crucial stage in their fabulous enrichment was opened by the second
phase of Chubais’s privatization, which followed the completion of
voucher privatization at the end of 1994. The new phase involved a
massive sale of state assets for money rather than vouchers.
It opened with “loans for shares” auctions in the autumn of 1995
that did much to discredit even more the market reforms and Chubais
as one of its main architects in the eyes of the Russian public.
Under the pretext of an urgent need to raise money for the state
budget, the last “heirlooms” of the Russian state sector were
transferred into the hands of a few well-connected individuals.
The scheme was
simple: the state transferred into temporary ownership of major
commercial banks its controlling interests in attractive companies,
such as Norilsk Nickel and major oil companies. In exchange for
state shares, the banks were to give loans to the government to
finance budgetary expenses. After an agreed period of time, the
government had to return the loans to the banks; failing that, the
state shares would become the property of the lenders.
this scheme, dubious auctions were set up, at which valuations of
state shares were set very low and only the bankers close to the
government were allowed to bid. As a result, they gained control
over state holdings in lucrative companies. As it turned out, the
government had no intention to repay the loans, and the
money-spinning enterprises were forfeited to the so-called
The “loans for
shares” auctions were ostensibly designed to salvage the
government’s budget, but they turned out to be a ploy that allowed
the privatization of lucrative companies in circumvention of the
parliament’s ban on the sale of state shares in such companies.
The auctions boosted the oligarchs’ powerful economic
structures, which now included oil companies, mines, and smelters,
as well as vast holdings in the banking sector.