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The basketball arena at Moscow State University was packed with chanting, clapping fans. Flags were waved, the Russian national anthem was sung and cheerleaders in fishnet stockings gyrated provocatively. The noise became almost deafening when the guest of honour, former Chicago Bulls all-star Scottie Pippen, strolled to centre court and thanked his hosts for the invitation to play in the celebrity game.

Mr. Pippen, one of the NBA's most decorated athletes, wasn't the only remarkable name on the celebrity squad cobbled together on the last Sunday in January. At 6-foot-7, the same height as Mr. Pippen, another lanky figure towered over his teammates - Mikhail Prokhorov.

Most oligarchs are avoiding public appearances as their rubles, euros and dollars disappear like vodka at a Russian funeral wake. Not Mr. Prokhorov, the president of Onexim Group, one of Russia's largest investment funds, and chairman and 30 per cent owner of Polyus Gold, the country's top gold producer. He's still worth billions (of dollars, that is, not devalued rubles), making him the stand-out winner among the depleted ranks of billionaires as the recession shreds the Russian economy.

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Mr. Prokhorov's rise, relatively speaking, and the fall of most of the other oligarchs is leading to a profound reordering of the financial and corporate power structure in one of the world's biggest economies.

As fortunes vanish and as the recession goes from mild to punishing, Corporate Russia seems on the verge of a seismic shift.

For a decade, the success of the oligarchs and their companies was more than a Russian economic and financial miracle. Their wealth and power was felt everywhere, from London's high-end housing market, whose values were propelled to absurd levels by the oligarchs' damn-the-price tag spending, to enormous chunks of the North American steel industry, which the Russians made an extension of their own. Through their mining and oil and gas holdings, the oligarchs established outposts throughout Africa and Asia. Imperial Russia was back in business, especially in the resources game, competing with the best that the North Americans and Western Europeans could throw at them.

Now, Russia's economy has been hard hit by the global crisis, as prices for energy and other commodities have plummeted. The ruble has fallen to its lowest point in more than a decade, despite efforts by the Kremlin to halt its spiral. The government predicts the economy will contract by 0.2 per cent this year - a number some economists say doesn't factor in low resource prices.

Once-powerful oligarchs such as Oleg Deripaska, who spread his tentacles into Canada with an ill-fated investment in auto parts giant Magna International Inc., are fighting for their survival. And that means entire Russian industries will come under new control, led by new executives and owners with different ideas, allegiances and strategies.

As the restructuring gathers momentum, the Russian government may emerge as the biggest oligarch of them all. Russian state loans are being used to save or prop up the hardest-hit players. A slow-motion re-nationalization seems to be under way, though Prime Minister Vladimir Putin claims the state has no intention of rolling back the clock to the Soviet era by owning and micromanaging the economy.

"The oligarch mess is an opportunity for the state to get some control of these companies," said analyst Michael Kavanagh of Moscow's Uralsib Capital.

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For the West, Russia's industrial overhaul is a high-stakes game. As the oligarchs fail, and as others, or the government itself, take their place, tens of billions of dollars of foreign loans, investments and joint ventures will be affected in some way, perhaps for the worse.

Empires under siege

Mr. Prokhorov loves basketball and played well. He made almost half of his foul shots and graciously avoided using his height and skills to deprive his shorter, chunkier teammates of ball time. While he didn't grin constantly like Mr. Pippen, he clearly enjoyed himself.

It's been many months since most of the other oligarchs have been able to relax like Mr. Prokhorov did on the basketball court. In a January interview with Germany's Der Spiegel magazine, Vladimir Yevtushenkov, the oligarch who controls Russia's ailing Sistema group of construction, telecoms and fashion businesses, said the financial crisis could eliminate as many as 40 per cent of the oligarchs.

"Most of the wealth of the oligarchs is in their companies, not with them personally," said a senior executive at one of Russia's leading steel companies. "When the companies lose, they lose."

But those who survive stand to gain. Mr. Prokhorov can credit lucky timing. Last spring, just before the Russian resources sector imploded, he sold his 25 per cent stake in Norilsk, the world's biggest nickel producer, to Rusal, the aluminum giant controlled by Mr. Deripaska. Mr. Prokhorov is now reportedly sitting on about $10-billion (U.S.) of cash.

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Swamped with debt, Mr. Deripaska is fighting for his financial life while Mr. Prokhorov scours the wreckage for bargains. A few months ago he paid $500-million for 50 per cent of Renaissance Capital. The price valued the Russian investment bank at three-quarters less than Renaissance had valued itself a year earlier.

The empire-threatening margin calls and losses now engulfing figures such as Mr. Deripaska stand in stark contrast with the glitz of their ascent only a few short years ago. The wealth, power and extravagance of Russia's elite businessmen - the three dozen or so oligarchs who bought, bludgeoned and beguiled their way to the top of the corporate pyramid since the Soviet Union's collapse in 1991 - was almost unbelievable.

No one knew how to toss money around like them. Banker and art collector Pyotr Aven equipped his English mansion with a nuclear bunker. Roman Abramovich, who made his fortunes in oil and steel, bought the Chelsea Football Club and launched an armada of superyachts; reportedly more than 150 metres long, his newest maritime palace, Eclipse, will make your average navy frigate look like a dinghy. Billionaire Suleyman Kerimov had a fondness for the fastest cars. In late 2006, he suffered severe injuries when he totalled his Ferrari Enzo in southern France. The passenger, a gorgeous Russian TV presenter who was only slightly injured, was not his wife.

Last summer, in a classic case of top-of-the-market buying, a company controlled by fertilizer oligarch Dmitry Rybolovlev paid about $100-million for Donald Trump's 60,000-square-foot Palm Beach mansion. And then there was Mr. Prokhorov. Dubbed Russia's most eligible bachelor, he was detained by French police a year ago on suspicion of procuring Russian prostitutes for his buddies at the Courcheval ski resort (he was released without charge).

The average Russian has never liked the oligarchs. Their extreme wealth, combined with the general suspicion that some of them looted their way to billionaire status, has created resentment among workers. Former president Boris Yeltsin created an unholy alliance with Russia's emerging business elite. They bankrolled his 1996 re-election; in exchange, they moved to the front of the privatization queues and bagged entire industries at knock-down prices.

When Vladimir Putin, now Prime Minister, was campaigning for the presidency in 2000, he said the oligarchs, as they had become known, "will cease to exist as a class" under his leadership. Russia's then-richest man, Mikhail Khodorkovsky, was delivered to a Siberian prison after his conviction for tax evasion and fraud. His oil giant, Yukos, was dismantled and sold off. Other fat cats who got on Mr. Putin's wrong side, among them media baron Boris Berezovsky, went into exile.

But the oligarchs were also instrumental in overhauling Russia's decrepit economy. Big companies were beaten into shape and transformed into national champions. Before the Russian stock market collapsed in the autumn, a couple of them were on the verge of international stardom. Take Norilsk. Born in the 1920s, the company nearly collapsed in the mid-1990s when it was incapable of even paying its workers. It was privatized in 1997 and transformed by Mr. Prokhorov and his then-partner Vladimir Potanin.

Norilsk has since become an efficient operation and the globe's top nickel and palladium producer. Polyus, the gold company spun out of Norilsk three years ago, is the world's 10th-biggest gold producer and has ambitions to break into the top five. Mr. Deripaska overhauled Rusal to similar effect. It is now the world's biggest aluminum maker.

Former KGB agent Alexander Lebedev revitalized National Reserve Bank and used the wealth it generated to buy a chunk of Aeroflot and create one of Russia's largest potato agribusinesses. Alexei Mordashov used Severstal to become a global steel magnate. His company's holdings include Rouge Steel, the steelworks created by Henry Ford in the 1920s.

Self-inflicted wounds

As it turned out, Mr. Putin never had to destroy the oligarchs. They're doing it all by themselves. Russian investment bank Troika Dialog estimated that the homegrown billionaires have shed an astounding $260-billion of wealth since the credit crunch started and the stock markets collapsed. Russia's Micex index is down almost 70 per cent since its spring high.

In an interview in Moscow, Troika chief economist Evgeny Gavrilenkov said the "banks and corporations borrowed irresponsibly" during the boom years, when Russian inflation rates were high, interest rates low and commodity prices soaring. Russia's foreign debt last autumn was $540-billion, almost all of it held by corporations and much of which can't be paid back as cash flows dry up and the ruble rusts like an old Lada.

Mr. Deripaska, he said, was certainly one of the irresponsible borrowers. The former metals trader used leverage piled on leverage to assemble Russia's biggest industrial conglomerate, Basic Element, whose 60 or so companies covered six industries, from energy to autos. Assets are now being shed or forfeited - in the autumn, a margin call deprived him of his $1.5-billion investment in Canadian auto parts maker Magna International. Rusal, the industrial heart of the Deripaska empire, relied on an emergency $4.5-billion loan from state-controlled Vnesheconombank (VEB) to escape the clutches of its international creditors. Mr. Deripaska was so desperate for the money that parts of the loan were backed with personal guarantees.

Last year, Forbes magazine put Mr. Deripaska's pre-crunch worth at $28-billion, making him the richest oligarch. It's possible he is no longer a billionaire. There is little doubt he ranks as the biggest loser among the oligarchs.

Judging which oligarch is up and which is down is difficult because most sit on a portfolio of public and private investments inside and outside of Russia, and their debt loads often are obscure.

Mr. Lebedev, for instance, owns about 30 per cent of Aeroflot, which has lost more than two-thirds of its market value in the past year. But his main holding, National Reserve Corp., owner of National Reserve Bank, is private, though allegedly still profitable. "Everything I have is loss making, except for the bank," he said in an interview.

Having shed his Norilsk stake before the collapse, Mr. Prokhorov is riding high and will no doubt exploit his rivals' financial misery. A Moscow investment banker said he expects a flurry of takeover activity starting as soon as this month and wouldn't be surprised if Mr. Prokhorov is leading the charge.

Mr. Mordashov, of Severstal, the Russian steel giant that once tried to buy Canada's Stelco, has lost billions in wealth. Severstal shares are down about 80 per cent in the past year, but Mr. Mordashov does not appear to be fighting for his life. His company is sitting on $3-billion of cash, and the Russian mills, unlike the U.S. ones, are holding up relatively well. Unlike dozens of other big companies, Severstal has not asked the government for emergency loans.

Mr. Mordashov's rival, Vladimir Lisin, the chairman of Novolipetsk Steel (NLMK) was said to be one of Russia's richest men until NLMK shares went into freefall. But he has a couple of things going for him. NLMK is relatively un-leveraged; net debt at Sept. 30 was about $600-million. The company also backed out of a deal in the autumn that could have proved fatal - the $3.5-billion purchase of American steel-tubing maker John Maneely.

Mr. Potanin, the president of Russian investment firm Interros, whose biggest holding is Norilsk, has lost billions too. Norilsk shares have lost 80 per cent of their value in six months. Mr. Potanin and Mr. Deripaska are scrambling to forge what looks like a back-door bailout, one that would see Norilsk merge with several steel companies to create a resources supergiant. The duo reportedly hope the government will take a 25 per cent stake in the new company - effectively control - in return for writing off some $27-billion of debt held by the companies. Analysts say the proposal is probably too complex to succeed. Mr. Abramovich is taking a beating on his significant investment in Evraz, the Russian steel company that owns plants and mines around the world, including Western Canada, where it bought Ipsco's tubular steel assets. In late 2008, Evraz received $1.8-billion in loans from VEB to help restructure its enormous debt load.

However many billions Mr. Abramovich has lost on paper, there is no sense his pain is as intense as Mr. Deripaska's. He is suing the Sunday Times for suggesting he wants to sell Chelsea FC to shore up his capital. The soccer team is not for sale, he insists.

The Kremlin's role

As Russia's downturn deepens, the government is widely viewed as likely to become increasingly involved in the economy. The question is, to what degree is the government likely to end up owning what once belonged to the oligarchs?

Some analysts and executives think the Kremlin would love to get its hands on the prize assets that were virtually given away during the privatization years. Others think the Kremlin realizes state ownership would make the economy less competitive when Russia needs all the competitive advantages it can muster.

Mr. Lebedev expects bailouts galore. "The bigger the losses, the more right you have, apparently, to share them with the country," he said.

By January, VEB, whose supervisory board chairman is Mr. Putin himself, had dispensed about $10-billion to help Russian companies refinance their foreign debt. Billions more are waiting to go out the door. VEB insists on strong collateral and, in some cases, management and board representation. If the loans cannot be repaid, there is a good chance the state will end up owning, perhaps even controlling, vast chunks of the economy.

Mr. Putin himself is suggesting heavy state involvement should be no more than a short-term fix. "In the 20th century, the Soviet Union made the state's role absolute," he said at Davos. "In the long run, this made the Soviet economy totally uncompetitive. This soon cost us dearly. I am sure nobody wants to see it repeated."

His remarks do not mean he is unhappy that some of the men who grabbed Russian businesses on the cheap are taking a financial beating. Through VEB and other agencies of the state, he has the power to spare the ones he finds useful. Who they will be is an open question.

But one thing is certain: Corporate Russia will go through a meat grinder before the doomed get out of the way and the survivors take their place.

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