The Oligarchs (61 page)

The newspaper was secretly created and published by Yeltsin's campaign. It was among the many different “black” propaganda ploys—disinformation, dirty tricks, paid newspaper articles, unsigned advertising, falsified documents—used to carry out the attack on Zyuganov. In another example, a million small posters were printed showing a glowering, threatening Zyuganov and the words: “Buy food—It could be your last chance!” The posters were adhesive backed and difficult to remove. They were stuck on food store windows all across Russia, a blatant scare tactic. The Yeltsin campaign never admitted they were behind it, but they were.

The campaign also mixed the technology of black propaganda with the reach and credibility of the mainstream news media. Journalists told my colleague Lee Hockstader that the Yeltsin campaign lavished hundreds of thousands of dollars on them for favorable coverage, mostly to drive home the anti-Communist attack on Zyuganov. The payoffs ranged from thousands of dollars a month for a top reporter to just a hundred dollars to a freelance journalist. The bribes and payoffs were especially welcome at struggling newspapers and media outlets, where salaries were low.

Even without the dirty tricks and bribes, Yeltsin reaped a huge wave of support among Russian journalists in the campaign against Zyuganov. Many honest and reputable reporters threw themselves into the task of defeating Zyuganov out of genuine fear about the return of Communism. They completely shared Berezovsky's views, expressed to me right after the election. “It's not an election as normal,” Berezovsky said. “It's not an election of the kind you have in the United States. It's not Republicans versus Democrats. It was a situation where we had to choose between two systems.”

Berezovsky and Gusinsky devoted their powerful television channels
to reelecting Yeltsin, and the third channel, RTR, was state-owned and easily manipulated by the Kremlin. The result was blanket coverage favorable to Yeltsin. In the five weeks before the June 16 first-round vote, Yeltsin received three times more airtime on prime-time news programs than his rival.
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The pro-Yeltsin bias came not only because the oligarchs ordered it, but also because journalists willingly joined them in the crusade. Yeltsin went so far in his memoirs as to claim that Malashenko “created a firm vertical chain of command for work with the television reporters and journalists.” In reality, this did not happen because it wasn't necessary—the journalists willingly entered the Kremlin corral.

Among the television channels, ORT was sympathetic to Yeltsin, as Berezovsky had promised it would be. But Gusinsky's NTV, born in the crucible of the Chechen war the previous year, earned a reputation for standing up to the Kremlin. Now, in a different situation, NTV shifted and went over to Yeltsin's side. Dobrodeyev, who with Kiselyov and Gusinsky had founded the channel, recalled later that he backed Yeltsin instinctively, without hesitation, because of his memories of the Soviet years. “For people of my generation, it was a matter of principle,” he said.

Kiselyov had also been in Davos and shared the anxiety of the tycoons when he saw Western businessmen rubbing elbows with Zyuganov. The election “wasn't a choice of supporting George Bush or Al Gore. It was a different choice, in a politicized society in transition, with an economic crisis that was not yet over, and with all the problems including Chechnya that we had.” In the months before the election, Kiselyov found that “rank-and-file correspondents, producers, reporters, news readers, all of them were enthusiastically and wholeheartedly supporting Yeltsin, with all the drawbacks, with all the understanding of his illness, his drinking habits, of his personality deteriorating, all of us understood that—we thought he was a better choice than Zyuganov.”

After the fact, Gusinsky concluded that he had made a fundamental mistake in cooperating so closely with Yeltsin in 1996 because the Kremlin got the idea that the news media—including his cherished NTV—could be treated like an obedient puppy. The flirtation with power took an immense toll on Gusinsky later on. But at the time, it seemed the right thing to do. “The fact is, we stirred hysteria and scared ourselves,” Gusinsky recalled. “We had no political experience.
And we all decided that we had a mission to prevent the arrival of the Communists. And journalists decided that if the Communists came, that would be the end. They were defending themselves, you see. They were not electing Yeltsin; they were defending themselves and their right to do their job.”

“The people who worked for the mass media, 90 percent were democrats. It was not paid for!” Berezovsky insisted. “It was their own opinions.”

In this atmosphere, the news media became a tool of the Yeltsin campaign. Even the worst of the “black” propaganda made it into the mainstream press. An example came just days before the first round of the election. On June 8,
Nezavisimaya Gazeta,
Berezovsky's newspaper, published a lengthy, alarmist article asserting that the Communists would not accept defeat peacefully. The article was a fabrication from the “black” side of the Yeltsin campaign. It claimed to reveal top-secret intelligence reports that Zyuganov was “losing control.” It claimed that radicals inside the party were preparing, through an elaborate eight-step plan, to seize power after the election, since they could no longer win it through democracy. The whole document was intended to raise fears about Zyuganov, and publication in
Nezavisimaya Gazeta
was just the first step. Next it became presidential ammunition.

Yeltsin gave a preelection interview to Kiselyov. The interview, broadcast on June 9, was taped earlier in a spacious, imperial-style room in the Kremlin, with Yeltsin in a dark gray suit, his hair brilliant white, sitting close to a round table in a pink-upholstered, gilded chair. “Boris Nicholayevich,” Kiselyov asked in his slow, trademark voice, “tell me please, there is only one week left to the elections. Do you have fears that there can be some unexpected unpleasantness, provocations, attempts to do something to disrupt the elections?”

Yeltsin replied that he just happened to read an article about that in the newspaper. “When an enemy, or a rival to be precise, loses confidence—and he is losing confidence now . . . you must expect that he will attempt to stir up the situation,” he said. The message was that Zyuganov equals instability. The fabricated memo was now transformed by Yeltsin into something real.

In the final weeks of the campaign, the oligarchs also lent a hand to Alexander Lebed, the gruff, deep-voiced, charismatic former general who was also running for president. The Lebed gambit was
intended to help Yeltsin by further eroding Zyuganov's support. Berezovsky's television channel aired a five-minute video portraying Lebed as a born leader, “one of us,” like Yeltsin. Berezovsky told me he also held long talks with Lebed, who “reflects the problems and doubts” of ordinary Russians. Vinogradov said his bank, Inkombank, took it upon itself to finance Lebed's campaign but coordinated it with the Chubais headquarters. “Lebed did everything we told him to,” Vinogradov said. Vinogradov estimated he spent $10 million to support Lebed's campaign.
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The Yeltsin campaign had an official budget of $3 million under campaign rules. But it spent many millions—perhaps $100 million or more—for the “black” propaganda, for the printing of
Ne Dai Bog!,
for the “Buy Food” posters, for payoffs to journalists, for personalized letters sent through the mail to every veteran of World War II, and for many other hidden campaign activities. The campaign headquarters was awash in cash. A friend of mine stumbled onto a youth campaign workers' conference at the Hotel Orlyonok, near Sparrow Hills. During the three-day affair, youth leaders were called one by one to a separate suite used by the chairman. There they were each handed a sack of cash.

Who paid for it all? Every journalist has a moment when his cumulative experience becomes a blindfold—mine came on the issue of the campaign financing. After years of watching American politics, where businessmen always make hefty contributions to candidates, it seemed perfectly natural to me to assume that the Russian tycoons bankrolled Yeltsin's campaign. My impressions were reinforced by the details I already knew of the tycoons' interest-free loan to Chubais.

But the deep, dark, dirty secret of the 1996 Yeltsin campaign was different. As I should have known, the tycoons didn't pay, they got paid. They delivered to Yeltsin their best brains and their airwaves, and they bankrolled Chubais. But when it came to big money, to the tens of millions of dollars needed to stage Yeltsin's reelection campaign, the flow of money was not from the oligarchs to Yeltsin, but from the state to the oligarchs.

They did not use government money directly. Rather, with help from the campaign headquarters, they created a hidden scheme in which they obtained government bonds cheaply. The bonds were deliberately sold to the tycoons' banks at a deep discount. Then the banks could resell the bonds at a market price, raising quick cash,
which they were then supposed to spend for campaign activities. How much they actually spent for Yeltsin and how much they pocketed will never be known. The details were so secret that even five years after the fact, many people still refused to talk about it, but I am confident that the scheme existed. A top campaign official told me that the oligarchs could not spare tens of millions of dollars at the time. Instead, they laundered cash by buying and reselling the government's own bonds. Precisely how they got the bonds is a mystery. Another source who directly participated said: “It goes without saying that no one was giving away money for nothing. That is all I want to say on this subject. Do you understand? Your information is correct.” The most likely source of the river of laundered money was the government's dollar-denominated bonds known as MinFins, because they were issued by the Ministry of Finance. In May 1996, the Ministry of Finance issued the sixth in a series of MinFin bonds, $1.75 billion worth of financial certificates. Financial specialists told me it would not have been difficult for the government to parcel out some the bonds to favored banks.
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The scheme had a certain elegance because the tycoons were not sucking money directly from the budget. Rather, they were finagling an asset cheaply—the government bonds—and selling them dearly. It was just like their past deals, importing computers, exporting oil, and speculating on the ruble-dollar exchange rate. The Yeltsin reelection campaign was financed with easy money. Satarov, the Yeltsin aide, later said in an NTV documentary about the election, “Let us not be naive, let us understand that black cash is turned over in our elections all the time, by everybody.”
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Vinogradov, who had been at Davos and attended the meeting with Yeltsin in March, nonetheless was something of an outsider among the tycoons. He refused to participate in the ORT consortium and did not win any loans for shares auctions. He claimed that he also got left out when the MinFin loot was distributed. “When the register was written, who was to get what at MinFin, they didn't write anything next to our bank,” he said. Vinogradov said $100 million was spent from the scheme on Yeltsin's campaign and $200 million stolen, although precise figures are hard to find. “This was a very large business, black business,” he said. “After the election there were informal lists of who stole how much. It was written there how much Smolensky stole, how much Khodorkovsky stole, how much Berezovsky got. He got the largest share.”
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Chubais oversaw the campaign's treasury, other campaign workers told me. When I asked him about it, he immediately recalled happily discovering a stack of
Ne Dai Bog!
newspapers at home, years later, reading them over again with great pleasure. “But it wasn't for free,” he said. “It cost money, serious money.” When I pressed him where the money came from, Chubais dodged the question. “Whether there had been some financial schemes, giving them an opportunity to receive certain privileges, or whether there had been no such schemes, I am not ready to answer,” he said. “I am not ready to either confirm or deny it.”

Konstantin Kagalovsky, a well-informed political operative who helped Khodorkovsky win the loans for shares auction for Yukos, wrote a newspaper article several years later expressing chagrin at the financing of Yeltsin's reelection campaign. Kagalovsky said no one in Russia believed the oligarchs used their own money to finance the Yeltsin campaign. Rather, they were used for their “technical” abilities—a reference, I think, to the scheme for reprocessing the bonds. Then Kagalovsky added, “Such a mechanism for financing the elections is called ‘corruption in defense of democracy.'” Chubais, he said, “can deservedly be considered the founder of this system of ‘corruption in defense of democracy.'” He added that it became the norm under Yeltsin in the following years. “Once you try it, you like it,” Kagalovsky wrote.
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It is an oversimplification to say that Yeltsin won the election because of
Ne Dai Bog!
or because of the overwhelming support of journalists or secret deals by bankers. No amount of campaign dirty tricks, advertising, and airtime can change the fact that Yeltsin won the election because of a profound choice Russian voters faced. For all their flaws, Yeltsin and Zyuganov represented two opposing visions of Russia's future. Zyuganov did not really understand, nor want to take, the path of market capitalism, which was still fragile in Russia. Yeltsin was barely capable of building that capitalism, but he was committed to the notion of it. Russian voters were only four years away from the memory of empty store shelves. My own travels at the time suggested that the best way to understand why Yeltsin won was to ask voters whether, and how, they had adapted to the new life of the 1990s, especially the economy. Millions of pensioners and elderly had not adapted—and voted for Zyuganov. But millions of younger people had adapted, and I think there was just barely a critical mass of them
by June 16, 1996. One day during the campaign, in the Volga River city of Nizhny Novgorod, I interviewed a bright young banker, Sergei Kiriyenko, who was then thirty-four years old. He told me, “We are in the middle of raging river rapids. We can go back. Or we can stubbornly go ahead. In the worst case, if we go back, we will lose everything we have already gained.” Yeltsin, he added, “is going to the other shore, where I want to go.”