The Big Steal · Fresh Air Production

From Communism to Kleptocracy

March 3, 2020·21 min·2 clips

How did Russia's government steal the country's biggest oil company, Yukos, in one generation?

Gavin Esler opens by characterizing the story as the biggest theft in history — the Russian government's seizure of its own country's resources, with Vladimir Putin as the principal beneficiary. He describes Putin as someone with no apparent problem with political violence, citing assassinations from the Skripals to Chechen fundraisers killed in Turkey. The episode then steps back to 1989 and the fall of the Berlin Wall, with journalist John Kampfner recounting firsthand how daily life in the collapsing Soviet Union was defined by total unpredictability — people being killed across republics, revolutions unfolding, the August 1991 coup that was over in three days but could easily have ended differently. Boris Yeltsin emerged from the first democratic elections in Russian history, thwarted the coup, and restructured the Soviet empire into the Commonwealth of Independent States. Khodorkovsky, introduced as Russia's richest man until he crossed Putin, explains why he had supported Yeltsin — to prevent a return to the pre-Gorbachev Soviet era. The Soviet Union formally dissolved on December 26, 1991. Khodorkovsky describes his early entrepreneurial career: in the 1980s he ran a small youth cafe, considered insignificant enough by Soviet authorities that they left it alone. He explains the privatization dilemma in structural terms: Soviet factories were not businesses — they were branches of ministry-level organizations. When the ministries collapsed, plant managers who had never run companies were suddenly required to act as CEOs. He argues this explains both why privatization was necessary and why it was carried out too fast for most of the 145 million people in Russia who could not understand what was happening. He estimates only 10,000 to 100,000 people genuinely understood the process. Swedish economist Anders Aslund describes how Khodorkovsky's bank Menatep acquired Yukos in 1995, spent four years in fierce ownership battles to establish control, and by 1999 had transformed Yukos into a model company with great corporate governance and 50-plus percent production growth. By 2003 Yukos was the largest taxpayer in Russia and was attracting international interest, leading Khodorkovsky to adopt Western-style transparency, bring in PwC accountants and McKinsey consultants. Khodorkovsky reflects on his moral transformation: at 28 in 1991 he did not fully grasp others' problems, but after the 1998 financial crisis — during which he personally asked oil-field workers for support — he felt enormous responsibility and began giving back through his Open Russia foundation. The episode closes by foreshadowing the coming conflict: rivals suspected Khodorkovsky of political ambitions, and Putin — described by an expert as standing for 'KGB and organized crime' — was watching closely.

As heard by us

A sober account of Russia's move from communism to kleptocracy through Yukos, Khodorkovsky, and Putin.

The episode follows Russia's move from communism to kleptocracy through Yukos, Mikhail Khodorkovsky's prosecution, and Vladimir Putin's rise as the main beneficiary.

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Why you'd press play

For the backstory to Putin's Russia, this is a strong place to begin with the fall of communism and the rise of kleptocracy.

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