19/12/2014 00:38 GMT | Updated 17/02/2015 05:59 GMT

Russian Art: To Buy or Not to Buy

Following the various bans imposed on Russian citizens living in Europe, and the drop in oil prices, there was apprehension surrounding Russian Art Week in London last month. Dealers and auction houses were wondering how the political and economical situation would impact the Russian art market. In essence, the market has proven to remain strong.

Even more interesting will be the results of the next Russian Art Week, in May next year, and the plausible impact of the record plunge of the Rouble on the art market.

Similar to the now well-established annual Asian Art week, the Russian Art Week takes place twice a year in London, in May and November. The main auction houses and dealers joint together to present a series of Russian sales and Russian art related events.

Within the last twenty years, London has become the centre of the Russian Art Market, overtaking by far New York and Moscow. Ten years ago, ex-financiers William and Catherine MacDougall even launched an auction house solely dedicated to Russian art. They have quickly become one of the three world's leaders in Russian art, alongside Sotheby's and Christie's, and now hold a quarter of the global market.

The reason for London being the leader in the trade of Russian art partly lies in the history of Russian collections.

There has long been art trade between Russian and the rest of Europe. Peter I (1672-1725), who would come to be known as Peter the Great, collected art from his youth. He travelled to Europe in 1697-1698 to learn the skills that Russia needed to grow and prosper. He bought significant works of art during his travels, including many Dutch paintings which are now kept in St Petersburg. Catherine the Great of Russia (1729-1796) was a great collector too and commissioned many works to European artists or factories, to complement her immensely rich collections of Eastern European art. Following the Russian Revolution of 1917, the Bolshevik government seized jewelry, furniture, icons, old master and modern paintings etc. from the Imperial family and Russian nobility and sold them off to Northern American and Western European collectors. Some of these items constitute the core of European museums' departments of Russian art.

Following the growth of Russian economy in the 1990s, new collectors have appeared and are now buying Russian items back, recovering part of their country's heritage. As Catherine MacDougall, founder of MacDougall's auction house, says: "Moscow collectors built up their collections on their own and they sell very little and reluctantly. They are mostly buyers. (...) in general, America and Europe are selling, and Russian is buying."

Russians have no hesitation to buy abroad and about three quarters of the buyers of Sotheby's and Christie's Russian sales in London are said to be Russian or from former Soviet Republics. Surprisingly enough, the market in Russia remains quite weak, thus even leading to the cancellation of Art Moscow last year.

This sudden interest in all art and antiques generated a rise in prices. In 2004, Russian billionaire Viktor Vekselberg spent $100 million (£50 million) to privately buy nine Imperial Fabergé eggs. This landmark sale is often said to have initiated the rise of prices for Russian items at auction in the United Kingdom.

The Russian art auctions are usually divided into two categories (sessions): Works of art, Fabergé and icons, and Russian art (paintings from the 18th and 19th centuries and 20th century, including Avant-Garde and Constructivism). The contemporary Russian art is yet still marginalised, as artists born after 1950 represent only about 5% of the market for Modern and Contemporary art). The Saatchi Gallery 2013 cutting-edge exhibition dedicated to contemporary Russian art 'Gaiety is the most outstanding feature of the Soviet Union' has not yet had a significant impact on the open auction market. In my view this is currently a good market to invest in as it is largely undervalued.

The market for the above collecting categories was at its peak in the Winter 2007. The prices dropped after the crisis. In 2010, the overall Russian market even showed 51% decline value from pre-crisis level (source ArtTactic).

Between 2007 and 2014, Sotheby's, Christie's, MacDougall's and Bonhams together sold just over 25,000 lots of Russian art for approximately £725 million (source Simon Hewitt, London's Russian auction market). Sotheby's are market leaders with sales of £308 million for a market share of 42%.

Among the top prices achieved between 2007 and 2014 in those collecting categories are: £7.88 million for Nikolai Roerich's Madonna Laboris, in 2013; £9.98 million for the Rothschild Fabergé egg at Christie's in 2007; and £445,250 for an icon depicting saint Pelagia and saint John Klimakos, attributed to Vasily Petrovich Vereschagin, in a Sotheby's sale in 2009.

The November sales of Russian art seem to have been affected by the recent economic trouble in Russia and political tensions in the region. The total sales came to £40.5 million, down 37% on the previous Russian Art Week in May 2014, the lowest total since May 2012. More than half of the lots offered remained unsold. Sotheby's achieved £10.8 million, with one of the top lots, Boris Kustodiev's Bakhchisarai selling for £1,258,000 and a Ovchinnikov silver-gilt tea and coffee service selling for £470,500.

Besides the impact of economic sanctions, the sector is now struggling to find works that excite collectors, compounded by overpricing and sometimes unrealistic expectations from the sellers.

Russian contemporary art struggles to find a proper voice in the international market, even though the contemporary segment might be an interesting route for dealers and auction houses to pursue, to re-ignite the enthusiasm in the market.

It remains to be seen how the recent dramatic drop in the rouble which could trigger fears of a new Russian economic crisis as well as the mounting geopolitical tensions with the West could further damage the Russian art market.