Rift over luxury housing spotlights rich-poor divide in Russia

McClatchy NewspapersAugust 3, 2008 

WORLD NEWS OLIGARCHS 1 MCT

Billionaire developer Aras Agalarov sits at his new real estate development outside of Moscow, Agalarov Estatem, July 26, 2008.

TOM LASSETER / MCT

VORONINO, Russia — On a sunny Saturday afternoon, Emil Veliev was chatting about the glories of Agalarov Estate — some 800 acres of residential development where every towering house will have a swimming pool, a community fitness center has been built with three indoor tennis courts, and the price tag for many homes starts at $10 million.

"It will be paradise," Veliev said, sitting behind the wheel of a sport utility vehicle as he showed a reporter around the construction site. Veliev, 24, is a personal assistant to Aras Agalarov, the Azerbaijan-born billionaire behind the project, which sits about 15 miles northwest of Moscow.

Turning the wheel, Veliev drove to the future setting of an 18-hole golf course and club, where joining may cost $200,000, and monthly dues an additional $1,000 — chump change for the intended demographic of men who are chauffeured around Moscow in Bentleys.

And then, on the front nine, Veliev paused. There was the unmistakable, heavy stench of cow dung, right in the middle of a rich man's paradise. The smell of excrement was from a dairy farm in a village on the other side of an enormous green fence built by Agalarov. Its owners so far aren't selling.

The challenge of building an enclave for Russia's wealthy elite near small, poor villages lays bare a central socio-economic tension in Russia today: The large rush of cash brought on by high oil and gas prices has created an ever-widening gulf between the super-rich and the rest of the country.

Moscow has more billionaires — 74 — than any other city in the world, according to Forbes magazine, and Russia is second, with 87 billionaires in all, only to the United States. Agalarov is one of them; he puts his net worth at more than triple Forbes' estimate of $1.2 billion.

Meanwhile, the average salary in Russia in May is about $720 a month, and inflation is in double digits, according to official statistics.

New developments like Agalarov Estate are springing up on the highways leading out of Moscow, right alongside tiny settlements where families have barely enough money to pay the bills.

"We have a large group of rich people who are moving to this poor environment," said Polina Kuznetsova, a senior analyst and project manager at Moscow's Institute for Urban Economics. "The people around them are still very poor, they are very angry."

The dairy farm is just one of the problems facing Agalarov Estate.

A band of residents in the nearby village of Voronino — a feisty collection of pensioners, their children and middle class Muscovites who spend the weekends there — has waged a campaign of letters and complaints to Russian officials alleging that Agalarov tried to force them to sell their property.

The villagers told the regional prosecutor's office that after a round of menacing phone calls to those who wouldn't sell, a local dog was shot, another had its throat slit, and a bathhouse was burned down.

Vladimir Yegorov, a retired taxi driver who said he has lived in Voronino since his birth in 1940 and whose family has been there since before the 1917 Russian revolution, recounted a conversation he had with an Agalarov representative.

"I told him right away I will never sell this place," said Yegorov, whose monthly pension is about $154. "I said I have been here all my life, you are a newcomer and you want to be here with all of your money, but I spit on your money." While no offer was made to Yegorov — he said his tirade stopped the representative in his tracks — Agalarov has so far bought 24 out of 56 plots in the village, often for several hundred thousand dollars.

Several residents and their family members echoed Yegorov: After toughing out the famines and brutality of Soviet rule, and then the poverty that followed the 1998 economic crisis, they said, it was inconceivable that the nouveau riche, much less a group led by an Azeri billionaire, would force them off the land.

Prior to 1992, Voronino was part of a Soviet kolkhoz, or collective farm. But after the fall of the Soviet Union, the farm and its holdings were changed to a joint stock company, which began selling much of its land to investors like Agalarov.

"There was a revolt, a war, perestroika, then everything collapsed, and my family stayed," said Olga Sorokina, whose grandmother has lived in Voronino for 84 years. "And now he (Agalarov) says we have to go . . . anything may happen, we are ready to defend ourselves."

Sorokina, a clerk with Moscow's municipal administration, said she became actively involved with the "struggle" against Agalarov Estate after a guard working for the company threatened to beat her up when she trespassed on Estate land, used by villagers for decades, near the river.

Interviewed at the building site, Aras Agalarov, one of Russia's biggest property developers, said that Voronino has been the only thorn in his side out of the four surrounding villages. The reason, he said, is not proud residents beset by an unscrupulous land developer — he denies all of their accusations — but greedy opportunists demanding exorbitant fees for their land.

"There is a group of people who are sore at us; we didn't buy their houses for $3 million or $5 million." Agalarov said. "They have this feeling that if they keep complaining all the time, then I'll have to buy them out to get rid of this headache"

It's an effective tactic, he said. After villagers write to local officials, inspectors visit the site looking for problems big and small, halting construction, Agalarov said.

Agalarov and his company, Crocus International, have pushed ahead, investing more than half a billion dollars, with plans to spend another $100 million by next summer, when the project is slated for completion.

So far, he's pre-sold 10 homes to close friends and, judging by the traffic on a Saturday in mid-July, he'll have little trouble selling the rest.

The pace of construction looked brisk: Bulldozers churned dirt as a battalion-sized group of Central Asian workers — some 700 live in barracks on the corner of the grounds — scurried around with bags of concrete and tools.

Is Agalarov worried about the large gap between millionaires who will live at Agalarov Estate, and the poverty looming just outside its walls? The answer was a quick no.

"I don't see this threat in this country," he said. An assistant approached and signaled an end to the interview — Agalarov had customers to meet.

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