#8
Fianancial Times (UK)
23 March 2002
BOOKS:
Roubles from the rubble.
Andrew Jack looks at how the new super-rich have emerged from Russia's chaos
By ANDREW JACK

THE OLIGARCHS: Wealth and Power in the New Russia
by David Hoffman
Perseus Press
Pounds 19.99 / Public Affairs Dollars 30,
567 pages

As the Soviet Union crumbled in the late 1980s, cracks emerged in the surreal communist economic system which presented unparalleled opportunities for personal enrichment for those with brains and contacts.

Mikhail Khodorkovsky, an activist in the Komsomol youth organisation, exploited a legal loophole allowing him to take the worthless "non-cash" accounting roubles used by planners and managers and convert them into very real cash which he switched into dollars for deposit abroad.

Vladimir Potanin, a son of the Soviet elite, pulled strings to gain effective control of a state bank, and then - at a time when there was no central treasury - persuade leading government departments to deposit their money with him, providing considerable opportunities to boost his income.

Alexander Smolensky, an earthy builder who constructed country homes for the party elite, benefited from the "mistaken" borrowing of millions of dollars in funds provided to his fledgling financial institution by the central bank on the back of faked money transfer orders.

Vladimir Gusinksy, a mercurial theatre director, was able to play on his contacts with Moscow's powerful mayor Yuri Luzhkov to receive buildings without charge for redevelopment, on the condition that ownership of the majority of the apartments was handed back to the city once the work was completed.

In the chaos of the 1990s, these men and a handful of others emerged as "oligarchs". They became politically influential on the back of their rapidly acquired wealth, but they then vastly increased their riches by exploiting their power in the corridors of government and the Kremlin itself.

In his well-written book, David Hoffman, who was the head of the Washington Post's Moscow bureau for six years of that turbulent period, offers one of the most wide-ranging and sober of several recent descriptions of the oligarchs during the painful past decade of change in Russia.

He is particularly strong in tracing the wild early histories of this group of men, many of whom still wield enormous influence in Russia, and are doing their best to convert themselves into respectable western-style executives, complete with corporate governance rhetoric and fast-expanding philanthropic programmes.

He focuses on the tight connections between some of them, and highlights a short-lived, exclusive club on Sparrow Hills overlooking Moscow which brought them together for fortnightly dinners.

He shows the networking role of Pyotr Aven, one-time minister and a partner in the powerful Alfa conglomerate today, who first introduced the economists Anatoly Chubais and Yegor Gaidar to each other, forming the basis of a liberal reformist group that still dominates much Russian policy-making.

Aven was also in at the start of the creation of the business empire of the future tycoon Boris Berezovsky, who worked at the same academic institute as Aven's father. He went on to introduce Berezovsky to Valentin Yumashev, a friend of Yeltsin, paving the way for Berezovsky to become the "grey cardinal" of the Kremlin.

Hoffman is careful to stress - if only in passing - the constraints that helped explain the widely discussed scandals of the era: the legal and institutional vacuum that meant that anything went; and the political compromises that were arguably necessary at the time of a weak state and fears of a return to communism.

But his account - for all its 500 pages - is still far from definitive, and he has arguably sacrificed the greater original depth that he could have provided into the oligarchs' activities, in favour of the broader sweep of contemporary Russian history of the 1990s already frequently written about elsewhere. As a result, the book feels less like an insider's account than that, for example, of my colleague Chrystia Freeland, who described revealing phone calls between the oligarchs even as they spoke with her.

Hoffman faced understandable prac-tical difficulties in his investigations. When two people meet in Russia, there are usually three contradictory accounts of what went on, which change radically as time goes on, before it turns out that those who made critical decisions were other people entirely. Nonetheless, most of the characters he describes get off rather lightly. The "body trail" that accompanied the struggle for control of business assets is glossed over, and the reader is left with many questions about the bribes, influence-peddling and threats behind the restructuring of the 1990s.

Hoffman seems over-generous to Smolensky, who appears to have systematically removed depositors' money from his SBS-Agro bank long before the August 1998 default served as a con-venient excuse; and he glosses over those who have felt the negative side of Luzhkov's Moscow machine.

In the absence of greater verifiable information, it would have been good to hear more from the oligarchs themselves on their opinions of their ascension, their changing relations with power and their future mission.

One could quibble over whether the influence of the oligarchs in the past decade has been over-played, or which of them are the most worthy of attention. More importantly - as so often is the case in the moving target of Russia - events had shifted radically by the time of this book's publication. While some remain influential, others - notably Gusinsky and Berezovsky - have fled into exile. The relations of those who remain with Vladimir Putin are starkly different. Hoffman has captured a past period well, but it is one that is already being consigned to history.