In the corner of Malashenko’s office at NTV stood a suit of genuine Toledo armour. His motto, displayed on his computer screensaver, was a quote from Ortega: ‘These towers were erected to protect an individual from the state. Gentlemen, long live freedom!’ The most important one was a television tower.
After seventy years of Soviet socialism, feudalism seemed like a step forward and the oligarchs were a lesser evil than those who had sacrificed millions of lives in the name of a strong state. With their taste for castles and private armies, the oligarchs seemed a good fit for the role of feudal barons.
As it soon turned out, Malashenko had miscalculated. His idea that the oligarchs would defend private liberties and counter the power of the state suffered a fiasco. A few years later, the oligarchy of the 1990s brought a KGB statist to the presidential post. The baronial identities that the oligarchs tried upon themselves were fake, but they behaved as though they owned the country, treating the rest of the population with contempt and arrogance. Their lack of historic perspective and above all responsibility meant that they used their money and power not to install rules and build institutions but to enlarge their fiefdoms and fight wars with one another and with the state.
The Bankers’ War
The first war between the oligarchs broke out in 1997 – less than a year after the elections. That war consumed not only the oligarchs, but also the government of young reformers appointed by Yeltsin after the election. The 1996 election assured the oligarchs that the future belonged to them and they began to turn this future into money and assets.
As a reward for his services, Gusinsky was given a full licence for one of the main channels, Channel 4, for a symbolic price and with no tender. This transformed NTV from a temporary ‘experiment’ into a permanent channel. But Gusinsky’s ambitions were now far greater. He decided to launch a satellite channel – along with the satellite itself – that would make his television omnipresent and autonomous of the state. It was the stuff of a James Bond movie. After relentless schmoozing, he got approval from Russia’s military and space industry chiefs and persuaded America’s State Department to give its blessing. He commissioned Hughes Space & Communications to build the satellite with the backing of America’s Export-Import bank.
To finance his new venture, he sold 30 per cent of NTV to Gazprom, Russia’s natural gas monopoly, run by the jovial, red-faced Soviet industry man, Rem Vyakhirev, who saw NTV as a deterrent against predators, including Berezovsky who had set his eyes on Gazprom. ‘NTV was like a gun hanging on the wall. If anyone attacked Vyakhirev, he could use it against them,’ said Gusinsky.53 Gazprom also provided Gusinsky with a $40 million loan on extremely lenient terms.
Half in jest, Malashenko, highly sceptical of the whole venture, advised Gusinsky to privatize an oil firm or some other natural resource company to pay for this indulgence. But Gusinsky had other plans. He was eyeing Svyazinvest – a telephone communications company that consisted of dozens of regional providers which jointly controlled 22 million crackling telephone lines. Gusinsky’s grand vision was to consolidate all these communication assets in the country into one vast private holding that could then be floated on the New York Stock Exchange.
Before the 1996 elections, Gusinsky was the only Russian oligarch who did not participate in the privatization of state assets. Now Gusinsky was certain that Svyazinvest belonged to him by right. Media and communications were his fiefdom and fellow oligarchs, including Berezovsky, agreed and encouraged him. ‘Some even tried to persuade me that I should get it for free,’ said Gusinsky.54 It seemed only fair: other oligarchs had already got their spoils, so why shouldn’t he?
He felt all the more entitled to it since he had spent six months wining and dining military generals and security services chiefs to get their agreement to allow private owners, including foreigners, into telecoms – a zone of strategic military importance since Soviet times. ‘The amount of alcohol which I had to drink with them over those six months inflicted serious damage to my liver.’55 Gusinsky then went to Chubais, who had been appointed a deputy prime minister after the 1996 presidential election, to agree the terms of the auction. Foreigners would be allowed in and no state money was to be used in the bidding process.[2] ‘We agreed that it would be an honest auction that would draw a line under the loans-for-shares privatization. This was an absolute consensus,’ recalled Gusinsky.56
Gusinsky’s understanding of an ‘honest’ auction had one important caveat, however: all other oligarchs who had participated in previous privatizations were supposed to stay away from Svyazinvest, allowing him to win the auction ‘honestly’, although he was prepared to pay real money for it. The oligarchs decided that Chubais was on their side.
Chubais had his own political agenda, however. He saw Svyazinvest as a chance to assert power over the oligarchs who considered him ‘their’ man. ‘I had a very simple picture of the world. If you want to beat someone, you need to consolidate resources. In 1996 I consolidated with the oligarchs against the communists.’57 Now the main political task had shifted. The new target was the oligarchs. ‘If it was not Svyazinvest, it would have been something else,’ said Chubais.
The problem was that in his affront to the oligarchs, Chubais ‘consolidated’ resources with one of their kind – Vladimir Potanin – who devised the loans-for-shares scheme and who also served as a government minister while handling the government’s money: his private bank held the account of the state’s Customs Agency which maintained a balance of about $1 billion.
When the government announced that the auction for 25 per cent + 1 share of Svyazinvest would be open to all bidders, Potanin, who had left the government shortly before the auction, said he would participate. ‘I thought we had agreed that Potanin was not allowed to take part,’ Gusinsky recalled, ‘but suddenly Chubais told me there was no such deal.’58 From Gusinsky’s point of view, this was a brazen breach of agreement.
Chubais’s pledge to make the auction fair was either hypocrisy, Gusinsky decided, or part of a secret deal with Potanin. ‘Chubais had upset the balance by pumping Potanin with [customs accounts] money,’ said Malashenko.59 The situation was made worse by Gusinsky’s personal relationship with Chubais. He had been enchanted by the charismatic Chubais and did not even mind when other people told him so. Now he felt betrayed.
Berezovsky was there to console him. Although he had no obvious commercial interest in Svyazinvest, he inserted himself into the conflict and sided with Gusinsky against Chubais. Any war was positive for him. Like Chubais, he saw the auction as a battle for political control. Its outcome would determine his own status as Russia’s chief oligarch, a man who could rule Russia from behind the scenes. The conflict between Chubais and Berezovsky was least of all about democracy: neither side believed that ordinary people should be trusted with important decisions. In a poor country like Russia, democracy would always lead to populism and ultimately to authoritarianism. And only the rule of the few – who had resources and intellectual power – could launch the country on the right path. The whole question was who would be the ruling minority.
2
Gusinsky formed a consortium of investors including Mikhail Fridman, another oligarch, Credit Suisse First Boston and, most importantly, Spain’s Telefonica, which was supposed to manage Svyazinvest.