The Oligarchs (91 page)
Authors: David Hoffman
8
Andrei Zolotov Jr., “Resurrecting the Past,”
Moscow Times
, August 19, 2000, p. iv; Mikhail Ogorodnikov, interview by author, November 2, 2000. Ogorodnikov is spokesman for the Fund for the Restoration of the Cathedral of Christ the Savior.
Andrei Zolotov Jr., “Resurrecting the Past,”
Moscow Times
, August 19, 2000, p. iv; Mikhail Ogorodnikov, interview by author, November 2, 2000. Ogorodnikov is spokesman for the Fund for the Restoration of the Cathedral of Christ the Savior.
9
De Preneuf. This story is attributed to an engineer-metalworker interviewed on the site.
De Preneuf. This story is attributed to an engineer-metalworker interviewed on the site.
10
Ogorodnikov interview. In his written answers to my questions about the Cathedral, Luzhkov said, “Investments in the construction of the cathedral are voluntary contributions. Do you really think that people would have invested so much money for construction of more down-to-earth projects?” He claimed neither the city nor the federal government suffered “losses” as a result of the reconstruction. The project created thousands of jobs and boosted Moscow tourism, he noted.
Ogorodnikov interview. In his written answers to my questions about the Cathedral, Luzhkov said, “Investments in the construction of the cathedral are voluntary contributions. Do you really think that people would have invested so much money for construction of more down-to-earth projects?” He claimed neither the city nor the federal government suffered “losses” as a result of the reconstruction. The project created thousands of jobs and boosted Moscow tourism, he noted.
11
Larisa Piyasheva, interview by author, March 23, 1999.
Larisa Piyasheva, interview by author, March 23, 1999.
12
Popov news conference, December 19, 1991.
Popov news conference, December 19, 1991.
15
Valery Simonov, “Moscow Does Not Believe in Rubles?”
Komsomolskaya Pravda
, November 24, 1993, p. 1.
Valery Simonov, “Moscow Does Not Believe in Rubles?”
Komsomolskaya Pravda
, November 24, 1993, p. 1.
16
Luzhkov, written answers.
Luzhkov, written answers.
18
Chubais press conference, March 23, 1994.
Chubais press conference, March 23, 1994.
19
Yeltsin news conference, June 10, 1994.
Yeltsin news conference, June 10, 1994.
21
Andrei Shatalov, interview by author, February 14, 1997.
Andrei Shatalov, interview by author, February 14, 1997.
22
Luzhkov, interview by author, February 5, 2001.
Luzhkov, interview by author, February 5, 2001.
24
Obid Jasinov, deputy general director, and other officials of Moscow Mechanized Construction no. 5, interview by author, February 12, 1997;“Moscow Construction: Together on the Path of Creation,”
Moskovskaya Pravda
, January 29, 1997, p. 9.
Obid Jasinov, deputy general director, and other officials of Moscow Mechanized Construction no. 5, interview by author, February 12, 1997;“Moscow Construction: Together on the Path of Creation,”
Moskovskaya Pravda
, January 29, 1997, p. 9.
25
Mikhail Moskvin-Tarkhanov, interview by author, November 2, 2000.
Mikhail Moskvin-Tarkhanov, interview by author, November 2, 2000.
26
Tatyana Tsyba, “Why Do the Russians So Dislike Moscovites?”
Komsomolskaya Pravda
, February 12, 1997.
Tatyana Tsyba, “Why Do the Russians So Dislike Moscovites?”
Komsomolskaya Pravda
, February 12, 1997.
27
Pavel Bunich, interview by author, February 18, 1997.
Pavel Bunich, interview by author, February 18, 1997.
28
Lee Hockstader, “Moscow Is a Haven of Haves amid Russia's Sea of Have-Nots,”
Washington Post
, December 27, 1996, p. A1.
Lee Hockstader, “Moscow Is a Haven of Haves amid Russia's Sea of Have-Nots,”
Washington Post
, December 27, 1996, p. A1.
29
Donald Jensen, “The Boss: How Yuri Luzhkov Runs Moscow,”
Demokratizatsiya
, Winter 2000, pp. 83â122.
Donald Jensen, “The Boss: How Yuri Luzhkov Runs Moscow,”
Demokratizatsiya
, Winter 2000, pp. 83â122.
30
Yegor Gaidar, “Why the Living Is Good in Moscow” (speech to the Moscow branch of the Democratic Choice of Russia Party, published in
Moscow News
, February 26, 1998); Gaidar press conference, February 6, 1998.
Yegor Gaidar, “Why the Living Is Good in Moscow” (speech to the Moscow branch of the Democratic Choice of Russia Party, published in
Moscow News
, February 26, 1998); Gaidar press conference, February 6, 1998.
31
Luzhkov, written answers.
Luzhkov, written answers.
32
Vladimir Yevtushenkov, interview by author, April 9, 2000.
Vladimir Yevtushenkov, interview by author, April 9, 2000.
33
Yelena Baturina, interview by author, August 23, 1999.
Yelena Baturina, interview by author, August 23, 1999.
34
Baturina interview.
Baturina interview.
35
Luzhkov, interview by author, February 5, 2001.
Luzhkov, interview by author, February 5, 2001.
36
Baturina told me the Luzhniki contract was “my great luck and success,” since her firm went on to win dozens more such contracts in Moscow and other Russian cities, as well as abroad. The stadium was 49 percent owned by the city. Baturina said she won a tender for the seats with a low bid, but, just as important, she said she was the only bidder with the correct specifications to meet the European standards.
Baturina told me the Luzhniki contract was “my great luck and success,” since her firm went on to win dozens more such contracts in Moscow and other Russian cities, as well as abroad. The stadium was 49 percent owned by the city. Baturina said she won a tender for the seats with a low bid, but, just as important, she said she was the only bidder with the correct specifications to meet the European standards.
37
Yuri Minkovski, “The First Underground Shopping Mall in the Heart of Moscow,”
Cost Engineering
, February 1998, pp. 15â17.
Cost Engineering
is published by the American Association of Cost Engineers.
Yuri Minkovski, “The First Underground Shopping Mall in the Heart of Moscow,”
Cost Engineering
, February 1998, pp. 15â17.
Cost Engineering
is published by the American Association of Cost Engineers.
38
Natalya Shulyakovskaya, “Defining the Moscow Style,”
Moscow Times Business Journal
2 (1998): 6. Dozens of these useless spires could be seen in Moscow atop new glass-and-steel office buildings.
Natalya Shulyakovskaya, “Defining the Moscow Style,”
Moscow Times Business Journal
2 (1998): 6. Dozens of these useless spires could be seen in Moscow atop new glass-and-steel office buildings.
39
Leonid Filatyev, head of the coordination group for decoration of the cathedral, interview by author, December 6, 2000. “Take, for instance, the text inscribed on the dome at the top,” he said. “How do you put the text in place so that it would exactly fit the length of the sphere? If you do it manually, it will take a long time. The computer can deal with this quickly and produce a print from which the painters can copy the drawing onto the wall. But the technique of painting was the original one from the nineteenth century.”
Leonid Filatyev, head of the coordination group for decoration of the cathedral, interview by author, December 6, 2000. “Take, for instance, the text inscribed on the dome at the top,” he said. “How do you put the text in place so that it would exactly fit the length of the sphere? If you do it manually, it will take a long time. The computer can deal with this quickly and produce a print from which the painters can copy the drawing onto the wall. But the technique of painting was the original one from the nineteenth century.”
42
Hockstader, “Moscow Is a Haven.”
Hockstader, “Moscow Is a Haven.”
43
A long battle against the
propiska
was carried out by Veronika Kutsillo, a journalist who wanted to live in Moscow. She had grown up in Kazakhstan. As a student at Moscow State University, she had a permit, but when she graduated and got a job at the newspaper
Kommersant Daily
, she needed another to live permanently in the capital and to buy an apartment. The Moscow police said they would only give her the permit if she paid the “fee” for city services, then set at five hundred times the minimum wage, or about $2,000. “In my view this was completely groundless,” Kutsillo told me. “They could not explain what the money was being taken for. They tried to explain it was for the metro, for using roads, movie theaters, and so forth. But any person who comes here pays to take the metro, pays for all of this.” Kutsillo wanted the permit because she did not want to live as a second-class citizen; she wanted to be legal. “What does it mean not to have a
propiska
?” she asked. “A person can't get a license for a car without it, can't register a car in their name, can't go to the local health clinic, and you can't even call an ambulance without huge problems. I couldn't get married. If there are children, you can't send them to school, to nursery school, and you can't get a passport for travel abroad.” Kutsillo had read all the federal laws on residency, which were clear that the only restrictions on freedom of movement could be war or catastrophe. There was neither in Moscow. Kutsillo appeared before the Russian Constitution Court to present her case personally and won a major decision on April 4, 1996. The court declared that although requiring people to register was permissible, the process could not be used as a “foundation for limiting a person's rights or freedoms.” The court declared that every citizen “has a right for free movement, a right to choose a place of residence,” and that paying a residency fee, as Moscow had required, “contradicts the right of citizens to freely choose a place of residence.” The city government quickly responded. The mayor's press office issued a statement warning the news media not to portray Moscow as a “city without borders” or to say that people were free to come live in the city. The statement declared that “an endless inflow of people to reside here may be the end of Moscow, and this would be true for any other big city as well.” Luzhkov formally canceled the
propiska.
But the mayor decided to try and implement it by another meansâto demand a fee, slightly lower than before, from anyone who purchased an apartment in the city. A top city official said at the time, “The ruling of the Constitutional Court is mandatory for Moscow, but the life of the city will be determined by its own rules.” Kutsillo had won a round, but the fight was not over. Two years later, on February 2, 1998, the Constitutional Court again upheld the principle of the Kutsillo case, that a city may register people only to “certify the act of the free expression of will of a citizen” to live there. The city cannot be “granting permission” or limiting where people choose to live, nor can it dictate how long a person can live in a particular place, the court said. Luzhkov's defiance of the court was clearly irritating the justices. One of them, Vladimir Yaroslavtsev, read a statement to Kutsillo's newspaper,
Kommersant Daily
, which had campaigned
against the
propiska,
saying, “We would like to warn Luzhkov and other regional heads: there will be no closed cities!” Eventually, a fee was created, of a thousand dollars or more, for transfer of real estate, so that the cost of getting residence was built into the purchase price of an apartment. Although Kutsillo had won in principle, the great wall around Moscow remained.
A long battle against the
propiska
was carried out by Veronika Kutsillo, a journalist who wanted to live in Moscow. She had grown up in Kazakhstan. As a student at Moscow State University, she had a permit, but when she graduated and got a job at the newspaper
Kommersant Daily
, she needed another to live permanently in the capital and to buy an apartment. The Moscow police said they would only give her the permit if she paid the “fee” for city services, then set at five hundred times the minimum wage, or about $2,000. “In my view this was completely groundless,” Kutsillo told me. “They could not explain what the money was being taken for. They tried to explain it was for the metro, for using roads, movie theaters, and so forth. But any person who comes here pays to take the metro, pays for all of this.” Kutsillo wanted the permit because she did not want to live as a second-class citizen; she wanted to be legal. “What does it mean not to have a
propiska
?” she asked. “A person can't get a license for a car without it, can't register a car in their name, can't go to the local health clinic, and you can't even call an ambulance without huge problems. I couldn't get married. If there are children, you can't send them to school, to nursery school, and you can't get a passport for travel abroad.” Kutsillo had read all the federal laws on residency, which were clear that the only restrictions on freedom of movement could be war or catastrophe. There was neither in Moscow. Kutsillo appeared before the Russian Constitution Court to present her case personally and won a major decision on April 4, 1996. The court declared that although requiring people to register was permissible, the process could not be used as a “foundation for limiting a person's rights or freedoms.” The court declared that every citizen “has a right for free movement, a right to choose a place of residence,” and that paying a residency fee, as Moscow had required, “contradicts the right of citizens to freely choose a place of residence.” The city government quickly responded. The mayor's press office issued a statement warning the news media not to portray Moscow as a “city without borders” or to say that people were free to come live in the city. The statement declared that “an endless inflow of people to reside here may be the end of Moscow, and this would be true for any other big city as well.” Luzhkov formally canceled the
propiska.
But the mayor decided to try and implement it by another meansâto demand a fee, slightly lower than before, from anyone who purchased an apartment in the city. A top city official said at the time, “The ruling of the Constitutional Court is mandatory for Moscow, but the life of the city will be determined by its own rules.” Kutsillo had won a round, but the fight was not over. Two years later, on February 2, 1998, the Constitutional Court again upheld the principle of the Kutsillo case, that a city may register people only to “certify the act of the free expression of will of a citizen” to live there. The city cannot be “granting permission” or limiting where people choose to live, nor can it dictate how long a person can live in a particular place, the court said. Luzhkov's defiance of the court was clearly irritating the justices. One of them, Vladimir Yaroslavtsev, read a statement to Kutsillo's newspaper,
Kommersant Daily
, which had campaigned
against the
propiska,
saying, “We would like to warn Luzhkov and other regional heads: there will be no closed cities!” Eventually, a fee was created, of a thousand dollars or more, for transfer of real estate, so that the cost of getting residence was built into the purchase price of an apartment. Although Kutsillo had won in principle, the great wall around Moscow remained.
46
Luzhkov, written answers. He added: “I also deal a lot with the problems of corruption. And not just every day, but every morning and every evening, and sometimes at night. To my deep belief, the increased criminalization of the economy and of life is the consequence of the economic system that was built by our liberal reformers, one more consequence of privatization.” He also said, “In my view, the level of corruption in Moscow is relatively quite modest, by Russian standards.” Although the situation in Moscow is not ideal, Luzhkov argued, the enormous investment in Moscow would not have come had corruption actually been so severe.
Luzhkov, written answers. He added: “I also deal a lot with the problems of corruption. And not just every day, but every morning and every evening, and sometimes at night. To my deep belief, the increased criminalization of the economy and of life is the consequence of the economic system that was built by our liberal reformers, one more consequence of privatization.” He also said, “In my view, the level of corruption in Moscow is relatively quite modest, by Russian standards.” Although the situation in Moscow is not ideal, Luzhkov argued, the enormous investment in Moscow would not have come had corruption actually been so severe.
47
Julia Rubin, “U.S. Businessman Slain amid Russian Rivalry,” Associated Press, November 28, 1996.
Julia Rubin, “U.S. Businessman Slain amid Russian Rivalry,” Associated Press, November 28, 1996.
48
The U.S. embassy said the decision to revoke the visa was based on a provision of the law prohibiting entrance to “any alien who the Consular Officer or the Attorney General knows or has reason to believe seeks to enter the United States to engage solely, principally or incidentally in unlawful activity.” Dzhabrailov angrily replied, “This is a disgrace for America. Have they any proof of this?” Nick Allen, “U.S. Revokes Radisson TV Chief's Visa,”
Moscow Times
, November 30, 1996.
The U.S. embassy said the decision to revoke the visa was based on a provision of the law prohibiting entrance to “any alien who the Consular Officer or the Attorney General knows or has reason to believe seeks to enter the United States to engage solely, principally or incidentally in unlawful activity.” Dzhabrailov angrily replied, “This is a disgrace for America. Have they any proof of this?” Nick Allen, “U.S. Revokes Radisson TV Chief's Visa,”
Moscow Times
, November 30, 1996.
49
In the March 26, 2000, election, Dzhabrailov took last place, receiving 78,498 votes out of 75 million cast. He later boasted about the result with a new set of billboard advertisements.
In the March 26, 2000, election, Dzhabrailov took last place, receiving 78,498 votes out of 75 million cast. He later boasted about the result with a new set of billboard advertisements.
51
Luzhkov, written answers.
Luzhkov, written answers.
53
Vladimir Yevtushenkov, interview by author, April 9, 2000.
Vladimir Yevtushenkov, interview by author, April 9, 2000.
54
Gaidar, “Why the Living Is Good.”
Gaidar, “Why the Living Is Good.”
55
Marina Rassafonova, “Yuri Luzhkov Failed to Defend His Honor and Dignity,”
Kommersant Daily
, May 20, 1998 ; Anna Ostapchuk, “Luzhkov Against Gaidar,”
Moscow News
, May 26, 1998 ; Alexander Fedorov, “Yuri Luzhkov Won in Court Claim to Yegor Gaidar
,” Moskovska Pravda
, October 29, 1998.
Marina Rassafonova, “Yuri Luzhkov Failed to Defend His Honor and Dignity,”
Kommersant Daily
, May 20, 1998 ; Anna Ostapchuk, “Luzhkov Against Gaidar,”
Moscow News
, May 26, 1998 ; Alexander Fedorov, “Yuri Luzhkov Won in Court Claim to Yegor Gaidar
,” Moskovska Pravda
, October 29, 1998.
57
Adi Ignatius, “Mayor Yuri Luzhkov Leads a Capital City Rife with Corruption,”
Wall Sreet Journal
, February 13, 1995, p. 1.
Adi Ignatius, “Mayor Yuri Luzhkov Leads a Capital City Rife with Corruption,”
Wall Sreet Journal
, February 13, 1995, p. 1.
58
Mark Whitehouse, “Moscow Mayor Steals Political Spotlight,”
Wall Street Journal
, May 20, 1999, p. 14.
Mark Whitehouse, “Moscow Mayor Steals Political Spotlight,”
Wall Street Journal
, May 20, 1999, p. 14.
59
Vladimir Yevtushenkov, interview by author, December 1, 1997; April 9, 2000. Yevtushenkov told me that, among his early business ventures, he helped Vladimir Vinogradov set up Inkombank, which became one of the largest commercial banks. My story on the rise of Systema appeared in the
Washington Post,
December 19, 1997, p. 1.
Vladimir Yevtushenkov, interview by author, December 1, 1997; April 9, 2000. Yevtushenkov told me that, among his early business ventures, he helped Vladimir Vinogradov set up Inkombank, which became one of the largest commercial banks. My story on the rise of Systema appeared in the
Washington Post,
December 19, 1997, p. 1.
62
Matt Bivens, “The Meteoric Rise of Luzhkov's System,”
Moscow Times Business Review
, February 1999, p. 11.
Matt Bivens, “The Meteoric Rise of Luzhkov's System,”
Moscow Times Business Review
, February 1999, p. 11.
63
Russian law stipulates that any auction must have a minimum of two bidders. Yevtushenkov said there were several bidders in this tender, but according to newspaper reports there was only one besides the Moscow Committee on Science and Technology, and the second bidder also had ties to Systema.
Russian law stipulates that any auction must have a minimum of two bidders. Yevtushenkov said there were several bidders in this tender, but according to newspaper reports there was only one besides the Moscow Committee on Science and Technology, and the second bidder also had ties to Systema.
64
Perhaps one reason for their secrecy was a provision in the deal, not apparent at the time, that eventually allowed Yevtushenkov to take control of the phone company. Once he satisfied the investment requirements in the initial tender, the provision granted Yevtushenkov the right to issue new shares in the telephone giant. The phone company issued 638,634 new shares in addition to the 1.2 million already outstanding. This had the effect of allowing him to take control, increasing Systema's share to 59.9 percent of the voting shares of the phone company, a solid majority. When I heard about this provision in 1998, I was dumbfounded. I went back to the original 1995 fax I had received from the Moscow property committee describing the conditions of the tender. It said nothing about the right to issue new shares. The key provision in the privatizationâwhich allowed Systema to bootstrap itself into control of Russia's largest city phone companyâhad been kept out of the public eye. The biggest loser was Svyazinvest, the largely state-owned national telephone holding company, which went from owning 46.6 percent of voting shares in the Moscow phone company to 27.9 percent.
Perhaps one reason for their secrecy was a provision in the deal, not apparent at the time, that eventually allowed Yevtushenkov to take control of the phone company. Once he satisfied the investment requirements in the initial tender, the provision granted Yevtushenkov the right to issue new shares in the telephone giant. The phone company issued 638,634 new shares in addition to the 1.2 million already outstanding. This had the effect of allowing him to take control, increasing Systema's share to 59.9 percent of the voting shares of the phone company, a solid majority. When I heard about this provision in 1998, I was dumbfounded. I went back to the original 1995 fax I had received from the Moscow property committee describing the conditions of the tender. It said nothing about the right to issue new shares. The key provision in the privatizationâwhich allowed Systema to bootstrap itself into control of Russia's largest city phone companyâhad been kept out of the public eye. The biggest loser was Svyazinvest, the largely state-owned national telephone holding company, which went from owning 46.6 percent of voting shares in the Moscow phone company to 27.9 percent.
65
Speaking to diplomats, journalists, and businessmen March 4, 1999, Luzhkov said, “I can officially tell you that all those myths that are spread around have nothing to do with reality. As far as Systema is concerned, attention to it is very high today, but many have tried to view Systema as some sort of extra pocket of the Moscow government, or a spare pocket for the mayor who has some sort of political motivations before the elections. Drop all these thoughts. We work honestly. We are not using what you suggest. And the suggestions themselvesâwhen we read themâspeak only to the bad taste of those who make them.” Natalya Shulyakovskaya, “Luzhkov: I Don't Funnel City Deals to Wife,”
Moscow Times
, March 5, 1999.
Speaking to diplomats, journalists, and businessmen March 4, 1999, Luzhkov said, “I can officially tell you that all those myths that are spread around have nothing to do with reality. As far as Systema is concerned, attention to it is very high today, but many have tried to view Systema as some sort of extra pocket of the Moscow government, or a spare pocket for the mayor who has some sort of political motivations before the elections. Drop all these thoughts. We work honestly. We are not using what you suggest. And the suggestions themselvesâwhen we read themâspeak only to the bad taste of those who make them.” Natalya Shulyakovskaya, “Luzhkov: I Don't Funnel City Deals to Wife,”
Moscow Times
, March 5, 1999.
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