Lenin's Tomb

by David Remnick

  The young millionaires were an arrogant lot, young men (never women) acting without a developed code of behavior or common language. Primitive capitalists, as Marx called them. The hard-liners despised the new breed, and the liberals saw them only as a necessity, a first step toward a decent material life. “Some of them are a crude bunch, but to develop wealth, you need these people. We can’t wait for angels to do the spadework,” said Igor Svinarenko, a reporter for the leading newspaper of the Soviet business world, Kommersant. “These businessmen who make their money selling rotten meat or lousy computers or patched-together trade deals, they’ll accumulate money and build things and set up factories and stores. Some of them may do ugly things or act like barbarians. But they’ll also educate their kids, maybe send them overseas to Harvard. And then the kids will come back with their high-minded ideas and they’ll say, ‘Dad, you are a scoundrel.’ And so they’ll do things in a more refined way. They’ll act on their guilty conscience. And so society will develop from there.”

  If there was a Soviet model for the young millionaires it was Artyom Tarasov, a high-tech and trading magnate in his forties who was a constant target of KGB and police investigation for the allegedly illegal export of capital. Tarasov was the first of the Soviet millionaires to flaunt his wealth publicly, even describing his real estate deals and foreign trips at a press conference at the Foreign Ministry. He once suggested publicly that Gorbachev might sell the disputed Kuril Islands back to the Japanese for billions of dollars. Infuriated, Gorbachev threatened to sue, and the KGB investigations increased. By 1990, Tarasov was spending most of his time on the French Riviera, fishing and waiting for the right moment to come back home. “I’ve been fascinated watching this generation—these young Tarasovs—and it’s clear they love the game more than the money as an end in itself,” said Vladimir Aleksanyan, an émigré who ran an import-export business with offices in Palo Alto, California, and Moscow. “They work sixteen, eighteen hours a day. Their mentality is completely different from anyone I ever knew before I left twelve years ago. They speak foreign languages. They come to the States and they rent cars, move around. They are absolutely fearless. They talk about renting military transport planes from the army to fly over some product, and they don’t even realize how mind-boggling this sounds to anyone over the age of thirty.”

  An example of the breed was Anton Danielets, a twenty-four-year-old information services and real estate czar in Leningrad. He was a moon-faced naïf with the bovine grace of a young Jackie Gleason. He claimed by 1991 a fortune of 20 million to 30 million rubles and $1.5 million in foreign banks. Danielets used a dying Communist institution, the Komsomol, to build his nascent empire. In the first rush of cooperative businesses in 1987 and 1988, he opened a video theater with Komsomol help and made 500,000 rubles in personal profit within a year. He learned management from a pirated copy of a business text published abroad. One of the first things he did next was to hire lawyers to “guide me through the thicket of laws.” The key to business amid the “war of laws” between Moscow and the republics, between cities and districts, he said, was to know just who owns what, who has the right to issue licenses.

  Racing around Leningrad from morning till night in a dilapidated Soviet Fiat, he quickly used his savings to rent and buy valuable properties and put some of his long-held ideas to work. He rented a run-down indoor pool and gym that the city had left for dead and turned it into a profitable sports center, popular with his fellow Soviet millionaires and the foreign community. He saw business on the rise and started a financial information center, a kind of Dow Jones in Leningrad. He started a popular newspaper, Nevskoye Vremya (“Neva Times”), and bought a printing press that had once belonged to the local Communist Party. In Siberia, the Urals, and Karelia, he traded in raw materials “whenever the deal looks good.” He had more than a thousand people working for him. After a while, Danielets finally decided that the backseat of his car was not quite adequate as a corporate headquarters, and so, for 300,000 rubles, he bought the glorious three-story mansion at 47 Herzen Street—Vladimir Nabokov’s childhood home.

  “My forebears too were business people, gentry, and we’re going to make this place look like it once did,” Danielets said, pointing to rooms immortalized in Nabokov’s memoir Speak, Memory. “I think of this place as our connection to what we lost and what we want to regain. People forget that there was something known as a Russian business life before the Revolution. Now we are nothing more, nothing less, than a Third World country—at best. I want to restore what we had. So when people come to me with interesting projects, I invest, maybe with cash, maybe with equipment or space.

  “Everyone knows that the smart guys in the Communist Party are trying to grab up as much as they can before they finally leave the stage. My attitude is this: Let them. Most of them are so stupid they don’t even know what real business is. It’s the young who are going to do the work over the years. We’re building empires, but not evil ones.”

  In classical Marxist theory, the initial stages of the accumulation of wealth produce “morbid symptoms.” Chief among them in the Soviet Union was the rapid rise of thuggery: protection rackets, Ponzi schemes, the occasional murder and night of arson. Zaslavsky and the police faced problems with crime all over the district, especially on blocks with new private businesses. For some reason, though, I had better luck meeting the mob in Leningrad.

  Alex Kahn said he knew someone who knew someone who sold computers “and whatnot” out of a storefront in the Vasilievsky Region of the city. The businessman, who was named Aleksandr, told us just to bring a bottle or two of Scotch—“Johnnie Walker if you’ve got it”—at two in the afternoon and we “might meet some interesting people.” Happily, the hard-currency store in the Astoria Hotel was well stocked with Johnnie Walker.

  The office was a shambles, a room filled with spiderwebs, scrap lumber, dust, and a desk and a phone. Aleksandr quickly said the Scotch was not for him and, “under the circumstances,” he would prefer I didn’t print his last name. It was soon clear why.

  Within five minutes, four brawny types arrived. “The Charity Society,” they called themselves. It was time to collect the weekly 5,000-ruble “donation” from Aleksandr. I handed over the Scotch, Aleksandr handed over a paper bag, and the Charity Society boys seemed happy. They were only too pleased to talk, they said brightly.

  “Some people call us gangsters,” an ex-athlete named Sergei explained as he popped a knuckle. “We like to think of it this way: we protect people. We persuade them to let us protect them.” Sometimes, Sergei said, they used pistols and Uzis bought on the black market as their instruments of persuasion. Pasha, a wiry hood who “went a little crazy” fighting in Afghanistan, explained how he and his partners did their business during what economists in the press were now calling “the transition period” from a centralized, socialist economy to a free market, and what the punks referred to as “the Wild West” and “Chicago in the thirties”:

  “First, everything is explained to the businessman in question. Very slowly and carefully. Then if he doesn’t seem to understand the kind of payments he has to make, he’s beaten up. But professionally. A couple of broken ribs, a few nights in the hospital. The next step is, he’s hustled into a car, driven out to the woods, and given a shovel. We tell him to start digging his own grave. That’s usually when they crack.”

  There was no way to know whether their stories were fact or cheap bravado. But such rackets did exist, such murders went on all the time, and Aleksandr, a Nordic-looking man in his late thirties, tried hard to keep from trembling as he listened. Occasionally he shot me an anxious glance. To make everyone just a little more nervous, Sergei broke into the sort of half-mad giggle that Robert De Niro used to great effect in the film Mean Streets. The mannerisms, it turned out, were as imported as the Reeboks on their feet. Sergei admitted that he had seen the films Once Upon a Time in America and GoodFellas on the Charity Society’s video system. “We learn a lot of
what we do that way,” he said.

  With private business growing by the day here, life was good for the Charity Society. They shook down everyone from the owners of newspaper kiosks to department stores selling foreign goods.

  “Just the price is different,” Sergei said.

  “When I get about two or three million for myself, then maybe I’ll go out and get some principles,” Pasha said. “I’ve got plenty of time later on to buy a farm and live quietly.”

  After the Charity Society left, Aleksandr said paying protection money was “just part of doing business nowadays.” His only other expense was his phone bill. “This country is in a state of transition, a wild time, and so there are no rules, no stability. It’s open season,” he said. “I know of one guy who couldn’t make his payments and they tortured him with a soldering iron. Ninety-nine percent of the businessmen in town—me included—violate a lot of rules. Taxes, hard-currency restrictions, the laws on hiring people. We have to break the law if we want to get anything done. And so the racketeers know we can’t resist. Calling in the police is hopeless. That is, unless you want to spend the rest of your life in a fortress. Or dead in the canal.”

  During the Brezhnev era, the personification of sleazy business dealings was the tolkach, the weary factory representative who would travel the country to make sure he got the supplies his firm needed. Bribes and gifts were his stock in trade. If he was from Moldavia, he would bring cases of wine to sway his clients; if he came from Astrakhan, it would be quart-size tubs of black caviar. But the tolkach was only the comic face of a degraded, dishonest system. Corruption permeated the centralized economy from the bottom to the top: from the state butcher shop manager who sold his best beef on the black market to the members of the Council of Ministers who lied about production levels to curry favor with the general secretary.

  That legacy of cynicism and lawlessness, despite all the talk of reform, still lingered. “The standard of ‘dual honesty’ for seventy years here has led to a deterioration of ethical standards,” said Vladimir Aleksanyan, the émigré import-export executive. “You rob your workplace. You cut in line. You skip out on contracts if it’s convenient. Dishonesty is deep-rooted. When a person in business is honest, it is because he has made a conscious, and usually temporary, decision to be honest. There is not a deep-rooted sense of ethics.”

  Corruption was a matter of course. In Leningrad’s Kirov District, officials and businessmen said, merchants quickly discovered that to do a simple remodeling job on a building or to get a decent location for a kiosk they had to pay off the district government’s architect. Finally, the local police caught the architect, Timur Kuriyev, taking a 9,000-ruble bribe in a public bathroom. One of the great scams of the Gorbachev era was known as the “convenient collapse.” In an effort to encourage semiprivate cooperative businesses, the government issued huge start-up loans at low interest rates. Some cooperators used the funding to open stores or services. But others, who did not believe the period of liberalization would last more than a few months and wanted to make a quick fortune, grabbed the money and, when the loan came due, said, “Sorry, the business failed.” The bank could do little more than put a 12 percent lien on the debtor’s meager state salary. Every time a new form of commerce began, it seemed, a new racket appeared alongside it. After Sotheby’s held its first auction of modern Soviet paintings in Moscow in July 1988, black marketeers discovered a source of quick income. Soviet artists told me that a man identifying himself as Oleg Petrovich—alias “the Gypsy”—showed up with his henchmen at various artists’ studios demanding works that he knew would bring in big money when sold abroad for hard currency. “Friends of mine were hit bad, and they told me that I was on the guy’s list for four or five paintings—specific ones that they saw in the Sotheby’s catalog,” said Lev Tabenkin, a Moscow painter who had sold many of his canvases abroad. “They’re very systematic. So far they haven’t gotten to me, but I haven’t been working very much in my studio these days either.”

  Lieutenant Nikolai Mirikov, chief of the Moscow police investigations department, said the “evolving economic situation,” the conversion to a market economy, will keep the rate of crime soaring for years. He said that while he needs five thousand police to cope with rising crime rates, he has lost more than a thousand officers in the past two years. “They mainly go off to work in cooperatives, where their salaries are a lot higher,” he said. KGB officers, some of them at the highest levels, often took an early retirement to use their connections in the official and underground economies and make a killing as businessmen. Sometimes the police went into business without turning in their uniforms. A Moscow detective was caught shaking down street vendors for bribes of 10,000 rubles a month, the business newspaper Kommersant reported. In 1990, the same officer had been voted the city’s Detective of the Year.

  Businessmen in the October Region and elsewhere told me it was easy to make millions of rubles. Step One: Get a short-term loan of, say, 10 million rubles. Step Two: Launder the rubles. That is, convert them into dollars. One of the most common back-channel methods is to buy from a third party a paper obligation for money owed in “semihard” currencies: Indian rupees, Chinese yuan. The paper obligation, for which you have paid dearly, makes the transfer to dollars much easier. Step Three: Buy goods—Japanese VCRs, Hong Kong computers, American blue jeans. Volume and a foreign label matter far more than quality. Step Four: The easiest part—sell the goods to a middleman or a commission store or a workplace. Make sure your prices are absurd; Soviet consumers are desperate, and the demand curve knows no bounds. Step Five: Collect your money and pay off the bank. In three or four months, if all goes smoothly, you will be several million rubles richer.

  It seemed painless. But then I met Oleg Falkovich.

  A plump man with a heavy measure of guile, Falkovich worked for twenty-five years in the state economy in Siberia and the far east before he began dealing privately in construction materials, clothes, and video equipment. Eventually, he became a buyer for a company called ARTO, which was looking to obtain millions of rubles’ worth of video equipment for resale on the Soviet market. Falkovich contacted another firm, Terminal, which agreed to get the televisions and VCRs from Japanese suppliers. A few weeks later, however, Terminal said the deal in Tokyo had fallen through, and Falkovich had to give the bad news to ARTO. But ARTO said it was going to suffer losses in the millions as a result of the deal’s collapse because it had taken out short-term loans with high interest rates. The ARTO bosses told Falkovich that the burden for getting back the money was on him.

  One spring afternoon, Falkovich said, and other sources confirmed, three men forced him into a car and drove him to the Rossiya Hotel near the Kremlin. “Once we were in a room, they started threatening me, saying that unless I signed a contract handing over to them five million rubles, they would rape me, kill me, kill my wife and daughter. This went on for days. But when they got to my family, I signed. I would have signed anything.”

  Falkovich managed to reach one of his partners by phone, and the partner called some members of their acquaintance in the Uzbek mafia to come to Moscow and set their boss free. The team flew to Moscow and knocked on the door of the hotel room. But Rustam, the Uzbek leader, recognized one of the three men as an old friend and colleague. “It was a nightmare,” Falkovich said. “Instead of freeing me, Rustam turned to one of the others and said, ‘Once you beat the five million out of him, we’ll beat out another million.’ ”

  Eventually, the police arrived at the Rossiya and sent everyone home. Later, they arrested the three men whom Falkovich accused of kidnapping him. But the men were released after three days of questioning; the police said there was insufficient evidence to prosecute. “Falkovich claims the men were extortionists and the three said they were not. The whole situation was a blur,” said Genri Reznik, the lawyer for ARTO.

  In the meantime, Falkovich said he is sure he is “a hunted man.” He has moved his family from their home
in Magadan to a secret location, and he is hoping to emigrate to the United States. With no relatives there, his chances for an entrance visa are not good. “I can’t live this way any longer,” Falkovich said. “In a normal world, they settle these things with contracts or, if it comes to that, with lawsuits. This kind of thing will go on and on in this country until we have real laws, real business, and not the kind of insanity we have now.”

  Despite the “morbid symptoms” of the new capitalism, Zaslavsky and Co. had no intention of scaling back their ambitions. They were world-beaters. Dmitri Chegodayev, the twenty-seven-year-old chairman of the district’s media committee, began holding meetings with foreign investors about setting up a thirty-two-station cable television system featuring an “October channel.” “We want to hook into Europe via cable TV,” he said. There were meetings about how best to attract foreign investors—the “capitalist leeches” of Stalinist legend. The most ambitious plan—one that smacked of megalomania to Communist Party loyalists—was to create a huge business center on Gagarin Square modeled on the La Defense complex in Paris. Important-looking documents were drawn up. The center would include luxury hotels, office buildings, underground parking lots, an exhibition center, a computer and communications center, a trade center, and a medical complex.

  But by the summer and fall of 1990, something else was happening. The Communist Party newspapers were beginning to hint at a counterrevolution. Suddenly, the most prominent free-market advocates in the country were under attack—Zaslavsky included. Like the Soviet Union itself, Zaslavsky was flying into the heavy weather of a market economy without a flight plan or a radar screen. His vision of the future—a world of stock markets, computer centers, and shopping malls—met head-on with the endless barriers of habit and instability: the obstinate psychology of a people grown used to “equality in poverty.” Perhaps a little sooner than the rest of the country, the radical free-market leaders of the October Region encountered the limits of people’s tolerance. Some workers in the district were growing angry with the new businesses. There were small demonstrations. Some of Zaslavsky’s supporters began to turn on him. “Many people in the district saw businesses like Alisa succeeding very quickly while they still had to stand in lines for food. It outraged them, and they started screaming, ‘Give us! Give us!’ ” said Zaslavsky’s aide, Gezentsevei. “Many people could not understand that the idea of government is not to provide, the way parents provide for a child. What we were trying to do was set up the structures, the possibilities for everyone to have the chance to work and succeed.”