Finding Putin’s money – Stabroek News

0

By Daniel J. Arbess

NEW YORK – The decision last week by Russian climate envoy Anatoly Chubais to resign from the government and leave Russia could prove very significant. By reopening a window on the recent history of Russia, the exit of Chubais could restore order in the Western strategy of “KleptoCapture”, which aims to freeze the assets of a dozen Russian “oligarchs” qualified as ‘”Appendages of Putin’s Regime”. But it could potentially do a lot more.

Chubais, who was responsible for Russia’s mass privatization program under President Boris Yeltsin in the 1990s, is a living digest of how the country’s wealth was distributed. He was also an early promoter of Vladimir Putin as a capable successor to Yeltsin. And although Chubais has long been outside Putin’s inner circle, he may well be able to lead the West to the president’s money – if he feels safe enough to speak.

Sanctioning Putin’s “appendages” sounds like a good idea, but Chubais knows that KleptoCapture, as currently designed, is probably more smoke than fire. The current handful of targets grew rich during the Yeltsin years, but eventually found themselves at odds with Putin and left Russia, or remained there at will. They own what Putin allows them to own as long as they stay out of his way, and they have minimal influence. Today’s Kremlin insiders are Soviet-era spies and “red managers” who control most of the thousands of companies that were privatized between 1992 and 1996.

At the time, the targeted oligarchs were now bankers who had loaned the Russian government $800 million, usually backed by minority stakes in 12 major oil and metals companies. This scheme was intended to help Yeltsin close a giant budget deficit and avoid hyperinflation before the 1996 elections, which he would otherwise lose to his communist opponent, Gennady Zyuganov. If the government did not repay the loans immediately after the election, the lenders could auction off the shares, cementing privatization, regardless of the winner.

Although Yeltsin was surprisingly re-elected, the state still failed – probably intentionally, to reward the bankers for their help. The stakes, then valued at between $1.5 billion and $2 billion, were “sold” in mostly rigged auctions to lenders, turning a few young financiers into oligarchs.

As an adviser to Chubais and his team at the time, I argued that “loans for equity” would corrupt the privatization process and create the impression that Yeltsin was intentionally enriching a small group of tycoons by actually selling large holdings at low cost. Chubais would later admit that the plan was “bandit capitalism”, but necessary to avoid a return to “bandit communism”.

Loans for shares have taken on mythical importance in the history of Russian privatization, eclipsing the mass privatization of thousands of other companies overseen by Chubais. But the real tragedy for Russia turned out to be the promotion of Putin by Chubais, who quickly reconsolidated corporate control – for himself.

In 1999, an ailing Yeltsin resigned before the end of his second term and appointed Putin, a former head of the Federal Security Service (FSB, successor to the KGB) who had previously earned a reputation as an effective reformer while he was deputy mayor of St. Petersburg. Petersburg. Financial markets broadly supported Yeltsin’s choice, which Chubais himself hailed as “a brilliant decision, extremely precise and profound and, apart from anything else, very courageous”.

On becoming president, Putin promised that “freedom of speech, freedom of conscience, freedom of the press, the right to private property – all these fundamental principles of a civilized society – will be reliably protected by the ‘State”. Putin actually supported market reforms for a time, on the condition that the oligarchs stay out of politics and share the economic benefits with him and his cronies in the security apparatus. But when Mikhail Khodorkovsky – the founder of Menatep Bank who acquired control of oil company Yukos through equity loans – signaled his political ambition, he was jailed for nearly a decade and Yukos’ assets were thrown away. renationalized.

Putin also turned on Boris Berezovsky, another Yeltsin crony, who was said to have played a key role in persuading Yeltsin to choose Putin as his successor. And he exiled Bill Browder, a successful Moscow-based American “constructive activist” investor who hired big Russian companies. Browder’s tax lawyer Sergei Magnitsky was later arrested and died in prison in 2009; Browder has since dedicated himself to obtaining justice for Magnitsky.

Several Russian oligarchs have made their fortunes on the sidelines of the turmoil of Russia’s privatization program. Some, like metals magnate Oleg Deripaska, have remained in Russia, wielding waning influence at home while investing in properties abroad. Others, like bankers Mikhail Fridman and Petr Aven, kept their Russian businesses, but were likely forced to share ownership or wealth with Putin and other government “protectors.” All three acquired foreign passports. Those like Berezovsky who openly opposed Putin died in mysterious circumstances, as did active political opponents like Boris Nemtsov, who was assassinated outside the Kremlin in 2015.

A few entrepreneurs who built their businesses from scratch had the foresight to sell them and leave Russia when Putin came to power. Vladimir Gusinsky – my first Russian entrepreneur friend in 1989 – founded NTV, Russia’s first independent media company, but sold it in 2001 to state-controlled Gazprom and emigrated with his family to Israel. NTV is now one of Putin’s main spokespersons.

Whether self-made or savvy beneficiaries of Yeltsin’s crony capitalism, most of these wealthy Russians with overseas assets seem to share a desire for social acceptance outside of Russia. Many have made substantial investments in Europe and the United States, where they have become shining stars in the philanthropic firmament of museums, philharmonies and other cultural institutions.

None of these men seem to have any influence, let alone control, over Putin. On the contrary, it poses a constant threat to their wealth and security. Instead of vilifying and punishing them, Western leaders could gain more by making them – and their former boss Chubais – comfortable enough to share everything they know about where the money from Putin might actually lie.

Copyright: Project Syndicate, 2022.

www.project-syndicate.org

Share.

About Author

Comments are closed.