Death of a Dissident - Alex Goldfarb [24]
Chubais, who strove to make the Russian economy 100 percent private, felt that his time was running out, so at some point in mid-1995 he came up with an extraordinary strategy: the state should take its biggest industries and privatize them in one big push. Let capitalists take over these companies. Rather than deceitful managers skimming income, have the owners start paying corporate taxes. At best, the new owners could help Yeltsin fight off the Communist onslaught. At worst, let the Communists, should they win, try to renationalize private property.
But this time Chubais could no longer afford to give out privatization vouchers free to every Russian. He needed cash. At the time, state budget receipts were only $37 billion, whereas expenditures were $52 billion, generating nearly a 30 percent deficit. Oil exports at the price of $15 per barrel were not generating enough cash. Taxes were not collected, and salaries of state employees had to be paid. The war in Chechnya was costing more and more each month. Foreign investment trickled to a minimum. So he turned to the only place where one could find cash in the country: the emergent banking sector, where no Soviet holdovers existed. It was a 100 percent novel, privately owned industry that originated from scratch.
As Chubais himself later explained, “In 1996, I had a choice between the communists coming to power, or robber capitalism. I chose robber capitalism.”
Chubais handpicked a dozen bankers whom he knew would never cave in to the Communists and offered them some of the crown jewels of Russia: gas, minerals, and elements of the infrastructure industries, in exchange for all the cash they could raise. The government got loans from the banks secured by shares in the enterprises. If the loan was not returned on time, then the bank could auction the shares off—a pure formality, since the bank itself controlled the process.
The loans-for-shares auctions involved twelve enterprises in all: six oil companies, three factories, and three shipping companies. They garnered $1.1 billion for the government. The lucky robber barons became some of the richest men on earth—assuming they could hold on to their assets after the elections.
As for Boris, he wasn’t initially planning to take part in the auctions, as he didn’t own a bank and didn’t have that kind of money. He also had the insatiable TV network hanging around his neck, which devoured all the profits from his automobile business. But among all the new oligarchs, he was the closest to the Kremlin, and so he figured out a way to turn his weakness into a strength: he explained to Chubais and Korzhakov, the two principals in the Kremlin, that in order to support ORT, he needed some sort of cash generator. After all, the state owned a 51 percent stake and should bear some responsibility for the unprofitable network. He got the go-ahead. An additional “auction” was hastily announced for a controlling stake in Sibneft, the Siberian oil company that was the seventh largest oil producer in the Russian Federation. Chubais’s economists valued it at a minimum of $100 million.
But Boris didn’t have $100 million. He could scrape up only about half that amount.
October 6, 1995: A bomb critically injures Anatoly Romanov, the Russian commander in Chechnya and one of the rare doves in the military, who was in the midst of peace negotiations with the rebels. The cease-fire that has been holding since June is shattered. Rumors abound that the attack on Romanov is the work of “the Party of War,” a cabal of top military and security mandarins unhappy about Yeltsin’s attempts to reach a negotiated settlement. The defense and interior ministers openly