CHAPTER 3

The Seventh Oligarch

The Jewish Billionaires of Post-Communist Russia

IN THE SPRING of 2000, a professor whom I’ll call Jerry White was furiously trying to finish up an article on the debacle of Russian privatization. Jerry and his coauthors had served as legal advisers to the Russian government during the country’s mass privatization process in the late 1990s. The article described, from an insider’s hindsight perspective, how Russia’s pro-market reforms (which he and other Western advisers had helped devise) had gone horribly awry. Instead of dispersing ownership and creating functioning markets, these reforms had allowed a small group of industrialists and bankers to plunder Russia, turning themselves almost overnight into the billionaire-owners of Russia’s crown jewels while the country spiraled into chaos and lawlessness. Although not yet published, the article had already created a stir. It was to be a major mea culpa, a candid exposé of the naïveté of Western advisers, in hopelessly over their heads.

I stopped by Jerry’s office one day after reading a near-final version of the article. Something about the oligarchs described in his article had struck me, and I wanted to run it by him.

It seemed to me, I said to Jerry, that most of the key players in the privatization and eventual economic takeover of Russia were Jewish. Was it possible?

“Oh, no,” Jerry replied instantly, with a frown. “I don’t think so.”

“Are you sure?” I pressed him. “If you look at their names—”

“You can’t tell anything from names,” Jerry snapped impatiently, clearly not wanting to discuss the topic any further.

As it turns out, six out of seven of Russia’s wealthiest and (at least until recently) most powerful oligarchs are Jewish. This fact became public knowledge in the United States just a few months after my conversation with Jerry, when Chrystia Freeland in Sale of the Century offered a journalist’s firsthand account of how, without actually breaking the law, a handful of extraordinarily savvy businessmen—all but one of them Jewish—used the privatization process to become the owners of vast amounts of Russia’s mineral wealth and the overwhelming victors in Russia’s “gladiator capitalism.”¹ Around the same time, John Lloyd wrote in a cover story for the New York Times magazine that “in a country where Jewishness is best kept quiet, nearly all [of Russia’s] oligarchs are Jewish.”² Yet Jerry, who was there in Russia, himself Jewish, and moreover writing an article meant to be provocative, wasn’t willing to touch the Jewish question.

Not all Jews, of course, react like Jerry. When I first mentioned to my husband, who is Jewish, that six out of seven of Russia’s wealthiest tycoons are Jewish, he raised an eyebrow. “Just six?” he asked calmly. “So who’s the seventh guy?”

The seventh oligarch—the only “full-blooded ethnic Russian” among them—is Vladimir Potanin. (“While the other oligarchs were still decorating their offices with leopard skins and mirrors, Potanin was buying graciously battered English antiques,” writes Freeland.)³ The six Jewish businessmen most frequently called oligarchs are: Roman Abramovich, Pyotr Aven, Boris Berezovsky, Mikhail Friedman, Vladimir Gusinsky, and Mikhail Khodorkovsky. Together, these men came over the course of the 1990s to wield mind-boggling political and economic influence.

The height of their oligarchic influence was reached in 1996, when the Yeltsin government hung on the verge of political and financial collapse. Among other problems, Yeltsin had suffered a heart attack; his approval ratings hovered between 5 and 8 percent; the Russian treasury was strapped for cash; and in the parliamentary elections the Communists and Vladimir Zhirinovsky’s extreme nationalists had captured two-thirds of the seats of the lower house, paralyzing the government.⁴

Already wealthy by that time, the oligarchs collectively put forth the so-called “loans-for-shares” deal—now notorious, but at the time grudgingly endorsed by Western advisers and Russian economists as well as England’s The Economist. Essentially, the oligarchs offered loans and political support to the government in exchange for majority shares—at a fraction of their potential market value—in the behemoths of the Russian economy, a half dozen massive enterprises breathtakingly rich in nickel, gold, and oil deposits. When in 1996 it appeared that Boris Yeltsin might lose his reelection to the Communists, the oligarchs poured millions into Yeltsin’s campaign and began flooding the television airwaves (which they owned) with pro-Yeltsin “news” items while conspicuously failing to give any airtime to the opposition.⁵

With Yeltsin’s victory, the loans-for-shares deal was finalized, catapulting the oligarchs from a small group of millionaires to a small group of billionaires. A few years later the oligarchs “guaranteed”⁶ that Vladimir Putin, like Yeltsin before him, would get elected in Russia’s 2000 presidential elections.

Russia has roughly 147 million inhabitants. The National Conference on Soviet Jewry estimates that Jews make up less than 1 percent of the population.⁷ Given these demographics, how is it that six Jewish businessmen came to wield such astounding economic and political power?

Russian Jews in Historical Perspective

In general, it is much harder to talk about Jewish economic dominance than that of any other group. This is because of the numerous episodes in which exaggerated or even patently false claims of Jewish economic dominance led to vicious discrimination, ghettoization, and some of the worst atrocities in human history. As a result, whereas one can relatively freely explore and talk about the phenomenon of, say, a 3 percent Chinese minority controlling 70 percent of a country’s wealth, it is far more difficult to ascertain or even discuss the extent of Jewish economic influence in any given context.

Nevertheless, Jews have been in many ways the quintessential market-dominant minority. Jews do not appear to have been particularly economically successful during antiquity—but that’s about the last time in history that they weren’t, at least when left alone to pursue their livelihoods. During the Middle Ages, despite recurrent anti-Jewish restrictions and persecutions, Jews prospered visibly and disproportionately as merchants and middlemen and eventually as international traders, particularly between Christian Europe and the Muslim lands. Indeed, Jewish entrepreneurialism during this period played a crucial role in the economic development of Europe. The enormous wealth that Jews were forced to leave behind when expelled from Spain in 1492 helped finance the voyage of Columbus that led to the discovery of the Americas.⁸

Fast forwarding five hundred years, Jews occupied a commanding economic position in many Eastern European countries during the early twentieth century. Jews in interwar Romania, although just 4 percent of the population, controlled most of the private capital in the export, transportation, insurance, textile, chemical, housing, and publishing industries. Although their access to universities was restricted, they were also strongly represented in law, medicine, journalism, and banking. In Poland, as of 1921 over 60 percent of all commerce was conducted by Jews, who comprised just 11 percent of the population. Around the same time, Lithuania’s Jewish minority accounted for more than three-quarters of the country’s commercial activity. Meanwhile, in Hungary, Jews in 1910 represented nearly one-quarter of the population of Budapest—earning the capital the epithet “Judapest.” As of 1920, Jews constituted 23 percent of Hungary’s actors and musicians, 34 percent of the country’s authors, 51 percent of the attorneys, 60 percent of the doctors in private practice, and the overwhelming majority of those “self-employed” in business and finance.⁹

Discussing Jewish economic success in present-day Russia is especially fraught because of the virulent history of Russian anti-Semitism. For centuries, anti-Jewish policies in Russia—expulsions (dating to as early as 1727), harsh economic restrictions, coerced twenty-five-year terms of military service, persecutions, pogroms, and so on—were to a large extent successful in preventing Jews from prospering, let alone being economically dominant.

In the late eighteenth century, Russia annexed much of eastern Poland and, along with the territory, acquired large numbers of Jews. Not wanting them to “spread throughout the country,” the tsarist government confined the Jews to certain relatively undeveloped regions, collectively known as the Pale of Settlement. Moscow, St. Petersburg, and, for a while, Kiev and Warsaw, for example, were all “beyond the Pale” and thus off-limits to Jews.¹⁰

The 1800s saw periods of relatively benign neglect toward the Jews, campaigns to assimilate them, and campaigns to annihilate them. The Russian statesman Konstantin Pobedonostsev, adviser to the tsars, supposedly predicted that Russia’s “Jewish problem” would be solved “by having one-third of them killed, one-third of them converted to Christianity, and one-third driven out of the country forever.”¹¹ Some Jews prospered. Around the thriving port of Odessa—on the Black Sea coast and within the Pale—Jewish bankers, traders, and businessmen were commercially prominent (and frequent targets of anti-Jewish mob violence). Jews also played a central role in Russia’s lucrative vodka industry, operating many of the large commercial distilleries on Great Russian estates as well as smaller-scale enterprises in the Pale. Trade in vodka—one of the largest sources of imperial income—made millionaires out of Jewish financiers, such as the Ginzburg and Poliakov families, both of which played major roles in the building of Russia’s railroads. The Ginzburgs were eventually ennobled. Meanwhile, at the other end of the social spectrum, the Jewish tavern-keeper cut a familiar figure throughout Eastern Europe.¹²

Nevertheless, restricted to the Pale, subjected to economic discrimination, and victimized by recurrent anti-Jewish plundering and violence, most Russian Jews at the turn of the twentieth century lived in cruel poverty. (Of course, most other Russians also lived in poverty; the Russian population, was, after all, one of the world’s poorest at the time.) From Warsaw to Lodz in the Polish territories, in Vilna (Vilnius) in the north and Odessa in the south, the Jewish proletariat, along with the Russian, eked out a hungry, miserable existence. At the turn of the century it was not uncommon for Jewish factory employees to work seventeen, even twenty hours a day, usually with only primitive sanitation. In many Jewish communities within the Pale it was typical for up to 40 percent of the population to be unemployed at any given time; begging was commonplace. Around 1900 an estimated 35 percent of Russia’s Jewish population depended on relief provided by Jewish welfare institutions. Between 1881 and 1914 over a million and a half Jews left Russia for the United States.¹³

Although Jews were disproportionately represented among the leaders of the Bolshevik Revolution of 1917, Russia’s deep ambivalence toward Jews persisted throughout the Communist era. Jews paid an especially terrible price during Stalin’s purges; virtually all the cultural leaders of Soviet Jewry were executed, and many Jewish academics and students were purged from institutions of higher learning. On the other hand, Jews tended to be overrepresented among the bureaucratic elite (although never at the top level), among doctors and lawyers, and in the Soviet Academy of Sciences.¹⁴ In addition, along with other “outsider” ethnic groups such as Chechens and Azerbaijanis, Jews played a disproportionate role in the Soviet Union’s black market system—a vast array of underground enterprises which, in the dysfunctional, shortage-stricken Communist economy, were a crucial source of necessities and consumer goods. Nevertheless, no one (outside the Politburo) got billionaire-rich in the former Soviet Union, and Jews were no exception.

Not so in the post-Soviet era. During the 1990s, seven entrepreneurs, six of them Jewish, came to control the overwhelming part of Russia’s newly privatized economy, including most of its vast natural resource wealth. Despite the inevitable rumors, these men did not become billionaires 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 [entrepreneurs] 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), for example, transformed himself from a middling manager of a state-owned enterprise into one of Russia’s wealthy “new businessmen.” “In the former Soviet Union,” recalls Tanya, “he was one of the more business-minded directors of a state-owned railroad line. As soon as individuals were permitted to set up private enterprises, Mr. Yurkovsky organized a company for transporting raw materials—using not just railroads, but also ships and planes. He made a massive fortune—and very quickly. He eventually moved to San Francisco, where he bought a huge house and a BMW for each member of his family.”

LIKE TANYA’S UNCLE, all the Jewish oligarchs were dabbling in quasi-clandestine private enterprise before glasnost. Mikhail Friedman—who was rejected by the “MIT of the Soviet Union” because of his Jewish origins and relegated instead to the less prestigious Institute of Steel and Alloys—started a ticket scalping agency while a student in the economically stagnant early eighties. Friedman paid Moscow university students to wait in line to buy theater tickets, which could then be bartered on the black market. Although ticket scalping existed long before Friedman came on the scene, he was the first to organize it into a well-disciplined business, employing 150 scholars—on full salary if they waited overnight, or half salary if they queued up in the early morning—and “managers” from every university department. Friedman, as a kind of controlling shareholder, would meet once a week with his managers to review their business plans.¹⁷

When private enterprises were legalized in 1987, Friedman and some college friends jumped at the opportunity. Friedman’s kooperativ—the predecessor of Russia’s now incredibly powerful Alpha Group—tried everything, from selling Siberian wool shawls to breeding white mice for laboratories. Friedman hit pay dirt with a window washing business. Within half a year his income was over ten thousand rubles a month, a pittance in dollar terms but forty times the combined salaries of his parents. After that, Friedman branched out to importing Western cigarettes and photocopy machines, then to exporting oil. By 1991 he was a dollar millionaire. A few years later, drawing on government connections formed during the glasnost era, Friedman set his sights on Russia’s mass privatization process. He quickly mastered the art of buying up large stakes in firms that would interest Western multinationals when shares in those firms were still selling at steep discounts. Western banks, including Credit Suisse First Boston, were astonished by how astutely Friedman’s Alpha Group anticipated where the profits lay in this first stage of privatization.¹⁸

Next, Friedman recruited Pyotr Aven, Yeltsin’s first trade minister, who later became an oligarch in his own right. Suddenly, Alpha had access to “the golden trough” of government contracts and oil export licenses. In 1996, Friedman and Aven were at the core of the clubby group that underwrote Yeltsin’s presidential campaign. Today the Alpha Group controls Russia’s largest private bank, 50 percent of Tyumen Oil Company (TNK), Russia’s fourth-largest oil company, as well as Crown Resources, an international commodities trading company with an annual turnover of some $5 billion.¹⁹

According to John Lloyd, there are allegations in Russian security agency dossiers that Friedman (“born in 1964 in the city of Lyov, former Ukrainian Republic, a Jew”) engaged in illegal activities to further Alpha’s businesses. When Lloyd asked Friedman about these accusations during an interview, Friedman shrugged and said, “That stuff’s always around.”²⁰

THE OTHER JEWISH oligarchs followed roughly similar paths. Vladimir Gusinsky’s boyhood dream was to be a physicist, but, like Friedman, he was rejected from his university of choice because of his Jewish background. In 1987 he abandoned his career as a provincial theater director for the turbulent new world of Russian business. From driving a gypsy cab to hawking blue jeans on the black market, the hustling, volatile Gusinsky finally broke through with copper bracelets, a kind of New Age fad that was supposed to prevent high blood pressure. Gusinsky then put his money in real estate and construction before realizing that the real money was to be made in banking. Shamelessly cultivating his relationship with Yuri Luzhkov, Moscow’s powerful mayor, Gusinsky was soon making millions managing the city’s operating capital. Snapping up newspaper, magazine, and television interests right and left—in some cases letting the business run into the ground while pocketing the assets—Gusinsky became in the nineties the most powerful man in Russian media. By turning his television station NTV into a massive propaganda machine for Yeltsin, Gusinsky—along with his sometimesally, sometimes-nemesis fellow oligarch Boris Berezovsky—played a crucial role in Yeltsin’s 1996 victory over the Communists.²¹

“I cannot say I am an absolutely honest man, an example for everyone,” Gusinsky admitted in an interview with Chrystia Freeland. “Nor can any person who survived in this country before 1985, or who built great things after 1985. We all have things that we would not like to tell our children.”²²

Like Friedman and Gusinsky, Mikhail Khodorkovsky was unable to realize his childhood dream, which in this case was to work in a leading Soviet defense plant, because of his Jewish ancestry. But Khodorkovsky had an important advantage over his fellow Jewish oligarchs: He had served in the Communist Youth League and from the outset enjoyed the patronage of senior Soviet-era government officials. Thus in the late 1980s, when Khodorkovsky ventured into private business with the establishment of Menatep Bank, he had the support and protection of the Communist regime. After 1990, Khodorkovsky served as economic adviser to the prime minister of the Russian Federation—a role he apparently had no trouble playing while continuing to run Menatep.

Just as Gusinsky made his initial fortune managing Moscow’s money, Khodorkovsky made untold millions while managing the federal government’s finances. In the early nineties, Khodorkovsky’s Menatep went on a “mass privatization shopping spree” in which it bought, at bargain basement prices, everything from a titanium-magnesium plant to glass and textile factories to food-processing companies.²³ In 1996, Khodorkovsky emerged from the loans-for-shares deal as the powerful chairman of Yukos, Russia’s second-largest oil company, with an estimated $170 billion in oil reserves. In addition to Yukos, Khodorkovsky today controls massive mineral and timber interests as well as the Moscow Times, St. Petersburg Times, and other newspaper interests. In 2002, Forbes named him the richest man in Russia.²⁴

Many, to put it mildly, have a low opinion of Khodorkovsky. He is famous for his ruthlessness. In one company he took over, he installed surveillance cameras in every office to monitor his new employees. He decided that over a third of them weren’t working hard enough, so he fired them.²⁵ After his Menatep Bank collapsed in 1998, Khodorkovsky transferred its good assets to a different entity, leaving its creditors empty-handed. A court-appointed manager was unable to trace the transactions, as a truck carrying most of Menatep Bank’s records mysteriously drove off a bridge into the Dybna River.²⁶

PROBABLY THE MOST notorious of Russia’s oligarchs is Boris Berezovsky. “Slight and balding, with lovingly manicured hands and a fondness for larding his conversation with Latin phrases,” Berezovsky, who is older than most of the other oligarchs, holds a Ph.D. in applied mathematics and spent twenty-five years at the Russian Academy of Sciences.²⁷

With the introduction of markets, Berezovsky abandoned science for car sales. Starting in 1989, Berezovsky parlayed his Logovaz car dealership into an immensely lucrative and sophisticated international financial structure, complete with reputable Swiss partners, shell companies in Panama and Dublin, and tax havens in Cyprus and the Cayman Islands.²⁸

At the same time, without violating the law, Berezovsky played to a naïve Russian public, which almost overnight had become an easy target for get rich quick schemes. In the convulsive first stages of Russian capitalism, when wealth was suddenly permissible and a few of their compatriots became very visible millionaires, ordinary Russians were in a panic not to miss out on the rags-to-riches moment. Riches seemed to be there for the taking, if one only had the courage to make investments. In this atmosphere, schemes of all sorts reached dizzying heights.

In 1993 the Russian public poured $50 million into Berezovsky’s Avva Fund, which, according to a massive advertising campaign, would be used to develop a fabulous new Russian “people’s car” through a joint venture with General Motors (GM). Unfortunately for Avva’s investors, GM, alarmed by Russia’s rampant gangsterism and corruption, backed out, rendering Avva securities almost instantly worthless.²⁹

Berezovsky quickly became Russia’s iconic nouveau-riche capitalist. Ostentatiously roaring around Moscow in a dark blue bulletproof Mercedes, flanked by bodyguards in Mitsubishi jeeps on either side, Berezovsky sent his two eldest daughters to Cambridge University and married a glamorous young second wife. In 1993, Berezovsky went for the real kill. Brazenly setting out to penetrate Yeltsin’s inner circle, he befriended the ghostwriter of the president’s memoirs, who in turn recommended to Yeltsin that Berezovsky publish the book. Berezovsky did—and (with the help of some Finnish companies) “did the Kremlin proud. The book was rolling off the presses within a few weeks and the color was brighter and the pages were thicker than the washed-out onionskin text that Russian publishers produced.” Moreover, Berezovsky published the book not as a business transaction, but as a “free” favor to the president. In return, Yeltsin gave Berezovsky a membership to the President’s Club, whose only members were close friends and family of Yeltsin. Berezovsky, an accomplished networker, used his membership to full advantage and within a matter of months had key connections throughout the Kremlin.³⁰

In 1994, using Gusinsky’s NTV network (which often criticized Yeltsin) as a foil, Berezovsky convinced the Kremlin to privatize ORT, the state-owned television network, and to give Berezovsky control of it. Shortly afterward, he acquired control of the state oil company Sibneft and Russia’s national airline Aeroflot. In 1997, Forbes named Berezovsky Russia’s wealthiest tycoon.³¹

But that was during the Yeltsin era. Under President Vladimir Putin, it was Berezovsky’s (also Jewish) protégé and former partner Roman Abramovich who, as the Washington Post put it in 2001, became “the man to see in Russia.” An orphan before the age of four, Abramovich has in the last several years orchestrated a takeover of the world’s richest aluminum industry and bought out Berezovsky’s share of the ORT television network. Moreover, on Christmas Eve 2000 the thirty-four-year-old Abramovich was, surreally, elected the new governor of Chukotka, a miserable, poverty-entrenched, below-freezing region in the remotest corner of Russia’s Far East, just across the Bering Strait from Alaska. Abramovich’s campaign strategy? Spending tens of millions from his own pocket airlifting food, boots, and parkas for the locals and flying thousands of them to sunny beach vacations. When asked about his motives, Abramovich says that he has grown tired of simply making money. “I do it for pleasure,” he explains.³²

WHY WERE SO many of the oligarchs Jewish? How did it happen that, even as Russia sank from Soviet superpower to post-perestroika immiseration, members of a minuscule “outsider” ethnic minority came to wield almost unimaginable economic and political power?

Certainly the answer is not that Boris Yeltsin had a special fondness for Jewish interests. Yeltsin agreed to loans-for-shares because he desperately needed capital, both to salvage a collapsing economy and to finance his reelection. And the soon-to-be oligarchs had capital. By the early nineties they had already accumulated far more wealth than anyone else in the country.

For one reason or another, for better or worse, in Russia’s nearly anarchic transition to a market economy, Jews rose to the top. Long before most Russians—including the country’s leaders—had any real understanding of how markets work, the six Jewish oligarchs mastered the game. These men started with next to nothing; most were actually disadvantaged by their Jewish ancestry. They were not particularly sophisticated. They may have been ruthless, but they were plainly smart, unsurpassed entrepreneurs who built their empires from scratch.

The Seventh Oligarch

The contrasting story of Vladimir Potanin, the non-Jewish oligarch, provides a stark counterpoint. Unlike the others, Potanin essentially inherited his wealth from the former Soviet Union. The well-connected son of a senior Soviet foreign trade official, Potanin was privileged all his life. During the Communist era he traveled widely with his father, to places like New Zealand and Turkey. He never had to barter theater tickets or hawk blue jeans. Instead, he attended Moscow’s Institute of International Relations, the prestigious training ground for Soviet diplomats, then began his climb up the bureaucratic power structure. In 1992, Potanin started a bank. It was not especially successful. Yet when Russia’s state-owned International Bank of Economic Cooperation collapsed, and the panicking Kremlin needed someone to take over its accounts, it was perfectly natural that they chose the golden boy Potanin. “He went straight from a promising Soviet career to a $300-million bank,” writes Freeland. “Even in a country where most fortunes were built on the back of government connections, Potanin earned an enduring reputation as the nomenklatura’s favorite capitalist, the tycoon who had been appointed by the old elites, rather than making his own way.”³³

In 1994 it was Potanin who conceived of loans-for-shares and, after getting the other oligarchs on board, it was Potanin who sold the scheme to the Kremlin. He was, after all, one of them: an archetypical Russian with a pug nose, pink skin, and sandy hair, and just the kind of “home-bred tycoon” Yeltsin’s pro-market reformers had hoped the market revolution would create. With the cash-hungry state behind them, Potanin and the other oligarchs wrested control of Russia’s crown-jewel natural resource companies away from their highly corrupt “red” directors. Potanin grabbed Norilsk Nickel, Russia’s metals colossus, Khodorkovsky took Yukos, Berezovsky and Abramovich got Sibneft, and so on.³⁴

All the oligarchs were ruthless. In this respect, however, the oligarchs essentially personified Russia’s agonizing, lawless transition to a market economy. The capitalism that emerged in Russia beginning in the 1990s was not the Pareto-optimal paradise of efficient, voluntary market exchange that Western economists envisioned. Instead, in the words of John Lloyd, Russian capitalism was “a deformed and ugly beast.”³⁵ Nevertheless, the fact remains that Russian capitalism was made and is still dominated by a tiny handful of immensely successful entrepreneurs, most of them Jewish.

Retaliation, Reform, and Mass Resentment

For at least two of the oligarchs, life has gone downhill since former KGB official Vladimir Putin came to power. A week before being elected president on March 26, 2000, Putin warned Russia’s billionaires that their days of running the country were over: “[T]hose people who fuse … power and capital—there will be no oligarchs of this kind as a class.”³⁶ So far, Putin’s main targets have been Vladimir Gusinsky and Boris Berezovsky, both media moguls who dared to cover the president unfavorably. Indeed, many Russia watchers are concerned that free speech in Russia is under serious threat. According to The Economist, for example, “Gusinsky, owner of NTV, the only independent national television station, was jailed on June 13th on a spurious-sounding allegation of fraud. Before that, the press minister had called him a ‘bacterium,’ anti-Semitic remarks were broadcast about him on state-controlled television and masked police had raided his headquarters.”³⁷ Gusinsky is now in exile.

Also in exile is Gusinsky’s former rival Boris Berezovsky, who is lashing back at Putin from his new home in London. According to one source, Berezovsky is planning to release a documentary “proving” that Russian security forces were behind a series of bombings that in 1999 killed over three hundred people in Moscow and other major Russian cities. Berezovsky claims that the bombings were conducted to incite hatred against Chechens in a calculated effort to rally public support for Putin.³⁸

The consensus in Moscow, however, is that the popular Putin has nothing to worry about. “The rating of [Russia’s security police] is way higher than Berezovsky’s own rating, not to mention the president,” explains one Moscow journalist. Stanislav Kucher, another Moscow journalist, is even less sympathetic. In his view Berezovsky is simply rankled “that he no longer can influence the development of this country.” “He was absolutely sure that had he not been Jewish he would make president. And of course, he would say that with bitter regret.”³⁹

Meanwhile, the oligarchs remaining in Russia have, at least in appearance, shaped up under the Putin presidency. In a recent interview with Matthew Brzezinski, Vladimir Potanin waxes eloquent: “We are coming to the end of the first phase of Russia’s capitalist transition: the accumulation of capital.” Now, in the “second stage,” we must make our holdings “profitable, restructure them into viable concerns, change the system.” “What was okay two years ago is no longer acceptable.”⁴⁰ Similarly, Mikhail Friedman “applauds” the government’s recent economic and rule-of-law reforms, “but wishes they could be pushed through more quickly.” And Mikhail Khodorkovsky in a recent interview with the Los Angeles Times: “We used to think that all that mattered was to have good production figures. We considered other matters less important: the environment, investor relations, public affairs, corporate governance as a whole. And suddenly it hit us over the head, hard, and we realized we were wrong.”⁴¹

The Jewish oligarchs in particular are keenly aware that they are increasingly at President Putin’s mercy. According to the Union of Councils for Soviet Jews, Putin “is gaining popularity by what is seen as a crackdown on widely hated, mostly Jewish, tycoons.”⁴² The most recent shakeup occurred in January 2002, when Roman Abramovich, an oligarch formerly favored by Putin, was replaced by Viktor Geraschenko as Russia’s “top business leader.” According to journalist Andrei Grigoriev, Putin’s move “did not make Abramovich any poorer but his weight did go down.” As recently reported by the National Conference on Soviet Jewry, political anti-Semitism appears to be on the rise in Russia, with prominent politicians, particularly those associated with the Communist Party, employing anti-Semitic rhetoric in parliamentary sessions, on television, in newspapers, and at mass rallies in order to further their own political ambitions.⁴³

As is sadly so often the case with market-dominant minorities, struggling ordinary Russian Jews, with no political connections or billion-dollar fortunes, bear the brunt of Russian anti-Semitism. According to the chairman of the Glasnost Public Foundation in Moscow, a majority of Russians today believe that “they have been impoverished at the expense of rich Jews.”⁴⁴ (Along with the oligarchs, many of the Yeltsin government’s key market reformers—including former prime minister Sergei Kiriyenko, shock therapy advocate Yegor Gaidar, and the now-despised “privatization tsar” Anatoly Chubais—are also well known to be part Jewish.)⁴⁵ Russian websites today are filled with references to the “zioncrats” and “bloodsucking Yids” who “hijacked the privatization process,” “control the economy,” and are “stealing the wealth of the Russian people.”

The financial collapse in 1998 brought a burst of popular anti-Semitism, including the bombing of synagogues, the beatings of two rabbis, a number of neo-Nazi marches in Moscow, and the desecration of Jewish cemeteries around the country. Russian National Unity, a paramilitary and virulently anti-Semitic extremist group, is thought to have at least 6,000 active members and up to 50,000 nonactive members, spread across twenty-five Russian regions. One of the group’s leaders was recently sentenced to two years in prison for inciting ethnic hatred. At the trial a Russian Orthodox priest testified that according to the Jewish Talmud, Jews “kill children, gather blood” and “use it to make matzah.”⁴⁶ Around the same time, hundreds of posters appeared in the Siberian city of Novosibirsk with the slogan, “Jews are Rubbish!” In the Kuban region of Krasnodar, mailboxes were filled with leaflets saying: “Help save your dear, flourishing Kuban from the damned Jews—Yids! Smash their apartments, set their homes on fire! They have no place on Kuban territory. … Anyone hiding the damned Yids will be marked for destruction the same way. The Yids will be destroyed. Victory will be ours!”⁴⁷

Obviously, Russian anti-Semitism is not caused by economic liberalization or capitalism. As discussed earlier, there was plenty of anti-Semitic sentiment and violence long before 1989, both during the tsarist era and in the former Soviet Union. Nevertheless, the fact remains that the chaotic, post-perestroika transition to markets has generated starkly concentrated and visible Jewish wealth, bringing to the surface tremendous ethnic resentment and hostility among the “indigenous” Russian majority. According to recent polls, most Russians are deeply “ambivalent” about Jews and thus susceptible to manipulation by politicians, particularly during periods of economic downturn and distress. In one independent survey of 1,509 Muscovites, 52 percent opposed Jewish social-political organizations operating in Russia, while 34 percent favored quotas limiting the number of Jews holding leading positions in Russia. “The basic problem is the economic situation,” Adolf Shayevich, Russia’s chief rabbi, said a few years ago. “People have no work and no prospects. Historically, that’s when Russians look for scapegoats.”⁴⁸

Even today, with Putin popular and the economy on the upswing, anti-Semitism shows no sign of waning. On February 28, 2002, the Moscow Times reported that a new political party was formed, calling for a better deal for ethnic Russians and explicitly blaming Jews for stealing the country’s wealth. “Look on the list of Russia’s richest people,” urged Vladimir Miloserdov, head of the party’s executive committee, “and you will see no ethnic Russians among them.” The head of the new party is Gen. Igor Rodionov, who served as defense minister under Yeltsin. His policy platform: The oligarchs “must return what they have looted in Russia and publicly repent to the Russian people for the crimes that Jewish terrorists and extremists have committed.” The new party expects to be registered with the Justice Ministry in May 2002.⁴⁹