Monday, 27 September 2010

06. June 5, 2009

Esteemed Lyudmila Yevgenievna,

I was very glad to receive your reply, I considered it as a well-deserved “wake-up slap”.

My parents arranged everything in such way that I would not become a “white crow” in that society. Now I understand it, but at the time I did not. Furthermore, both in school and in the institute I did not see “white crows”. School was in the proletarian outskirts, the institute was also extremely “proletarian” - 70% was admitted from plants [28]. We did not have any dissidents whatsoever. In the institute there was a special defense-oriented department, and if you were excluded from the Komsomol, they also automatically dismissed you from the department. Moreover, we considered this as fair.

As the secretary of the departmental Komsomol committee, I refused to exclude those who had been dismissed from the institute from the Komsomol, because I was convinced that not every Komsomol member is able to study. But the opposite seemed absolutely fair to me in a defense-oriented department. After all, we must, if necessary, give our lives for the Motherland, even in time of peace, and how can you demand this of a non-member of the Komsomol or a non-communist? I am not kidding, I am not exaggerating. This is exactly how I thought.

I read One Day in the Life of Ivan Denisovich [29], I was shaken, I despised Stalin as having tarnished the Party’s cause just for the cult of his own personality. To Brezhnev [30] and Chernenko [31] I reacted with humour and disdain, they are gerontocrats, they were harming the Party. Andropov [32] I respected, despite the “local excesses”. You find this funny? I would like to laugh. Doesn’t work.

When I was having my practical training, I was not sitting in the plant library, I was scooping trimethylenetrinitramine (an explosive) with a shovel, working on an automatic moulding press (my friend and I were almost killed because of an error we made). We used to attend training camps, [33]] they gave me the rank of sergeant and appointed me deputy commander for political affairs, but I once again asked to be sent to a plant and to dismantle old ammunition. We were Komsomol members, after all; we were supposed to go to the most dangerous sectors. And I dismantled, under the baffled stares of the commanding officers from our military department.

I will get you laughing again: I did not understand their bafflement, but they did not say anything.

Incidentally, I was quite bold in my arguments with the secretary of the party bureau. I did not even feel any fear. He himself would come to the Komsomol committee, there were 20 women from plants and two, three guys - he and I would argue, and the committee would vote for me, practically 100%. The partorg [34] would complain to the rector - Yagodin. The girls, by the way, still write to me. One of them is my first wife, another, since already 20 years, is the current one. True, not only they wrote, but others did it as well; even the partorg (this is the Party bureau secretary’s boss) Lyuba Strelnikova wrote.

Do not think anything bad. I was, in this sense, a very decent young person. I’m joking.

Now, about the perception of an external enemy, it was extremely acute, as was the perception of belonging to the “big nine” - the group of defense industry sectors.

While we are on the subject, when I was already an advisor to Silayev [35], I took part in the last session of the VPK (the military-industrial commission), the “big nine” plus the Ministry of Defense. Well, that is a separate topic.

I never knew the CC secretary for defense Baklanov [36], but later, after 1991, I hired him to work for me out of corporate solidarity. Yeltsin knew this, but did not say anything to me.

And in 1996, the defense people refused to give money to Yeltsin (as a loan to the government, such things were possible then!), but when I asked it, they gave it to me on nothing more than a handshake. Although they were risking their heads. It was partially from their money that I bought Yukos, then I returned the money. They knew what I was taking it for. Some of my acquaintances, whom I consider good people, entered into the Central Committee of the Communist Party of the Russian Federation, some supported the GKChP [37] (as, by the way, Baklanov and Lukyanov [38], whose daughter is now my lawyer).

What I am getting at, Lyudmila Yevgenievna, is that the people were not at all one-dimensional on that side of the barricade. “Hard-headed” in one aspect and absolutely decent in another.

I was, just like they were, a soldier in a virtual war, not of my own making. But we were honest soldiers. We defended what we considered being the truth.

I am going to tell you something even more risky. We took the cooperation with the KGB very seriously. “We” - this is the defense people. They worked for us and at the same time watched over us, only not at all from the point of view of “political literacy”, but rather from the point of view of physical security, counterespionage and so forth. They were very serious and highly-qualified specialists. Some of them had been involved in clandestine operations in the Great Patriotic War [39]. Their lessons appeared to be very useful for me in jail, as they had been through prisons, concentration camps, and zindans [40]. They were very happy that their experience was needed by someone. Turns out, and how was it needed!

There were others who were the “NKVD-niks” [41]. They were not respected, they were shunned both by us and by those specialists about whom I was talking.

Incidentally, none of them (the specialists) ever asked me for money. Although I did help some of them to find work after the year 1991. But their colleagues saved our lives, having refused to storm the White House. Some of them I know personally, others only indirectly.

There you have it: destiny. There you have it: civil war. But after that, everything got all mixed up…

Now about leadership and careerism. I will not agree those are two different things. A career, in the bad sense, is going up the steps of the bureaucratic ladder, licking boots and grovelling. Yes, it’s the path of the majority of the “successful people”. By doing so, I could have become a second secretary, a deputy plant director, a department chief and even a deputy minister. But not a “line supervisor”, a workshop superintendent or a plant director. They placed other people there. Leaders. And they tolerated them, because if careerists got those jobs the whole thing would collapse. And they wanted things to work.

Both Yagodin and Yeltsin tolerated me as a “line supervisor”, absolutely “in the spirit of party traditions”.

There was room for a “different” sort of persons, just as there was in science. Only “different ones” in another sense: they were politically orthodox, but they did not “bend easily”.

As for Boris Nikolayevich [Yeltsin], I can not be impartial. I know all his shortcomings. More than that, in 1999, I considered that he ought to go. Though I did not welcome Putin’s candidacy, and Putin knows this.

But Boris Nikolayevich was a figure. A giant rock. A real Russian tsar with all the pluses and minuses that go with that. He did a lot of good things, and a lot of bad ones too. But once more, it is not for me to judge.

Could one have globally changed Russia more strongly or better than he did? Could it have been done without a “Thermidor” [42] and a new stagnation, without a return of “comrades of the organs” [43]? Without the Chechen war, without the storming of parliament? Almost certainly. But we couldn't. And I don't meant him - I mean all of us. And anyway, what right have I got to judge?

When he and I made each others’ acquaintance, I was 23. And I want to preserve these memories of mine. He's dead now, and I'd rather hold onto those memories.

When Gaidar was in power I did not have ideas about the overhaul of the country as a whole, as a historical edifice, but I did have an idea of how we should be restructuring the economy. I was a supporter of the creation and subsequent privatization, not of individual enterprises, but of large scientific-and-production complexes along the lines of Gazprom [44] (not always of such scale, but analogous in structure). We in government called this an active industrial policy (not only the creation, but also a certain definition of objectives, determination of tasks and priorities).

When my ideas did not “please the court”, I left, having warned that I would make use of the idiotic laws that they were planning to pass. Including vouchers which could be cashed in. It must be said that I said right from the start that this would end badly, that the Czech model was better (they had “closed funds” [45]), but I was told - as always - that I clearly had a selfish interest. Although it wasn't clear what this interest was. I didn't argue with them. You don’t want it so you don’t do it.

But then later - and right here we can talk about the boundaries of the permissible - I made use of any loophole in legislation and always personally told the members of the government which loophole in their laws I would use or was already using - and how.

Yes, this was petty revenge, perhaps it was the sin of vanity. But, it must be noted, they behaved decently: they litigated, filled in the loopholes with new laws and instructions, got angry, however they never accused me of playing dirty. This was our continuing jousting match.

Was I right at the end of the day? I am not convinced. On the one hand, objectively speaking I did succeed in reviving industry. But on the other hand, I was running in circles around a government that wasn't really that bad. On the one hand, of course, I did invest all the money I could in industry. I invested it effectively. I didn't show off and I didn't let those around me do so. But at the same time, I didn't really think about people, about my wider social responsibility, beyond the limits of my team - even though it was a very large team.

Now, as concerns “ruthlessness” during takeovers and redistribution, the question has a funny, implausible answer.

There were at most 20 players in the “major league”. No more than that. As for the number of enterprises involved in the “loans for shares auction” [46] - there were 800. Altogether, we had enough money to buy 70, I would say.

I myself was forced to drop everything else in order to deal with Yukos. To sit in endless business trips, to drop the bank [47], to sell off and give away just about all the enterprises purchased earlier. For example, before this I owned the entire construction materials production industry of Moscow, a series of metallurgical plants, that same infamous Apatit [48].

Sorry - we're having a technical break

This was no joke - it was really hard work. And I wasn't remotely interested in any one else's businesses. We were very rarely in competition with one another. What we were up against was the chaos, the collapse of everything. The criminal gangs left us pretty much alone, as they had no idea what that vast machine consisted of, or how they could get their hands on it. There were thugs, of course. There were risks too. But the time of the “major league” was positively vegetarian compared to today's “raiders”.

For example, when the late Volodya Vinogradov (Inkombank) [49] got in my way in the fight for the oil company VNK, [50] I offered him a payoff, and when he refused, I just pushed up the price at the auction. Which, of course, cost me dearly.

And this was the usual practice: we used PR campaigns, we lobbied, we threw money around. But the police wasn't involved, nor was the criminal underworld. If anyone had been, people would have stopped dealing with him, for reasons of their own safety. And they would be substituted very soon.

It is precisely for this reason that all the efforts of the General Prosecutor’s Office in recent years have not led to convincing results.

In the “major league”, at least until citizens with a “law-enforcement past” joined it, the barrier lay where things could be defended in a court of arbitration (perhaps not a fully independent one, but neither a controlled one, like the Basmanny Court [51] today). A barrier stood also at the level of an acceptable support by officials, who could take your side for their own selfish reasons. But they knew that they would have to defend their position seriously before the Prime Minister and President - and worst of all - before the media!

It means that the today’s level of “cutthroat-ness”, in which people feel complete irresponsible for correctness in their “political position”, no, such a level was difficult to imagine.

I had dismissed an NGDU [52] chief, Fazlutdinov. Maintaining the unlawfulness of the dismissal, he got all the way to the SC RF [53] and won. He received from me more than 40 thousand dollars as a compensation (it was very big money at the time). And my legal department, knowing what losing the case would mean, couldn't do anything.

When he tried it on at Rosneft, which had taken our place, they simply threw him out of court. He came to cry to my lawyer, who took on his case at the company.

No. Looking for loopholes in the law and exploiting them - this was the most that we allowed ourselves. And we got our kicks from showing the government the mistakes they had made in the legislation.

I have to say that it was mainly the 1998 crisis [54] which changed my attitude to society and business. Before that, I saw business as a game, and only that. You need to win, you want to win, but losing is not a problem either. Hundreds of thousands of people came to work every morning to play the game with me for a while and in the evening they went home to their own lives and concerns, not connected with me.

This is very simplified, of course. I had also encountered problems before 1998, but those were problems I was not personally responsible for: it was how things were when I arrived on the scene.

And so: the year 1998. Fun at first - we’ll survive! Then came August. It was a catastrophe. The price of oil was 8 dollars a barrel, and the production cost was 12 dollars. There was no money to pay off debts, and there was no money for salaries. People really had nothing to eat and I was personally responsible. No one was buying oil inside the country and exports were blocked. No one was paying. Banks we owed money to threatened to block our accounts abroad. In Russia banks were not making any payments. Berezovsky [55] gave me a loan at 80% interest per year in hard currency!

I went to the “shift” [56] - the people were not yelling, not striking - they understood. They were simply collapsing from lack of food. Especially young people who didn't have their own farm [57] or had small children. And the hospitals… We had been buying medicine and sending our workers for treatment, but now there was no money. The main thing was the understanding faces. People who simply said: “We didn't expect anything good anyway. Thanks for coming and talking to us. We will endure...” There were no strikes after August 1998 at all.

As a result, after overcoming the crisis, my life guidelines started to change. I couldn't simply be a “director” any more. In 2000 we created “Open Russia” [58].

One more thing about my attitude to the law. I have never considered, and still don't consider, that "everyone was breaking the law" is a justification. If you broke the law, then you are accountable for it. My position is quite different: our legislation (like the legislation of any other country, in fact) has many “blank spots”, areas open to various interpretations, which are dealt with by the courts (especially the Supreme Court). The excesses, or to put it politely, the “selective application of the law” we saw in the Yukos case, were due to a separate, special interpretation of the law which was used for us. An interpretation which is not, and cannot be, applied for any other litigants.

I consider that, on the whole, our laws are normal, no better and no worse than in other countries, but the application of the law and the courts are a disaster.

Now about the ideas and values of my youth.

- “The country is a besieged fortress, so everything must go towards the strengthening of our defensive capability, we are surrounded by enemies”. This has gone, of course, and been replaced by an understanding of the interests of nations and peoples, which don't always (to put it mildly) coincide with the interests of the state and the elite. At the same time - you'll laugh - Russian patriotism is still alive. It is still inside and, for example, will stop me of saying nasty things about my country, even when I want to do it very much.

- The idea of communism as a “bright future” for all has disappeared, leaving a bitter aftertaste at the deceit which has been exposed. After all, behind the beautiful dream was hiding a brazen bureaucratic totalitarianism. Moreover, the very idea of a socialist state, which ensures that society cares for its outsiders (willingly or unwillingly), that every child has a fair chance in life - this idea survives. But it was only after the 1998 crisis that it became an additional mainstay. Before that there was resentment, and the wish to prove that “I can”...

- It took a long time for me to understand the importance of human values. I think I rebelled precisely when they “got through”. This was in 2001 - NTV, and the revolt was forced “to its knees”. But then the question arose at the RSPP: [59] what comes first - property or freedom of speech? After all, NTV’s debts to Gazprom were real. At that point I came to the conclusion that the one can't exist without the other, and I gave NTV 200 million dollar. Which was then used as a charge against me.

I am not a revolutionary. And if they had saved NTV, I would perhaps had have a less attentive attitude towards the rest of the events. In general, I would not have rushed to stand out, I would have left politics to more active “comrades”. As I was used to do, by the way. Here I could not. I felt a stranglehold around the neck.

From this perspective, prison is something more definite, less oppressive. Although, of course, in everything else it’s definitely no picnic.

And, of course, this outcome was not what I had planned. But I was forced into a corner, from which there was no other decent way out. A wise man would have probably avoided such an alternative.

Regarding the “cultural anthropology” project, I’m not convinced to be the best expert in terms of money. I will think about it. No, if I may, let my lawyers have a look at the references.

Once again thank you for your letter.



[28] "People from plants" were industrial workers who were sent to the institute by their employer to receive a higher education; entrance requirements for such students were less stringent than for new high school graduates.

[29] "One Day in the Life of Ivan Denisovich" is a novel written by Aleksandr Solzhenitsyn, first published in November 1962 in the Soviet literary magazine Novy Mir (New World). The story is set in a Soviet labor camp in the 1950s, and describes a single day of an ordinary prisoner, Ivan Denisovich Shukhov. Its publication was an extraordinary event in Soviet literary history - never before had an account of Stalinist repression been openly distributed.

[30] Leonid Brezhnev (1906-1982) was a Soviet politician and the fourth General Secretary of the Communist Party of the Soviet Union. He led the Soviet Union from 1964 until his death in 1982.

[31] Konstantin Chernenko (1911-1985) was a Soviet politician and the sixth General Secretary of the Communist Party of the Soviet Union. He led the Soviet Union from 1984, until his death in 1985.

[32] Yuri Andropov (1914-1984) was a Soviet politician and the fifth General Secretary of the Communist Party of the Soviet Union. He led the Soviet Union from 1982 until his death in 1984. Andropov was personally obsessed with “the destruction of dissent in all its forms”. The brutal repression of dissidents included plans to maim the dancer Rudolf Nureyev.

[33] "Training camps" are military reserve officer training sessions.

[34] "partorg" is short for party organiser, a person appointed by the Central Committee of the Communist Party to work at important places: larger plants, construction sites, kolkhozes, institutions, etc. The position was introduced in 1933. The duties of a partorg were political work and supervision of the execution of plans in production, procurement, etc.

[35] Ivan Silayev (°1930) is a Russian political figure. He served as the Prime Minister of Russia from June 15, 1990 to September 26, 1991 and was also the last Prime Minister of the Soviet Union from September 6, 1991 to December 25, 1991.

[36] Oleg Baklanov (°1932) is a Soviet politician, high functionary in government and industry. From 1988 to 1991 he was a member of the Communist Party Central Committee, responsible for issues of state defense. He is now a scientist and businessman.

[37] The GKChP is the State Committee for the State of Emergency, a group of eight high level officials within the Soviet government, the Communist party and the KGB. They were the leaders of the short-lived “putch” that attempted to overthrow Gorbachev and reinstate the old system in August 1991; their failure hastened the collapse of the USSR.

[38] Anatoly Lukyanov (°1930) is a Russian Communist politician who was the Chairman of the Supreme Soviet of the USSR between March 15, 1990 and August 22, 1991. One of the founders of the Communist Party of the Russian Federation in 1993. He is described by its leader Gennady Zyuganov as the "Deng Xiao Ping" of the party.

[39] The term "Great Patriotic War" is used in Russia and some other states of the former Soviet Union to describe the part of World War II from June 22, 1941, to May 9, 1945, against Nazi Germany and its allies in the Eastern Front.

[40] A zindan is a traditional dungeon-style Central Asian prison.

[41] The NKVD was the secret police organization of the Soviet Union that directly executed the rule of power of the Soviets, including political repression, during the era of Stalin - precursor of the KGB.

[42] The Thermidor reaction was the name of a mutiny on 9 Thermidor of the year II (July 27, 1794) against the excesses of the reign of de Robespierre in France. Leon Trotsky described the rise of Stalin and the rise of post-revolutionary bureaucracy the Soviet Thermidor.

[43] "Comrades of the organs" is an allusion to the way of how the secret police was named in the Stalin period. Nobody dared to directly pronounce the name of the NKVD.

[44] Gazprom is the largest company in Russia and the largest natural gas company in the world. It supplies gas to many countries in Europe, particularly to former Soviet states and countries in Central and Eastern Europe. The Russian federal government acquired a majority stake in the company in 2005. Gazprom has tried to get hold of Yukos, but eventually the best pieces of Yukos could be acquired by Rosneft.

[45] Closed funds are mutual funds having temporarily or permanently suspended sale of shares to new customers, usually due to rapid asset growth.

[46] A "loans for shares auction" is a privatization program that would simultaneously speed up privatization and yield the government a much-needed infusion of cash for its operating needs. Under the scheme, the Yeltsin regime auctioned off substantial packages of stock shares in some of its most desirable enterprises as collateral for bank loans. In exchange for the loans, the state handed over assets worth many times as much. If the government did not repay the loans by September 1996, the lender acquired title to the stock and could then resell it or take an equity position in the enterprise. The first auctions were held in the fall of 1995. By summer 1996, major packages of shares in some of Russia's largest firms had been transferred to a small number of major banks. These deals were effectively giveaways of valuable state assets to a few powerful, well-connected, and wealthy financial groups.

[47] The bank is the Menatep bank. Before he would acquire control over Yukos, Khodorkovsky and his partners used their international connections to obtain a banking licence to create Bank Menatep in 1989. As one of Russia's first privately owned banks, Menatep expanded quickly, by using most of the deposits raised to finance Khodorkovsky's successful import-export operations.

[48] Apatit. In early July 2003, Platon Lebedev, a Khodorkovsky partner and second largest shareholder in Yukos, was arrested on suspicion of illegally acquiring a stake in a state-owned fertiliser firm, Apatit, in 1994. The arrest was followed by investigations into taxation returns filed by Yukos, and a delay to the antitrust commission's approval for its merger with Sibneft. Khodorkovsky was himself arrested in October 2003, charged with fraud and tax evasion.

[49] Volodya Vinogradov (1955-2008) was considered one of Russia's oligarchs, and served as president of Inkombank, one of the largest banks in the 90’s in Russia. In a secret deal Vinogradov offered organized crime boss Semion Mogilevich direct access to the world financial system. Inkombank collapsed in 1998, in the period of the financial crisis, under suspicions of money laundering.

[50] Tomskneft-VNK - when Yukos wanted to take over this oil company, the management of VNK resisted the takeover; it used a technique that was widespread in the late 90’s - making up a fictitious debt for the company. All the same, Yukos succeeded in acquiring the controlling interest. It refused to pay the fictitious debt. Yukos bought out the state's remaining stake in the company at an auction - at a fair market price, as the state later acknowledged.

[51] Basmanny Court - the term “Basmanny justice” refers to the Basmanny District Court of the City of Moscow where Khodorkovsky was taken after his arrest. It entered the lexicon as describing Russia's subservient judicial system, where judges are fired for issuing rulings not to the government's liking and where rule of law is largely absent.

[52] An NGDU is a company (or a structural unit of a company) pumping crude oil and gas on behalf of commercial companies. The NGDU in question was Yuganskneftegaz. Anfir Fazlutdinov was a Deputy Director.

[53] The SC RF is the Supreme Court of the Russian Federation.

[54] The 1998 crisis - The Russian financial crisis, also known as the ruble crisis, struck Russia in the summer of 1998. On August 13 there was a stock market crash site. The shares decreased by 65% and the ruble lost most of its value. The Russians were in panic and massively took changed savings into stable foreign currencies. At the end of the year the inflation was 84% and prices for food and drink had increased by over 100%.

[55] Boris Berezovsky (°1946) is a Russian businessman, mathematician, member of Russian Academy of Sciences, who was accused of numerous crimes in Russia and sentenced to several years of imprisonment in absentia. Berezovsky is currently a political refugee in Britain, which so far has refused repeated extradition requests from Russia.

[56] The "shift" refers to oil workers living and working at remote fields in rotating multiple-week shifts.

[57] A "farm" is actually more of a vegetable garden plot, the harvests from which formed a substantial part of many Russians’ diet during the economic crisis being described by Khodorkovsky.

[58] Open Russia was a non-profit organization, founded by Yukos in 2001. The Foundation wass engaged in the selection, coordination and implementation of projects in education, culture and charity. It also promoted “the dissemination of objective and truthful information about the activities of the Russian government and public institutions”. In 2006, the Basmanny Court of Moscow seized all the accounts of Open Russia.

[59] The RSPP is the Russian Union of Industrialists and Entrepreneurs.

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