As Vladimir Putin strode alone through the vaulted halls of the Grand Kremlin Palace, he seemed dwarfed by the majesty of the presidential inauguration. Solemn, with a slight smile, downcast gaze and light lopsided gait, he was dressed in a dark suit that differed little from the garb of an everyday office worker. He’d been trained to be bland and unremarkable, to blend in anywhere. But on this day, trumpeters dressed in an imperial uniform of white and gold heralded his entrance, while the state officials who thronged the gilded palace rooms applauded his every step down the endless red carpet into the glittering Andreyevsky Hall.
It was May 7 2000, and the kandidat rezident had arrived in the Kremlin. The former KGB officer who only eight months before had been just another faceless bureaucrat was about to take on the mantle of Russian president. The gold that dripped from the walls and the chandeliers was testimony both to the KGB men’s plan for Russia’s imperial revival and to the crooked Mabetex contracts that had restored the Kremlin far beyond its pre-Revolutionary grandeur – and had helped bring Putin to power.
Never before had there been such splendour at a Kremlin inauguration – it was the first time the newly restored palace halls had been opened for a state event – and never before in the history of the country had there been a peaceful handover of power from one president to another. It must have been a bitter pill for Boris Yeltsin to be surrounded by the glitter and gold that proved to be his own undoing. But he stood there bravely and stiffly, battling to contain his emotion as he lauded the country’s hard-won freedom. ‘We can be proud that the handover is being done peacefully, without revolutions or putsches, in a respectful and free way,’ he said. ‘Such a thing is possible only in a free country, a country that has stopped fearing not just others, but also itself … This is possible only in a new Russia, one in which people have learned to live and think freely. We wrote the history of the new Russia from a clean slate … There were a lot of challenging tests, a lot of difficulties. But now we all have something to be proud of. Russia has changed. It’s changed because we took care of her … and strongly defended our main achievement – freedom … We didn’t allow the country to fall into dictatorship.’[1]
Yeltsin’s parting words almost sounded like a warning. But the man picking up the mantle that day was decisive and focused, and when he spoke, he spoke of a restored Russian state in which all of the country’s history – no matter how brutal – was to be honoured and preserved. Though he paid lip service to respecting Russia’s democratic achievements, the central thrust of his speech was as different from Yeltsin’s as night from day: ‘The history of our country has run through the walls of the Kremlin for centuries. We don’t have the right to be “Ivans who don’t remember their birth”. We shouldn’t forget anything. We should know our history as it was, and take lessons from it, and always remember those who created the Russian state and defended its values, who made it a great and powerful state. We will preserve this memory, and this connection through time … and all the best from our history we will hand over to our descendants. We believe in our strength, that we can really transform our country … I can assure you that in my actions I will be led only by the interests of the state … I consider it my holy duty to unite the people of Russia, to collect its people around clear aims and tasks, and remember each day and every minute, that we have one Motherland, one people, and that together we have one common future.’[2]
In the front rows of those who applauded him that day were the Yeltsin Family officials who’d helped bring him to power. First among them was Alexander Voloshin, the deft former economist who’d served as Yeltsin’s chief of staff. Next to him was the gravel-voiced, barrel-chested Mikhail Kasyanov, another Yeltsin holdover who’d climbed through the ranks to head the finance ministry, handling the payments of Russia’s strategic foreign debts, and had been appointed acting prime minister when Yeltsin handed over the reins to Putin on New Year’s Eve. In a signal of the continuity pact Putin had made with Yeltsin’s Family, his first act as president was to reappoint Kasyanov as prime minister, while later in May he reinstated Voloshin as Kremlin chief of staff.
But hidden and unnoticed in the mass of officials who thronged the golden Andreyevsky Hall were the KGB men Putin had brought with him from St Petersburg. In those days, they were seldom seen and rarely heard. But these were the siloviki who, first in union with Yeltsin’s officials, and later on their own, were to flex their muscles and make their presence very well known. Within days of the inauguration they were to send a strong signal that the decade of freedom Yeltsin was so proud of was coming to an end.
Among them were KGB-linked businessmen such as Yury Kovalchuk, the former physicist who’d become the largest shareholder in Bank Rossiya, the St Petersburg bank created by the Communist Party in the twilight of the Soviet Union. There too was Gennady Timchenko, the alleged one-time KGB operative who’d worked closely with Putin to control the city’s oil exports. These men had been hardened in the vicious struggle for cash in the St Petersburg economy, and they were now hungry for the riches Moscow had in store. Also hidden among the faceless crowds were a web of little-known allies with whom Putin had first served in the Leningrad KGB, and who he’d brought in as his deputies on his appointment as FSB chief in July 1998. Few had paid much attention to them.
Among them was Nikolai Patrushev, the gnarled and experienced operative who, according to one former Kremlin official, had fumed at being caught red-handed in the Ryazan apartment-bombing plot. Patrushev had replaced Putin as FSB chief the moment Putin was appointed prime minister, and he would remain in the post for the entirety of Putin’s first two terms in power. He’d served in senior posts of the FSB in Moscow since 1994, long before Putin began his rise. A year older than Putin, he’d served with him in the Leningrad KGB’s counter-intelligence division in the late seventies. When Putin was appointed as Sobchak’s deputy mayor, Patrushev headed the contraband division of St Petersburg’s newly created FSB, just as Putin’s group of former KGB men were beginning to take over the main channel for the city’s contraband goods – the Baltic Sea Fleet and the strategic sea port.
Soon Patrushev was transferred to Moscow, where he rose rapidly to the top of the FSB. A hard-drinking KGB man, he combined a strong capitalist ethic of amassing wealth with an expansive vision for the restoration of Russian empire. ‘He’s quite a simple guy, a Soviet person of the old school. He wants the Soviet Union, only with capitalism. He sees capitalism as a weapon’ to restore Russia’s imperial might, said one person close to him.[4] Another close Putin ally agreed: ‘He’s always had very strong independent views.’[5] Always, Patrushev had been a visionary, an ideologist for the rebuilding of Russian empire. ‘He is a powerful personality. He is the one who really believes in rebuilding the empire. He is the one that got Vladimir Vladimirovich into all these ideas,’ said the person close to him.[6] But while Patrushev was well-versed in the founding texts of Russia’s geopolitical ambition,[7] he was a ruthless and relentless operator who would stop at nothing to get his way. He could not speak without swearing, and if you didn’t swear back, he wouldn’t respect you. ‘He doesn’t understand any other way,’ the person close to him said. ‘He can’t speak or behave any other way. He will come into a meeting and say, “Well, you motherfuckers, what is it you’ve fucked up all over again?”’ The other close Putin ally would only say that Patrushev had always been tough, while Putin had initially been more liberal than him. The person close to Patrushev said that he’d always considered himself cleverer and wilier than Putin: ‘He never considered Putin was his boss.’ Patrushev had waged a vendetta against the rebels in the breakaway Chechen republic – he hated the ‘Chechy’, and anyone who worked with them, with a vengeance.
Also among the little-noticed siloviki applauding Putin’s inauguration in the Andreyevsky Hall was Sergei Ivanov, who’d served as a senior foreign-intelligence operative for the KGB. His urbane manner and fluent English masked a sharp tongue and an at times vicious manner. He too had worked closely with Putin in the Leningrad KGB. They’d operated out of the same dingy room in the Bolshoi Dom KGB headquarters, a monolithic block of granite on Liteyny Prospekt, for two years until Ivanov was promoted and transferred abroad – long before Putin made it to the Red Banner school. Ivanov had served in Finland, and possibly the UK, before being whisked away to serve as chief resident in the Kenyan embassy after a spy who defected to the UK blew his cover.[8] In the nineties, he’d served directly under Primakov as deputy chief of the European desk for the foreign-intelligence service, or SVR, becoming the youngest general since the Soviet collapse. When Putin became FSB chief he appointed Ivanov one of his deputy chiefs together with Patrushev, and after he took over as prime minister, Ivanov became secretary of Russia’s Security Council, a post that became the second most powerful position in the Kremlin. He was to grow in influence during Putin’s regime.
Also hidden in the grey mass of besuited men was Viktor Ivanov, a mustachioed KGB officer of the old school who viewed the world strictly through a Cold War lens. Two years older than Putin, he’d been a Party worker before being recruited by the Leningrad KGB. He’d begun service shortly after Putin, and worked his way up over nearly two decades through the KGB’s human resources department to head the St Petersburg FSB’s contraband division, taking over that important post from Patrushev at the time Ilya Traber’s men were taking over the sea port. According to a former colleague from the FSB contraband division, Ivanov was notorious for never lifting a finger against smuggling: ‘His favourite words were “later” and “not now”.’[9] One intelligence report written by a former senior KGB officer suggested that there might have been a very good reason for Ivanov’s inactivity: he had helped the Tambov group (of which Traber was part) in its efforts to take over the sea port while it was being used to smuggle drugs from Colombia into Western Europe.[10] The report, which was later aired in a London court and drew strong denials from Ivanov, also claimed that Putin had supplied Ivanov with protection all the time he was operating in St Petersburg.
When Putin became FSB chief he immediately brought Ivanov in as his deputy, and when he rose to the presidency he appointed him deputy head of his administration. His job was to keep a close eye on everyone, and according to one person close to him he had ‘a phenomenal memory’, and knew everybody’s idiosyncrasies.[11] Yury Shvets’s report put it far less charitably. The job of human resources, he said, was to collect damaging information on colleagues and use it to destroy their careers: ‘Anywhere Ivanov worked he deliberately set people against each other, thus creating an unfriendly environment in which he could dominate by resolving the conflict generated by him. He is masterful at understanding the balance of forces around him.’[12]
But perhaps the closest to the new president was Igor Sechin. Eight years younger than Putin, he had followed him like a shadow ever since his appointment as deputy mayor. He had served as his secretary, standing like a sentry behind a podium in the anteroom leading to Putin’s office in the Smolny headquarters, a fierce gatekeeper to all. He controlled access to Putin and all the papers Putin saw. Anyone who needed Putin’s signature to establish a business had to deal with Sechin first. When one St Petersburg businessman required Putin’s signature to set up a joint venture with a Dutch company trading coal and oil product, his friends arranged for him to see Putin. After they’d discussed it, Putin told the businessman to go to his secretary, Igor Sechin, saying, ‘He will tell you which documents to bring and I will sign.’ ‘I left the office and went to Sechin without thinking who he was,’ the businessman, Andrei Korchagin, recalled. ‘I was just wondering about how he was a guy, and not a girl like the secretary usually was. We were very dismissive of officials in those days. We began talking about which documents I’d need, and then Sechin suddenly began writing on a piece of paper. He said, “And bring …” showing me he’d written “$10,000” on the piece of paper. This made me very mad. I said, “What! have you lost it completely?!” But he said, “This is how we do business here.” I told him where to go – but that was it: we never registered the business. Back then, it was an absolutely different time. I had no idea who Sechin was. This was how they collected petty bribes.’[13]
Sechin would always act as a barrier in front of his boss, and would organise meetings for those who wanted to see him, a former close Putin ally said. Even if a meeting had already been put in the calendar, Sechin would say it had to be organised through him: ‘This is how he would take control of the connection. And if it would turn out that the person did not follow Sechin’s orders, he would become his enemy, designated for destruction.’[14]
Sechin had long served in the KGB, according to two people close to him, not in military intelligence as is often ascribed to him.[15] He’d been recruited in the late seventies, when he was studying languages at the Leningrad State University, and was asked to file reports on his fellow students, one person close to him said. Sechin’s parents had divorced when he was young, and he had studied hard, driven by a relentless ambition to succeed, to escape the poverty of his childhood in the grim outskirts of Leningrad. ‘He always had a chip on his shoulder. He always had an inferiority complex,’ said a former Kremlin official who knew him well. ‘He came from such a poor region of Leningrad, but where he went to university, in the language department it was filled with the children of diplomats.’[16]
Sechin had always served undercover for the KGB, and his time there was never mentioned in his official biography. Instead it said he’d been sent to work as a translator, first in Mozambique, where his knowledge of Portuguese was in demand as a civil war was raging and the Soviet military was training and equipping a national army. He’d then been sent, again officially as a translator, to Angola, where the Soviet military, still playing out a Cold War great game in Africa, was advising and equipping rebels in another civil war. When he returned, he took a post at the Leningrad State University, where he’d met and worked with Putin supervising foreign ties, and later in the city council, overseeing its work with foreign twin towns, but remaining an undercover operative for the KGB all along. He’d kept close to Putin ever since, always acting as his obsequious servant, carrying his bags whenever he travelled, following in his footsteps wherever he went. He’d been his deputy in the Kremlin foreign property department, working in the same small office in the former Central Committee headquarters, and then moving into higher posts in the administration as Putin’s career soared. When Putin became president, he made Sechin deputy chief of his administration. But behind his subservient manner lay a relentless ambition for control and an endless capacity for plots. And, said two people close to him, he hated and resented his master.
While Sechin sought to quietly and unnoticeably put thoughts into Putin’s mind, Putin regarded him as a mere shadow, no more than a servant of his regime. ‘He always saw him as the guy who carried his bags,’ said the former Kremlin official close to both men.[17] In Putin’s head, a petty insistence on rank and position always reigned. At the beginning of their Kremlin careers in the mid-nineties, Kremlin property chief Pavel Borodin provided both men with apartments in the centre of Moscow, but a problem arose when Putin realised that Sechin’s was bigger than his. Sechin invited Putin to his new apartment soon after they arrived, and showed him around, demonstrating the views across Moscow. Putin asked how large the flat was, and after checking the documents Sechin told him: 317 square metres. He immediately started. ‘I have only 286,’ he said. He congratulated Sechin, but then stepped away, as if Sechin had stolen something from him, or cynically betrayed him. ‘Putin has a problem with envy,’ the official familiar with the incident said.[18] ‘You need to know him well to understand what this means. Igor told me that at this moment he understood that everything was up, that when Putin said “Congratulations,” actually he wanted to shoot him, to shoot him with a controlled shot to the head. He said he couldn’t speak with him for weeks after. It was such a banal, tiny matter … But Putin has such complexes. It is always better when you see him to tell him how badly everything is going. Igor learned to do this very fast.’[19]
It was a telling indication of Putin’s mindset, of how quick he would be to take offence at perceived slights in the years to come. Like Sechin, he too had climbed to the top from a background of poverty, from the back streets of Leningrad, where he’d had to fight to win respect. A chip on his shoulder, the mark of an inferiority complex, was always there.
The last of the close-knit group of former Leningrad KGB men Putin brought with him to the Kremlin was Viktor Cherkesov, who had ruled the city’s FSB ever since Putin had been appointed deputy mayor. Two years older than Putin, he’d held top posts in the Leningrad KGB for nearly eight years, and had been Putin’s senior before Putin was sent to study in Moscow. In the final years of the Soviet regime, Cherkesov had headed one of the KGB’s most vicious divisions, investigating the activities of dissidents. But after the regime collapsed he embraced the new shadow capitalism that ruled St Petersburg, acting as a vital link between the mayor’s office, the security services and organised crime. He’d been a key player behind the Tambov group’s takeover of the Baltic Sea Fleet and the sea port,[20] and Putin had always treated him with the utmost respect. ‘He was a senior figure when Putin was no one,’ a person close to both men said. ‘He is from the closest circle. He is the elite.’[21] When Putin was appointed prime minister, he’d intended Cherkesov to replace him as FSB chief, but Patrushev had made sure he was appointed in his place. Yumashev had been told he shouldn’t grant Putin his every wish, that there had to be some counterbalances. Cherkesov was appointed deputy chief instead.
*
For the first few years of Putin’s presidency, these Leningrad KGB men, the siloviki, shared an uneasy power with the holdovers from the Yeltsin regime. They watched and learned as Voloshin, the wily Kremlin chief of staff who Putin retained in the role, helped ensure that Putin inherited ‘a well-oiled machine’. Voloshin was the main Kremlin representative of the Family, a liberal in his economic views, but a statist in his political ones. He was among those who’d helped engineer the transfer of power to the KGB. An economist, he’d graduated from the Academy of Foreign Trade – which had always been associated with the First Chief Directorate, the foreign-intelligence division of the KGB[22] – and then served as the deputy head of its Centre for Competitive Research in the perestroika years. Putin later sent Voloshin, who spoke fluent English, as a special envoy to discuss military matters with top generals in the US. In the beginning he proved a vital ally for the siloviki as he assisted Putin in pushing out political enemies.
Voloshin had also worked in tandem with the other leading figure who remained from the Yeltsin era, Mikhail Kasyanov, who Putin had reappointed as his prime minister. Having been in charge of foreign debt in his previous post as first deputy finance minister, Kasyanov was steeped in the murky debt deals that were the core of the shadow financing of the regime. Although he was a pro-Western economic liberal, he was seen as a safe pair of hands. But he was in fact the personification of the Yeltsin years, a deep-voiced, avuncular type with a reputation – strongly denied – for greasing the wheels behind the scenes that had earned him the nickname ‘Misha 2 Per Cent’.
In line with the relatively pro-market pitch he’d used to win the trust of the Yeltsin Family and then in his manifesto as president, Putin announced a series of liberal reforms that won him plaudits with economists across the globe and convinced investors of his market credentials. He introduced one of the world’s most competitive income-tax rates, a flat 13 per cent that at one swoop eradicated many of the problems with non-payment that had plagued the Yeltsin regime. He embarked on land reforms that allowed private property to be bought and sold, lifting another major brake on investment. As his presidential economic adviser, he’d hired Andrei Illarionov, widely regarded as one of the country’s most principled liberal economists. Amid the pro-market moves, oil prices – on which so much of the Russian budget depended – were finally starting to rise. And, buoyed by the surging inflows, Putin’s government began paying down the vast debts on funds the Yeltsin administration had borrowed from the IMF. The instability and chaos of the Yeltsin years seemed, finally, to be coming to an end.
The world was also cheered by Putin’s attempts to seek rapprochement with the West. One of his first acts as president was to close down the Lourdes listening station in Cuba, that Yegor Gaidar had fought so hard to maintain. He sought to build a close relationship with US president George W. Bush, and was the first world leader to call and express his condolences after the September 11 2001 attacks. He even defied the advice of his own defence minister – by that time Sergei Ivanov – and allowed the US access to military bases in Central Asia from which it could launch attacks in neighbouring Afghanistan. Putin’s KGB past was pushed into the background, as George W. Bush said that when he looked deep into his eyes he got a ‘sense of his soul’.
But all of this was short-lived. The early days of Putin’s presidency now seem an era of wishful thinking and great naïvety. According to Pugachev, the attempts at rapprochement with the West were made not out of any sense of generosity, but because Putin expected something in return.[23] So when in June 2002 George W. Bush, after months of being courted by Putin, announced that the United States was unilaterally withdrawing from the Anti-Ballistic Missile Treaty, a key arms agreement dating from the Cold War, Putin and his advisers felt betrayed. The withdrawal from the treaty would allow the US to begin testing a missile-defence system that it proposed to install in former Warsaw Pact states. The US claimed that it was intended as a defence against Iranian missiles, but Putin’s administration saw it as directly aimed at Russia. ‘It’s clear the missile-defence shield can’t be against any other country apart from Russia,’ Voloshin told reporters. American officials, he said, had ‘Cold War cockroaches in their head’.[24] At the same time, NATO was continuing a relentless march east. Assurances given by a string of Western leaders to Gorbachev that there would be no eastern expansion were being ridden over roughshod. The final year of Yeltsin’s rule had seen NATO swallow Poland, Hungary and the Czech Republic. In November 2000, NATO invited seven more Central and East European countries to join.[25] It seemed to the Kremlin that the US was rubbing the West’s dominance in their faces.
From the beginning, behind the appearance of liberal economics there was a strong undertow aimed at strengthening the control of the state. Putin’s early reforms were in fact intended to establish an Augusto Pinochet-type rule, whereby economic reform would be pushed through with the ‘totalitarian force’ of a strong state. Almost as soon as he was elected, Pyotr Aven, the bespectacled economist who’d trained first with Gaidar and then at a KGB-linked institute of economics in Austria, had called on Putin to rule the country as Pinochet had ruled Chile.[26] Aven was the former minister for foreign economic trade who’d protected Putin and signed off on the St Petersburg oil-for-food schemes, and who’d hired the international investigations firm Kroll to track down the missing Party gold, without giving it access to the information Russian prosecutors had. By this time, he had joined forces with Mikhail Fridman, one of the young Komsomol cultivated by the KGB to become the country’s first entrepreneurs. Aven was president of Fridman’s Alfa Bank, which formed the core of one of Russia’s biggest financial industrial conglomerates, with holdings in oil and telecoms. At the centre of the Alfa Group’s financial network sat the director of one of its main holding companies in Gibraltar, Franz Wolf, the son of Markus Wolf, the Stasi’s ruthless former intelligence chief.[27] To all appearances, Fridman and Aven were honouring and preserving KGB connections. Putin, Aven was clearly hinting, was now in a position to complete Russia’s market transition in the way Andropov had intended, before the process spiralled out of control.
The signs that Putin was seeking to carve out a different type of power were there from the start. Optimists hoped at first that he was carrying out a tightrope act, seeking to balance the relatively liberal, relatively pro-Western Yeltsin Family flank of his regime with the St Petersburg security men. But the influence of the KGB men began to far outweigh all else. Their world view was steeped in the logic of the Cold War, and gradually that came to define and mould Putin too. Seeking to restore Russia’s might, they viewed the US as eternally seeking the break-up of their country and the weakening of its power. For them, the economy was to be harnessed as a weapon first to restore the power of the Russian state – and themselves as leaders of the KGB – and then against the West. Putin had, to some degree, retained some of the influence of the liberal Sobchak. But eventually, said Pugachev, ‘the inner circle made him. They changed him into someone else. He got disappointed in the US and then he just wanted to get rich. It was the inner circle who pushed him to restore the state.’[28]
The FSB chief Patrushev, in particular, had sought to tie Putin to the KGB security clan and its Cold War views. He had been more senior than Putin within the FSB, holding top posts in the Moscow security services for most of the nineties, and when Putin was elevated first to FSB director and then to the presidency, he was sceptical and believed he could manipulate him. ‘He was always the most decisive. Putin was nothing compared to him,’ said a Kremlin insider.[29] Patrushev wanted to bind Putin to the presidency so he would not ever be able to step away. He’d begun to do so from the very beginning of Putin’s run for the presidency. with the apartment bombings that led to the Chechen war. But for the first year, the Yeltsin Family seemed oblivious to this strand of Putin’s background – or, believing that their own position had been secured, they did not want to know.
All the while, Pugachev moved in the shadows, watching over his protégé like a hawk, trying to balance the influence of the opposing forces – the Yeltsin Family and the security men – over the president. He attempted to shield Putin from attempts to bribe him, he said, instead paying for everything he needed himself. In Putin’s first year in office, Pugachev said that he spent $50 million on meeting the Putin family’s every need, down to buying the cutlery they used in their home. He bought apartments for prosecutors in order to make sure they were under the president’s – and his – control. He insisted that this was essential to make sure the president and his prosecutors remained uncorrupted: ‘There were always people proposing he take money for this, or for that. Mostly it was done through Yury Kovalchuk,’ he said,[30] referring to the St Petersburg ally who’d taken over Bank Rossiya, the main cash pot for Putin’s St Petersburg allies. Pugachev claimed that he was trying to bring an end to the era when the oligarchs of the Yeltsin years believed they controlled the Kremlin by giving ‘donations’ to Kremlin officials – not realising, perhaps, that essentially he was doing exactly the same.
‘I was just trying to make sure this didn’t happen. The rules had to have changed,’ he said.
*
When Putin took over the presidency, the might of the Yeltsin-era oligarchs was still strong. The Moscow businessmen who’d been propelled through the first market experiments of the perestroika era with the support of the KGB had by then long broken free from their former masters to emerge at the top of Russian power. They’d taken over a considerable swathe of the country’s economy when they took advantage of Yeltsin’s vulnerability on the eve of the 1996 elections and persuaded him to hand over the crown jewels of the nation’s industry. The loans-for-shares auctions had consolidated nearly 50 per cent of Russia’s wealth in the hands of seven businessmen, while Yeltsin was left ever more dependent and weak. He’d depended, in part, on funds from the oligarchs to secure his re-election in 1996, and they’d grown used to a role where they not only supported but dictated some of the rules to the regime.
An estimated $20 billion in cash had flooded into bank accounts in the West every year since 1994, while the Yeltsin government coffers had been bled dry.[31] The funds that oligarchs like Khodorkovsky and Berezovsky had stowed abroad had weakened the Russian state to such a degree that Putin’s KGB men argued the country was on the brink of collapse. In the nineties, wage arrears had mounted, while paying taxes was almost universally avoided. Russia had fallen deep in debt to Western institutions such as the IMF and the World Bank, and the $40 billion debt default, more than a third of which was to foreign creditors, had tarnished the country’s finances even more. In the KGB men’s view, the political freedoms Yeltsin had granted to the regions had brought the country even closer to the brink. Amidst the political tumult of Yeltsin’s final year, some regional governors had refused to transfer part of their tax take to the federal government. ‘We saw how the country was disintegrating,’ said Sergei Bogdanchikov, a close Putin ally who served as head of the one remaining state oil company, Rosneft, and had also been close to Primakov.[32] ‘What Putin took over was no more than fragments of the state. Things had gone so far that some governors were talking about introducing their own currency … If Putin had not come and another two or three years had passed we would not have had the Russian Federation. There would have been separate states like the Balkans. The collapse was absolutely clear to me.’[33]
The KGB men had long been looking at the situation intently. Vladimir Yakunin, the bluff former senior KGB officer who’d served undercover at the United Nations in New York and then taken over Bank Rossiya on his return to Leningrad, had prepared a study on the ownership of the Russian economy, which found that in 1998–99 almost 50 per cent of the nation’s gross domestic product was produced by companies owned by just eight families. ‘If things stayed that way then they would soon control more than 50 per cent,’ says Yakunin now, nearly twenty years later. ‘All the profits were going into private pockets. No taxes were paid. It was looting, pure and simple. Without greater state involvement, it was clear to me it was a path to nowhere.’[34] Yakunin, who’d been close to Putin since they had shared the Ozero dacha compound, said he’d handed the report with his comments to Putin soon after he took the presidency.
But for Putin’s security men, the Yeltsin-era oligarchs’ sending of cash to the West provided a useful argument for shoring up their own power. They could claim that the dominance of the oligarchs was a threat to national security, though it was mostly a threat to their own positions. They saw themselves as the anointed guardians of Russia’s restoration as an imperial power, and believed that the resurgence of the state and their own fates were inextricably – and conveniently – linked.
Soon after Putin’s inauguration, Yakunin recalled, Zbigniew Brzezinski, the Cold War-era US national security adviser, had scoffed when discussing the cash held in overseas accounts by the Russian elite. If all that money was in accounts in the West, he said, then whose elite was it? Russia’s, or the West’s?[35] Brzezinski’s comments had scalded the KGB men’s ears. It was all the more rankling to hear them from a Cold War warrior like him, who they regarded as one of the architects of the West’s efforts to dismantle the Soviet regime.
None of the oligarchs’ arrangements had seemed more odious to the KGB men than the billions that ran through Valmet, the offshore fund co-owned by Khodorkovsky’s adviser Christian Michel. With branches in London, Geneva and the Isle of Man, it managed the foreign bank accounts of Khodorkovsky’s Menatep Group, as well as the Swiss oil trader Runicom, which exported oil from Sibneft, the Russian oil major belonging to Boris Berezovsky and Roman Abramovich. Khodorkovsky and Berezovsky were two of the most independent oligarchs, and in many ways Valmet had come to represent the new post-Cold War order, in which the US reigned supreme and Russian money from the by-then independent oligarchs fled to Western bank accounts. This status was underlined when one of the oldest and most venerable banks in the US, Riggs National Bank of Washington, bought a 51 per cent stake in Valmet. The bank, which for decades had held the accounts of US embassies across the globe, was seeking to expand into Eastern Europe and Russia, and Valmet was its vehicle for doing so. The symbolism of the West’s Cold War victory ran deep. Riggs’s chief of international banking was a former US ambassador to NATO, Alton G. Keel, who saw his mission as helping ‘foster private enterprise in previously hostile climates’.[36] Christian Michel, meanwhile, an avowed libertarian, was convinced that Riggs Valmet’s operations were contributing to an effort to free Russian entrepreneurs from the weighty hand of the Russian state. And when Khodorkovsky’s Menatep took a stake in Riggs Valmet too, Michel believed that the investment represented ‘a wonderful symbol of the new world order that President Bush senior was so proud of … The oldest US bank and an upcoming Russian bank sharing in the capital of Valmet. I thought it was a coup.’[37]
But in the eyes of the St Petersburg KGB men and the generals who backed them, the Riggs–Menatep tie-up was a symbol of the Yeltsin era: a Western-backed gangster capitalism in which oligarchs like Khodorkovsky had been able to dictate their will to power. They viewed Anatoly Chubais, the architect of Russia’s privatisation programme, in particular as a stooge of the West.
In the Cold War mindset of the KGB men, for whom almost every action was part of a zero-sum game, the American economists who flocked to Russia to advise Chubais must have been agents of the CIA, bent on destroying what remained of Russian industry as, with their assistance, it passed into private hands, while the defence industry was dismantled piece by piece. The KGB had sought to retain control of industrial cash flows, but under Chubais’ watch the nation’s enterprises had been broken up and transferred to independent hands. ‘The US sent senior CIA people to Russia to help to negotiate the privatisation process,’ said one close Putin associate who, more than twenty years after Chubais’ privatisation programme began, was still livid about it. ‘They took advantage of this process and made money out of it. They had no right to make money in this privatisation.’[38]
For all his declarations about backing Russia’s further transition to a market economy, Putin had in fact made his feelings about the oligarchs clear from the start of his election campaign. The first hint came at the end of February, when he answered a question from a campaign worker about when he was going to ‘waste’ the ‘leeches’ – meaning the oligarchs – that had attached themselves to power. He replied that his regime needed to do more than ‘just destroy them’: ‘It is extremely important to create equal conditions for all so no one can fasten onto power and use these advantages for themselves … Not a single clan, not a single oligarch … all should be equally distanced from power.’[39] The next warning came a week before the election, when he told a Moscow radio station he wanted to eliminate the oligarchs: ‘Such a class of oligarchs will cease to exist … Unless we ensure equal conditions for all, we won’t be able to pull the country out of its current state.’[40]
Such statements, of course, were cheered by a population tired of the excesses of the Yeltsin years and fed a daily diet of corruption stories by a relatively free media that was being used by its independent tycoon owners as a means of battering their rivals. Putin was echoing the line first drawn by Primakov when he called for space to be freed in the country’s jails for businessmen and corrupt officials.
But while Primakov’s statement had sent a chill through the Yeltsin Family, when Putin made such comments, they seemed oblivious. He was their agent in the Kremlin, and they felt sure he would never touch them. ‘The inner circle and the oligarchs thought he was a temporary figure, and they really thought they could take him under control,’ said one person close to Putin. Ahead of the presidential election, one oligarch had apparently gone to see Putin in the White House, the seat of the Russian government where he still kept his office, and told him in no uncertain terms that he should know he would never be elected without their support, and that he should therefore understand how to behave. Putin barely batted an eyelid, and merely replied, ‘We’ll see.’ ‘He didn’t throw anyone out of his office. But of course he was playing with them. They absolutely underestimated him.’[41]
Boris Berezovsky was probably the oligarch who went to see Putin. At the time he seemed to be the only one who was beginning to wonder if they’d made a fatal mistake. After completing his effort to destroy the Primakov–Luzhkov tandem, he’d been holidaying on Anguilla with a new girlfriend for most of the presidential election campaign. When he arrived back, he’d clearly been distressed by the changes he saw. ‘He came back from his holiday and something happened he didn’t like,’ said one person close to him. ‘He’d gone to see Putin to agree on who would be president in 2004. He proposed Putin would only be president for four years, while he, Berezovsky, would work on creating an opposition party. He wanted there to be a real democracy.’[42] But if this conversation took place, it evidently did not go well. Days before Putin’s inauguration, Berezovsky’s Kommersant newspaper raised the alarm with an article leaking what it said were plans to merge the Kremlin with the FSB, with the aim of muzzling opposition parties, all critics and the free press. Although such a merger never formally occurred, the plans the article described seem ominously prescient now. Putin’s rise to power did of course amount to the takeover by the KGB of the Kremlin. The two entities really were to be fused. It was as if Berezovsky had suddenly realised the depth of his mistake. ‘The new president, if he really wants to ensure order and stability, does not need a self-regulating political system,’ the alleged Kremlin blueprint read. ‘Instead he needs a political structure in his administration that can clearly control the political and social processes in the Russian Federation. The intellectual, personnel and professional potential of the FSB should be brought in to work on controlling the political process.’ The FSB would be used for damage control when information surfaced that wasn’t in the interests of the president or his inner circle.[43]
The Kremlin denied that any such proposals were under discussion. But just four days after Putin’s inauguration, phase one of the plan seemed to be put into play. It was clearly aimed at bringing the media to heel. Masked police commandos with automatic weapons had swarmed through the offices of Vladimir Gusinsky, the tycoon who owned the Media Most empire, which included the television channel NTV, Putin’s most vocal critic.[44] NTV was Russia’s second most popular channel, and Gusinsky had never been afraid to use it for political ends, deploying it in support of Luzhkov’s Fatherland bloc in the parliamentary elections. The channel had also been a strident voice of independence, probing Putin’s Chechen war. On the eve of the presidential election it aired a prime-time discussion on the suspicious incident in Ryazan, and openly questioned whether the FSB was behind the apartment bombings. Its weekly satirical show Kukly, or ‘Puppets’, was a constant thorn in Putin’s side. On more than one occasion it wryly portrayed him as an ungainly dwarf from an E.T.A. Hoffmann fairy tale named Tsaches, who inherited a ready-made kingdom of great riches through no effort of his own.
The raid on Gusinsky was not the only powerful signal from the Kremlin’s new KGB masters in the first few days of Putin’s rule. Ten days after his inauguration, Putin unveiled sweeping new plans to rein in the powers of Russia’s regional governors – measures clearly intended to ensure that the elected governors would never again unite against the Kremlin as they had on behalf of Luzhkov and Primakov. The proposed legislation would take away the governors’ seats in the Federation Council, the upper chamber of parliament where they’d dug in for so long to block the removal of Skuratov as prosecutor general, essentially becoming an independent political force.[45] The removal of the governors’ seats would take away their immunity from prosecution, while the proposed measures would also allow the president to dismiss any regional governor into whom a criminal investigation was opened, a move clearly aimed at making sure they never again departed from the Kremlin line. As a further element of Kremlin control Putin also proposed seven Kremlin-appointed plenipotentiaries – sort of super-governors – who would oversee seven swathes of territory. Five generals from the army and the FSB, and two other Kremlin loyalists, were promptly anointed to the posts.
To Berezovsky, this legislation represented a dangerous dismantling of the democratic achievements of the Yeltsin era. On May 31 he wrote an open letter to Putin protesting that the proposals were a ‘threat to Russia’s territorial integrity and democracy’.[46] The letter made the front page of almost all of Moscow’s newspapers, while the Berezovsky-controlled TV channel ORT gave it first billing on the evening news. One of his friends, a business tycoon who’d always been close to the security men, in particular to Primakov, warned him he’d better pipe down: ‘I said, “That’s enough, Borya. What are you doing? Your guy became president. What more do you want?”’ But Berezovsky had answered, ‘He’s a dictator.’ ‘He saw that he was a dictator before everyone.’[47]
But back then Berezovsky was the lone canary in the coal mine, warning about the demise of democracy. Officials close to the Yeltsin Family who were running the Kremlin, namely the chief of staff Alexander Voloshin and his baby-faced deputy Vladislav Surkov, had been among the chief architects of the project to bring the regional governors to heel. Behind the scenes, they’d also thrown their backing behind plans to rein in the media. It was as if they were taking revenge on the forces that had nearly had them jailed, and had caused them so much angst, just twelve months before. Yumashev insisted that when Putin raised the matter with him, he’d told him that any attack on NTV went against the grain of freedom of speech. But neither he nor Voloshin did anything to stop what was to become a campaign to bring the TV channels under the control of the state, while Voloshin actively participated in it. ‘Putin told me that Yeltsin will be tainted in the history books,’ Yumashev recalled.[48] ‘He said all the books will tell of the Family, and it will be one lie after the other because of NTV. Putin said, “Why should I put up with this? Why should we allow them to discredit the regime? Why should I put up with this if they are going to lie every day?” I told him freedom of speech was the most important institution of power. We need to remember this. But he said this should never be tolerated when the regime is weak. It can be tolerated when the regime is strong, but when it is weak it can never be stomached. And then he acted as he considered necessary.’
The way Putin steered the conversation was a typical KGB manipulation: he was stirring up the Yeltsin Family’s visceral antipathy towards NTV after they’d been subjected to its unforgiving spotlight over the corruption scandals that had plagued and humiliated them the previous year, eventually forcing them into the hasty handover of power. He exploited their fears about how this would impact their legacy to manipulate them into giving their backing for an attack on the channel. ‘He considered this was a TV company that was involved not in informing people but in lobbying for the interests of its owner,’ said Yumashev. ‘He said, “They’ve been caught. They took a loan from the state.” He said, “If there was not this loan, I wouldn’t have touched them. But they’ve been compromised, and therefore we need to use this.”’[49]
The raid on Gusinsky’s Media Most was the beginning of an all-out campaign by Putin’s Kremlin, Voloshin and the officials of the Yeltsin Family included, against many of the oligarchs of the Yeltsin era. It was the launch of Putin’s efforts to eradicate challenges to his power. All that was needed was for a target to be compromised in some way – and now that Putin’s men had taken over the apparatus of law enforcement, it was not hard to find something to latch on to after the hurly-burly transition of the Yeltsin years.
What followed that summer was a well-planned series of coordinated raids aimed at scaring the tycoons out of politics that were carried out with KGB precision. First, less than a month after the raid on Media Most, Gusinsky was jailed. Though he was held for just three nights in Moscow’s notorious Butyrka prison, charged with embezzling $10 million from the state, for the oligarchs who had grown used to their near-untouchable status during Yeltsin’s rule, the unthinkable had happened. Gusinsky, a garrulous, larger-than-life figure, had always been able to use his media to criticise the authorities and get away with it. The tycoons united to fire off a joint letter in protest at Gusinsky’s arrest, calling it ‘an act of vengeance … against a political opponent’.[50] But if any of them were thinking of rebelling against the new regime, they were soon to get a new warning. A week later, Moscow prosecutors filed suit to contest the 1997 privatisation of Norilsk Nickel, the sprawling $1.5 billion nickel producer that had been sold for a mere $170 million in the controversial loans-for-shares auctions to Vladimir Potanin, the architect of the privatisation scheme. Igor Malashenko, the first deputy chairman of Gusinsky’s Media Most, warned that the suit indicated that any businessman involved in privatisation ‘could be thrown in prison tomorrow … A new order is being created in the country, which in the eyes of the new leadership means that everything has to be under the control of the Kremlin.’[51]
As if to further underline the arrival of a new regime under which none of the tycoons’ empires was safe, in early July Putin’s men launched three more raids in the space of two days. They first targeted Lukoil, the vast energy conglomerate owned and run by a wily Soviet-era official from Azerbaijan, Vagit Alekperov, accusing it of falsifying tax refunds. Then they raided Gusinsky’s Media Most again, and for the first time its TV channel, NTV.[52] The next day it was the turn of another potent symbol of the capitalism of the Yeltsin era, the sprawling AvtoVAZ, the nation’s biggest carmaker, which was controlled by associates of Berezovsky. The head of the tax police claimed that the company had evaded tax amounting to hundreds of millions of dollars.[53]
The panic in the business community was reaching fever pitch. On the same day that the tax police were swarming through AvtoVAZ, Putin gave a television interview justifying the raids and vowing to bring justice to those who had made their fortunes in the ‘muddy waters’ following the Soviet collapse. ‘We cannot confuse a democracy with anarchy,’ he warned.[54] ‘In Russian, we have a saying about catching fish in muddy waters. There are fishermen who have already caught a lot of fish and would like to keep the system as it is. But I do not think this state of affairs is appreciated by our people.’ The next day he gave a newspaper interview in which he claimed that the recent moves did not signal a return to a police state. But he added that business should observe ‘the rules of the game’ – particularly now that he’d tabled the new 13 per cent flat income-tax rate that was supposed to support liberalising efforts.[55]
It was a typical KGB tactic of bait and switch, and the well-oiled machinery of the Kremlin was being unfurled for Putin. The Kremlin’s propaganda machine and law enforcement were working in near-perfect tandem, and the tycoons, desperate to understand the new rules of the game, were begging for a meeting with him. Khodorkovsky warned quietly that any of them could fall foul of post-Soviet laws, as they’d been written in a contradictory way, and the judiciary was weak.[56] Berezovsky, again, was the lone voice of protest. He’d noisily resigned his post as a member of parliament, telling a packed press conference that he didn’t want to take part in ‘the dismantling of Russia and the imposition of authoritarian rule’.[57] His stance was a desperate rallying cry to the other Moscow tycoons. But it came far too late.
When twenty-one of the most powerful tycoons met Putin at the end of July, the encounter around the oval table of the Kremlin’s ornate Ekaterinovsky Hall was a far cry from the cosy secret meetings they’d had with Boris Yeltsin. This was a formal affair, and it was a public dressing-down. Putin’s comments were televised across the nation as he told the magnates that they had only themselves to blame for the wave of tax-police raids and criminal probes: ‘You must remember that you formed this state yourselves through the political and quasi-political structures that you controlled.’ Citing a Russian folk saying, he continued, ‘It’s no use blaming the mirror [if you have an ugly face].’[58] In the end, while he reassured them that he would not reverse the privatisations of the nineties, he exhorted them to support his economic programme, and to stop using their media outlets to ‘politicise’ the legal probes against big business. After the TV cameras had left, he made the new rules of the game clear to them. They should stay out of politics, or else. Two of the tycoons were conspicuous by their absence: Berezovsky and Gusinsky, both of whom had publicly railed against Putin’s policies, and used their media empires to do the same.
But another was conspicuous by his closeness. To Putin’s right hand, from time to time whispering in his ear, was Sergei Pugachev. While the others quaked, he seemed unperturbed. In those days, while Putin was adjusting to his new role, the two men spoke many times a day. Later that day, at Pugachev’s suggestion, Putin hosted the oligarchs for another gathering, away from the TV cameras, that was rich in symbolism. Pugachev had persuaded Putin to meet them in more informal circumstances to demonstrate to them that he didn’t want to go to war. But the setting Putin chose for the ‘friendly’ barbecue was also meant as a pointed signal. Hidden in the woods on the outskirts of Moscow, Stalin’s dacha had been kept almost untouched since the day he died there in 1953. The telephones down which the dictator barked orders remained in place. The couch on which he preferred to sleep instead of retiring to bed still stood in his study. Time seemed to have stood still since Stalin had spent days and nights there drawing up lists of enemies among the country’s elite. The oligarchs had been invited to the place from which Stalin had ordered thousands to be sent to their deaths in what became known as the Great Purge. Putin was dressed in T-shirt and jeans, and was trying to appear relaxed and approachable. He’d only ever seen many of the tycoons on TV, said Pugachev, and he was still anxious about how to behave in front of them. But if Putin was uneasy, the tycoons were even more so. No one was going to challenge the new president there. ‘It was enough that he let us leave,’ Pugachev remembered one of them saying.
All the while, Pugachev had been operating behind the scenes. In those days, while the other oligarchs faced raids and tax police, he believed that he commanded all he surveyed. He’d installed his man as president, and an ally as FSB chief. He’d personally brought in the new head of the Federal Tax Service, Gennady Bukayev, an associate from Bashkortostan where he had interests in the oil sector. He’d helped to appoint Vladimir Ustinov as Prosecutor General, as he sought to quash the investigation surrounding Mabetex. Pugachev liked to believe he controlled them all. Through his Mezhprombank, he doled out cash left and right. An apartment for Ustinov here, an apartment for his deputy there. Other tycoons lined up to work with him. ‘They were coming to me constantly, saying, “Let’s raid this guy and take over the business,”’ he laughed, with a deep nostalgia for those days.[59] Even Roman Abramovich, the seemingly shy, stubble-faced oil trader who’d begun as a protégé of Boris Berezovsky but had now outmanoeuvred him to gain favour with the Yeltsin Family, bowed to him: much later, Abramovich would complain to another tycoon that he’d had to agree everything with Pugachev in those days. One Moscow newspaper hailed Pugachev as the Kremlin’s new ‘favourite’, while others called him the new grey cardinal, who together with Putin’s KGB men from St Petersburg was taking over financial flows.[60] He was seen as an ideologue behind the new policy of keeping the oligarchs ‘equally distant from power’, an idea he’d never admit to now, but which then he seemed to subscribe to, as long as he was above everyone else.
While some oligarchs, like Pugachev and Abramovich, were clearly more equal than others, the chief threats to Putin’s power were picked off one by one. Just days before Putin’s Kremlin meeting with the Moscow tycoons, Gusinsky had been presented with an offer he couldn’t refuse. He was told by Putin’s new press minister, Mikhail Lesin, that he should agree to sell his Media Most empire to the state-controlled gas monopoly Gazprom for $473 million in debts and $300 million in cash; otherwise he would face jail.[61] The debts, which Putin had honed in on in his conversation with Yumashev, were mostly owed to the state gas giant, and Media Most was behind on its payments. Gusinsky had quickly agreed – he didn’t want to risk any more nights in the decrepit Butyrka jail. By the time the tycoons gathered in the Kremlin, prosecutors had announced they’d dropped all charges against Gusinsky.
But soon after, Gusinsky fled the country, and later he re-emerged saying he’d been forced to sign the deal under duress, practically ‘at gunpoint’.[62] Therefore, he said, he was reneging on it. When news first emerged of the deal, the country’s elite had been shocked. It was the first sign of how far Putin’s regime was willing to go to acquire control over the independent media networks. Putin’s men were using the criminal justice system as a weapon of ‘crude blackmail’ to force through a takeover. For them, such tactics were par for the course.
But for Putin, the final showdown with the media tycoons was yet to come. From the beginning, the Kremlin focused its efforts on them. Putin had become obsessed with the media’s power, knowing all too well how, with the help of Berezovsky’s TV channel, he’d been transformed from a nobody into the country’s most popular leader. He was aware that without control of the country’s federal TV channels, that could change at any minute.
*
More than any of the other tycoons, Boris Berezovsky represented the archetypal oligarch of the Yeltsin era to Putin’s men, by whom he was reviled, loathed and feared in equal measure. He was the epitome of the insider dealing of the Yeltsin years, when a small coterie of businessmen bargained behind the scenes for prime assets and government posts. The ties he’d cultivated with the separatist leaders of Chechnya made him invidious in the eyes of the KGB men – especially Patrushev, who hated anyone connected with the Chechens. Berezovsky had backed separatist leader Aslan Maskhadov and helped forge a peace deal following Yeltsin’s disastrous first Chechen war, in which thousands of Russian soldiers – and many more Chechen civilians – had lost their lives. The deal granted Maskhadov broad autonomy for a republic that, in the eyes of Putin’s KGB men, had become a black hole for people and cash. Berezovsky had been able to navigate the treacherous clans of Chechen warlords to make money not just out of negotiating the release of hostages, but also out of the business of war. ‘He is a war criminal. He stole people,’ one Putin associate claimed. ‘All this: the war, the Chechen warlords, was Berezovsky’s work.’
But most of all Putin’s men feared the power of the media he ran. Even though his ORT TV channel was, on paper, controlled by the state, which held a 51 per cent stake, Berezovsky, who owned the rest and had stacked the board with his allies, was in fact in charge.
By early August, Berezovsky had moved into outright opposition to the new regime. The day after a terrorist bomb tore through an underpass in central Moscow, leaving seven dead and ninety injured, he held a press conference to announce that he was creating an opposition bloc to combat what he called Putin’s rising authoritarianism. He warned that more such blasts could occur if the Kremlin continued its ‘dangerous’ push to destroy the rebels in Chechnya.[63] With Berezovsky’s ties to the Chechen rebels, it seemed he was laying down the gauntlet to the Putin regime.
When disaster struck later that month, leaving Putin facing the first major crisis of his fledgling presidency, it became more urgent for the Kremlin’s men to push Berezovsky out of the media game. A torpedo on board one of the country’s nuclear submarines, the Kursk, had somehow detonated, sending an explosion ripping through it, and sending it and its crew to the bottom of the sea. Berezovsky deployed the full force of his ORT TV channel to hurl criticism at how Putin handled the disaster. For six days confusion reigned as he failed to publicly address the tragedy, remaining hidden away in his summer residence near Sochi on the Black Sea coast, only appearing – in footage shown by ORT – to frolic on a jetski. Putin stayed totally silent while the navy obfuscated for days over what had happened, even after acknowledging that the submarine had sunk. The families of the crew were in despair, a rescue operation had only been haltingly mounted, and Russia had initially refused offers of international assistance, fearing the disclosure of secrets about the state of its nuclear fleet.
Still an inexperienced leader, despite his years of work handling illegals against the West and his decisive military action in Chechnya, Putin was initially paralysed by fear, one person close to him said. ‘He was in a stupor. He went totally white. He didn’t know how to deal with it, and therefore he tried to avoid dealing with it. We knew that it had exploded right away … We believed everyone was dead from the start. Putin just did not know how to deal with it, and so when everyone came and said, “What do you want us to do – launch a rescue operation, announce war against the US [one of the claims had been that the Kursk had collided with a US submarine]?” he played for time. Even though we believed all were dead we launched the rescue operation, and all the stories appeared about the plaintive cries of the submariners knocking on the walls. The Norwegians and others were calling in with offers of help. But he did not want them to uncover that everyone was dead, and so he just refused the help – which of course made everything worse. All the lies just made everything worse.’[64]
On the seventh day, Putin flew quietly back to Moscow. But it was only three days later that he emerged in public. After much prodding and cajoling from advisers, he flew to Vidyayevo, a closed military city above the Arctic Circle, where the Kursk had had its home port, and where the stricken relatives of the crew had gathered days ago, in vain hopes of good news that had long descended into grief, anger and despair. The day before, the Russian authorities had finally admitted that all 118 crewmen were dead, and Putin had already been taking a beating in the media over his inaction in handling the affair. Berezovsky’s ORT led the charge, interviewing grief-stricken relatives who laid into Putin for his lack of leadership. Putin exploded in rage over the footage, and claimed that his security men had given him a report saying that the women who appeared on screen were not wives or relatives, but prostitutes hired by Berezovsky to discredit him.
But when Putin arrived in Vidyayevo he was faced with a tirade of real-life anger as wives and relatives tore into him. The fury portrayed on Berezovsky’s channel was genuine: any suggestion that it had been staged was out of the question. Putin’s initial reaction was another sign of his deep-seated paranoia and his lack of empathy. For three hours he spoke with them, trying to soothe their rage. Though he told them he was ready to take responsibility for everything that had happened in the country in the hundred days since he’d become president, he said he could not do the same for the previous fifteen years: ‘For this, I am ready to sit down next to you and pose these same questions to others.’[65] He blamed the bungled rescue operation on the parlous, pitiful state of the military, which had been left to decay with little funding during Yeltsin’s rule.
But most of all he laid the blame at the feet of the media tycoons. Clearly targeting Berezovsky and Gusinsky, he lashed out at them as the real cause of the military’s plight, for stealing from the country even as they sought to score political points out of the tragedy: ‘There are people on television today who … over the last ten years destroyed the very army and fleet where people are dying now … They stole money, they bought the media and they’re manipulating public opinion.’[66]
Eventually, Putin appeared to have won the relatives round. But his comments singling out the media tycoons as thieves who’d undermined the state signalled that any hope for Berezovsky’s or Gusinsky’s continued ownership of their independent media channels was dead. Again, the Berezovsky associate who retained ties with the security services had scolded his friend and warned him to back off.[67] ‘I said, “Borya, why are you undermining him and not giving him a chance? How can you blame him for this submarine?”’ But Berezovsky was unrepentant; he feared the rise of the KGB state, and wanted to do everything he could to undermine it. After the Kursk episode, Voloshin told Berezovsky that his ownership of ORT was over, as he’d been found to be using the channel ‘to work against the president’.[68] Then, according to Berezovsky, he told him he had to surrender his stake within two weeks, or follow Gusinsky into Butyrka. He regarded this as an ultimatum that would lead to the ‘end of television information in Russia’: ‘It will be replaced by television propaganda controlled by [Kremlin] advisers.’[69] For a time he played an uneasy game of cat and mouse with the Kremlin, announcing that he’d handed his stake in ORT in trust to the channel’s journalists, all the while proclaiming he would not allow the country to fall into an authoritarian abyss.
For all Berezovsky’s prescience, the Yeltsin holdovers in the Kremlin were working in lockstep with Putin and law enforcement. The Kremlin machine was united against Berezovsky and Gusinsky, and there was never going to be any chance for them. Gleb Pavlovsky, the Kremlin spin doctor who’d helped engineer some of the propaganda behind Putin’s election campaign, had helped to create a new Kremlin ‘Information Security Doctrine’ which, he said, would allow the government to remove ‘shadow information brokers’ like Gusinsky and Berezovsky, who posed ‘serious threats to the country’s national interests’.[70]
In mid-October, prosecutors reopened their case into allegations that Berezovsky had siphoned hundreds of millions of dollars through Swiss companies from Aeroflot, the Russian state airline he part-owned. The pressure became unbearable. When prosecutors announced on November 13 that they were calling him in for questioning, and that they were ready to charge him, Berezovsky fled Russia and said he would never return. ‘They have forced me to choose between becoming a political prisoner or a political émigré,’ he said in a statement from a location he would not disclose.[71]
The same tactics were used against Gusinsky. He’d also been called in for questioning on the same day. But he too was long gone, having fled out of the prosecutors’ reach to his villa in Spain soon after he signed the deal to hand over his shares in Media Most in July. He’d then reneged on the deal, claiming it was signed under duress in exchange for a guarantee of his freedom. But he could not escape the long arm of the Russian prosecutors. They charged him in absentia with misrepresenting his assets in Media Most when he’d accepted loans from Gazprom, and fired off an Interpol warrant for his arrest.
Even in exile, the pressure became too much to bear for both men. In February 2001, on the insistence of Voloshin, Berezovsky sold his shares in ORT to Roman Abramovich, who’d abandoned his former partner to become a financial bridge between the Yeltsin Family and Putin’s men, and who promptly sold the shares to the state. In April that year Gazprom seized control of Gusinsky’s NTV, launching a boardroom coup as it called in a $281 million loan it had lent to Media Most.
Putin and his men were flexing the tried and tested tactics of the St Petersburg days, when all they’d had to do to take over the city’s port and Baltic Sea fleet was to have its director thrown in jail. But at that early stage of their rule they would have been able to do little without the assistance of the Yeltsin holdovers in the Kremlin. ‘They [the Yeltsin Family] were the ones who thought up the schemes to bring all the media into the state’s hands, that led to the practical destruction of all independent media,’ said Leonid Nevzlin, the former Menatep tycoon who was closely watching the goings-on from the sidelines. ‘They gave this to Putin … We should have concluded where this was all leading to in the first year of Putin’s rule. But we wanted to continue looking through rose-coloured glasses, because everything else in the economy seemed to be fine.’[72]
Behind the wizard’s curtain of Putin’s Kremlin, behind the bombastic show of force, Putin had still been nervous, according to Pugachev. In January 2001, before the takeover of NTV by Gazprom, he’d invited the channel’s top journalists to the Kremlin in an attempt to reassure them of the state’s intentions. He was visibly fretful before he walked into the Kremlin library to greet them, Pugachev recalled: ‘He was scared before the meeting. He didn’t want to go in and speak with them. I had to tell him what to say. They were the cream of the Moscow intelligentsia, household names.’[73]
Putin was so anxious that he pulled one of the journalists aside into a separate room and asked her what she wanted to hear, said Pugachev. For the past four years Svetlana Sorokina had been the face of NTV’s most popular political talk show, Glas Naroda, or Voice of the People. ‘He told her, “You and I, we are both from St Petersburg, we have that in common, tell me how you would like it to be,”’ Pugachev said. The other journalists, waiting outside, believed Putin had pulled Sorokina aside to wrongfoot them, to take the wind out of their sails. But Pugachev claimed it was because he had no idea what to say. It was also a classic tactic for recruiting allies. By the time Putin finally walked into the wood-panelled Kremlin library to greet the journalists, chameleon-like, he’d absorbed Sorokina’s persona and was able to tell them exactly what they wanted to hear. It was another KGB operation. Over the next three and a half hours, he sought to assure them of the Kremlin’s benign intentions. The fight, he told them, was only with Gusinsky. He didn’t want the channel’s editorial staff to change. He would welcome a foreign investor in the channel. He wanted them to preserve their editorial independence. Gazprom, he assured them, was not the state. As for the prosecutors, who were now turning their attention to individual journalists’ financial relations with Gusinsky, he could not control them – they were beyond his command.
‘We found out that day that the prosecutor’s office is an absolutely independent organisation – Putin said it several times,’ one of the journalists, Viktor Shenderovich, later recalled of the meeting, barely believing what he’d heard. ‘He said he is ready to help us, and considers some of the prosecutors’ actions excessive.’[74] Putin had told them: ‘You will not believe me, but there is nothing I can do. Do you want me to return to the times of telephone law?’[75] – a reference to how the Soviet Politburo had dictated judgments from on high to the courts and prosecutors.
It was a command performance, typical of many Putin would later make in his insistence on observing the official, legal status of institutions while masking the real power games at play. He was at his most skilled when taking on the persona and concerns of others. It was a tactic he’d honed in Dresden. ‘He was like a mirror,’ said Pugachev. ‘He just tells everyone what they want to hear.’[76]
Nevertheless, the journalists left the Kremlin uneasy. How could they believe what they had just heard? And when Gazprom installed new management in early April, on the grounds that Gusinsky had defaulted on his debts, they staged a sit-in to keep control of the station, and continued to air reports critical of the Kremlin, as if still half-hoping that Putin had meant what he said.
But early in the morning of the eleventh day of their sit-in, Putin’s true intentions became crystal clear. He’d meant nothing of what he said about preserving the channel’s editorial independence. Security men quietly entered the building at 4 a.m. and replaced the channel’s security force. Journalists arriving to work that morning were only allowed in if they swore loyalty to the new management. The senior journalists resigned en masse in protest at the strong-arm tactics that had seized their hard-won independence away from them. ‘A creeping coup is taking place in the country,’ declared Igor Malashenko, a co-founder of the channel. ‘This operation is along the same lines as the attempted putsch in August 1991, and it is being carried out by the same people, members of the secret service.’[77] ‘We are all guilty, because we have let the KGB get back into power,’ Sergei Kovalyov, a prominent human rights activist, told reporters.[78]
Putin’s Kremlin had taken back control of the airwaves. The freewheeling media of the Yeltsin years was no more.