Magical oligarchs pulling roubles from their hats

In Mikhail Bulgakov's The Master and Margarita, a satirical tale of Stalin's Russia in the 1930s, the devil comes to Moscow. As well as predicting the death of the critic Berlioz - the poor fellow slips under a tram and has his head cut off - Satan, together with his sidekicks who include a large black talking cat, two demons and a beautiful witch, sends various people to the madhouse or in exile to Yalta. A worse fate befalls those who come to watch his magic show at the Variety Theatre. As well as revealing information that some would like to keep hidden, Satan, appearing as a magician called Professor Woland, showers the audience with vast quantities of 10-rouble notes. The crowd disperses in rapture. But the money turns out to be fake, turning blank in the morning. Even worse, some of it turns into foreign currency. In Stalin's Russia, hoarding foreign currency was a crime. One of the characters rushes to deposit the money in his bank, only to see it turn into Canadian dollars, English pounds, Dutch guilders, Latvian latts, Estonian crowns. He is immediately arrested.

It is easy to laugh at the Muscovites' predicament. They were not laughing 10 years ago in 1998, when there was a run on the banks and the rouble was devalued. Another generation of Russians learnt the painful lesson that the authorities were not to be trusted. While you might not disappear - as you might have done in Stalin's time - your money could. Among all the billion-dollar bailouts by governments around the world, it should be remembered that not every citizen trusts their politicians.

Russians are right to be wary. While they were queuing in vain for their cash in 1998, a select few were bailing out their government. I interviewed one of these oligarchs, Mikhail Friedman, in the mid-1990s. It was a surreal experience. I was driven in a black Volga to the former offices of Vnesheconombank, the Russian trade bank that could no longer afford its grand offices and had been despatched to a less salubrious part of town. I was escorted down an interminable corridor, then asked to wait and invited to sit on a sofa. Fifteen minutes or so later, an overweight, badly dressed man about my age with curly hair and two days' stubble shuffled up to me. I assumed he was a driver, or a caretaker, coming to ask me if I wanted something to drink.

"Hello, I'm Mikhail Friedman," he said. He showed me into his rather grand office with a mezzanine floor and a secretary of stunning good looks. She was too beautiful to bother, so he made me a cup of coffee himself, then settled down to tell me his story. He had started washing windows for state companies, then moved quickly into import and export. This was the brave new world of Mikhail's Gorbachev's perestroika. One of the main exports was oil, bought in roubles - paper money about as valuable as Professor Woland's in the Variety Theatre - and sold for dollars. Mr Friedman and his partners made a fortune. They also imported computers and western goods that were in short supply.

Mr Friedman became one of the founder members of the group of seven oligarchs who shot to prominence in the 1990s. Led by Boris Berezovsky, the gang included Mikhail Khodorkovsky, who is now languishing in prison camp number 13 in the city of Krasnokamensk in deepest Siberia. He was jailed for eight years on tax-evasion charges, although his real crime was to fund political parties that were hostile to Vladimir Putin.

The oligarchs, operating first under the aegis of president Boris Yeltsin, participated in one of the greatest transfers of money from state to private hands in history. For derisory sums of money - sometimes as little as US$300 million (Dh1.1 billion) - the oligarchs gave "loans for shares" and were rewarded with the jewels of the Russian economy, ranging from oil to gas to aluminium companies. My pal Mikhail has done rather well since our encounter. Forbes magazine estimated earlier this year that he was worth about $21bn, putting him at number 20 on the world's rich list. He now owns the Alfa Group, which has its own financial institution, Alfa Bank. It is therefore rather surprising to learn that these oligarchs in turn are now being bailed out by the Kremlin - with the exception of Mr Khodorkovsky, who is probably working for free, making mail bags or tables for Ikea or whatever they make in Russian jails.

The list of oligarchs with their hands out includes Oleg Deripaska, reputedly Russia's richest man with a yacht the length of a football pitch, happily trousering $4.5bn from the Russian state to keep his business afloat. Alfa Group gleefully accepted a reported $400mn to hang on to its 44 per cent stake in Vimpelcom, Russia's second-largest mobile phone company. Igor Sechin, chairman of the state-controlled Rosneft, an oil company, accepted $800mn. The list goes on. It is ironic that the vehicle disbursing this largesse is none other than Vnesheconombank, whose fortunes have also revived since they were despatched to a duller part of town.

What is the lesson for Muscovites? Beware of magicians and black cats and keep your cash in dollars. Unless of course you are an oligarch, in which case you can pull roubles out of a hat. [e-mail]