MOSCOW BLOG: Berezovsky a man of the times and the past

By bne IntelliNews March 25, 2013

Ben Aris in Moscow -

The last time I saw Berezovsky was in 2005 at his Mayfair offices, just off Green Park in London and a 15-minute walk from the Russian embassy. It is a choice address. A modest glass door led to a smallish reception staffed by two bright English girls. There was also a burly Russian man was sitting on the couch, the obvious assumption being he was a bodyguard, but the man was too old to be security and not well enough dressed to be a businessman waiting to see Berezovsky. I assumed he was part of the Berezovsky entourage that came with him to London when he fled into self-imposed exile in 2000.

I didn't have to wait long. Berezovsky came charging out of his office with his usual frenetic energy and shook my hand briskly. The security was low key, but you always felt it hovering somewhere in the background. The double doors to his inner sanctum could only be opened by a thumb-print keyed to Berezovsky, but he couldn't get the doors open. His thumb was too sweaty, he explained, pulling out a handkerchief and wiping it vigorously. The doors clicked open.

The airwaves were crackling on the night of Saturday, March 23 as the news broke that Berezovsky had been found dead in his Surry home. He was 67. The story that the newswires and TV stations are hoping will emerge is that Berezovsky's death was a hit ordered by the Kremlin - or at least he was murdered with some exotic or radioactive poison.

The Thames Valley police, which are in charge of the investigation, specifically ordered a cordon several miles wide around Berezovsky's house in Surrey and called in the chemical and biological agent specialist unit. The team found nothing during an examination on Sunday afternoon and the cordon has been reduced to the road running past Berezovsky's gate.

While the investigation is ongoing, at this point the police say there are no grounds to presume the involvement of a third party and his death looks like what it says on the tin: Berezovsky has frittered away his fortune, was facing debts he couldn't pay and had no prospect of reinventing himself in some way. So in a fit of depression alone in his countryside mansion, he drew a bath and committed suicide - although this remains speculation at this point.

Yuri Felshtinsky, author of "The Putin Corporation" and a close associate of both Berezovsky and Alexander Litvinenko, a former KGB officer who died after being poisoned in London, spoke to him only recently: "When we recently spoke for the last time, Boris was looking to the future and did not seem to be suicidal." Other friends have reported him to be very depressed and "close to the end," said one.

LogoVaz to ORT

Berezovsky has had an astonishing career and made many enemies along the way. He is the epitome of the fast moneymakers that rose to prominence under former president Boris Yeltsin in the days when "breakfast bombs" (car bombs placed under a car in the early morning) and assassinations were common place. Indeed, Berezovsky suffered a car bomb attack in early 1990s, which he survived but his driver did not.

He trained as a mathematician and had a PhD in system controls, knowledge that he put to better use as a businessman. His specialism was not corporate raiding or asset grabs at the point of a gun, but using his undeniable charm and ability to steamroll people with weaker personalities to grab hold of the system and then bend it to his advantage.

His first fortune was made from Avtovaz, the maker of the Lada. Rather than take over the company, a politically sensitive topic as the company employed hundreds of thousands of people, he grabbed hold of the distribution system. Avtovaz may have been struggling as a business, but it was still making cheap cars and these were still selling in the early 1990s. According to popular legend, Berezovsky did a deal with the Chechen mafia, which controlled the distribution network while Berezovsky ensured the supply of product. Everyone got a cut and no one complained, while the corporate entity itself sank slowly into debt - but that was the state's problem and it had many problems to deal in those days.

With now some serious cash in the bank, Berezovsky's star rose quickly, but he craved more power. He started hanging out at the Spartak tennis club, favoured by Yeltsin, and wangled his way into the presidential circle. From here he built up a circle of contacts and peddled influence. In the beginning Berezovsky only pretended to people that he had connections and influence, but as more and more people came to believe him, this pretense became a reality. "When Berezovsky came into the Kremlin it was a chaotic time in the country. No one knew what was really going on," oligarch Vladimir Potanin told me in an interview in 2002. "Berezovsky found all the tools of influence lying on the floor so he picked them up."

But he really came into his own in the mid-1990s during the notorious loans-for-shares deals, where rich oligarchs offered to lend the cash-strapped government money in return for shares in Russia's industrial crown jewels. The trouble was that Berezovsky didn't have a bank to make the loans, nor were there any oil companies on offer - the most obvious target in these deals - as the other oligarchs had all "dibs" on the good ones. It was then that a young and highly successful oil trader Roman Abramovich approached him about setting up a new oil company by bring together bits of other companies and several different oil fields. Yeltsin owed him, as Berezovsky was the principle oligarch behind a team of powerful financiers that bankrolled a successful re-election campaign in 1996. They needed a decree from Yeltsin to organise the oil deal and Berezovsky got the paperwork done. Sibneft was born.

As Berezovsky's cash pile grew, his links with the government deepened. In the second half of the 1990s he reached his peak and boasted to the young Chrystia Freeland, the FT correspondent at the time: "There are seven oligarchs and together we control half the Russian economy." It was this Berezovsky interview that coined the term "oligarch" for the press and it was not the last time Berezovsky was to use the western press to boost his own image. He loved bombast, but a later World Bank study found that 22 groups accounted for about a quarter of the economy. But Berezovsky was determined to make good on his boast.

In another scam, Berezovsky managed to "privatise the cashflow," as he famously put it, from Aeroflot's international (and so hard currency) foreign ticket sales. In a set-up similar to draining off the cash from the Lada distribution network, all these payments were put through a shell company in Switzerland that charged exorbitant fees and interest rates, effectively siphoning off the company's dollars into a Berezovsky-controlled offshore haven. It was this deal that Vladimir Putin ultimately used to start legal proceedings against Berezovsky that drove him into exile.

But things were starting to go wrong for Berezovsky long before Putin's onslaught in 2000. He had already armed himself to do battle with the takeover of Russia's main broadcaster ORT (now First Channel), which he later used to devastating effect during the "banker's war." The ceasefire of 1996 during the Yeltsin re-election campaign was being eroded, but came to a head during the privatisation of a 25% stake in Russia's fixed line operator Svyazinvest in 1997. According to the privatization chief Anatoly Chubais, cited by David Hoffman in his book "The Oligarchs," Berezovsky came to see him and tried to persuade him to let the oligarchs carve up the company in a fixed auction. Chubais refused and an open tender was held won by the MustCom consortium, led by George Soros and the Alfa Group, which paid $1.8bn for the shares. (Soros later called it "the worst deal of my life" and sold his stake again in 2006 for a reported $1.3bn). Berezovsky was incensed and launched an all-out assault on his foes in the Russian media.

Chubais became Berezovsky's nemesis and the two clashed many times afterwards. There is an unconfirmed story that Berezovsky managed to persuade a disorientated Yeltsin to appoint him chairman of Gazprom in 1999 on the eve of his resignation. Yeltsin was on the verge of signing the decree when Chubais got wind and raced to the Kremlin to talk the ailing president out of his decision.

By that time, Berezovsky had already been edged out of Sibneft by the younger Abramovich and was also being edged out of the Kremlin. Berezovsky introduced Abramovich to the Kremlin's inner circle, the so-called "Family" headed by Yeltsin's daughter Tatyana Dyachenko. But Abramovich quickly moved beyond Berezovsky and worked hand in glove with Dyachenko. Soon he was known as the "Cashier of the Kremlin" and walked away with the power and Sibneft.

During our interview in London office in 2005, Berezovsky would not talk about this period, possibly hoping for a reprieve and return to Russia. "Tell me what the people in Moscow are saying," Berezovsky demanded from me, to which I began to talk about the growing economy and improving standards of living. "No, no. Not those people. The people that matter - what are they saying?"

But a decade later no peace deal was ever offered. Relations with the Kremlin only got worse. Berezovsky backed the Orange team during the popular protests in Kyiv in 2004, mainly to annoy the Kremlin, and set up a radio station to broadcast anti-government propaganda into Russia. He kept his name in the press as a vocal critic of the Kremlin and the death of Litvinenko in November 2006, who was also linked to Berezovsky, highlighted his anti-Kremlin agitation. In 2007 he went as far as to call for armed insurrection to oust the Putin government and offered to pay for it. "We need to use force to change this regime," he said in an interview. "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."

An op-ed that he penned and was published by The Guardian with Moscow correspondent Luke Harding's byline on it so incensed the Kremlin that it began to harass Harding personally - to an extent I have never seen any other foreign correspondent suffer in nearly 20 years of covering the country - that ended with Harding being refused re-entry into the country. Up until this op-ed, the Kremlin had seen The Guardian as critical, but fair, as it always made an effort to run both sides of the story.

The most painful blow for Berezovsky came last year when launched a multi-million lawsuit against Abramovich, claiming he was owed billions of dollars from the creation of Sibneft, without being able to offer any conclusive documentary evidence. In retrospect the case, which is reported to have cost Berezovsky $100m in legal fees, looks like a desperate last gamble to regain his former status and wealth. Mrs Justice Gloster ruled in Abramovich's favour, delivering a scathing judgment of Berezovsky that he had been an "unimpressive and inherently unreliable" witness "who regarded truth as a transitory, flexible concept".

Putin and flee

For Berezovsky, the beginning of the end came in 1999. With Yeltsin's health fading, the "Family" came to the fateful decision that the old man needed to be replaced in a controlled handover to a selected candidate rather than a disorderly one that they could not control should Yeltsin die suddenly.

Dyachenko and Abramovich began searching for a candidate and a string of prime ministers were appointed and sacked in the last years of the decade as men were tried out and then rejected. Until they hit on Vladimir Putin, who Yeltsin had hired away from the administration of St Petersburg administration of Anatoly Sobchak in 1996. If Berezovsky was involved in this decision, then he badly miscalculated: the oligarchs had hoped to control the new president, but he quickly turned on them and the two media moguls Vladimir Gusinsky and Berezovsky were his first victims.

Berezovsky had always loved playing politics. In addition to creating the alliance of oligarchs that hired young reformer Anatoly Chubais to run Yeltsin's re-election campaign in 1996, he has been credited with creating the Kremlin party United Russia that Putin has used to such great affect.

In the 1999 Duma elections, former Moscow mayor Yuri Luzhkov teamed up with former PM Yevgeny Primakov to create the Fatherland party, which went into the vote with a lead in the polls. Once again the Family scrambled to protect their political franchise, and once again Berezovsky was in the fore of working a solution.

In that year Russia came within a whisker of getting a true representative parliament with a genuine opposition that was drawn not from the intellectual and liberal opposition, but from insiders and real politicians that wanted something different for Russia. But the vote was fixed and Berezovsky's United Russia pipped Fatherland to the post, later subsuming the rump of Luzhkov-Primakov's party.

And instead of relying on a campaign to sway voters, the campaign was organised a la Berezovsky. "It was my job to go round the regions and convince the governors to back United Russia," Alexsei Sitnikov, the president of Image Contact, told me in an interview shortly after. "It was Berezovsky's money and we convinced or bought 53 of the governors [from a total of 89] to back United Russia. There was nothing to be done about some of the communist governors and there were a few other special cases, but it was a great result," Sitnikov said making claims that I have since not been able to verify.

If you play those sorts of rules, you must develop a sense of paranoia. During our interview in London, I quizzed Berezovsky about a VAT rebate scheme that was being run by his son-in-law. The deal was very simple: in the UK exporters are entitled to reclaim their VAT, but the paperwork takes six months to complete, however, Berezovsky's company would pay customers their VAT back immediately in exchange for 4% on top. The business went from $20m to $750m in the space of two years and was suddenly seized by the UK's Customs and Excise on suspicion of money laundering. Berezovsky flat out denied he was involved, whereas I knew for a fact he had financed the whole thing. At that point the air was rent by an ear splitting alarm. Berezovsky got up and fumbled at his desk for over a minute, finally managing to turn it off. "Sorry, don't worry. Someone must have set it off my mistake."

Berezovsky's death along with that of his close associate Badri Patarkaschishvili, who also died in Surrey of a heart attack in 2008, marks the beginning of the end of the first chapter of Russia's transformation. Most of original seven oligarchs of Berezovsky boasted of are either in exile or retired, with the exception of Alfa Group's Mikhail Fridman and Vladmir Potanin. And the style of business they practiced, while still prevalent, is changing too. The corruption and Kremlin ties are still there, but the breakfast bombs and mindless political parties are a thing of past.

The Kremlin has said it is open to Berezovsky being buried in Russia, if they receive a formal request from his family. He is survived by six children by two ex-wives and his more recent partner Elena Gorbunova: two of his children are in their 40s, two are in their 20s and his youngest are aged 12 and 10.

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