The Russia Conundrum

When I got back, I wrote to the local KGB department (back then, it was the KGB that took the lead in the fight against organised crime), where we had good contacts – they were responsible for the Mendeleev Chemical Technology Institute, where I had been a student, our office was on their territory and, what’s more, we had plenty of defence industry clients, so they paid attention to us. That was the last we heard from the Izmailovo mob. Years later, I learned that the boss of the Organised Crime Unit of the regional KGB had a quiet word with the mafia and told them that our contracts with official government departments meant we were off limits. That’s how things worked in those days. There were endless reports of premises being blown up and entrepreneurs having their throats cut, but I never had a problem. Perhaps I should have been more worried. On a few occasions, I was warned there was a contract out on me so I hired a couple of bodyguards, but I never paid for ‘protection’. I told my staff that I didn’t want any security briefings so that I could try to remain oblivious. I didn’t want to live in fear.

My son Pavel was born while my first wife and I were still students. We were very young, times were hard and the marriage didn’t last. The fact is that I met someone else. It happened while I was doing my stint as Komsomol deputy secretary at the Mendeleev Chemical Technology Institute. I was 23, Inna was just 17 and she was pretty wary of this cocky fellow with big ambitions; but I knew from the very first moment that I loved her and wanted to be with her for the rest of my life. I moved out of my family apartment and slept in my car until Inna took pity on me. We are now in our fourth decade of married life together, with a grownup daughter and twin boys. In my business life, I always felt I was in control, but I learned that love is a lot less predictable.

At first, Inna and I lived in rented flats with two small rooms and second-hand furniture, plus chairs and a table that I borrowed from the office. The business climate was cutthroat. It is no exaggeration to say that I had enemies and could have been killed, and Inna was also at risk. But she stayed with me, stayed cheerful, supportive and endlessly beautiful; I can’t thank her enough for all she has done for me.

My wife, Inna Khodorkovskaya

Progress became easier as the years went by. It was a lawless decade in Russia, but we worked hard and Menatep Bank gained a reputation for honesty and reliability. People came to understand that their cash was safe with us. It helped us not only to acquire many private investors, but also to build relations with ministries, departments and state organisations, which opened accounts with us. Within a couple of years, we had a large number of branches and a substantial turnover. We were the first Russian bank to list its shares.

Things were changing fast in the USSR and anyone with the nous and agility to keep up could make a lot of money. There was no stock exchange back then and no developed system of private banks, so if a company managed to earn hard currency it could only exchange it through the state bank at a very uncompetitive rate. Our idea was to find companies in that position and offer them a better exchange rate to convert their hard currency to ‘soft’ roubles. At the same time, we knew that many state enterprises had massive reserves of soft roubles that they were desperate to turn into foreign currency in order to purchase vital technology from abroad. We travelled up and down the country looking for such firms, offering to help them out and charging healthy margins for doing so. This in turn allowed us to enter the field of foreign currency trading, which had been forbidden under the old Soviet Constitution, punishable by long prison sentences or even death, but was not specifically banned under the new legislation of the Gorbachev era. We were a bunch of youngsters – most of us were still under 30 – but we had grown Menatep into one of the biggest commercial banks in Russia, and the future offered even greater possibilities. Gorbachev’s liberalisation was beginning to allow us to see how things were done in the West and we wanted the same freedoms for ourselves.

CHAPTER 2

AN OPEN SOCIETY