Turning Point by John Francis Kinsella
Vyacheslav Nikolayevich Babkin’s arrival in the Pais Vascos, for the inauguration of a Russian modern art exhibition at the Bilbao Guggenheim Museum in late 2007, was almost heaven sent for Fernando Martínez. Babkin, at the invitation of the Russian minister of culture, had flown up from Marbella where he was vacationing with his family.
Martínez had reached a turning point in the development of his group. Its future growth depended on the acquisition of prime construction sites his ambitious projects. Flush with success, he had emulated the methods of Ferrovial, another Spanish construction giant, builders of Frank Ghery’s futuristic Bilbao Guggenheim, by using the market values of his group’s assets as a lever to raise funds on international debt markets. The risks were enormous, but cheap and liquid financing incited Martínez to take advantage the growth of debt backed development.
With the saturation of Spanish markets, Martínez had realised Grupo Martínez Construcciones needed new markets and had expanded into sunshine destinations such as Morocco. This did not entirely resolve his problem as potential buyers remained Western Europeans whose buying power was slowly being strangled by increasing debt.
He turned to the new countries of the EU, but a larger market lay further to the east: Russia, with one hundred and fifty million potential consumers, with the advantage of its immense oil and gas wealth, and a vast potential housing demand given the aging decrepit Soviet housing stocks. Nova Russia had money, though its laws were not enticing for investors — a Wild West version of a free market economy — it better than the quickly vanishing Spanish market.
Martínez, eyeing the opportunities in Russia, invited Babkin to join him for a weekend in San Sebastian on his yacht the Jai Alai. In no time the two men were soon on familiar first name terms; Slava and Pepe. Both were self-made men and both were facing challenging changes in their respective worlds. Martínez had become one of the established business elite in Spain. Babkin, ten years younger, one of Russia’s nouveaux riches, had built-up his business empire over the previous fifteen years after grabbing control of a Moscow construction firm on the verge of bankruptcy. He had started by building homes for the new Russian oligarchy, then graduated to building their prestigious office buildings and the luxurious condos they were promoting for the growing class of Russia’s prosperous business elite.
Babkin knew little of Spain, but he immediately took a liking to the country’s climate and life style. Marbella’s more brash style appealed to the nouveaux riches and San Sebastian’s to the more discerning. He felt at ease dealing with men for whom building permits and political arrangements could be easily fixed when it came to ambitious projects.
Babkin like many oligarchs had set up residence in London, a home from home for many rich Russians and their entourages, and in spite of its difficulties London looked like a haven of peace in comparison to Moscow. The after shock caused by the fall in oil and gas prices compounded by the effects of the Georgian war had shaken the confidence of investors and sent the MICEX tumbling. However, Babkin and his friends still had solid reserves, built from the revenues they had siphoned off from the ex-combinats they controlled and their commodity exports. In spite of the crisis they could count on the world’s needs for oil, gas, fertilisers, metals, timber and other raw materials.
When Kennedy arrived at the soirée held in the exclusive Pushkin Club, on Argyll Street, he could have been excused for thinking he was in Moscow. Russian seemed to be the only language spoken and when Kennedy, who had never his tongue in his pocket, attempted to use his smattering of Russian he quickly attracted the attention of a couple of attractive, though rather flashily dressed, young women who were delighted to discover he was a real City banker.
As one of the friends successfully cultivated by Sergei Tarasov in London banking circles, and the number two at the Irish Netherlands Bank, Kennedy had been invited to the private cocktail party thrown to celebrate Vyacheslav Nikolayevich Babkin’s decision to establish himself as a non-dom in London with the addition to his list of trophy assets a palatial home in Belgravia. The Russian was not alone in setting-up home in London, it was estimated that there were at least a couple of hundred thousand of his compatriots in the capital, many of them rich, accompanied by their families — and mistresses. A few were adventurers, others drunks, but the rest were for the most part simple job seekers.
Londongrad had become a second home to Russia’s Gotha: politicians’ wives, oligarchs, wealthy businessmen, artists, show business personalities, sports stars and supermodels, many of whom who commuted between London, Moscow and St Petersburg. There was also the jeunesse d’orée – the privileged offspring of the nouveaux riches – getting an education at the best public schools or studying at the most in vogue of the country’s centres of higher learning.
The Russians had lavishly spent their millions on anything from jewellery to modern art, as well as on their own cultural legacy that was up for sale at Sotheby’s or Christies. The rich new arrivals were propping up the venerable though ailing auction houses that were beginning to feel the effects of the credit crisis as the market for fine arts virtually came to an abrupt stop.
Kennedy was becoming used to the kind of evenings thrown by Tarasov, one of Irish Netherlands Bank’s best partners, where he met other amateurs of Russian hospitality including Steve Howard. The names of the celebrities and stars that were flashed around meant little to him, celebrity gossip had never been his thing, however he was impressed to know that the heiress Paris Hilton, who had become a household name, had been a guest at the very exclusive Pushkin Club.
The Crisis Grows
Martínez had reached a turning point in the development of his group. Its future growth depended on the acquisition of prime construction sites his ambitious projects. Flush with success, he had emulated the methods of Ferrovial, another Spanish construction giant, builders of Frank Ghery’s futuristic Bilbao Guggenheim, by using the market values of his group’s assets as a lever to raise funds on international debt markets. The risks were enormous, but cheap and liquid financing incited Martínez to take advantage the growth of debt backed development.
With the saturation of Spanish markets, Martínez had realised Grupo Martínez Construcciones needed new markets and had expanded into sunshine destinations such as Morocco. This did not entirely resolve his problem as potential buyers remained Western Europeans whose buying power was slowly being strangled by increasing debt.
He turned to the new countries of the EU, but a larger market lay further to the east: Russia, with one hundred and fifty million potential consumers, with the advantage of its immense oil and gas wealth, and a vast potential housing demand given the aging decrepit Soviet housing stocks. Nova Russia had money, though its laws were not enticing for investors — a Wild West version of a free market economy — it better than the quickly vanishing Spanish market.
Martínez, eyeing the opportunities in Russia, invited Babkin to join him for a weekend in San Sebastian on his yacht the Jai Alai. In no time the two men were soon on familiar first name terms; Slava and Pepe. Both were self-made men and both were facing challenging changes in their respective worlds. Martínez had become one of the established business elite in Spain. Babkin, ten years younger, one of Russia’s nouveaux riches, had built-up his business empire over the previous fifteen years after grabbing control of a Moscow construction firm on the verge of bankruptcy. He had started by building homes for the new Russian oligarchy, then graduated to building their prestigious office buildings and the luxurious condos they were promoting for the growing class of Russia’s prosperous business elite.
Babkin knew little of Spain, but he immediately took a liking to the country’s climate and life style. Marbella’s more brash style appealed to the nouveaux riches and San Sebastian’s to the more discerning. He felt at ease dealing with men for whom building permits and political arrangements could be easily fixed when it came to ambitious projects.
Babkin like many oligarchs had set up residence in London, a home from home for many rich Russians and their entourages, and in spite of its difficulties London looked like a haven of peace in comparison to Moscow. The after shock caused by the fall in oil and gas prices compounded by the effects of the Georgian war had shaken the confidence of investors and sent the MICEX tumbling. However, Babkin and his friends still had solid reserves, built from the revenues they had siphoned off from the ex-combinats they controlled and their commodity exports. In spite of the crisis they could count on the world’s needs for oil, gas, fertilisers, metals, timber and other raw materials.
When Kennedy arrived at the soirée held in the exclusive Pushkin Club, on Argyll Street, he could have been excused for thinking he was in Moscow. Russian seemed to be the only language spoken and when Kennedy, who had never his tongue in his pocket, attempted to use his smattering of Russian he quickly attracted the attention of a couple of attractive, though rather flashily dressed, young women who were delighted to discover he was a real City banker.
As one of the friends successfully cultivated by Sergei Tarasov in London banking circles, and the number two at the Irish Netherlands Bank, Kennedy had been invited to the private cocktail party thrown to celebrate Vyacheslav Nikolayevich Babkin’s decision to establish himself as a non-dom in London with the addition to his list of trophy assets a palatial home in Belgravia. The Russian was not alone in setting-up home in London, it was estimated that there were at least a couple of hundred thousand of his compatriots in the capital, many of them rich, accompanied by their families — and mistresses. A few were adventurers, others drunks, but the rest were for the most part simple job seekers.
Londongrad had become a second home to Russia’s Gotha: politicians’ wives, oligarchs, wealthy businessmen, artists, show business personalities, sports stars and supermodels, many of whom who commuted between London, Moscow and St Petersburg. There was also the jeunesse d’orée – the privileged offspring of the nouveaux riches – getting an education at the best public schools or studying at the most in vogue of the country’s centres of higher learning.
The Russians had lavishly spent their millions on anything from jewellery to modern art, as well as on their own cultural legacy that was up for sale at Sotheby’s or Christies. The rich new arrivals were propping up the venerable though ailing auction houses that were beginning to feel the effects of the credit crisis as the market for fine arts virtually came to an abrupt stop.
Kennedy was becoming used to the kind of evenings thrown by Tarasov, one of Irish Netherlands Bank’s best partners, where he met other amateurs of Russian hospitality including Steve Howard. The names of the celebrities and stars that were flashed around meant little to him, celebrity gossip had never been his thing, however he was impressed to know that the heiress Paris Hilton, who had become a household name, had been a guest at the very exclusive Pushkin Club.
The Crisis Grows