As Gusinsky would soon learn, Putin had a much thinner skin. After Putin sent troops back into Chechnia in 1999, NTV resumed its criticism—only this time Putin, not Yeltsin, was the target. Gusinsky understood there was a change in leadership and understood there was a risk to him and his media empire. In a conversation in Moscow in March 2000, the week before Putin was elected president, Gusinsky acknowledged to a group of us from the Jamestown Foundation that such outspoken criticism of Putin might cause problems for him, his staff, and his network. But he and one of his senior assistants insisted at a late-night dinner before Putin’s expected victory that they would not pull their punches.
Perhaps they should have. Three months later in June 2000, only just installed as president, Putin had Gusinsky arrested on charges of embezzling funds from a St. Petersburg company.
STAY OUT OF POLITICS
In contrast to Yeltsin’s tolerance of criticism, Putin summoned twenty-one of the country’s new oligarchs to a Kremlin meeting convened the next month on July 28, 2000. Neither Gusinsky nor Berezovsky was invited. Had they been there, they would have heard Putin tell those in attendance that if they kept out of politics, he would leave them alone and not question how they had managed to accumulate so much wealth so quickly. His message was an implicit warning to avoid Gusinsky-type attacks in the media and interference with Putin’s policies in the Duma. Most of the oligarchs got the message and paid heed to Putin’s warnings.
Two oligarchs, Boris Berezovsky and Mikhail Khodorkovsky, did not. Even though he was not there in person, Berezovsky quickly learned of Putin’s warnings, but typical of the arrogance of the oligarchs who rose to affluence in the Yeltsin years, Berezovsky acted as if it made no difference. When Russia’s nuclear submarine Kursk sank in August the following month, ORT, the TV network Berezovsky controlled, joined with Gusinsky’s NTV (Gusinsky had been released from jail) to criticize the accident and the government’s belated response to it. ORT made a special point of interviewing the bereaved families of the dead sailors in their drab quarters in Vidyayevo, the submarine’s home port on the Barents Sea. Where, the families wanted to know, were Putin and other senior government officials? Why weren’t they at the scene of the accident? Both ORT and NTV provided the answers with video shots of Putin enjoying himself on vacation outside his home along the ritzier Black Sea. That did it. Now Berezovsky and Gusinsky were in serious trouble. Soon after, Media-Most, Gusinsky’s holding company, was seized from him (ostensibly for his failure to repay a loan). He then fled to Spain and into exile in the United States and Israel.
Berezovsky can be forgiven for thinking that he would not become a Putin target. As one of Putin’s original backers for the post of prime minister, Berezovsky evidently assumed that as a minimum, out of gratitude, Putin would not turn on him. After all, before all this trouble began, Berezovsky had even gone so far as to welcome Putin and his family as houseguests in Berezovsky’s mansion on the French Riviera.12 Moreover, Berezovsky had been close to Yeltsin’s family and other senior officials in the Kremlin. He had become a financial supporter and confidante to Yeltsin’s daughters and their husbands. Berezovsky made one of them, Valery Okulov, the CEO of Aeroflot. That in large part explains why they, in turn, agreed to set aside Sibneft, a petroleum complex in one of the Loan for Shares auctions so that Berezovsky would emerge as the dominant owner. Berezovsky, in turn, agreed to use some of the revenue from Sibneft in an off-the-books pass-through to underwrite Kremlin expenditures and Yeltsin’s 1996 campaign for reelection.
Berezovsky’s biggest mistake, however, was that he allowed ORT to join with NTV in its various attacks on Putin. Eventually that set off rumors that Putin had put out an order for Berezovsky’s arrest. Taking the hint, Berezovsky fled to London and surrendered control of his media assets as well as his petroleum company, Sibneft, to what had been his junior partner, Roman Abramovich. Abramovich, in turn, was happy to be cooperative and graciously put them at Putin’s disposal. In a few months, state-owned Gazprom took possession of Gusinsky’s company Media Most and Berezovsky’s Sibneft, in effect nationalizing them both. Putin’s national champions were quickly beginning to take shape.
RECLAIM GAZPROM
The next year in May 2001, Putin continued his campaign by asserting firmer control over state-controlled Gazprom. He did this by using the Gazprom stock owned by the state to vote to oust Vyakhirev as CEO. With the removal of both Chernomyrdin and Vyakhirev and their replacement with Dmitri Medvedev and Alexei Miller, two younger bureaucrats who had worked with Putin in St. Petersburg, Putin was now in a position to halt the blatant asset stripping that had characterized Chernomyrdin and Vyakhirev’s almost decade-long raid on Gazprom, the company they were supposedly leading.
One of the most brazen examples of this asset stripping was the way Gazprom executives aided and abetted the formation of ITERA. This company soon became the second largest producer of natural gas in Russia. ITERA stands out because although its main business was in Russia, it was headquartered in Jacksonville, Florida. As far as is known, Jacksonville was picked because it is warmer than Moscow and because the CEO, Igor Makarov, had a Russian friend who emigrated to Florida and suggested that Makarov open an office nearby. In retrospect it was probably a safer place than Moscow for a company that on occasion (even if unfairly) has been accused of asset stripping. No one in Jacksonville seemed particularly upset that ITERA’s assets had been stripped from Gazprom nor did they seem to care that according to rumors that may have been part of a campaign of disinformation to discredit ITERA, almost all the trustees of ITERA seemed to be close relatives or mistresses of senior Gazprom executives. As of this writing, the identity of those trustees has not been published. That was nothing unusual in the Yeltsin era.
Putin’s ouster of Chernomyrdin and Vyakhirev from Gazprom plus his subsequent removal in March 2002 of Viktor Gerashchenko as chairman of the Russian Central Bank were all efforts to halt such banditry and punish what Putin saw as mismanagement and the personal pillaging of state assets. (In the case of Gerashchenko, he had been accused of misusing the powers of Russia’s Central Bank.) All three—Gerashchenko, Chernomyrdin, and Vyakhirev—had been long-serving state officials, and all had begun their careers in the Soviet era and had become members of the nomenclatura, the Soviet bureaucratic elite. With their removal, ITERA soon lost most of its contracts and in a short time it surrendered its position as Russia’s second largest producer of natural gas to another firm, Novatek.
Putin’s purge of Gusinsky and Berezovsky was of a different nature. Both were viewed as upstarts from the murkier side of the street. Unlike Chernomyrdin, Vyakhirev, and Gerashchenko, neither Gusinsky nor Berezovsky had served as a senior government official in the Soviet era. Nor were Gusinsky and Berezovsky ethnic Russians. Although Berezovsky had an advanced degree in economics, like so many upstart oligarchs he began building his wealth as a trader. Gusinsky emerged from the black market of the Soviet era—an economic criminal by Soviet standards. Berezovsky had been closely involved with criminal groups as well. Neither would ever have been allowed into the upper ranks of the Communist Party. They had not come up through the system like Chernomyrdin, Vyakhirev, and Gerashchenko. Gusinsky and Berezovsky were both at least partly Jewish and were not “ole boys” or part of the Soviet nomenclatura. Both sets of men had enriched themselves at the expense of the state, but somehow the excesses of Chernomyrdin and Vyakhirev at Gazprom and Gerashchenko at Gosbank were not regarded as venal and therefore not punishable with imprisonment or exile (apparatchiks will be apparatchiks, and besides, they are ours). Conversely, Gusinsky and Berezovsky—most definitely not “ours”—were both either imprisoned or threatened with imprisonment.