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August 4, 2015updated 05 Jun 2017 10:05am

Small-time Oligarchs shun Europe

It could be claimed that, were it not for Russia’s oligarchs, central London would not be the place it is today. From the basements undermining Knightsbridge to the courtrooms of the City, where Oligarchs file suits against one-another with increasing frequency, Russia’s wealthy rule the roost.

By Oliver Williams

It could be claimed that, were it not for Russia’s oligarchs, central London would not be the place it is today. From the basements undermining Knightsbridge to the courtrooms of the City, where Oligarchs file suits against one-another with increasing frequency, Russia’s wealthy rule the roost.

Or so has been the case. However, new research from WealthInsight reveals that the wealth of Russia’s HNWIs (those with $1m plus)will increasingly find a home in Asia.

A total of $382 billion in Russian private wealth is currently held outside Russia, 8% more than the worldwide average. Of that, most is held in Europe, but between now and 2019, WealthInsight predicts that Europe will see its share of Russia’s overseas wealth drop from 50.5% to 40.3%. Asia, on the other-hand, will increase from 22% to 26% in 2019.

Why, at a time when Russia’s wealthy are leaving in their droves would they shun Europe? Some may be bitter about the EU imposed sanctions affecting the Russian economy, though they are probably in the minority. The real cause is likely to be down to Russian HNWI’s main concern – their wealth.

The UK, and more precisely London, is the largest home of Russian HNWIs outside Russia. So when the UK doubled the cost of its Tier 1 investment visa – the type most sought after by Chinese and Russian applicants – to £2m and ruled out the ability to tie into the cost investments in residential property, as was previously the case, the cost of moving to the UK suddenly shot up.

Of course, a potential £3.4m resettlement fee (£2m for the visa plus another £1.6m for the average 2 bedroom properties in central London) would be small change to a true oligarch, but most of them already have a passport and a home in the UK, if they aren’t living here outright. It is therefore not the billionaires that are shunning Europe for the Asia, but the mere millionaires. The UK is simply pricing Russia’s millionaires out of the country and it is Asia that is picking up the slack.

Aside from geo-politics and litigation, there is one other factor that we at WealthInsight look at when predicting the movement of wealth – economic opportunity. Just as today’s aging oligarchs sought economic prosperity in Europe during the 1990s, today’s Russian millionaires are shunning Europe for the same reason. While Europe mires in economic stagnation there are fortunes to be made in rising Asia, not least in economies more friendly to the Russian state.

Russia’s lesser wealthy HNWIs – normally younger than the aging oligarchs parked in European capitals – are finding it easier, cheaper and, at the same time, more profitable to invest in cities such Dubai, Hong Kong and Singapore. Further afield, China’s ‘silk road’ policy is opening doors to the East while Israel maintains a large Russian-speaking population to the West.

While these movements of Russian wealth to Asia are as yet very minor, they are certainly something to watch. Wealth in today’s world is much freer and global than ever before, therefore predicting its ebb and flow has become ever more troublesome. Russia’s small time oligarchs may be parking a portion of their wealth in Asia now, but as the tide of geo-politics and economic opportunities is played out in the next decade, the flow of wealth and wealthy individuals from Moscow to Dubai, Hong Kong and elsewhere could be much more significant.

The real worry for London, though, is not the rise of Asia, but if the Russians start to shun our shores who will replace them in London’s court rooms and cafes? As wealth becomes more mobile, predicting the next movement of millionaires is the ultimate million-dollar question.

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