Red Wolves & White Knights

by Peter Kysel

  “Like what?”

  “11 2 ground attack aircraft, 15Mig fighters, 16Tu bomb­ers …”

  “Ok, but so what?”

  “After the war the Progress Plant in Kuybyshev made ballis­tic missiles and the city became the missile shield centre for the USSR. I wrote reports about it all when I was your age, but I never really believed that the plant existed.” Michael decided not to ask for details and changed the subject.

  “Samara sounds intriguing, is it still a secret city?”

  “It was opened up recently, when its name was changed back. It also has an interesting bit of Czech history for me.” Michael came back with a suggestion.

  “The visit to the car plant has been arranged, but Tolyatti is a dump, so why don’t we stay in Samara. The Bristol hotel it close to Stalin’s bunker, which I definitely want to visit, and I’ll combine the trip with some research into my family history in the region.”

  “Samara remains a top military city; we’ll be very exposed and expect to be shadowed.”

  “Ok, see you in Nizhny Novgorod” ……

  On a walk through Strukovsky park in Samara, we passed a young man lolling on a bench. Michael whispered

  “Surprisingly, he’s an Englishman and some sort of aca­demic. I spoke to him when he was hanging about outside the bunker earlier, but he was very curt.” The Englishman was slim and dishevelled, appearing to be either drunk, or asleep. Could he be our shadow? We turned towards the Volga embankment and maintaining a safe distance from possible eavesdroppers, walked back to the hotel.

  “This afternoon, I’ll drive you to the Progress Plant and we can visit the museums, to satisfy our curiosity.”

  “What’s your Czech history link?”

  “In February 1918 the Bolsheviks agreed that the Czechoslovak Legions, representing some hundred thou­sand soldiers, could evacuate Russia via the Trans-Siberian Railway. Three months later Leon Trotsky agreed to sell these soldiers to the Germans, to be shot. He ordered the Red army to arrest the legionnaires on 14th May 1918.”

  “And, the Czechs were overwhelmed?”

  “No, three weeks later, the Legions overthrew Bolshevik rule in Samara and re-installed the elected Constitutional Assembly. By September the Czechs had taken control of the 6000 mile long railway line from Penza to Vladivostok.”

  “Incredible story. Tell me more at dinner.”

  The long, narrow restaurant at the Bristol was almost empty. As was to be expected, two stocky men were sitting a couple of tables away, pretending to be reading newspapers, when Michael joined me with his news.

  “I found out that Lenin ordered the secret police to kill my great-grandfather Michel Alexandrovich together with his secretary Nicholas Johnson. They were shot on 13th June 1918 in the woods outside Perm. It was a few days before the Czech Legions occupied the city and chased the Bolsheviks out.”

  “So, the Czech and your personal history are mixed up. What’s your plan?”

  “I’m going to try and find the place where they were shot, outside the village of Motovilikha, on the Kama river.” We fell silent, till Michael asked

  “Tell me more about the Czech Legions in Russia.”

  “Your family story was repeated in Yekaterinburg, a month later, when the Bolsheviks executed the whole imperial family just ahead of the Legions arriving in the city.”

  “Considering their relatively small size, the Czechs had a pretty strong impact.”

  “The Legions helped to recover the imperial gold reserves in Kazan in August 1918 and handed them to the Provisional government in Omsk as the legitimate succes­sor to the Constitutional Assembly. All efforts to unite the anti-Bolsheviks crashed when, on 18th November, Alexander Kolchak staged a coup, declaring himself the dictator and admiral. Kolchak stole the imperial gold and launched a policy of White terror against the population under his control.”

  “His reign must have been catastrophic for the White Russians,”

  “Yes. He was a fool. While the strength of the Red army grew to 3 million, Kolchak’s forces disintegrated. He was abandoned, in his gold-filled train on the Trans-Siberian Railway, even by his own bodyguards.”

  “That’s fascinating, but the Czechs controlled the railway?”

  “Yes, but Czechoslovakia was declared independent on 28th October and the legionnaires just wanted to get out of war-torn Russia. They handed Kolchak with all his gold, to the constitutional government that he had origi­nally betrayed. The Legions then moved on to Vladivostok, which they evacuated in September 1920, and sailed home to Europe.” Michael was taking notes.

  “What a fascinating lesson in Russian history at the time when most of my family was executed.” I leaned over and lowered my voice

  “That dishevelled Englishman came in. He is sitting all alone but keeps looking at us. I nodded to him, but he didn’t respond. Maybe he’s shy. Shall we invite him over to our table?” Michael turned around and nodded to the young man, who didn’t respond and moved his chair back.

  “He’s getting up, I’ll go over to him,” A minute later Michael returned

  “He brushed me off when I invited him to join us and he’s left the hotel.” One of the men at the nearby table stood up and followed the young Englishman out.

  “Our English shadow has left the restaurant with his Russian shadow. There are shadows all over Samara,” I commented, and Michael added “Samara is a city is full of secrets. It’s a great setting for a spy thriller.”

  “I wonder what that English guy is doing here. It’s strange that a guy like that is allowed to stay.”

  “I guess that he is either teaching his shadows English, or he’s in training to be their next Gagarin. Let’s eat.”

  #

  Davos

  The political future of Russia was about to be designed at the World Economic Forum (WEF) in Davos in January 1996. Presidential elections were scheduled for June. Yeltsin was trailing badly in the opinion polls. The most popular candidate was the Communist Gennady Zyuganov. The international political situation was on a knife edge.

  If Zyuganov won the presidency, the whole of Eastern Europe would be destabilised. The Russian election cam­paign coincided with the crisis in the Czech financial system. Was this a coincidence?

  The Russian delegates turned the Swiss ski resort into a campaign city for the most important election in their country’s history. The director of WEF, Macha Levinson, sought me out in the foyer.

  “I have a pass for you to attend Zyuganov’s meeting.” The communist candidate had been given star billing at the forum. Passes to his meeting were impossible to come by. Four years earlier Zyuganov had backed the putsch against Gorbachev. In Davos, the same Gennady stood up to defend privatisation and the sanctity of property rights in Russia. The audience listened in stunned silence. His speech was the equivalent of the pope selling Catholic churches or announc­ing his marriage to a Muslim. Macha turned to me.

  “You understand the Russian. Is he telling the truth?”

  “No. This is history repeating itself. Zyuganov’s hero, Lenin, made the identical speech in 1921. Bolsheviks facing the starving masses, made a tactical retreat and Lenin restored private enterprise in the USSR. When the famine receded, private entrepreneurs were shot, and all private property was confiscated.” Macha thought for a moment and then responded

  “For seventy-seven years communists ruled, only allow­ing state ownership. By advocating privatisation today, they are adding credibility to Yeltsin’s reforms.” I was encour­aged by Macha’s observation.

  Michael Johnson arrived at Davos with Boris Berezovsky with more news.

  “Chubais had a meeting with Borby, to convene the magic circle. They are going to finance Yeltsin’s re-election.” Davos was a far better location than Moscow, to learn about the presidential campaign.

  “Are Khodorkovsky, Vinogradov, and Potanin members of this circle? What have they promised?”

  “They are, and about twenty others. Chubais is sign�
�ing them up to the Davos pact. They are committing to give unlimited financial support to Yeltsin. Their pledges have reached a billion dollars.” We went for a walk along the Promenade towards the banks of the Davosersee. Newspapers carried headlines about the inevitability of Zyuganov’s victory.

  “Yeltsin’s victory will open up business opportunities. I suppose, I should take advantage of this” mused the twen­ty-seven-year-old Michael. I turned my attention from the beautiful snow-covered mountains

  “Yeltsin’s win would be a huge boost for eastern Europe. Generally, the rouble will remain a hopeless currency and the Russians will siphon money out. They’ll seek to protect their wealth in the West.” Michael had an idea.

  “I have enough contacts to form a corporate finance boutique, which could advise Russian capitalists on how to make foreign investments through London.” I agreed

  “You should start ahead of the election and establish relationships with lawyers, accountants, bankers and estate agents. I’ll give you a list of my contacts.”

  “I’ll organise some meetings and fly straight from here to London.”

  My own conclusions from Davos were different. On the return flight to London I scribbled a few notes

  Regardless of the election result, it would be reckless for Govett to manage Russian investments out of London. Investments in Russia can only be successful, if they are managed by locals, with sharp elbows. Their management style would conflict with Govett’s compliance rules. Russians will view foreign investors as vultures, who are out to steal their national assets. They are bound to retaliate against these vultures.

  I presented these recommendations to our board of direc­tors in London. It was agreed that it would be too expensive to set up and staff a Moscow office. I assumed that the idea to create a Russia fund had been shelved.

  Secretly, our deputy chairman, an Asian specialist, per­suaded clients to set up a fund to invest in the former Soviet Union. Despite his ignorance of the country and its language, but brimming with confidence, he decided to manage this new fund from our offices in London. Only a handful of people knew about it and I was not one of them.

  #

  Nina

  Nina Smirnov was a lawyer, working for Gosbank in Moscow, when she was introduced to Boris Berezovsky and his former assistant Michael Jackson. The two of them came to Gosbank to discuss currency transfers.

  Michael was smitten by Nina. Having exchanged business cards, he invited her to a ballet at the Bolshoi theatre and supper afterwards. The first date went well, and they began seeing each other. When Michael and I met in London, he gushed,

  “She is so bright. We get on really well. She is pretty and great company and unlike most Muscovites, she is worldly. I am definitely in love with her.” It was a startling admis­sion. Michael had spent six years in Russia and had had casual relationships. I had met some of his girlfriends, but this declaration was serious. I asked him to tell me more.

  “Nina comes from St Petersburg. She studied law at Leningrad University. One of her professors was Anatoly Sobchak. Do you remember him? Didn’t he open the investment conference in 1992? Mayor Sobchak invited Nina to work for him at the town hall in the international department.” It was a coincidence, so I said,

  “Nina was probably at the same conference as us…” and Michael interrupted,

  “Yes, she told me, she was, but unfortunately, we never met. I don’t understand how I could have missed her,” he laughed, and I asked,

  “Have you told your parents?”

  “Yes, and I am taking her on holiday to South Africa over Christmas.”

  “And her parents?”

  “Her mother is an artist. She’s a well-known painter in St Petersburg. Her father runs electrical shops. They don’t seem to mind that Nina is going out with a foreigner. They have been perfectly pleasant to me.” He paused and added

  “Nina’s English is perfect. She was posted abroad by Gosbank. She even worked in London.”

  “I hope that you’ll introduce me to her soon” I responded and changed the subject to talk about our holiday in South Africa. In July 1996 Yeltsin won the election and the com­munist threat receded.

  #

  Havel in 1997

  Signs of an impending Czech financial crisis were multiply­ing. I went to Prague in the spring of 1997 to see if part of the system could be restructured and rescued. My father, who for me represented the conscience of the nation, was resolute.

  “People have been fooled. They are aware of it and under­standably very angry because the financiers betrayed their trust. The small banks are imploding. Czech finance is a stinking bog. Don’t get sucked in. Our family name would be mud. It’s too late for any salvage.”

  “What can be done in this swamp?” My father was uncompromising.

  “Nothing. Wait for the collapse. Don’t try and rescue the thieves.”

  I went to see others in Prague, to work out if we could find a resolution. The regulators of the financial system denied the existence of any major problems. Politicians claimed that they were not qualified to assess them, bankers refused to discuss them and all the investment managers wanted was to sell me their privatisation funds. The clock was ticking. It was depressing. I began to fear that the forthcoming crisis could undermine the results of all the earlier reforms.

  I went on my favourite walk through Petřín Park, climbing the hill to a white marble statue of the Virgin Mary in Exile (panna Marie z exilu) to see the view and to reflect. The statue’s history appealed to me. It had been commissioned by Czech exiles in 1949 and kept at a Czech abbey, near Chicago, throughout the communist era. After the res­toration of democracy, it was installed by the wall of the Strahov monastery, its position offering the most beauti­ful view, stretching from the castle, across the city and the valley of the river Vltava. A stone bench nearby was the perfect place to take stock.

  I sat alone on the bench and thought Even if I ignore my father’s warnings, there is nothing I can do. The problems are systemic and there will be a financial crash. The taxpayers will pay to rescue the financial sector. This will create a chance to get rid of the red wolves and sell the banks to foreign owners. With these thoughts, I left the statue and walked down the hill through the Strahov Gardens, past the German embassy, to Jánský Vršek.

  On the corner of Vlašská Street, I stopped at a small cafe for an americano and a strudel. Two of the cafe’s four tables were occupied. The owner was chatting to Vaclav Havel who was sitting at the table by the window, while the pres­ident’s two bodyguards sipped mineral water in the corner. There were no other guests. I went over to introduce myself.

  “Mr president, perhaps you’ll remember me, we met at lunch at Centre Point in London five years ago.”

  “Yes indeed, I remember your story about the London gallows. I am sorry you didn’t get the ambassadorship.”

  “I made myself more useful by implementing privatisation”

  “Yes, I remember. The British ambassador told me about your appointment.” The thought occurred to me that perhaps the two of them had met through the secret door in the wall between the embassy and the castle. We talked about my time at KB.

  “What do you think about our reforms?” Havel asked and, as in London, I replied openly.

  “The initial reforms were effective. But when the red wolves replaced the dissidents the reforms stalled. Corruption is strangling the economy. I fear the financial system will be bankrupted. The prime minister denies the very existence of dirty money, yet his political party is financed by it” I outlined examples of bad loans advanced at KB.

  “Are you going back to Prague?”

  “Definitely not as a banker. The system is far too rough and corrupt.” Havel finished his coffee and left. It was the last time I ever saw him.

  My school friend Zdeněk and I met in Cafe Slavia, oppo­site the National theatre. We sat at a window table and I told him about my encounter with Havel. He looked out at the castle, with
the presidential flag fluttering over it and sighed.

  “I remember how we met Havel here, thirty-five years ago and how he inspired us. Now he is ill and weak, and the red wolves feel invincible. Our homeland will have to collapse before there are any changes.”

  On 10th December, the president made a speech at the Rudolfinum, about morality in public life and widespread corruption. The ruling red wolves were outraged. They demanded respect and obedience from their president.

  Retaliation against Havel was swift. The tabloids led the charge, by whipping up a campaign of personal smears against him and his family. While the president retained his esteem abroad, the mud slung at him by the media stuck and damaged his reputation at home.

  #

  Vultures

  It was a time of reckoning for the vultures. Legal protection didn’t extend to them. At the municipal court in Prague, the state prosecutor accused Viktor Kožený and his accom­plices of defrauding the Harvard Group of $350 million.

  Kožený had long left Prague and was focussing on voucher privatisation in Azerbaijan. Having visited Harvard’s offices in Baku, I saw boxes of vouchers bought from the Azeri citizens. Viktor’s prime interest was the acquisition of the oil company, Socar. If successful, he would have been cata­pulted into the level of affluence of an oligarch. My meeting with the Azeri privatisation officials filled me with distrust of their voucher scheme and we declined to participate.

  Viktor claimed to have raised $300 million in America and invested $150 million himself, through the Baku based Oily Rock Group. The Azeri venture crashed when their presi­dent for life, Heydar Aliyev, turned nasty and cancelled the country’s voucher privatisation. The vouchers purchased by foreigners from the Azeri citizens became worthless.

  Kožený’s investors, including US hedge and insurance funds, failed to achieve their expected hundredfold returns, lost their money, turned their anger on Viktor and sued. The Manhattan district court in New York ruled, that $180 million had been lost in the Azerbaijan venture.