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SPIEGEL Interview with Anatoly Chubais

'40 Million Russians Are Convinced I'm a Scoundrel'

Anatoly Chubais, one of the chief architects of Russia's massive privatization wave during the 1990s and now the head of the giant electric utility UES, discusses his successes and failures in 15 years of economic reforms, the risks of nationalization and the threat of a new Cold War between Russia and the West.

SPIEGEL: Mr. Chubais, 15 years ago you launched the privatization of the Russian economy on behalf of the government in power at the time. From today's perspective, what would you do differently?

Chubais: We made many serious mistakes, both legal and technical. But the most important thing was that privatization happened in the first place. You must not forget where we started. During the Soviet era, private ownership was a crime punishable with up to five years in prison. Germans are more familiar with these problems than others. Forty years of socialism in East Germany did not come without consequences. In our case, the communists were in power for 75 years. But today 60 percent of our economy is private, and that is the basis of our economic growth.

SPIEGEL: What mistakes do you mean, specifically?

Chubais: There were 400 privately licensed funds that had collected 40 million privatization checks, so-called vouchers. From those, we distributed a total of 144 million to the public. We thought that the funds were helping people to invest their vouchers wisely. The ordinary man on the street couldn't know, after all, whether gas, oil or machine production offered the best prospects. All 400 funds went bankrupt, and the vouchers of 40 million citizens became worthless. That's why 40 million Russians are convinced that I am a scoundrel, a thief, a criminal or a CIA agent, who deserves to be shot, hanged or drawn and quartered.

SPIEGEL: And it was Jeffrey Sachs, the American economist, who pushed the idea of all this shock therapy down the throats of Russians?

Chubais: Jeffrey Sachs's role in privatization was close to zero. We had already formed a group of young economists in St. Petersburg in the 1980s. We studied the history of reforms -- Lenin's New Economic Policy, and the reforms in Yugoslavia, Poland and Hungary. We also read the works of Western economists, which were banned at the time. If state security had known what we were doing, we would have paid a heavy price.

SPIEGEL: Who belonged to the group?

Chubais: Alexei Kudrin, the current finance minister, Sergei Ignatyev, now head of the central bank, and liberal economist Vitaly Naishul. The concept of the privatization vouchers was his. I was actually against it at the time.

SPIEGEL: Why did you change your mind when you became part of the government after the fall of the Soviet Union?

Chubais: Because in early 1992 there were only two possible scenarios. One was already in place: The director of a state-owned enterprise and a relative sign a lease for a plant with an option to purchase it. He pays rent for three months and then he buys the plant for a pittance. That was legal at the time. I saw hundreds of those kinds of contracts. There was only one way to stop this gradual privatization: distribute vouchers to all citizens.

SPIEGEL: You make it sound like a choice between the plague and cholera.

Chubais: Yes. To be more precise, between the plague you mention and a serious but curable disease.

SPIEGEL: The economic reforms of the 1990s -- your form of privatization -- plunged millions of people into poverty. Real incomes declined by half. Did you ever have trouble sleeping?

Chubais: And how I tortured myself! But history doesn't recognize the subjunctive. What we did was anything but ideal. However, we did prevent a far greater catastrophe. There was no civil war, which has happened so often in Russian history. Hundreds of thousands would have lost their lives. This is the true value of our reforms, not the fact that oligarchs are worth billions today. I couldn't care less about that.

SPIEGEL: Did then-President Boris Yeltsin understand what he was doing?

Chubais: Probably not the economic intricacies, but certainly the political and social big picture. He wanted to destroy communism by creating private ownership. In doing so, he laid the foundation for today's growth.

SPIEGEL: At any price, for him and your team?

Chubais: Have you ever watched a birth? It's a painful and bloody process. But it results in something wonderful: new life!

SPIEGEL: The Uralmash machine-building factory, with more than 50,000 workers, was sold for just a few million. Why did you practically give away these sorts of companies?

Chubais: Because the law of supply and demand applies in a market economy. No one was able to pay more back then. In the early 1990s, foreign capital eschewed Russia and there was no money in the country. When I left the government in 1996, I had only $3,000 in my account.

SPIEGEL: President Vladimir Putin complained that the government and the economy "dashed the hopes of millions" at the time. Did you feel that his comments were directed at you?

Chubais: I don't have to speculate over whom he meant. I myself am familiar with the things that went badly and unfairly.

SPIEGEL: For example, the oligarchs made billions out of nothing. That certainly gave the market economy a bad name among the Russian people.

Chubais: Financier George Soros referred derisively to our oligarchs as robber barons. He had apparently forgotten that the expression is American. Just look at the history of capitalism. I don't have to remind you of how (German steelmakers and arms manufacturers) Thyssen and Krupp made their money during World War II. America had the Rockefellers, the Kennedys and the Stanfords, who, at the expense of ordinary Americans, didn't always resort to the most savory of business practices. Current Secretary of State Condoleezza Rice taught at the respectable university that bears Stanford's name. The Americans have gone through 150 years of ups and downs, to pull themselves up out of the mud. After only 15 years, Russia is already in the process of liberating itself from the same thing.