Morning:
6°c
The £5 billion reason Rothschild knifed his friend George in the back
Keith Dovkants24 Oct 2008
As Oleg Deripaska's yacht sailed away from the fateful encounters off Corfu last August her captain set a course far from the playgrounds of the mega-rich and headed for one of the most desolate harbours in the Adriatic. The Queen K had dallied for days at the gorgeous anchorage near Nat Rothschild's magnificent cliff-top villa, but on 27 August, just after hosting Mandelson, Osborne et al, the £80 million vessel dropped anchor off a wharf filled with rusting cranes, crumbling concrete and a couple of half-sunken Cold War submarines.
It was a sight to gladden Deripaska's heart. This was Tivat, in Montenegro, where he is engaged in a deal he expects to make him and his friend Nat Rothschild a great deal of money. Tivat is a port once used by the navy of the former Yugoslavia. The old arsenal is a wreck but Deripaska and Rothschild hope to turn it into the new Monaco.
Their plan is ambitious; some might say audacious. It is also an indicator of the exceptional bond between them. The personal and business relationship shared by these two men lies at the heart of the still-unfolding Corfu affair. The fallout continues to engulf all concerned, with Shadow Chancellor George Osborne fighting for credibility and Lord Mandelson savouring the doubtful pleasure of a Pyrrhic revenge. Their actions are easily explained, perhaps, but what of Rothschild?
Many wondered why he dived into the fray, attacking his old friend Osborne and plunging the entire political career of the Tory chancellor-in-waiting into jeopardy. Now, apparently, he has warned Osborne he will strike again if his veracity is challenged.
It has been reported that in revealing private conversations that took place under Rothschild's roof Osborne made a grave error of judgment and Rothschild decided to punish him. That is almost certainly true. But punish him for what? Suggestions that 37-year-old Rothschild was somehow trying to uphold a code of omerta may be wide of the mark.
A more likely explanation is that Osborne's loose tongue has unleashed a whirlwind, not just for the politicians, but for Deripaska. Being thrust into the forefront of a media scrum was the last thing Deripaska needed, especially now. In the past few weeks he has been conducting delicate negotiations with banks to whom his companies owe serious sums of money. He has been fighting to hold on to parts of his £16 billion empire after being forced to relinquish some of it just as his fortunes reeled from the global downturn. By the end of this month he has to find £1.14 billion to cover an investment in the nickel industry. According to recent reports he is having difficulty raising the cash.
Imagine his reaction when he found himself on front pages across the world, at the centre of stories about his alleged links to undesirables and claims that his companies had been involved in doubtful deals. Just as his lawyers were working on trying to get his US visa restored, the papers were full of suggestions that the FBI wanted to keep him out of America.
There must have been some interesting exchanges between the protagonists in the Corfu affair over the past week or so but conversations between Deripaska and Nat Rothschild may have been among the most colourful.
Is it surprising Rothschild lashed back? The evidence of just how close he and Deripaska really are suggests it was inevitable. To understand how their relationship works, it's necessary to go back, to the time before they met, to the person Rothschild used to be.
At Eton, Rothschild was a handful. At one point he was boarded with a master to try to calm him down. As an undergraduate at Oxford he was an enthusiastic member of the Bullingdon Club (Osborne was a roistering pal) and one evening leaped on to a table and yelled "Ninety Seven Million!" for reasons no one managed to discover, although some guessed that might be the size of his trust fund.
Young Nat liked a drink and became boisterous after a few. On the town with his Bullingdon chums one night he sent a portable lavatory rolling at speed down a hill, in the full knowledge it was in use at the time.
In 1995 he eloped to Las Vegas to marry Annabelle Neilson, the daughter of a prominent City figure. They first met on a beach in India and later went to New York together. Annabelle and Nat partied hard on both sides of the Atlantic. The marriage was a blur of long nights around people who were doing a lot of drink and drugs. After three years, punctuated by explosive rows and emotional reconciliations, they gave up and parted for good. At the end of it, Nat's friends say, he was a mess.
Some thought he might fall victim to the Rothschild curse that saw his cousin, 23-year-old Raphael de Rothschild, collapse and die on a New York pavement from a heroin overdose and another relative, Amschel Rothschild, hang himself in a Paris hotel room at the age of 41.
But Nat suddenly found something repellent in an existence as a dedicated sybarite. He stopped drinking and started looking for a job. He has never talked about what some close to him regard as a moment of epiphany but there is a view that at this point in his life, Nat saw his destiny not as a playboy, but as a Rothschild and everything the name implies. Like making lots of money.
First he joined Lazards in the City then he returned to New York where he met Tim Barakett, an ambitious arbitrage expert who, like Rothschild, was in his mid-20s. Barakett wanted to start his own hedge fund, Atticus, and Rothschild put in his own money to become a 50 per cent partner.
They started with less than £4 million. Before Atticus took a beating in the current financial storm it was believed to have around £12 billion under management. One report suggested it has now lost around a third of its value.
This is where the story returns to Oleg Deripaska. The extraordinary fortune that Rothschild and his father Lord (Jacob) Rothschild have built up in the past few years has largely derived from Russia and eastern Europe. They work together and in the latest Rich List their wealth is estimated jointly at £1.4 billion.
Like most other great fortunes that number may have been reduced recently but there can be no question that Nat is vastly richer now than he was a few years ago. Deripaska has played a part in that.
The 40-year-old Russian and Nat met five years ago through Roman Abramovich, the owner of Chelsea Football Club, who is also a business associate of the Rothschilds. They became friends almost instantly. Deripaska's English was poor at the time but he worked assiduously at it and is now fluent.
Soon after they met, Rothschild and Deripaska were talking big deals. And the focus of their attention was Russia and the East. Nat and his father formed JNR, a company dedicated to finding investments behind what had once been the Iron Curtain. Deripaska, if not a partner in every deal, was rarely far away. In 2004 he and Nat went on a jaunt to Israel in Deripaska's private jet. A few months later they were in Tajikstan, then Pskov in northern Russia.
As co-chairman of Atticus, Rothschild was perfectly poised to explore areas of wealth the rest of the world could not easily see. The contacts and depth of knowledge of his friend Deripaska were invaluable.
Deripaska invited Rothschild to join the advisory board of his aluminium company Rusal, the world's second largest producer of the metal. They discussed oil exploration in the Black Sea, investments in Ukraine, Kazakhstan and other former Soviet republics.
Last year TriGranit, a Hungarian investment fund in which Rothschild has a large stake, agreed a £3.5 billion real estate venture with a subsidiary of Gazprom, the Russian energy giant. Industry insiders wondered if Deripaska's close links to the Kremlin helped smooth the way.
As his jet criss-crossed the world east of Vienna, it must have seemed to Rothschild that he had been invited into an Aladdin's cave of hidden treasures. Witness his excursion into Kalmykia, a remote Russian republic run by Kirsan Ilyumzhinov, a charismatic leader who fought an election campaign on promises of providing a free mobile phone for every shepherd and a guarantee that Diego Maradonna would be signed up by the local football team.
Ilyumzhinov confides in friends that he had been captured by aliens and has glimpsed a view of the universe not allowed most mortals. His political ruthlessness is combined with a sense of divine right and what rare visitors to his country call a shocking charm.
Nat Rothschild certainly fell for it. On a trip to Tblisi he told the Georgian president Mikhail Saakashvili he wanted him to meet Ilyumzhinov. Rothschild's fascination for Kalmykia and its space-travelling president may, of course, have something to do with the fact that the tiny republic has vast resources of oil and gas.
A London businessman familiar with Anglo-Russian transactions said: "Nat has made his money out of the Russians. He discovered that his name is like a deity to these new entrepreneurs and he has used it to his advantage. He has to protect Deripaska. Their fortunes and probably their futures, too are inextricably linked."
This is certainly true of the Tivat deal. Deripaska spotted the potential of Montenegro years ago. His impeccable political connections would doubtless have alerted him to this sleeping gem in the Adriatic, once weighed down by its link with Serbia but now independent. Deripaska has invested heavily in the country, buying up its valuable aluminium industry. He has made friends with the prime minister Milo Djukanovic, who has been instrumental in paving the way for the new Monaco project.
Intriguingly, while Deripaska and Rothschild were negotiating to buy a lease on the old naval port, Peter Mandelson, then EU trade commissioner, was championing Montenegro's efforts to join the World Trade Organisation.
The plan for Tivat is breathtaking. Rothschild, his father, Deripaska and other investors want to turn the bay once described by Byron as "the most beautiful encounter between land and sea" into a new haven for the rich. There will be a marina for the world's biggest yachts, several first-class hotels, apartments and boutiques. The natural beauty of the location and Montenegro's relaxed taxation regime is expected to attract the world's most wealthy people. Some estimates say the scheme could be worth £5 billion.
It is a big deal for Rothschild and Deripaska. When Deripaska sailed the Queen K away from this future paradise and into the crossfire of the Corfu affair, it would have been remarkable indeed if his friend had not launched a counter-attack.
Reader views (27)
In any decent society Mandleson, Rothschild, Osborne and their foreign friends would be put up against a wall and shot. Their combined wealth used to succour the poor of this world.
- Kerry, Purley, 24/10/2008 13:55
Report abuse
As far as I can tell, when the comments about Mandy hating Browny came out first, Georgie and Mandy were on the same side. They made barely a ripple until Mandy got a his frame into a nice line in ermine. Then the comment came up again - The Times had the story first. Then this came, now Mandy has changed sides. I don't think it was about betraying a confidence under someone else's roof. It is politics, pure and simple. From this article, it looks as though Rothschild is worried about his own cash. Sauve qui peut, as they say in France.
- Andrew, Peterborough, UK, 24/10/2008 12:58
Report abuse
I echo the thoughts of Andy, Leeds.
George is well rid of him. But for all his money Rothschild has been royally stuffed by Mandeleson. Peter M knew what would happen but didn't care. Now all eyes will be on Rothschild and the Russian and the press will go after them.
He may know something about money, but he knows nothing about media management and he chose to take advise from a serpent.
If he thinks that his invitation to George O was a mistake, its a baby. With Mandy's support he has just advised made the daddy.
- Sally, Ipswich, 23/10/2008 22:36
Report abuse
Isn't it strange that as soon as Mandy returns issues surface. The sultan of spin appears to be linked to everything.
- Tony C, London, UK., 23/10/2008 22:04
Report abuse
What on earth does this say about Rothschild, is he not rich enough! Why hang around with low-life like the Russian. And what does Mandy have on him. This is pure handbags ladies!
- Jed Wild, London, UK., 23/10/2008 20:30
Report abuse
At last! A piece of serious investigative journalism on this whole murky affair. All the other so-called journalists who have covered this as a simple `Tory Sleaze` story should hang their heads in shame. There is far far more at issue here.
- Jem Spilsbury, Warwickshire, UK., 23/10/2008 19:04
Report abuse
With respect, they are a lot more relevant than the like of Peaches Geldoff and Girls Aloud now they really are a waste of space, but they're still all over the place.
They are also business people who are obviously trying to amass more money, they're in business!! Easy to say be philanthropic about it, but I doubt many people would give millions to charity.
But I am sick of the super wealthy, and the way politicians are involved in it now. Money corrupts, and this country is rotting to the core, maybe this recession will address the balance of power somewhat, wishful thinking, but at present it appears we're in a state of the rich get richer and everyone else is left behind. This in my opinion is in part to the increase of foreign money in UK, but it was always going to happen, just pathetic the way the country and its leaders has gone along with it.
- D, London, 23/10/2008 17:40
Report abuse
Congratulations, Keith Dovkants, on a great piece of investigative journalism. Very well written. I echo P Harriss's comments above.
- Mrs Alfred Moppe, London, UK, 23/10/2008 17:26
Report abuse
Rothschild isn't much of a friend and George is well rid of him. And I think Rothschild would have been far wiser to have said nothing. Lord Mandelson has used him but there is such a thing as being too clever by half. All they have ended up doing is shining a spot light on their activities. There are plenty of questions that need answers.
- Andy, Leeds, UK, 23/10/2008 17:09
Report abuse
If I can just come back on an earlier point:- the mainstream press appear to think that it is more important that Osbourne broke some idiotic gentleman's agreement that "what happens on tour stays on tour" than that one hugely privileged man has the ability to persuade interested parties to give "evidence" to suggest wrong-doing - when all are complicit in his desires to make billions of pounds. I have no problems with him becoming even more rich - but the idea that individuals linked to possibly corrupt Russian businessmen can alter the composition of her majesty's opposition is something that appeals to the UK media is truly repellent.
- Johnfaganwilliams, London, 23/10/2008 16:58
Report abuse
Mandy seems to do what he likes and then gets into the House of Lords so that he can become a Minister without the public ever voting for him.
OSBORNE WAS ELECTED
I have just been to Montenegro with my wife (September) and can say quite categorically that it is one of the most beautiful countries that I have visited which is being totally destroyed by Russian investment in cheap tourism and tourists themselves. The Russian tourists while they appear to have plenty of cash, have no manners are loud quite frightening and totally uncouth. What also calls ones attention is that they have no credit cards or travelers cheques just wads of cash.
If Rothschild, Mandy and the Russian hordes think Tivat will compete with Monte Carlo it will only be on the basis of money but definitely no class.
It appears that up market Amanresorts has given up on Sveti Stefan due to lowering standards of tourism in the country so good luck to Nat, Mandy and their Russian friends.
- Peter Glazier, Sao Paulo, Brazil, 23/10/2008 16:37
Report abuse
But the world was ever so; democracy is good but scratch beneath its surface anywhere that is where the real power belongs.
My advice - go to Montenegro before it gets taken over by super yachts and the machinations of billionaires - it is a startlingly beautiful place; and makes us remember what happened with the former Yugoslavian republic not so very long ago.
We in the west need to remember how close to the surface trials and tribulations are.
- Jc, SE1, 23/10/2008 16:29
Report abuse
Democracy in the UK is totally dead now, our MP's of all parties are constantly found out to be lying self serving servants to whoever has the £££ to splash around. Why do these MP's think they can get free holidays and hob nob with billionaires and still make out they do nothing wrong. The whole system of public accountability, tax payers getting value for money, public pensions, and public expenses is so far out of control I seriously believe only a period of very very serious civil unrest will spur anyone into action. Otherwise we are damned and left to the constant cockups and incompetence and self enriching of our political classes and their public servant yes men. I am very depressed about the UK and feel this country is in freefall my only hope is to emigrate to a country that actually cares about its population as opposed to one seeking to create some kind of new world order that only benefits the ruling classes and filthy rich - I am truly sickened.
- P Harriss, london, 23/10/2008 15:37
Report abuse
Surely the reason for Rothschild knifing George Osborne in the back was the fact that Osborne had betrayed a confidence about a fellow member of the highly influential Bilderberg Group of international politicians and industrialists?
The Bilderberg Group is founded on absolute trust and discretion, and Rothschild, Osborne and Mandelson are all members. Once Osborne had betrayed Mandelson's comments about Gordon Brown, given in confidence, all bets were off. No doubt Osborne's membership of the Group has already been "reviewed".
- Tony, Aylesbury, UK, 23/10/2008 15:34
Report abuse
More tales of incredibly rich offspring frittering their lives away on OTT lifestyles at daddy's/granddaddy's expense. What a waste of space these people are, they do nothing but try and amass more wealth at whatever cost, they are obsessed by it and its corrupting influence. The fact that Mandelson is involved explains a lot!
- Wen, Oxfordshire, 23/10/2008 14:56
Report abuse
And the lesson for Osborne?
Who trusts a Rothschild?
Perhaps we would all do well to remember this little episode.
- Chuck Unsworth, London, 23/10/2008 14:51
Report abuse
So George, who may have talked about, but not received a donation, faces a possible enquiry. Mandy, meanwhile, who spent a week on Deripaska's yacht, has had several dinners with him and then put £50 mln into his pocket by reducing EU subsidies, is not. What is going on here?!
Wonder how much he'll get out of the new Monaco.
- Anne, London, London, England, 23/10/2008 14:26
Report abuse
I’m glad that Rothschild’s devious little plan is coming back to bite him in his behind. Understandably, the newspapers, having realized that nobody’s interested in something that the shadow chancellor didn’t do, are now focusing on Mandelson (a newly-appointed peer and a member of the Government lest we forget) and his dealings with this posh, gobby little chap who seems to think we’re interested in his grievances. As for the rich Russian, well, I think we all know what to think about Rich Russians…
- St, London, 23/10/2008 14:07
Report abuse
Do you count Osborne as one of the undesirables the Russian was associating with? I know a number of Tory M.P.'s would be pleased to see Osborne cut down to size.
- Harold Hill, Acton, 23/10/2008 12:45
Report abuse
It would seem world politics and now even the economy of the 21st century have fallen into the hands of knaves and blackguards. This is most certainly the case when one cogitates over the devalued intengrity and honour within British Politics and particularly New Labour. One might expect "devaluation" will now occur within the world monetary systems.
- Robert El-Cid,, Hull, East Yorks.,, 23/10/2008 12:30
Report abuse
I'm struggling to find sympathy for ANY of the parties involved. It's more of a "what goes around, comes around" scenario .......
- Marianne, S W France, 23/10/2008 11:51
Report abuse
Thank you for a beautifully researched piece of thoughtful journalism. It would be interesting to see how close Lord Mendleson's activities within the EU, have been in respect to the business dealings of this Russian gentleman, and Mr Rothschild's. Will the real truth ever be discovered? The only hope lies with the investigative power of journalists actually seeking the truth, rather than sensationalist headlines.
- Trevor Edwards, London, England, 23/10/2008 11:47
Report abuse
Twas only the pertinent 'dripping poison' exclusive that Osborne exposed, which, after all the subsequent vitriolic disclosures, was, more revealingly, now so obviously confirmed.
Despite his gurnered grins of late, Brown will certainly now have no doubts that 'Lord' Mandelson, whose duplicity he last 'experienced' 15 years ago, will never again be trustworthy.
Meddlesome, with Campbell's nudging, probably 'encouraged'
Lord Rothschild to pen the letter, if future 'easier access and favour' were to ever be required of the new Peer, and much more importantly, and now more evidently, his recent 'EU contacts'.
The dangerous to know, M'Lord Mandy, who, like the Russian, is fast becoming an 'establishment' persona-non-grata, and the duplicitously creepy Campbell, are surely the culpable duo here.
After all it was surely 'their' rumour that embroiled the naively 'innocent' Osborne, and ultimately exposed this grubby gathering.
For heaven's sake, it was none other than Mandelson, the 'Lord of the Flies' himself, already well accomplished at 'this money chasing game', and who had already 'made himself one of the family' whilst living, in 'his' deluxe cabin, on the yacht, who sought to orchestrate proceedings.
Was he intent on becoming a 'sleeping partner' in this development deal, and has he since been excluded by Rothschild after [the cleverer than we think] Osborne's searchlight had lit up this 'embarrassment'.
What else happened in Mandelson's four year EU Grand Tour?
- Dave, cumbria, 23/10/2008 11:35
Report abuse
Looks like the sleaze trail from Mandelson leads directly grubby Rothschild. The explanation above says it ll. Shame Brown makes himself look even more stupid as it reflects on this country.
- Roy, Hertford, 23/10/2008 11:17
Report abuse
Nat and his friends are a gigantic waste of space. Money has clearly filled a large hole inside their heads. Seek out some human interest stories of more relevance to decent lives, please.
- Paul Freeman, London, England, 23/10/2008 10:59
Report abuse
Looking at NR he looks like an old public school boy, what he probably can`t see is the fact he is dealing with some ruthless East Europeans and Russians along with their associates, there may come a time when he finds his usefulness to them is less than he personally thinks it is, that`s when he will need eyes in the back of his head, rather than anything else.
- Keithw, UK, 23/10/2008 10:56
Report abuse
Everyone seems to think the fall guy here is Osbourne. Maybe six months down the line the Rothschilds will think that a fit of temperament/lack of understanding of the real world has caused damage to their own image and reputation far greater than any damage to the undoubtedly foolish but basically innocent putative chancellor.
- Johnfaganwilliams, London, 23/10/2008 10:48
Report abuse
