The Oligarchs (90 page)

33
In
Privatizatzia
, Chubais recalled, “We had to make hundreds of thousands of people do something they had never done before. We had to fundamentally change their attitude to property.... I remember sitting with Gaidar at some regional meeting. There are, maybe, a thousand people in the audience. And I feel with my skin that we are like two Martians for them. Completely alien.... You had to adjust to their own way of thinking. You had to realize that you cannot make dozens of thousands of people all of a sudden understand the Martian language you are talking. You must speak their language” (pp. 144–145).

34
Boycko [Boiko], Shleifer, and Vishny,
Privatizing Russia,
p. 86.

35
Leonid Rozhetskin, interview by author, March 10, 1999.

36
Chubais, speech to the State Duma, April 12, 1994.

37
Chubais,
Privatizatzia
, p. 187.

38
Boycko [Boiko], Shleifer, and Vishny,
Privatizing Russia
, pp. 100–101.

39
Dmitry Vasiliev, press conference, July 13, 1999.

40
The voucher funds suffered from a crucial design error as well. Because Chubais and Vasiliev feared they could become too powerful, the funds were limited to owning 10 percent of any one company. This meant the funds were a weak voice in the boardrooms of the companies they owned. “The voucher funds failed because people feared they would become too powerful—and as a result we ended up with nothing,” one of the designers told me.

41
Hans-Joerg Rudloff, interview by author, September 7, 2000; November 10, 2000.

42
Boris Jordan, interview by author, October 1, 2000.

43
Rudloff, interview by author, November 10, 2000.

44
Steven Jennings, interview by author, March 3, 2000.

45
Chernomyrdin, press conference
, Rossiiskie Vesti
, December 16, 1992, p. 1.

46
Anders Åslund, “Why Has Russia's Economic Transformation Been So Arduous ?” (paper delivered at the World Bank Annual Bank Conference on Development Economics, April 28–30, 1999); Åslund,
“How Russia Became a Market Economy,”
(Washington, DC: Brookings Institution, 1995), pp. 191–193.

47
Mikhail Berger, interview by author, October 10, 2000.

48
Arkady Yevstafiev, interview by author, March 7, 2000.

49
“Anatoly Chubais: Up to 80 percent of State Property for Vouchers,”
Literaturnaya Gazeta
, November 18, 1992, p. 10.

50
Chubais, interview by author, May 13, 2000.

51
Chubais,
Privatizatzia
, pp. 160–161.

52
I personally interviewed the intermediary, who asked to remain anonymous. When I asked Chubais about the contribution, he said, “Soros back then really played a positive role” but refused to discuss details.

53
Literaturnaya Gazeta
, November 18, 1992, p. 10.

54
William Browder, interview by author, March 21, 2000.

55
Yulia Latynina,
Sovershenno Sekretno
, Moscow, August 1, 1999. Latynina added of Khodorkovsky's buying binge: “No public funds would have been sufficient for so extensive a program, but, fortunately, a large part of the enterprises were purchased at investment competitions, at which the winner was the one that promised to invest more money in the enterprise. As a consequence of Menatep's extreme attentiveness in regard to the government officials that organized the competition, and also to the ‘red directors' in command of the enterprises, its promises were believed more often than those of others. Menatep was, generally, invariably courteous to the directors and would invariably toss them onto the garbage heap after the shares had been purchased.”

56
Boycko [Boiko], Shleifer, and Vishny,
Privatizing Russia,
pp. 109, 119.

57
Chrystia Freeland,
Sale of the Century
(New York: Crown Business, 2000).

58
“Sale of the Century,”
Economist
, May 14, 1994, p. 67. The article pointed out that the book value of Russian companies was fixed once, in January 1992, and was not adjusted even though Russian prices had risen 10,500 percent since then. The book value, which is based on the depreciated value of an enterprise's capital stock and takes no account of property or intangible assets, was still being used as the basis for the voucher auctions. Jordan was quoted as saying that there were still big risks. “These are extraordinarily low asset values, but you must be careful about using the word cheap,” he said.

59
Chubais, interview by author, May 13, 2000.

1
Kadannikov interview,
Profil
, October 23, 2000, pp. 22–27. In Russian.

2
Bryan Brumley, “Factory Managers Back Privatization Plans, Criticize Financial Policy,” Associated Press, October 26, 1992. Kadannikov opened a one-day meeting with Gaidar and cabinet ministers in Togliatti, praising privatization but criticizing the Gaidar government on financial and tax issues.

3
Bella Zlatkis, interview by author, October 18, 2000.

4
International Monetary Fund, “International Financial Statistics,” quoted in
Evolution of Monetary Policy Instruments in Russia,
IMF Working Paper, December 1997, p. 17.

5
International Monetary Fund,
Relative Price Convergence in Russia,
IMF Working Paper, May 1995, p. 1.

6
Yegor Gaidar,
Days of Defeat and Victory
(Seattle: University of Washington Press, 1999), p. 80.

7
Yevgeny Myslovsky,
Beware: Swindle Invest
,
A Guide for Law Enforcement Agencies
(Moscow: Spas, 1996), p. 21.

8
Alexander Oslon, interview by author, May 29, 2000.

9
“Russian Car Alliance Starts Sales of Registered Stocks,”
Business-Tass
(Moscow), December 14, 1993.

10
The founders, according to Leonid Valdman, deputy general director of AVVA, were Avtovaz, 25 percent; Logovaz, 15 percent; Forus Holding, a Swiss firm of Berezovsky's, 15 percent; the Russian Federal Property Fund, 15 percent; Obedinennie Bank (close to Berezovsky), 10 percent; Kuibyshevneft, an oil company, 10 percent; Samara Oblast administration, 5 percent; and Avtovazbank, 5 percent. The data accompanied a Valdman interview that was published November 4, 1994, in the magazine
Kommersant Vlast
.

11
“Car Consortium to Run Lottery,”
Moscow Times,
February 18, 1994.

12
Yuri Zektser, interview by author, October 30, 2000.

13
Avtovaz was privatized by option 2, which meant 51 percent for workers and managers, 27 percent in voucher auctions, and 22 percent in an investment tender.

14
Yuli Dubov,
Bolshaya Paika
(Moscow: Vagrius, 2000), pp. 247–275. Many details described by Dubov are corroborated by other evidence, including news reports and AVVA annual reports.

15
Translations of the MMM commercials are from my own tape. However, I benefited from a superb analysis of the MMM advertising campaign as soap opera in
Consuming Russia: Popular Culture, Sex, and Society Since Gorbachev
(Durham, N.C.: Duke University Press, 1999). See chapter 3, Eliot Borenstein, “Public Offerings, MMM, and the Marketing of Melodrama” (pp. 49–75).

16
James Meek, “Russian Investment Firms Head for the Rocks,”
Guardian
(London), April 28, 1994, p. 12.

17
Mary Darby, “In Ponzi We Trust,”
Smithsonian Magazine
, December 1998.

18
Mikhail Dubik, “MMM: Is Seeing Success Believing?”
Moscow Times
, May 19, 1994.

19
Carey Goldberg, “It's Risky Business in Russia
,” Los Angeles Times
, June 9, 1994, p. 1.

20
Golubkov was played by an actor, Vladimir Permyakov, who related his own rags-to-riches story. “I came from Siberia and dragged out a miserable existence playing occasionally at a small Moscow theater. I had no money and very little hope to succeed as an actor, but my work with MMM turned everything around.” Mikhail Dubik, “Lyonya in the Flesh: A Tale of Rags to Riches,”
Moscow Times
, August 25, 1994.

21
Depositor's information sheet, provided by Yevgeny Kovrov, director, Federal Fund for the Defense of the Rights of Depositors and Shareholders.

22
Goldberg, “Risky Business.”

23
Yevgeny Kovrov, interview by author, April 28, 2000.

24
Helen Womack, “Gamblers Push MMM's Share Price Up Again,”
Independent
(London), July 29, 1994, p. 12.

25
Russia's Itar-Tass news agency reported September 26, 2000, that investigators were still seeking Mavrodi's whereabouts.

26
Goldberg, “Risky Business.”

27
Yevgeny Myslovsky, interview by author, October 10, 2000.

28
His comments were made on an NTV documentary,
Independent Investigation,
produced by Nilcolai Nikolayev, broadcast March 16, 2000.

29
Zektser, interview by author. He said AVVA had fulfilled the obligations of the investment tender, which called for $111 million to be invested in the factory by the end of 1995, but it is hard to see how AVVA accomplished this.

30
“Interview with the President of AO Avtovaz: V. Kadannikov,”
Trud
, November 2, 1994. In Russian.

31
“Information Report about the General Meeting of Shareholders of the AOO All-Russian Automobile Alliance,”
Ekonomika i Zhizen
, May 20, 1995. In Russian
.

32
Kadannikov continued to mask the events years later. In an interview in April 2000, when asked whether he had used AVVA to seize Avtovaz, he replied, “I cannot quite understand why anybody would need a plant; why seize it? It's hard work, low profit. And what's the use in just making do with the turnover? You can do it for a couple of months, and then what?” He also blamed the government, saying it had “eaten up the people's money very fast.”
Vedomosti
, April 5, 2000, p. A5.

33
Berezovsky interview,
Moscow News
, May 16, 1996.

34
Speculation finally came to an end in mid-1995 when the government and Central Bank announced a ruble-dollar “corridor” that limited currency movement and thus crimped the superprofits of traders.

35
Smolensky, interview by author, August 30, 1999.

36
Yegorov made the comments to the seventh congress of the Association of Russian Banks. “Chubais Tells Banks to Focus on Industry,”
Moscow Times
, April 23, 1997.

37
“Learning to Lend,” CentreInvest Securities, October 24, 1997, p 7.

38
Bank Menatep (Group),
Independent Auditors Report,
Arthur Andersen, 1995.

39
Former Menatep vice president, interview by author.

40
Vladimir Vinogradov, interview by author, June 28, 2000.

41
Yulia Latynina, “Mikhail Khodorkovsky: Chemistry and Life: Unknown Pages from the Life of a Superoligarch,”
Sovershenno Sekretno
, August 1, 1999, pp. 3–5.

42
Victor Huaco, interview by author, April 14, 1999.

43
“
MMM Deflates Shares, Russia Weighs Action on Stock Scandal,”
Agence France Press
, July 29, 1994.

44
Grigory Satarov, a one-time adviser to Boris Yeltsin and president of INDEM, the Information for Democracy Fund, Mark Levin, an economics professor, and M. L. Tsirik, a graduate student, lay out this argument in their analytical study, “Russia and Corruption: Who Is Doing What to Whom?” prepared for the Council on Foreign and Defense Policy, Moscow, 1998. They concluded that among
the most important reasons for corruption in the new Russia, aside from historical ones, were “the rapid transition to a new economic system that was not supported by the necessary legal base and legal culture; the absence during Soviet times of a normal legal system and the corresponding cultural tradition; the collapse of the party control system.”

45
“Diagnosis: Corruption: Is It Possible to Kill the Illness of Russia?”
Vechernaya Moskva
, October 18, 1999, p. 3. A roundtable discussion, in Russian.

1
Ryszard Kapuscinski, “The Temple and the Palace,”
The New Yorker
, May 23, 1994.

2
Vladimir Mokrousov and Valentina Mokrousova, interview by author, November 3, 2000. In another sign of his caution, Makrousov submitted the mock-up twinned with another, the St. Georges Cathedral.

3
Flore Martinant de Preneuf, “The Historical and Political Significance of the Reconstruction of the Cathedral of Christ the Savior in Moscow” (M.Phil. thesis, Oxford, 1997), an excellent recounting of how the cathedral was rebuilt in the early 1990s.

4
De Prenuef, “Historical,” p. 29.

5
Vasily Shakhnovsky, interview by author, November 26, 1999.

6
Mokrousova interview, November 3, 2000.

7
When I interviewed Luzhkov on February 5, 2001, he handed me a thirty-fourpage response to questions I had posed in advance. Of the cathedral, he said, “I always believed that the revival of Russia must not begin with demagoguery on macroeconomic subjects but with spiritual revival. I thought the restoration of the cathedral—barbarically destroyed—was a symbol of this revival.”