Frontline World

Moscow - Rich in Russia, October 2003

Related Features THE STORY
Synopsis of "Rich in Russia"

The Oligarchs

Money, Power and Politics

Examining the Young and the Restless

Government, Population, Economy

Life in Russia Today and the Transition to Capitalism




How to Make a Billion Dollars
Roman Abramovich Vagit Alekperov Boris Berezovsky Oleg Deripaska Mikhail Fridman Vladimir Gusinsky Mikhail Khodorkovsky Vladimir Potanin

Special Update - Oct 28, 2003
Just five days before FRONTLINE/World's broadcast of "Rich in Russia," Russian oligarch Mikhail Khodorkovsky was seized at gunpoint by Russian federal agents in Siberia while refueling his private jet. Khodorkovsky's dramatic arrest and detention on charges of fraud and tax evasion follows a months-long government investigation of his company Yukos. Khodorkovsky claims the attack is politically motivated, because he has bankrolled the campaigns of opposition party candidates running in the December 2003 parliamentary elections. (President Vladimir Putin is preparing to seek a second term in March 2004.) If convicted, Khodorkovsky could face up to ten years in prison.

Mikhail Khodorkovsky Mikhail Khodorkovsky - Billionaire Industrialist
Mikhail Khodorkovsky, 40, Russia's wealthiest man, made his first fortunes in banking. Born in 1963, he was raised in a communal apartment in Moscow by factory worker parents. As a child, he talked of becoming a factory director, and later he became an active member in Kommosol (Communist Youth League). He studied economics at the Mendeleeva Chemical Technical Institute, and in 1987, with several of his fellow classmates, opened a cooperative, selling computers and designing software. By 1990, Khodorkovsky had founded Menatep, a bank with profits rumored to be supplemented by funds controlled by various Kommosol, Central Committee and KGB groups attempting to divert state funds. When the old order collapsed, Menatep provided credit to state enterprises and regional offices while they waited for the new government to establish financial flows. Khodorkovsky also set up a market for state vouchers, and at this time he gained control of several enterprises. Through his holding company, Rosprom, Khodorkovsky snatched up chemical, construction, textile, mining and oil enterprises. In 1995, he won a controlling stake in the oil giant Yukos for less than $500 million -- today it is Russia's largest oil company with market capitalization of $15 billion. In 2003, he became a main target of the Kremlin's anti-oligarch crackdown. After raiding his offices and arresting Khodorkovsky's close business associate, investigators went after several other people and companies affiliated with Khodorkovsky for fraud, tax evasion and even murder. In October 2003 Khodorkovsky was seized at gunpoint by Russian federal agents on charges of fraud and tax evasion.

Estimated Worth:
$8 billion

Current Position:
Founder, Menatep Group

Major Holdings:

Other Interests:
Bank Menatep, Trust Investment Bank and Menatep International Financial Alliance; investment firms Global Asset Management, the Blackstone Group, the Carlyle Group and AIG Capital Partners: information technology company Sibintek; telecom operators MKS, Macomnet, Metrocom, Rascom and Magistral Telecom; and, through his Open Russia Foundation, several Russian news publications

Political Connections:
Khodorkovsky cultivated relationships with government officials through his bank, Menatep, which served the accounts of many state enterprises and regional governments. Three years before his acquisition of oil company Yukos, Khodorkovsky was appointed to the Ministry of Fuel and Energy. In 1996, he was among the Big Seven, Russia's most influential bankers who backed the reelection of President Boris Yeltsin. Khodorkovsky's longtime partner, Leonid Nevzlin, is a senator in the Federation Council (the upper chamber of the Russian parliament; seats in the Federation Council are appointed). Despite an informal pact Russian oligarchs made with Putin in 2000 that they would stay out of politics, Khodorkovsky has become increasingly involved in the Kremlin's affairs. He has financed two liberal opposition parties, Yabloko and the Union of Right Forces, upsetting Putin's dominance in the Russian parliament.

New Plays:
In April 2003, Khodorkovsky announced his intention to merge Yukos with competitor Sibneft to create the fourth-largest oil company in the world. Although antimonopoly officials have approved the merger, with the ongoing investigations into Khodorkovsy's activities, it may be delayed.

Khodorkovsky lives with his wife and four children in Moscow. He frequently travels to the United States. He reportedly dined with Condoleezza Rice last year and recently was a guest at Herb Allen's Idaho ranch, along with Bill Gates, Warren Buffett and other luminaries, for an annual telecommunications executives meeting.

After a series of dubious business practices, Khodorkovsy has struggled with a poor public image. In 1998, his bank Menatep collapsed, yet Khodorkovsky managed to protect himself, despite damage to his depositors and creditors. (The bank also defaulted on a $236 million loan from Western banks.) In 1999, he moved the location of a Yukos shareholders meeting 160 miles from Moscow without advance notice to minority stockholders, keeping them from voting against the sale of Yukos's assets to an offshore company. That same year, he prepared a large issue of new shares that diluted the stake of American investor Kenneth Dart, who claimed Khodorkovsky defrauded him of millions of dollars. Recently, however, Khodorkovsky hired a Washington, D.C., public relations firm, and he is presenting himself as a crusader for stockholder and investor rights. Khodorkovsky donated $1 million of Yukos profits to the U.S. Library of Congress, and he set up the Open Russian Foundation, with Henry Kissinger as a member of its board of trustees, to donate to museums, hospitals and universities. In 2001 and 2002, Khodorkovsky's net worth increased fourfold.

Next: Vladimir Potanin - Kremlin Insider

Previous: Vladimir Gusinsky - Media Magnate

Photo Credits
Photo of Vagit Alekperov - Photographer/Getty Images
Photo of Vladimir Potanin - Photographer/Getty Images
Photo of Roman Abramovich - AP / Wide World Photos
Photo of Mihail Fridman - AP / Wide World Photos
Photo of Vladimir Gusinsky - AP / Wide World Photos

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