Guilty as charged

Russian oligarchs are being harassed and jailed in a crackdown that's raising eyebrows in the West. But most Russians thinks they're guilty -- just like everybody else.

By Jeffrey Tayler
July 20, 2000 3:00PM (UTC)
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"Our position is extremely clear. Only a strong ... and effective state and a democratic state is capable of protecting civic, political and economic freedoms ... Strong government has an interest in having strong opponents, [and] without a truly free mass media, Russian democracy simply will not survive."

Russian President Vladimir Putin delivered these heartening words about a strong state, democracy and free media in his recent address to the Russian parliament -- one month after government officers arrested media magnate Vladimir Gusinsky, the director of Russia's main independent television station, NTV. At the same time, masked, gun-wielding agents from the successor agency to the KGB, the Federal Security Service (which Putin once headed), raided the Moscow headquarters of MEDIA-Most, the parent company of NTV, seizing documents and causing an international uproar.

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Gusinsky was detained for three days in Moscow's czarist-era Butyrka Prison, charged with defrauding the government of $10 million, then released, pending trial. Two days after Putin's July 11 speech, state prosecutors and officers of the FSB returned to MEDIA-Most and took away more documents, warning that Gusinsky may be arrested again. No one has seen the evidence that the prosecutors say they have gathered against him.

Western reporters and political commentators on NTV have equated Gusinsky's arrest with a Soviet-style attack on freedom of the press. They say NTV is being persecuted for its frank coverage of the war in Chechnya and its failure to endorse Putin in presidential elections. Putin's KGB past, and his pledge to strengthen the state and its control over the media, seem to bear out the direst suspicions.

But the events are a bit more complex than that. Gusinsky's arrest is part of a campaign to fortify the state, a campaign with one overriding aim: an assault on the oligarchs -- Gusinsky being one of them -- who oppose chief oligarch and Kremlin insider Boris Berezovsky.

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Berezovsky happens to own 49 percent of the main state television channel, ORT, which is NTV's main competitor. Berezovsky, who was the most influential member of Yeltsin's court, is thought to have engineered the rise of Yeltsin protigi Putin to the presidency through a combination of intrigue and financial and media support. His choice of Putin may well have been based on the latter's KGB background. As a spy chief, Putin presumably had the dirt on all the other presidential candidates (witness the speed with which they withdrew from the race, and the fawning alacrity with which they pledged him their allegiance), and on Berezovsky's rivals as well.

Hardly a day now passes without the announcement of raids and indictments against Berezovsky's rivals (alleging, for the most part, tax evasion and embezzlement). Recently, for instance, government auditors announced an investigation into Anatoly Chubais, head of the electricity monopoly Unified Energy System. Chubais, who designed many economic reforms under Yeltsin, said the charges that he allowed foreigners to invest illegally in the company were "absolutely laughable."

The oligarch hit list also includes former untouchables Vagit Alekperov, head of LUKOil, Russia's leading oil company; Vladimir Potanin, former deputy prime minister and the owner of Norilsk Nickel, one of Russia's most profitable enterprises; and Vladimir Kadannikov, the boss of AvtoVAZ, the producer of the country's most popular car, the Lada. AvtoVAZ may, in fact, be partly owned by Berezovsky, which illustrates the complexity of the matters at hand. (The raid against AvtoVAZ could have been a feint designed to convince the public that Putin is acting independently of the widely hated Berezovsky. Berezovsky's announcement on Monday that he is quitting the state Duma in protest of Putin's moves against the oligarchs may be another such ruse.)

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All in all, the pressure on Berezovsky's rivals suggests that Putin's state and Berezovsky are redistributing between them the spoils of privatization auctions held in the mid-1990s. As the loot is redivided, the last voices of opposition need to be silenced. (I say "last" because many of the current restrictions on the press stem from the Yeltsin-era Ministry of the Press, from acquisition of media outlets by oligarchs, who use them to advance their own agendas, and, where the provinces are concerned, from the tight control imposed by tyrannical and unreconstructed local administrations. Putin is simply continuing a process begun under his predecessor.)

But such dissent is not being silenced -- at least so far -- on a scale recalling Soviet times. Today, as during the Yeltsin years, Russians on the street excoriate, ridicule and inveigh against their government. And despite Gusinsky's arrest, NTV still broadcasts damning reports about Chechnya, official corruption and Putin's plans to smother the press. Shutting up NTV will not be easy, if only because Gusinsky is wealthy and determined to stay out of prison. He will use his media to save his skin.

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Few Russians, besides journalists, seem to care about Putin's move against Gusinsky. Their apathy has a simple, two-part explanation. First of all, the media, for decades a tool of propaganda, elicits no special sympathy from a public whom it routinely duped and led astray in Soviet times, or dupes and leads astray now in the service of the oligarchs and state. Second, and most important, Russians possess a sophisticated, firsthand knowledge of what their country has become since 1991.

On hearing about Gusinsky's arrest, my Russian friends said, "Well, he must be guilty of something -- all our businessmen are!" They are alluding to the Byzantine nature of laws and the malleability of justice here -- the core problems that have turned the "reforms" much touted in the West into a nefarious and often bloody farce.

Russian businessmen are often assumed guilty by the public, and they may be right: There are too many contradictory laws on the books for them to operate a business without violations. Tax evasion becomes something of a necessity since the approximately 20 separate levies on the books would, if complied with, tax as much as 105 percent on gross earnings, depending on the region.

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To stay afloat, businesses keep a secret chornaya kassa (a "black" accounting ledger accurately showing profits and losses), and present to auditors from the Tax Inspectorate only the belaya bukhgalteria (or "white" books -- a false record of low profits and high expenses). Auditors, who work for a commission (a percentage of the taxes they collect), may also expect, during their frequent and prolonged "official" visits to businesses, to be feted with vodka and caviar, munificent gifts and perhaps young lovelies. Such favors are, for many company directors, the norm in Russia. Why, the auditor reasons, should he miss out?

Registration and re-registration with numerous local agencies and departments costs hundreds of employee hours on redundant and frivolous paperwork. Bureaucrats offer to expedite this paperwork for "fees" (bribes); without bribes, papers are "lost," phone calls not returned and the tax man, fire inspector or sanitary officer may show cause and order the business closed, its assets seized, the business head and/or its accountant arrested, and so on. Legal redress at times works, but most often fails, foundering on venal judges and clerks and thuggish police. To stay in business principle falls by the wayside and vodka, bribes and young lovelies are distributed when the tax man, fire inspector and toilet examiner cometh. And since the state pays them little and late, they cometh a lot.

Then there's the "mafia "-- or, to be more accurate, a loose nationwide network of competing territorial criminal gangs, many of whom work in concert with police and government officials. It has been estimated that 80 percent of Russian businesses pay 'dan', or protection money, to their krysha (literally "roof"). The krysha demands as much as 15 to 20 percent of gross earnings to keep the business safe from local racketeers (who are the same guys as the krysha, of course). At times, the mafia steals chornaya kassa accounting records and threatens to hand them over to the Tax Inspectorate; businessmen buy them back. But on the whole its a straightforward relationship. Businessmen pay promptly when they come round, not wanting to be beaten, have their offices torched or car bombed, their daughter kidnapped or murdered.

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Businesslike as they may be, however, the krysha is not above making playful extracurricular demands, and may request "gifts" from you in the form of a new Mercedes to ride around in, extra sacks of cash for those long nights out at the casino, or, again, young lovelies to keep them company -- the cherished and hard-working secretary in the reception room, for example.

When the demands for bribes or protection money mount, or when the business needs to expand to keep up with competitors (who, to keep their share of the market, at times resort to murdering their rivals rather than advertising their wares), businessmen may seek a loan. Russian banks charge interest rates that have exceeded 50 percent a year in the past decade and they often disappear with their depositors' money.

If businesses manage to make money -- it could happen, with luck or if the krysha intimidates or rubs out competitors -- the money is sent abroad, by hook or by crook, whenever possible. After all, the bank is unreliable and local investments are unsafe. Capital flight is logical and necessary in such conditions, and has probably far exceeded the amount of loans granted to Russia by the International Monetary Fund and the World Bank.

So at the end of the day, average businessmen probably lack the desire or energy to sympathize with a beleaguered millionaire media tycoon. Nor do they have much faith in Putin or other representatives of the state, which in Stalin's time may have executed their grandfather, dispossessed their grandmother or starved to death the Ukrainian side of their wife's family. The only thing they give a damn for is themselves and their loved ones. They are, in short, apathetic.

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This morass of crime, tax evasion, venality and arbitrary enforcement of laws stems in part from the negligence of President Yeltsin's otherwise benign rule. But in the main it derives from czarist and Soviet traditions of an all-powerful state and the concomitant absence of a civil society -- of institutions that could protect the individual. The mess serves to keep every businessman in fear. From the entrepreneur with the shop on the street corner to the oligarch with an oil company or a media empire, their guilt can be manufactured on demand when it suits the government, the reigning oligarch or the mob.

So, is Gusinsky guilty? He may be. We do not know, we will probably never find out and it hardly matters, for guilt and innocence in Russia derive from the needs of those in power, be they oligarchs or masters of the Kremlin.

What does matter is that Putin has embarked on a program to strengthen the state, a state that is corrupt and has traditionally plundered its subjects, a state that may end up serving the interest of not of a single party (as in Soviet days), but a single man -- oligarch Berezovsky -- and his clique. At present, it is unclear whether he will succeed. Much power still lies in the hands of the other oligarchs, besieged as they are, as well as regional governors (whom Putin has targeted for dismissal, but his plan to kick them out of the Upper House of parliament appears to have reached an impasse for now).

The resulting balance of power, as messy as it has been, has prevented any centralized reign of terror reminiscent of the Stalin era. If the oligarchs and governors fall to Putin's masked men, the Kremlin may set its sights on its citizens. And most, to be sure, in one way or another, are guilty as charged.


Jeffrey Tayler

Jeffrey Tayler is a contributing editor at The Atlantic. His seventh book, "Topless Jihadis -- Inside Femen, the World's Most Provocative Activist Group," is out now as an Atlantic ebook. Follow @JeffreyTayler1 on Twitter.

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