The most stunning suggestion in this chronicle of the making of new billionaires in the Yeltsin era is the theory that in his mid-twenties Mikhail Khodorkovsky caused the bankruptcy of the Communist Party. When it was discovered that billions in cash and gold were missing, the treasurer jumped or was thrown from a window. Several weeks later the previous treasurer jumped or was thrown from the same window.
Although the operational details are left to the reader's imagination, we are told that beginning in the late 1980's the young Khodorkovsky set up "amorphous scientific technical" cooperatives that never did any scientific or technical work. Like an alchemist, he manipulated these shells in order to trade non-cash Soviet credits for actual rubles and even hard currencies from the Treasury. The rubles were used to throw lavish parties and to extend Khodorkovsky's network of shells. The hard currencies were deposited in Swiss and other foreign banks. One investment banker at Riggs Valmet Bank said Khodorkovsky had been a client since 1989.
Today Khodorkovsky remains in prison. Boris Berezovsky emigrated in October 2000 a few weeks after Vladimir Gusinsky and two years before Khodorkovsky's arrest. The other Oligarchs have either lowered their profiles in Russia or left the country permanently in fear of prosecution--all except Yuri Luzhkov, Mayor-for-Life of Moscow since June 1992 when Yeltsin appointed him to the position. "As he built his Empire, every storefront and every factory was a potential source of revenue." Luzhkov may not be a billionaire, though his wife, Elena Baturina, a former factory worker, earned 31 billion rubles (over $1 billion, primarily from public contracts) in 2009, according to Forbes. Yet his salary--8 million rubles a year ($270,000)--is unusual among Russian public employees at any level. Luzhkov's Chechen henchmen have been such effective enforcers that President Yeltsin publicly accused him of running a mafia city. He ignored Yeltsin's Kremlin when he wasn't openly battling it. Yet in 1996, it suited both to plaster all of Moscow with posters of smiling Yeltsin and Luzhkov together. (For the 65th anniversary of Victory Day 2010, Luzhkov spoke of putting up posters of Stalin. One can only guess who vetoed that embarrassing idea with the World War II allies participating for the first time.)
This summer while Moscow choked in record heat and thick smoke from raging wildfires, Luzhkov blithely continued his holiday. High profile contract murders go unsolved but if an unwelcome demonstration is organized in Moscow, Luzhkov springs into action. He bulldozes and fences the planned street or park location. This week Triumph Square is fenced to prevent opposition protests there. Luzhkov is the godfather of the city-state that is Moscow.
Befriending Luzhkov was crucial to the success of Vladimir Gusinsky. Failing to make a career in the theater, he became a fixer, helping western businessmen negotiate the unfamiliar maze of bureaucratic Moscow. He set up a bank with the advice of Lehman Brothers after he and Luzhkov toured the US in Lehman's private jet.
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One important contribution of this book is the spotlighting of the tutorial provided by George Soros and other American and European investment bankers. From them the young tycoons learned to deal with government "in one crude way: bribery and coercion." It appears that extra-legal appropriation was equally important in building their power networks and fortunes. To keep what they had appropriated, they built private "armies and intelligence agencies..." Force was not the primary method of coercion. The kompromat (compromising evidence) often "...manufactured--using forged documents..." was a preferred tool. It could easily be published or simply revealed to the victim who would comply with any demand to keep the kompromat quiet. Was poisoning Litvinenko just another clever kompromat?
Forbes Editor Paul Klebnikov titled his book about Boris Berezovsky, "Godfather of the Kremlin." He documented Berezovsky's relationship with Chechen gangsters and close proximity to murder victims until Klebnikov himself was murdered one night in 2003 on a Moscow street. Victims included journalists who spotlit unsavory deeds or means of acquiring his wealth, business associates who were in his way or to whom he was indebted and even a flamboyant nuisance like Litvinenko, who depended entirely on Berezovsky for his own and his family's existence. This phenomenon did not end when Berezovsky settled in London. The unlikely death of Badri Pataratsishvili 4 hours after he was with Berezovsky reminded some of the death of 39-year-old Boris Fyodorov, a founding shareholder of one of Berezovsky's companies. No murder charges have ever been filed against him, so they must be a series of coincidences.
Berezovsky is the most visible Oligarch in exile, just as he was the most visible inside Russia in the Yeltsin era. He acquired ownership of the vast Ostankino broadcast television network by promising to turn it into a Yeltsin propaganda machine. He controlled the news coverage to make Yeltsin popular throughout all the Russian time zones, assuring electoral victory if ballot fraud didn't. "By dictating the news coverage, Berezovsky could become a power broker." And Kremlin power broker he became, seeing himself as the ultimate ruler to the point of choosing Prime Ministers and even terminating them. Prime Minister Chernomyrdin learned his fate on Sunday night when Berezovsky predicted the change during a TV interview taped several days earlier at his luxurious dacha. Chernomyrdin was fired the next morning, Monday, March 23, 1998.
Alexander Smolensky had no fancy education, nothing more than a dump truck. Yet somehow he formed a cooperative, Moskva 3. His SBS Agro banking group grew out of Stolichny Bank which he created without knowing anything about banking. Instead of making loans, he engaged in currency speculation and pumped up the value of his bank by owning shares in the other new banks while they owned shares in Stolichny, creating the fictional value. No financial reports were published and his activities were conducted in complete secrecy. In the early 1990's fake avisos from Dagestan and Chechnya ordered Russia's Central Bank to transfer millions of rubles to Stolichny Bank. By the time it was discovered they were fake, $30 million had been transferred. Nevertheless, no charges were brought against Smolensky before he emigrated.
Anatoly Chubais is the odd man out--neither a billionaire nor an exile--but he was once the bureaucrat who made billionaires through his giveaways of Russian national assets. Growing up in a patriotic Soviet family, he only reluctantly gave up Soviet orthodoxy after intense debates with fellow economics students about the shortage economy of socialism.
In the epilogue to this chronicle of the Soviet origins and rise of six prominent men in the Yeltsin era, the author quotes the subsequent President at a 2001 news conference. Putin responded to a question about his former supporter, "Boris Berezovsky--who's that?'
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Warren
A good insight into Russia and written like a novel
Reviewed in Canada 🇨🇦 on April 6, 2017William Sharp
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Reviewed in Canada 🇨🇦 on December 24, 2017
