The world of collectibles is seeing the rise of a new superpower, whose bidding strength rivals that of the mighty China.
Following the recent old master’s sales in London, Sotheby’s announced that it had seen a record number of investors from Russia, with buyers spending more than $22.6m at its July 3 auction.
Included in the sale was El Greco’s Saint Dominic in Prayer, which set the record for the artist’s work, propelled by the buying power of Russia’s new wave of investors.
"They’re well-advised and are buying the triple-A lots. They’re spreading their wealth by buying top-quality in any area of the market,” confirmed Amsterdam-based art consultant Johan Bosch van Rosenthal to Bloomberg.
But what has caused this sudden influx of Russia buyers to the market?
The R in BRIC
The nation puts the R in BRIC – the acronym given to the four emerging economies deemed to be the next big thing.
As such, the newfound wealth of its citizens – particularly the ever-expanding middle-class – has resulted in an increasing amount of disposable income to spend on collectibles, or place in assets such as art.
Prior to the old masters sales in London, major auction houses targeted these new Russian buyers with Russian Art Week, which provided an excellent example of their buying power:
- Nikolai Roerich’s Madonna Laboris set a new £7.9m ($12.1m) record for an artwork at a dedicated Russian art auction.
- An Ilya Mashkov piece more than trebled its £1.5m ($2.3m) estimate – selling for £4.7m ($7.3m)
- Ivan Shishkin’s Twilight netted a £2.2m ($3.3m) record for the artist.
"It is incredible to think that just over 10 years ago, Sotheby’s Russian painting sales only made around £4m a year, and that by 2007 the market had grown to nearly £100m," commented Theodora Clark, founder of the Russian Art Week guide and editor of Russian Art & Culture, to the Telegraph newspaper.
Eurozone fears fuel buying
Clarke went on to attribute the recent growth to the economic troubles in Europe: “Art is being seen by high net-worth individuals as a good alternative investment given the eurozone crisis," she told the UK’s Telegraph newspaper.
"As a result, buyers want top-quality works with a good provenance, which is what the main auction houses offer.”
Russian investors were hit hard when those that were using Cyprus as a tax haven were faced with a levy on all uninsured deposits in the Cyprus Popular Bank, and around 40% of those in the Bank of Cyprus.
Since then, the nation has felt the brunt of several headwinds, with the strong US dollar affecting rouble-denominated assets as well as issues with the chief energy producer, Gazprom, which has seen about a third of its market value decline of the past year.
In fact, since the global recession, Russian equities have lost about a third of their value in the past two years. Stocks have now reached the lows seen in November 2012.
Obviously, these statistics do not exactly instil investor confidence in Russia and the country is now reaching bear market status. Investors yanked more than $393m of out Russian mutual funds in the week of April 10, 2013 – the worst weekly outflows since September 2011.
A patriotic conquest of the West
There is also the factor of the recent high net worth individuals (HNWIs) looking to repatriate their nation’s cultural heritage.
The country saw much of its prized imperial artworks destroyed or sold off during the Russian revolution at the beginning of the 20th century and, when the soviet state collapsed in 1991, many of the artworks created during the era were taken to the west.
As a result, collectors such as Andrei Filatov are seeking to return these pieces. Filatov, a Russian billionaire and chess expert, has spent over $100m collecting Soviet artworks, with the hope of opening a museum.
"When the Soviet Union collapsed, a huge amount of great artworks were taken out of the country to the west and elsewhere. My task is to buy these artworks and show them to people,” he explained to CNN.
There’s also Viktor Vekselberg, one of a new generation of Russian industrialists, who bought nine imperial Faberge eggs for an estimated £50m ahead of a Sotheby’s sale in 2004.
This is similar to the trend in China, which saw many items, particularly porcelain and furniture, disappear from its imperial palaces when French and British troops marched on Beijing at the end of the second opium war in 1860.
Put-off by Putin
However, unlike China, Russian investors aren’t keen to see their money stay in their home country.
When former president Dmitry Medvedev stepped aside for Vladimir Putin after just one term in 2012, it crushed the hopes of entrepreneurs and art collectors who had believed Medvedev’s promise to modernise the economy, fight corruption and improve social situations.
As such, roughly 1.25m Russians have left the country, many of them HNWIs keen to stay in the West until the situation changes.
Commenting on the failing Russian modern art market, which has been abandoned by the same investors that have left for the West, Pierre-Christian Brochet, a French publisher and collector, told RT news: "There is a respect for modern art in the West, here I have never seen any sign of that support that you are hoping for."
And it’s not just art and the decorative arts that the Russians are looking towards, other collectible categories have also been reaping the rewards of the nation’s wealth:
- Poet Alexei Remizov’s At the Fox’s Ball sold for $62,500 at Bonhams in June.
- The current world record for space memorabilia is held by a Vostok 3KA-2 test capsule that sold for $2.3m.
- An archive pertaining to the career of filmmaker Andrei Tarkovsky sold with a 1,397% increase on estimate in November 2012.
This is the early days of a new trend that may see Russia rise to the heights of China, which is now the world’s largest art market.
There are plenty around today who wish that they had got on board when China was first emerging as a big power in collectibles – don’t let your thoughts of Russia be full of regret.