Masha Gessen - The Man Without a Face

In early 1992, Marina Salye had set out to learn exactly what the little man with the empty office was actually doing. The city council launched a full-fledged investigation, the results of which—twenty-two single-spaced typed pages plus dozens of pages of appendices—Salye presented to her colleagues less than two months following her visit to Boldyrev. She discovered that Putin had entered into dozens of contracts on behalf of the city, many if not all of them of questionable legality.

Putin’s department in the mayor’s office was now called the Committee for Foreign Relations. Most of its activities ostensibly centered on providing for foodstuffs to be brought into the city from other countries. The city had no cash with which to buy the food: the ruble was not a convertible currency; Russia’s monetary system, inherited from the Soviet Union, was out of balance, and efforts to right it immediately led to hyperinflation. But Russia had plenty of natural resources, which it could trade, directly or indirectly, for food. To that end, the government in Moscow allowed subjects of the federation to export natural resources.

Salye found that Putin’s department had entered into a dozen export contracts, together worth $92 million. The city agreed to provide oil, timber, metals, cotton, and other natural resources granted to it by the Russian state; the companies named in the contracts undertook to export the natural resources and import foodstuffs. But Salye’s investigation found that every single contract contained a flaw that made it legally invalid: all were missing seals or signatures, or contained major discrepancies. “Putin is a lawyer by training,” she wrote later. “He had to know that these contracts could not be used in court.” In addition, Putin had violated the rules of these import-export barter operations, set by the Russian government, by picking the exporting companies unilaterally rather than by holding an open competition.

The food that by contract was supposed to be brought into Leningrad never made it to the city. But the commodities mentioned in these dozen contracts apparently had been transported abroad; in fact, another irregularity to which Salye’s investigation drew attention was the inordinate nature of the commissions written into the contracts: between 25 and 50 percent of the sum of each contract, for a total of $34 million in commissions. All evidence seemed to point to a simple kickback scheme: handpicked companies received lucrative contracts—and they did not even have to hold up their end.

Asked about the investigation by his biographers, Putin acknowledged that many of the firms with which he had signed contracts had failed to bring any food to the city. “I think the city did not do all it could, of course,” he said. “We should have worked more closely with law enforcement, we should have beaten it out of their firms. But it made no sense to try to go to court: the firms would just disappear instantly, stop functioning, remove their goods. In essence, we had no claim against them. Remember that time: it was full of shady businesses, financial pyramids, that sort of thing.” This was the same man who, just a day or two earlier, had emphasized to his biographers how vicious he could be if someone so much as seemed to cross him, the same man who flared up instantly and had a hard time winding down, the same man whom his friends remember all but scratching out his opponents’ eyes when he was angered. Why would this man sit idly while one private company after another violated the terms of the contracts he had signed with them, leaving his city without the food supplies it so badly needed?

Because it was rigged to end that way from the beginning, Salye believes. “The point of the whole operation,” she wrote later, “was this: to create a legally flawed contract with someone who could be trusted, to issue an export license to him, to make the customs office open the border on the basis of this license, to ship the goods abroad, sell them, and pocket the money. And that is what happened.”

But that, Salye believed, was not all that happened. Moscow had actually given St. Petersburg permission to export a billion dollars’ worth of commodities, so the twelve rigged contracts she found represented only a tenth of the wealth that should have traveled through Putin’s office. What was the rest of the story? She eventually found evidence that all, or nearly all, of the commodities, including aluminum, oil, and cotton, had been exported, or, as she put it, “had vanished”: there was simply no documentation. But her report to the city council focused only on the twelve contracts for which there was documentation; nearly a hundred million dollars’ worth of commodities ostensibly bartered for food that never arrived.

The city council reviewed Salye’s report and resolved to forward it to Mayor Sobchak with the recommendations that the report be submitted to the prosecutor’s office and that Sobchak dismiss Putin and Putin’s own deputy, whose signature was on many of the contracts. Sobchak ignored the recommendations and the report itself. The prosecutor’s office would not launch an investigation without Sobchak’s permission. Salye had already hand-delivered a three-page letter to Yeltsin outlining some of the biggest violations and asking that they be investigated. There had been no reaction. Only Boldyrev, Russia’s chief comptroller, had reacted with understanding, immediately sending a letter to the foreign trade minister and pursuing the case.

Boldyrev reviewed the documents Salye had brought him. His findings were essentially the same as Salye’s: someone had been stealing from the people of St. Petersburg. He summoned Sobchak to Moscow to respond. “Sobchak came and brought all of his deputies with him,” Boldyrev recalled in an interview later. Putin came. “They wrote down their versions of the events…. I then reported the findings to Yeltsin.”

And then nothing happened. The Russian president’s office in Moscow forwarded some documents to the Russian president’s representative office in St. Petersburg—and the story died.

“IT WAS JUST AN ORDINARY INVESTIGATION,” Boldyrev explained many years later. “It uncovered significant violations, but they were not radically more serious than what was going on in the rest of Russia. They were standard-issue violations having to do with obtaining the right to export strategically important resources in exchange for foodstuffs that never materialized. It was just a typical case at the time.”

Russia’s new elite was busy redistributing wealth. This is not to say that all of them behaved like Putin—the scale and the brazen nature of the embezzlement uncovered by Salye is shocking even by early-1990s Russia standards, especially if we take into account how fast he acted—but all of the country’s new rulers treated Russia like their personal property. Less than a year earlier, it had all belonged to other people: the Communist Party of the USSR and its leaders. Now the USSR no longer existed, and the Russian Communist Party was a handful of stubborn retirees. All that had been theirs was now nobody’s. While economists tried to figure out how to turn state property into private property—a process that still is not completed twenty years later—the new bureaucrats were simply taking the old state edifice apart.

Sobchak was handing out apartments in the center of St. Petersburg. They went to friends, relatives, and valued colleagues. In a country where property rights had not really existed and where the Communist ruling elite had long enjoyed the status of royalty, Sobchak, who basked in his early popularity, saw nothing wrong with what he was doing.

“And here are the papers on an entire city complex Sobchak tried to give away to some development company,” Salye told me all these years later, fishing several more sheets of paper from her pile. “This was a rare situation where we managed to get it reversed, but what a fight it was.”