Rich Rasputin who bewitched Yeltsin
Boris Berezovsky, high priest of the elite capitalists of Moscow, wields huge influence via the Premier's daughter. James Meek reports.
Sunday August 30, 1998
The lives of three men named Boris are held hostage to Russia's fortune today. One has lost his power. The second grows weaker by the moment. The third, accountable only to his enormous wealth, struggles to pull the strings in a vast, disintegrating nation that may yet overwhelm him.
Boris Yeltsin, the old, sick President who wanted to go down in history as the leader who broke the chain of oppression that has bound Russia for all of this millennium, finally admitted that he was not capable of leading it into the next. Communism beaten, a task he could understand, it was time to withdraw and let others tackle a global economic disaster that is beyond his grasp.
Boris Nemtsov, the archetypal young reformer once seen as Yeltsin's natural heir, who many in the West hoped would carry the torch of social and economic liberalism into the new century for Russia, is out of government, his boasted dreams of smashing the country's oligarchic capitalists in ruins.
The champion of Russia's business barons, Boris Berezovsky, has beaten both of them. He persuaded Yeltsin and his family, increasingly fearful for their future, to begin handing over power and to bring back the discredited former Prime Minister, Viktor Chernomyrdin, as a safe successor. This in turn has meant the expulsion of Nemtsov, his allies and all they stood for from the government.
Berezovsky, who compares his desire for power and wealth with the sexual urge, is playing a dangerous game. He has always been a better manipulator than a politician. Now he must be wondering whether his aims - to avenge himself on the Nemtsov faction, increase his power behind the scenes, and protect and expand his control over the Russian economy - are not being destroyed by the mounting economic catastrophe he has helped create.
For Berezovsky's legacy is this. The rouble is still in free fall. The banking system is collapsing and foreign investors are fleeing with all the grace of first-class passengers on the Titanic. There is no government, and when there is it won't have any money. None of the old problems - particularly non-payment of wages - has gone away. And Berezovsky cannot be sure his worst nightmare, a re-examination of old privatisation deals and a redistribution of property by a new, neo-socialist administration, will not come about.
Taking a break from an evening farewell party in the government White House on Tuesday, his last day in office, Boris Nemtsov sat down and tried to explain what had happened. The government of Sergei Kiriyenko - it was Nemtsov who first brought Kiriyenko to Moscow from his native Nizhniy Novgorod - had reached a critical moment.
With foreign lenders about to explode in anger over the terms of Russia's debt default, the banks in crisis and the rouble beginning its precipitous slide, the reformers had to prove themselves by a show of strength. That could only mean bankrupting some of the most notorious non-payers of tax, which would have spelt disaster for Berezovsky and his friends.
"The country is built as a freakish, oligarchic capitalist state," Nemtsov told The Observer. "Its characteristics are the concentration of property in the hands of a narrow group of financiers, the oligarchs. Many of them operate inefficiently, having a parasitic relationship to the industries they control, sucking out capital and keeping it in Moscow or moving it abroad. They don't pay taxes and they don't pay their workers.
"This week there could have been bankruptcies. That meant the government had to go."
Berezovsky, a world-class mathematician in Soviet times, used his connections to launch the first private car dealerships in Russia as the USSR fell apart. He has holdings in ORT, the biggest television channel, in Aeroflot and in a large oil company, among other interests. Forbes magazine has named him as one of the world's richest men, his wealth running into billions of dollars. But it is hard to say exactly how rich he is, how he came by the money, and how he is able to exert such powerful editorial control over companies such as ORT when he owns only a tiny percentage of the shares.
Berezovsky has been accused of 'handling' the Yeltsin family finances. It is believed to be thanks to him that one of Yeltsin's sons-in-law now runs Aeroflot. He led the group of bankers and industrialists, the dozen or so mega-rich tycoons who soon became known as the oligarchs, which backed Yeltsin's successful 1996 election campaign.
He is particularly close to Yeltsin's daughter and aide, Tatyana Dyachenko, and to the head of the presidential administration, Valentin Yumashev, known as "the son Yeltsin never had".
Berezovsky shuttles back and forth between his large grey mansion on Moscow's inner ring road, his country home and his properties abroad. He has houses in London and on the French Riviera and it may have been in Nice that the tactics for ousting Kiriyenko and restoring Chernomyrdin were finalised early this month.
Berezovsky grew close to Chernomyrdin after the Prime Minister was sacked in March. After Chernomyrdin's restoration last week, Berezovsky was with him when he triumphantly returned to the White House. One report claimed that on Sunday evening, just before the curt Kremlin announcement that the Kiriyenko government was being sacked, Berezovsky sketched out squares on a piece of paper and wrote in the names of the Ministers he wanted to see in the new government.
It was eerily quiet in the White House on Tuesday. Outside, the Moscow rush hour hissed through the rain. The queues of desperate depositors outside banks had dispersed for the day and the permanent picket of unpaid coal miners was out of sight, round the corner. Nemtsov, wondering what to do with his life, fidgeted with a lighter.
Once a Yeltsin family favourite, he admitted that he had not seen the President since July, and increasingly rarely before that. "If you want to be close to the President, there are always those who want to get you further away from him," he said.
He was sceptical that money had much to do with Berezovsky's closeness to Yeltsin's inner circle. What, then? He shrugged and looked distracted. "Extra-sensory powers?" he said.
Surely he couldn't be serious. "I don't know," he said. "Such people have always existed. Remember Rasputin. How did he penetrate the imperial court? Now we have a new Rasputin, Berezovsky."
There has been bad blood between the two men for at least a year. Last August their feud burst into the open over a huge privatisation auction - the sale of 25 per cent of Svyazinvest, a Russian telecoms holding company. Largely thanks to Nemtsov and his ally in government, Anatoly Chubais, the stake went to the highest bidder, a consortium partly financed by George Soros - who gratefully announced that the days of 'robber capitalism' in Russia were over.
Berezovsky, who despite the fact he was also in government at the time was quietly involved in the rival lower bid, was enraged.
The battle lines were drawn. When Nemtsov and Chubais later engineered Berezovsky's dismissal from the government on the ground that he had lied about putting his business interests in a blind trust, they seemed to have won.
In fact, they - and, later, Kiriyenko - never had the full backing of Yeltsin to carry through the bankruptcies they wanted when the economic going got tough after the Asian crisis began in autumn.
At the same time the oligarchs, too, lost faith in Yeltsin - not just in his ability to protect them but in his ability to survive. His physical weakness, indecision, failure to grasp issues and capriciousness alienated him from his supporters. Fearing that their machinations and law-breaking over the years might eventually be laid against them in court, the Yeltsin circle were ripe for a deal.
Leonid Shebarsin last head of the KGB's network of foreign spies, now runs a white-collar security service for banks. He occupies a suite of offices under Moscow's Dinamo Stadium. As he talked to The Observer, the sounds of a busking flautist and the hubbub of the surrounding clothes market rose through an open window. The significance of the rouble's collapse was only beginning to sink in and consumers were still not sure how to react - spend everything as quickly as possible, or wait?
"In a way, the reformers reminded me of the Bolsheviks," said Shebarshin. "They ignored the interests of the people and ignored the real circumstances in the country in an attempt to make a foreign economic theory come to life in Russia."
Shebarshin was coolly trashing the past seven years of radical economic change in Russia. "Thousands of banks sprouted up like mushrooms. There was a chaotic stripping of national wealth. No other country has experienced privatisation on such a scale. The atmosphere was one of boundless greed, of a desire to enrich yourself at any price.
"The people who were in power looked on this power as an instrument of direct and brazen self-enrichment.
"Over several years we created not just millionaires, but billionaires. I don't think there's a precedent in world history for this, apart from the emergence of the drug barons."
The irony is that in understanding the post-Soviet road Russia has travelled, and where it might go from here, there is no better subject than Shebarshin and his kind. Most of Russia's banks have someone like him on their staff: a former KGB man who now loyally works to protect a capitalist's interests and sniffs out what the competition and the politicos have up their sleeves.
Shebarshin recalled with distaste the days of Soviet collapse, when KGB headquarters was taken over by "arrogant" new chiefs, and the agency was submitted to humiliations such as having the issue of fake foreign passports frozen. Yet instead of drawing their weapons and fighting to defend the USSR, Shebarshin and his colleagues wandered out and looked for new, richer power structures to attach themselves to. They found the banks.
As the neo-Gaullist general, Alexander Lebed, puts it sardonically in his memoirs: "Nobody died defending the Soviet Union with a gun in their hands, like Allende."
The most senior KGB men, the most outspoken dissidents, the senior Communists, the reformers of the early 1990s held very different ideals. But they shared one thing: a lack of will to prevent the USSR from collapsing, an intense desire for personal prosperity and a sense that they deserved to have it.
And for the past seven years, economic change in Russia has been driven by this inner psychological engine rather than by any Russian vision of what reform should be, or even of what exactly Russia is trying to reform.
"I wouldn't blame the West," Shebarshin said. "The West takes care of its interests and Russia should have taken care of ours. But this time personal and group interests overwhelmed the interests of the state and the people."
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