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By Root 1833 0

the overwhelming part of Russia’s newly privatized economy, including most of its vast natural resource wealth. Despite what one occasionally hears, these men did not become billionaires principally through violence or mafiya tactics. Rather, they became billionaires by playing the game more effectively and ruthlessly than anybody else during Russia’s free-for-all transition to capitalism. Russia’s incipient corporate economy operated in practically a legal vacuum at the time, with no laws prohibiting insider trading or other forms of self-dealing. “Russia has been looted all right,” says Freeland, “but the biggest crimes haven’t been clandestine or violent or even, in the strict legal sense, crimes at all. Russia was robbed in broad daylight, by businessmen who broke no laws, assisted by the West’s best friends in the Kremlin.”

15

The Rise of the Oligarchs

When I first began to research the oligarchs, I arranged a series of informal interviews with recent Jewish émigrés from the former Soviet Union. One of the people we spoke with was a financial analyst named Sonia living in New York’s Brighton Beach, who still has many relatives in Russia and speaks Russian at home.

At one point we asked Sonia if she had any thoughts as to why so many of the oligarchs were Jewish.

Sonia shook her head. “You don’t understand,” she said dismissively. “These oligarchs—they are 95 percent Russian and only 5 percent Jewish. They are fully assimilated, products of the Russian environment. The Jews in Russia, it is not like the Jews in the U.S. In the U.S., there is an active Jewish community, synagogues, organizations. In Russia there is nothing. For most people, it is just something they have stamped on their passport.”

But wasn’t it strange, we persisted, that so many of the oligarchs should be Jewish?

“You know Jews!” Sonia laughed. “They gravitate towards business! So, many became involved in the black market. In the Soviet era it was difficult to get goods, so the black market prospered. Everyone, from regular people to Communist officials, used the black market. Of course, it was against ‘official policy,’ but it was an open secret and mostly tolerated by the government. These black market types, they had a head start when private business began to be allowed.”

Sonia’s impression that Jews were significant in the former Soviet Union’s black markets was repeated by another interviewee named Tanya, who is also Jewish and whose family moved to New York from the Ukraine six years ago.

“‘Black market’ sounds terrible,” she said. “But what are considered black markets in a Communist economy would be perfectly legitimate businesses in a capitalist system. My uncle, for example, had one of these underground firms. He manufactured shoes on his own. Later he sold the shoes either at the weekend flea market or through an ‘off-the books’ arrangement with a state-owned shoe store. What my uncle did was considered illegal. Yet everyone liked him and depended on him. There would have been no shoes on the shelves without people like my uncle.”

In 1987 and 1988, as part of Gorbachev’s initial tentative embrace of markets, small private businesses were legalized (with certain restrictions). By January 1990 roughly two hundred thousand businesses—misleadingly named kooperativs—were in operation.

16 The underground shoe business run by Tanya’s uncle was, after 1988, one of the early, authorized private enterprises operating in Russia’s incipient capitalist economy. “It made sense,” Tanya explains. “The people who ran the illegal businesses in the Soviet era were the people who understood at least the basics of how the free market functioned. That gave them an advantage over the rest of the Russian public when the country transitioned to capitalism.”

Despite the (generally accurate) stereotype of former directors of Soviet enterprises as inept, fist-thumping Communist Party officials representing everything markets do not, some Soviet directors were more entrepreneurial than others. The father of Tanya’s boyfriend (who is also Jewish),