The Oligarchs (68 page)

Dorenko had lit the match, and it did not take long to ignite a fullscale media conflagration, just as Gusinsky and Berezovsky had promised. On the first day newspapers were published after the auction,
Monday, July 28, Gusinsky's broadsheet,
Sevodnya
, rendered a verdict in the headline: “The Money Stank.” The article said Potanin and Kokh had become too friendly and that Potanin's money was of questionable origin. The young reformers were immediately thrown on the defensive, and the feisty Nemtsov wheeled out his favorite slogans to blast the losing oligarchs, Gusinsky and Berezovsky. “They don't need honest rules and democratic capitalism,” he said. “They want bandit capitalism!” Nemtsov had never really defined his “bandit capitalism,” and
Sevodnya
fired back with the obvious question: Who had been the father of it? Perhaps it was Chubais or Yeltsin? “It now transpires,” the newspaper deadpanned, “that the guarantor of Russian democracy has presided over a sustained effort to build ‘gangster capitalism.'”
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The point was, If Russia had become a gangster state, weren't they all responsible?

Kokh, the privatization chief, resigned on August 13, announcing he wanted to go into private business. The initial Kremlin reaction was cordial; Yeltsin thanked Kokh for his services. Up to this point, Gusinsky had said nothing in public, as he tried to get Chubais to reverse the deal. But by mid-August it was evident Chubais would not budge. Gusinsky then attacked. In an August 14 interview on Echo of Moscow radio, Gusinsky said of Potanin's winning bid, “There is money, and there is money. As far as I am concerned, money has a smell.” He recalled the discussion with Chubais about new rules of the game. “Honest rules of the game,” he added, “presuppose that the seller and the buyer should not be in collusion.” Gusinsky hinted that the government had been in cahoots with Potanin, but he was cautious. (The truth was that Gusinsky had expected that the government would be in cahoots with him, but he had lost.) The next day, Yeltsin unexpectedly weighed in, noting that both Svyazinvest and Norilsk Nickel auctions had been won by Potanin.
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“The entire scandal,” Yeltsin said, “is connected with the fact that certain banks are apparently closer to the soul of Alfred Kokh than others.”

Kokh's role now came under closer scrutiny. Although no one paid much attention at the time, Kokh had earlier reported on his financial disclosure form that he had received a $100,000 advance to write a book about privatization. Alexander Minkin, the muckraking journalist who was close to Gusinsky since their theater days, wrote an article in the newspaper
Novaya Gazeta
, questioning why Kokh was given such a large advance from what he described as a tiny company,
Servina Trading, in Geneva. Minkin, using a Swiss reporter to make some checks, reported that the company had only a tiny room and two or three workers. He quoted a Servina official as saying they had not yet seen the manuscript. “Servina paid Kokh a hundred thousand dollars for hope only,” Minkin said. “It's obvious that a tiny company cannot make such luxurious gestures. It was not Servina that paid. It was someone else paying through it. It is also clear that Kokh sold not the book, but something totally different.”
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Minkin was just getting warmed up.

Every day, the battle brought new headlines and new charges. The war consumed the “young reformers” and the tycoons. On Saturday morning, September 13, I grabbed a few newspapers and went to watch my sons play soccer. But once on the field, I stood riveted, not on the game but on
Nezavisimaya Gazeta
, the Berezovsky newspaper. The paper published a remarkable front-page ad hominem tirade against Chubais under the headline “Anatoly Chubais Seeks Control over Russia.” What was interesting was that the attack was not the usual sleazy
kompromat
of secret documents or embarrassing wiretaps, but a thinking man's screed against Chubais. The byline was Ulyan Kerzonov, most likely a pen name for Berezovsky. The commentary was acid. Chubais, already a hated figure in Russian public opinion, was portrayed as darkly scheming and power hungry, “a cynical zealot,” for whom “the ends justifies the means,” whose mentality “resembles that of Lenin,” a “ferocious pragmatist who has placed his faith solely in revolutionary expediency.” The author complimented Chubais for creating, during the election campaign, “a closed-circuit oligarchic system, later nicknamed ‘the seven banks.'” But now, the author said, Chubais was wrecking the group of seven bankers in order to build up Potanin alone as a “privately owned supermonopoly.” The essay had all the markings of an angry personal letter from Berezovsky, furious that Chubais had ruined his cozy club of oligarchs, his
bolshoi kapital
operating system. “The ‘seven banks' system could have become a normal market,” the author said, “but Chubais decided otherwise.”

The article was the talk of Moscow and reverberated the following evening on Kiselyov's widely watched Sunday television show,
Itogi.
“We haven't heard or read something like that for quite a long time,” Kiselyov marveled. He was cautious and recalled later that he was distracted by negotiations for the release of a kidnapped NTV correspondent
in Chechnya.
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Dobrodeyev told me he felt trepidation and dismay when the bankers' war broke onto the airwaves. “I had doubts, and very big doubts,” he said. It was one thing to use journalists and television for a fight against Zyuganov and the Communists, a cause that was “clear, explicable, and absolutely comprehensible to everyone.” But Svyazinvest was an obscure commercial dispute. Should journalists risk their reputations on a war between avaricious business interests? “It was a shameful situation for the mass media as a whole,” he recalled.

Yeltsin was furious at the growing discord, and he was also confused. He had given rise to the “young reformers” and the tycoons, and now they were at each other's throats. The vicious mudslinging every day in the newspapers “irritated me tremendously,” Yeltsin recalled.
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He summoned the oligarchs to the Kremlin on the Monday after the article appeared in
Nezavisimaya Gazeta
. Gusinsky, Potanin, Friedman, Khodorkovsky, Vinogradov, and Smolensky came, as did Yumashev, but Berezovsky, deputy secretary of the security council and theoretically a civil servant, was absent, as was Chubais. Smolensky told me that Chubais was “divorced from the banks, and it's hurting. . . . We shall have a hard life without him. Everybody feels it. We have been together a long time.”
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It was the first time since the meeting after Davos that Yeltsin had seen the oligarchs as a group. Vinogradov recalled that Yeltsin appeared self-assured and was clear of voice. “I urged them, and they agreed, that banks cannot be, as it were, above the authorities,” Yeltsin told reporters after the two-hour meeting. Yeltsin said the oligarchs agreed to stop attacking Chubais and Nemtsov, and “we achieved mutual understanding.” Inside the meeting, Yeltsin also said that some bidders felt Kokh leaked information to one side during the Svyazinvest auction. Potanin came steeled for criticism: on the spot, in front of Yeltsin, he volunteered to give up his lucrative Customs Committee accounts and transfer the money to the Central Bank.
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Looking back, Yeltsin said he felt estranged from the tycoons. “Despite their assurances, I sensed that these men had not really become my allies. Potanin seemed to stick out from all the others. I couldn't rid myself of the hunch that he had his own agenda.” Yeltsin said that behind their smiles and agreements, the tycoons left him cold. “It was as if I were dealing with a people of a different race,” he said, “people made not of steel but of some kind of cosmic metal. Not
a single side considered itself guilty. There was no area for compromise. There were no concrete concessions.”

Indeed, Yeltsin at this critical moment was baffled. He remains confused in recalling the role of the oligarchs in his memoir. He vigorously defends how property was sold off cheaply to the oligarchs, welcomes approvingly their support for him in the 1996 campaign, and notes their interest in political stability, so their companies would grow. He insists they were not underworld figures. Yet, at the same time, Yeltsin decries the fact that the tycoons tried to influence the government and “tried to run the country behind the backs of the politicians.” Yeltsin describes this as a “new and dangerous challenge.” He calls the businessmen “new and illegitimate centers of power.” He writes, ominously: “Our greatest threat came from the people with big money, who gobbled each other up and thus toppled the political edifice we had built with such difficulty.” Yeltsin obviously both liked and disliked his oligarchs, the children of his capitalist revolution.
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Soros, who said he thought investing in the Svyazinvest deal was helping establish legitimate capitalism, found himself snared in the sleazy bankers' war. Alex Goldfarb, who had been the intermediary between Soros and Berezovsky earlier, told me that Soros expressed worry about the uproar. “Soros said it will all end very badly,” Goldfarb told me. Goldfarb went to see Berezovsky in the middle of the bankers' war to appeal for a truce. He urged Berezovsky to stop the combat. “I said it will destroy everything,” Goldfarb recalled. “Everyone was so ecstatic when they got rid of the party of war. They got the good side of Yeltsin, the reformist side, and then a few months later this ugly thing comes out.”

“I am not an angel,” Berezovsky told Goldfarb, “but those guys are worse.”

Soros later recalled that he personally tried to dissuade Berezovsky from the onslaught, telling Berezovsky that he could be rich enough with the companies he already owned. “He told me I did not understand,” Soros recalled. “It was not a question of how rich he was, but how he measured up against Chubais and against the other oligarchs. They had made a deal, and they must stick to it. He must destroy or be destroyed himself.” Soros concluded that there was no way Berezovsky could be transformed from robber baron to legitimate capitalist.
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Jordan, who had brought Soros into the deal, suddenly found that
his multiple-entry visa to Russia was yanked, just before he left Moscow for London in early October. Dorenko, sticking in the knife ever so smoothly, announced on his television show that Jordan, a U.S. citizen, was in possession of Russian government secrets, perhaps secret contracts about weapons sales. Jordan, he said, must “say ‘God Bless America' every time his eyes fall on any sort of classified information.” There was no secret who was behind the decision to pull Jordan's visa; it was Berezovsky. He said a few days later, “The case with Jordan is a matter of a U.S. citizen getting access to exclusive information about our financial and defense secrets.”
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Jordan's firm responded that the real issue was using the visa in a war of business competitors. Nemtsov stepped in and got Jordan a new visa.

In early October, London's
Financial Times
reported that the tiny company which paid Kokh's $100,000 book advance had ties to Potanin's Uneximbank: the link that Gusinsky had suspected. An official of Potanin's Swiss affiliate, Banque Unexim (Suisse), had previously been a director at Servina Trading and commissioned the book. The Moscow city prosecutor announced a criminal investigation into the book advance, saying it seemed to be unusually large given the potential subject. Potanin acknowledged that he and Kokh were friends but insisted it “does not affect the work.” Chrystia Freeland, the
Financial Times
correspondent in Moscow who broke the story, later wrote that even more incriminating
kompromat
was waiting in the wings—the offended oligarchs obtained a shaky, handheld video of Kokh and Potanin on holiday at the Côte d'Azur one month after the Svyazinvest sale.
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Kokh later told me he didn't see anything wrong vacationing with Potanin so soon after the Svyazinvest deal. “But what's wrong if I want to spend some time with my friends in France?” he asked curtly. He admitted, however, resentment over the investigation by the prosecutor. “I was nearly put in jail,” he complained.
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Chubais came to Kokh's defense again, saying Kokh had indeed written a book. “I have known Kokh for ten years and know that he is a man of integrity,” Chubais told reporters. “Lavishly paid lies are reprinted from one newspaper owned by a banker to a newspaper owned by another, from a TV channel owned by one of them to a TV channel owned by another.” Gusinsky had another view. He believed that Chubais was clean, but Kokh had taken money from Potanin and Chubais was trying to protect his friend.

Chubais decided it was time to strike back. With Nemtsov, he
went to Yeltsin at his out-of-town retreat, Gorky 9, on November 4 and demanded that Yeltsin fire Berezovsky from the Security Council. Chubais argued that the war would subside if Berezovsky were dismissed. Yeltsin looked at Chubais and recalled that only a year before Chubais had asked him to appoint Berezovsky to the same post. Yeltsin later wrote in his memoir that he resented all the attention Berezovsky got as the supposed kingmaker, the power behind the throne of the Yeltsin years. “I never liked Boris Berezovsky and I still don't like him,” Yeltsin wrote. He complained that Berezovsky always overstated his influence. “There weren't any mechanisms through which Berezovsky might have exercised influence over me, the president.” Yeltsin did not address the book royalties that others said Berezovsky brought to the president's family.

Nor was it Berezovsky's style to whisper directly into Yeltsin's ear. Berezovsky operated through intermediaries and agents, through layers and indirection, including his friends in Yeltsin's inner circle.
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For example, Yumashev invited Berezovsky to the Kremlin the day before he was sacked to show Berezovsky the presidential decree, Berezovsky said. Yumashev had advised Yeltsin against firing Berezovsky.