The Silent Coup: Putin vs. the Oligarchs
ON JULY 28, 2000, Vladimir Putin gathered the 18 most powerful businessmen in Russia for an unprecedented discussion. This was the beginning of Putin’s campaign to undermine and reduce the power of a group of men who had made titanic fortunes from reforms designed to pave the way for a transformation of the Soviet planned economy into a free market economy. Russian President Vladimir Putin was rewriting the rules again. In no uncertain terms, Putin told Russia’s wealthiest that the jig was up, and he denounced them as creators of a corrupt state.
A very small number of people — known now as the oligarchs— were able to concentrate a very large portion of the Russian people’s wealth into their hands through backroom deals and insider connections. Some who read this essay might condemn me because I point out the Jewish identity of the majority of these oligarchs. My reason for doing so is not to be unfair to Jews or to increase hostile feelings towards them. The reason is the simple fact that their Jewishness is a factor and must be taken into consideration when dealing with Russian politics. In Russia, everyone is aware of the Jewish identity of these men, and the acts of the Jewish oligarchs themselves have done quite a bit to increase anti-Jewish feelings there. The oligarchs themselves recognize this, as do many Russian Jews, who blame the oligarchs for giving Jews a bad name. In my opinion, it is much better to be honest about it than try to pretend that this factor doesn’t exist.
The jig is up!
The Kremlin launched a series of raids and criminal cases against Vladimir Gusinsky and Media-Most; the financial-industrial group Interros, headed by Vladimir Potanin; Lukoil, headed by Vagit Alekperov; Sibneft, an oil company controlled by Roman Abramovich; as well as a number of businesses connected with Boris Berezovsky. On Jan. 24, 2001, Vladimir Putin met with 21 leading oligarchs and told them that he hoped that things had changed for the better since their last meeting, basically meaning that he hoped that they had learned a lesson. He stressed that the Russian state had no plans to re-nationalize the economy, but added that they should have “a feeling of responsibility [to] the people and the country” and asked them to donate $2.6 million to a fund he was setting up to help families of soldiers wounded or killed in action.1 In short, Putin told the oligarchs to play ball his way — or no way. At this point, it appeared that Putin thought he could force the oligarchs to meet his demands, or he realized that he was not yet strong enough to take on all of them at the same time.
(footnote 1. Moscow Times, January 25, 2001)
These men were not used to a Russian President treating them this way. During the Yeltsin years, they could count on a weak president who needed them for his very political survival. Putin was supposed to have been an extension of the old system. After all, they helped to get Putin elected. It was their television channels and newspapers that provided Putin with one-sided coverage during Yeltsin’s reelection campaign. It was their money that financed his campaign. They even created a political party, Unity, just for him. The reason they installed Putin was to maintain the status quo they enjoyed under President Yeltsin.
The oligarchs thought that they had things all worked out ahead of time and that there was an ‘understanding’ with Putin on how things would work. However, as they would soon learn, Putin wasn’t “one of the boys,” and he represented other, more powerful interests. The interests that Putin represented despised Yeltsin and the ‘pro-Western’ reformers. These interests were waiting for their time to move. The oligarchs simply did not realize what was ahead. Perhaps they believed that things could continue as they were until Russia was bled dry. Perhaps they were arrogant enough to believe that the Russian people would not put up a fight.
Putin was elected on March 27, 2000, but only a few months later he no longer needed his former “friends.” Still, some of the oligarchs thought some kind of deal could be reached. Putin would allow them to keep a portion of the loot they stole through their privatization schemes and they would agree to “play by the rules” from now on. Perhaps they hadn’t paid attention to Putin’s rhetoric, or maybe they thought that such rhetoric was simply meant for the Russian electorate. Once, when asked during an interview what the future held for the oligarchs, Putin replied that if one meant “those people who fuse, or help the fusion of power and capital — there will be no oligarchs of this kind as a class.”2
(footnote 2. Radio Mayak, March 18, 2000)
“You Jews have seized the TV and the radio and the newspapers. You are everywhere. You annoy everybody.” — Russian caller to a state radio call-in program.3
(footnote 3. A caller to the Russian State Radio Service’s Jewish program who identified herself as Yelena K., quoted by the Canadian Jewish News, “Russian Jews Fear Backlash Against Jewish Moguls” May 25, 2000, Iyar 20, 5760. From my experience living in Russia, this attitude is not at all uncommon among Russian citizens, who correctly view the oligarchs as bandits who have helped to make their lives miserable. Berezovsky is, perhaps, one of the most hated men in Russia, next to Yeltsin and Gorbachev.)
The oligarchs had been worrying about a backlash for a number of years. During Yeltsin’s presidency, they were especially visible, even to the point of flaunting their power.
In the autumn of 1996, a group of influential oligarchs met in a villa in the Sparrow Hills district of Moscow to discuss an issue that was quite troublesome to them: anti-Semitism. The undeniable fact of the matter was that the overwhelming majority of these oligarchs were Jewish, and they had very large influence over the Russian media. Berezovsky and Gusinsky controlled Russia’s two largest television stations and several of the largest newspapers and magazines.4
(footnote 4. “Jews in Power or Jewish Power? The Captains of Russia’s Post-Communist Economy Invited Uneasy Questions,” Forward, Sept. 13, 2002)
At the time, Jewish publications and even the oligarchs themselves were quite honest about their shared background. The London Times reported:
“Prominent Jewish figures today enjoy unprecedented positions of power in politics, the media and the private sector, and have emerged as some of Russia’s most creative and talented minds. Boris Berezovsky, the most influential Russian Jew, who holds the post of deputy head of the Security Council as well as controlling a small business empire, even boasted recently that the country was run by seven key bankers, most of them Jewish.”5
(footnote 5. The London Times, Jan. 27, 1997)
The small group of oligarchs who met that day were concerned about a backlash from the Russian population. Boris Berezovsky, Mikhail Friedman, Vladimir Gusinsky, Mikhail Khodorkovsky, and Alexander Smolensky collectively decided to appoint one of the few non-Jewish oligarchs, Vladimir Potanin, to be their public liaison officer.
Fear of anti-Semitism caused Friedman and Gusinksy to form the Russian Jewish Congress, an organization to lobby for Jewish interests in Russia. It hadn’t always been this way. Earlier, many of the oligarchs, Berezovsky in particular, seemed to enjoy flaunting their power and the fact that they were Jewish. Berezovsky, whom US News & World Report (Jan. 13, 1997) called “the most influential new capitalist tycoon in Russia,” even bragged about his ability to appoint officials in the Yeltsin administration: “We hired Chubais. We invested huge sums of money. We guaranteed Yeltsin’s election. Now we have the right to occupy government posts and use the fruits of our victory.”6 He also claimed that Yeltsin had a “moral obligation” to Jewish business in Russia.7
(footnote 6. Forward, April 4, 1997)
(footnote 7. Komsomolskaya Pravda, Nov. 5, 1996)
In fact, due to his support of Yeltsin during his 1996 reelection campaign, Berezovsky was appointed deputy chief of Russia’s national Security Council. However, due to the nationalist press, it was revealed that Berezovsky had taken out Israeli citizenship three years earlier. Apparently, he was worried about criminal charges being pressed against him and wanted to have a place to flee if necessary. The Russian State Duma objected to Yeltsin’s appointment because Berezovsky’s dual citizenship disqualified him from occupying a sensitive Security Council position. Berezovsky was forced to give up his Israeli citizenship, but he then said that “Every Jew, regardless of where he is born or lives, is de facto a citizen of Israel. The fact that I have annulled my Israeli citizenship today in no way changes the fact that I am a Jew and can again become a citizen of Israel whenever I choose. Let there be no illusions about it, every Jew in Russia is a dual citizen.”8
(footnote 8. Segodnya, Nov. 14, 1996)
Needless to say, such comments did nothing to reduce resentment among the Russian population. One does, however, have to give credit to Berezovsky for being so honest. American Jewish oligarchs would never say such a thing for public consumption.
Ready to reap — and to rape
How did all this come to be? How did a small clique gain so much power and control over the Russian government in such a short period of time? Of course, the Jewish public position is that under the Soviet regime, Jews were ‘discriminated against’ and had to form networks to survive. Yeveny Satanovsky, a lesser Jewish oligarch, explained it the following way: “This sort of thing happens any time you have repression and then revolution. When you have a group of people who are repressed and then those restrictions are suddenly removed, all the extra efforts they have traditionally made in order to succeed propel them ahead much faster than the general population. It’s a natural phenomenon.”9
(footnote 9. Forward, April 4, 1997)
One theory, the one given by Soviet Jews, is that, because of Communist state-sponsored anti-Semitism, many Jews were involved in the black market during the Soviet era. These unofficial brokers would corner items in short supply, arrange to find gifted surgeons for clients able to pay high fees, and set up behind-the-scenes deals with factory managers. When perestroika came in 1987, these businessmen used their contacts to form cooperatives, which later developed into corporations. Gusinsky bought copper wire on the black market to make bracelets, while Berezovsky traded in German cars and Italian computers. Future banker Khodorkovsky used his connections in the Communist Youth League to secure software contracts.10 When privatization came after the fall of the Soviet Union, these people had an overwhelming advantage over ordinary Russians because they already had networks in place. In addition, because they thought of themselves as a distinct ethnic group/caste, Russians who thought of themselves simply as individuals could not compete on the same level.
(footnote 10. Ibid.)
With 1992 came the infamous voucher privatization scheme. Anatoly Chubais, Yeltsin’s prime minister, privatized one-third of Russia’s economy. His idea was to push privatization at any price, as the effects would supposedly be irreversible, paving the way to a capitalist economy. He claimed that the voucher plan “signifies the death of the command economy and the political system that was built on the basis of total state property ownership.”11 Each Russian citizen was given a voucher good for one share. In theory, the voucher plan made each Russian citizen a shareholder, and millions of Russians became property holders, on paper, overnight. In total, 148 million vouchers were given away, which were to be traded at auctions for shares of companies.12 When pushing his voucher scheme, Chubais claimed that one voucher would be worth enough to buy two Volga automobiles.13 Having the necessary capital beforehand, the oligarchs were able to buy up thousands of vouchers and redeem them for entire industries, which would later be stripped and sold. Unregulated voucher investment funds walked away with their clients’ vouchers and then resold them to domestic criminals, Western investment banks, and international money launderers. Some of these ‘funds’ were simply companies buying up their own shares.14 Nearly six hundred voucher funds obtained 45 million vouchers. The largest, First Voucher, collected 4 million vouchers.15 This left many Russian citizens feeling cheated, and their first experience with privatization was a bad one.
(footnote 11. Celestine Bohlen, “Citizens of Russia to be Given a Share of State’s Wealth,” New York Times, October 1, 1992)
(footnote 12. David Hoffman, The Oligarchs: Wealth and Power in the New Russia, p. 193. I reference this book heavily because it contains much valuable biographical information on the various oligarchs. Although Hoffman takes a somewhat favorable view of the various personalities he covers, he is honest enough to include truthful information, which has proven very valuable to me.)
(footnote 13. Chubais press conference, August 21, 1992)
(footnote 14. Anne Williamson, “The Rape of Russia,” testimony before the Committee on Banking and Financial Services of the U.S. House of Representatives, Sept. 21, 1999)
(footnote 15. Hoffman, Op. cit., p. 197)
Due to widespread opposition to privatization and pressure from the parliament, a referendum was held on April 25, 1993 over the question of continued privatization. The voters were asked a series of questions: (1) do you support Yeltsin, (2) do you support Yeltsin’s economic policy, (3) do you want early elections for President, and (4) do you want early elections for parliament? Chubais met secretly with Jewish financier and currency manipulator George Soros, who agreed to fund the referendum campaign. Soros transferred $1 million to offshore accounts.16 George Soros has a long history of interfering in the affairs of other states. Yeltsin’s opposition sensed victory, and members of the Duma were openly talking about prison cells being readied for the ‘reformers.’ Due to an extensive media campaign, Yeltsin and his reformers just barely managed to survive, with 52 per cent approving economic reform. The privatization continued, and wealth was concentrated into fewer and fewer hands, much to the harm of the Russian population.
(footnote 16. Ibid., p. 202)
The fact that the future oligarchs already had capital and connections gave them the opportunity of purchasing industry at dirt cheap prices. Khodorkovsky, who would later become the richest man in Russia, bought up large amounts of vouchers. Using his connections, he was able to purchase several factories in investment tenders. He purchased large blocks of shares in timber, titanium, pipe, and copper smelting. In total, he gained control of more than one hundred companies. In the auctions, Russian industry was greatly undervalued. Based on the number of total vouchers that were circulated, the entire Russian industrial system had a total value of under $12 billion, less than that of many single American companies. Zil, the Soviet truck and limousine maker with 100,000 workers, was valued at a mere $16 million. The auto giant GAZ was valued at only $27 million.17
(footnote 17. Ibid., p. 205)
Boris Berezovsky, the most infamous and hated oligarch, got his start in the auto business. He became rich when he worked out a scheme taking advantage of Russia’s hyperinflation, which was in part caused by the privatizations. His company, Logovaz, was at the time Russia’s leading auto dealer. His company took thousands of cars from the Avtovaz factory in Togliatti and paid for them much later in inflated rubles, which allowed Berezovsky to make a huge profit and left Avtovaz with virtually nothing. In 1993, Berezovsky came upon the idea of constructing a new auto factory to create a “people’s car” like the Volkswagen. Berezovsky thought of the idea of issuing his own vouchers to people who invested in his company, similar to what Volkswagen did before World War II. Berezovsky reasoned that he would need about $2 billion to start, and he claimed that he would use the money he received from selling his vouchers as startup money. Berezovsky’s new phantom company was called the All-Russian Automobile Alliance (AVVA). He had his certificates printed in Switzerland on expensive paper designed to resemble money. Each voucher was engraved with a portrait of a well-known pre-revolutionary Russian industrialist. On the front side, the certificates read “One Share.” Their face value was ten thousand rubles. Berezovsky promised that the first dividends would be paid out to the “shareholders” in 1995.18 The certificates were so-called “bearer certificates,” which meant that the holder, in theory, had the right to exchange the certificate for one real share of AVVA. In reality, Berezovsky was not selling shares at all, but simply pieces of paper designed to look like shares. Control of the company was held by companies and banks close to Berezovsky. In addition, the certificates did not have the name of the holder printed on them, which was required by Russian law.
(footnote 18. Ibid., p. 216)
Even though it is doubtful that Berezovsky ever intended to actually set up a legitimate “Russian Volkswagen,” President Yeltsin signed a decree in December of 1993 awarding AVVA tax breaks over three years, further defrauding the Russian people. Berezovsky’s real plan was to buy the Avtovaz factory, which was being privatized. His scheme was to collect the money he needed by selling his worthless certificates to the Russian people and then use the money to purchase real shares in Avtovaz at special insider prices. Altogether, Berezovsky’s scheme brought in $50 million between December 1993 and mid-1994, and 2.6 million Russians traded away their money and government vouchers for AVVA certificates. Berezovsky used the money to gain partial control of the Avtovaz factory. Berezovsky’s company, AVVA, spent only $3.1 million to buy one-third of Russia’s largest automobile factory, which was quite a bargain by any standards. To do this, he used the government vouchers he collected from the population to purchase real shares of a real company. AVVA was the winner of an August 8, 1994 investment tender for Avtovaz. For some reason known only to the “insiders,” AVVA was the single bidder in what was to have been an open competition, which resulted in AVVA holding 34 per cent of the nation’s largest car factory. The simple reality is that the Russian people were defrauded and, at the time, they could do nothing about it. Berezovsky’s scheme was organized in such a way that there was never a list of the buyers and the vouchers were sold without any name printed on them. The buyers could not prove that it was they who purchased Berezovsky’s phony vouchers.
Such schemes were very common in the 1990s, and it was one of the many ways that oligarchs like Berezovsky were able to take advantage of a population with no experience in a market economy and who were easily tricked by official-looking pieces of paper.
It’s the media, stupid!
With their accumulation of wealth, many of the oligarchs began to move into the media business. Berezovsky and Gusinsky, Russia’s two most infamous and hated oligarchs, were especially active in the media. The oligarchs quickly realized that owning newspapers, television channels, and radio stations was not only a source of income; it allowed them to protect their other businesses and gave them political power.
Vladimir Gusinsky, a one-time theater director, started his business career hawking imitation sculptures and hood ornaments. During perestroika, in 1988, he opened a cooperative named Infeks as a consulting company for foreign investors interested in doing business in the Soviet Union. Gusinsky then formed Most Bank, which started as an accounting department. Using his contacts with Moscow Mayor Yuri Lushkov, he was able to land many of Moscow’s accounts in the early 1990s. By 1992, banker Gusinsky had already decided to try his hand at running a newspaper. For him, this was a way to expand his influence, and wasn’t really about making money. He later recalled, “When I started the newspaper, I will say it directly as it was: it was nothing but an instrument of influence. One hundred per cent — influence over officials and over society. I was creating the newspaper exactly for this aim. If an official turned bad, I would attack him with a newspaper and tell the truth that he demanded money, extorted it, or accepted conditions dishonestly.”19
(footnote 19. Ibid., p. 168)
We often hear the term “corporate media” used, but the real power of the media is influence over politics. In Russia, as well as in the United States, making money is often only a secondary goal, while influencing politicians and the electorate comes first. Gusinsky’s first newspaper, Sevodnya (“Today”) appeared in February of 1993. However, an influential paper was not enough. Using his contacts in the Yeltsin administration, he was able to lobby the Russian President to sign a decree giving his company the air time held by one of the Soviet channels, Channel 4. On October 10, 1993, Gusinsky’s private channel, NTV, went on the air and by January, it was on the air six hours a day.20 With his emerging media empire, Gusinksy became a true oligarch and held a powerful role in Russian politics.
(footnote 20. In Russia, frequencies are often shared between channels.)
Gusinsky wasn’t the only oligarch eager to become a Western-style media mogul. Boris Berezovsky, the same Boris that got rich with his “voucher” scam, had his own plans as well. Originally a researcher at the Institute of Control Sciences, he dreamed of a career in politics. According to Berezovsky, the only reason he didn’t hold a high position in society was because he was a Jew: “For me, there was no political future. I wasn’t a member of the political elite. I am a Jew. There were massive limitations. I understood that perfectly well.”21Later in life, he would claim that anti-Semitism was the reason Putin had cracked down on him. As always, criticism of Jews equals “anti-Semitism.” It’s the same old story.
(footnote 21. Hoffman, Op. cit., p. 130)
By 1992, Berezovsky was already thinking of acquiring his own channel. He was most interested in Channel 1, which, due to expensive satellites purchased by the Soviet government, has a strong enough signal to reach nearly the entire former Soviet Union, an estimated 200 million people. Berezovsky formed Logovaz Press, an advertising agency. This agency was among the founders of Reklama Holding, which was set up to monopolize advertising time on Channel 1. Between 1993-1994, Logovaz Press earned $1 million in profit by acting as the middleman between the station and companies interested in advertising there. However, merely making money off of television wasn’t enough for him. He, like Gusinsky, wanted to use television for political power. During this time, Berezovsky was working his way into Yeltsin’s inner circle.
Supposedly, after Yeltsin had completed his second memoir, Notes of the President, they were looking for a publisher. Berezovsky arranged for a million copies of the book to be published in Finland by a firm called Ogonyok. He then presented the royalties to the Russian President’s family. After this, Berezovsky found himself in favor and was invited to join the President’s personal sporting club, the Presidential Club. While there, Berezovsky lobbied for his television channel. He claimed that this new channel would in effect be the President’s channel and would be used to support him and his policies. On November 29, 1994, President Yeltsin signed a decree to privatize Channel 1 without an auction, contrary to the law.22 The new channel’s name was Russian Public Television (ORT). The Russian state retained 51 per cent. of the shares, with the rest divided up among Yeltsin’s wealthy supporters. The main shareholders were Berezovsky, Khodorkovsky, Friedman, and Smolensky. An oversight board was formed, and Yeltsin was the official chairman of the new channel. Everything was convenient for everyone, and everyone was happy with the new arrangement.
(footnote 22. Ibid., p. 281)
While the oligarchs often had common interests and worked together to benefit themselves at the expense of the Russian people, they sometimes fought among themselves. One example was a highly public dispute between Berezovsky and Gusinsky. By late 1994, Gusinsky was ranked the richest banker in Russia and the second most powerful. Berezovsky was the seventeenth most wealthy banker and the thirteenth most powerful.23 At the time, Berezovsky had a political alliance with President Yeltsin, while Gusinsky backed Moscow Mayor Lushkov. Lushkov is a very popular Moscow mayor because of his ability to squeeze money out of businessmen for his pet projects and his genuine desire to make Moscow life better. He has created many jobs for Muscovites, and he sees to it that his people are paid on time. Yeltsin was becoming insecure with the growing popularity of Lushkov, a possible threat in the upcoming Presidential election. In addition, Berezovsky and Gusinsky were competing over the right to handle overseas ticket sales from Aeroflot, the Russian national airline. However, when it really came down to it, the two were on the same side because they grew wealthy off the same corrupt system, and needed that system to survive.
(footnote 23. Julie Tokacheva, “Moscow’s Capitalist Elite: Wealthy and Wary,” Moscow Times, July 22, 1994)
During the 1996 pre-election Presidential campaign, it looked like Communist Party leader Gennadi Zyuganov would defeat Boris Yeltsin. A population that felt cheated and humiliated was very receptive to the Communist message. Early in the campaign, Yeltin’s support was in the single digits. The ‘reformers’ and Yeltsin’s inner circle began to panic. They were afraid that all their hard work of stripping the Russian nation of its wealth for their personal benefit and remaking Russia in the image of ‘the West’ might be brought to nil. Rising to the challenge, Chubais called a press conference and denounced Zyuganov. He claimed that Zyuganov presented two faces: one for foreign and one for domestic audiences. He claimed that, if the Communists returned to power, they would forbid the “free” press and put their political adversaries into prison. He then added, “My judgement is that this kind of policy will inevitably lead to big bloodshed in Russia.”24
(footnote 24. Chubais press conference, Feb. 5, 1996)
This was the moment that Berezovsky and Gusinsky realized that they were on the same side and had to do anything it took to keep Yeltsin in power. Gusinsky said, “I was present at the meeting between Zyuganov and Swiss bankers. It was very important for me to see how he was going to behave. And when I saw that he was looking into their eyes and lying to them, that he was saying exactly what they wanted to hear, a typical Soviet Communist KGB trick, I knew it! They will close us down. The minute he wins, he’ll shut us down. I was frightened.”25 Berezovsky also realized the danger. He called Gusinsky, and the two competitors agreed to meet. “We didn’t waste time finding a common language. We both understood that the threat of a return to Communism required a joint counter-attack,” Gusinsky later recalled.26 Many of the oligarch’s friends, such as George Soros, were also worried. Soros predicted to his friend Berezovsky that, if Zyuganov was elected, he would “hang from a lamppost.”27 As has always been and will always be the case in history, when threatened, Jews identify as a group and recognize their group interests over all else. That is a key to their survival strategy, which has worked quite effectively for millennia.
(footnote 25. Hoffman, Op. cit., p. 327)
(footnote 26. Natalya Gevorkayan, “Young Russian Capital Helped the President Win the Election,” Kommersant Daily, June 17, 1997, p. 4)
(footnote 27. George Soros, Open Society: Reforming Global Capitalism (New York: Public Affairs 2000), p. 242)
There were many everyday working Russians who wanted to see the Berezovskys and the Gusinskys of Russia hanging from lampposts. However, owning two of the three major Russian television stations, the two had a powerful weapon in their arsenal to use against Yeltsin’s enemies: a media onslaught. Yet, in addition to media control, the two needed huge amounts of funding for Yeltsin’s campaign. This was a do or die situation for the oligarchs. Soon, they formed what was called the “group of seven,” which included Berezovsky, Gusinsky, Khodorkovsky, Potanin, Vinogradov, Smolensky, and Friedman. Yeltsin was their man, the person on which their very survival depended. Without Yeltsin, they were gone, and they would feel the wrath of the Russian people. What was to follow was the first “Western-style” political campaign in Russian history. The Communists were at a distinct disadvantage from the start. Yeltsin’s 1996 reelection campaign truly showed the world how powerful media control can be — and how easy it is change the outcome of elections.
The oligarchs hired Chubais, the man who was largely responsible for creating their fortunes, as Yeltsin’s campaign manager. He created a private fund called the Center for the Protection of Private Property and received $5 million as startup money. It looked like the task of getting Yeltsin re-elected was nearly impossible. With only six months left before the election, Yeltsin’s ratings were 3 to 4 per cent, while Zyuganov led the pack with about 20 per cent.28
(footnote 28. Hoffman, Op. cit., p. 330)
Certain members of Yeltsin’s inner circle even considered the idea of postponing the elections for two years. In fact, Yeltsin came very close to dissolving the State Duma, banning the Communist Party, and putting off elections for two years. He even had all the documents written up and planned, and a decree was nearly sent out. Yeltsin was convinced that if he indeed followed through with his decree, the army might not have supported him and a civil war very well could have broken out. Yeltsin took the advice of his inner circle and went on with his re-election campaign.
Meanwhile, the Communists smelled victory at hand. On March 15, 1996, the State Duma voted 250 to 98 for a non-binding resolution to repeal the 1991 agreement at Beleovezhskaya Pushcha between Yeltsin and the leaders of Ukraine and Belarus to form their own union, which caused the end of the Soviet Union three weeks later. The vote, in reality, had no effect, but it was a powerful political statement that humiliated Yeltsin.
Yeltsin hit the road to provide images of his mingling with the population for the television. In four months, he visited two dozen cities. The most famous scene from this campaign was Yeltsin dancing onstage during a rock concert held in Rostov-on-Don. Yeltsin presented himself as the only true alternative to the Communists, eating away at rival democrat Yavlensky’s poll ratings. By March, Yeltsin’s ratings were in the teens, and, by April, he had nearly caught up with Zyuganov. On April 27, the oligarchs published an open letter in Russian newspapers expressing alarm about a schism in Russian society and appealing to the military, businessmen, politicians, and opinion makers to combine their efforts in the search for political compromise. The letter was highly critical of the Communists and was signed by the group of seven as well as well as six other businessmen and industrialists. This letter was an effort to torpedo Zyuganov.
Soon, “Western-style” campaign ads began to run asking the voter to “Choose with Your Heart.” Another ad featured Yeltsin’s family photos, while Yeltsin recalled events in his childhood: as an athlete, a rebel, a father, and a grandfather. All the while, sentimental music was playing in the background. At the end of the ad, Yeltsin appeared wearing a white shirt offering sympathy for his countrymen. The idea was to appeal to the voters most likely to vote for Zyuganov: the person who has been hurt in recent years and who is affected by emotional appeal. There is little doubt that if the media coverage had been fair and unbiased, Zyuganov would have easily won the election.
The inner circle also decided that it was not enough to cast Yeltsin in a softer light. They had to make Yeltsin the ‘lesser of two evils’ to win. This is where the oligarchs proved to be especially effective. One of their tricks was to create a fake newspaper just to promote their candidate. Each issue of the newspaper had a print run of ten million. The newspaper contained articles and commentary critical of Zyuganov. One issue contained a fake transcript of a Communist Party meeting in which it was said, “We will not be able to give the people anything that we promised.” 29 The Yeltsin campaign also paid hundreds of thousands of dollars to journalists in exchange for favorable coverage. If these things had happened in another country in another time, the West would have complained about election irregularities.
(footnote 29. Ibid., p. 345)
The most damaging thing to Zyuganov was the completely biased television coverage of the election. Berezovsky and Gusinsky controlled two of the major channels, while the third, RTR, was state owned: a complete media blackout for Zyuganov.
Since the Communist and nationalist parties had no access to the media, other than their own newspapers, they were at a distinct disadvantage, as they could not get their real message out, and their enemies created the image of them that they wanted the electorate to see. Another trick was to secretly support General Alexander Lebed, the populist general who was also running his own campaign. The oligarchs knew that Lebed would only cut into Zyuganov’s support, so any gain he made would be Yeltsin’s as well. In fact, Lebed was given $10 million for his campaign by Yeltsin’s men. Altogether, Yeltsin’s campaign spent around $100 million. 30
(footnote 30. Ibid., p. 348)
Yeltsin barely managed to survive the first round of voting. He won 35.28 per cent, while Zyuganov won 32.03 per cent of the vote. Lebed, the dark horse, won 14.52 per cent, and Yavlinsky, leader of the Yabloka (“Apple”) party, won 7.34 per cent. Yeltsin then gave Lebed a post in his government as head of the Security Council and prepared for the second round. On June 26, 1996, Yeltsin suffered from a heart attack. Polls were showing that Yeltsin’s support was slowly slipping, and his campaign planned a number of appearances for him. They were able to keep the state of Yeltsin’s health a secret from most Russians through their control of the news media. On July 3, 1996, Yeltsin was reelected with 53.82 per cent of the vote to 40.31 for Zyuganov. The oligarchs were victorious, and, for the moment, they were safe. They even came to feel that they were the real and rightful rulers of Russia. To them, it seemed that nothing could stop them. Through their control of the media and Russian banking, the oligarchs were able to reelect a President who started his campaign with only 3 per cent. in the polls. However, even in their moment of triumph, a basically instinctive fear of a backlash and of anti-Semitism remained.
The status quo in Russia could not hold, however. The oligarchs and ‘reformers’ simply had too many enemies, and it was only a matter of time before something would be done about them.
A close call
Due to a standoff in the State Duma, Yeltsin was unable to have his appointment of Viktor Chernomyrdin to the post of Prime Minister confirmed. On September 10, 1998, Yeltsin abandoned his support of Chernomyrdin and nominated Yevgeny Primakov, a person with whom the Duma was willing to work. Primakov is a very interesting personality. By the Western press and the ‘reformers,’ he is regarded as a Soviet-era spymaster and a person who cannot be trusted. However, he is trusted and liked in Russia, where he is considered to be one of the few honest politicians. Himself a Jew, Primakov is an Arabist known for his support of Saddam Hussein and Arab causes. In fact, he is one of the few Jews widely accepted in Russian politics, and the only one to my knowledge often accepted by Russian nationalists.
Unlike many other Russian politicians, Primakov owed nothing to the oligarchs and felt free to deal with them as he saw fit. He did not need their support and was not a weakling who could be influenced by threats or bribed. He considered them criminals and started to go after them. On January 28, 1999, Primakov told a cabinet meeting that, due to a recent amnesty freeing 94,000 prisoners, “we are freeing up space for those who are about to be jailed — people who commit economic crimes.”31 Apparently, Primakov especially disliked Berezovsky, who soon was in the Prime Minister’s gun sites. It wasn’t long before prosecutors and armed men in camouflage and black masks raided Berezovsky’s companies in Moscow. On April 5, 1999, the Prosecutor’s Office issued an arrest warrant for Berezovsky for his involvement in a scam involving Aeroflot ticket sales. In May, members of the State Duma tried to impeach President Yeltsin. The impeachment failed, but it was rumored that votes had to be bought by the Kremlin at $30,000. apiece.32 It seemed that attacks were coming from all sides. It was probably during this time that Yeltsin began thinking about protecting himself from prosecution after his second term expired, and the oligarchs began thinking about making sure that the next Russian President would not go after them. However, these were merely signs of what was yet to come. Behind the scenes, there was something else going on. People who had remained silent were about to make their move.
(footnote 31. Ibid., p. 459)
(footnote 32. Ibid., p. 461)
It all started with NATO’s criminal war of unprovoked aggression against the sovereign state of Yugoslavia. The war was extremely unpopular in Russia, where the Serbs are viewed as Russia’s “little brothers” and fellow Orthodox Slavs. While he was in flight to the US to meet with American leaders, Primakov was told by Al Gore about the decision to bomb Yugoslavia. In mid-flight, Primakov ordered the plane to turn around and return to Moscow. Because Russia depended on loans and other financial aid from the West, Yeltsin’s government was not willing to risk confronting the United States and did nothing for the Serbs. Beginning to flounder, Yeltsin replaced Primakov with Sergei Stepashin. I happened to be in Moscow when the bombing started, and I remember seeing angry crowds as far as the eye could see protesting against the war. Upon learning that I was an American, every Russian I met wanted to express his opposition to the war and wanted me to try to explain why the United States government was acting in such a manner.
The American administration either did not know it at the time, or simply was too arrogant to care, but its actions had a huge impact on the future of Russia and its relations with the West. For many Russians, the bombing of Yugoslavia was simply too much: It was the ultimate sign that America could not be trusted and would attack Russia if it could. On June 11, 1999, the Russian military rejected the Kremlin’s capitulation and ordered Russian troops to seize the airport in Pristina, Kosovo. Yeltsin had lost control over his military. This was the beginning of a silent coup. With little choice, Yeltsin’s administration agreed to require the Foreign Ministry to coordinate its activities with the military and security apparatus. Yeltsin was left in office, but his time was running out. On August 10, Yeltsin fired Prime Minister Sergei Sephashin and replaced him with Vladimir Putin, an unknown former KGB officer and former head of the FSB.
Nobody knew what to think of Putin. He had very little political experience; he had only served as deputy mayor of St. Petersburg for a short time. He mouthed the right words about ‘democracy’ and ‘open markets.’ His actions as Prime Minister would soon increase his popularity. The Chechen war was reignited when Chechen rebels attacked several towns in the neighboring Russian Republic of Dagastan in August of 1999. Putin responded to the crisis with a firm hand. Without hesitation, he sent in the Russian military to crush the rebels. A series of apartment bombings in Moscow gave Putin even more room to move. Putin said that he would wipe out the Chechens “in the outhouse.” It is important to point out the widespread hostility many Russians have for Chechens and other ethnic groups from the Caucasian region. Soon, Putin’s popularity ratings went sky-high. After years of Yeltsin’s weak leadership, it seemed that a strong leader had finally arrived.33
(footnote 33. Many historians argue that Russians have historically preferred strong leaders.)
The hunters become the hunted
For Berezovsky and the others, it seemed that Putin was the man they could count on for a “continuity of power.” However, Putin wasn’t their man at all. He represented different interests, and the security agencies were in the process of reclaiming power.
Berezovsky went about the task of preparing for the 2000 Presidential election. He organized and funded a new political party to back Putin called Unity. Even though this party had no real ideology, it won enough seats to make Unity the second largest bloc in the Duma, all on account of Putin’s popularity. (Other than the Communist Party, most political parties in Russia are not grass-roots organizations. They are simply parties set up to support a politician and people simply vote for the party that is headed by the politician they most agree with. When Russians think of the LPDR, they think of Zhirinovsky. When they think of Fatherland, they think of Lushkov. When they think of Unity, they think of President Putin.) At this time, Yeltsin’s primary concern was shielding himself and his family from future prosecution. The Duma’s earlier attempt to impeach him gave him an idea of what these forces might do if they ever came to power. He was even accused of “genocide against the Russian people.” In short, he believed his enemies would make him pay for his real or alleged crimes against Russia. Most likely, as part of the silent coup, a deal was struck to protect Yeltsin and his family from prosecution in exchange for Putin becoming Prime Minister and later President. When he became President, Putin’s very first act was to sign a decree granting Yeltsin immunity from prosecution. Yeltsin was saving his skin. After nine years of impoverishment, privatization scandals, the rise of the oligarchs, the use of the military against opposition forces, and two wars in Chechnya, Yeltsin had plenty to fear. And it seemed at first that Putin was indeed “one of the boys,” willing to play along with the Jewish money men.
On New Year’s eve 1999, President Yeltsin gave a surprise address to the nation. He announced that he was stepping down as President and naming Vladimir Putin acting President. In March of 2000, Putin easily won the election, but nobody knew exactly what to expect. They would soon find out.
Putin began to move with lighting speed. He announced that he would create one set of rules for everyone, including the oligarchs. He stated that he would initiate “vertical control” over the country, and began to move on the regional governors, who enjoyed a great deal of autonomy under Yeltsin. To do this, he launched a plan to divide the country into federal districts, with each district controlled by a supergovernor appointed by Putin. The existing 89 regional chiefs now had to report to these Putin appointees. Five of the seven men appointed by Putin were either former KGB or military officers — all people loyal to Putin. He followed this up with a campaign to oust certain governors on corruption charges. Then, Putin began to move against the same people who had supported him and helped him get elected: the oligarchs. Putin’s words about gaining control over “bandit capitalism” were for real, but he couldn’t go after all of the oligarchs at once. First on his hit list was Gusinsky.
Putin and his surrogates launched a relentless campaign against Gusinsky and his empire. Within one year, they were victorious. Gusinksy’s media conglomerate was called Media-Most. Media-Most was guaranteed a loan by Gazprom, a large state-controlled energy company, for $211 million in 1996. When Gusinsky was unable to pay back the loan to the creditor, Gazprom did, which boosted Gazprom’s stake in Media-Most. Gazprom received 25 per cent. plus one share of Gusinsky’s media empire. After Putin came to power, Gazprom soon became a hostile partner. Gazprom was no longer willing to take Gusinsky’s equity, and demanded cash. Putin’s team knew that Gusinsky wouldn’t be able to come up with the needed amount, which was part of their whole plan. Gusinsky began to openly criticize Putin, calling him an opponent of free speech. On May 11, 2000, Gusinsky was arrested as a suspect in a fraud case in a privatization deal involving a St. Petersburg television company, Russian Video. Gusinsky, one of Russia’s wealthiest men, a person who thought he was untouchable, was thrown into Moscow’s most notorious prison, Butyrskaya, an overcrowded eighteenth century jail.
While on a trip to Spain, Putin was asked about the scandal, but he replied that it was all a matter of business disputes. He replied that Gusinsky had taken out $1.3 billion in loans for his Media-Most and had “returned almost nothing.” He also added that “several days ago Gusinsky did not pay back another $200 million loan, and Gazprom again paid the outstanding debt. I wonder why Gazprom should spend money on this.”34 The Kremlin’s plan was brutally simple: to force Gusinsky to repay all of the loans at once, bankrupting him. Although the Western media did make claims that this was a matter of free speech in Russia being crushed, and President Clinton did speak with Putin on behalf of Gusinsky, the writing was already on the wall. Gusinsky’s time was up. The feared backlash had started. Once again, the cry of “anti-Semitism” was voiced, but this wouldn’t help Gusinsky. If the other oligarchs had realized that Putin wasn’t only after Gusinsky, they might have been able to come to his defense and save their corrupt system. They didn’t, and it would only be a matter of time before their turn came.
(footnote 34. Hoffman, Op. cit., p. 469)
Gusinsky was formally charged with fraud and released on June 16. The pressure continued. Mikhail Lesin, the recently appointed Press Minister, was given the task of destroying the oligarch. Secret negotiations were held. In total, Gusinsky owed $473 million in dept to Gazprom. An ultimatum was presented to Gusinsky: If he sold his media empire to Gazprom, he would go free. Quite simple, really. They even offered the oligarch $300 million in cash, proving that this wasn’t really about money, but about control over Gusinsky’s media. Threats continued against Gusinsky. Raids continued against his businesses. On July 7, investigators hauled off boxes of documents from NTV. According to Gusinsky, “They said it more than once. There were constant threats to put me in jail cells with tubercular prisoners and people with AIDS…. I was indeed a hostage. When you have a gun to your head, you have two options: To meet the conditions of the bandits or take a bullet in your head.”35 It was wheeling and dealing, Russian style.
(footnote 35. Ibid., p. 481)
On July 18, Gusinsky signed a written statement saying that he was being forced against his will to sell his business, in exchange for a promise to drop the criminal charges and permission to go abroad. According to Gusinsky, it was Lesin who was forcing him to do it. On July 20, he signed a secret agreement to sell his empire for $300 million. On July 27, the prosecutors announced that they were dropping all charges against Gusinsky. He immediately boarded his private jet and flew to Spain, never to return to Russia. While in Spain, Gusinsky changed his mind about the deal, which resulted in prosecutors issuing arrest warrants through Interpol. Gusinsky was indeed detained in Spain and twice jailed, but the Spanish high court threw out the case. In April, Gazprom held a board meeting and moved to seize control of NTV. A new general director was appointed. On April 14, NTV was taken over by armed men, and the new director assumed control. Sevyodna, Gusinsky’s first newspaper, was closed. Gusinsky should have taken the $300 million while he had the chance, but he foolishly thought that he could fight Putin. Now it was all over for him.
Gusinsky was only the first. Other oligarchs who thought that they could escape were sadly mistaken. One of these was Boris Berezovsky, the man who did more than anyone else to get Putin elected. Berezovsky was under the mistaken impression that Putin owed him something for his support and that he was therefore ‘immune.’ When asked about any charges being brought against him, he replied: “To be honest, I am not expecting this, neither tomorrow nor in the near future.”36 However, as Putin had said during his meeting with the oligarchs, the rules of the game were now different. Berezovsky was next.
(footnote 36. Ibid., p. 486)
In August, Putin said that the oligarchs and their television channels had been destroying the state, as well as the army and navy. Kremlin aide Alexander Voloshin told Berezovsky “Listen, 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.”37Berezovsky arranged a meeting to speak directly with President Putin and get to the bottom of things. Apparently, he felt that he was powerful enough to convince the President to change his mind. Putin told Berezovsky that he had something to tell him. He opened a file, the same file prepared by Primakov when he started to go after Berezovsky. Putin began to read a document, which detailed the corruption of ORT. Berezovsky was in shock. Putin was completely serious, and he meant business. Realizing that it was useless to fight and that he could very well end up in prison, Berezovsky sold his interest in ORT and left the country. However, his troubles were not over. He would not be safe in London, and Berezovsky could not resist the temptation to continue to meddle in Russian politics. He was an addict, and power and politics were his drugs of choice. It is simply not in Berezovsky’s nature to keep quiet and be content with his money. This was his downfall.
(footnote 37. Ibid., p. 487)
While in London, Berezovsky set up yet another new political party in Russia, Liberal Russia, in 2002. Liberal Russia was meant to be an opposition party, and was bankrolled by Berezovsky. The fact that Berezovsky is such an unpopular figure in Russia gave this party little chance of success from the start. Berezovsky also continued to make accusations against the Kremlin, accusing the FSB of being behind a series of apartment blasts in 1999. He even accused the FSB of being behind the 2002 siege of a Chechen-seized theater in Moscow that left 129 hostages dead. Putin’s government responded by releasing information indicating that, in fact, Berezovsky has very close ties to the Chechen separatists — and has funded them.
The Kremlin had had enough of Berezovsky’s mischief. In March of 2003, Berezovsky was arrested in London on an extradition warrant charging him with fraud while head of the Logovaz car company.
Though he has so far managed to remain in his safe haven in Britain, it is very likely that Berezovsky could end up paying for some of his early crimes against the Russian people. In an effort to gain immunity, Berezovsky announced in early April 2003 that he was planning to run in the legislative elections in Russia: As a member of the Russian State Duma, he would enjoy parliamentary immunity. His effort fizzled out, and he has lost most of his support. Berezovsky is like a gambler who cannot quit while he is ahead. If he continues to insist on trying to influence Russian politics, it is very likely that he could end up in prison for the rest of his life, or even could lose his life. Those who know what he has done are now in a good position to fight him — and they are never going to forgive.
‘Anti-Semitism’ or immunity from criticism?
Of course Putin’s highly visible fight against Russia’s oligarchs has been accompanied by charges of ‘anti-Semitism.’ The fact that the overwhelming majority of these oligarchs are Jews means that high-profile Jews are being targeted. For some, it is simply Putin going after criminals who just happen to be Jewish. For others, it is something similar to Stalin’s anti-Jewish crackdowns. It wasn’t that Stalin hated Jews because of their religion or any other reason. Stalin viewed Jews as a powerful interest group that could never be trusted — and as a threat to his personal power. Putin’s crackdown has increased his popularity in Russia, and the fact that so many of the people he is cracking down on happen to be Jewish can’t hurt him in the eyes of the Russian population. To many ordinary people, these Jewish swindlers defrauded the Russian people out of property that was supposed to belong to the people and used their wealth to buy up the Russian media and influence to control the government. Some Jews in Russia view this as a good thing, because it counters the image of the Russian media being owned and controlled by Jews, and some Jews believe this will reduce anti-Jewish feelings in Russian society.
In a very shrewd move, President Putin has managed to protect himself from charges of anti-Semitism by splitting various Jewish groups and seemingly supporting others. On January 23, 2001, Israeli President Moshe Katsav visited Moscow. This gave Putin a chance to promote one Jewish leader as the authentic chief rabbi in Russia. For the reception of Katzav. the only Russian rabbi invited was Berl Lazar, who was contending for the title of chief rabbi. Lazar was fighting with Adolf Shayevich, who is associated with the Russian Jewish Congress, which was founded by Gusinsky in an effort to bring Russian Jews together to promote their own interests. Lazar is part of the Chabad movement and head of the Federation of Jewish Communities. In effect, the Kremlin has named Lazar chief rabbi. In return, Lazar follows the party line and backs the Kremlin when it feels it needs a “Jewish voice.” Lazar, for all purposes, is a Kremlin-controlled rabbi and is now considered Russia’s chief rabbi. Lazar has defended the Russian government from charges of ‘anti-Semitism’ and has even supported the return of the “Stalin hymn.” Now, whenever the administration wants to defend itself against charges of ‘anti-Semitism’ it can just bring out Russia’s “chief rabbi” and have him make a few statements of support.
How far will he go?
Of course, the question of whether or not the Putin government is serious about tackling the oligarchs remains. Some argue that this has more to do with controlling the flow of information in Russia and that the excuse of cracking down on the oligarchs is used to garner support among the population. One thing is certain: Putin’s campaign has indeed been very popular in Russia, and it has done quite a lot to convince Russians that his government it at least trying to take steps to do what is right, unlike Yeltsin’s.
The real test starts now. Putin has just been re-elected. He will have a much freer hand in implementing his policies and installing his people in leadership positions throughout the country. For now, it seems that the Russian government is willing to allow some oligarchs to remain if they do as they are told. A good example of this is Roman Abramovich, who moved to the region of Chukotka and became governor. He has spent a good deal of his own money trying to improve the region, and he has expanded business ties with foreign countries and brought in investment. The most important thing about Abramovich is that he does not visibly try to influence the Kremlin, unlike other oligarchs. I remember that at the time he made the move to Chukotka some people had a hard time understanding his actions. One theory is that Abramovich was given a choice: either go to Siberia and help the people there as a governor, or go to Siberia as a prisoner. There have most likely been many such behind-the-scenes deals made. In the long run, it does make sense, because the remaining oligarchs know that they must play by the new rules that Putin has made, and they know what will happen to them if they don’t. Yet, even Abramovich doesn’t seem to be immune, as investigations have recently been launched into some of his past business dealings. Abramovich recently moved to Britain, becoming its wealthiest resident (edging out the Duke of Westminster by some 50 per cent.) and buying the Chelsea Football Club.
It appears that the silent coup has worked and Russia’s security services are now in control. A new set of players is running today’s Russia, which cannot but be better than the Yeltsin gang. One can only hope that Putin and his team really have Russia’s best interests at heart and that this is the beginning of a national awakening in Russia. I firmly believe that Putin’s interests are of a long-term nature and that he will continue to maneuver in a cautious manner with an eye on the future. Russian politics are not what they might at first seem, and Putin will continue to play his enemies off against each other. Stalin did the same while he was consolidating his power and weakening the Jewish grip on Russian society. Putin will continue to say what needs to be said in public in order to implement his long-term plans. Yet, when one looks at the bigger picture, one can see that the new rulers of Russia are moving Russia in a direction much different from that of Yeltsin and his ‘pro-Western reformers’ and mafia-style Jewish ‘family.’ Putin’s second term will provide some answers to the questions so many of us have asked for so long.
originally published June 2004