The Oligarchs (83 page)

At the time, this comment unleashed a torrent of speculation about what Putin really meant. My own view was that Putin understood
full well the distortions that oligarchic capitalism had brought to Russia. That was not really the issue; the question was what Putin intended to do about it. Did he want to change the system? Many Westerners, especially those in the financial markets, rejoiced at Putin's words because they believed he would carry out an assault on the system of opaque, dirty deals, clean up the mess, and make Russia safe for foreign investment. If Putin had really been serious about systemic change, about building a competitive, market-oriented, rule-of-law approach, then it would have been welcome news indeed.

But Putin did not begin with an assault on the system. He began with an attack on one of the oligarchs: Gusinsky. Starting soon after the March 2000 election, which Putin won, the Kremlin intensified a relentless campaign, through surrogates, to destroy Gusinsky's media business and largely succeeded over the following year. Putin's backroom team had already ruined Luzhkov's presidential hopes. Then they turned on Gusinsky and, amazingly, they eventually turned on their own creator, Berezovsky. Putin's approach to oligarchic capitalism during his first year was not to change the system. He just wanted to get control of it.

 

Gusinsky recalled with some pride how he had once taken the chairman of Gazprom, Rem Vyakhirev, to see the ground station that Gusinsky's conglomerate, Media-Most, had built to operate the satellites for NTV-Plus. Ever since it bought 30 percent of NTV in 1996, Gazprom had been a friendly investor in the television company. Gazprom, a gargantuan, hidebound monopoly that operated by its own secretive methods, was a pillar of the Russian economy. The company earned billions of dollars from lucrative gas exports to Europe. It was a cushion of capital for Gusinsky after the 1996 election. Gazprom was there for Gusinsky again after he failed to float his shares on Wall Street. It agreed to guarantee a $211 million loan for Gusinsky through Credit Suisse First Boston and paid off the loan when Gusinsky could not. Gusinsky now had a debt to Gazprom. A deal was struck to boost Gazprom's stake in the holding company, Media-Most, in exchange for paying off the debt. Under the terms, Gazprom would get 25 percent plus one share of Media-Most. Gazprom agreed to the deal, but details were still being worked out early in the year 2000, when Putin was elected.

Then everything changed. The Kremlin entered the picture, and Gusinsky felt a noose tightening around his neck. Gazprom would no longer be his friend.

A disturbing sign of trouble came in early May 2000. Gusinsky was negotiating to sell his Most Bank to a Central Bank subsidiary. The plan had been drawn up and was ready to be signed when the chairman of the Central Bank, Viktor Gerashchenko, received a phone call from the Kremlin. The caller was Putin's chief of staff, Voloshin, and he told the central banker not to go ahead with the deal. According to several accounts I heard at the time, Gerashchenko told Voloshin to go to hell and hung up the phone.

The next call came ten minutes later from Putin, who also instructed Gerashchenko not to sign the deal. This time, Gerashchenko obeyed.

On the morning of May 11, three minibuses of armed, masked men identifying themselves as tax police pulled up at the headquarters building of Gusinsky's holding company, Media-Most, in the center of Moscow. The building was lavishly appointed by Russian standards, with fountains, marble floors, and a luxurious amphitheater. The raiders, wearing black masks with only their eyes showing and wielding semiautomatic rifles, ordered the employees to leave their offices and remain in the cafeteria while they searched the building. What were they searching for? Who were they? All day the authorities gave conflicting accounts: they were tax police; no, they were searching for bugging equipment; no, they were investigating Gusinsky's debts. The raid was just the first hint of what was to come.

To Gusinsky's surprise, Gazprom turned hostile. Gazprom appointed Alfred Kokh, the salty former privatization chief who had overseen loans for shares and Svyazinvest, to manage its share of Media-Most. Kokh was still angry at Gusinsky three years after the Svyazinvest fiasco. He knew Gusinsky was behind the disclosure that he had received the $100,000 book advance from a company linked to Potanin. He was still seething at the way Gusinsky had used his media to disclose the book advance. This was no casual decision by Gazprom; it was tantamount to putting Gusinsky's most hateful enemy in charge of his business. I ran into Kokh during this period at his office in central Moscow. He was extremely agitated at something he had seen about himself on one of the proliferating Internet sites that carried
kompromat
from anonymous sources. Kokh invited me to
look at the computer screen in his office. I don't remember what it was that so agitated him, but I well remember his shouting that it was all Gusinsky's fault. “Bandit!” he said over and over again of Gusinsky. The wounds of Svyazinvest still festered, and Kokh was in a position to extract his revenge.

On the day of the raid against his headquarters, Gusinsky flew back to Russia from a business trip to Israel. Speaking to reporters at the airport, he denounced the show of force as “political pressure.” Still, Gusinsky could not help but feel that he had been through all this before, when Korzhakov's goons had chased his car into the center of Moscow in 1994. The Kremlin had pressured him then too, and he had been forced to flee the country for six months until things cooled down. But he survived that, and NTV had thrived. “History repeats itself somehow,” he said, rather philosophically. “If you remember 1994, all this has happened already.”

More worrisome was the changed attitude of Gazprom. The mammoth company was run like a private fiefdom in which Vyakhirev could do as he pleased. This worked to Gusinsky's advantage from 1996 until 2000, when Gazprom was his ally. Gusinsky said that, as a major shareholder in NTV, “Gazprom never attempted to interfere.” Only a few months earlier, Vyakhirev agreed to take the larger share of Media-Most in exchange for the unpaid debt. It was a debt-for-equity swap, a transaction hardly unusual in the West. Gazprom was a “partner,” Gusinsky told me, “and I had no reason not to trust the deal.”

But after Putin took office, Gazprom was no longer willing to take Gusinsky's equity. Gazprom demanded that Gusinsky pay cash, which the Kremlin knew Gusinsky did not have. Gusinsky said he believed that Vyakhirev was personally pressured by the Kremlin into the aboutface. Moreover, Gusinsky, who had wide contacts in the West, found it much harder to raise new capital abroad. The masked men raiding his offices had taken care of that. Just the news photos of a police investigation were enough to scare away investors. “You understand, investors are afraid of scandals,” Gusinsky told me. His attempts to borrow from abroad were effectively blocked by the Kremlin. Gusinsky, stubborn, emotional and vain, concluded that Putin was personally out to get him. “If the president of such a big country as Russia, who has internal problems, problems with governing, problems with Chechnya, problems with the government, finds time to call up Gerashchenko—I think it is clear who is dealing with Gazprom, and why.”
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The next blow fell on Gusinsky personally. He openly criticized Putin. “The myth of Putin as a president who advocates reforms, democracy, free speech, and so on, is history now,” Gusinsky said defiantly the first week of June. “His real actions unmask him, revealing his true face, you know.”
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A week later, Gusinsky was asked to come answer questions at the general prosecutor's office. At issue was the origin of several bullets for a decorative pistol belonging to a Gusinsky aide that had been confiscated in the May 11 raid. For reasons that were not clear, Gusinsky was not alarmed by the summons and went to answer the questions without a lawyer, taking only a bodyguard. He was originally scheduled to answer questions at 2:00 P.M. but was delayed and arrived at 5:00 P.M. Then, at 6:15 P.M., his lawyers received a note from the prosecutor's office that Gusinsky was under arrest. Later in the evening, the prosecutors announced that Gusinsky was being held as a suspect in an old fraud case involving privatization of a St. Petersburg television company, Russian Video. The whole arrest was carried out with haste; the original documents said that Gusinsky was to be taken to Lefortovo, the large federal prison, but instead he was thrown in Moscow's most notorious prison, Butyrskaya, an overcrowded, eighteenth-century jail, and denied access to a lawyer.

Putin, who was on a state visit to Spain, pretended that he had no idea what was happening and claimed that he could not even get the general prosecutor, Vladimir Ustinov, on the telephone. But Putin displayed a surprisingly detailed knowledge of the case. He clearly had been briefed about Gusinsky's financial plight. Putin claimed that Gusinsky had taken $1.3 billion in loans for Media-Most but “returned almost nothing,” including debts to Gazprom. “Several days ago Gusinsky did not pay back another $200 million loan,” Putin added, “and Gazprom again paid the outstanding debt. I wonder why Gazprom should spend money on this.” Putin's words revealed the Kremlin's crude tactics: to force Gusinsky to pay all his debts at once, effectively to bankrupt him.
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Although Putin claimed he was not involved in Gusinsky's arrest, it was a lie. He had his hands on the hangman's noose now being strung around Gusinsky's neck.

When he heard about the arrest, Sergei Dorenko grew angry. Dorenko had indirectly helped Putin come to power with his fifteen silver bullets, but he did not like what he saw unfolding. That evening, NTV was broadcasting an edition of its popular talk show,
Glas Naroda
(Vox Populi). The subject was Gusinsky's arrest. The show was broadcast from an amphitheater-like studio and encouraged participation by a large audience. Dorenko was Berezovsky's man, but he rushed to Gusinsky's defense. Wearing jeans and a sweatshirt, Dorenko drove madly to the studio. Halfway there, his beeper went off. It was Kiselyov, inviting him to appear on the air immediately. Berezovsky called on his mobile phone, seeming a bit confused about what was happening. “Oh Borya!” Dorenko replied. “They are simply idiots!” he said of the arrest of Gusinsky. “And you know I am on my way to the studio.” Berezovsky was surprised but silent.

The show was filled with passion. Politicians, lawyers, and journalists from Gusinsky's publications, and others who were just his friends, appeared with emotions flashing in their eyes, their anger searing and deep. The imprisonment of Gusinsky was nothing other than an assault on Russia's fragile freedoms, they said, an arbitrary reversion to the old authoritarianism. “This is an action of threat and revenge,” said Andrei Cherkizov, an acerbic radio commentator on Gusinsky's Echo of Moscow station. “It's a threatening action—if you misbehave, this will happen to you also,” said Boris Nemtsov, the young reformer who was now a progressive member of parliament.

Dorenko was hardly a beacon of idealism when it came to defending a free press. He was a showman, and he had personally carried out a debilitating smear campaign against Luzhkov. But he had guts, and on this night he was not afraid to say what he saw happening. Dorenko's comments were the most memorable of the entire evening. He declared that Putin had given the green light for the “robots” of the old regime, the security services, to return to the fore. Dorenko had disliked Primakov as a symbol of this old regime. Now, Dorenko realized, Putin was turning out to be just a continuation of the old school—arbitrary attacks, total control. Just six weeks after Putin had taken office, and at a time when he was still being hailed in the West as a young, post-Yeltsin remedy for Russia's ailments, Dorenko punctured the image with just as much energy as he had smashed Luzhkov.

“We thought something happened over these last ten years,” he said, referring to the rise of Russian democracy since the collapse of the Soviet Union. “We thought that the old system broke over these ten years. We dumped the robots. They have been lying there. And they stirred and started moving again, as if they heard some music. They got up and started moving. Today the security structures
throughout the whole country are taking a message from Putin's rise to power.... They hear music that we do not hear, and they get up like zombies and walk. They surround us. And they will go far if there is silence.... We need to bash them over the head every day.”

More amazing than Dorenko's eloquent and revealing speech that night was the phone call he got a few days later, after Putin returned to Moscow. Putin invited Dorenko to the Kremlin, urgently. Putin behaved like a KGB man, always seeking control, even over his enemies. Putin offered Dorenko tea and pastry and then said, “Sergei, something has happened with our relationship.”

Dorenko replied that was not the point. “You have sent a very important message to everyone in this country, to everyone,” Dorenko said. “To all the policemen, to all the FSB people. You told them to try and catch journalists, businessmen, and Jews. This is what you said. Because Gusinsky is a Jew connected with the press and a businessman. And now you can issue any kinds of decrees or laws, but people will know what you really want: to catch journalists, businessmen, and Jews.”
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Dorenko recalled that, at the mention of Jews, Putin told him that Israeli Prime Minister Ehud Barak had called Putin and asked why he was attacking Gusinsky. Putin then recounted how he had told Barak that Gusinsky “isn't paying taxes in Israel” or Russia. Dorenko was appalled.

“I told him, ‘Vladimir Vladimirovich, that has nothing to do with you. You are not an investigator, are you? You are a politician. It's not your level; there are other people whose job it is to deal with that. It's absolutely not your level where he is paying his taxes. And second, in Russia, it is ridiculous. The policeman who will tomorrow smash Jews, journalists, and businessmen . . . doesn't even know the word ‘taxes.'”