The recent hype in Russian media about a legal trial between Sergei Vasiliev and his former associate Sergei Baranov, regarding the latter’s illegal ousting from Leaderland TTM BV and Soyuz Corporation, has led to questions concerning the Kremlin’s ties to the illegal proceedings of Russian businesses and their wealthy owners. Serious allegations have been launched at Vasiliev, insinuating he has used harsh and illegal methods of intimidation to scare Baranov into silence. His Soyuz corporation bears the official stamp of approval of the Kremlin, which begs the question, are Putin and the Kremlin acting as the “krysha” for Russia’s oligarchs?
The concept of “krysha” – a Russian criminal slang term meaning “roof”, or in other words protection – was a widespread phenomenon in the 1990s Russian privatization process. During this murky period, in which a few Russian elites were able to acquire a considerable amount of cheap previously state-owned assets, it was imperative that these new millionaires and their businesses were sufficiently secured from their enemies. But is this truly an occurrence of the past? Or do we still see such devices being used today in the name of protection?
Back in the 90s, “New Russians”, as these oligarchs are commonly known in modern Russia, would operate outside the law and pay an individual with political and mafia connections significant sums of money (transactions were often in millions) in return for a protective kryshaover their heads. In return, these individuals, ranging from criminal gangs to semi-legal state organizations took care of certain complications, whether business related or personal. By using the threat of violence, protectors were able to deter certain individuals from undertaking any actions that would harm business or clients and ensure that debts were collected in a timely fashion.
The relationship between the protector and protected was mutually beneficial: if the protector continued to provide his various services, then the protected would proceed to dish out huge sums of cash. What makes this system even more perverse is the fact that these “krysha’s” were not merely street thugs but had positions in various companies in Russia that could be tied to government interests, which essentially connects this criminal activity to the highest level of government.
The prevalence and pervasiveness of this system can be evidenced from the 2012 London court case between Chelsea owner Roman Abramovich and Boris Berezovsky. Berezovsky had claimed that him and Abramovich were partners in the 1990s and had helped the latter acquire the state owned company Sibneft through his close ties with Yelstin. Berezovsky, who had been in exile in London since Putin’s rise to power, accused Abramovich of cheating him out of more than $5 billion and forcing him to sell his shares in the company at less than their value.
On the contrary, Abramovich claimed that the billionaire oligarchs were never partners and that the relationship was based on “krysha”. Given Berezovsky’s high status and political connections at the time, Abramovich claimed that he had paid him millions of dollars to ensure the protection of his business. Abramovich eventually won the case in the London High Court as the Judge found that Berezovsky was an unreliable witness. Berezovsky, who was later found hung in his bathroom, accused the judge of “rewriting Russian history”.
A similar scenario took place during the London-based trial between aluminum tycoon Oleg Deripaska and Michael Cherney, during which the latter accused Derispaska of cheating him out of 20% of metals giant Rusal. Deripaska insisted on a similar arrangement as Abramovich, claiming that he had paid Cherney over $250 million in protection –“krysha” – fees which he had been doing since the mid-1990s after his colleague was shot. It is widely rumored that Cherney had connections with one of the most feared mafia groups in Russia – Izmailovskaya – which made him a useful asset to the billionaire Deripaska, who’s very visible wealth made him a target of all sorts of criminal violence and extortion. The case was unexpectedly settled between the two men in an out of court agreement in September 2012, and both parties refused to comment further on the nature of the agreement.
Although the use of “krysha” was a prominent phenomenon in 90s Russia, it is reportedly still used today among the business elite.
It is hardly a secret that Russia is a dangerous place to embark on business ventures in, especially if the interests of the powerful begin to conflict. It the end, the one who prevails in such disputes may simply depend on who has a better “krysha”, which today is more associated with political connections rather than criminal gangs. As the Economist has rightly pointed out, most businessmen who do business in Russia “know that their best protection is still not the law but their krysha, […] a well-connected power broker”.