The Magazine

THE MEN WHO RUN RUSSIA

Aug 3, 1998, Vol. 3, No. 45 • By DAVID AIKMAN
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Moscow


Leaving Sheremetyevo Airport for the trip into Moscow, the visitor gains a first insight into the current Russian scene. The driver -- if he was hired through one of the official airport tourism companies -- points out bitterly the desirable spots close to the airport arrivals area where his unlicensed competitors illegally park. Their favored position, he snorts, is a result of their connections with "the mafia." People bribe the police, he grumbles, so gypsy cab operations go on unimpeded. "Everything here is 'under the roof,'" he says, using the slang for "protected by organized crime." "It's like a state within a state."


Actually, Russia is in worse shape than that. It's more like a state within a bank -- or several banks. To put it bluntly, since the election of Boris Yeltsin in 1996, Russia has been run by a seemingly all-powerful oligarchy of bankers and financiers whose acquiescence in government decisions is increasingly necessary for the government to operate. When in mid-June the IMF demanded tough budget cuts as a prerequisite for making available to Russia another $ 670 million slice of a $ 9.2 billion IMF loan package, the young prime minister Sergei Kiriyenko didn't call in top economists for advice. Instead, he summoned Russia's financial oligarchs and met with them twice in three days. What did they suggest to help get the country out of its dire economic straits? One response to his inquiry: Set up a semi-permanent Council on Economic Cooperation consisting of themselves -- the oligarchs -- to advise the government of what they want it to do.


If such a council ever came into being, it would only institutionalize what almost all Russians and many foreigners now recognize as the country's greatest source of weakness -- even of potential national calamity -- since Russia broke off the shackles of communism back in 1991. In effect, it would crown with legal standing the emergence of a small group of ultra-rich businessmen who pillaged the country during the privatization process and have used their economic power to manipulate both public opinion, through the media they own, and the entire political process. Andrei Piontkovsky, a columnist for the English-language daily Moscow Times, derided the proposed oligarchs' council as "not even a parallel shadow government, but a type of Politburo of the Oligarchic Party of the Russian Federation."


The first to apply the word "oligarchy" to the ultra-rich capitalists who have taken over Russia was Alexander Solzhenitsyn, in a speech to the Russian parliament in 1994. The Russian media sometimes speak of semibankirshchina, "rule of the seven bankers," an unflattering allusion to the semiboyarshchina, the brutal rule of aristocratic officials and landowners during a period of national weakness in the 17th century.


These days, such analogies are commonplace. In early June, as the Russian stock market collapsed and interest rates rose to a stratospheric 150 percent, the IMF's managing director Michel Camdessus warned of the "dangerous similarities" between the Russian government's relationship to the oligarchy and the South Korean government's relationship to the chaebols, largely family-controlled conglomerates whose crony-capitalist habits helped precipitate the collapse of the South Korean economy last year. Some Russian analysts actually thought the chaebol reference unfair to the Koreans. "Where are the industries and technologies created by [the Russian oligarchs]," asked one, "or the highways and scientific cities built by them?"


Where indeed? As the IMF prepared to negotiate the stringent conditions that Russia would have to meet to receive the next installment of its loan, few Russians or foreigners doing business there had any illusions about where the government's vanishing funds had gone: Much has been ferreted away in foreign bank accounts, largely for the benefit of the notorious semibankirshchina. Literally billions of dollars lent to Russia from abroad or raised by the government in taxes for various infrastructure purposes have disappeared without a trace. In one of the most blatant cases of robbery of the public purse, of some 14 billion rubles ($ 2.3 billion) allocated by Moscow for the reconstruction of Chechnya, just over half was very sloppily accounted for and the rest had disappeared without a trace when Russia's Chamber of Accounts conducted an audit. Of course, the oligarchs can hardly be held responsible for every act of thievery from the state. But the super-rich certainly set the pace. One of the Western European cities where Russian is most commonly heard these days is Zurich, headquarters of Swiss banking.