The Millionaire President of Kalmykia Inc.

Kirsan Ilyumzhinov exudes far more flamboyance than one might expect from a man whose power base is a sleepy Buddhist republic on Russia's southern steppes, where sheep outnumber people 10-to-1.


Like a small crop of Moscow bankers who have gained government posts and influence, Ilyumzhinov was one of Russia's early millionaires before he parlayed his personal fortune into political power.


When he became president of Kalmykia in 1993, he declared the republic independent and disbanded the parliament. After initially lining up with the losing side in the October 1993 parliamentary standoff against President Boris Yeltsin, he shifted his support to the president and abolished the republic's sovereignty claims.


Ilyumzhinov has his detractors. The source of his wealth has never been entirely clear. In 1993, the Kremlin investigated a series of financial scandals in which budget money for the republic disappeared, including one in which the firm Step -- headed by Ilyumzhinov -- received about $70 million set aside for the purchase of Kalmyk wool, most of which reportedly went into commercial bank accounts and later disappeared. The Prosecutor General's Office opened criminal investigations, but they went nowhere.


Among the 320,000 residents of Kalmykia, though, he has retained popularity as a man of grand gestures. During his 1993 campaign, he handed $100 bills to voters. He quickly created the Kalmykia Corp., a national investment company to manage state enterprises. His promise to bring soccer star Diego Maradona to play for Kalmykia never came to pass, but he did manage to bring world-class chess to town as the president of FIDE, the World Chess Federation.





After finishing the Moscow Institute for International Affairs in 1989, you immediately went into business. How did you decide on that path?


After I saw an advertisement in Moskovsky Komsomolets for a management job for a Japanese firm and won the position, my parents called me immediately. My mother almost came straight to Moscow. "Have you lost your mind? Go work for the Foreign Ministry!" she said.


But working at the Foreign Ministry didn't interest me at all. I could already visualize the whole career ladder there, and the thought of creeping up it was so dull. So I went to work for Liko-Raduga. Our company was the first to sell German Audi and Volkswagen cars, not to mention Japanese cars.


At the same time, I started doing business on my own. That's the sort of character I have: I can't sit still for long at all. The Japanese were surprised. Their work day ended at 8 o'clock in the evening, and I would sit until one, two, three in the morning. After six months or so, I already felt that I could work on my own. I thank the Japanese deeply because I manage the way I do because of them: It's perseverance, and it's the principle, "My company is my family."


In 1990, everything was in upheaval and a person could make a fortune quickly. How do you recall that time?


Those were great times. I recall those years now with a great amount of warmth, the same way I remember my two years in the army. Because it was in the army that I had my first taste of business. They put us to work: in a tobacco factory, then in a wine and drinks plant. The ensigns pushed us to make money for the armed forces.


On one hand, those were really hard years, when I first held $100 in my hands, then $200. A tough struggle with racketeers, with the mafia, with different kryshy [protection rackets]. The whole time it was one krysha coming to call, then a second. I would go to one razborka [settling of accounts], then another. Once I had an automatic trained on me; another time I got into a mess, they set our cars on fire. I would go and work things out. It was really rough.


But on the other hand, it was possible then to become a millionaire in a day, and lose your life in one day. They were good times, because it was when both my personality and my business came into being.


You can't compare those months and years of business with what's going on now, when money is just a number that you move from one place to another.





There are a lot of conjectures now about your wealth. When, exactly, did you earn it?


Some say I stole it; others say I didn't. From 1989 to January 1993, I was very actively into business. I founded a lot of structures. I had so many companies that even I lost track of them.


When I became president, it was necessary for me to get out of those companies. Even just now, when I was filling out my tax declaration, I sat and counted the places where my name was still on the books.


In 1993, I counted probably more than 100 companies I had to get out of. Even at that time, I didn't really control them. Somewhere I would be listed as president, in another case as the chairman of the board of directors, general director, chairman of the supervisory committee.


Not long ago there was an incident: A couple of my companions came to me and said, "What should we do, Kirsan?"


"What's this all about?" I said.


"You're our founder, after all. A member of the board."


I told them to strike out my name immediately, or else, God forbid, someone could find out.


Sometimes I'll go into a restaurant, into some kind of tavern; I'll be sitting there and the manager will come to me and begin to ask if I like the place. I'll say, "It's fine, we just came by for some lunch." And then they tell me: "You know, Kirsan, this is one of your creations. You remember, you had such-and-such a structure, then it was divided up, and we came over to this side, that side lost and we won." It turns out that in fact, the restaurant was founded with my money.


My first million dollars, of course, came when I was working with the Japanese. I latched onto anything that brought money quickly, although I screwed up a lot. For example, some academics came to me once, started talking me up, told me they had created a new metal. ""We just need a bit more funding," they said. I ended up financing some kind of laboratory. Then I found out that in the West, corporations finance this kind of research for years and can't turn a profit. I lost a whole lot of money.





While we're on the subject of income, were a lot of people shocked by your tax declaration?


Yes. Last year I earned $1.1 million. I earned that money legally: as the president of Kalmykia, working on creative educational activities, writing a book and delivering lectures. Thanks to those four components, I earned that money.


When I started as president, I tried to continue on as a businessman. But when you're president, you have a lot of worries: There are elections, crops to sow, political parties, conferences to lead, work in the Federation Council and so on. To try to do business on top of that is impossible. A businessman has to be a professional. Anything else is just bribe-taking.


Besides, I was tired of being a businessman. I'd already exhausted myself. It was just money, money, money all the time. I wanted to move on to something bigger. But on the other hand, what is politics? Politics is just big business.





Was the creation of Kalmykia Corp. your first presidential project?


When I came to the republic, Kalmykia worked 95 percent on government subsidies. Our entire economy revolved around sheep, but wool hadn't been sold in years. So I came and said I wanted to create a corporation. I'm a businessman; I'm a capitalist. I'll survive without Kalmykia, but you won't survive without me because you don't know the science of making money. So consider me the president of Kalmykia Corp. And the Central Bank chairman is the chief accountant.


And during privatization, I didn't bargain away our strategic industries. Kalmykia Corp. is a basic holding company. As the state, we have handed over to the management of this corporation the shares in our strategic holdings: the fishing industry, caviar, meat plants, oil, machine building. But now, we're auctioning all of this off a little at a time and giving it over to entrepreneurs.


And all the little stuff -- restaurants, cellar places -- all this I gave away practically for free. Because the middle class is the foundation for any state.





You use market and capitalist methods in governing Kalmykia. How successful is a Western economic model in a republic with a patriarchal Asian social system?


I wouldn't just speak about cold Western reasoning vs. patriarchal Asian tribal relations. I would also introduce a third element here -- the cosmos. Before I make any decisions, I usually consult with the cosmos, with God; this is also one of the aspects of decision making at the presidential level.


I am not ashamed to say that in addition to economists, my staff includes fortune-tellers and astrologists. We aren't alone in this world. We exist in an expanse where there are other civilizations, other dimensions.


If you're speaking of models, I have studied the experience of the Asian Tigers. I've gone through all the courses, gotten all the diplomas on that subject. I've just started writing my doctoral dissertation on ASEAN [the Association of South East Asian Nations].





Which of the characteristics that you developed in business help you most as a politician?


"Make good on your word." You said it, you do it. If you said the goods will be there, then they'd better be there. Die doing it, sell you wife or your home, but you'd better do it.


Then honesty, openness. In business, everything has to be open. If you start a deal, don't hold back 1 or 2 percent of the commission. Sooner or later you'll be found out. You always have to play with your cards on the table. Honesty is the greatest ruse.





It's common to wrap up with a question about hobbies. But as far as I understand, chess is more than a hobby for you.


Chess has helped me very much in achieving success. Chess is assiduousness, it is intellect, it forces you to think five moves in advance. All of my success in business is from chess. Because I sat for hours and contemplated -- what will happen if I do this, or that. In politics it's the same thing.


Chess has allowed me to become acquainted with lots of people. [Prosecutor General] Yury Skuratov, the entire leadership of Uneximbank, beginning with Volodya Potanin, they're all avid chess players.


Everywhere you go it's always: "Aha, Kirsan, let's play a quick game of chess." After all, to play with the president of FIDE is an honor.