Boris Berezovski, the smuggler

The collapse of the USSR unleashed a violent battle of influences among different components of the former Soviet nomenclature, essentially the new entrepreneurs engendered by Gorbatchov Perestroika. Under the pretext of going to individual property and to “privatization”, Boris Yeltsin liquidated at a very low price all the economic wealth of the country to thirteen individuals, the oligarchs, and by doing so he got his own share.

Washington expected that the crumbling down of the Russian Federation should follow the disappearance of the USSR allowing for the imposition of a total US prevalence. But, one of the Prime Ministers, Vladimir V. Putin, with the support of the former KGB networks, progressively deposed Yeltsin from power with the promise of impunity. Then the new master in the Kremlin devoted himself to recover all goods stolen by the oligarchs, confronting them, whenever possible, one by one.

Boris Berezovski is one of the thirteen oligarchs and, for sure, the most notorious one. Berezovski, after participating in multiple financial operations that lead to the flight of most of the Russian assets overseas, presents himself today as a liberal democrat, opposed to the administration and management of the government by the Russian president, Vladimir V. Putin, democratically elected of both the economy and the mass media.

Paul Klebnikov, a journalist working in the US magazine, Forbes, devoted himself to a book in the year 2000. Its title : Godfather of the Kremlin. Boris Berezovsky and the looting of Russia. [1].

Entering the “business” world

The history of Boris Berezovski in the post-Soviet Russia is an example, almost a caricature, of the new Russian entrepreneur generation, combining on a daily basis politics, economy and organized crime. Beresovski, born in 1946 within «a Jewish family of the Soviet intellectual strata», received an excellent education in the best schools of Moscow.

He underwent higher studies in the electronic and informatics school at the Forestry Institute, a secret scientific center, entrusted, in fact, with the Soviet space program. Berezovski was not part of the political sphere, but rather to the scientific elite of the country, until 1989.

He is admitted at the Science Academy where he starts working in the decision making process and later on, heads the laboratory of the Administration Institute where he specialized in “problems of automation and informatics systems destined to industrial companies”. Thanks to this, in 1989, he established contact with the leaders of AvtoVaz, the main auto manufacturer in Russia, to create a private society in charge of bringing informatics into the factory.

At that time, the laws enacted by Gorbatchov authorized the creation of two types of private societies: “the cooperative and the joint ventures with foreign partners”. Berezovski, wishing to invest abroad a share of his gains, profiting from the fiscal advantages Russia offers, selected the second solution. The chairman of AutoVaz proposed a foreign partner, Logo systems, an Italian specialist in automation residing in Turin.
This is how LogoVaz is founded with Berezovski acting as General Director. Nevertheless, instead of automating production, LogoVaz takes the marketing of the autos produced by AvtoVaz.

Boris Berezovski selects this path knowing the fact that he is entering into a market traditionally occupied by Mafia gangs. The collapse of the USSR allowed for the liberation of all inmates in the hard labor working camps, most of which were common prisoners that immediately went back to their criminal activities. Former Soviet military men, returning from the socialist block countries where they were stationed, joined these criminals upon finding that the criminal economy is a way to recycle their skills in a productive way.

Many former soldiers, and even, former KGB agents, marched then to undertake intelligence tasks, or simply work as hit men for private societies linked to Mafia interest. In the period between 1993 and 1994, Moscow is transformed into the field of violent battles among gangs. The two most important gangs are those of the Slaves (Russians) and the Chechen.

Chechnya: from independence to gangsters

Chechnya became an autonomous Russian republic at the end of 1991, upon the collapse of the USRR: «formally it was still part of Russia and received government subventions and was part of the Russian financial system. At the same time, it was not included in customs control or in the controls of the Russian institutions entrusted with the maintenance of public order». Chechnya underwent a moral and social crisis that was more important than the one faced by the rest of the Russian republics given the fact that it was not able to provide jobs for the demobilized soldiers, although it has always been a traditional reserve of the Red Army.

President Dudaiev unilaterally proclaims independence in the Republic. Again, this entailed the release of numerous common inmates that transformed Chechnya into the center of organized crime in the region. The airport in Grozny, became an obliged stop in heroin world traffic, money laundering and other criminal activities. Some of these criminals traveled to Moscow to create there new gangster networks. Its extreme violence and the strong links that unite all members of this community bring about the fact that very soon it was a fearful adversary for Russian “legal thieves”.

Berezovski had an important contact within the criminals in the person of Badri Patarkatsichvilin, a Georgian who was co-founder of LogoVaz. This allowed him to stage operations with the Slaves of the Solntsevo Brotherhood, a sort of Russian Mafia cupola, and also, on a parallel basis with the Chechen, specially with the latter, who became privileged partners. Nevertheless, in different occasions it was about to take all the blame in the war wage between both organizations.

Valeri Dlugatch, a.k.a. “the Balloon”, protector of Trinity Motors, main distributor of foreign cars after LogoVaz, was murdered in 1993, most probably by the hands of a Chechen gang. In retaliation, several attacks against LogoVaz interests took place, several concessionaires suffered an attack with grenades and even the headquarters of the association also became a target.

Berezovski then spent the winter of 1993 in the West. In November he went to Tel Aviv, where he obtained the Israeli citizenship. «According to Russian reports, Berezovski also went to USA around the same time and obtained the “Green Card”, the American work permit for aliens». With these new foreign «Charts» he returned to Russia in 1993.

The gang war is in its summit. The main Slave chiefs are killed and on June 7, Berezovski is victim of a dynamite attack that beheaded his driver and seriously injured his bodyguard. The entrepreneur escaped alive although with severe burns that required long months of care in a Swiss clinic. The intellectual author of the crime is not found, but, a few months later, Berezovski accused the TV tycoon Vladimir Gussinski and its political “chief”, Yuri Luchkov, the major of Moscow.

Later on, “Sylvester”, head of the Solntsevo Brotherhood, died in a dynamite attack. For awhile, Berezovski was a suspect of that action, since he has just returned to Moscow, but given the lack of evidences there are no consequences. Step by step, violence decreases and the gangs reached to an agreement regarding the sharing of the crime market. During this rather violent period, it is noted that Berezovski is «the only one among the main entrepreneurs, later on called “the oligarchs” that was personally involved in the Chechnyan and Slave gang war.»

Redistribution of political charts

Entrepreneurs like Berezoski had a lot to win with Gorbatchov’s Perestroika. But things went faster. With the failure of the military coup in 1991, Boris Yeltsin seized complete power at the head of the Russian Federation and created a young team, totally immersed into the business world. This team will organize what researcher and writer Paul Klebnikov calls “the plundering of Russia”.

Berezovski is pleased since these are personalities with whom he has links. Among his friends are: interim Prime Minister, Igor Gaidar [2], Anatoli Sobtchak, Anatoli Choubais as well as young economist Piotr Aven, a personal friend, who later on became the new minister of Foreign Trade under Yeltsin and Mijail Kodorkovski, Deputy Minister of Oil and Energy, who soon shall become a business partner.

ENTERPRISES	Privatizations (1993-94)	Actual Price on Stock Market (1997) (1997)
Gazprom (natural gas)	250	40.483
Power systems (electricity)	957	17.977
Lukoil (oil)	704	15.839
Rostelcom (Telecom)	464	4.172
Iouganskneftegaz (oil)	80	1.656
Sourgoutneftegaz (oil)	79	6.607

Value of the Russian companies in privatization bonds in comparison to its market value (in millions of US dollars)

Time is great for this young generation that will seize power over the oil sector just by pennies, in detriment of the country.
Mijail Kodorkovski, founder of Menatep Bank, seized 45% of Yukos capital, a «holding that joined Samaraneftgaz oil producing company and the Samara refinery», all by the modicum price of US dollar 159 millions. [3].

Boris Berezovski established an alliance with Roman Abromovich to obtain 51% of Sibneft just for 100 million US dollars. As seen in the previous chart, these are amounts of money that have nothing to do with the real price of the companies determined upon their entrance into the stock market.
Berezovski also expanded his list of political friends. His friendship with Alexander Korjakov, head of security of President Yeltsin, opened him the door to the cupola of Russian power. He undertakes the financing for the editing of an authorized biography of Boris Yeltsin, with the title Over the razor edge.

After embezzling a large chunk of the sales reported, Berezovski returned the money to the Head of State and he the main financier of the latter. Berezovski realized the importance of media power. He invested in TV, basically in the publicity market of the most important network in the country, ORT: «the plan was to buy programs from the network and obtain profits based on publicity earnings. (The association created by Berezovski) Publicidad-Holding will resell to announcers the broadcasting time, charging a fee for that».
Later on, the business man exerted pressure on Korjakov and Yeltsin so that they will «sell» the network to him. It finally took place in 1994.

Berezovski is not the only one interested in the TV market. Vladimir Gussinski, owner of Most Bank, is also the owner of NTV, the first independent TV network in the whole of Russia, created in 1993, by special decree signed by Boris Yeltsin. Gussinski is also a personal enemy of Boris Berezovski, dating back to Moscow gang war in 1993-1994. He is a friend of the USA and of Ted Turner, owner of CNN.

Gussinski that created, just as his rival, a joint venture with foreign partners (Americans) was publishing one of the most important newspapers in the country -Segodnia- (Today) and also founded an important bank.

He also enjoyed the protection of Yuri Luchkov, major of Moscow. The help provided by the Russian President to Berezovski was such that the latter had to go into exile, on December 2, 1994. Nezavissimaia Gazeta, a newspaper belonging to Berezovski, will later on publish an article saying that Yeltsin took that decision after reading a report on the political ambitions of Gussinski and the political support he had, that is to say Yuri Luchkov.

Some time later, Berezovski was the object of a political inquest, as result of the assassination of Vlad Listiev, a prominent anchor man of the Russian TV. The latter has taken part in the privatization process of ORT, but already he has expressed his unrest by the radical change the network was facing in the hands of the business man. Just like with other legal processes, this will get lost within the Russian justice system.

The maneuvers taken by Berezovski to get hold of the media were successful. In just a few weeks he secured control of Channel 1 of the Russian TV, he purchased Channel 6 -privatized with the participation of Ted Turner, and purchased Ogoniok and the journal Nezavissimaia Gazeta, becoming one of the most influential men in the Russian media universe.

«Thus he is transformed into one of the architects of the Russian politics. The news service of ORT was transformed into a resonance box for Berezovski’s interests at crucial moments in the political life of the country, saying only good things about Yeltsin during the 1996 elections, praising the merits obtained by Lebed after reaching to an agreement with the Kremlin trying to be reelected, denouncing that same Lebed months later for his dispute with Berezovski (...)».
Berezovski, in 1996, availed himself of this new situation to finance the Yeltsin’s election campaign and returned to government after its reelection.

The health problems faced by the Russian President created a power gap, filled by different members of his tem, in first place by Anatoli Chubais, the architect of “privatization”. It is the triumph of oligarchs: the bank owned by Vladimir Potanin is entrusted with the administration of the new government accounts, Vladimir Gussinski’s TV network -NTV- gets authorization to buy Channel 4, Stolitchnyi Bank -property of Alexander Smolenski and Berezovski- doubled its size by its merging with the public bank Agroprom...

All of the sudden, Berezovski is under attack from all sides. General Korjakov revealed that the entrepreneur was the one who requested the assassination of Gussinski. The journal Novaia Gazeta published a video showing the moment when Berezovski accuses Gussinski for trying to blame him for the assassination of Listiev. In this juncture, particularly difficult, the tycoon joined the administration of the country by taking the job as Joint Secretary of the Security Council, in charge of coordinating security policies and the defense of the country.

To take that job, Berezovski has to renounce to his Israeli passport. Already in his new position, he takes in his hands the negotiation process with Chechnya, just when General Lebed is able to put an end to the conflict. According to the latter, Berezovski did everything possible to obtain the failure of the peace talks: «After the signing of the peace agreements of Khassaviurt [...] Berezovski came to visit me and tried to intimidate me. When he realized it was not possible to scare me, he simple stated: " you have interrupted a very nice business. Everything was going well. So, they were killing each other? So what? They have done that always and they will continue doing so "».

After the reestablishment of peace, he was able, nevertheless, to use his former relations with Chechen gangs in Moscow to obtain the sympathy of the leaders of Grozny. Salam Raduiev, one of the armed leaders, will salute Berezovski calling him «an honorable man». He comments: «He is personally interested in this oil (the pipeline Bakú-Novorossisk)».

Things changed when Vladimir Putin reached power. Although in principle he had the support of the oligarchs against Evgueni Primakov, Putin gave a total twist to the policy implemented until that moment and tried to rebuild the country. This tasks clashes fatally against the private interest of oligarchs, that already have seized a considerable share of the Russian economy.

Putin embarks then in a battle against that empire, no matter under what disguise its appearance, either as a media empire built, companies created or political parties supported by them. The Russian media under the control of these oligarchs, but also a vast part of the international press, gave their vision of the facts -that brought about the exile of former cadres in the country-, as the expression of an authoritarian regime with dictatorial trends.

Kodorkovski is then presented as a victim of the enemies of democracy, while Berezovski is constantly speaking to the Western press about the threat Putin represents, according to his criteria, for the Russian civil society. Nevertheless, it seems there is no other alternative. Besides their own personal enriching process, the policy line followed by the oligarchs simple represented the total economic destruction of the country, the plundering of its natural resources and a terrifying fall in the living level in Russia.

Within the geopolitical context that followed the collapse of the USSR, there was suspicion that the USA expected for the country to be totally devastated, in the economic sphere, before providing any type of help. In fact, this period served the interests of many, but not those of the Russian people. Thanks to this, many countries could get access, at very low prices, to Russian raw materials, while the organized crime weaken the State power, a must for such a huge country.

The war in Chechnya was a distraction for Moscow into a costly front both in men and money, that contributed to a delay in geopolitical issues, that since that time, Russia has been accumulating in the “Big Game” of sharing Central Asia, but the first stage was the destabilization of it.