Pariah of the homeland

In the book How they blew it: The CEOs and entrepreneurs behind some of the world’s most catastrophic business failures, Tony Goodwin and Jamie Oliver alert the world to the debacle which embraces some business people. In this chapter, they investigate Boris Berezovsky, a one-time golden child of Russia; now a Russian exile

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In the 1990s, Boris Berezovsky had the ear of the then president of Russia, Boris Yeltsin. Having the ear of a heavy-drinking president might not, in retrospect, be that impressive, but with Yeltsin in charge of a global superpower, Berezovsky had influence by association. When Yeltsin’s anointed successor took over, in the guise of Vladimir Putin, Berezovsky was expecting more of the same. He was wrong. Within days of coming to power in 2000, Putin promised to ‘liquidate the oligarchs as a class’. And by oligarchs, he meant the likes of Berezovsky. While this move could be interpreted as a positive, pro-Western European approach to cleaner politics, others argue it was simply a way of clearing the field of other likely pretenders to the Putin throne.

Whatever the motive, Berezovsky took the hint. He fled to the United Kingdom where, perhaps oddly, he was granted British citizenship and from where he changed his name to Platon Elenin. Quite why the British government was prepared to accommodate such a character remains unclear. Questions on the subject to the British Foreign Office are rapidly dispatched with a curt ‘no comment’.

Since 2001, Berezovsky has been provocateur number one, making threats to overthrow Putin, dismissing all manner of criminal allegations and fending off extradition orders to Russia. There remains an uneasy truce, although without doubt the Berezovsky story has further to run.

It is remarkable quite how far Berezovsky has come, but then has fallen. He was born in 1946, into a modest family in Moscow. A bright child, he went on to study forestry then applied mathematics, receiving a doctorate in computer science from Moscow State University in 1983, aged 37. He then worked on information management at the Academy of Sciences of the USSR before becoming a corresponding member of the Russian Academy of Sciences in 1991. His first foray into business was possible under the ‘perestroika’ period of Russian politics towards the end of the 1980s. Its literal meaning is ‘restructuring’, as in the restructuring of the Soviet economy, and these were heady times. Soviet leader Mikhail Gorbachev was behind the move towards ‘demokratizatsiya’, a form of political democratization, and the changes to Russian life would be deep and far-reaching.

One of the key economic reforms was the Law on Cooperatives, enacted in May 1987, which for the first time since Lenin permitted private ownership of businesses in the services, manufacturing, and foreign trade sectors. For those with entrepreneurial ambition, it was a green light.

Berezovsky’s initial business dealings consisted of him and three friends going to West Germany, buying a used Mercedes and selling it on in Russia for three times what it cost. It didn’t take a mathematician to work out that this was good business, and Berezovsky soon returned to Germany and came back with four more cars. There is no doubt that Berezovsky showed a healthy entrepreneurial flair. What is less clear is the means by which he managed to make it so big.

In 1992, he created LogoVaz, the USSR’s first capitalist car dealership. It bought cars intended for export at the state-set prices, then sold them at the much higher prices to Russian consumers. ‘We created the country’s car market,’ Berezovsky said. ‘There was no market then.’ Business boomed.

To achieve this level of business success, Berezovsky proved himself to be an expert political manipulator. In a country where making money was previously illegal, to have created such a massive car dealership business would not have been possible without friends in the right places. Berezovsky certainly had some nerve, but he wasn’t finished with cars. With the Soviet government selling off state assets at knock-down prices and the now wealthy Berezovsky backing Soviet incumbent Boris Yeltsin, he flourished. In the chaotic fire sale of Russian state assets, Berezovsky managed to take ownership of the Sibneft oil company.

The business was created in 1995 by Presidential Decree 872, which ordered that the state’s shares in oil-producing enterprise Noyabrskneftegas, the Omsk Refinery, exploration enterprise Noyabrskneftegasgeophysica and marketing company Omsknefteprodukt all be transferred to Sibneft. Berezovsky, along with fellow oligarch Roman Abramovich, bought the business through various front companies, for US$100 million. It was later valued at US$1 billion. He also took control of national airline Aeroflot, established a bank to finance his operations, and acquired several news media holdings, including stakes in television channels ORT and TV6, and leading newspapers Nezavisimaya Gazeta, Novye Izvestiya and Kommersant.

Here was a real oligarch, straddling the worlds of politics, business and the media. He was the antithesis of what Putin wanted from his country’s businesspeople, and it would put the two men on a collision course. It was by becoming a media baron that Berezovsky started to gain serious influence, and it was his 36 percent stake in Russian public television channel ORT that became particularly important. The channel became an unofficial mouthpiece for the campaign to re-elect Boris Yeltsin. In 1996, Yeltsin’s popularity rating was a miserable 30 percent and his nationalist rival, Vladimir Zhirinovsky, was all set to defeat him. Then along came Berezovsky and his pro-Yeltsin propaganda machine, and the voters gave Yeltsin another four years. With the relief palpable in the capitals of Europe and beyond, Berezovsky was duly owed a few favours. He famously boasted how he was part of a small coterie of so-called oligarchs who owned 50 percent of Russia’s wealth. He was on top of the world, seemingly invincible.

First off he was given the mostly honorific post of deputy secretary of the National Security Council, then he became secretary of a Kremlin group coordinating the so-called Commonwealth of Independent States. Yet with Russian politics come intrigue, dark arts and the sort of plot lines only usually seen in a James Bond film. And it was in these posts that Berezovsky became embroiled in the murky and bloody civil war in Chechnya.

Situated in the extreme south-west of Russia, Chechnya occupies a mountainous region and borders Dagestan, Ingushetia and Georgia. It is a volatile part of the world, and one that has been fought over for centuries. In the 1990s, following the break-up of the Soviet Union, Chechnya went through two devastating wars, with separatists fighting Russian forces. Estimates put the total death toll from the first war (1994–96) at 100,000, and it was double or triple that for the second war (1999–2000). Today the republic is run by Ramzan Kadyrov, the son of former Chechen president Akhmad Kadyrov. Born in 1976, the Russian choice of leader is variously described as ‘brutal, ruthless and anti-democratic’.

Berezovsky admitted that between 1997 and 1999, while he was an adviser to Yeltsin, he had had extensive contacts with Chechen separatist leaders, and that in 1997 he had given US$2m of his own money to a Chechen field commander, Shamil Basayev, when Basayev was serving as Chechnya’s prime minister. Basayev died in an explosion in 2006 – the Russians claimed they killed him, the Chechens said he died in an accidental explosion.

In the fog of war – particularly Russian ones – it is difficult to be sure quite what Berezovsky did or didn’t do, but one thing is certain. When Putin came along as Yeltsin’s successor, he presented himself as very much the tough-guy, pro-Russia and anti the Chechen ‘rebels’. This posturing caught the mood of the public. And publicly, he wasn’t best pleased with the likes of Berezovsky, who was quickly characterized as representing all that was wrong in post-Soviet Russia. For Berezovsky, who had helped Putin in his rise to power, it was quite a blow. Putin reportedly told some of Russia’s big businessmen that they could do either business or politics, but not both. Sidelined, Berezovsky accused Putin of returning to totalitarianism. He also complained that the Kremlin had threatened him with imprisonment unless he surrendered control of television station ORT. He refused.

Soon afterwards, an investigation into Berezovsky’s handling of Aeroflot’s finances was revived. He got the message – and fled to Britain.

It is hard to discern exactly why Berezovsky was prepared to risk everything he had accumulated to that point. All the work, the risks, the time and energy, all down the toilet and for what – to prove to the president that he was as tough as him? Or that he was an intellectual match? Did Berezovsky really harbour dreams of becoming Number One at the Kremlin – or did he assume he was untouchable? If so, he was badly wrong.

But he wasn’t finished. In December 2000, he announced that he was establishing a New York-based, multi-million-dollar organisation, the International Foundation for Civil Liberties, to promote judicial reform and the development of civil society in Russia. It is fair to say that this sort of effort did not go down well with the former KGB agent and judo expert Putin. He must have been furious. Battle lines were drawn. The fact that the British government made Berezovsky a British citizen did not smooth tensions, and ever since Berezovsky landed in the United Kingdom there has been a sort of tit-for-tat exchange of threats, abuses and claims.

Berezovsky was accused in Russia of defrauding a regional government of US$13 million. He strongly denied it. In 2007, a Moscow court found Berezovsky guilty of massive embezzlement while running Aeroflot, and sentenced him to six years in jail. Berezovsky called the accusations ‘a farce’ and again denied it. Also in 2007, Berezovsky told the British Guardian newspaper that he was plotting the violent overthrow of Putin. “We need to use force to change this regime,” he said. “It isn’t possible to change this regime through democratic means. There can be no change without force, pressure.” Asked if he was effectively fomenting a revolution, he said, “You are absolutely correct.” What a statement!

That, it is fair to say, went down like a tonne of Chechen lead balloons in Moscow. Dmitry Peskov, the Kremlin’s chief spokesperson, said at the time: “In accordance with our legislation [his remarks are] being treated as a crime. It will cause some questions from the British authorities to Mr Berezovsky. We want to believe that official London will never grant asylum to someone who wants to use force to change the regime in Russia.” The British authorities kept schtum, at least publicly, and refused to hand over Berezovsky.
Now in his mid-60s, Berezovsky continues to antagonise from the wings, talking up his liberal-leaning credentials and the importance of limiting the power of the state. But while he has long predicted the end of Putin, it does not look like happening any time soon.

Putin has since been succeeded by his preferred candidate, Dmitry Medvedev, in the role of Russian president while he remains very much involved under the title of prime minister.

Of course Putin would be wise not to ignore history. Just as he was appointed by the Yeltsin regime, Medvedev himself is now top man – and who knows what surprises the lawyer president from Leningrad will throw up.

And all the while, Berezovsky lives in the United Kingdom, travels with a retinue of heavies in bullet-proof vehicles and probably fears for his life. He has survived numerous assassination attempts, including a bomb that decapitated his chauffeur. He now has an office in Mayfair and an estate in Surrey, reportedly guarded by former members of the French foreign legion.

It’s not only Russia that bears a grudge against Berezovsky. In 2007, a Brazilian judge issued an arrest warrant for him in relation to a money-laundering investigation. Berezovsky dismissed the investigation as a part of the Kremlin’s ‘politicised campaign’ against him. In 2003, the Swiss financial authorities too investigated him for money laundering. Berezovsky claimed the proceedings were motivated by anti-semitism.

The Dutch authorities were said to have been investigating Berezovsky on similar charges, and then there are the accusations – unproven and hotly refuted – of his involvement in the murder of journalists. He was also closely associated with the former KGB agent Alexander Litvinenko, a man who came to a particularly Russian sticky end, poisoned by radioactive polonium-210.

While Berezovsky has never been found guilty of money laundering, and strongly denies any involvement with the death of Litvinenko and the journalists, these are not the sorts of things most entrepreneurs would wish to be associated with – unless they imagine themselves beyond the law. Berezovsky denies it all, talks of dark plots and claims political motivations are behind the charges.

So, Mother Teresa he is not. But what is he? While undoubtedly intelligent, occasionally charming, and an energetic entrepreneur, he blurred the line between business and politics and set off after both – something that has considerably affected his wealth, and may end up potentially damaging his health.

One journalist referred to him as ‘a charming Machiavellian character whose drug is political intrigue’. Sergei Markov, a political consultant, described Berezovsky as a ‘world-class provocateur… a character from Dostoevsky because he shows how intensive the dialogue can be between the human soul and the devil’. Vladimir Putin described him as – well, we can only imagine.