What Abramovich may do with his money

By Will Smale
BBC News business reporter

You'd be grinning too if you had £16bn in the bank

"Money, it's a gas," Pink Floyd once sang, but as Roman Abramovich would no doubt confirm - oil is also a very profitable natural resource.

Already a billionaire eight times over, the Russian businessman and Chelsea FC owner almost doubled his wealth this week when he pocketed a cool £7.4bn ($13bn) through the sale of his oil company Sibneft.

By offloading his majority stake to Russia's state-owned gas firm Gazprom, Mr Abramovich is now worth an estimated £15.7bn.

The 38-year-old, who spends most of his time living in the UK, is no doubt now mulling over what to do with his latest windfall.

Multiple properties

For someone who redefines the saying "what do you get the man who has everything?", he may initially be puzzled as to what exactly he should do with the extra cash.

Competition is tight among the players - for a seat on the coach

After all, he already has a portfolio of properties that would make royalty envious.

Mr Abramovich has a £28m six-storey house off Sloane Square in Belgravia, central London; a 440-acre estate in Sussex; and a £10m villa in St Tropez on the French Riviera.

And with two private planes and three yachts - including one of the world's largest, the £39m Le Grand Bleu - he doesn't exactly lack for modes of luxurious transport.

He could of course invest even more money into his beloved Chelsea football team, which he bought for £140m in 2003.

Yet Mr Abramovich has already lavished Chelsea with all the money it needs to buy the most expensive players in Europe, and the club's squad can only be so big.

He could choose to further enlarge Chelsea's Stamford Bridge ground, but this is difficult as it is backed by railway lines on two sides and would be hard to achieve.

Even if Mr Abramovich does further increase his spending at Chelsea, it would still leave him with billions spare.

Tax avoidance

Independent financial advisor Justin Modray of Bestinvest Brokers suggests Mr Abramovich think of ways to reduce his tax obligations.

Mr Abramovich's villa in St Tropez is certainly no gite at £10m

"Assuming Mr Abramovich is a tax resident in the UK then he is most definitely a higher rate taxpayer, so I'd suggest he maximise his use of available investment tax relief," he says.

"For example, he can invest up to £200,000 into Venture Capital Trusts and enjoy a 40% income tax rebate on the contribution, as well as tax-free growth and dividends."

Mr Modray also says a couple of ISAs might be a good bet for your typical Russian billionaire living in London.

Abramovich - key figures £7.4bn - from sale of Sibneft £15.7bn - new personal wealth £140m - to buy Chelsea $39m - for yacht Grand Blue

Yet other analysts caution that the Russian government may have put conditions on Mr Abramovich's latest windfall, such as a limitation on how much he can take out of Russia.

Dafne Ter-Sakarian, senior eastern European analyst at the Economist Intelligence Unit, says the Kremlin might have told Mr Abramovich to invest some of the money in the impoverished far eastern Russian region of Chukotka.

Mr Abramovich has been governor of Chukotka since 2000.

"There are probably strings tied to his governship of Chukotka, such as having to spend quite a lot of extra money there alleviating poverty," says Ms Ter-Sakarian.

However, Mr Abramovich is estimated to have already spent $1.3bn of his own money on good causes in the state.

Quiet life

With what money he is allowed to take out of Russia, Mr Modray says Mr Abramovich might wish to diversify out of oil and football.

"Investing his fortune globally in other areas of the economy will spread risk and reduce the chances of his fortune being dented should oil prices fall or Chelsea start losing matches," says Mr Modray.

Or Mr Abramovich could take the easy route - open a UK bank account, put his feet up and never worry about global oil prices again.

"He should be able to negotiate favourable terms with his bank manager," says Mr Modray.