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Oleg Deripaska (Anthony Jenkins/The Globe and Mail)
Oleg Deripaska (Anthony Jenkins/The Globe and Mail)

The Lunch

At home with Russian oligarch Oleg Deripaska Add to ...

In spite of his wealth - Forbes magazine last put it at about $11-billion, down from a pre-crisis peak of $28-billion - Mr. Deripaska is not conspicuously flashy like many of the oligarchs. Roman Abramovich collects superyachts like so many bathtub toys, owns Britain's Chelsea football club and just forked out £50-million ($79-million) for Spanish striker Fernando Torres. Suleiman Kerimov has a penchant for Ferraris, one of which he crashed in 2006, nearly burning him alive. Mikhail Prokhorov, the gold baron who loves to play basketball, owns the New Jersey Nets.

That is not to say that Mr. Deripaska deprives himself. His 73-metre, six-deck yacht, the Queen K, is a regular visitor to the Mediterranean's most glamorous resorts. He shuns hotels wherever he can. Instead, he buys properties in the places he frequents: Tokyo, London, Montenegro, among others. Mr. Deripaska is shy and strives to avoid publicity, to the point he doesn't publicize his numerous charities, which have doled out $250-million (U.S.) over the last decade, largely to education projects.

He is lucky he can play his own version of global Monopoly, for he came close to losing it all in the 2008 financial crisis.

Mr. Deripaska was born in Krasnodar, in Cossack country's tea-growing region in the far south of Russia. He was drafted into the Soviet army, became an accomplished physics and math student and went on to study nuclear physics at Moscow State University. Graduating just as the old Soviet Union was giving away to the new, raw capitalist Russia, he like many of his contemporaries went into business instead of state research.

He became a metals broker and emerged as the big winner of the so-called aluminum wars of the 1990s. The details are murky. What is known is that there were nasty bouts of violence. Mr. Deripaska often slept in his Siberian smelters so he could monitor their production during those turbulent years. Today Rusal is the biggest single source of his wealth. The company, floated on the Hong Kong exchange last year, is 47.4-per-cent owned by Mr. Deripaska, has a market value of about $25-billion and owns 25 per cent of Norilsk, the world's biggest nickel maker.

In 2007 he was on top of the world, only to learn that leverage cuts both ways. The crisis crippled his real estate, manufacturing and auto businesses. Gaz alone blew out 50,000 workers (though has since rehired 15,000). A margin call deprived him of his $1.5-billion stake in Canadian auto parts company Magna International and he had to unload his stake in Strabag, the Austrian construction giant that is building infrastructure for the Sochi Olympics (he has since bought back into Strabag).

When aluminum prices collapsed in the autumn of 2008, Rusal breached its covenants and seemed certain to become a ward of the international cadre of banks that had stuffed Rusal with $7.4-billion in loans.

Mr. Deripaska used a combination of tough negotiations and clever gamesmanship to keep control of Rusal. He bet correctly that the banks would have no interest in owning and managing a massively complicated company, whose supply chain extends from alumina operations in Jamaica to Siberian hydropower plants. "The deal was very simple," he says. "We never tried to screw the banks. I said 'You keep the debt and I will manage the company and deliver for you.'"

Another interpretation is that he owes Rusal's salvation to his impeccable government connections (he is married to the daughter of the chief-of-staff to former president Boris Yeltsin). Kremlin-controlled VEB bank gave Rusal a $4.5-billion bailout loan at the height of the financial crisis, allowing the company to restructure its foreign debt. The Kremlin would not have liked the alternative. The foreign banks might have seized Rusal, only to sell it to a rival such as Aloca or Rio Tinto. Big resources like aluminum are considered national strategic assets in Russia.

The crisis appeared to damage Mr. Deripaska's relationship with Mr. Putin, however. In a televised broadcast in mid-2009 in a hard-hit Russian industrial town called Pikalyovo, Mr. Putin compared industrial barons who left workers' wages unpaid to cockroaches. He then forced Mr. Deripaska to sign a document safeguarding the future of a local factory, snapping "And give me back my pen," the moment the crestfallen oligarch did so.

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