The Oligarchs (85 page)

Putin erupted in anger at the news coverage. He said the oligarchs and their television channels had been destroying the state, and the army and navy too. Dorenko was ordered taken off the air immediately. Putin called Berezovsky to complain that ORT had compared the sunken submarine to the Chernobyl nuclear accident. Berezovsky suggested a meeting. Putin said fine. The next day, Berezovsky arrived at the Kremlin to find Voloshin waiting for him instead of Putin.

“Listen,” Voloshin told Berezovsky, “either you give up ORT within two weeks or you will follow Gusinsky.”

“This is not the way to talk to me,” Berezovsky replied. “You are forgetting something. I am not Gusinsky.”

Berezovsky asked Voloshin to set up the meeting with Putin. Voloshin agreed. He called Berezovsky the next day at 2:00 P.M. and asked the tycoon to show up at the Kremlin in an hour. Berezovsky came. Voloshin was again waiting in his office. Putin arrived, tense, and
Berezovsky launched into a defense of how ORT had covered the
Kursk
disaster, including its interviews with bereaved widows of the lost sailors.

“This is helping you, it's not obstructing you,” Berezovsky said, “because only openness can help you, nothing else.”

“Is that all?” Putin asked.

“Yes, that's all, the main thing,” Berezovsky replied.

“And now, I have something to tell you,” Putin said. He opened a file. He began to read in a monotone. Berezovsky did not recall the exact words, but the gist of it was that ORT was corrupt and managed by just one person, Berezovsky, who took all the money under his control.

Berezovsky had a flashback to his nemesis, Primakov. The document was right out of Primakov's campaign against him the previous year. This was really galling to Berezovsky. “The signature down there, is it Yevgeny Maximovich Primakov?” Berezovsky asked Putin. “Why are you reading it to me?”

“I want to run ORT,” Putin said. “I personally am going to run ORT.”

Berezovsky was stunned. Dorenko had said that Putin viewed himself as a creature of television, and now it was clear that he wanted to control every minute on the air. “Listen, Volod,” Berezovsky replied, using a friendly, shortened form of Vladimir. “This is ridiculous, at a minimum. And second, it is unrealizable.”

“ORT covers 98 percent of Russian territory, of Russian households,” Putin replied, coldly.

“Don't tell me the statistics!” Berezovsky answered. “I know them all. Do you understand what you are talking about? In fact, you want to control all the mass media in Russia—yourself!”
⁵¹

Putin stood up and left. Berezovsky went back to his office and dashed off a short letter to Putin. He wrote that Putin was committing the same mistakes over and over again, first by escalating the conflict in Chechnya, then by imposing his will on the governors, and finally in taking over the mass media. Berezovsky lamented that the president was trying to “find solutions to complex problems by simple means.” Putin was trying to become an autocrat. It wouldn't work. He gave the letter to Voloshin.

The letter marked Berezovsky's bailout from the Kremlin inner circle. The power broker had reached a dead end. He had given up on his
own creation. Berezovsky concluded there was no point in fighting Putin over his television station. He sold his interest in ORT to Roman Abramovich, who was his partner in Sibneft, and one of the younger, new generation of oligarchs willing to cooperate with the Kremlin. Berezovsky then left the country.

When I saw Berezovsky a few months later in New York City, he recalled one final scene from his encounter with Putin. In their last conversation in the Kremlin, Putin had turned to him plaintively, fixing his cold stare on Berezovsky, the short, hyperactive man with the soft rat-a-tat voice who would wait on your doorstep for hours. Putin looked at him, the power broker extraordinaire who had, with his own hands and tireless ambition and dreams of great wealth, done more than anyone to shape the age of the oligarchs. Now their days of glory were over. New players were coming, new fortunes being made. And a new Russian leader sat in the Kremlin.

“You,” Putin said, “you were one of those who asked me to be president. So, how can you complain?”

Berezovsky had no answer.

T
HE SOUND AND FURY of the Yeltsin era came to a muffled end. Yeltsin was a sad figure on the last night of his presidency. His televised farewell speech from the Kremlin on December 31, 1999, was laced with words of regret. “Many of our hopes have not come true,” he acknowledged, asking the Russian people to forgive him. “What we thought would be easy turned out to be painfully difficult.”

The oligarchs, the sons of Yeltsin's unruly capitalism, took different paths.

Of the six, Mikhail Khodorkovsky ended up the wealthiest. After the dark days of 1999, when he played hardball with lenders and investors, Khodorkovsky demonstrated once again his shrewd judgment. He switched from tough guy to gentleman, realizing that his fortune could be multiplied if he played by more open and honest Western rules. He paid dividends to shareholders for the first time, published accounts by international standards, and reinvested profits into his oil business. Yukos shares resumed trading on the Russian stock market and soared from $0.20 a share to $3.60 a share. Khodorkovsky became much wealthier, since he and his partners controlled 69 percent of the company. His coffers overflowed with cash after world oil prices rose suddenly in 1999 and 2000. In the annual
Forbes
magazine list of the world's five hundred wealthiest men in 2001, Khodorkovsky was the richest Russian on the list, with a net worth estimated at $2.4 billion.

Anatoly Chubais, who led the reformers in the Yeltsin years, was no longer at center stage. Gone were the days when his every word made headlines. In 1999, he threw himself into fixing Russia's decrepit electricity monopoly, and he became just one among many Russian industrial barons. Chubais enthusiastically backed Vladimir Putin at the outset of the second Chechen war. Chubais did not see Putin as a threat to Russian democracy or a free press, but rather as a strong-willed leader who would throw his weight behind Russia's modernization. When Putin crushed Vladimir Gusinsky and wrested NTV away from him, Chubais expressed regret but did not defend Gusinsky. He had only bad memories of the bankers war and Gusinsky's role in it.

After the presidential campaign, Yuri Luzhkov went back to his familiar role as
khozyain
of Moscow. He no longer harbored ambitions for the presidency. Chastened, he paid deference to Putin and returned to his own protected realm, as builder and boss of the capital city.

Alexander Smolensky dropped out of sight. For a while he worked on establishing a new bank, using some of the offices of the bankrupt SBS-Agro, but then sold it.

Gusinsky's media empire fell apart under the relentless pressure of Putin's Kremlin, but the journalists who worked for Gusinsky were not destroyed. Many of them stuck together and attempted to rebuild. With Gusinsky's blessing, Yevgeny Kiselyov took a core group of the NTV staff and set up shop at a smaller Moscow television station, TV-6. Boris Berezovsky, who owned the station, now shared it with Gusinsky's journalists. But starting over was hard work, and the NTV dream was difficult to rekindle. Gusinsky owned part of the Israeli newspaper
Ma'ariv
and often visited the United States. But he could not go home again to Russia.

Berezovsky was as restless as ever, but his days as power broker were over. He felt it was risky to return to Russia and did not go back, although his predominant business and political interests were inside the country. Berezovsky still controlled two influential daily newspapers and the TV-6 television station, but he was forced by the Kremlin to sell the larger ORT television channel, which had been his most influential tool. Berezovsky concluded that he had made a mistake bringing Putin to power, but he could do little about it from abroad. Berezovsky, who once epitomized the insider, who championed the embrace of wealth and power, was now on the outside looking in.

On July 18, 2001, after more than a year in office, Putin held a news conference. A reporter asked him about Berezovsky. He sighed and responded, “Boris Berezovsky—who's that?”

O
f all the oligarchs, none survived and thrived quite as well as

Mikhail Khodorkovsky in the years 2000 to 2003. World oil prices remained high, and Yukos became the largest company in Russia, as measured by market capitalization. Khodorkovsky and his core partners reaped billions of dollars in dividends. In 2002, for the first time, Khodorkovsky disclosed the ownership structure of Yukos. With this decision, he became the first owner of a major company to break with the climate of secrecy in which Russian capitalism was born in the 1990s, and this pioneering step forward was even more surprising because of Khodorkovsky's own history of murky deals. The disclosure revealed that the oil company was controlled by Group Menatep, a Gibraltar company owned by Khodorkovsky and a handful of close friends. Khodorkovsky's share of Yukos was worth about $8 billion. Leonid Nevzlin, the computer programmer who had been an early recruit to Khodorkovsky's youth science center, was also a billionaire shareholder. So was Vasily Shakhnovsky, the onetime engineer who thought up the idea for the Club on Sparrow Hills and later become a Yukos executive.

When I finished writing
The Oligarchs
in 2001, Khodorkovsky's shift in approach toward more openness and toward Western business
practices was already evident. In the subsequent two years, as he sought to turn Yukos into a global oil giant, the change deepened. He proposed building a pipeline to China and, in a demonstration of how Russia could support American energy needs, shipped a tanker full of crude oil to Texas.

Khodorkovsky also talked about becoming a major force behind the development of philanthropy and civil society in Russia. These ambitions went well beyond the status he had already achieved as the wealthiest oligarch of his generation. He supported a widening circle of charitable activities inside Russia. When American financier George Soros pulled out, saying that his work was finished after donating billions of dollars to Russia in the 1990s, Khodorkovsky became the largest single private philanthropist in the country. He began a foundation, Open Russia, to advocate expanded ties between Russia and the West, especially Britain and the United States. His initial investment was $16 million—a fraction of the billions of dollars in profits and dividends generated by the oil company.

The launch of Open Russia in Washington was a businesslike affair and spoke volumes about how far Khodorkovsky had come. The event was held in the historic Thomas Jefferson Building of the Library of Congress. About one hundred lobbyists and government officials dined in the Members Room, an ornate chamber with painted silk panels in the high ceilings where the House of Representatives once met. The host was James H. Billington, the Librarian of Congress and one of the leading scholars of Russian history in the United States. Billington's classic work
The Icon and the Axe
, an interpretive history of Russian thought and culture, was published in 1966, when Khodorkovsky was just three years old. The scholar told his dinner guests that Khodorkovsky was a “visionary” and added, “It's not often you get someone who has done well and wants to do good.” Khodorkovsky made a $1 million donation to the Open World exchange program, inspired by Billington, which brought young Russian leaders to the United States for short-term visits. Khodorkovsky also donated money to the National Book Festival, sponsored by Billington. At that event he was photographed with President Bush and First Lady Laura Bush, a potent reminder of how much things had changed for Khodorkovsky since the dark days of 1999.

Khodorkovsky's ambitions, however, were not yet satisfied. On April 22, 2003, Yukos announced plans to merge with Sibneft, the oil
company originally created by Boris Berezovsky. The reader may recall that a proposed merger of these two oil companies fell apart in 1998. Now the combined company, to be called YukosSibneft, would be the fourth-largest oil company in the world by production. Once combined, the colossus would be a tempting target for a merger with—or sale to—another international oil company. This was Khodorkovsky's intent, and his most ambitious goal ever: to build up his empire and then sell it off to ExxonMobil or ChevronTexaco. The rewards would be fantastic. His vast oil reserves would be turned into cash worth tens of billions of dollars. And the dream was not implausible: the Russian oil companies were still cheap by international standards, and earlier in the year British Petroleum had made a $6.7 billion investment in another Russian oil company. A study by United Financial Group showed that the enterprise value of Yukos, per barrel of oil, was the equivalent of only about 10 percent of Exxon. It was not hard to see why Yukos would be a tempting catch.

Khodorkovsky was never comfortable in public, but as his fortunes improved he became a public figure and found himself spotlighted with great intensity as the richest man in Russia. Still fresh in my own mind were the nasty corporate disputes of the late 1990s. I wondered whether the same businessman who had championed such shady transactions a few years earlier could become the new standard-bearer for corporate governance and transparency in Russia. But Khodorkovsky's new direction was tangible, and impossible to dismiss.

After Putin had forced Gusinsky and Berezovsky to leave Russia, he came to an understanding with the oligarchs who remained: don't interfere in Kremlin affairs, and you can keep your gains from the crazy capitalism of the 1990s. For Khodorkovsky and some of the other businessmen, these gains were the huge natural resource companies, such as Yukos, that they had obtained cheaply in the privatization of state assets and that now produced mountains of cash for them. As his wealth and prominence steadily grew, it seemed to me that Khodorkovsky was careful to toe the Kremlin line. When it came to political support for parties in parliament, Khodorkovsky told me that he made the expected donations of tens of millions of dollars, including big contributions to the progressive parties Yabloko and the Union of Right Forces, but he did so with Kremlin supervision, like most of the other businessmen.