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




The Story
Folk singer, Tavernise waiting in conference room, Close up of Berezovsky

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From behind the walls of Moscow's Kremlin, Russia has been ruled by czars, by Bolsheviks, and more recently by democratically elected presidents. New York Times reporter Sabrina Tavernise says that outside the Kremlin walls a new power has emerged: money. Tavernise takes FRONTLINE/World on a tour of the brave new world of Russian capitalism - from the young entrepreneurs remaking Moscow to the billionaire tycoons, or "oligarchs," the Kremlin regards as rivals for power.

What's it like to be young, Russian and newly affluent? Tavernise meets 30-year-old Vladislav Dudakov, who got his start as a soldier in the Red Army, assigned to an elite unit guarding Lenin's Tomb. Then, McDonald's came to town, and Vladislav switched allegiances. He worked his way up from floor sweeper at McDonald's to store manager, after being sent to Hamburger University in Chicago. Ten years later he went to work for an investor who wanted to open a chain of Starbucks-style coffee shops in Moscow - a revolutionary enterprise in a country where the coffee had been undrinkable. Western business ideas are reshaping everything in Moscow. No more sour expressions on the faces of Russian waitresses, says Dudakov, these days his waitresses must learn to "smile, smile, smile."

Andrei Gnatiuk is another prosperous Muscovite, the owner of a new type of business in Russia -- advertising and political consulting. He says it is people like him who will bring a new order out of the chaos of post-communist Russia. According to Gnatiuk, Russian capitalism is still in its wild phase. For those with money, everything is for sale, even the law itself. He argues that Russia is rapidly trying to build a stable free enterprise economy -- something that took the United States centuries. "We have yet to arrive at a society governed by the rule of law," concludes Gnatiuk.

In the ten years since Russia chose capitalism, Moscow has been transformed into a party for the young and the rich. The nouveau riche are famous for their indulgent excesses, with high fashion, luxury automobiles and a nightlife that rivals that of Paris or London. But beyond the bright lights of Moscow, the average salary in the country is just $4,000 a year. Moscow is an enclave where fortunes are being made.

Rafael Filinov, a 33-year-old real estate speculator, sees Moscow and Russia as two entirely separate entities. "Don't be confused," he tells Tavernise, "Moscow and Russia are two different countries." He's keenly aware that the prices that the Moscow rich are paying now for real estate with views of the Kremlin would simply not be believed by any Russian "babushka" out in the country.

For ordinary Russian citizens, billionaires and the exclusive boutiques where they shop are a world apart. Most Russians are poorer since the fall of the Soviet Union. They despise the rich and powerful for having grabbed the crown jewels of the Soviet economy - factories, oil fields, gold mines. The profound changes have left many Russians disoriented. Their country is no longer a great world power. Their economy has shrunk to the size of Poland's. Doctors have to moonlight as cab drivers. "It is as if they are immigrants in their own country," says Tavernise.

Worst off are the elderly, whose pensions do not even begin to cover the cost of modern life. On the streets Tavernise finds a 70-year-old woman, a former foreman at a Soviet shoe factory. She is selling a scrap of fur from an old family coat to supplement her pension. "Every country needs rich people," she says. "They have a lot to contribute. We just wish that they would give a tiny bit back to us."

Russia now has 17 billionaires, more than any country except for the United States, Germany and Japan. At the very pinnacle of those rich people is 40-year-old Mikhail Khodorkovsky, the principal owner of Yukos, Russia's biggest oil company. Khodorkovsky is worth an estimated $8 billion, his company $45 billion. His recent arrest on charges of tax evasion and fraud puts him at the center of a new power struggle between big business and the Kremlin.

In an exclusive interview with Tavernise, Khodorkovsky admits that a decade ago he conducted his business in a careless, if still legal, way. At the time, he says, "Russian law allowed us to do things that were unthinkable in the Western business world." But now he insists he not only obeys the law but also adheres to good business ethics. Despite his current struggle with the government, and the fact that he has been financially backing opposition parties, Khordorkovsky claims he does not deal in politics. "You can do business, or you can do politics," he tells Tavernise. "But you cannot play both games."

The Russian government is wary of the economic power concentrated in the hands of men like Khodorkovsky, and of their political ambitions. President Vladimir Putin told the so-called "oligarchs" who had surrounded former President Yeltsin that they could keep the wealth they had grabbed as long as they stayed out of politics.

One of the country's best-known oligarchs, Boris Berezovsky, is currently living in London, where the British government has granted him political asylum. At the peak of his power Berezovsky owned a television network, Russia's biggest car company and its national airline. Now he's wanted in Moscow for fraud, and says Kremlin agents are plotting to assassinate him.

On her way to Moscow, Tavernise met up with Berezovsky in London, just as a new Russian movie, "Tycoon," was released, based on Berezovsky's controversial rise from math professor to powerful billionaire. When asked about the business practices of the Russian oligarchs, he acknowledges that they did make some "mistakes," but also likens the oligarchs to rich Americans who became active in politics, such as Nelson Rockefeller. He maintains his innocence, saying "We didn't break any laws, but if you call giving bribes a crime, then all oligarchs were criminals."

Does Berezovsky feel guilty about his fortune? "I don't regret being rich," he tells Tavernise. "I only regret that there are so many poor." Moreover he says, "I believe oligarchs are true heroes. Because of us, Russia was put on a new course."

The oligarchs may have put Russia on a new course, but as Vladimir Seminov, a communist agriculture minister turned capitalist farmer, sees it, that course is still perilous. The man whose greenhouses provide lettuce and tomatoes to McDonald's in Moscow warns that the oligarchs must learn from President Roosevelt's New Deal in the Depression - capitalism must be reformed and provide for the poor to avert rebellion. "Russia will not survive another revolution," he says.

Not long after Tavernise interviewed the richest man in Russia - Mikhail Khodorkovsky - the Russian government arrested him in a dramatic, military-style raid on charges of business corruption. Khodorkovsky's supporters say his arrest was politically motivated - Putin's way of appealing to voters before Russia's parliamentary elections in December - showing that he was willing "to spear an oligarch." But the arrest of such a prominent businessman also raises fundamental questions about how Russia will operate politically and economically in the future.

Leaving Moscow, Tavernise has no doubt that Russia will continue to pursue a capitalist course, but that the rivalry will continue between the Kremlin and the oligarchs, and that foreign investors - including companies like ExxonMobil - will be more cautious about buying into Russia's unsettled oil companies.


Sabrina Tavernise

Marian Marzynski

Videographer / Editor
Jason Longo

Additional Materials
Tycoon Courtesy Of New Yorker Films

Produced In Association With The New York Times

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