I love this exercise, and today is also September 1, the traditional first day of the school year in Russia. A bit of very simple math that I’m sure you’ll enjoy too.
The bank owned by the Rotenberg brothers — Putin’s money men — has just published its financial statements, and it turns out to be highly profitable. The Rotenberg brothers are doing a splendid job managing their bank. They made 25 billion rubles in six months.
There is just one catch, though — one that applies to almost all of Putin’s businessmen: most of these profits come from special relationships with the state.
In particular, the Rotenbergs’ bank received 8.5 billion rubles for 12 years at 0.5% annual interest.
It’s marvelous, really. Probably any of us could become a successful banker if we were given money on terms like that. But being a banker is complicated. So let’s apply this figure to a mortgage loan — yes, yes, a painful subject for me — and compare the conditions under which the Rotenberg family lives and the family of... let’s say, the Vasechkins.
Katerina and Kirill Vasechkin (the names and photos are random) versus Arkady and Boris Rotenberg.
So. Katerina and Kirill are ordinary Muscovites. They earn the average Moscow salary — 69,800 rubles each. That means 139,600 rubles per month for the household.
They rent an apartment, but they would like to have a child, so they decided to buy a two-room, 50-square-meter apartment with a mortgage.
The average price per square meter in Moscow is 164,418 rubles. So their desired apartment costs 8,200,000 rubles.
First, Katerina and Kirill saved up for the down payment — 30% of the apartment’s price, or 2,400,000 rubles. Every month they set aside half of Kirill’s salary — 34,500 rubles. It took them almost six years.
(Inflation, rising prices, and other factors work heavily against the Vasechkin family, but let’s ignore them for simplicity.)
Once they had saved 2,400,000 rubles, the Vasechkins went to take out a mortgage. For 12 years.
The cheapest one — with government support — was offered at 11.65%.
Let’s fire up the mortgage calculator:
For their 8.2 million-ruble apartment, the Vasechkins had to overpay by almost 5 million rubles. And every month they had to hand over all of Kirill’s salary and a bit of Katerina’s as well.
That left them just 64,000 rubles a month to live on — for two adults in Moscow who wanted to have a child.
So this part of the story does not end happily. Katerina and Kirill were practically starving; of course they couldn’t afford a child. Out of despair, Kirill started drinking heavily. He was fired. Katerina fought with him several times and eventually left him for Igor Yuryevich Ch. (the name is chosen at random), a young but promising businessman connected to government contracts.
Kirill, meanwhile, could no longer pay the mortgage, was thrown out of the apartment, and moved back to his hometown — let’s say St. Petersburg — where he now lives with his parents.
But for Boris and Arkady, the math looks different! Their loan interest rate is 0.51%!
Their total overpayment on the loan over all 12 years came to a laughable 180,000 rubles — 4.8 million less than the Vasechkins paid.
And the monthly payment is 41,000 rubles — almost half of what Katerina and Kirill pay.
So Arkady and Boris did not drink themselves into misery; they just kept doing business. Gradually they bought a three-room apartment. Then a four-room one. Then a five-room one. And when they realized they could borrow from the state at 0.51% and lend it out at 11.6% to people like Katerina and Kirill, business went so well that they ended up building hundred-room palaces.
Here the photos and names are real. Footage from the Anti-Corruption Foundation shows the actual homes of Arkady and Boris:
Why have I written all this? Because this little comparison poses an important question — and an important answer.
The question is: what the hell does our country, Russia, even exist for — is it for the Vasechkins, or for the Rotenbergs, the Kovalchuks, and the Chaikas?
And here is the answer to the recently asked question, “Why does Russia need a revolution against Putin? He provides stability, doesn’t he?”
- Because Putin stole your apartment and handed it to the Rotenbergs. That is the only stability this regime provides.