Far and Away: Reporting from the Brink of Change

I go to see Yuri Begalov, who owns, with two partners, Kvant International, a company whose turnover last year, I am told, was $1 billion. He is thirty; I have heard that he is honest and sophisticated. At his office in Profsoyuznaya, a modest enough location, he is wearing a cashmere blazer, flannel trousers, an Hermès tie, and a Patek Philippe watch. His Porsche is parked outside. Initially, we sit in a cramped Soviet-looking room to talk; then we move down the hall to a conference room, where we sit at a large table laid with crisp linen and set with bone china and heavy silver. The staff serves a five-course lunch of refined Georgian food, complete with various wines. Begalov is Armenian, but grew up in Georgia; he has imported an entire Georgian kitchen, housed in the office complex.

“To start a business in this country, you need connections more than you need anything else,” Begalov says. “So because my partners were both physicists, we set up a firm to specialize in business uses for scientific research. We went wherever our connections led us; any work was okay if it was profitable.” When the Moscow Exchange opened, Begalov saw that this was the next wave of opportunity, and he immediately took out a bank loan (loans were then very new) and purchased a seat. The Moscow Exchange works according to arcane and bizarre rules. “It was incredibly high risk,” he says, “and my only real advantage was that I had taken the time to understand Russian business practice and Russian law, which almost no one else bothered to do.”

A Russian sociologist I know says, “The opportunities in this country are completely wasted on the Russians.” I will hear this sentiment over and over. Begalov followed the move toward privatization within Siberia, and when he heard that a commodities exchange would open in Tyumen, he bought a seat. Oil was a vastly inefficient state-run industry: state-run wells passed oil to state-run refineries that sold it to state-run factories. Begalov went to the director of a Moscow factory and got a commission to buy oil, then went to the first day of the exchange and bought the oil offered. The members of the exchange telephoned around town to get more oil, and Begalov bought that oil as well, establishing market control.

Begalov became a dominant force in Siberian oil and helped it enter the world market. Initially, his business was not covered by the tax code, and his activity remained wholly unregulated; business law in Russia is so new, so tangled, and so badly constructed that a clever person can still circumvent it. “I don’t worry about whether I’m doing good for this society,” says Begalov. “It’s been relatively easy for me to be successful in this context. There’s surprisingly little competition.”

Aydan Salakhova is owner and director of Aydan Gallery. She is in some ways the best that the new Russia has to offer: intelligent, beautiful, sophisticated, knowledgeable, with good contacts in the East and the West. She is herself a talented painter, and her gallery has a sleek, finished quality unusual in Moscow. She shows many of the city’s best artists and sells work to informed Russian and foreign collectors. “I see myself as helping to educate this population,” she says. “They have money, but often they have no idea what to do with it. They buy cars. They buy apartments. They have showy parties with Gypsy music. And after that, they need someone to show them what is beautiful, how to live well. It’s like in your country, only faster. First you get money, then you want power, then you go for taste. Someone has to bring together our cultural riches with these newly wealthy and empowered people. It’s a social responsibility.”

I go to an exhibition, at Moscow’s Central House of Artists, of the Rinaco corporate collection. Young bankers and artists pass and nod. “These people need each other,” says the curator, Olga Sviblova. “Everyone got money and culture from the Soviet state, a kind of forced diet of culture, but now culture is expensive and desirable; people have to interact with each other to get these things.”

“Yes,” says Sergei Volkov. “The ‘sophisticated’ businessmen now bring on the artists the way the unsophisticated ones bring on the dancing girls.”

A Life of Crime