port, the fleet and the oil terminal: ‘She had a dossier on the group of people who controlled the oil business in St Petersburg. Traber told me about this. He said, “Why the hell did she start looking into the oil business?” This is why she was killed.’[123] Later, a former FSB officer who’d investigated her death told me he suspected it was indeed Tambov that organised it: ‘We understood that we would not be able to get anywhere with the case.’[124]
The events that accompanied Putin’s rise were ominous. But the country was hurtling towards another financial crisis, and the warning signs, it appeared, were not noticed by anyone. Yeltsin’s health was failing, and if at least one account is to be believed, the generals of the KGB were preparing to return. One evening in Moscow, soon after a financial crash that obliterated the Russian economy in August 1998, a small group of KGB officers and one American gathered for a private dinner. Among them were the former KGB chief Vladimir Kryuchkov; Robert Eringer, a former security chief for Monaco who’d dabbled as an informant for the FBI; and Igor Prelin, an aide to Kryuchkov and one of Putin’s senior lecturers at the Red Banner spy institute. According to Eringer, Prelin told the other guests that soon the KGB would return to power: ‘He said, “We know someone. You’ve never heard of him. We’re not going to tell you who it is, but he’s one of us, and when he’s president we’re back.”’[125]
Operation Successor: ‘It Was Already After Midnight’
*
‘Everyone forgot. Everyone thought that democracy would just be there. Everyone was thinking only about their own personal interests.’
Andrei Vavilov, former first deputy finance minister in Yeltsin government[1]
*
Plan A
MOSCOW – It was summer 1999, and a deathly quiet had descended on the Kremlin. In the warren-like corridors of the main administration building, the only sound was the steady whirr of electric motors as cleaners polished the parquet floors. In the distance, the clopping heels of a lone presidential guard on patrol echoed down the halls. Offices once overflowing with petitioners queuing for favours now stood largely empty, their former occupants huddled far from Moscow in their dachas, nervously drinking tea. ‘It was like being in a cemetery,’ said Sergei Pugachev, the Kremlin banker who’d also happened to serve as an adviser to a succession of Kremlin chiefs of staff. ‘It was like a company that had gone bankrupt. All of a sudden there was nothing there.’[2]
For Pugachev and the other members of Yeltsin’s inner circle, widely known as the ‘Family’, who were the Kremlin’s few remaining occupants, a tense new reality had begun. Yeltsin had been in and out of hospital ever since October, and outside the walls of the Kremlin, it seemed, a coup was being prepared. Piece by piece, the foundations of Yeltsin’s rule were being dismantled, a consequence of the past summer’s disastrous rouble devaluation and default on $40 billion in government debt. The easy money, the free-for-all for the well-connected few that had defined the boom years of the market transformation had ended in a spectacular bust. The government had spent four years funding the country’s budget through issuing short-term debt, creating a pyramid scheme in which the only winners had been a handful of oligarchs, the young wolves of the Yeltsin era. For a time, the tycoons had used surging interest rates on government bonds and a fixed exchange rate to pocket the proceeds of a surefire bet, while the central bank burned through its hard-currency reserves keeping the rouble stable. It had all come crashing down in August 1998, and once again the Russian population had borne the brunt of the blow. Many of the oligarchs’ banks had collapsed in the crisis, but while they themselves had managed to funnel most of their fortunes away offshore, the general population’s savings were wiped out. The parliament, then still dominated by the Communists, was in uproar. Forced onto the defensive, Yeltsin had been backed into appointing a prime minister from the top echelons of the KGB, Yevgeny Primakov, the former spymaster who’d run the foreign-intelligence service and had long been a sentinel of the networks of the KGB. Racked by ill health, his regime in tatters, Yeltsin had retreated to the Black Sea resort of Sochi, while Primakov brought a string of Communist deputies, led by the former head of the Soviet economic planning agency Gosplan, into his government. Yeltsin was repeatedly hospitalised, and a Kremlin aide gently hinted that he was to take a back seat from then on.[3]
One by one, members of the Communist old guard had been settling on perches at the top of the government, and now that they were taking control of the cabinet, financial scandal after financial scandal targeting the excesses of their opponents in the Yeltsin ruling elite was beginning to emerge. Leading the corruption charges was Yury Skuratov, Russia’s rotund and seemingly mild-mannered prosecutor general. Until early that year, he had attracted more attention for his ability to quietly close down criminal cases than for opening them. Now, however, amid the widespread outrage that accompanied the country’s financial collapse, he’d begun to target top-level corruption. First, he’d launched a broadside against the central bank. In a letter to the Communist speaker of the State Duma, he zeroed in on how the bank had secretly funnelled $50 billion of the country’s hard-currency reserves through Fimaco, the obscure offshore company registered in Jersey[4] – a revelation that opened a Pandora’s box of insider trading and siphoned funds through the government debt market.
Behind the scenes, several more threatening probes were under way. One was a case that could lead directly to the financial accounts of the Yeltsin Family. It focused on Mabetex, a little-known company based in the Alpine Swiss town of Lugano, near the Italian border, which throughout the nineties had won billions of dollars in contracts to renovate the Kremlin, the Russian White House and other prestigious projects. Initially the probe, launched by Skuratov in tandem with Swiss prosecutors, appeared to focus on kickbacks apparently paid to middlemen close to Pavel Borodin, the jovial and earthy Siberian party boss who’d ruled over the Kremlin’s vast property department since 1993. But behind that lay a potentially bigger affair. And those in the Kremlin who were ruling in Yeltsin’s stead knew this only too well. ‘Everyone was scared about what was going to happen,’ said Pugachev. ‘No one dared to come to work. Everyone was shaking like rabbits.’[5]
The groundwork for the case had been laid quietly. Part of the old guard, particularly those waiting in the shadows in the security services, had been looking for ways to oust Yeltsin since the beginning of his rule. They had long viewed his overtures to democracy with disgust, and when he appealed to Russia’s regions to take as much freedom as they could swallow, they saw it as part of a Western plot to weaken, and ultimately destroy, the Russian Federation. Still set in the zero-sum thinking of the Cold War, they regarded Yeltsin as being in thrall to the US government, which they liked to believe had helped to install him and destroy the Soviet Union in the first place. They despised his apparent friendship with US president Bill Clinton, and believed the market reforms they themselves had developed, and which had helped bring Yeltsin to power, had been perverted to create the oligarchic rule of the semi bankirschina – the seven bankers who’d outrun their former KGB masters to take over much of the economy. They cared nothing for Yeltsin’s democratic achievements: in their view he was an addled alcoholic incapable of leading the country, while the Yeltsin Family, which included his daughter Tatyana, his chief of staff (and future son-in-law) Valentin Yumashev and various acolytes of the oligarch Boris Berezovsky, was an unholy alliance that had illegally taken power behind the scenes, and was leading the country towards certain collapse.
‘A certain group of people understood that things could not continue this way,’ said one of the participants in this plot, Felipe Turover, the former KGB operative who’d worked with Putin on the St Petersburg oil-for-food scheme. ‘The whole operation was started out of necessity. There was no other choice. It had to be done. Yeltsin was a drunk and a heavy drug addict. It is a matter of fact that