‘Birthrights for broth.’
How Putin won the obedience of the oligarchs
April 21, 2023
  • Tatyana Rybakova

    Journalist and writer
Tatyana Rybakova explains why the Russian oligarchs do not resist Putin or the war: 20 years ago, when Putin’s power did not yet seem absolute, they were about to oppose him, but in the end backed down.
The EU may soon start discussing an 11th package of sanctions against Russia. There are rumors that it will include new sanctions against Russian oligarchs, including oligarchs who have yet to be targeted – in particular, the head of steel-giant NLMK Vladimir Lisin. How sanctioned Russian businessmen view the war and the Kremlin can be gleaned from a leaked conversation between Russian music producer Iosif Prigozhin and ex-parliamentarian Farkhad Akhmetov, the former owner of Russia’s Northgas, where they curse Vladimir Putin, Defense Minister Sergei Shoigu and the entire military and political leadership.

Even Alfa Group co-owner Mikhail Fridman, who is fighting in London against prosecution and sanctions levied against him, has not explicitly spoken out against the war or the regime in Russia. His defense rests on the fact that he is a native of Ukraine’s Lviv and cannot influence Kremlin policy in any way.

The inability to influence Putin is cited today by almost all Russian public figures, from oligarchs to culture workers. They may be right, but there are two issues. First, I recall the well-known sketch in which artists take turns taking the stage, each exclaiming: “What could I have done by myself?!” Gradually, the stage fills up with people chanting these words in unison, which makes the act an absurdity.

Second, every day our news feeds are filled with photographs of ordinary Russians who continue to picket against the war even while in Russia, despite the massive prison sentences that are being meted out to dissenters. Just recently, in mid-April, the audience at a rock concert in Moscow boldly chanted an anti-war slogan. These people are also unable to stop the war with their protests. But at least they try.

The Russian oligarchs had a much better chance of stopping Putin, and once, when Putin’s regime was just taking shape, they even wanted to. But at the last minute they got cold feet.
The November 2001 Congress of the Russian Union of Industrialists and Entrepreneurs, nicknamed the “oligarch trade union." Moscow. Source: Wiki Commons
Congress of the disgruntled

On November 14, 2003, the 13th Congress of the Russian Union of Industrialists and Entrepreneurs (RSPP), popularly known as the “oligarch trade union,” opened in the Hall of Columns in Moscow. Far from every billionaire was there. YUKOS head Mikhail Khodorkovsky was absent – three weeks before he had been arrested. But the hall was full of journalists, as all the main outlets sent their correspondents, and many more than one. The reason was that the day before, rumors spread from the bowels of the RSPP that President Vladimir Putin might come and that congress attendees were ready to express their opposition to the arrest of Khodorkovsky.

Prior to the congress, members of the RSPP board wrote to Putin urging him to intervene in the YUKOS case: “Only the clear and unambiguous position of President Putin can reverse the situation. The absence of such a position will make irreversible the deterioration of the economic climate and the transformation of Russia into a country unfavorable for business development.” Another rumor was that Putin agreed to come to the congress only if Khodorkovsky was not mentioned. “Will he come or not? Will they say something or not?” the journalists wondered.

In his opening remarks, Arkady Volsky, the longtime head of the RSPP, now deceased, did not say a word about Khodorkovsky or YUKOS. After the introduction, Volsky invited Vladimir Putin to the stage. He spoke about the social responsibility of business and the governance reforms that were then being carried out by then-Minister of Economic Development German Gref.

In his response, Volsky delicately mentioned the use of siloviki to carve up business and the “excessive cruelty of state institutions during criminal investigations of economic crimes” – and that was it. Still, Putin again took the floor and responded: business uses the siloviki to advance its own interests, and as for cruelty, “we should get used to a culture of lawfulness.”

At this point, the audience palpably tensed up: until then, in confidential conversations with journalists many billionaires said that Khodorkovsky’s case was an exception, that “Khodor was asking for it;” however, Putin’s words sounded like an unambiguous warning: we will crush anyone who dares to go against our will. Yesterday’s rulers of Russia – often called the “oligarchy,” the people who had won their assets in a brutal and sometimes bloody struggle – obviously did not want to bow before the bureaucrats. Sitting in the back rows, along with journalists from other outlets, I felt in my bones that things were about to explode. And then Putin abruptly changed the subject.

Oligarchs and the land question

Note that shortly before Khodorkovsky’s arrest, a law was passed to allow industrial enterprises to buy out the land where they operated – before that, all privatized factories had been on land leased from local authorities. The cost of the buyout was high, with coefficients multiplying the appraised value. The owners grumbled. The oligarchs were especially indignant, as large enterprises typically sat on massive land plots that were built according to Soviet military standards: should a workshop be destroyed by bombs, debris was not supposed to block transport routes or damage the walls of neighboring plant buildings, hence the distances between buildings were hundreds of meters. It was now either unrealistic or very expensive to reduce that space.

And here was Putin, who had just said that business should work hand in hand with the state and not try to fight it, all of a sudden saying that he considers it unfair to make enterprises buy out the land and that it should be given away free. For a few, long seconds, the hall froze, taken by surprise. And then it burst into applause and cries of joy. Respectable gentlemen hopped up from their seats and jumped like children. In front of the astonished journalists, they squealed and hugged.

In the first minutes, I did not understand why the businessmen were so euphoric. Free land is, of course, a fabulous gift. However, firstly, the issue was not one for the president – the oligarchs could resolve it at the level of the government and parliament, since they had a powerful lobby in both places. Secondly, though the buyout prices were high, big business could definitely afford them. Finally, is it worth rejoicing at free land if as part of the deal you can be thrown in a prison cell?
But soon everything became clear: the oligarchs were glad that Putin gave them the opportunity to abandon their planned rebellion and save face.
They understood everything: both the unequal trade of independence for land plots, as well as the pettiness of the issue for the president to be involved. However, they were terribly afraid of getting into a conflict with Putin and were relieved by the opportunity to back down. In part because it was quite clear from Putin’s speech that, after Khodorkovsky, he was ready to send away anyone who did not accept the new rules. His – Putin’s – rules. And people who until recently were not afraid of meetings with criminals or attacks from rivals, people whom George Soros called “robber barons,” backed down in front of a man who had supposedly not even thought about the presidency three years before.

A fateful deal

During a break, the congress attendees nervously joked, laughing maliciously at Severstal owner Alexei Mordashov, who had hurried to buy out the land at his factories at an inflated price – by the way, he was not at the congress. I directly asked businessmen I knew: “Do you understand that today you traded in your birthrights for broth?” Some laughed it off, others got angry, still others muttered uncertainly that I was exaggerating the significance of what had happened. Everyone understood everything and everyone was shaken.

Vladimir Yevtushenkov, who founded the holding Sistema, who repeated in a 2010 interview the view that Khodorkovsky had “set himself up,” almost repeated Khodorkovsky’s fate: in September 2014, he was accused of money-laundering in relation to shares in the Bashneft oil company and put under house arrest. The criminal case was closed only in 2016 – after Yevtushenkov handed over the shares of Bashneft to the state. While under arrest, he saw his fortune decrease by $8.0 billion to $2.8 billion, though he did not grumble. And he has not since.

Norilsk Nickel chief Vladimir Potanin, who as a member of the RSPP board signed the appeal to Putin about YUKOS, afterward stayed clear of politics, focusing on business and charity. Oleg Deripaska, the head of Rusal, six months after the congress said that “the dialogue between business and government under the aegis of the RSPP is over” – and nothing else.

A little more than a decade would pass before, after the annexation of Crimea and the first sanctions against Russia, congress attendees Vladimir Potanin and Oleg Deripaska, following the lead of Gennady Timchenko, declared that they were ready to give all their assets to the state if needed.
“Because by that time they already understood that nothing was theirs – they were only graciously being allowed to hold their profitable businesses.”
Kakha Bendukidze (1956-2014), the Georgian-born business magnate who refused to choose between rights and handouts. Source: Wiki Commons
The former “robber barons,” who had fought for their assets tooth and nail, turned into obedient underlings of Putin. Thus free enterprise was traded in for largesse from the regime. The oligarchs’ silence about the war today is a natural consequence of that fateful deal.

I caught Kakha Bendukidze at the exit from the Hall of Columns – he left immediately after Putin’s speech and was unusually gloomy. “Now will you be more afraid for your money?” I asked. “I am always afraid for my money,” Kakha Avtandilovich chuckled mirthlessly. Pretty soon, he began to carefully sell off his Russian assets, and then left for Georgia, where he helped the new president, Mikheil Saakashvili, build a liberal, efficient economy. Unlike most oligarchs, he understood what needed to be done so that he did not have to choose between rights and handouts.
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