The Ghost of the Loans-for Shares Auction by Mikhail Zygar

[In America most businesses were built from the ground up. Folks started something, worked, got a lot of capital, formed big corporations and then used their influence on government to get subsidies, trade protections, tax breaks and suitable regulations to help them expand and grow richer.]

Things are different in Russia. In the nineties the State owned everything then Yeltsin and his cronies came up with the infamous loans-for-shares auctions, which is how the oligarchs became oligarchs in the first place. The plan envisaged that all major state-owned enterprises, including those involved in petroleum and other natural resources, would be privatized by the largest banking groups. The banks lent the government money and received company shares as collateral. Everyone knew the government would never repay the loans, which meant that the enterprises would become the property of the creditor banks.

There were a couple of additional details, including, for instance, the fact that the banks lent the government the government's own money. Before each deal the Russian Ministry of Finance opened an account with each bank and deposited funds there - and that account was the source of the bank's loan to the government.

However, the collusion did not end there. Formally, each auction involved several bidders. But in fact the result of each auction was a forgone conclusion.

The person behind the drive to Russian privatization, Anatoly Chubais, who served as deputy prime minister between 1994 and 1996, later told the Financial Times that the government "did not have a choice between  an 'honest' privatization and a 'dishonest' one, because an honest privatization means clear rules imposed by a strong state that can enforce its laws .  .  . we had no choice. If we did not have the loans-for shares privatization, the communists would have won the 1996 elections and this would have been the last election Russia ever had, because these guys do not give up power easily."

In 2014 Khodorkovsky ( one of the lucky ones) had this to say about the auctions:

"In what way was it a collusion? There was a long list of enterprises to be privatized, around eight hundred, and everyone stated which one of them they'd be able to handle. The problem at the time was not the money to be paid to the government (the government was providing the money), but the availability of personnel. I could have taken a lot more; there were no restrictions. . The government went ahead with the auctions because it somehow had to resolve the situation with the 'red directors' [those who favored a planned economy] who on the eve of the election stopped paying people's salaries, not to mention taxes. They were forever creating stress points. It was a political issue. I knew full well from my bit of managerial experience that my team had enough resources to cope with no more than one enterprise."

The upshot was any subsequent rotten, collusive deal such as the sale of Northern Oil was seen as a small matter compared to the loans-for shares auction when Russia's business leaders had gotten their assets from the state practically as a gift. Khodorkovsky simply did not have the moral right to publically lecture president Putin about the harm of corruption. As a last resort, the proceeds of large resource-extraction companies might be seized. Business leaders understand that some or all of their property could at some point be expropriated in the interests of the state.  They have long since come to terms with that fact. It is often said that Russia's top businesspeople are not billionaires but simply work with billions of dollars in assets. They manage what Vladimir Putin allows them to manage.

No one I interviewed see any prospect of change. Or rather, they see the prospect of change only in one circumstance, which dare not speak its name. Instead, they resort to euphemisms: "when the black swan flies," when the president visits Alpha Centauri," 'when the heavens fall.' They all refer to the time when Putin is no longer, well, Putin. They are wrong, of course. It is a peculiar myth that everything in Russia depends on Putin and that without him everything will change.

This book demonstrates that Putin, as we imagine him, does not actually exist. It was not Putin who brought Russia to its current state. For a long time he resisted the metamorphosis, but then he succumbed, realizing that it was simpler that way.

In the very beginning Putin did not believe that Russia is surrounded by enemies on all sides. He did not have plans to shut down independent TV channels. He had no intention of supporting Viktor Yanukovych. He did not even want to hold the Olympics in Sochi. But in trying to divine the intentions of their leader, his associates effectively materialized their own wishes.

Today's image of Putin as a formidable Russian tsar was constructed by his entourage,  Western partners, and journalists, often without his say. In one of the most famous photographs there is, he has the mein of a haughty ruler, the 'military emperor of the world." But that is not Putin himself, merely Time magazine's 2007 Person of the Year staring out from the cover.

Each of us invented our own Putin. And we may yet create many more.