Russians

by Gregory Feifer

  Oligarch Roman Abramovich, the owner of Britain’s Chelsea Football Club, lost billions of dollars in 2008, but not before buying a Lucian Freud painting for $33 million and a series of three paintings by Francis Bacon for $86 million. The driving force behind his affection for art was his new girlfriend, thirty-two-year-old socialite Daria Zhukova, a former model and the daughter of another billionaire, Alexander Zhukov, an economist who was also a deputy prime minister. Zhukova launched Moscow’s newest contemporary art gallery, called Garage, which is housed in a massive avant-garde bus depot built in the 1920s.

  Marat Guelman, who is sometimes called the entrepreneurial leader of Russian avant-garde art, says the publicity surrounding the opening of Garage helped sire a new appreciation for contemporary art. Not long ago, Guelman, who wears a scrappy beard and publishes a literary magazine called Pushkin, was using his selling skills as a public relations consultant to Vladimir Putin’s Kremlin. Guelman’s bohemian-chic, exposed-brick-wall apartment in an upscale pre-Revolutionary Moscow neighborhood serves as an informal gathering place for artists who, carrying on an enduring Russian tradition, often drop by unannounced for coffee or vodka. Sitting there, near a life-size female mannequin encrusted in a glass mosaic like a giant disco ball, he told me that seventy years of socialism left many bare walls that would-be oligarchs are now eager to adorn. Although a handful of top collectors know more about art than he does, most are unsure of themselves. “French collectors are delighted to discover new artists and buy their work cheaply. Russians tend to buy expensive pictures by names they learned in grade school.”

  How truly different are Russia’s rich from others in the world? An old joke about a man who’s just bought a Christian Dior tie still applies. Spotting another Russian wearing the very same tie, he approaches to ask how much he paid for it. “A hundred dollars” is the proud reply.

  “Ha! I paid two hundred.”

  As Guelman says, extravagance is partly a reaction to the decades of Soviet austerity, when wallets and purses were immediately emptied whenever their owners spied something worth buying in the knowledge that another chance would be unlikely to materialize. But over-the-top spending is more than that in a country whose tsars built some of the world’s most lavish palaces—as well as the world’s largest cannon and bell, both of which were too big to function. Aliona Doletskaya sees it as a reflection of national character. When I visited the former longtime editor of Russian Vogue, who is called Russia’s Anna Wintour, in the magazine’s offices in a nineteenth-century building several blocks from Nobu, we sat on clear plastic Philippe Starck chairs. The admirably composed fiftysomething blonde with shoulder-length hair spoke in flawless British English that edged toward whispers, as if she were confiding great secrets.

  “For years, I remember hearing ‘New Russian, New Russian, New Russian,’ ” she said of the disparaging term for the country’s nouveau-riche. “Suddenly I realized that’s what I am, a New Russian.”

  The doyenne of fashionable Muscovites and one of their chief arbiters of taste said the thick gold chains and cheap red sport jackets favored by capitalist thugs during the years following the Soviet collapse are long gone. Now the very wealthy spend for “pure entertainment.”

  “Russians love spending money. The generosity of sharing fun is in our blood. Being able to spend without thinking is a gift. You invite as many people as possible to your house and throw everything you’ve got on the table.” Spending with abandon is called gussarskoe, meaning “like a hussar”—the dashing, fast-living, hard-drinking imperial cavalry officer. Status symbols are all-important for satisfying that impulse. “Very expensive, very unique cars, houses in Sardinia, in England… Russians invest a lot in houses. And in yachts for cruising the Mediterranean, they love them,” Doletskaya said.

  The main preserve of such lifestyles is Rublyovka, a suburban region where Moscow’s wealthiest have built sprawling mansions behind high metal gates. Once a zone for dachas of the Soviet elite, the area is now home to the compounds of oligarchs and ministers—as well as Putin, who travels there along the Rublyovo-Uspenskoye Road, for which it’s named. Closed to most cars under communist rule, the narrow way winds through a dense fir forest fronted by an endless stretch of billboards advertising French real estate and Philippine maid services. In the formerly rustic settlement of Zhukovka, a Gucci shop neighbors a Lamborghini dealership. When I interviewed the billionaire vodka and banking magnate Roustam Tariko nearby, it was on a bench on his front lawn, within spitting distance of one of his cars, a million-dollar Bugatti Veyron. His apparent disregard for it as it stood baking under a hot summer sun seemed typically cavalier.

  “Those bastards,” complained Gera Kiva, an elderly cousin of my mother’s who worked for forty years as an engineer and teacher of automation technology before hyperinflation in the 1990s wiped out his life savings. Although he welcomed the collapse of communism, he joined the great majority of Russians who became vocal supporters of Putin, under whose rule the oil boom created most of Moscow’s countless millionaires and billionaires. He also took to dismissing Western criticism of the president, including mine, as the reflection of a desire to see Russia back on its knees. Now he’s unhappy, although not yet to the point of dissent. So are the very many Russians who openly rail against the corruption that chokes daily life and its beneficiaries in the Kremlin, whose behavior they call bezpredel, “without limits.” It’s virtually impossible to ride in a Moscow taxi without hearing the kind of complaints that used to be whispered only in the privacy of Soviet kitchens.

  “Those greedy bastards,” Gera repeated with not so much as a fleeting thought that he or anyone like him can do the slightest thing to counter them. “They stole my country.” Still, Gera’s lucky because he and his wife, Lucia, are supported by their two sons, who work for private companies and live in large suburban houses they recently built for their families. Many others often speak, as they’ve been doing since the collapse of communism, about a new revolution waiting just around the corner.

  The Bolshevik Revolution was supposed to have eliminated class conflict. Having condemned egalitarianism as “petit bourgeois,” Stalin characterized Soviet society by 1936 as “two friendly classes and a layer”: workers, peasants and the intelligentsia. He failed to mention its most privileged members, the communist elite, which he cultivated by abolishing limits on Party members’ salaries and instituting a graduated pay scale, along with perks that would help keep subordinates loyal. Although some later argued that the nomenklatura, as the officials who ran the USSR came to be called—the term literally means a list of posts—could not be considered a social class because the Party drew its members from all groups, historian Michael Voslensky nevertheless called it a “concealed class.” Describing the various Party bosses and managers who lived in sprawling apartments and relaxed in large dachas behind high walls to which they sped in specially reserved highway lanes, he estimated their numbers at around three million, roughly 1.5 percent of the population, and illustrated the great lengths to which the coddled elite hid its private use of supposedly public property.2

  It is just as improper for a nomenklatura official to own his own dacha as it is to own his own car. Infringement of this unwritten law would expose the offender to being suspected of being a free-thinker or being not very sure of his future in the nomenklatura. Consequently a head of desk who buys a dacha will do so in the name of his parents; if he buys a car, it will be in the name of one of his grown-up children or his brother. This is his way of avoiding any suspicion of having petit-bourgeois leanings, while enlarging his share of the collective property of the nomenklatura.3

  Voslensky mentions a telling joke. One day the mother of a Central Committee official who lives on a collective farm visits her son in Moscow. After staying in his luxurious apartment, enjoying his opulent dacha and eating excellent meals prepared from food bought in special stores, she nevertheless wants to return home as quickly as possible.

 
“What’s the matter, Mother?” her son asks. “It’s lovely here; don’t you want to stay?”

  “It is lovely,” she replies, “but very dangerous. What if the Reds come?”

  If Russia’s current one percent aren’t like you and me, to paraphrase F. Scott Fitzgerald’s celebrated statement, they’re also unlike the rich of other countries. Despite the desire to show off by spending in a very big way, the instinct for self-preservation still compels most of them to hide the full extent of their wealth. Extravagant acquisitions made in the names of spouses and children remain common. And although the surge in art sales helped buoy the local art scene for more than a decade, purchases began dropping off around 2010 because most collectors—including more than 80 percent of Guelman’s onetime clients—now live abroad.4 Those who make up an ever-larger share of the rich back home—officials and others whose fortunes depend on their connections to the state—tend not to collect art because they’re more interested in hiding their no doubt ill-gotten gains instead of displaying them on their walls. In 2012, soon after Guelman moved his gallery to Vinzavod, or “wine factory,” a sprawling nineteenth-century industrial space that’s become a center of the city’s art world, he announced he was closing it. Others followed suit.

  Fighting the urge to display wealth is an increasingly good idea for everyone in Russia. With the Soviet authorities, under whom hiding became its own kind of art, swept away, the danger today often comes from the tax police. Masked officers sometimes raid the offices of political critics, possible rivals and lesser threats to Kremlin favorites. Almost always, the offending parties’ real dereliction is to have shown themselves to be insufficiently loyal to the Kremlin or allowed themselves to be perceived as such. The danger of arbitrary punishment from the authorities remains a key aspect of life for Russia’s tycoons. In a country that runs on crime, where law enforcers are believed to be among the most corrupt officials, fear may be the only effective way of putting limits on lawlessness.

  Fear has also been used to carry out a redistribution of wealth—which is to say back under the control of the state, where Putin is chief among a collection of officials whose roles more closely resemble those of Mafia dons than public servants. An American investment banker in Moscow characterizes the newest rich as “thugs” who demand kickbacks of up to 70 percent in all their deals. “We now consider 40 percent average,” he told me under the condition I wouldn’t name him. “Everything’s being sucked out of the economy because they think only about what they can deposit into their offshore bank accounts before they lose their jobs, or worse.” When the government quietly ordered managers of Russia’s state energy companies to declare their unofficial incomes and assets along with those of their subordinates several months before Putin’s reelection in 2012—an indication of how bad the situation has become—many panicked but proceeded to reveal as little as possible. Putin later launched a drive to “nationalize Russia’s elite”—a common description of his purpose for enacting regulations passed in 2013 that bar officials from owning foreign bank accounts and other assets. The new rules put even the outwardly obedient under threat.

  Estimates for the amount illegally spirited abroad from Russia each year reach above $70 billion. One especially well-placed source put the 2012 figure at $49 billion, or 2.5 percent of the GDP. Shortly before stepping down after eleven years, the usually taciturn Central Bank governor revealed his calculations of so-called capital flight, saying more than half was accomplished by one unnamed “well-organized group of individuals.”5

  His description of “shady operations conducted by firms directly or indirectly linked to each other by payments” appeared to back widespread circumstantial evidence that officials are routinely involved in massive underhanded schemes, such as the $230 million tax fraud uncovered by the now well-known lawyer Sergei Magnitsky in 2009. He said thieves used corporate seals and tax documents that police had confiscated during a raid on a foreign investment fund in 2007 to hijack several companies it controlled. Impersonating company employees, they pleaded guilty to crimes for which the company was subsequently fined in order to make it appear unprofitable. The three companies then proceeded to apply for the largest tax refund in Russian history, which was granted the same day. Arrested by the same police investigators whom he had exposed, Magnitsky died in jail in a pool of his own urine after being tortured and denied medical care for failing to recant his accusations. Tracking some of the money, the independent newspaper Novaya Gazeta—protected partly by its high profile and influential supporters—later linked officials from a tax office Magnitsky had accused of taking part in the fraud to the purchase of luxury apartments in Dubai and the United States.

  The tension between the need or desire to display wealth and power and the wish to remain safe by obscuring it pervades Lukoil, a company that operates gasoline stations in many foreign countries, including the United States, where the opening of the first station in 2003 sanctioned an appearance by Putin. Founded by Vagit Alekperov, Russia’s third-richest man at the time I spoke to him—although estimates of oligarchs’ fortunes cannot be fully trusted—Lukoil has its headquarters on an old, tree-lined boulevard in Moscow’s center. Amid the street’s neoclassical architecture, Lukoil’s concrete-and-glass building, constructed during the final Soviet years and later given to the company, is something of an eyesore.

  Although it may look odd in a city where glamour seems to be everything, Lukoil’s workaday image has been a vital factor in its success. The Kremlin’s drive to control the country’s energy industry, by far its largest source of wealth and power, has led to dispossessing and even imprisoning once high-riding tycoons. Nevertheless, Alekperov’s Lukoil—Russia’s largest private oil firm and number two overall, after state-controlled Rosneft—remains hale, if not entirely unscathed.

  The company headquarters differ in other ways from typical office buildings. The security measures require visitors to spend half an hour passing through numerous checkpoints manned by a private army of guards. I was divested of my camera, cell phone and even my passport before a spokesman escorted me to the president’s executive suite, where more men wearing berets and earpieces that gave them the look of special-forces troops waited. My final destination was a large anteroom staffed by a single saccharine receptionist. Behind it, a small, wood-paneled room offered sofas, armchairs and a wall decorated with photos of Alekperov with Putin, Prime Minister Dmitri Medvedev and the late Orthodox Church Patriarch Alexiy II.

  The rise of Russia’s leading oligarchs to pinnacles of wealth and influence—at levels barely imaginable to most people during the lawless, literally murderous free-for-all 1990s—has made them legendary. Together with the envy and dislike the captains of industry prompt in their fellow Russians, they also earn grudging respect for their often relaxed, if haughty, personas—reminders that they were once like everyone else. They are Russia’s biggest superstars, and the expectation of meeting one made me nervous as well as excited.

  An automatic door opened and in walked the CEO. Ruggedly handsome, with close-cropped gray hair that matched the color of his suit, Alekperov had the brusque manner of a self-made man. Unlike most other oligarchs, who knew little about industry before acquiring their assets in the mid-1990s, he started by dirtying his hands as an oil-field worker.

  Born in the Azerbaijani capital, Baku—the world’s first oil boomtown before the Revolution of 1917—eighteen-year-old Alekperov followed in his father’s footsteps by finding work in the Soviet republic’s Caspian Sea oil fields. In the 1970s, he moved to the forbiddingly rough territory of western Siberia, where major new oil fields were being tapped in endless expanses of steppe and virgin forest. By 1990, he’d worked his way up to first deputy oil minister. His job overseeing all Soviet oil production provided an ideal position for putting together what would become the country’s top oil company from formerly state-owned fields and refineries. Visits to the American company Chevron, Italian Eni and other foreign oil giants ope
ned his eyes to possibilities back home, where, he said with characteristic understatement, he saw the Soviet industry’s “problems.”

  Alekperov persuaded Yeltsin, then still head of the Russian Republic, to give him control of three of its biggest oil fields. Lukoil took its name from the three—located near the Siberian towns of Langepas, Urai and Kogalym—which Alekperov and two others built into a vertically integrated company that Alekperov privatized after the Soviet collapse the following year.

  “I see the oligarchs positively,” he told me. “They spend most of their lives working, and they’re very responsible to their shareholders and workers. They make unique investments in Russian industry and in the United States, Europe and Asia.” However, Alekperov draws a distinction between Lukoil and other major companies run by more visible oligarchs who borrowed huge amounts during the great oil boom in the first decade of the twenty-first century. “Our heads weren’t spinning from high oil prices,” he insisted of his company’s conservative investment strategy. As a result, Lukoil suffered significantly less during the financial crisis of 2008.

  Far more threatening is the arbitrary power Putin returned to the hands of the state officials whom fleets of black Audis and Mercedes ferry around town. Although entrepreneurs continue earning immense fortunes, it’s now at the pleasure of those ruling bureaucrats, who tend to see private business as an extension of the state, an attitude nowhere more evident than in the rise of massive state industries run by Putin’s former KGB cronies. Sergei Chemezov, who served with him in the East German city of Dresden in the 1980s, is now chairman of state-run Russian Technologies, a massive defense-industry umbrella company that includes the country’s arms export firm Rosoboronexport; Avtovaz, maker of the Lada automobile; and Black Sea resorts. Another former KGB officer named Igor Sechin is CEO of state-owned Rosneft, the country’s leading oil company. Widely believed to be the boss of bosses, Sechin, Putin’s former deputy chief of staff, heads a powerful clan of siloviki, “strongmen” who run the country’s security services. Many saw him as the country’s second-most-powerful man after Putin. Although Sechin left the government after Putin returned to the presidency in 2012, he retains great influence because in addition to heading Rosneft, he is a board member of the main state energy holding company, Rosneftegaz.