The Oligarchs (89 page)

19
Berezovsky later became the exclusive dealer for Mercedes in Russia. He told me how fascinated he was to discover German efficiency. The Germans planned six months in advance to stage a banquet to mark the opening of a dealership, and they carried out the plan. “I thought I had fallen into a crazy house,” Berezovsky told me, recalling the day that the Mercedes representative told him of the plan. “A
half year beforehand
,” he was given a card that said “this table and that table, these people are sitting here, how many sausages, how much beer. And everything went off exactly as they had planned it.” The example suggests how tumultuous life was in Russia at the time—six months' time was considered an eternity.

20
Once Berezovsky recalled how he stopped at a German gas station and forgot to pay after fueling up. “I forgot!” he said. “And I drove off. I hear some kind of horrifying scream behind me. I look in the mirror and I see that a person is running after me and is screaming something in German. I stopped and right away understood what happened. That I hadn't paid the money. “I go backward, drive up to the person, and he is screaming, ‘POLITSA! POLITSA! RUSSIAN!' I don't know what to do, now that I'm going to have to deal with the police. I don't know how to stop him. He's a grown, middle-aged man. And suddenly, you know, again, it's that intuition, suddenly I realized that I could stop him only in one way. I started cursing at him. Really. With Russian curses. And he suddenly stopped. Was silent. He schlumped over like a dog with a tail between its legs and said, ‘Enough, enough.' I went, paid my money, and drove away!”

21
Yuri Tselikov, interview by author, March 31, 2000.

22
Valery Ivanov, interview by my researcher Margaret Paxson, February 16, 2000. We were deeply saddened to learn Ivanov was murdered in Togliatti on April 29, 2002.

23
Anatoly Ivanov, interview by author, March 29, 2000.

24
By one account, there were four major criminal wars in Togliatti in the 1990s. Vladimir Ovchinsky described them in
Moscow News
, June 18–24, 2000. The first occurred when criminal groups took over businesses in the city in the late
1980s and began blackmailing citizens buying Zhigulis; they also took control of the assembly line. The first war climaxed with a fight involving seventy gang members near the Hotel Zhiguli. The second war was fought in 1994–1996; sixty-six people were killed. After the war the city and factory were divided into zones of influence controlled by powerful clans. A third criminal war broke out in 1996 and was followed by Operation Cyclone, an effort by the federal Interior Ministry to clean up the factory. “Avtovaz was literally in the hands of bandits,” Ovchinsky wrote. In the first half of the year 2000, the fourth war broke out: sixteen contract murders. Ovchinsky said 500 million rubles a year were being siphoned off by criminal groups in 1999. “One can conclude that Togliatti is still an epicenter of the Russian criminal world. The Mafia structures have an ability to imitate, adjust themselves, and live separately, apart from any economic or political transformations. The murder of leaders of criminal groups hardly influences the situation because new leaders appear.”

25
“Changes in the Free Delivery Price, on the Basis of Models Manufactured by VAZ,” a chart (in Russian).

26
Logovaz official price list as of January 1, 1993.

27
Exchange rate table, Central Bank of Russia.

28
“Volga Automobile Works, Descriptive Memorandum,” Bear Stearns, 1991.

29
Bolshaya Paika
, p. 247.

1
Vladimir Gusinsky, interview by author, September 22, 2000.

2
Valery Belyakovich, interview by author, September 12, 2000.

3
J. A. E. Curtis,
Manuscripts Don't Burn: Mikhail Bulgakov, A Life in Letters and Dairies
(London: Bloomsbury, 1991).

4
Alexander Minkin, interview by author, July 12, 2000.

5
Tatyana Volodina, actress, Tula Academic Drama Theater, telephone interview by author from Tula, September 27, 2000. Volodina provided details from the program of the performance. Also “Youth of an Oligarch,”
Moscow News
, July 4–10, 2000, p. 13.

6
Gusinsky later said of Bobkov, “When the Communists had a lot of clout, he helped us a lot because he had some influence over them.... Bobkov had considerable clout with old-timers in the Communist Party.... As for me, this is what I think happened. Dissidents were harassed by the state machine in which Bobkov used to be a cog. But I never fought the regime; I studied at the GITIS [state theater institute], an ideological institute of higher education, one might say. I was a person absolutely loyal to the authorities. It is another thing that I was an unruly character, and a Jew. I didn't have much of a future then. You can condemn me as you like, but I, personally, don't have the right to judge and punish Bobkov. Dissidents, fighters against that regime—they have various rights.”
Obshchaya Gazeta
, June 8–14, 2000, pp. 1–3.

7
Margery Kraus, interview by author, July 13, 2001; “U.S. Firm, Soviets Establish Joint Venture to Venture Jointly,” Associated Press, December 13, 1988.

8
Boris Khait, interview by author, September 14, 2000.

9
Yuri Schekochikhin, “Fear,”
Literaturnaya Gazeta
, June 10, 1992, p. 11.

10
Lloyd Grove, “Russky Business: The Mogul in Exile Who's Got Moscow Up in Arms,”
Washington Post
, April 7, 1995, p. D1.

11
Oleg Dobrodeyev, interview by author, July 20, 2000.

12
Mikhail Leontiev, interview by author, July 4, 2000.

13
Sergei Zverev, interview by author, June 23, 2000.

14
Lee Hockstader, “Brave New World: Moscow Anchor Leads Bold, Bloody Experiment in Press Freedom,”
Washington Post
, March 29, 1995, p. B1.

15
Yevgeny Kiselyov, interview by author, August 2, 2000.

16
Igor Malashenko, interview by author, July 25, 2000.

17
Chrystia Freeland,
Sale of the Century
(New York: Crown Business, 2000), p. 155.

1
In his memoir, Gaidar recalls that he broke party taboos in the journal and wrote about such topics as inflation, unemployment, poverty, social stratification, the budget deficit, and military spending. Moreover, “we tried to explain to the ruling elite how ruinous its course was.” Yegor Gaidar,
Days of Defeat and Victory
(Seattle: University of Washington Press, 1999), p. 35. Gaidar hailed from a well-known family of the intelligentsia. His grandfather, Arkady Petrovich Gaidar, was author of famous Soviet-era children's stories. His father, Timur, was a foreign correspondent for
Pravda.

2
Boris Yeltsin,
The Struggle for Russia
(New York: Times Books, 1994), pp. 125–126.

3
Pyotr Aven, interview by author, July 11, 2000.

4
Mikhail Berger, interview by author, October 10, 2000.

5
Mikhail Dmitriev, interview by author, November 19, 1999.

6
Yeltsin had a similar conception. He recalled, “Gaidar's ministers and Gaidar himself basically took this position with us: Your business is political leadership ; ours is economics. Don't interfere with us as we do our work, and we won't butt in on your exalted councils, your cunning behind-the-scenes intrigue, which we don't understand anyway.” Yeltsin,
Struggle for Russia
, pp. 156–157.

7
Maxim Boycko [Boiko], Andrei Shleifer, and Robert Vishny,
Privatizing Russia
(Cambridge: MIT Press, 1995). According to the authors, who participated on the Chubais team, privatizers believed that “political influence over economic life was the fundamental cause of economic inefficiency, and that the principal objective of reform was, therefore, to
depoliticize
economic life” (pp. 10–11).

8
Yegor Gaidar, interview by author, September 29, 2000.

9
Chubais press conference, April 21, 1993.

10
Gaidar,
Days,
p. 129.

11
Gaidar,
Days,
p. 66.

12
Jeffery Sachs,
Poland's Jump to the Market Economy
(Cambridge: MIT Press, 1993).

13
Gaidar,
Days,
p. 86.

14
Anatoly Chubais, ed.,
Privatizatzia Po-Rossiiski
(Moscow: Vagrius, 1999), p. 20. In Russian.

15
Chubais interview,
Literaturnaya Gazeta
, October 12, 1994, p. 10.

16
Chubais,
Privatizatzia,
p. 28.

17
Chubais,
Privatizatzia,
pp. 29–31. The Kolo story was originally reported by the newspaper
Kuranty
in late February, and the scheme was also described by Berger in
Izvestia
. Chubais denounced the scheme at a press conference on February 28, 1992. See Francis X. Clines, “Russian to Fight Private Sell-offs by Ex-Officials,”
New York Times,
February 29, 1992, p. 5; and John-Thor Dahlburg, “Russia's Neo-Capitalists Learning Art of Rip-Off,”
Los Angeles Times
, March 1, 1992, p. 1.

18
Dmitri Vasiliev, interview by author, September 16, 1999; November 20, 1999; and September 18, 2000.

19
Gaidar, interview by author, September 29, 2000; Chubais recollections from
Privatizatzia
. The auction was described by Fred Hiatt, “Russia Auctions Off State-owned Firms,”
Washington Post
, April 5, 1992, p. A1.

20
Gaidar, interview by author, September 29, 2000.

21
Gaidar,
Days,
p. 131

22
Vasiliev, interview by author.

23
Sachs had recommended Andrei Shleifer, a professor of economics at Harvard University. Along with Jonathan Hay, he played a key role in organizing Western help to support Chubais and Vasiliev. Among other activities, the Westerners helped design the Russian privatization vouchers, helped write the laws and decrees, and helped set up and carry out the great sell-off. Some criticism has subsequently been aimed at these efforts. The author acknowledges that this issue is beyond the scope of this book. However, the author believes it is mistaken to criticize the Westerners alone for what occurred in Russia. Many of the most fateful choices were made by the Russians, such as the decision to free prices, property, and trade before building the institutions of a free market. The Westerners often advised and encouraged them in the direction they took, but Yeltsin, Gaidar, and Chubais led the way.

24
Anatoly Chubais, interview by author, May 13, 2000.

25
Chubais,
Privatizatzia
, p. 34.

26
In the end there were three options. The first, proposed by Chubais, distributed 25 percent to the workers, who could then buy an additional 10 percent of the shares at 70 percent of the (low) book value of the enterprise, and management could buy 5 percent at the book value. This was effectively 40 percent to insiders. Option 2, proposed by the industrialists, allowed workers and managers to buy 51 percent of the enterprise at 1.7 times the book value. A third option for medium-sized companies allowed managers to buy up to 40 percent if employees agreed, but with restrictions. In the end, studies showed the overwhelming majority of enterprises were privatized using option 2, the one proposed by the factory directors. Anders Åslund,
How Russia Became a Market Economy
(Washington, DC: Brookings Institution, 1995), pp. 233–235.

27
There was a major debate within the privatization team on whether to model Russia's privatization after the Czech or the Polish models, both of which were getting under way at the time. The Polish model involved large mutual funds in which people would obtain shares. The Czech variant was more open, using
vouchers that people could dispose of as they wished. “From the political viewpoint, the signals coming from Poland and Czechoslovakia in 1992 made it clear that the Czechs were excited about privatization and involved with it, while the Poles were not. Choice made all the difference. Since popular involvement was deemed absolutely essential for the sustainability of Russian privatization, vouchers were a clear choice” (Boycko [Boiko], Shleifer, and Vishny,
Privatizing Russia,
p. 83).

28
Chubais made the claim at an August 21, 1992, press conference introducing the vouchers. He said he figured that the price of a secondhand Volga was only 2,000 or 3,000 rubles—this was the so-called residual price, after depreciation, which was sometimes used for selling off state property such as ten-year-old taxis to their drivers. It was not a real price. Since the face value of a voucher was 10,000 rubles, a voucher “could be sufficient to buy two or even three, and with luck even more Volga cars,” Chubais claimed. In fact, Chubais later acknowledged “errors” in his public relations pitch for vouchers. He said he was thinking at the time that a voucher might buy a share that would appreciate significantly. The two Volgas claim was one of Chubais's biggest goofs and the butt of jokes for many years. Chubais,
Privatizatzia
, p. 191; Chubais press conference, August 21, 1992.

29
Celestine Bohlen, “Citizens of Russia to Be Given a Share of State's Wealth,”
New York Times
, October 1, 1992, p. 1.

30
Chubais,
Privatizatzia
, p. 157.

31
Vasiliev, interview by author, November 20, 1999.

32
Paul Bograd, interview by author, March 26, 1999.