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The decision of the Russian envoy for climate change, Anatoly Chubais, to resign and leave Russia can be very significant.
Reopening A new window into recent Russian history, Chubais’s departure could bring some order to the West’s KleptoCapture strategy, which aims to freeze the assets of a dozen Russian “oligarchs” described as appendages of the Putin regime ”.
But it can potentially do much more than it has. Chubais, who led a major privatization program in Russia under President Boris Yeltsin in the 1990s, is a living symbol of how the country’s wealth was distributed.
He was also an early promoter of Vladimir Putin as a competent successor to Yelstin. And although Chubais has long been outside Putin’s inner circle, he may be able to lead the West toward the president’s money, always if he feels confident enough to speak.
Sanctions against Putin’s oligarchs sound like a good idea, but Chubais knows that the KleptoCapture, in its current form, is probably more “smoke” than “fire.” Some of the current oligarchs became rich in the Yeltsin years, but then clashed with Putin and were forced to leave Russia, or remain there obeying his dictates.
They own what Putin allows them to own, as long as they stay away from politics, do not open problems for his regime, and have minimal influence. The people of the Kremlin’s inner circle are Soviet-era spies who control most of the thousands of companies that were privatized between 1992 and 1996.
At the time, the sanctioned oligarchs were bankers who lent $ 800 million to the Russian government, usually secured by stakes in 12 major oil and metal companies. This scheme was intended to help Yelstin close a gigantic budget deficit, and avoid hyperinflation before the 1996 elections, which he was expected to lose to the communist challenger, Gennady Zyuganov.
In the event that the government did not repay the loans immediately after the election, then lenders could auction off the shares, thus consolidating privatization, regardless of who would win. Although Yelstin was surprisingly re-elected for another term, the state went bankrupt again, perhaps deliberately, to reward the bankers for their help.
The shares, which at the time were valued at $ 1.5-2 billion, were “sold” to lenders at largely rigged auctions, turning overnight some young financiers into big oligarchs.
As an adviser to Chubais and his team at the time, I said at the time that “stock exchange loans” would corrupt the privatization process, and give people the idea that Yeltsin was deliberately enriching a small group of tycoons. selling important shares at a very cheap price.
Chubais himself would later admit that the scheme was a “bandit capitalism.” but necessary to avoid a return to “bandit communism.” The “stock exchange loan” schemes gained great importance in the history of privatizations in Russia, overshadowing the massive privatization of thousands of other companies overseen by Chubais.
But the real tragedy for Russia turned out to be Putin’s promotion by Chubais. In 1999, a sick Yeltsin resigned before the end of his second term, appointing as his successor Putin, the former head of the Federal Security Service (FSB, the successor to the KGB), who during the time who was deputy mayor of St. Petersburg had created the image of an efficient reformer.
The financial markets widely supported Yeltsin’s choice, which Chubais himself described as “a brilliant decision, very accurate and extremely bold.” After becoming president, Putin promised that “freedom of speech, conscience, freedom of the press, the right to private property – to “All these basic principles of a civilized society – will be reliably protected by the state.”
In fact he supported market reforms for some time, on the condition that the oligarchs stay out of politics, and share with him and his friends in the security apparatus the economic benefits. But when Mikhail Khodorkovsky – the founder of Menatep Bank, and later the head of the Yukos oil company through the famous scheme – signaled his political ambitions, he was imprisoned for nearly a decade and Yukos’s assets were re-nationalized.
Putin also turned against Boris Berezovsky, another friend of Yeltsin, who is thought to have played a key role in persuading the latter to choose Putin as his successor. And Putin expelled Bill Bro from Russiawder, a successful American investor in Moscow, that ran large Russian companies.
Browder’s tax lawyer, Sergei Magnitsky, was later arrested and died in prison in 2009. Browder has since devoted himself to securing justice for Magnitsky. Some Russian oligarchs created their wealth in ways similar to the privatization program.
Some others, like metal tycoon Oleg Deripaska, have stayed in Russia, exerting less influence while investing in properties abroad. Others, like bankers Mikhail Fridman and Peter Aven, kept their Russian businesses, but were probably forced to share wealth with Putin and his men.
All three have received foreign passports. Those who, like Berezovsky, openly opposed Putin, died in mysterious circumstances, as did active political opponents such as Boris Nemtsov, who was assassinated near the Kremlin in 2015.
Some entrepreneurs who started their businesses from scratch were far-sighted enough to sold and fled Russia when Putin came to power. Vladimir Gusinsky – my first Russian entrepreneur friend in 1989 – founded NTV, the first independent Russian media company. But in 2001 he sold it to Gazprom, the state-owned gas company, and emigrated with his family to Israel.
Today NTV is one of the main spokespersons of Putin’s propaganda. Today most of these wealthy Russians, with wealth abroad, seem to share the desire to integrate into the West. Many have made large investments in Europe and the United States, donating to museums and other cultural institutions.
But none of them seem to have much less control over Putin. On the contrary, he poses a constant threat to their wealth and security. Instead of despising and sanctioning them, Western leaders can gain more by bethey – and Chubais, their former boss – comfortable enough to share any kind of information about where Putin’s money can actually be found./bota.al
Note: Daniel J. Arbess, CEO of Xerion Investments. He has previously advised the World Bank and the European Bank for Reconstruction and Development for Anatoly Chubais on the privatization program in Russia.
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