Wealthy Russians are scrambling to buy luxury goods to preserve their wealth, as worldwide sanctions in response to the invasion of Ukraine has sent the Ruble plunging in recent days.
According to Bulgari SpA CEO Jean-Christophe Babin, sales in Russian stores has risen in the last few days after international financial sanctions sharply restricted the movement of cash, Bloomberg reports.
“In the short term it has probably boosted the business,” he said in an interview with the outlet, describing the company’s jewelry as a “safe investment.”
“How long it will last it is difficult to say, because indeed with the SWIFT measures, fully implemented, it might make it difficult if not impossible to export to Russia,” Babin added, referring to Russia’s ouster from the SWIFT financial-messaging system.
And while many consumer brands ranging from Apple to Nike, and several energy giants such as BP, Shell and Exxon have announced a pullout from Russia, luxury brands have thus far attempted to continue operating in the country with the exception of Burberry – which has now ‘paused’ all shipments to Russia.
Bulgari, owned by LVMH SE, is far from alone. Richemont’s Cartier is still selling jewelery and watches, Swatch Group’s Omega timepieces are still available, as are Rolexes. All are continuing to make sales and trying to strike an apolitical stance. -Bloomberg
“We are there for the Russian people and not for the political world,” said Babin. “We operate in many different countries that have periods of uncertainty and tensions.”
Burberry, on the other hand, will no longer ship to Russia ‘until further notice,’ according to Bloomberg, citing “operational challenges” amid the Ukraine situation.
“This is a fast-moving situation and we continue to monitor developments closely,” a spokesman told the outlet, adding that the company is focused on supporting “our people and partners” in Ukraine and Russia, and has donated to the British Red Cross Ukraine appeal. “These are incredibly difficult times for many people and our thoughts are with all those impacted by the crisis.”
Luxury watches and jewelry can hold and even appreciate in value amid economic turmoil – yet allowing wealthy Russians a financial life-raft has created a ‘potential public relations issue’ according to the report.
“It is true that luxury brands could decide not to serve the Russian market. Rationally, this would be a cost to them, possibly outweighed by the positive communication image they get in other markets,” said Bernstein analyst Luca Solca.
Sales in Russia and to Russians abroad account for less than 2% of overall revenue at LVMH and Swatch Group and less than 3% at Richemont, a “relatively immaterial” level, according to a report this week by Edouard Aubin and fellow analysts at Morgan Stanley.
That’s due, in part, to Russian income and wealth disparities, with a small number of billionaire oligarchs living way beyond the means of ordinary people. The average monthly wage in Moscow is about 113,000 rubles ($1,350 at pre-invasion exchange rates), and much lower in rural regions. -Bloomberg
Meanwhile, Europe’s financial war with wealthy Russians has escalated – as Switzerland has become the latest player to break with their historic neutrality and enforce EU sanctions in an attempt to pressure oligarchs to lean on President Vladimir Putin to end the invasion of Ukraine.
Switzerland, home to 8.6 million people, has long been a favorite destination for wealthy Russians thanks to its discretion and ‘light-touch’ regulation, according to Bloomberg.
The Basel-based Bank for International Settlements (BIS) shows Russian residents and companies held a combined $11 billion in Swiss banks – which is more than double the roughly $5 billion held in UK institutions. That figure does not include brokerage accounts, investments or assets held through offshore companies. Private bankers have estimated that rich Russians hold in excess of $100 billion across the country’s lenders. One person put the figure at $300 billion – equal to nearly 40% of the Swiss economy.
Over the last two years, deposits in Swiss institutions by Russians increased significantly after falling between 2013 and 2018.
Now, some of those assets will be subject to freezes if they’re linked to any of the hundreds of Russian officials and entities, including Putin, put under EU sanctions.
According to the report, the Swiss government will implement the EU sanctions with ‘immediate effect,’ after spending the weekend taking flack from opposition politicians and editorials in leading Swiss papers, as well as from other governments, to join the sanctions.
The EU sanctions include six of Russia’s wealthiest oligarchs; Alexey Mordashov, Mikhail Fridman, Petr Aven, Alisher Usmanov, Gennady Timchenko and Alexander Ponomarenko.
