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Next Stop New York: Wealthy Russians Move Millions from Cyprus to US

Heidi Moore
The Guardian

On the west side of Manhattan, a strange sight greets the tourists and natives who happen to be walking, running or cycling by Pier 90. Pearly and serene amid the beeping and bustle of highway traffic, a 536ft, bulletproof yacht called the Eclipse has been anchored in the freezing water of the Hudson for over a month. It is the world’s largest yacht, owned by Roman Abramovich, a secretive Russian oligarch whose net worth, at Forbes’ last count, was about $10.2bn.

It’s no coincidence that Abramovich’s glistening ship is anchored in New York. The city has been a haven for wealthy Russians for at least three years, as oligarchs and demi-oligarchs moored their money far away from the political whims of Vladimir Putin or the growing fiscal fiasco of the eurozone.

Abramovich“In Russia, whether you’re friendly with the government is a very important thing, and that changes like the wind changes,” said David Newman, a partner with Day Pitney who has represented the ex-wife of former potash magnate Dmitry Rybolovlev in a prominent divorce case. Evidence of Russian wealth has been everywhere.

“They have boats, they have cars; you go buy a plane for $40m, it’s not a big deal any more,” said Newman. Rybolovlev’s 2012 acquisition of an $88m Central Park apartment once owned by Citigroup chief Sandy Weill still stands as one of the biggest real estate deals in New York history, and a soaring example of Russian influence and ostentation in high-end New York real estate.

“How many Maybachs can you have, how many Maseratis can you have?” Newman recently learned of an extravagantly priced crocodile-skin T-shirt for sale. “I thought right away, ‘there’s going to be a Russian at Hermes buying that $100,000 t-shirt.”

The shirt is still sitting in the Hermes store. As Newman notes, Russians have sought assets that stick around a little longer. The wealthiest Russians knew months ago that the Cypriot economy was failing and hurried their money out into other investments.

The European crisis has forced more and more money out of the bank accounts of wealthy Russians in Cyprus and elsewhere and into the US. “This past year, we’ve been seeing a shift in investments in the United States as a result of the financial state of the European Union,” said Ed Mermelstein, a New York real estate lawyer who advises wealthy Russians.

The meltdown of the Cypriot financial system came as no surprise to well-connected, wealthy Russians, who bundled some of their money to the United States. “Many of our clients had a heads-up on this issue,” said Mermelstein. “Cyprus had started having the conversations about what it was intending, and that’s been going on for half a year.”

That’s why some wealthy Russians seemed insulted by the insinuation that the collapse of the Cypriot banking system this week caught them by surprise. Cypriot banks were suffering “substantial outflows” for weeks before the meltdown, according to the country’s finance minister, Michael Sarris.

Igor Zyuzin, a Russian oligarch, nearly bit off a reporter’s head when asked whether his finances would suffer from the debacle in Cyprus. “You must be out of your mind!” Zyuzin reportedly barked.

He wasn’t the only one who had hustled most of his money out. Gennady Timchenko, the head of commodity trading firm Gunvor, only had a “few hundred thousand euros” in Cypriot banks, he boasted to a Swiss newspaper. Alfa Capital Holdings, a Cyprus-based investment firm owned by Russians, informed visitors to its website that its subsidiaries “are not and will not be affected by any levy on deposits imposed by the Government of Cyprus.”

Read more at The Guardian

READ MORE CYPRUS NEWS AT: 21st Century Wire Cyprus Files