Yeltsin received intelligence about the budding conflict over Svyazinvest and had Yumashev confer with Potanin and Gusinskii before July 25. Yumashev’s recommendation was that they divide the company down the middle—a notion hard to reconcile with the principle of market competition—but Chubais would not hear of it. One week after the auction, Berezovskii took advantage of a phone call Tatyana Dyachenko made to him on another matter to bend her ear on the injustice of the result.97 He addressed her in the second person singular and struck a cloying tone which she did not reciprocate.98 Dyachenko sounded politely receptive, although she did have doubts about Gusinskii’s belligerency. “Some kind of compromise” should be found on the case, she said, and on the whole the rules should require “normal competition” for state assets. Tatyana did not indicate her father’s opinion and Berezovskii did not ask her to influence it. When he opined that the minister for privatization, Al’fred Kokh, should be dismissed, she replied that would be up to Chubais, who supervised his department. Berezovskii went on to put in a good word for another cause close to his heart (and wallet)—a general amnesty for back taxes owing, with “a normal tax regime” instituted only after previous illegality had been forgiven. “Let me tell you with certainty,” he said knowingly, “no one [in Russia] has filed an honest tax return, except for the president, naturally.” Dyachenko took exception. Her entire family had paid all its taxes; a free ride for tax delinquents would be unfair to the upstanding majority of Russians; and, by some formula or another, business should pick up more of the tab for government.99 Berezovskii signed off by telling her he had been talking with “Valya” (Yumashev) and giving her his cell phone number. She had to ask him what codes to use to dial. The conversation demonstrated that the country’s best-known businessman had access to the president’s daughter and adviser in 1997, but also that they were not close and she had a mind of her own.
Whatever Dyachenko may have preferred, Yeltsin was opposed to reconsideration of the Svyazinvest auction, as Gusinskii and Berezovskii were demanding, but made oracular comments that sounded more critical of Potanin and his government backers than of the sore losers. He did not want to meet with the parties. Yumashev brought him around after an alarming article in the Berezovskii-owned Nezavisimaya gazeta painted Chubais as power-mad, Potanin as in cahoots with him, and the two of them as conspiring to find a “Trojan horse” candidate for president in 2000; in the interim, they meant to castrate Yeltsin politically, and would be much more devious at doing so than Aleksandr Korzhakov and Oleg Soskovets before them, who could not see “beyond the tennis court and the steambath” (no compliment to the president who whiled away so many hours with them in those locations).100 Potanin’s Russkii telegraf and Izvestiya, which his conglomerate partly owned, replied in a like manner.
On September 15, in the Oval Hall of Building No. 1, Yeltsin hosted the third of his four roundtables with high-flying businessmen. At the table with him and Yumashev were five of the six (Gusinskii, Khodorkovskii, Potanin, Aleksandr Smolenskii, and Vladimir Vinogradov) who had conferred with Yeltsin in February 1996 (see Chapter 14), plus Fridman as a substitute for Berezovskii. Yeltsin maintained neutrality between Gusinskii and Potanin but tested Potanin with a barb about how much government money (from taxes and customs duties) he had on deposit in his bank. Hearing that, Potanin feared the Svyazinvest auction was going to be overturned. Then Yeltsin pulled back. Potanin was at once relieved and let down: “Essentially, [Yeltsin] said, ‘Guys, I have had a look at you, and in principle I remind you that I am the chief here, so everybody should go ahead and live in friendship !’ But nobody was arguing with him about whether he was the chief. The chief is the chief. How were we to live from now on, and by what rules? He didn’t explain anything about the rules.” Yeltsin was to recount in his memoirs that he could tell as the conference broke up that no good would come of it. He does not say why. Be it out of fatigue, confusion of the oligarchs with state employees whose standing depended completely on him, or some other cause, Yeltsin had failed to lay down the law.101
For the Svyazinvest combatants, the only law for the moment was the law of the jungle. President and government did not act to change the auction result. After another six weeks of mudslinging, Yeltsin on November 4 agreed to a proposal by Chubais and Nemtsov to remove Berezovskii from his position in the Security Council. The decisive consideration was conflict of interest: He was mixing business and politics. Yeltsin was disgusted with Berezovskii and made a show of firing him by minor executive order (rasporyazheniye) rather than full-dress presidential decree (ukaz).102 On November 12 Berezovskii and Gusinskii struck back by releasing “kompromat,” compromising material put together by their corporate security branches, to the effect that Chubais and four of his young reformers had accepted honorariums of $90,000 each for a not-yet-written book on the history of Russian privatization. The money had come from a firm that was soon to be purchased by Potanin. Within days, Yeltsin felt compelled to dismiss all of the coauthors except Chubais, who had to relinquish his second cabinet title, as minister of finance, on November 20.103 Nemtsov was also lowered a notch, losing his second position as minister of fuel and energy to Sergei Kiriyenko. After that, writes Yeltsin, “My meetings with Chubais became much less frequent.”104 Nemtsov noticed the same, as he dropped from two audiences a week to one every several weeks.
The Svyazinvest imbroglio turned into a loss maker for all, and not least of all for Boris Yeltsin. On business’s role in the new politics, he had to concede after the fact that he “did not immediately grasp the scale of this phenomenon and all the dangers it posed.”105 The winners of the auction did not make money from it, and George Soros sold his stake in 2004 at a loss. The oligarchs as a group also lost and were revealed, not as omnipotent, but as selfish and even rapacious and as politically inept—disunified, shortsighted, overplaying their hands. The scandal would have echo effects for years to come. After the 1996 election, it had been understood in all quarters that the cream of Russian business and the Yeltsin government, to quote Nemtsov, were “in the same boat.”106 The question was now not only about who had captured whom but about whether anyone would be moving the boat forward, and toward what destination. In certain regards, as the Washington Post’s David Hoffman has written, the business elite and Westernizing politicians, with Yeltsin looking on at a regal remove, had been functioning as a comfortable club. When the members came to blows over one obscure company, “the club of tycoons and reformers began to fall apart.”107