The Oligarchs (41 page)

“For me, the question always was, where did this magic hand come from?” Huaco asked. “The magic hand came with money, and these people utilized the money to make ten times more by having access to information or deals. When the magic hand picked them, it did not only give them money, it gave them information. They knew certain things and placed their bets accordingly.” In one case, Huaco helped a Russian government agency borrow money from a Western lender. The loan was guaranteed by Russia, transferred to Moscow, and deposited in a Russian bank. A while later, the government agency that was supposed to get the proceeds from the loan complained about never receiving it. Huaco tracked it down. “The Russian bank had just
churned it into their own investments,” he said. The magic hand was at work again.
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Periodically, the government would announce with great solemnity that the days of easy money were over. Alexander Livshitz, an economic adviser to Yeltsin, declared after the MMM disaster, “The time of easy money is passing.”
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He could not have been more wrong.

 

The age of easy money, the roaring 1990s, masked a dark side of the new Russia. The oxygen of freedom was exhilarating, yet many took it as an invitation for brazen abuse. There was freedom to skirt the law, cheat the state, steal from the population, and get away with it. Coal miners, pensioners, teachers, and nurses went without pay because the “authorized” bankers—the tycoons—who were supposed to distribute their pay on behalf of the state used the money instead to make a quick windfall. Russia offered the spectacle of an elite in Moscow that had become stronger than the state, protected by their own private armies, strong-arming the government into relinquishing its riches, threatening and coercing anyone who stood in their way.

Boris Yeltsin and the liberal reformers around him had spent their best years destroying the symbols of Soviet power, and they did not want to revive the big state; it was a danger still fresh in their memory. In a decision that would have profound consequences for the early years of Russian capitalism, the liberal reformers choose to provide maximum freedom first and rules later. Into this vacuum rushed chaotic forces of evil—the cheaters and charlatans, the hooligans, criminal gangs, corrupt politicians, bureaucrats, natural resource barons, Mafia kingpins, ambitious tycoons, and former KGB bosses. Sadly, in the enfeebled condition of the new Russian state, which could barely muster a pauper's salary for militiamen and bureaucrats, money bought power. The very essence of the state—authority to set the rules of the game—was simply privatized by the new capitalism. The sequence was unmistakable: the wave of money came first, starting with early opportunities to sell oil and computers for superprofits. The easy money was followed later by privatization of gigantic factories and natural resource treasures. Money and property invariably brought competition and conflict. And conflict needed a place to settle its disputes, but since the rules were still not drawn—the laws not enforced, the courts not effective—the new money and property interests
created their own rules outside the law, using bribery and corruption, using violence and coercion, all of which could be easily purchased. The cycle was complete: money ruled.

In the excitement of the easy money years, a profound fact was often overlooked: from the tsars to the Soviet Communist Party, Russia simply never had a tradition of the rule of law. Russians have spent centuries appealing to individuals—a concrete person with whims, a tsar, a party boss—rather than to an abstract law that has no personality, that exists above individual discretion.

When Soviet power was demolished, a lid was lifted; the weight of arbitrary Communist Party rule ceased to exist overnight. This was a moment of great danger that no one fully understood. No one thought to put anything in place of the heavy lid. Russia was suddenly thrust into a void.
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Slowly, new laws were written and a new constitution was adopted on the heels of the violent shelling of parliament in 1993. But the utterly painful reality of the 1990s was that Russia remained in a vacuum, a free fall, a place of arbitrary power, individual whims, and private score settling. It extended from a simple street corner, where a traffic policeman spent his day taking petty bribes, to ghastly shoot-outs between gangs of thugs, to the highest echelons of the Russian state itself, where money, that mighty symbol of onrushing capitalism, was a potent, caustic force.

The astonishing corruption of post-Soviet Russia was hardly new; the culture and practice were centuries old. Bribery flourished in the time of Peter the Great, who hanged a Siberian governor, Gagarin, for corruption and three years later hanged Nesterov, the man who exposed the governor, for bribery. Throughout the entire reign of the Romanov dynasty, corruption remained a source of income for both petty government employees and high officials. In Soviet times, the definitions changed: the authorities persecuted and prosecuted the perceived enemies of socialism, including those with entrepreneurial instincts. But old-fashioned corruption remained below the surface, in the shadow economy; it was frequently the only possible way to carry out market transactions in a planned economy.

A powerful legacy of the Soviet era—the hostile ideology toward entrepreneurship and capitalism—persisted in the new Russia. The cops on the beat during Russia's first taste of wild capitalism were the same ones inculcated with the Soviet notions that all businessmen were criminals for the mere fact of doing business. They were the
same ones who grew up on a Soviet legal code that criminalized all kinds of market transactions. These law enforcement officials never absorbed the radically new idea that their job was to protect business. Once I asked a Russian police academy instructor about a string of unsolved murders of bankers. He grew indignant and began shouting at me, pushing his chair away from the table, standing, and glowering. “If a banker gets killed, it's because he did not have a strong enough security service!” he declared. He did not see protecting a banker as police work.

In many oppressive regimes, there is a powerful link between a weak state, corruption, and authoritarianism. If the laws are unenforceable or nonexistent, then just about anyone can be found at fault. This greatly enhances the power of selective prosecution: the rulers can decide arbitrarily who will be caught and punished. Here was the core of Russia's troubles in the 1990s. The archaic tax laws, for example, were impossible to obey. A small businessman once told me that the total official tax bill on his business was 110 percent of the profits, a refrain that I heard time and time again. The laws made almost every businessman and taxpayer a lawbreaker—and thus a potential criminal and thus a willing supplicant to power and, finally, a briber. Alexander Gurov, the head of an Interior Ministry training institute, once candidly acknowledged that this mentality had become embedded in the Russian people. “Of one hundred people stopped by the traffic police,” he said, “95 percent were offering bribes even before the policeman opened his mouth.”
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T
HE CATHEDRAL was as grand as the military victory it commemorated. After Russia's army turned back Napoleon in 1812, Tsar Alexander I ordered the construction of a mammoth temple to mark the triumph. The Cathedral of Christ the Savior was started in 1839 and completed forty-four years later, a colossal thirty-story structure of 40 million bricks, with walls more than three meters thick, sheathed on the outside with slabs of marble and granite and crowned with a gigantic cupola, covered in copper weighing 176 tons. At the summit stood a cross three stories high. The main cupola was surrounded by four belfries in which hung fourteen bells with a combined weight of sixty-five tons. Twelve doors sculpted in bronze led to the interior of the grand cathedral, which was both a religious shrine and a war memorial. “Tsars came and went, old generations died off and new ones populated the earth, Russia threw herself into the chaos of wars and conquests, suffered recurring waves of famine and epidemic, and yet nothing interrupted the effort to complete this extraordinary structure,” one historian wrote. The finished temple, consecrated on May 26, 1883, was a signature structure of Moscow.

In 1931 Joseph Stalin ordered the magnificent cathedral blown up.
After four months of scavenging the edifice for every scrap of gold, prying off the marble and copper and weakening the bricks with small dynamite blasts, workers toppled the structure in a series of explosions on the cold morning of December 5, leaving behind a tall, smoking mound of rubble. “A terrifying silence reigned in this place,” a witness noted.
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Stalin wanted to build an even larger “palace of soviets,” a high-rise taller than the Empire State Building, with a gargantuan statue of Lenin on top. Architectural competitions for the new skyscraper went on for years, but the project was abandoned after Stalin's death. In Nikita Khrushchev's time, a large, heated outdoor public swimming pool was built on the site. The cathedral was officially wiped from the history books, but not from memory.

In 1989, when Mikhail Gorbachev permitted more openness about the past, Vladimir Mokrousov constructed a small plaster-and-cardboard model of the cathedral, working from an old photograph of the original cathedral that a friend had given him. Like all who dared defy official ideology, Mokrousov was cautious and indirect, at first. A prolific sculptor with a lined forehead, gray eyes, long, gray hair, and shaggy beard, Mokrousov worked out of a drafty, aging two-floor studio in Moscow with creaky floorboards. He created a mock-up of the original cathedral, working quietly. He had to hide the model because the Union of Artists still had a charter prohibiting members from working on religious subjects. The cathedral was at least officially a forbidden topic, and Mokrousov did not want to take the risk of attracting the attention of the KGB.

In 1989 a competition was announced for a World War II war memorial in Moscow. The entries were displayed at the Manezh exhibition hall next to the Kremlin, and Mokrousov, in a flash of rebelliousness, decided to submit his model cathedral to “correct the mistake” that Stalin had made.
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It was just one of four hundred entries—many of them bearing the hammer and sickle—but Mokrousov's particular model caused a stir. It was on display for two weeks and then suddenly disappeared. Mokrousov said the KGB seized it and put it in a vault. But the KGB was too late. Mokrousov's model sparked interest in the idea of resurrecting the church. In addition to a newspaper article about it, a small grassroots movement was born, the members gathering periodically in Mokrousov's studio. They called themselves the Obschina, a Russian word that means a local religious or ethnic community. In the next few years, the Obschina activists
stood on street corners across the country seeking signatures and small contributions for restoration of the grand cathedral. Their dream was strictly a street-level affair; the Russian Orthodox Church and the Russian state paid them little heed.
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On December 5, 1990, to mark the anniversary of the destruction of the cathedral, a stone was laid near the spot, and the following March, a two-meter-high plaster cross, sculpted by Mokrousov, was erected; people gathered around it and prayed. They were a mixture of nationalists and religious believers at first, but later, after the August 1991 coup, they were joined by some of Russia's democrats, who saw the cathedral's rebuilding as a symbolic spike through the heart of Communism. In 1991, on the sixtieth anniversary of the cathedral's destruction, Boris Yeltsin declared that “this unprecedented act of vandalism was committed not by foreign invaders but by people blinded by false ideas and motivated by hatred toward everything good and saintly.”
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Yeltsin appointed Yuri Luzhkov mayor of Moscow after Gavriil Popov unexpectedly resigned on June 6, 1992. Luzhkov inherited a confused and worried citizenry facing grim shortages and deep uncertainty. He recognized that he needed to inspire hope, but he was not a charismatic figure. He was a pragmatic man, a Soviet-era administrator and engineer with a limited understanding of politics. Certainly he had no idea what kind of politics would inspire people in the brand-new state that was unfolding. Vasily Shakhnovsky, who was a senior aide to both Popov and Luzhkov during this time, told me that Luzhkov took office suddenly, unexpectedly, without a grand plan or strategy. Shakhnovsky recalled, “He found himself in a very difficult situation because he didn't have a ready, thought-out program.” Shakhnovsky said Luzhkov followed his instincts.
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“The most important thing now is to survive this moment,” Luzhkov told a Moscow government meeting at the time he took office, launching a massive and ambitious construction plan for the city, which he hoped would provide jobs—and take the edge off popular discontent, fueled by unemployment and despair.

On the streets, the Obschina was collecting contributions with growing vigor, the members standing in subway stations and posting notices on light poles seeking support. The Obschina won official government recognition, allowing it to register as a legal group and open a bank account. Activists presented tens of thousands of signatures to the authorities, petitioning for reconstruction of the cathedral. A
small bank was even started in the name of reconstruction of the church. But no matter how hard the grassroots campaigners tried, they were amateurs, and the chances of their dream becoming a reality remained slim. They raised only paltry sums from their public solicitations. Mokrousov's wife, Valentina, who had become treasurer of the Obschina, began to wonder if they would ever succeed; members were asking why nothing was happening. “There was very little money, but we needed to do something, at least start something,” she said.
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