The oligarchs, p.68
The Oligarchs, page 68
25 Mikhail Moskvin-Tarkhanov, interview by author, November 2, 2000.
26 Tatyana Tsyba, “Why Do the Russians So Dislike Moscovites?” Komsomolskaya Pravda, February 12, 1997.
27 Pavel Bunich, interview by author, February 18, 1997.
28 Lee Hockstader, “Moscow Is a Haven of Haves amid Russia’s Sea of Have-Nots,” Washington Post, December 27, 1996, p. A1.
29 Donald Jensen, “The Boss: How Yuri Luzhkov Runs Moscow,” Demokratizatsiya , Winter 2000, pp. 83–122.
30 Yegor Gaidar, “Why the Living Is Good in Moscow” (speech to the Moscow branch of the Democratic Choice of Russia Party, published in Moscow News, February 26, 1998); Gaidar press conference, February 6, 1998.
31 Luzhkov, written answers.
32 Vladimir Yevtushenkov, interview by author, April 9, 2000.
33 Yelena Baturina, interview by author, August 23, 1999.
34 Baturina interview.
35 Luzhkov, interview by author, February 5, 2001.
36 Baturina told me the Luzhniki contract was “my great luck and success,” since her firm went on to win dozens more such contracts in Moscow and other Russian cities, as well as abroad. The stadium was 49 percent owned by the city. Baturina said she won a tender for the seats with a low bid, but, just as important, she said she was the only bidder with the correct specifications to meet the European standards.
37 Yuri Minkovski, “The First Underground Shopping Mall in the Heart of Moscow,” Cost Engineering, February 1998, pp. 15–17. Cost Engineering is published by the American Association of Cost Engineers.
38 Natalya Shulyakovskaya, “Defining the Moscow Style,” Moscow Times Business Journal 2 (1998): 6. Dozens of these useless spires could be seen in Moscow atop new glass-and-steel office buildings.
39 Leonid Filatyev, head of the coordination group for decoration of the cathedral, interview by author, December 6, 2000. “Take, for instance, the text inscribed on the dome at the top,” he said. “How do you put the text in place so that it would exactly fit the length of the sphere? If you do it manually, it will take a long time. The computer can deal with this quickly and produce a print from which the painters can copy the drawing onto the wall. But the technique of painting was the original one from the nineteenth century.”
40 “Moscow Celebrates,” Time, September 8, 1997, p. 38.
41 Lee Hockstader, “Puttin’ on the Ritz in Russia,” Washington Post, August 3, 1995, p. 22.
42 Hockstader, “Moscow Is a Haven.”
43 A long battle against the propiska was carried out by Veronika Kutsillo, a journalist who wanted to live in Moscow. She had grown up in Kazakhstan. As a student at Moscow State University, she had a permit, but when she graduated and got a job at the newspaper Kommersant Daily, she needed another to live permanently in the capital and to buy an apartment. The Moscow police said they would only give her the permit if she paid the “fee” for city services, then set at five hundred times the minimum wage, or about $2,000. “In my view this was completely groundless,” Kutsillo told me. “They could not explain what the money was being taken for. They tried to explain it was for the metro, for using roads, movie theaters, and so forth. But any person who comes here pays to take the metro, pays for all of this.” Kutsillo wanted the permit because she did not want to live as a second-class citizen; she wanted to be legal. “What does it mean not to have a propiska?” she asked. “A person can’t get a license for a car without it, can’t register a car in their name, can’t go to the local health clinic, and you can’t even call an ambulance without huge problems. I couldn’t get married. If there are children, you can’t send them to school, to nursery school, and you can’t get a passport for travel abroad.” Kutsillo had read all the federal laws on residency, which were clear that the only restrictions on freedom of movement could be war or catastrophe. There was neither in Moscow. Kutsillo appeared before the Russian Constitution Court to present her case personally and won a major decision on April 4, 1996. The court declared that although requiring people to register was permissible, the process could not be used as a “foundation for limiting a person’s rights or freedoms.” The court declared that every citizen “has a right for free movement, a right to choose a place of residence,” and that paying a residency fee, as Moscow had required, “contradicts the right of citizens to freely choose a place of residence.” The city government quickly responded. The mayor’s press office issued a statement warning the news media not to portray Moscow as a “city without borders” or to say that people were free to come live in the city. The statement declared that “an endless inflow of people to reside here may be the end of Moscow, and this would be true for any other big city as well.” Luzhkov formally canceled the propiska. But the mayor decided to try and implement it by another means—to demand a fee, slightly lower than before, from anyone who purchased an apartment in the city. A top city official said at the time, “The ruling of the Constitutional Court is mandatory for Moscow, but the life of the city will be determined by its own rules.” Kutsillo had won a round, but the fight was not over. Two years later, on February 2, 1998, the Constitutional Court again upheld the principle of the Kutsillo case, that a city may register people only to “certify the act of the free expression of will of a citizen” to live there. The city cannot be “granting permission” or limiting where people choose to live, nor can it dictate how long a person can live in a particular place, the court said. Luzhkov’s defiance of the court was clearly irritating the justices. One of them, Vladimir Yaroslavtsev, read a statement to Kutsillo’s newspaper, Kommersant Daily, which had campaigned against the propiska, saying, “We would like to warn Luzhkov and other regional heads: there will be no closed cities!” Eventually, a fee was created, of a thousand dollars or more, for transfer of real estate, so that the cost of getting residence was built into the purchase price of an apartment. Although Kutsillo had won in principle, the great wall around Moscow remained.
44 Chrystia Freeland, “Moscow: Mayor Says Nyet to Foreign Words,” Financial Times, March 1, 1997.
45 Chrystia Freeland et al., “A Mayor with Attitude,” Financial Times, November 4, 1996, p. 22.
46 Luzhkov, written answers. He added: “I also deal a lot with the problems of corruption. And not just every day, but every morning and every evening, and sometimes at night. To my deep belief, the increased criminalization of the economy and of life is the consequence of the economic system that was built by our liberal reformers, one more consequence of privatization.” He also said, “In my view, the level of corruption in Moscow is relatively quite modest, by Russian standards.” Although the situation in Moscow is not ideal, Luzhkov argued, the enormous investment in Moscow would not have come had corruption actually been so severe.
47 Julia Rubin, “U.S. Businessman Slain amid Russian Rivalry,” Associated Press, November 28, 1996.
48 The U.S. embassy said the decision to revoke the visa was based on a provision of the law prohibiting entrance to “any alien who the Consular Officer or the Attorney General knows or has reason to believe seeks to enter the United States to engage solely, principally or incidentally in unlawful activity.” Dzhabrailov angrily replied, “This is a disgrace for America. Have they any proof of this?” Nick Allen, “U.S. Revokes Radisson TV Chief’s Visa,” Moscow Times, November 30, 1996.
49 In the March 26, 2000, election, Dzhabrailov took last place, receiving 78,498 votes out of 75 million cast. He later boasted about the result with a new set of billboard advertisements.
50 Alessandra Stanley, “The Power Broker,” New York Times Magazine, August 31, 1997, p. 44.
51 Luzhkov, written answers.
52 Andrew Kramer, “Detectives Fight Odds in Contract Hit Cases,” Moscow Times, November 27, 1996.
53 Vladimir Yevtushenkov, interview by author, April 9, 2000.
54 Gaidar, “Why the Living Is Good.”
55 Marina Rassafonova, “Yuri Luzhkov Failed to Defend His Honor and Dignity,” Kommersant Daily, May 20, 1998 ; Anna Ostapchuk, “Luzhkov Against Gaidar,” Moscow News, May 26, 1998 ; Alexander Fedorov, “Yuri Luzhkov Won in Court Claim to Yegor Gaidar,” Moskovska Pravda, October 29, 1998.
56 Ana Uzelac, “Police: Moscow Official Put $700K in Switzerland,” Moscow Times, November 25, 2000.
57 Adi Ignatius, “Mayor Yuri Luzhkov Leads a Capital City Rife with Corruption,” Wall Sreet Journal, February 13, 1995, p. 1.
58 Mark Whitehouse, “Moscow Mayor Steals Political Spotlight,” Wall Street Journal , May 20, 1999, p. 14.
59 Vladimir Yevtushenkov, interview by author, December 1, 1997; April 9, 2000. Yevtushenkov told me that, among his early business ventures, he helped Vladimir Vinogradov set up Inkombank, which became one of the largest commercial banks. My story on the rise of Systema appeared in the Washington Post, December 19, 1997, p. 1.
60 Natalya Shulyakovskaya, “A Family of Born Leaders,” Moscow Times, February 9, 1999.
61 Interfax Telecommunications Report, February 4–10, 1998. The old exchange was removed in 1998.
62 Matt Bivens, “The Meteoric Rise of Luzhkov’s System,” Moscow Times Business Review, February 1999, p. 11.
63 Russian law stipulates that any auction must have a minimum of two bidders. Yevtushenkov said there were several bidders in this tender, but according to newspaper reports there was only one besides the Moscow Committee on Science and Technology, and the second bidder also had ties to Systema.
64 Perhaps one reason for their secrecy was a provision in the deal, not apparent at the time, that eventually allowed Yevtushenkov to take control of the phone company. Once he satisfied the investment requirements in the initial tender, the provision granted Yevtushenkov the right to issue new shares in the telephone giant. The phone company issued 638,634 new shares in addition to the 1.2 million already outstanding. This had the effect of allowing him to take control, increasing Systema’s share to 59.9 percent of the voting shares of the phone company, a solid majority. When I heard about this provision in 1998, I was dumbfounded. I went back to the original 1995 fax I had received from the Moscow property committee describing the conditions of the tender. It said nothing about the right to issue new shares. The key provision in the privatization—which allowed Systema to bootstrap itself into control of Russia’s largest city phone company—had been kept out of the public eye. The biggest loser was Svyazinvest, the largely state-owned national telephone holding company, which went from owning 46.6 percent of voting shares in the Moscow phone company to 27.9 percent.
65 Speaking to diplomats, journalists, and businessmen March 4, 1999, Luzhkov said, “I can officially tell you that all those myths that are spread around have nothing to do with reality. As far as Systema is concerned, attention to it is very high today, but many have tried to view Systema as some sort of extra pocket of the Moscow government, or a spare pocket for the mayor who has some sort of political motivations before the elections. Drop all these thoughts. We work honestly. We are not using what you suggest. And the suggestions themselves—when we read them—speak only to the bad taste of those who make them.” Natalya Shulyakovskaya, “Luzhkov: I Don’t Funnel City Deals to Wife,” Moscow Times, March 5, 1999.
66 Alexei Ulyukaev, interview by author, October 31, 1997; Ulyukaev’s essay on Moscow published October 13, 1997 in Expert magazine; and an unpublished, undated paper by Ulyukaev, “The Moscow Mayor’s Appetite,” p. 38. The prospectus was for the city’s $500 million 1997 Eurobond.
67 Luzhkov press conference, March 10, 1995.
THE CLUB ON SPARROW HILL
1 The location was renamed Lenin Hills in 1935 but is still known by many as Sparrow Hills.
2 Vasily Shakhnovsky, interview by author, November 26, 1999; December 18, 2000.
3 Shakhnovsky, interview by author, and Leonid Nevzlin, interview by author, March 16, 2000; Mikhail Khodorkovsky, interview by author, June 19, 2000; Vladimir Vinogradov, interview by author, June 28, 2000; Alexander Smolensky, interview by author, August 30, 1999.
4 Anonymous source, notes of conversation with participant in the club meetings.
5 Report of the Department for Public Relations of AO Logovaz, undated, but prepared for a meeting in summer 1994.
6 He told me he did not stay there long. Boris Berezovsky, interview by author, December 20, 1996.
7 This gang warfare is described by Paul Klebnikov in Godfather of the Kremlin: Boris Berezovsky and the Looting of Russia (New York: Harcourt, 2000). However, much about this conflict remains unknown. It is not clear to what extent Berezovsky was a victim or a cause of the gang violence. It later became evident, during the Russian war in Chechnya, that Berezovsky enjoyed excellent connections with the Chechens.
8 Berezovsky, interview by author, February 28, 2001.
9 Leonid Boguslavsky, interview by author, May 16, 2000.
10 Ellen Mickiewicz, Changing Channels: Television and the Struggle for Power in Russia (Oxford: Oxford University Press, 1997), p. 238.
11 Igor Malashenko, interview by author, July 25, 2000.
12 For the channel, this was supposedly an improvement. Alexander Yakovlev, then chairman of Ostankino, said that when Reklama Holding was formed, the channel’s revenues went from 5 billion rubles a month to 35 billion. Jean MacKenzie, “Listyev Killing Linked to TV Shakeup,” Moscow Times, March 3, 1995. A lengthy, unsigned story in the magazine Kommersant Weekly on March 28, 1995, said that Channel 1 received 16 billion rubles in the first half of 1994. After the creation of Reklama Holding, the amount rose to 104 billion in the second half. Still others said that Reklama Holding was simply centralizing the same process of ripping off Channel 1 that had been carried out by the independent producers.
13 Report of the Department for Public Relations of AO Logovaz.
14 Stephanie Baker-Said, “TV Advertising Sales, Ad Time Up in 1996,” Moscow Times, March 4, 1997, p. 3.
15 Berezovsky had both money and politics in mind. He was willing to take early losses in exchange for immediate political influence and big profits later. In our 1996 interview, Berezovsky told me that he invested in media for “influence on the political process. And at the same time, at the first stage, I understood it wasn’t going to give profits. I don’t want to talk about exact numbers, but I can say that ORT today is for me not a source of profits but a source of enormous expenditures.” However, he said it could be “made very profitable,” with the right investment. “These investments aren’t enough today. But already today it is possible to attract big money.” He summed up both reasons. “One is political: the protection of my interests. And the second reason: it is business.” He told me in 2001 that he lost control of ORT before ever realizing the big profits, but all of his hopes for political influence were fulfilled. “All the political tasks that I formulated for ORT were fulfilled.”
16 On March 27, 1998, Berezovsky told a group of journalists that Aven introduced him to Yumashev.
17 Alexander Korzhakov’s recollections are contained in his memoir, Boris Yeltsin: From Dawn to Sunset (Moscow: Interbook, 1997). Despite their once close relationship, Yeltsin and Korzhakov displayed great animosity toward each other after Korzhakov’s 1996 dismissal. In his memoir, Yeltsin said he had not read Korzhakov’s book, but “I am told it contains much untruth and sleaze. I decided not to read it because I couldn’t contain my revulsion.” He says Korzhakov was overpromoted and had “concentrated more power into his hands than he could handle.” Yeltsin said Korzhakov’s influence—appointing people in government, for example—is “entirely my fault.” Yeltsin, Midnight Diaries (New York: PublicAffairs, 2000), p. 69.
18 Korzhakov made this comment on the television program Sovershenno Sekretno, November 21, 1999.
19 Korzhakov, Boris Yeltsin, p. 283.
20 Berezovsky recalled in the meeting with reporters in 1998, “Earlier than others, we started thinking about what was going to happen in 1996, and together we lobbied the idea of creating ORT.”
21 The agreement between the new company, ORT, and Ostankino was published in Rossiiskaya Gazeta, February 16, 1995.
22 Berezovsky also gave Korzhakov power of attorney, turning all the shares over to Yeltsin in case there was any doubt about Berezovsky’s loyalty. But this appears to have been more a gambit to reassure Korzhakov than anything else. Korzhakov said at a November 30, 1998, press conference that he never showed the documents to Yeltsin. Details of the authorization were first published in “Yeltsin Is Shareholder,” Kommersant Daily, November 19, 1998.
23 Ivan Franko, “A Man Capable of Resolving Questions,” Kommersant Daily, November 2, 1996, p. 15.
24 Berezovsky, interview by author, February 28, 2001.
25 Text of Yeltsin’s remarks to Ostankino journalists, March 2, 1995, BBC Summary of World Broadcasts.
26 The killing was surrounded by a number of still unexplained events. I offer a summary here to give the reader a sense of the unanswered questions that followed the murder.The day before the murder, February 28, Berezovsky met with a man he has identified as Nikolai Plekhanov, a member of an underworld gang. According to Berezovsky, he was told by police who came with Plekhanov that the gangster knew who had planted the bomb attack against Berezovsky the previous year, and that Plekhanov had once again been ordered to assassinate him. Berezovsky said he gave Plekhanov $100,000 that day, in the presence of the militiamen. Berezovsky also videotaped the encounter. The money was intended to forestall another assassination attempt, Berezovsky said.
Berezovsky then flew off to London on an official trip with Chernomyrdin. Upon hearing about Listyev’s murder, Berezovsky returned immediately by private jet to Moscow.
Two days after the murder, Berezovsky and one of the independent Channel 1 producers, Irena Lesnevskaya, recorded a videotaped appeal to Yeltsin. Berezovsky told me the tape was Lesnevskaya’s idea. They had sought a meeting with Yeltsin, but Korzhakov insisted they make the tape instead. The tape was recorded in Korzhakov’s office in the Kremlin. (Korzhakov said he never actually showed the tape to Yeltsin.) On the tape, they nervously pointed the finger at some vague, power-mad, spooky Moscow organization that included Gusinsky and Luzhkov. Lesnevskaya said, “I have no doubt that this logical scheme was built up by the Most group, by Mr. Gusinsky, Mr. Luzhkov, and the structure under him, a huge pyramid with islands; the former KGB came up with this [devious] plan to assassinate Vlad.” A twenty-three-minute segment of the Berezovsky-Lesnevskaya tape was played by Korzhakov at a Moscow press conference November 30, 1998; a longer version is reproduced in Klebnikov, Godfather.
