The crisis has hit Russia in a merciless fashion. President Dmitri Medvedev, left, met with Oleg Deripaska, once Russia’s richest man./ILYA NAYMUSHIN/AGENCE FRANCE-PRESSE — GETTY IMAGES

By ANDREW E.KRAMER

MOSCOW


THEY ARE LARGER-THAN-LIFE figures at home and abroad, men who saw themselves as the Carnegies or Rockefellers of Russia. They are known as oligarchs, and they may soon be thrown into the dustbin of history by the economic crisis.

Brash, young and wealthy, those insiders of post-Soviet business who escaped nationalization - to say nothing of exile or prison - under Vladimir V.Putin went on to make ever greater fortunes in the commodity boom of recent years. But few businessmen anywhere have fallen as hard or as fast in recent months.

Many of Russia’s richest men were highly leveraged going into the financial crisis and were unable to renew loans from Western banks.
The Kremlin bailed them out with short-term credits last year, not wanting the assets to fall into foreign hands. Those state loans will be coming due by the end of the year, on top of additional foreign loans.

The mountain of debt is so huge - the Central Bank calculates that corporations and banks in Russia must repay $128 billion this year alone - that many oligarchs will be unable to repay the loans, bankers say.

Only a fraction of this debt, about $7 billion, is corporate bonds. The rest is bank loans to companies predominantly owned by the oligarchs or the state.

“Those who are left will be swept away in the crisis,”said Olga V.Kryshtanovskaya, a sociologist who studies the Russian elite at the national Academy of Sciences, which is headquartered in Moscow.“The Kremlin has all the levers. If they want to help, they will help. If they do not want to help, they will say,‘We are liberalizing now; market relations will determine which of you survive.’”

Some oligarchs are so desperate that a group of metal executives made a pilgrimage to the Kremlin in January to seek help.

Oleg V. Deripaska, who is married to the step-granddaughter of former President Boris N.Yeltsin and who became a post-Soviet corporate raider, was among those executives.

Mr.Deripaska is no longer seen as the richest man in Russia. The business magazine Finans reported in February that he had fallen to eighth place after the value of his assets fell 90 percent, to $4.9 billion, in the market crash that began in Russia last spring.

Meeting with President Dmitri A.Medvedev, the executives proposed merging their assets, which include some of Russia’s largest mines and factories, into a statecontrolled conglomerate. In exchange, the government would refinance billions in Western bank debt.

In other words, they were voluntarily proposing to reverse the contentious loans-forshares privatizations that birthed the oligarchs in the mid-1990s.

“They’ve all been racing to see who can be the first to do a deal with the government,”said Rob Edwards, a metals analyst at Renaissance Capital in Moscow. Access to Russia’s hard currency reserves, he said, is the oligarchs’“get-out-of-jail-free card.”

Unfortunately for many oligarchs, and the Western banks who lent them money, that option may no longer be possible. In a paradoxical twist, the government that had supported nationalization in oil and other industries is now struggling for funds to support the ruble and prop up the budget, and seems wary of investing in troubled industries.

Once-invincible oligarchs now look extremely vulnerable. With or without state aid, the government is likely to gain more control of their operations. If they get no help, many could go into bankruptcy, with nationalization of one form or another likely to follow. And any new bailout would probably mean larger equity stakes for the government.

Already, bankers say, the crisis has touched a lifestyle of megayachts, private jets and spacious residences in Britain and France. In the initial collapse of the Russian stock market from May to October last year, Bloomberg News has calculated, the richest 25 people on the Forbes magazine list for Russia lost a collective $230 billion.

“Today’s crisis is merciless for rawmaterials producers,”Alisher B.Usmanov, an iron and steel tycoon, and one of those at the Kremlin meeting, said in an interview.“It will take back everything we accumulated yesterday.”