magazine, Moscow's style bible. There has also been criticism. Just after the Chelsea deal was struck, Russia's chief audit officer, Sergei Stepashin, accused Abramovich of using money that should have been paid in taxes. Moscow mayor Yuri Luzhkov called the deal "unpatriotic," saying he should have bought one of Russia's impoverished football clubs.
Abramovich himself is cagey about his motives for buying Chelsea. After an interview lasting nearly two hours, I left knowing little more than when I started. (Although he appears to understand some English, my questions were translated into Russian and he replied in Russian, in part I suspect to give him more control over the dialogue.) No, he never played football, never even liked it. Yes, he loves Chelsea, plans to invest in it for "25 to 50 years." No, he never considered buying a Russian club. Before buying Chelsea he knew very little about the game - in either sporting or commercial terms. In one interview he talked about the Premiership being less dominated by just one or two clubs than other European leagues; the opposite of the truth. Yet now he can often be seen at Chelsea's training group watching the players, focusing on his new asset - rather as he once focused on the problems and needs of Chukotka.
Abramovich insists he is not abandoning Russia. "I like the seasons here in Russia," he says. "I cannot spend all my time on the Cote D'Azur." And just as Russia had written him off, or out, Abramovich has come bouncing back. In October, Khodorkovsky was finally arrested. Western investment houses cried foul. But Russian voters signalled their approval. Putin's poll ratings inched further upwards. On 7th December, the pro-Putin United Russia party came first in the parliamentary elections, increasing its majority. Then came the shock. Abramovich abandoned the merger deal between Sibneft and Yukos. There is speculation that the deal may be changed to become a reverse takeover, with Sibneft taking control of Yukos. Most commentators think the Kremlin pushed Abramovich into it, anxious to break the power of Khodorkovsky who, although having resigned from Yukos, continues to control it. It's possible that Abramovich might then give part of the merged company back to the state as another gift. That would surely make him safe. But when I ask his advice to anyone starting out in business in Putin's Russia he frowns and replies: "Never think that you won't go to jail."
Since his mid-twenties, Abramovich has led a charmed life. Perhaps he has just been lucky. Yet it is also possible that he has a wisdom rare among the very successful - the sense of knowing where to stop. Tycoons such as Bill Gates and Rupert Murdoch continue working 18-hour days even when they have earned more money then they can possibly spend. Perhaps Abramovich is simply ahead of the game. Perhaps he really does want to spend more time with his family - and his pet football club. Is he clever, or just lucky? It is too soon to tell. As I write, he may be about to burst back on the scene as the greatest of all oligarchs, in a Kremlin-approved merger. But one thing seems certain. The trick that Abramovich has learned, and learned well, is that even in the realms of the super-tycoons, a little humility can go a long way.
