Chubais and the Privatization of History
- By Matt Bivens
- Apr. 26 2004 00:00
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Consider the April 16 interview, "Chubais rejects call to repent Russia sell-offs." Here's how the FT sums up the whole ball of wax:
"Mr. Chubais was one of the masterminds behind a privatization scheme, which put the vast majority of the country's natural resources into the hands of a few politically connected oligarchs ... "
So far, so good. But don't miss the kicker:
"... in return for the loans they extended to the government and support they had lent to former President Boris Yeltsin when he struggled to beat the Communist candidate in the 1996 presidential elections."
Arrggh! Stop saying that.
It's obviously not true -- it doesn't even make sense. It didn't make sense years ago, when young-energetic-reformer apologias began proliferating, and it doesn't make sense now.
Assume you're Boris Yeltsin; assume your government needs "loans" and you personally need electoral "support."
Fine. Borrow money.
The Yeltsin government asked for and received $10 billion in a three-year International Monetary Fund loan deal, with money explicitly "front-loaded" to arrive for the '96 campaign.
Compare those billions to the paltry millions in "loans" against oil companies: $88 million for 40 percent of Surgutneftegaz; $170 million for 38 percent of Norilsk Nickel; $130 million for most of Sidanco; $250 million for 5 percent of LUKoil; $309 million for most of Yukos; $100 million for most of Sibneft.
The price paid for Norilsk Nickel -- set at an "auction" run by (and won by) Vladimir Potanin's Uneximbank -- was roughly equal to one month of revenues from the mines. (Would now be a good time to say how personally pleased I am to see that Potanin has bought into this paper's parent company?)
But leave aside the manically hilarious laughter at these crazy low prices and consider: Yukos, LUKoil, Sidanco, Surgut, Norilsk, Sibneft -- all of those dubious "auctions" brought in "loans" of just barely more than $1 billion.
If the point was some extra walk-around cash for the elections, the Kremlin could easily have borrowed a billion or three on international private markets. And it wouldn't have lost control of all of its collateral to a new class of corruptly minted oligarchs in the process.
In fact, as has been well documented -- by the FT's own Chrystia Freeland, among others -- all the talk about "loans for shares" was designed to be confusing. It was necessary to hide from the public what was really happening: the theft of natural resource companies, organized by Chubais for friends of Chubais.
But what about the "support?" The oligarchs didn't just get the oil companies for free -- they also paid for them by helping Yeltsin get re-elected, right?
Wrong. First, they would have had to do that anyway: They were worried about their own relatively modest businesses long before Chubais gave them oil and metals companies to worry about, too.
Second, oligarchs did not have the chokehold over the media that they would later come to enjoy; and Moscow media people were already unanimous anyway in opposing Communist Gennady Zyuganov.
Third, Chubais gets a free pass every time he whines how "We did not have people's support for the painful reforms." But as long as he was giving out oil companies for free, there was no reason not to subject them to the "voucher privatization" scheme -- one-share-per-Russian. And that would have been hugely popular.
Matt Bivens is a former editor of The Moscow Times.