The Oligarchs (87 page)

A serious problem for any understanding of Russia in the 1990s is
kompromat
—the materials used by businessmen, politicians, and others to smear their enemies. Often
kompromat
is a mixture of genuine information and falsified materials, impossible to sort out. An enormous amount of
kompromat
found its way into the press and onto the Internet, and I have sought to avoid it as a source for this book.

Even the most aggressive research on my part often ended in disappointment. The reader will notice moments when the inexplicable happens—when a bank suddenly inherits a windfall, when a factory is given away for nothing, when a tiny company explodes from zero to $1 billion. What occurred at these critical junctures was often impossible to reconstruct, and it remains part of the mystery of the new Russia. I hope this book begins to unravel the mystery, but I acknowledge that many secrets of the oligarchs remain untold.

1
Andrei Sinyavsky,
Soviet Civilization: A Cultural History
(New York: Arcade, 1990), p. 181.

2
Lev Timofeyev, “A New Theory of Socialism,”
Moscow News
, December 10, 1996.

3
Alena V. Ledeneva,
Russia's Economy of Favors: Blat, Networking, and Informal Exchange
(Cambridge: Cambridge University Press, 1998).

4
Igor Primakov and Masha Volkenstein, interview by author, December 11, 1999.

5
This account is based on many interviews with Irina Makarova, who retraced the train ride with me on December 2, 1999. The train ride out of Kursky Station is also the setting for a book that was hugely popular among young people who, like Irina, had come of age in the 1970s era of stagnation. Venedict Erofeyev, a maverick, rebellious writer, captured the meaning of escape in
Moskva-Petushki.
The work was published in
samizdat,
books outlawed by the state but self-published, often as carbon copy manuscripts, and passed from hand to hand.
Moskva-Putushki
was a tragic, satirical work. Erofeyev was a rebel against the system. He wrote in slang-filled prose about the train ride from Kursky Station to his own town, Petushki, a paradise of jasmine and singing birds. Erofeyev drinks during the entire train ride to Petushki, and in a cruel parody he never reaches his paradise. He comes full circle back to Moscow and perishes. Erofeyev came across to Irina's generation as the antisystem hero. Instead of the bold, optimistic, modern, utopian Soviet man who changes the future through supreme effort, he is capable of changing nothing and is just carried along. Ultimately, the system breaks its teeth on him because he does not care. He neither fears nor conforms; he drifts.

6
John Kenneth Galbraith,
A History of Economics: The Past as the Present
(London: Hamish Hamilton, 1987).

7
At the time Marx wrote, there was vivid evidence to support his views. The industrializing European economies imposed great hardships on workers and gave rise to huge inequalities between the rich and poor.

8
Alec Nove,
An Economic History of the USSR, 1917–1991,
3d ed. (London: Penguin, 1992).

9
Vitaly Naishul, interview by author, October 7 and December 9, 1999. Naishul's work,
Drugaya Zhizn,
or
Another Life,
is available in Russian at
www.inme.ruand
www.libertarium.ru
. Among his many publications I found especially useful was
The Supreme and Last Stage of Socialism
(London: Center for Research into Communist Economies, 1991).

10
Moisei Eydelman, “Monopolized Statistics under a Totalitarian Regime,” in
The Destruction of the Soviet Economic System: An Insiders' History,
ed. Michael Ellman and Vladimir Kontorovich (New York: Sharpe, 1998), p. 75.

11
Sergei Ermakov, a demographer and professor at the International Institute of Economics and Law, told me that information on mortality was kept secret well into Gorbachev's
glasnost
reforms. Thus Soviet citizens were not told that their life expectancy was falling below that of Western Europeans. Ermakov said his own work was long confined to theoretical models. Ermakov, interview by author, November 27, 1999.

1
The lyrics were written by Alexander Galich.

2
Alexander Smolensky, interview by author, October 10, 1997, and August 30, 1999.

3
Eduard Krasnyansky, interview by author, September 2, 1999, and March 17, 2000.

4
This was a modest salary at the time. The Soviet ruble was not convertible. Its value in dollars is hard to measure because consumer goods were in such shortage that having money was often less important than having access to goods. In the late Soviet period, black market rates were about five rubles per dollar and rose by 1990 to between twenty and thirty rubles per dollar. After the Soviet Union collapsed, the ruble could be exchanged for dollars. Anders Åslund,
Gorbachev's Struggle for Economic Reform
(Ithaca: Cornell University Press, 1991), p. 184.

5
Alex Goldfarb, interview by author, February 27, 2000, and May 27, 2000.

6
“Report, based on operational data, in regards to Stolichny Savings Bank,” undated, in Russian. I received this twelve-page law enforcement dossier on Smolensky in 1997 from the organization of a rival banker. Portions of it concerning Smolensky's biography, including the 1981 arrest, I have confirmed from other sources and from Smolensky himself. However, some of it is unconfirmed and appears to be police speculation, which I have omitted. Smolensky claimed he reported to the construction brigade but did not serve out the term.

7
Timothy J. Colton,
Moscow: Governing the Socialist Metropolis
(Cambridge: Harvard University Press, Belknap Press, 1995), p. 494.

8
Mikhail Gorbachev,
Memoirs
(New York: Doubleday, 1995). Gorbachev recalls, “We felt that we could fix things, pull ourselves out of this hole by the old methods, and then begin significant reforms. This was probably a mistake that wasted time, but that was our thinking then” (p. 218).

9
Åslund,
Gorbachev's Struggle,
p. 161.

10
Åslund,
Gorbachev's Struggle
, pp. 167–181; Dimenico Mario Nuti, “The New Soviet Cooperatives: Advances and Limitations” (European University Institute, Florence, Italy, July 1988).

11
Viktor Loshak, interview by author, March 18, 1999.

12
Yelena Baturina, interview by author, August 23, 1999.

13
Alexander Panin, interview by author, March 11, 1999.

14
Joel S. Hellman, “Breaking the Bank: Bureaucrats and the Creation of Markets in a Transitional Economy” (Ph.D. diss., Columbia University, 1993).

15
Alexander Bekker, interview by author, October 3, 1997.

16
Hellman, “Breaking the Bank,” p. 150.

17
Ron Chernow,
The Death of the Banker
(New York: Vintage, 1997). Chernow's major work on Morgan is
The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance
(New York: Touchstone, 1990).

18
Hellman, “Breaking the Bank,” p. 166.

19
Hellman, “Breaking the Bank,” p. 162.

20
Hellman, “Breaking the Bank,” p. 163.

21
Joel Hellman, interview by author, June 4, 1998.

22
“Offering Circular,” SBS-Agro, $250 million notes, July 18, 1987.

23
Anonymous source, interview by author, October 3, 1998.

24
Sergei Pluzhnikov, Sergei Sokolov, “Operation SBS,”
Sovershenno Sekretno
6 (1999).

1
Yuri Luzhkov,
We Are Your Children, Moscow
(Moscow: Vagrius, 1996) in Russian. In English, revised as:
Moscow Does Not Believe in Tears: Reflections of a Moscow Mayor
, trans. Mark Davidov (Chicago: Martin, 1996).

2
Leon Aron,
Yeltsin: A Revolutionary Life
(New York: St. Martin's, 2000), p. 153.

3
Alexander Vladislavlev, interview by author, April 15, 1999.

4
Vice Rector Vladimir Koshelev, interview by researcher Anne Nivat, April 28, 1999; and Rector Albert Vladimirov, interview by author, May 7, 1999, at the Russian State University of Oil and Gas in the name of I. M. Gubkin. Also, “Information for Entering Students in Moscow,” Gubkin Institute, 1954.

5
Luzhkov, interview by author, February 5, 2001. Luzhkov recalled that the meeting ended with a dramatic confrontation. The hall was emptied of the audience, so only the top managers remained. One by one, they roundly denounced Luzhkov. The party man suggested that he be fired. “I am ready to leave,” Luzhkov recalled saying. But he was not fired. He received a reprimand, still protesting that his idea was a good one.

6
Timothy J. Colton, “Understanding Yuri Luzhkov,”
Problems of Post-Communism
, September-October 1999, pp. 14–26.

7
Colton, “Understanding Yuri Luzhkov,” pp. 14–26.

8
Alexander Panin, interview by author, March 18, 1999, and April 9, 1999.

9
Yelena Baturina, interview by author, August 23, 1999.

10
Viktor Loshak, interview by author, March 18, 1999.

11
Yuri Bortsov,
Yuri Luzhkov
(Rostov-on-Don: Feniks, 1999), p. 148. The quotation originally appeared in
Vechernaya Moskva
, February 20–27, 1997.

12
David Remnick, “Hundreds of Co-Ops Lead a Soviet Revolution,”
Washington Post
, February 4, 1988, p. A25.

13
Luzhkov,
Seventy-Two Hours of Agony
(Moscow: Magisterium, 1991), pp. 79–80. In Russian.

14
Vladimir Bokser, interview by author, November 13, 1999.

15
Colton,
Moscow,
p. 615.

16
Francis X. Clines,
New York Times
, March 22, 1990, p. 1; April 16, 1999, p. 1.

17
James Blitz, “Moscow Is ‘Close to Catastrophe,'”
London Sunday Times
, May 27, 1990.

18
Benjamin B. Fischer, ed.,
At Cold War's End: U.S. Intelligence on the Soviet Union and Eastern Europe, 1989–1991
(Washington: Central Intelligence Agency, 1999). See National Intelligence Estimate (NIE) 11–18–90, November 1990, “The Deepening Crisis in the USSR: Prospects for the Next Year.”

19
Vasily Shakhnovsky, interview by author, November 26, 1999.

20
Another popular perception at the time was that Popov was tolerant of corruption. Popov had once said that bureaucrats should list their preferred payoffs like items on a restaurant menu.

21
I am in debt to Margaret L. Paxson for this definition.

22
Mikhail Shneider, interview by author, March 26, 1999.

23
Gavriil Popov, interview by author, February 13, 1997.

24
Alexander Osovtsov, interview by author, March 29, 1999.

25
Michael Dobbs, “Soviet Price Hikes Draw Anger, Pessimism,”
Washington Post
, April 3, 1991, p. A19.

26
Elizabeth Shogren, “Reformer to Face Three Communists in Moscow Vote,”
Los Angeles Times
, June 6, 1991, p. 8.

27
Colton,
Moscow,
p. 651
.

28
Luzhkov,
Seventy-Two Hours
, p. 38.

29
Alexei Venediktov, interview by author, August 28, 1999.

30
Luzhkov was appointed to a four-man commission that ran the Soviet economy in the final months before the Soviet Union collapsed. He appeared frequently on television, touring construction sites, bus stops, and food lines.

1
Nina Oding, interview by author, October 23, 1999.

2
For a description of the library at this time, I am indebted to Alexei Yurchak, letter to the author, June 9, 2000.

3
Grigory Glazkov, interview by author, December 1, 1999; and Yuri Yarmagaev, interview by author, October 22, 1999.

4
Anatoly Chubais, interview by author, May 13, 2000.

5
Obshchaya Gazeta
, interview with Chubais, February 22–28, 1996. In Russian.

6
Igor Chubais, interview by author, May 25, 2000.

7
Vladimir Korabelnikov, interview by author, October 21, 1999.

8
Chubais résumé, provided by RAO Unified Energy Systems, October 25, 1999.

9
Sergei Vasiliev, interview by author, August 24, 1999.

10
Janos Kornai,
Economics of Shortage
(Amsterdam: North Holland, 1980).

11
Friedrich A. Hayek,
The Road to Serfdom
(Chicago: University of Chicago Press, 1944).

12
Friedrich A. Hayek, “The Use of Knowledge in Society,”
American Economic Review
, September 1945, pp. 519–530.

13
Gaidar's thesis was entitled “Indicators for Evaluating Activity in Self-Financing Enterprises (Based on a Study of the Electrical Engineering Industry).”

14
Pyotr Aven, interview by author, October 22, 1999; July 11, 2000.

15
Yegor Gaidar,
Days of Defeat and Victory
(Seattle: University of Washington Press, 1999), p. 29. Originally published in Russian (Moscow: Vagrius, 1996).

16
Chubais, interview by author, February 20, 2001.

17
Gaidar recalled in his memoir that “I should point out I was right on the mark in casting Chubais in a key role.” He does not say which role. Nina Oding told me, “Chubais took the role of public relations. He was in PR because he knew how to talk about ideas, to simplify them, better than anyone. They didn't think he would do privatization. They thought he would be entirely responsible for PR.”