The Oligarchs (45 page)

A rich young Muscovite spent hundreds of thousands of dollars to plaster billboards all over town with a close-up image of his exquisite wife and an inscription, “I love you.” For weeks, the billboards were a mystery. No one could figure out who had put them up or why. When the story was finally told, many people deemed it a shining and chivalrous act—not ostentatious in the least.
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Hockstader recalled that Luzhkov and eighty close associates dropped by the swanky Maxim's restaurant a few weeks after it opened in 1995. “There were spit-andpolish waiters, Tiffany lamps, Belle Epoque paintings, soft music, terrific wine, sublime food—and a check that ran more than $20,000,” he reported. “The mayor's party paid cash. In dollars, of course.”

The new luxury and excess in these boom years often lay awkwardly juxtaposed against the reality that poverty was still widespread,
even in Luzhkov's city. Only a thin layer of the elite and the newly rich could really afford the sleek cocktail dresses, jewels, and furs displayed in Moscow's boutique windows.

Emotions were often rubbed raw in the contrasts between freshly minted wealth and aching poverty. When Yeltsin was preparing for heart surgery in October 1996, I decided to try and find out what it was like for an average Russian who needed the same heart operation. In the courtyard of the Bakulev Cardiovascular Surgery Institute, I found Nina Dyomina, a lonely figure dabbing tears from her eyes with a soiled handkerchief. “Money, money for everything,” she cried softly. “The only word you hear is ‘money!'” In a hospital ward, her husband, Viktor Dyomin, then fifty-eight years old, lay in need of heart surgery. Although the operation was theoretically free, Dyomina, who had come from a provincial town, needed money to pay for medicines and care, and even then she might have to wait years for her husband's operation. The formula was simple: no money, no surgery. Those who could pay for private care got it. Those without money, forced to depend on the aging Moscow city health care system, could wait forever. Despite all the money lavished on the cathedral and the Manezh shopping mall, the number of hospital beds in Moscow did not grow in the 1990s, and two health care systems existed: one for the haves and another for the have-nots. For many of the most unfortunate city dwellers, the homeless, Luzhkov offered the boot. Police rounded them up from railway stations and vegetable markets and put them on trains, forcibly deporting them to villages or makeshift camps far beyond the city limits. Nor was it pleasant to be dark-skinned in Luzhkov's city. Those with darker complexions who were thought to be from the North Caucasus—especially from Chechnya—were often unceremoniously rounded up on city streets after the Chechen war began.

Luzhkov regarded Moscow as a fortress and he fought for years to keep the gates closed to outsiders. Defying the courts, he enforced a Soviet-era residence permit, known as a
propiska,
for everyone living in the city. In the Soviet era, people were told where to work and live by the Communist Party. The 1993 Russian constitution attempted to bury this legacy. It promised that all Russians “shall have the right to freedom of movement and to choose their place of stay and their residence.” But the constitution was only paper; in practice, Luzhkov was stronger. The old Soviet procedures were kept alive. Luzhkov feared a
wave of immigrants that would overtax the city and compete for its resources. The
propiska
stood, although it was later called a fee for residency. Obtaining one in the mid-1990s required a payment of about $7,000, far beyond the means of most people living in the provinces.
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Despite the gaps between wealth and poverty in post-Soviet Moscow, Luzhkov was not just a mayor for the rich. He was attentive to the needs of the pensioners, the middle class, and the poor and was popular among them. He was far more public than any other politician of the time, plunging into the cold Moscow River for a swim, fit as a fiddle, or singing a song on stage at a local theater.

Luzhkov tried to ease tensions brought on by unemployment and the humiliation many felt as the old verities of the Soviet system disappeared. He became the champion of a grimy, sweaty army of traders who carried goods on their backs, into Russia from overseas and back and forth between Moscow and the provinces. Known as shuttle traders or
chelnoki,
after the Russian word for the shuttle in a weaving loom, which rapidly carries thread back and forth, they numbered a million or more in the mid-1990s, hauling suitcases, duffel bags, boxes, and crates for endless hours on planes, buses, trains, and cars, often under exhausting and miserable conditions—including frequent demands from militiamen for bribes—just to earn small profit margins. Luzhkov provided a king-sized crossroads for shuttle traders at Moscow's Luzhniki stadium. Outside the arena, under a statue of Lenin, spread over dozens of acres, he established a bazaar that rivaled Middle Eastern souks. Every day, thousands of people came to buy and sell, many arriving at dawn after overnight bus rides from the provinces and departing again before sunset, carrying their goods home for peddling on a distant street corner. The shuttle traders were often teachers, nurses, and military officers, moonlighting to eke out a living. When the buses pulled out from Luzhniki, they left behind mountains of empty boxes, remnants of the shoes and video machines that the traders had unpacked in order to squeeze more into each nook and cranny of the bus. The market itself was a chaotic sea of bargain hunters, gawking at leather coats and wolfing down sausages and potatoes. The goods—imported coats, rugs, watches, shoes, hair dyes, sweaters, tapes, and more—were hoisted on rickety metal frames reaching high into the trees. “This kind of business,” Luzhkov declared, “has become a way of survival for millions of Russians.” The
markets also became havens for criminal gangs that extracted protection money from the merchants.

As Moscow's mayor, Luzhkov was a micromanager when it suited him. On holidays, he often would dictate the kind of signs and lights storefronts could display. He once signed a decree banishing certain English words and insisting that Russian words be used instead, to be chosen from a list provided by—Luzhkov. Thus “minimarket” became “gastronom.” Those who dared defy the mayor were subject to fines up to $700.
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Luzhkov fussed over the smallest details. He personally selected the caricature of a nineteenth-century Russian cossack officer as the mascot for a new chain of fast-food restaurants in the city, Russkoye Bistro. He chose the smart orange uniforms, the borscht and tea, and scrutinized every item on the menu, including such Russian traditional foods as hot
pirozhok
pies and the drink
kvas
. “Everything we sell was tasted by the mayor himself,” boasted Vladimir Pivovarov, the deputy general director. The restaurants were part of the Moscow city commercial empire, often described as “state capitalism,” in which the city was the direct owner of the business. By 1997 Moscow Inc. included fifteen hundred businesses, mostly former Soviet enterprises, and the city was a partner with outside investors in another three hundred firms. The businesses included hotels, construction outfits, bakeries, publishing houses, banking, aviation and communications firms, beauty salons, an oil refinery, and a pair of venerable, troubled auto factories. Luzhkov was in position to give city businesses a huge advantage over competitors. In the case of Russkoye Bistro, the city contributed choice spots for the restaurants, cheap utilities, and bank loans at low interest rates. The system captured perfectly Luzhkov's vision of the
khozyain
, but it hardly fit the Chubais notion of a new generation of private owners competing in the marketplace. Arkady Murashev, a former Moscow police chief who led a liberal opposition campaign for city council, infuriated the powerful mayor once when he said Luzhkov had become “the biggest entrepreneur in the city, having taken control of everything.”

But Luzhkov's brand of state capitalism failed when it came to a far more ambitious commercial venture, rescuing the moribund Zil truck factory. Once a crown jewel of Soviet industry, Zil built the four-ton bulletproof limousines enjoyed by Communist Party leaders. The factory fell on hard times after it was privatized. The first private owners
used some questionable financial schemes to nearly wreck the company. The city took a controlling stake in a bailout in late 1996. A factory that once churned out 200,000 vehicles a year was making only 17,000 that year and sinking into loss and debt. “Comrade Zilites, I think that you steal!” Luzhkov thundered to the assembled management of Zil one day, after the city assumed responsibility for the faltering plant. Luzhkov, with typical brusqueness, declared later: “They say to me, you are crazy. The factory has already died. Nothing of the sort. Give me half a year, and Zil will be standing quite seriously on its feet.”
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He was wrong. Luzhkov funneled enough cash into the factory to keep it afloat, in part by guaranteeing a loan from commercial banks. He forced municipal departments to order Zil trucks. But the trucks Zil made were uncompetitive on the open market—a far more popular model was made by the rival Gaz factory in Nizhny Novgorod—and Zil was, in true Soviet fashion, cranking out a product for which there was no market. Four years after Luzhkov's promise to put Zil back on its feet, the company was still running in the red, with no end in sight. Luzhkov fared just as poorly with the other big Moscow auto factory, Moskvich, for the same reasons. State capitalism simply could not substitute for a real market.

The dark side of Luzhkov's empire was endemic, uncontrolled corruption, fueled by the passions of the new money that flooded Moscow. The city was rife with protection rackets—virtually every business had to employ a
krysha
, or roof, for protection in the early 1990s—and several large organized crime gangs thrived. Bribery, kickbacks, and secret overseas bank accounts were common, and disputes were settled with car bombs and contract murders. In this respect, Moscow was not unique, but a more concentrated example of the corruption sickness that befell all Russia. When the government itself was a major breeding ground for corruption, when city bosses and federal ministers were routinely on the take, the law enforcement authorities alone could not have cleaned up the mess. They were just as much a part of the corrupt network as the ministers and bureaucrats. The issue was much more profound: Russia had not become a state with the rule of law, and its rulers were often indifferent to, and sometimes complicit in, the chaos.

Luzhkov told me he struggled with the crime wave in Moscow, but he laid blame for it on the way Russia's economy was built in the early
1990s, when the “shadow economy” turned into big business. “Representatives of the criminal world penetrated both business and law enforcement bodies,” he said, “and they imported their rules.” He insisted that the level of corruption in Moscow was lower than in other cities.
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But it was impossible to do business in Luzhkov's Moscow without being harassed for bribes by inspectors, police, and bureaucrats. To get a street-level view, one day I visited a typical bakery and candy store near Moscow State University, Bread Store 185. In the back of the store, I listened to Vera Trusova, a pleasant woman in a boldly striped sweater who was once an engineer, describe the trials endured by small businesses in Luzhkov's city. She cupped her hands in a begging sign of helplessness as she recounted how the latest city inspector, who was checking price stickers, imposed fines on her that were equal to a month's pay. The petty corruption—demands for bribes were made by anyone with a badge—were wrecking her business. “If she comes right now, I am still going to bow down before her,” Trusova said of the latest inspector. “And I am going to say, ‘Yes, how much?'” Trusova wrote a letter to fellow small business owners, in which she recalled how a team of inspectors was “driving by the store, and a lamp was not burning in the window. A fine. They approach the store, and there's a cigarette butt lying on the ground. A fine. The salesperson was not wearing a cap. A fine. And they found dust on the lamp in the storage room, a fine. They wrote out a pile of fines and walked out of the store, happy!”

A more ominous shadow was cast over Luzhkov's empire on a gray Sunday afternoon, November 3, 1996. At about 5:00 P.M., an American businessman, Paul Tatum, left the Radisson-Slavyanskaya, a 430-room hotel he had helped convert into one of the first Western-style hotels in the city. Tatum, a flashy, eccentric forty-one-year-old Oklahoman who was among the early wave of enthusiasts about the rise of capitalism in Moscow, walked with two bodyguards toward the Kievskaya Metro stop, just beyond the hotel. As he descended down the worn stone steps of an underpass, a lone gunman opened fire from the parapet around the stairway. Twenty shots rang out, eleven of them hitting Tatum, who died shortly after being shot. The killer escaped, leaving behind the murder weapon, a Kalashnikov free of fingerprints and wrapped in a plastic bag.

At the time, Tatum was locked in a nasty business dispute over the
hotel. Tatum's company owned 40 percent, the Minneapolis-based Radisson Hotel chain owned 10 percent, and Luzhkov's city held the other 50 percent. Tatum's fight pitted him against Umar Dzhabrailov, an ethnic Chechen, a slight man with shoulder-length hair, always impeccably tailored, who swooped up and down the main hallway of the hotel surrounded by a flying wedge of bodyguards. Dzhabrailov was the city representative of the joint venture that was running the hotel, as well as other properties. Tatum had been sharply and openly critical of Dzhabrailov—saying he was part of the Chechen mafia in Moscow—and their arguments spilled into the newspapers and television. Tatum said he was being pushed out of the hotel venture; Dzhabrailov said Tatum failed to pay his debts. Tatum arrived at the hotel one day in June 1994 and was blocked by armed guards. He held a news conference in the hotel parking lot to denounce his Russian partners. A week and a half later, accompanied by a dozen bodyguards and wearing a bulletproof vest, he bullied his way back into the hotel.
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