Bear Essentials: Enter the Oligarchs

<< Back to Robb Report, January 2009
  • Jack Smith

One of the first oligarchs was Boris Berezovsky, who exploited his connections with then Prime Minister Boris Yeltsin to establish a company that sold cars directly from a state-owned factory. Later, Berezovsky took over Sibneft, Russia’s largest oil company, before becoming the main shareholder in the country’s largest television station. In the course of business, Berezovsky became the target of frequent shakedown and assassination attempts, prompting him to surround himself with a Praetorian guard of former French Foreign Legionnaires.

Vladimir Gusinsky was another of the original oligarchs. A black marketeer in the 1970s, Gusinsky later formed a relationship with Moscow mayor Yuri Luzhkov through his work with Komsomol, the Communist Youth League. Gusinsky eventually built a media empire, Most Media, which owned newspapers, newsmagazines, radio stations, and a television network. To discourage shakedown artists and rivals, Gusinsky also created a thousand-man security division that included many former KGB agents.

The richest of all the oligarchs—for a short while, at least—was Mikhail Khodorkovsky. In 1995, Khodorkovsky acquired Yukos, the Russian petroleum giant, for a price estimated to be anywhere from $200 million to $1.5 billion. Soft-spoken and seemingly shy in manner, Khodorkovsky was at the center of an enterprise that allegedly could be as violent as any in Russia. The mayor of Nefteyugansk, where Yukos’ major producing unit was headquartered, was murdered after he criticized the company’s failure to pay taxes. When a Yukos manager threatened to expose the company’s off-the-books deals, he and his wife met the same fate. A woman who owned a Moscow tea shop and refused to sell her space to Khodorkovsky’s bank was also killed.

However venal and violent Khodorkovsky had been, he and his ilk went too far when they began dabbling in politics. This, said Vladimir Putin, Russia’s then-new president, would not be tolerated. In July 2000, Putin reportedly told a delegation of 21 oligarchs that he would not interfere with their businesses or renationalize state resources as long as they stuck to making money and left affairs of state to him. Berezovsky and Gusinsky not only ignored Putin’s advice, but also stepped up their opposition to the president. Through their media outlets, Berezovsky and Gusinsky criticized Putin’s policies in Chechnya and his response to the sinking of a nuclear-powered submarine in the Barents Sea in 2000. Khodorkovsky answered Putin’s ultimatum by giving Russia’s two opposition parties $100 million to unite and campaign against Putin, and he floated the idea that he himself might run for president.

In hindsight, these were all very bad ideas. In 2000, Berezovsky fled to London to avoid arrest on charges of fraud and political corruption. Two years later, Gusinsky sought sanctuary in Spain to escape charges of fraud. Khodorkovsky is still in Russia and will not be going anywhere soon: He was arrested in 2003 and is serving an eight-year prison sentence for fraud.

Still, while Putin may have been—and may remain—at odds with the oligarchs, most Russians credit the former president with establishing the political and economic stability that has enabled a new generation of the rich to become many times wealthier than their predecessors.

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