The Oligarchs (88 page)
Authors: David Hoffman
18
Dmitriev told me that their institute, the Institute of Economics and Finance,
held a treasure of economics works, a library from the Imperial Russian Central Bank with a large number of books about capitalism, some dating back to prerevolutionary days, which the authorities had never bothered to lock up. Dmitriev said he also read contemporary Western texts through a progressive supervisor who gave him access to the
spetzkhran
. Finally, Dmitriev pointed out that his institute emphasized systems analysis and mathematics, a more technical approach to economics that minimized ideology.
Dmitriev told me that their institute, the Institute of Economics and Finance,
held a treasure of economics works, a library from the Imperial Russian Central Bank with a large number of books about capitalism, some dating back to prerevolutionary days, which the authorities had never bothered to lock up. Dmitriev said he also read contemporary Western texts through a progressive supervisor who gave him access to the
spetzkhran
. Finally, Dmitriev pointed out that his institute emphasized systems analysis and mathematics, a more technical approach to economics that minimized ideology.
20
This account of the seminar is based on my interviews with Naishul, Chubais, Glazkov, Gaidar, Dmitriev, and Dmitry Vasiliev.
This account of the seminar is based on my interviews with Naishul, Chubais, Glazkov, Gaidar, Dmitriev, and Dmitry Vasiliev.
21
Anatoly B. Chubais and Sergei A. Vasiliev, “Economic Reform and Structural Change in the USSR,” in
Ten Years of Russian Economic Reform
(London: Center for Research into Post-Communist Economies, 1999).
Anatoly B. Chubais and Sergei A. Vasiliev, “Economic Reform and Structural Change in the USSR,” in
Ten Years of Russian Economic Reform
(London: Center for Research into Post-Communist Economies, 1999).
22
Sergei Belyaev, interview by author, October 18, 1999. Belyaev was then a member of the council and recalls that Chubais, “very sure of himself,” delivered a speech on how shock therapy could be applied to Russia.
MIKHAIL KHODORKOVSKYSergei Belyaev, interview by author, October 18, 1999. Belyaev was then a member of the council and recalls that Chubais, “very sure of himself,” delivered a speech on how shock therapy could be applied to Russia.
1
Peter Slevin, then a reporter for the
Miami Herald
, gave the author notes from an interview with Khodorkovsky in the first week of August 1991 before the coup attempt. See also Slevin, “The New Soviet Up-and-Comers Trade Party Line for Bottom Lines,”
Miami Herald
, August 18, 1991.
Peter Slevin, then a reporter for the
Miami Herald
, gave the author notes from an interview with Khodorkovsky in the first week of August 1991 before the coup attempt. See also Slevin, “The New Soviet Up-and-Comers Trade Party Line for Bottom Lines,”
Miami Herald
, August 18, 1991.
2
Alexei Yurchak, letter to the author, February 17, 2000; Yurchak, interview by author, October 9, 1999, January 3, 2000. Yurchak's doctoral dissertation, “The Cynical Reason of Late Socialism: Language, Ideology, and the Culture of the Last Soviet Generation” (Duke University, 1997) is a compelling work that I found immensely helpful.
Alexei Yurchak, letter to the author, February 17, 2000; Yurchak, interview by author, October 9, 1999, January 3, 2000. Yurchak's doctoral dissertation, “The Cynical Reason of Late Socialism: Language, Ideology, and the Culture of the Last Soviet Generation” (Duke University, 1997) is a compelling work that I found immensely helpful.
3
Steven L. Solnick,
Stealing the State: Control and Collapse in Soviet Institutions
(Cambridge: Harvard University Press, 1998), p. 60. Chapter 4 describes the Komsomol's troubles and collapse.
Steven L. Solnick,
Stealing the State: Control and Collapse in Soviet Institutions
(Cambridge: Harvard University Press, 1998), p. 60. Chapter 4 describes the Komsomol's troubles and collapse.
4
Earlier, the Komomsol had officially sponsored many youth activities such as concerts, and there had been a youth underground as well. But Komsomol's role declined in Gorbachev's years while the informal associations rapidly expanded.
Earlier, the Komomsol had officially sponsored many youth activities such as concerts, and there had been a youth underground as well. But Komsomol's role declined in Gorbachev's years while the informal associations rapidly expanded.
6
Olga Kryshtanovskaya, interview by author, November 3, 1999. According to Solnick and others, self-financing had another side: huge central budget accounts of the Komsomol were spirited away into private hands and commercial banks, including one, Finistbank, which was founded by funds from the Komsomol central committee. At the same time, the party and the KGB also transferred enormous riches to their own front companies and bank accounts, many overseas. The full extent of this process has never been revealed, but it was undoubtedly quite substantial.
Olga Kryshtanovskaya, interview by author, November 3, 1999. According to Solnick and others, self-financing had another side: huge central budget accounts of the Komsomol were spirited away into private hands and commercial banks, including one, Finistbank, which was founded by funds from the Komsomol central committee. At the same time, the party and the KGB also transferred enormous riches to their own front companies and bank accounts, many overseas. The full extent of this process has never been revealed, but it was undoubtedly quite substantial.
7
Konstantin Zatulin, interview by author, March 22, 1999.
Konstantin Zatulin, interview by author, March 22, 1999.
8
Alexander Khachaturov, interview by author, November 19, 1998.
Alexander Khachaturov, interview by author, November 19, 1998.
9
Mikhail Khodorkovsky, interview by author, June 19, 2000.
Mikhail Khodorkovsky, interview by author, June 19, 2000.
10
Sheindlin recalled that Khodorkovsky was accompanied by Leonid Nevzlin, who later became a close associate. However, Nevzlin said he was not there. It could have been another Khodorkovsky associate. Sheindlin was also uncertain of the date.
Sheindlin recalled that Khodorkovsky was accompanied by Leonid Nevzlin, who later became a close associate. However, Nevzlin said he was not there. It could have been another Khodorkovsky associate. Sheindlin was also uncertain of the date.
11
Khodorkovsky gave a different account: “I found a group of young specialists in my institute who could make a special device to measure a high temperature in an alloy. After that, together with them, we found an institute that could order such work from us. It was the Institute of High Temperatures of the Academy of Science. And we asked them if they would like to order this work from us.” He said the answer was affirmative. (Khodorkovsky, interview by author). In his remarks to Igor Bunin in 1994, Khodorkovsky said his “first credit” was 164,000 rubles and that he used the money for investment. He told author Rose Brady that he “hired students to do research” for the Institute of High Temperature and, Brady says, the “job pulled in 169,000 rubles.” Rose Brady,
Kapitalizm
(New Haven: Yale University Press, 1999), p. 55.
Khodorkovsky gave a different account: “I found a group of young specialists in my institute who could make a special device to measure a high temperature in an alloy. After that, together with them, we found an institute that could order such work from us. It was the Institute of High Temperatures of the Academy of Science. And we asked them if they would like to order this work from us.” He said the answer was affirmative. (Khodorkovsky, interview by author). In his remarks to Igor Bunin in 1994, Khodorkovsky said his “first credit” was 164,000 rubles and that he used the money for investment. He told author Rose Brady that he “hired students to do research” for the Institute of High Temperature and, Brady says, the “job pulled in 169,000 rubles.” Rose Brady,
Kapitalizm
(New Haven: Yale University Press, 1999), p. 55.
12
According to the decision of the Komsomol central committee, local groups were “given an opportunity to determine for themselves a form of expenditure of Komsomol fundsâin cash or noncash.”
Komsomol i Molodezh' Rossii
(Moscow: Komsomol, 1990), p. 33. In Russian.
According to the decision of the Komsomol central committee, local groups were “given an opportunity to determine for themselves a form of expenditure of Komsomol fundsâin cash or noncash.”
Komsomol i Molodezh' Rossii
(Moscow: Komsomol, 1990), p. 33. In Russian.
13
Although the Komsomol played a role in his success, Khodorkovsky expressed disdain for it. He told me he had been passed over for a higher-level job and had become disenchanted with the organization. “I had bad relations with the Komsomol,” he said.
Although the Komsomol played a role in his success, Khodorkovsky expressed disdain for it. He told me he had been passed over for a higher-level job and had become disenchanted with the organization. “I had bad relations with the Komsomol,” he said.
14
The connection was his friend Sergei Monakhov, who was leader of the local Komsomol organization and remained a member of Khodorkovsky's team.
The connection was his friend Sergei Monakhov, who was leader of the local Komsomol organization and remained a member of Khodorkovsky's team.
15
Leonid Nevzlin, interview by author, March 16, 2000.
Leonid Nevzlin, interview by author, March 16, 2000.
16
Andrei Gorodetsky, interview by author, November 24, 1998.
Andrei Gorodetsky, interview by author, November 24, 1998.
17
Peter Slevin, notes from interview with Khodorkovsky, August 1991, given to author.
Peter Slevin, notes from interview with Khodorkovsky, August 1991, given to author.
18
Igor Bunin,
Forty Stories of Success
(Moscow: Center for Political Technology, 1994), pp. 169â178.
Igor Bunin,
Forty Stories of Success
(Moscow: Center for Political Technology, 1994), pp. 169â178.
20
Yelena Baturina, who was then an assistant to Luzhkov, said that Khodorkovsky was refused because it was unclear whether one of the youth science centers could be turned into a purely commercial organization, a cooperative. But she added that there was great concern about mixing noncash and cash together, that it would do “big damage” to the Soviet economy. Baturina, interview by author, August 23, 1999, Moscow. Panin said that Luzhkov was so worried about this that he testified on the subject before parliament.
Yelena Baturina, who was then an assistant to Luzhkov, said that Khodorkovsky was refused because it was unclear whether one of the youth science centers could be turned into a purely commercial organization, a cooperative. But she added that there was great concern about mixing noncash and cash together, that it would do “big damage” to the Soviet economy. Baturina, interview by author, August 23, 1999, Moscow. Panin said that Luzhkov was so worried about this that he testified on the subject before parliament.
21
Igor Primakov, interview by author, December 11, 1999.
Igor Primakov, interview by author, December 11, 1999.
22
Anonymous source, interview by author.
Anonymous source, interview by author.
24
Khodorkovsky, in the Bunin interview, gave a slightly different account of why
he was pressed, saying it was the result of a new government rule that barred him from paying people in advance, upsetting the chain of cash conversions, trade, and payments. He did not say precisely when this took place.
Khodorkovsky, in the Bunin interview, gave a slightly different account of why
he was pressed, saying it was the result of a new government rule that barred him from paying people in advance, upsetting the chain of cash conversions, trade, and payments. He did not say precisely when this took place.
25
Yulia Latynina, “Mikhail Khodorkovsky: Chemistry and Life: Unknown Pages from the Life of a Superoligarch,”
Sovershenno Sekretno
, August 1, 1999, pp. 3â5.
Yulia Latynina, “Mikhail Khodorkovsky: Chemistry and Life: Unknown Pages from the Life of a Superoligarch,”
Sovershenno Sekretno
, August 1, 1999, pp. 3â5.
26
In his remarks to Slevin in 1991, Khodorkovsky offered a clue about the deal with Zhiltsotsbank. “We went to get a loan and we ended up paying
them
to write a set of rules for us,” he said.
In his remarks to Slevin in 1991, Khodorkovsky offered a clue about the deal with Zhiltsotsbank. “We went to get a loan and we ended up paying
them
to write a set of rules for us,” he said.
27
The name was derived from the Russian acronym for Inter-branch Center for Scientific and Technological Programs.
The name was derived from the Russian acronym for Inter-branch Center for Scientific and Technological Programs.
29
Joel Hellman, interview by author, June 4, 1999.
Joel Hellman, interview by author, June 4, 1999.
31
Daniel Sneider, “The Soviet Economy: Commercial Banking Is Off and Running,”
Christian Science Monitor,
December 31, 1991, p. 5.
Daniel Sneider, “The Soviet Economy: Commercial Banking Is Off and Running,”
Christian Science Monitor,
December 31, 1991, p. 5.
33
Vladislav Surkov, interview by author, October 18, 1999. Surkov had become a top Kremlin political adviser by this time. He ended our interview saying he had to rush off to attend a meeting with Khodorkovsky and the Kremlin chief of staff.
Vladislav Surkov, interview by author, October 18, 1999. Surkov had become a top Kremlin political adviser by this time. He ended our interview saying he had to rush off to attend a meeting with Khodorkovsky and the Kremlin chief of staff.
35
Hellman, “Breaking the Bank.” Hellman wrote, “Several commercial banks maintained covert correspondent relations with foreign banks, well before they were granted a license to conduct hard currency operations. Menatep even set up affiliates in Budapest, Switzerland, and Gibraltar for transferring and maintaining hard currency accounts abroad for Soviet clients.” Hellman said his information was based on an interview with Alexander Golubovich, a vice president of Menatep (p. 163). He also said, “Though virtually all commercial banks were officially prohibited from dealing with hard currency, this restriction was routinely ignored. From the very beginning, commercial banks were engaged in a wide range of illegal hard currency transactions” (pp. 162â163).
Hellman, “Breaking the Bank.” Hellman wrote, “Several commercial banks maintained covert correspondent relations with foreign banks, well before they were granted a license to conduct hard currency operations. Menatep even set up affiliates in Budapest, Switzerland, and Gibraltar for transferring and maintaining hard currency accounts abroad for Soviet clients.” Hellman said his information was based on an interview with Alexander Golubovich, a vice president of Menatep (p. 163). He also said, “Though virtually all commercial banks were officially prohibited from dealing with hard currency, this restriction was routinely ignored. From the very beginning, commercial banks were engaged in a wide range of illegal hard currency transactions” (pp. 162â163).
37
Sneider, “Soviet Economy.”
Sneider, “Soviet Economy.”
39
Gaidar wrote in his memoir that the issue came up because two high-ranking former Soviet intelligence officials had written to Yeltsin about the matter, and Yeltsin asked Gaidar to look into it.
Gaidar wrote in his memoir that the issue came up because two high-ranking former Soviet intelligence officials had written to Yeltsin about the matter, and Yeltsin asked Gaidar to look into it.
40
Fritz W. Ermarth, “Seeing Russia Plain: The Russian Crisis and American Intelligence,”
National Interest
, Spring 1999.
BORIS BEREZOVSKYFritz W. Ermarth, “Seeing Russia Plain: The Russian Crisis and American Intelligence,”
National Interest
, Spring 1999.
1
Leonid Boguslavsky, interview by author, April 26, 2000; May 16, 2000.
Leonid Boguslavsky, interview by author, April 26, 2000; May 16, 2000.
2
Vladimir Grodsky, interview by author, June 30, 2000.
Vladimir Grodsky, interview by author, June 30, 2000.
4
Boris Berezovsky, interview by author, March 22, 2000.
Boris Berezovsky, interview by author, March 22, 2000.
5
Alexander Oslon, interview by author, May 29, 2000. Oslon became one of Russia's leading political pollsters: head of the Public Opinion Foundation.
Alexander Oslon, interview by author, May 29, 2000. Oslon became one of Russia's leading political pollsters: head of the Public Opinion Foundation.
6
Berezovsky's publications include a candidate of science dissertation, “Dispatching by Vector Criteria of Queues of Requests in Computer Systems,” which he defended in 1975, when he was twenty-nine years old. In 1981 he cowrote
Binary Relations in Multicriteria Optimization
, with V. I. Borzenko and L. M. Kempner (Moscow: Nauka). In 1983 he defended a doctor of technical science dissertation, “Working Out the Theoretical Foundations for the Algorithimization of Preproject Decisionmaking and Its Application.” In 1984 he wrote, with A. V. Gnedin,
Problem of the Best Choice
(Moscow: Nauka). In 1989 he wrote, with Y. Barishnikov, Borzenko, and Kempner,
Multicriteria Optimization: Mathematical Aspects
(Moscow: Nauka). All these publications are in Russian.
Berezovsky's publications include a candidate of science dissertation, “Dispatching by Vector Criteria of Queues of Requests in Computer Systems,” which he defended in 1975, when he was twenty-nine years old. In 1981 he cowrote
Binary Relations in Multicriteria Optimization
, with V. I. Borzenko and L. M. Kempner (Moscow: Nauka). In 1983 he defended a doctor of technical science dissertation, “Working Out the Theoretical Foundations for the Algorithimization of Preproject Decisionmaking and Its Application.” In 1984 he wrote, with A. V. Gnedin,
Problem of the Best Choice
(Moscow: Nauka). In 1989 he wrote, with Y. Barishnikov, Borzenko, and Kempner,
Multicriteria Optimization: Mathematical Aspects
(Moscow: Nauka). All these publications are in Russian.
7
Mark Levin, interview by author, June 9, 2000.
Mark Levin, interview by author, June 9, 2000.
8
This kind of trade-off is described in
Bolshaya Paika
, by Yuli Dubov (Moscow: Vagrius, 2000) In Russian. The book is described by Dubov as fiction but appears to be a thinly disguised memoir of Berezovsky's early years in business. On page 40, Dubov describes how the Berezovsky character helps a scientist at the institute buy his first car in exchange for reading a dissertation and agreeing to be the “opponent” at the defense.
This kind of trade-off is described in
Bolshaya Paika
, by Yuli Dubov (Moscow: Vagrius, 2000) In Russian. The book is described by Dubov as fiction but appears to be a thinly disguised memoir of Berezovsky's early years in business. On page 40, Dubov describes how the Berezovsky character helps a scientist at the institute buy his first car in exchange for reading a dissertation and agreeing to be the “opponent” at the defense.
9
Pyotr Aven, whose father, Oleg, was a founder and leading scientist at the institute, told me that many of the mathematicians whom Berezovsky brought into his laboratory were Jews who could not get work elsewhere.
Pyotr Aven, whose father, Oleg, was a founder and leading scientist at the institute, told me that many of the mathematicians whom Berezovsky brought into his laboratory were Jews who could not get work elsewhere.
10
Levin, interview by author.
Levin, interview by author.
11
Berezovsky's final academic quest was to become a corresponding member of the Russian Academy of Sciences, which he achieved.
Berezovsky's final academic quest was to become a corresponding member of the Russian Academy of Sciences, which he achieved.
13
For connections, Avtovaz was a gold mine. Berezovsky used his
svyazi
there to get spare parts for friends. Berezovsky earned a respectable professor's salary of five hundred rubles a month, but he was always scrounging for money, Grodsky recalled. “I just recall that Borya was used to borrowing money. And he always lacked money. He borrowed from me, from other colleagues. Borya spent a lot, and he never had enough money.”
For connections, Avtovaz was a gold mine. Berezovsky used his
svyazi
there to get spare parts for friends. Berezovsky earned a respectable professor's salary of five hundred rubles a month, but he was always scrounging for money, Grodsky recalled. “I just recall that Borya was used to borrowing money. And he always lacked money. He borrowed from me, from other colleagues. Borya spent a lot, and he never had enough money.”
14
The statistics are taken from a display on the history of the factory at the official museum in Togliatti.
The statistics are taken from a display on the history of the factory at the official museum in Togliatti.
15
Alexander Zibarev, a deputy director of the factory, told a reporter the Russian car market “is like a hungry dog; you throw it a new car and it gobbles it up.”
New York Times
, June 30, 1992, p. D2.
Alexander Zibarev, a deputy director of the factory, told a reporter the Russian car market “is like a hungry dog; you throw it a new car and it gobbles it up.”
New York Times
, June 30, 1992, p. D2.
16
It may have helped Berezovsky that his mentor, and director of the institute, Alexander Trapeznikov, was a deputy head of the State Committee on Science
and Technology. Still, it is not clear why the state committee would have paid such a large sum.
It may have helped Berezovsky that his mentor, and director of the institute, Alexander Trapeznikov, was a deputy head of the State Committee on Science
and Technology. Still, it is not clear why the state committee would have paid such a large sum.
17
National Intelligence Estimate (NIE) 11â23â88, reprinted in Benjamin B. Fischer, ed.,
At Cold War's End: U.S. Intelligence on the Soviet Union and Eastern Europe, 1989â1991
(Washington, D.C.: Central Intelligence Agency, 1999), p. 1.
National Intelligence Estimate (NIE) 11â23â88, reprinted in Benjamin B. Fischer, ed.,
At Cold War's End: U.S. Intelligence on the Soviet Union and Eastern Europe, 1989â1991
(Washington, D.C.: Central Intelligence Agency, 1999), p. 1.
18
Yuli Dubov,
Bolshaya Paika
(Moscow: Vagrius, 2000). The word
paika
here is prison slang for the ration an inmate receives in a prison or labor camp, when food is divided among members of a group. The title means “big piece,” and to explain it, Dubov refers to another author who wrote that “in a camp it's not the small
paika
that gets you, but the big one.” The point is that you die not when you don't have enough food but when you have more than others and they start envying you. Dubov's comment that he painted what he saw was made in a
Novaya Gazeta
interview (February 28, 2000). I also interviewed Dubov about the book and Berezovsky's early years on May 3, 2000. Many people I spoke with said
Bolshaya Paika
contains accurate descriptions of specific events, such as Berezovsky's dealings with the factory. However, the book's bias toward Berezovsky is plainâhe is portrayed as a business genius.
Yuli Dubov,
Bolshaya Paika
(Moscow: Vagrius, 2000). The word
paika
here is prison slang for the ration an inmate receives in a prison or labor camp, when food is divided among members of a group. The title means “big piece,” and to explain it, Dubov refers to another author who wrote that “in a camp it's not the small
paika
that gets you, but the big one.” The point is that you die not when you don't have enough food but when you have more than others and they start envying you. Dubov's comment that he painted what he saw was made in a
Novaya Gazeta
interview (February 28, 2000). I also interviewed Dubov about the book and Berezovsky's early years on May 3, 2000. Many people I spoke with said
Bolshaya Paika
contains accurate descriptions of specific events, such as Berezovsky's dealings with the factory. However, the book's bias toward Berezovsky is plainâhe is portrayed as a business genius.
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