Death of a Dissident - Alex Goldfarb [64]
But George Soros knew what was going on, because he himself had been lending Russia money to keep it afloat between infusions of Western cash. In early August, when shortages in liquidity briefly paralyzed the Russian interbank market, he decided it was time to sound an alarm.
On August 13, he published a letter in the Financial Times that began, “The meltdown in Russian markets has reached the terminal phase.” To avoid catastrophe, he urged the Russian government to “modestly” devalue the ruble by 15 to 25 percent and introduce a “currency board,” which in effect meant a new currency linked to the dollar, backed by a $50 billion Western infusion into the Russian treasury.
George simply wanted to offer advice and alert the West to the problem. Instead, his letter acted as a match to a gasoline tank: stocks on the Moscow exchange plunged, the price of dollars soared in the streets, and banks became incapable of paying each other. On August 17, the Central Bank could no longer defend the ruble, so it freed the exchange rate. Prices skyrocketed. People rushed to the streets in search of dollars. Regional authorities reported shortages of supplies due to widespread hoarding. On August 23, Yeltsin sacked the Kiriyenko government. Russians lined up to withdraw their savings. Banks failed. The government defaulted on its short-term bonds.
When the dust settled, several major banks were wiped out, together with the savings of millions of depositors, and foreign investors were left with losses amounting to $33 billion, of which George Soros’s share was about $2 billion.
As for Boris Berezovsky, the crisis did not hurt him economically; he did not own a bank, and his oil company took in revenues in dollars and paid most bills in rubles. The devaluation only helped him.
But politically it was a disaster. After two failed attempts in the Duma to reinstall Viktor Chernomyrdin as prime minister, Yeltsin bowed to Communist pressure and accepted the compromise candidate, Evgeny Primakov, the foreign minister and former chief of the Foreign Intelligence Service (the SVR). He was Boris’s sworn enemy.
For the first time since the dissolution of the Soviet Union, someone who was neither a democrat nor a reformer headed the government. Primakov, a sixty-eight-year-old veteran of KGB foreign intelligence who was derisively nicknamed “Primus” behind his back, was a staunch ideologue of the Russian empire who viewed the West as a long-term geopolitical threat. From his KGB days, he was a friend of many anti-American dictators, from Saddam Hussein to Slobodan Milosevic.
He leaned toward a state-dominated economic model. In the realm of political reform he preferred law and order to rights and freedoms. As for his attitude toward Russian capitalism, he sent chills through the business community when he announced an amnesty for 100,000 Russian prisoners by saying, “We are freeing up space for those who are about to be jailed—people who committed economic crimes.”
For Primakov, no one personified capitalist evil more than Boris Berezovsky. They had an old feud to settle: the contest for the Russian national airline, Aeroflot.
Boris had first become interested in Aeroflot in early 1995, when he was setting up ORT. He quickly discovered that of all the giants of the ex-Soviet economy, Aeroflot was perhaps the most saturated by spy agencies. He knew that to take hold of this prized asset, he would have to confront very powerful and resourceful interests.
But he was not deterred. His moment of opportunity came in the late summer of 1995, when Yeltsin replaced a Communist holdover at the helm of the national airline with Marshal Evgeny Shaposhnikov, Gorbachev’s defense minister, who had sided with Yeltsin in the last days of the USSR. Shaposhnikov, a complete novice in business management, asked Boris to help streamline the company, which was losing money. That year it carried 3.5 million passengers to 102 countries on its 110 aircraft. Hoping to eventually privatize the airline, Boris