Once Upon a Time in Russia

1. The rise of Russian oligarchs: From academic outsiders to billionaire power brokers

"Perestroika, the lightning bolt that had shattered everything."

Seismic shift in Russia. The fall of the Soviet Union and the introduction of perestroika created a chaotic environment where a small group of individuals, often outsiders and academics, seized unprecedented opportunities. These men, later dubbed "oligarchs," used their intelligence, ambition, and connections to acquire vast fortunes in a remarkably short time.

From theory to practice. Many of these future oligarchs came from academic backgrounds, particularly in mathematics and sciences. The sudden shift to a market economy allowed them to apply their analytical skills to real-world business scenarios, often exploiting inefficiencies and loopholes in the emerging capitalist system.

Key oligarchs:

• Boris Berezovsky: Mathematician turned car dealer and media mogul
• Vladimir Gusinsky: Theater director who built a banking and media empire
• Mikhail Khodorkovsky: Young physicist who became Russia's richest man through oil

2. Boris Berezovsky's meteoric ascent through strategic arbitrage and political maneuvering

"Manufacturing line to consumer, an incredible journey of miles and minutes: these had been the perfect ingredients for an epic level of arbitrage."

Exploiting inefficiencies. Berezovsky's first major success came from recognizing and capitalizing on the inefficiencies in the Russian car market. By taking cars on consignment from AvtoVAZ, selling them through his dealerships, and delaying payments, he profited enormously from the hyperinflation plaguing the Russian economy.

Political connections. Berezovsky's true genius lay in his ability to forge relationships with key political figures, most notably members of President Yeltsin's family and inner circle. These connections allowed him to expand his influence beyond business and into the realm of politics and media.

Berezovsky's key strategies:

• Arbitrage in the auto industry
• Acquisition of media assets (ORT television network)
• Cultivating relationships with the "Family" (Yeltsin's inner circle)
• Positioning himself as a power broker in Russian politics

3. The birth of "loans for shares" and the privatization of Russia's state assets

"We must sell it all," he had said on various occasions—believing that if they sold enough assets, the situation would be irreversible.

Desperate measures. The "loans for shares" program was conceived as a way for the cash-strapped Russian government to raise funds quickly. State-owned companies were offered as collateral for loans from private banks, with the understanding that the state would likely default, transferring ownership to the lenders.

Creation of empires. This program allowed a small group of well-connected businessmen to acquire vast industrial assets at a fraction of their true value. Companies that would soon be worth billions were sold for mere millions, creating instant billionaires and concentrating much of Russia's wealth in very few hands.

Key privatizations:

• Yukos (oil): Acquired by Mikhail Khodorkovsky
• Sibneft (oil): Acquired by Roman Abramovich and Boris Berezovsky
• Norilsk Nickel (metals): Acquired by Vladimir Potanin
• Impact: Concentrated ~50% of Russia's GDP in the hands of seven men

4. Vladimir Putin's ascension to power and the changing dynamics of oligarch influence

"Those who combine power and capital—in the future, these Oligarchs will cease to exist as a class."

A new era. Vladimir Putin's rise to power, first as Prime Minister and then as President, marked a significant shift in the relationship between the state and the oligarchs. Initially seen as a continuation of Yeltsin's policies, Putin quickly asserted his authority and vision for a strong, centralized state.

Reining in the oligarchs. Putin made it clear that the era of oligarchs wielding significant political influence was over. He famously told them to stay out of politics and focus on their businesses. Those who didn't comply faced severe consequences, as demonstrated by the fate of Vladimir Gusinsky and later, Mikhail Khodorkovsky.

Putin's approach to oligarchs:

• Demand for political non-interference
• Selective prosecution (e.g., Khodorkovsky)
• Encouragement of "patriotic" business practices
• Creation of a new class of state-aligned oligarchs

5. The Kursk submarine tragedy: A turning point in Putin's presidency and Berezovsky's fall

"Push and push and push, and sometimes a tree limb bends, sometimes it breaks. Sometimes it does neither of these things, sometimes it snaps back at you, with deadly force . . ."

National tragedy. The sinking of the Kursk submarine in August 2000 was a defining moment in Putin's early presidency. The government's slow and ineffective response, coupled with Putin's decision to continue his vacation during the crisis, drew widespread criticism.

Berezovsky's miscalculation. Seeing an opportunity to weaken Putin, Berezovsky used his media assets, particularly ORT, to heavily criticize the government's handling of the tragedy. This aggressive approach backfired, as Putin saw it as a direct challenge to his authority and moved to neutralize Berezovsky's influence.

Consequences of the Kursk incident:

• Increased public scrutiny of Putin's leadership
• Governmental push for greater control over media
• Berezovsky forced to sell his stake in ORT
• Beginning of Berezovsky's fall from power and eventual exile

6. Exile, lawsuits, and the unraveling of Berezovsky's empire

"Even though it had come from the opposing lawyer, Berezovksy had to agree that Shakespeare was an apt comparison."

Life in exile. Forced to flee Russia in 2000, Berezovsky settled in London, where he continued to criticize Putin and position himself as a leader of the opposition. However, his influence waned as he lost access to his media empire and other Russian assets.

Legal battles. Berezovsky engaged in numerous high-profile legal battles, including defamation suits against Forbes magazine and, most notably, a $5.6 billion lawsuit against his former protégé, Roman Abramovich. These legal fights, while garnering media attention, ultimately proved disastrous for Berezovsky's reputation and finances.

Key events in Berezovsky's exile:

• Granted political asylum in the UK (2003)
• Multiple extradition requests from Russia
• Failed lawsuit against Abramovich (2012)
• Financial difficulties and asset seizures
• Suspected suicide in 2013

7. The poisoning of Alexander Litvinenko and its impact on Russia's international relations

"As I lie here I can distinctly hear the beating of wings of the angel of death."

A shocking assassination. The 2006 poisoning of Alexander Litvinenko, a former FSB officer and Berezovsky associate, with polonium-210 in London sent shockwaves through the international community. The use of a rare radioactive isotope pointed to state involvement, with suspicion falling on the Russian government.

Diplomatic fallout. The Litvinenko case severely strained UK-Russia relations and brought increased scrutiny to the activities of Russian expatriates in the West. It also highlighted the dangers faced by Putin's critics, even those living abroad.

Consequences of the Litvinenko affair:

• Deterioration of UK-Russia diplomatic relations
• Increased suspicion of Russian activities in the West
• Reinforcement of Putin's image as a ruthless leader
• Spotlight on the risks faced by Russian dissidents abroad

8. The historic legal battle between Berezovsky and Abramovich: A tale of krysha and betrayal

"Krysha—literally, roof—was a uniquely Russian concept."

Clash of titans. The 2012 lawsuit between Berezovsky and Abramovich in London's High Court was billed as the largest private litigation in history. At its core was the concept of "krysha" (protection) and differing interpretations of their business relationship during Russia's turbulent 1990s.

Cultural disconnect. The trial highlighted the challenges of applying Western legal standards to business practices that evolved in post-Soviet Russia. Abramovich argued that payments to Berezovsky were for protection and political influence, not for ownership stakes in companies.

Key aspects of the trial:

• Berezovsky claimed ownership rights in Sibneft and Rusal
• Abramovich portrayed payments as fees for krysha
• Judge found Berezovsky to be an "unreliable witness"
• Verdict in favor of Abramovich
• Devastating blow to Berezovsky's reputation and finances

Last updated: January 23, 2025