The Oligarchs by David Hoffman

Author:David Hoffman
Language: eng
Format: epub, mobi
Publisher: PublicAffairs
Published: 2011-08-03T16:00:00+00:00

Chapter 12

The Embrace of Wealth and Power

CHARLES RYAN, who delighted in buying a fistful of Menatep Bank shares on a street corner in 1991, became an adviser to the privatization team working with Anatoly Chubais. One of his first acquaintances was Alfred Kokh, a sharp-tongued, bullheaded young man, deputy head of the Leningrad privatization office in those early days. Later both of them came to Moscow. Ryan cofounded United Financial Group, an investment bank. In 1995 Kokh was appointed acting director of the State Property Committee, in charge of continuing the sell-off of industry begun by Anatoly Chubais, who became one of two deputy prime ministers.

It was a difficult time for the Chubais team; the privatization of state property had stalled, Boris Yeltsin was weak, and the Communists were gaining strength in polls for the December 1995 parliamentary elections. On Saturdays, Kokh was often in his office, and the door was open. Ryan liked to wander in and shoot the breeze on these quiet afternoons with Kokh, who was known for his earthy language and short temper. One day in late summer of 1995, as they were talking, Kokh asked Ryan casually, “What do you think about Uneximbank and Menatep?”

Ryan discovered that Kokh was working on a privatization deal that would change Russian capitalism and politics forever. On his desk was a scheme in which Russia would give away its industrial crown jewels—the most lucrative oil companies and richest metal mines—to a coterie of tycoons, all of them from the Sparrow Hills club. Vladimir Potanin of Uneximbank was first in line, followed by Mikhail Khodorkovsky of Menatep. From the beginning, Kokh had handpicked the winners, Ryan recalled. According to the plan, shares in the factories were to be given to the tycoons for safekeeping, in exchange for a loan to the government. Everyone knew the deficit-ridden government would not repay the loan. Then the tycoons would sell the shares, as repayment of the loans. But there was a twist. The tycoons would probably sell the shares to themselves, very cheaply, through hidden offshore companies. That way, they would get the valuable assets for next to nothing. It looked to Ryan suspiciously like a backdoor giveaway, a loan to the government in exchange for colossal oil and mineral riches. The scheme was called “loans for shares,” and Ryan told Kokh: “This loans for shares thing really stinks.”

“What do you mean?” Kokh asked.

“You know Alfred, the funny thing is that you are going to get hosed. You are going to be the scapegoat for all this. You are the one signing all the orders.”

“That’s not true,” protested Kokh. “Everything I have done has been approved by Anatoly.”

“Alfred, you’re such a joker. In four years, Chubais is going to have some great job, and you’re going to be the sucker.”

Kokh grew furious and shouted at Ryan, “Fuck you!” Ryan later recalled, “I told him where he could stick it. And this loans for shares thing was pretty much the end of my friendship with those guys.

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