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New Buyers: Russia, China, the Middle East

Veteran art-world observers are betting that future growth for many galleries and the major auction houses will be fueled by soaring demand in Russia, China and the Middle East. The new wealth generated by entrepreneurs in the economies of Russia and China has already created a growing class of art collectors, who have been spending

NEW YORK—Veteran art-world observers are betting that future growth for many galleries and the major auction houses will be fueled by soaring demand in Russia, China and the Middle East. The new wealth generated by entrepreneurs in the economies of Russia and China has already created a growing class of art collectors, who have been spending money in large and ever-increasing amounts on fine and decorative arts of their respective cultural heritages.

“The growth has been exponential,” Henry Howard-Sneyd, managing director of Sotheby’s China, Southeast Asia and Australasia, told ARTnewsletter. “You might call it exuberant.” Sonya Bekkerman, head of the Russian art department at Sotheby’s, says the new buyers have jolted the market with their large quantities of cash and bold style of collecting: “They’re not entering at the low end of the market. They’re not getting their feet wet. They’re jumping right in and going after big-ticket items. It’s an interesting approach.”

Alexis de Tiesenhausen, international head of Russian works of art at Christie’s, agrees. He points out that many of the newly rich buyers often seek to acquire half-a-dozen artworks or more at one time rather than collecting one piece at a time.

Last April Christie’s became the first international auction house to open an office in Dubai (see ANL, 4/12/05), citing “increasing interest in collecting.” Christie’s International CEO Edward Dolman said the office would act as “a local gateway in the Middle East, providing access to the global art market.”

William Ruprecht, president and CEO, Sotheby’s, says that the long-term outlook for sales of Chinese and Russian art is excellent. Many of the Russian buyers “have a strong international base and operate from various parts of the world,” Ruprecht notes, and they look to bring Russian works back to Russia. “You can’t satisfy that in a year or two.”

Chinese Artworks Double in Price

Gains in the Chinese fine and decorative art market for Sotheby’s have “doubled every year for the past four years,” Ruprecht reports. “I expect profitability to grow. There may be hiccups or moments of uncertainty, but the nature of wealth creation in China, combined with the culture of this nation, which has great pride in its cultural heritage, will lead to an enormous appreciation of those assets.”

Sotheby’s Howard-Sneyd reports that the market in Chinese modern, contemporary and classical paintings, as well as jade and porcelain, has doubled in the past two years alone, principally owing to “bidders from mainland China.” And at Goedhuis Contemporary, a Manhattan gallery specializing in Chinese art that sells primarily to American and European collectors, the number of buyers from mainland China has jumped from 2 to 20 percent over the past five years, says director Michael Goedhuis.

Sotheby’s spring sale of Chinese art and decorative objects in Hong Kong brought $81.6 million, the highest total achieved for a series of auctions in Sotheby’s 32-year history in Hong Kong.

Also last spring, the Sotheby’s inaugural combined sale of fine and applied Russian art in New York realized $35.2 million (estimate: $15.6/22.2 million), the highest total ever for a sale of Russian art worldwide (see ANL, 5/10/05).

Record prices for pieces that far exceed auction- house estimates are occurring regularly. At the Sotheby’s sale in April, for example, a painting by Boris Dmitrievich Grigoriev, Sailors at a Café, fetched $1.6 million—a record for the artist and five times higher than the $300,000 high estimate.

A gilded Russian silver tea and coffee set, 1848, was sold for $1.8 million, more than three times above the $300,000 high estimate; and a pair of porcelain vases, 1825, took $3.9 million, far surpassing the presale high estimate of $800,000 and setting a record for Russian porcelain.

Last November’s Russian art sale at Christie’s produced record prices for several 19th-century artists, including Ivan Konstantinovich Aivazovskii ($2.1 million); Il’ia Efimovich Repin ($1.9 million); Henrik Ippolipovich Semiradskii ($1.4 million); Ivan Ivanovich Shishkin ($1.4 million); and Nikolai Egorovich Sverchkov ($644,621).

There also appears to be ample competition from international buyers for these artworks. A jar, Yuan dynasty (1279-1368), fell last July at Christie’s London for $26.7 million (see ANL, 7/19/05), the highest price ever paid at auction for an Asian artifact. The blue-and-white piece was purchased by British art dealer Giuseppe Eskenazi, outbidding five others (including two from mainland China who were still in the hunt at the $20 million level). Eskenazi, who bought the work for a private client, told ARTnewsletter at the time, “The buyer is not Chinese; the jar is not going to Asia.”

Similarly, a large oil painting by Konstantin Egorovich Makovsky (1839-1915), Judgment of Paris, 1889, on which Sotheby’s had placed a $750,000/1.1 million estimate at its April 21 sale in New York, was acquired by an American collector for $2.1 million, a record for the artist (see ANL, 5/10/05).

Because of export restrictions on cultural artifacts in Russia and China, most of the objects coming on the market have been in collections outside those countries. The acquisition of Chinese art by Chinese collectors and Russian art by Russian collectors frequently has been labeled a “repatriation” of these cultural pieces, although dealers and auction-house personnel have disputed the view that buyers are motivated by a philanthropic aim, such as returning their nation’s artworks to the people.

Christie’s de Tiesenhausen acknowledges that he doesn’t know the destination of many of the artworks being purchased by Russian collectors, since so many of these wealthy buyers have multiple residences across the world. “They have a place in Monaco, a pied-à-terre in London, a place on the Riviera,” he told ARTnewsletter. “It’s difficult to see where they live.”

Russian Tax Factor Cited

Peter Schaffer, director of the Russian art gallery A La Vieille Russie, New York, suggests that one reason for the Russian buying rush is tax avoidance. He describes the tax rate in Russia as onerous and getting worse, causing many wealthy people there “to try to get their money out of the country” and invest it in hard assets that are rising rapidly in value.

Christie’s Asian art, watches and jewelry sale in Hong Kong last spring set a record sale total for auctions in Asia: $127.3 million—a total on par with any major Impressionist art evening sale— surpassing the record the auction house had set in fall 2004 of $91.93 million. Nearly 21 percent, or $143.1 million, of Christie’s revenues in the first six months of 2005 accrued from sales of Asian art.

In comparison, Asian art sales amounted to just above $60 million for the same period in 2000. Theow Tow, international director of the Christie’s Chinese art department, notes that perhaps a quarter of its Hong Kong sales are made to mainland Chinese collectors—a group of buyers that has comprised the newest element of the Asian art market to emerge in the past five years.

Their entry into the auction world usually has followed some period of buying from art dealers in Beijing, Shanghai or Hong Kong, “and quite a number have advisers—art dealers and experts,” he told ARTnewsletter. The difficulty in obtaining visas keeps some collectors from attending auctions or visiting galleries in London and elsewhere, and most mainland Chinese bidders at

auction make their bids either by phone or through agents.

Sotheby’s Asian Sales Up 57 Percent

For the first half of 2005, Sotheby’s aggregate sales in Asia totaled $101.5 million—up 57 percent from the first half of 2004 ($64.7 million). For all of 2004, Sotheby’s aggregate sales in Asia were $154.9 million, up 53 percent from 2003 ($101.1 million).

The rapid rise in prices has made some experts wary. A La Vieille Russie’s Schaffer suggests that some buyers, who “have made so much money so fast,” fail to “understand what they are buying. In their rush to gobble up things, they’ve made some mistakes, such as acquiring fakes and vastly overpaying. I see it all the time.”

However, Schaffer adds, a growing number of collectors are making an effort to learn about the objects they already have bought or else want to acquire.

Sotheby’s Bekkerman feels the buying is not reckless. Instead she calls it “savvy,” noting, “Russian art is undervalued, and Russians know that.”

The future of Russian national and mainland Chinese collecting remains a point of considerable speculation. “Since 2000, dozens of mainland Chinese collectors have entered the market for Chinese art outside China in a substantial way,” says Christie’s Tow. “The number of mainland Chinese collectors,” he predicts, “will grow dramatically in the next 10 years.”

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