It is December 25, 1991 Moscow. The stocky chubby-cheeked man walks across the hall from his Kremlin office and pauses in front of a door, his fingers absently patting the dark purple port-wine stain that has run across the right side of his forehead ever since he was born, in a hick town called Privolnoye, in western Russia. He takes a deep breath and enters a room, it’s walls panelled with pecan-coloured woodwork, with two large windows that are covered with heavy drapes. Usually this room is reserved for receiving visitors but tonight a television crew is waiting.
Mikhail Sergeyevich Gorbachev seats himself behind a heavy mahogany table and when Kremlin chimes have completed seven peals, he begins his final address as President of the USSR. In the past, most of his addresses were taped in advance but tonight he is going on air, live.
“I am ceasing my activities as President of the USSR”, Gorbachev announces, his words implying that while his presidency is finished, the USSR is still alive. Nothing could be further from the reality. In fact, by the time he has walked back to his office, the Soviet flag outside has already been lowered from the Kremlin flag pole. The Russian tricolor of red, white and blue, now secured to the end of the rope, goes up in convulsive jerks until it reaches the top of the mast and begins billowing in the sudden gust.
Back in his office, Gorbachev waits for the arrival of Boris Yeltsin, for the handing over of the devices and codes for the Soviet nuclear arsenal, but Yeltsin does not show up. Instead it is the Minister of Defence, Air Marshal Yevgeni Shaposhnikov, who explains that Yeltsin has been offended by some portions of Gorbachev’s farewell address and has refused to meet him. Gorbachev decides that there is no point in prolonging the agony and hands over the briefcase with the nuclear button to Shaposhnikov.
The Union of Soviet Socialist Republics has finally passed into history – quietly, but hastily, carelessly, precipitously, without any preparation or planning.
Just a few kilometres from the Kremlin, on Mokhovaya St, nothing has changed – Moscow in deep freeze, with drab, shabbily dressed workers shuffling along in the snow, reeking of cheap vodka. They hurriedly step aside as a black six-door Zil sweeps by. Seated inside, gruff men in astrakhans stare stonily out the darkened windows.
Moscow, December 2000. The picture hasn’t changed – the same bone chilling cold, the same shabbily dressed factory workers shuffling in the snow. Only this time it is not a clunky Zil that passes them. It is a gold Lamborghini and it eases to a stop under the porte-cochère of the Ritz-Carlton, the hotel where 13 years in the future, a certain Donald Trump will be video-taped by the FSB having high priced Russian prostitutes urinate on him.
Meanwhile, beyond the canopy of the porte-cochère a crowd gathers, eager to see who steps out of the car. The Lamborghini’s gull-wing doors open like a giant albatross stretching it’s wings up into the heavens. A chubby guy in sunglasses and enough gold on his fingers and neck to bouy up an African country’s GDP steps out and waddles in through large armored glass doors, followed by four heavily armed aides.
The man the crowd is gaping at used to be a minor bureaucrat in the USSR’s Ministry of the Petroleum Industry. Now, thanks to an old boy network that has existed ever since the time he was a paper pusher, he is worth $31 billion. He is the face of the nouveau russe – the typical garden variety Russian oligarch.
An oligarchy is a social system that is under the complete political control of a small elite. According to the theory of Robert Michels, a German academic famed for his study of sociology in politics, social systems become oligarchical because ordinary folk find governance too complicated and generally prefer to let others make decisions for them. Those who achieve authority are then unwilling to give up the resulting privileges and prestige and thus try to consolidate and extend their power in order to keep those privileges. The first oligarchy was probably the 1st Century BC Roman triumvirate of Julius Caesar, Pompey and Crassus.
Oligarchies in varying forms have been in existence in almost every continent. Humans realized millennia back that it was easier to carve up and jointly lord over a territory in a small group, than to be alone at the top and have to fight off challenges all the time. My own country of birth, India, was hijacked a long time ago, by the Ambanis, Tatas, Birlas, Goenkas, Ruias, Piramals and Srinivasans of the 20th century.
The US too has had its oligarchies, though in a slightly different sense. There was no sudden switch there. From the time of it’s birth, America has been governed by oligarchs, beginning with it’s ‘robber barons’ – immensely wealthy industrialists and businessmen who reigned between the mid-18th and early 20th centuries. They made and bent laws to reflect their will and made Presidents beholden to them. They lorded over vast tracts of land and owned virtually every business within five hundred miles. Andrew Mellon, J.P.Morgan, Marcus Goldman, Cornelius Vanderbilt and Patrick Joseph Kennedy were all robber barons.
America’s underbelly too has had it’s oligarchs, starting in the early 20th Century with the organized crime families, the Gambinos, Bonnanos, Colombos, Genoveses and the Luccheses.
And lording over them all is the oligarchy that runs the United States of America – the farcical two-party Republican/Democrat political system and it’s wealthy donors and lobbyists, all together forming this rotating oligarchy, having no distinct platform or separate identity or ideology that separates them. An unarmed black man in America will be shot and killed by a police officer, regardless of who, a Republican or a Democrat, is President.
By far the most interesting of all oligarchies is the Russian kind. Oligarchy has always been a way of governance in Russia, right from the time of the Slavs, the Dregovichs and the Slovens of the 7th century, through the 75-year Soviet rule. The Soviet Politburo became a tight cabal of privileged men who governed as they saw fit through a slightly larger group called the Nomenklatura, members of which were hand-picked by the Politburo.
Let’s go further back in time. Following the October 1917 Bolshevik Revolution, all land and income-producing properties, that had been confiscated and placed theoretically in trust for the nation, were placed in the hands of bureaucrats to administer. In practice, the bureaucrats began acting like the new owners and that’s how it stayed. Until Boris Yeltsin took over in 1991.
Under Yeltsin, the first item in the new Russian Government’s agenda became economic reform. But what could it do? How would it begin? It couldn’t return all the businesses and properties that it had confiscated from their owners 75 years back. They were no longer there, having perished long ago in it’s gulags. There were no claimants alive, other than the Russian nation itself as a whole.
The first decision the Russian Government took was very nobly worded in it’s press releases. “The state bureaucracy has grown inefficient and corrupt”, it announced. Henceforth, it would “empower” it’s citizens to own and administer it’s assets directly and thus bring Russia speedily into the free market economy. It would divest it’s exclusive holdings in virtually all that it owned – it’s oil industry, it’s natural gas pipelines, its heavy engineering industries, it’s merchant fleets, it’s aluminium smelters and steel plants and open up it’s financial sector to private banks.
We know what happened next. That divestment went ahead – a bit too smoothly. Boris Yeltsin delivered vast government assets directly into the hands of a chosen few. Russia was now an open oligarchy, it’s assets directly owned and administered by a few well-connected cronies of Yeltsin. The metamorphosis from communism was so badly managed that it left many ordinary Russians feeling nostalgic about communism and wondering what the struggle to be free had been for.
The emerging Russian oligarchy was replete with unbelievable rags-to-riches lives. The Yeltsin set consisted of a taxi driver, a rubber duck salesman, a komsomol functionary and a hair dresser. From living in huge rundown apartment blocks, they were now jetting around the world, having high-priced call-girls flown in to satisfy their kinky desires.
Before I introduce you to the Yeltsin oligarchs, here’s a look at Vladimir Putin’s current St Petersburg set. Arkady Rotenberg, Putin’s former judo coach, net worth $11bn, makes oil pipes for Gazprom, owns real estate, malls, ports, distilleries and mines. Yuri Kovalchuk, former Putin sidekick and neighbor, $15bn, holds a 30% stake in Bank Rossiya. Gennady Timchenko, former sales rep, Putin buddy, $20bn, 5% of Russia’s total economic output in the form of oil and commodities, flows through companies he owns. Oleg Deripaska, construction worker, now a commodities and metals trader and manufacturer worth $35bn.
Most of these fat cats live in the wealthy ghetto of Rublyovskoye Shosse, near Putin’s dacha on the edge of Moscow, where Lamborghini showrooms jostle for space with Gucci boutiques, plastic surgeons and glitzy restaurants that charge $7500 just to reserve a table and stock $150000 bottles of vintage wines in their cellars.
The ghetto keeps things private, away from the ordinary Russians who shiver in the cold as they shuffle to and from work where they barely manage to make $150 a month. In just 20 years, Moscow has grown to have the world’s second largest number of billionaires, fully 64 of them, as per a database published by The Guardian.
Moscow is the only city in the world which hosts an annual Millionaire Fair – For a week, you can walk in and pick up a diamond encrusted cellphone for $15000, a $25000 negligée, $50000 S&M bondage set with leather and gold whip and a pearl-studded dildo or an obscenely priced mink coat. If you are musically inclined, there might be a grand piano on promotion for $350000.
The Millionaire Fair has a wine counter, selling wines so exclusive that for the price you pay, the vintner will fly down personally to uncork the bottle for you and show you how to drink the stuff. Jacuzzi-fitted executive jet sales counters and are strewn everywhere you turn. Watch where you’re going or else, you might inadvertently bump into one of the skimpily dressed blonde waitresses carrying complimentary bowls of Beluga caviar, plates of Chatka crabs, Limfjorden oysters and pickled quail eggs.
On paper, Putin is a modest man. The NY Times says that official documents show he has an income of about $153,000 and owns a small plot of land, a small flat and two cars, one of which is a Soviet era Lada. There are however, persistent rumors of a $1billion dacha being built for him on the shores of the Black Sea not far from Sochi, by his grateful nouveau riche friends.
Now lets get back to the original set, the Yeltsin oligarchs. They were the pioneers of the post-Soviet smash and grab. They behaved like little kids who had suddenly been given their own playrooms full of toys. They paraded their naked wealth obscenely. Villas, yachts, cars, private jets, beautiful women, you name it and it was there to be shown to the world, while ordinary Russians queued up for basic necessities, as before.
The newly installed Putin decided to first get rid of the Yeltsin set of oligarchs, before he brought in his own St Petersburg set.
Quite ironically, it was the Yeltsin set which – increasingly concerned about Yeltsin’s alcoholism, had ganged up and gotten Putin elected, thinking they could control him. But they vastly underestimating his cunning. Unlike the vodka-soaked Yeltsin, Putin – a teetotaler, was a cold, calculating hombre with a set of reptilian emotion-free eyes. The Yeltsin oligarchs would soon realize that they had outsmarted themselves.
There was Boris Berezovsky, a former functionary at the Soviet Academy of Sciences, worth $7bn, living in exile in a vast estate in England when he was assassinated on the orders of Putin. Roman Abramovich, formerly a mechanic and a rubber duck salesman, now worth 20bn, spared when he quickly maneuvered himself onto Putin’s right side. Badri Patarkatsishvili, a minor Georgian Soviet Komsomol functionary, made $12bn before he was assassinated on Putin’s orders, simply because he had been a close associate of Berezovsky. Mikhail Khodorkovsky, a low-level communist party functionary before he became the 16th richest billionaire in the world and Russia’s richest. He fell foul of Putin and was packed off to a Siberian gulag where he spent 8 years before he was finally persuaded to hand over his billions to Putin’s control and set free, now worth a measly $500 million but lucky to be alive. Vladimir Gusinsky, Moscow taxi driver-turned media mogul, amassed over $500mill, imprisoned immediately after Putin came to power. Mikhail Fridman, movie theater ticket black marketer-turned business magnate and co-founder of Alpha Bank, now rolling in $15bn, like Abramovich he too managed to wiggle onto Putin’s right side. Vladimir Vinogradov, former construction engineer turned owner of Inkombank, worth $6bn, declared bankruptcy a month after Putin was inaugurated, died impoverished of a heart attack in 2008.
Unlike Yeltsin, Putin didn’t have a vodka haze to muddle his thought processes. Things had been crystal clear to him from the start. Two things actually. One, with all their riches, Yeltsin’s oligarchs were potentially more powerful than him and therefore a threat that needed to be neutralized. Two, ordinary Russians hated them, not only because they did what they did- rob the state of its resources, but also because they were mostly Jewish. Russians have always been rabidly anti-Semitic.
Putin proceeded to take the Yeltsin oligarchs down one by one, a move that saw his approval rating among the masses, shoot up to 80%. Most of the Yeltsin groupies escaped into exile by the skins of their teeth, to England.
The British are very hospitable toward people who have a billion in their pockets. While the French and the Spanish welcome African and Latin American despots, the British love Russian oligarchs. Who do you think occupy those palatial homes in Belgravia and Kensington Palace Gardens in London? Englishmen? Nah, those neighborhoods are strictly for the ‘Bratva’. London now has the world’s third largest number of billionaires, 54 of them, as per The Guardian. I’ll bet most of them are expatriate and probably from the erstwhile Soviet Republics.
Putin’s finesse is evident from the smooth switch from the Yeltsin oligarchs to his St Petersburg cabal. There’s a difference between the two sets. Putin has His oligarchs in a tight leash. He has ordered them under pain of death to be more discreet with their cash, which may be why nobody noticed when, during the 2008 global financial meltdown, some of them saw their wealth fall to their last $100 million and there was not even a whimper in the press. (A drop in assets to $100 million is like the über-rich equivalent of hitting skid row).
The 2008 downturn however didn’t stop Russia’s oligarchs from splurging behind closed doors. When a Times correspondent asked Kamaliya Zahoor, wife of Mohammed Zahoor, an oligarch from the erstwhile Ukrainian Soviet Socialist Republic settled in London, about the kind of champagne she prefers, the gorgeous singer replied that she liked ‘slipping into some Krug Clos d’Ambonnay’ to perk her up after a day of shopping. The reporter assumed that the young lady meant to say ‘sipping’ and not ‘slipping’.
“No, no, I need it to bathe in,” she replied. “I fill the tub with it and just slip in. It cleanses all the toxins from my body. You should try it some time.” She actually meant it.
The Krug retails for $750 a bottle and Kamaliya’s spacious bath tub needs just 165 bottles to fill up to the overflow drain.
Oligarchy? By Gollygarchy!!