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Billionaire Brothers' Feud Gets PoliticalOxford Analytica 09.03.08, 6:00 AM ET

Mukesh Ambani was widely proclaimed to have become the world's richest man earlier this year. Mukesh holds 48% of the stock in the giant Reliance Industries, as well as astring of subsidiary companies, and his personal wealth was estimated in excess of $45

 billion. Yet he was only marginally richer than his brother, Anil, whose network of telecom, power and construction companies gave him a fortune of $42 billion, and whose value hasrisen sharply since.

The two brothers are the sons and heirs of Dhirubhai Ambani who, from a humble beginning, built the Reliance Industries conglomerate into a powerhouse of Indian industry spanning petrochemicals, oil and gas, electricity, telecoms and, more recently, retail. On his death in2002, he left his companies to his two sons, Stanford-educated Mukesh and Harvard-educatedAnil.

However, the brothers quickly fell out. When they officially divided their inheritance in 2005,older brother Mukesh took the original Reliance petrochemical and energy companies, whileAnil took the newer ventures in telecoms and power.

Battling brothers. Since 2005, the brothers have prospered in India's rapidly growingeconomy. However, the division of the family estate has not ended their rivalry, which goesvery deep and reflects fundamental questions of business ethics:

--The family is from the same Gujarati caste as independence leader Mahatma Gandhi.Mukesh has always taken the sober values of the Indian bania (or merchant, part of thetraditional business class) very seriously. He is noted for the simplicity of his lifestyle, lack of flamboyance and disinterest in political and public affairs.

--By contrast, Anil has long associated himself with Bollywood glamour, marrying a film star and appearing publicly with the elite of India's entertainment industry--in many of whoseventures he has invested. He is also rumored to be in the process of buying an EnglishPremier League football club (Newcastle United).

--Moreover, Anil has taken the family into politics by becoming a key financial backer of theSamajwadi Party (SP), which has the fourth-largest delegation in the Lok Sabha (lower house

of parliament) and has mounted a push to expand from its base in Uttar Pradesh--the most populous Indian state--to become a national party. Anil once represented the SP in the RajyaSabha (upper house of parliament).

Economic consequences. The rivalry between the brothers has moved well beyond sportssponsorship and the loss of a few contracts. It has begun to affect national politics and

 billions of dollars in potential investments:

--Mukesh interventions. Earlier this year, Mukesh intervened on a technical legal point to prevent his brother from participating in a merger between Reliance Telecom and MTN of South Africa, which would have created the fifth-largest telecom company in the world.

--Anil alliance. However, Mukesh does not hold the upper hand. The SP has now become a

key ally of the Congress-led national government. When four Marxist parties forced aconfidence vote on July 22 by withdrawing their support over the issue of a nuclear energy

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deal with the U.S., Anil played an important role in securing the necessary backing to keepthe government intact--at an estimated cost of $3 million per vote. Where the SP'srapprochement with the ruling Congress Party will leave Mukesh and the older RelianceIndustries is now a matter of open conjecture.

--Energy implications. Within hours of the vote, the government impounded two of Mukesh's

 private jet aircraft on allegations of nonpayment of taxes. Also, SP leader Amir Singh is believed to have demanded from the government, as the price of its support, a windfall tax on private energy companies and a ban on the export of refined petroleum products--both of which would devastate Mukesh's interests. While the government has yet to respond to thesedemands, which would hit many companies in addition to Reliance, they have a populistappeal and could be enacted.

The struggle between the Ambani brothers threatens to exert a serious impact on theeconomy, in the short term by introducing uncertainty into energy regulation and delayinginvestment in the gas sector. However, while Anil Ambani's political links may strengthen his

 position against his brother at present, his business interests will be vulnerable if theopposition Bharatiya Janata Party returns to power.