Oil baron blasts Putin for market upheaval

WHAT is really going on in Moscow? The stock market, booming all year, went into freefall last week when President Vladimir Putin launched a raid against tycoon Mikhail Khodorkovsky.

Oil giant Yukos was caught in the crossfire as the government seized Khodorkovsky's 44% stake. Western investors are deeply concerned. They have been piling into Russia all year. BP alone has invested £4bn.

Shares rallied this week on hopes that this is merely a targeted campaign against the oligarchs - the businessmen who accumulated huge fortunes during the 'gangster capitalism' of the 1990s. But fears and rumours are bubbling away. Memories are still vivid of the 1998 crisis, when the government defaulted on its debt.

An alarming if idiosyncratic view comes from Boris Berezovsky, until recently one of the richest and most powerful men in Russia.

He sees months of turmoil ahead, and warns that oligarchs like him have been moving their money out of the country while foreigners were pouring theirs in. He is scarcely a non-partisan critic. He fled Russia in 2000 after falling out with Putin and recently received political asylum in Britain. Earlier this year, he took out bizarre full-page newspaper advertisements mocking the Russian regime.

Berezovsky knows more about the Russian political and business scene than anyone. This obscure mathematician was among the first to seize the chance for undreamt of wealth after the fall of Communism, making a fortune in the ruthless car trade before branching out into mysterious offshore foreign exchange dealing for major industries including Aeroflot, the national airline.

Under President Yeltsin he was known as the 'grey cardinal' for his influence in business and the Kremlin. He helped to elect Yeltsin in 1996 and Putin four years later.

Today he is holed up near Shepherd Market in London's Mayfair. In his outer office, scowling young men in black suits and open-necked black shirts mutter into their mobiles in Russian and French.

Berezovsky, 57, looks less like a power broker than an accountant. Dressed in black and dark greys, he wears the worried expression of a man who fears he has left the tap on at home. When he encounters a difficult question, he never bristles, but merely ticks off rebuttal points on his fingers.

He sees the move against Khodorkovsky as just the beginning, as Putin steps up his campaign against the oligarchs as a stunt to win political support. Parliamentary elections are due next month with a presidential poll in March.

'Putin will lose the parliamentary elections. He knows that and he is trying to do something to improve the situation. Why did they catch Khodorkovsky like a bandit? They wanted to demonstrate power - two months before the election - to show they don't allow anyone to go against the Kremlin.'

Some assume that Putin enjoys widespread support. Berezovsky says this is 'propaganda from the old KGB'. In 40 local governor elections, he says Putin candidates won just seven times. The most recent got only 15% of the vote. The president 'has no more than 15% support, the Communists about 40%'.

He adds: 'Putin's team are looking at how to postpone elections because they know they do not have a chance to win. He will postpone or decide not to hold them at all.'

Berezovsky does not share the Western view of Putin as someone who is trying to clean up the system. Ex-KGB man Putin 'does not care about the stock market, only about power', Berezovsky claims.

The Kremlin believes Russia has enough resources, especially oil and minerals, to tide it through 'five months of turmoil' until the presidential elections. He predicts that bullish foreign investors will 'change their minds' about Russia in the months ahead.

Berezovsky estimates his own fortune at £1.3bn. This is surely conservative. He pulled cash out of Russia years ago into banks across Europe. He warns that his fellow oligarchs are following his lead.

The regime has charged him with fraud. He denies this and the accusation that he spent the Yeltsin years salting money away abroad. 'Until 2000, 95% of my capital was concentrated in Russia.'

Berezovsky's application for asylum here succeeded after three alleged attempts from Russia to assassinate him.

The latest involved a man supposedly trying to use a pen to inject him with poison at his asylum hearing. He blames the Moscow regime - which denies the charge. Business rivals have tried before. A 1994 bomb left him needing surgery. The blast decapitated his chauffeur while Berezovsky sat in the limousine's back seat.

Berezovsky's most extraordinary charge against the Russian regime relates to the apartment block explosions in Moscow that killed nearly 300 people and were blamed on Chechen rebels.

Berezovsky claims otherwise. 'I have a lot of evidence that the FSB [the rebranded KGB] exploded the houses. They were not sure Putin would be elected, so they created a lot of chaos and put up Putin as the man who could overcome it.' The sensational accusations have not gained widespread currency.

Many are suspicious of Putin's political ambitions. But Russians have no love for the oligarchs who made such vast fortunes in the violent and murky era following the 1991 revolution.

Most infamously, they profited when state companies were sold off cheaply in 1995. Berezovsky and new Chelsea owner Roman Abramovich bought oil company Sibneft, now valued at £7bn, for just £65m.

Berezovsky defends himself logically. He says the privatisations came 'just after the Communists took power in the parliament and Yeltsin had a 5% rating'. The companies could have been seized back. The prices were low simply because the risks were so high, he argues.

Outsiders at the time told him Sibneft was not worth what he paid. He tried to raise capital for the purchase.

'The person I visited first was George Soros. I saw him in New York and in Dallas. He said, 'I wouldn't give you $1 [to put into Sibneft], because Zyuganov [the Communist leader] will become president, he will take everything and then he will kill you'.

'I travelled to Germany, to Japan, and they said the same thing. I found the money in some banks in Russia, including Menatep. Six months later, after Yeltsin won the election, I had visitors from New York offering me $1bn.'

He also argues that the oligarchs 'took state companies under control and improved them a lot, made them effective'.

Berezovsky no longer speaks to Abramovich, once a good friend, who remains in favour back home. 'I haven't spoken to Abramovich for three years. We are on different sides of the barricade. He is one of Putin's key supporters.'

He admits the breach has been painful. He says in their last dealings, his former friend acted as a go-between to broker a deal between Berezovsky and Putin. He says Putin reneged on his side.

He calls his former ally's £140m purchase of Chelsea 'a mistake'. 'He is playing for the favour of the crowd.'

By acquiring a foreign company 'it sends the message that the oligarchs don't care for Russia. But it is important for him how the West will accept him'.

Berezovsky, who owns a 240-acre spread in Surrey and a chateau on the Cap d'Antibes in the south of France, says he plans to return to Russia 'immediately' after Putin falls.

He believes opposition to the tycoons is overstated. 'There are people there who love oligarchs - particularly young people. They are the future of Russia. There is a place in Russia for rich people,' he says. We shall see.