LOANS FOR SHARES PROGRAM

Part of the overall program ofprivatizationunderBoris Yeltsin, the “loans for shares” scheme saw the regime auction off large bundles of stock shares of formerly state-owned enterprises. Payment was made in the form of loans, which, if unpaid by 1996, would be converted into ownership stakes in the firms in question. Theindustriesparticularly affected were energy, telecommunications, and metallurgy. Only a small number ofbankswere allowed to participate, thus creating conditions where transparency was absent. The prices for these “shares” were surprisingly low, allowing well-connected individuals access to extremely valuable assets. In effect, the loans for shares program expanded the fortunes of Russia’s mainoligarchsovernight.Boris Berezovsky,Mikhail Khodorkovsky,Vladimir Potanin, and other tycoons emerged from the scheme with both economic and political clout that could be matched by few in Russia.

See alsoCorruption.