more Taibbi on Yeltsin
Well, not exactly. What Americans missed during Yeltsin’s presidency
– and they missed it because American reporters defiantly refused to
report the truth of the matter — was that under Boris Yeltsin the
Russian state itself became little more than a cash factory for
gangland interests. This was corruption on the larger scale, a
corruption of the essence of the state, corruption at the core. Some
of the schemes hatched by Yeltsin’s government were so astonishing
and audacious in scope that they almost defy description.
The FIMACO scandal was a great example. An extraordinarily complex
affair, the broad strokes go as follows: in the midst of a Russian
financial crisis in 1998, Yeltsin’s government received $4.8 billion
of an eventual $17 billion loan from the IMF. Shortly after receiving
that money, three things happened; the ruble devalued, the IMF money
vanished, and huge masses of hard currency mysteriously fled Russia.
IMF officials were subsequently forced to make statements along the
lines of “IMF director Michael Camedessus emphasized that there was
no proof of a link between these operations and IMF loans,” even
though everyone knew exactly what had happened.
Subsequently, huge masses of the IMF money appeared in the accounts
of a tiny Jersey Islands-based company called FIMACO, which had
started with only $1000 in capital. FIMACO then began buying up huge
masses of Russian T-bills, also known as GKOs. The Russian state, in
other words, was stealing hard currency from the West — if you go
back far enough, from you and me — and using that money to
artificially create market demand for its own securities.
Here in America we call that kind of economics a pyramid scheme, and
that is exactly what the Russian treasury was used for during those
years. The state’s coffers under Yeltsin were ritualistically raided
for mass orgies of self-dealing, filtering tax revenues through
tawdry offshore accounts, chiefly using two classes of people –
Westerners and the Russian public — as marks in the con. It is worth
noting that the economic crash that ensued after the theft of this
IMF money (and the collapse of the pyramid-pumped T-bills) left more
than 11 million Russians unemployed, an extraordinary amount when
compared to the less than two million Americans who lost jobs after
the 1929 crash. So we know who the victims were.
The beneficiaries? Well, in 1999 reports surfaced that a company
belonging partially to Yeltsin’s daughter, Tatiana Dyachenko, had
received a payment into its Australian bank account of $235 million,
and that that money had been taken from the $4.8 billion IMF credit.
Maybe that was the carrying charge for the FIMACO transaction, who
knows. The source for that story was Viktor Ilyukhin, a much-despised
“dirty commie,” as one friend of mine described him, but the details
still ring true, if only because we ended up hearing so many similar
stories with similar endings before Borya and his daughters stepped
down from the throne.
In addition to those payments, we also now know that the revenues
from FIMACO’s T-bill machinations were used for all sorts of ill
deeds, including the financing of election campaigns. There are even
stories suggesting that Yeltsin himself received funds for his re-
election from other T-bill scams. Ah, yes — Yeltsin’s elections. The
proof positive that Our Man in Moscow was a “Democrat.” There were
two big ones, the constitutional referendum of 1993 and the re-
election of 1996. About the referendum it is worth saying only that
evidence has surfaced suggesting that that vote was rigged and that
Yeltsin actually lost — but he got away with it, and the vote was
close anyway, so mazel tov.
But 1996 was a historic event. The short version of the story is that
Yeltsin originally looked likely to lose the election to the dreary
communist Gennady Zyuganov. Panicked, Yeltsin’s cronies, in
particular privatization chief Anatoly Chubais, brokered (at Davos in
1995) a deal with the seven chief “bankers” of the new Russia,
gangsters like Mikhail Khodorkovsky and Vladimir Potanin and Vladimir
Vinogradov, who were really Russia’s version of the Godfather five
families. In exchange for their massive financial and media support
(these men owned most of the new Russian media outlets) in the
election, Yeltsin would hold a series of auctions of state properties
called “Loans-For-Shares.”
Essentially, Yeltsin agreed to a sell-off of Russia’s major
industries, in particular the great state oil and energy companies,
for pennies on the dollar. In some cases, Yeltsin’s government even
lent the money the mobsters needed to make their bids. Bank Menatep,
for instance, run at the time by Khodorkovsky, had $50 million in
Finance Ministry funds transferred into its accounts just before it
submitted the winning bid of $100.3 million for the oil giant Yukos,
control of which of course was worth at least ten times that amount.
Yukos eventually grew into one of the most powerful private companies
in the world, but few people know it was born as a back-room favor in
an election season.
Yeltsin, in other words, single-handedly created a super-gangster
class to defend his presidency against an electoral challenge. He had
also restored a system of despotic government-by-tribute that had
reigned in Russia for centuries, even throughout the worst years of
Soviet rule. In Russia there survives a style of leadership dating
back to the local Khans of the East in which the leader is a
pathologically greedy strongman who takes everything for himself, and
then rules by handing out “gifts” to an oligarchy of ruthless
underlings devoted to his political survival. Stalin himself, an
ethnic Georgian, used to physically re-enact this political style by
walking around the room during feasts and breaking off pieces of
chicken or hunks of mutton for his more important guests.
Without me, you don’t eat; with me, you eat good. Americans will
recognize this form of rule because they see it every Sunday night in
The Sopranos. You send the envelope upstairs every week, rain or
shine (had a fire? Fuck you, pay me!), and once in a while the boss
buys you a Hummer. That was Russia after 1996. Loans-for-shares
formalized Russia’s transformation from a flailing Weimar democracy
into an organized mafia state; Boris Yeltsin was the Don.
[…]