Chapter 568: Carving Up the Spoils (Part 1)

December 21, 1991. Alma-Ata, Kazakhstan.

The leaders of eleven Soviet republics gathered around a table to jointly sign a historic declaration.

They announced the creation of the Commonwealth of Independent States and formally declared that the Union of Soviet Socialist Republics had ceased to exist.

Ever since the tripartite Belovezha Accords in the Belovezha Forest two weeks prior, Moscow had been trying in vain to halt the march toward dissolution.

Gorbachev still held the title of President of the Soviet Union, and the red flag still fluttered over the Kremlin, but now, not even the republics needed to sustain the union were willing to stay.

After enduring nearly seventy years of stormy global dominance, that red colossus pieced together from fifteen republics was left with only a few lingering gasps of life.

Yet a mere piece of paper could never clean up the practical mess left in its wake.

To whom did the millions of Soviet troops scattered across the land answer? Who would take charge of the tens of thousands of nuclear warheads stationed across four republics? And who would pay off the mountain of foreign debt left behind by the central government?

To whom did the thousands of miles of oil and gas pipelines, mines, munitions plants, and top-secret research institutes belong?

A nation could be declared nonexistent at a conference table, but those tangible assets would not simply vanish into thin air.

While most people were still bickering over their ownership, others had already sprung into action.

After all, that was the Soviet Union.

Even carving off the tiniest sliver from such a colossal corpse was enough to make many unimaginably wealthy.

…

December 23, Moscow.

In an office of the Russian State Committee for State Property Management, the telephone had been ringing incessantly all morning.

Korolyov held the receiver between his ear and shoulder, casually listening to the person on the other end explain while noisily flipping through the thick registry before him.

“I’ve already told you, the application must be accompanied by certification from the original governing authority.”

“Which governing authority?”

“Your original governing authority, obviously.”

“But that ministry was abolished last week!”

Korolyov’s hand stopped turning the page.

He pushed the registry forward slightly and saw the neatly printed letterhead on the paper: Ministry of Heavy Machinery Industry of the USSR.

That name had indeed become a bit troublesome lately.

“Then just send over your existing business registration documents for now.”

“Can you guarantee it’ll be approved?”

“No.”

A curse came through the receiver, followed by an immediate click as the caller hung up.

Korolyov put down the receiver and rubbed his furrowed brow in exhaustion.

That was his sixth call of the morning, and judging by the mountainous pile of documents in the corner of his desk, the afternoon would only bring more.

In the past, these massive state-owned enterprises employing tens of thousands had sacred Five-Year Plans, unshakeable funding pipelines, and their respective supervisory ministries.

Now, the old institutions were stripped of their authority one after another, and the Russian government was scrambling to take over in utter chaos. A vast number of enterprises didn’t even know which doorway to knock on to submit their reports.

Some were genuinely anxious to keep production going, but others clearly harbored different motives.

There was a soft knock on the door.

A middle-aged man wrapped in a dark wool overcoat stepped inside, followed by a young secretary clutching a genuine leather briefcase.

Korolyov recognized him—the general director of a massive chemical conglomerate along the Volga River. Under the old system, when such powerful trust bosses came to Moscow for meetings, a junior officer like Korolyov wouldn’t even have had the standing to deliver papers to them.

Today, however, the director was all smiles, exuding an enthusiasm that was almost uncomfortable.

“Comrade Korolyov, apologies for disturbing you,” he said, extending his hand proactively. “I just wanted to confirm: will our plant’s original all-union operating license officially fall under your committee’s purview going forward?”

“The handover is currently in progress.”

“Then please expedite it, comrade.”

The man took off his hat and sat down. His secretary immediately pulled out a freshly printed document from the leather bag and slid it across the desk with both hands.

“We have a production line slated for modernization. The German side is very sincere; they’re willing to provide turnkey equipment and even handle long-term export procurement.”

“Their only condition is that the contracting entity must possess clear asset disposal rights and foreign trade authorization.”

Korolyov took the document and looked through it.

It was filled with high-sounding corporate jargon: equipment upgrades, export settlements, operational autonomy… until he flipped to the final two pages, where a proposed draft regarding the future “internal restructuring into a joint-stock company” stood out conspicuously.

Korolyov looked up, his gaze sweeping across the desk.

“Your fiscal budget for next year hasn’t even been finalized, and you’re already thinking about corporate restructuring?”

“It’s precisely because Moscow cut off supplies that we must find a way to survive on our own.”

The general director answered self-righteously, without flinching.

“Over ten thousand workers are waiting anxiously for their wages, and raw materials for the workshops have to be purchased. If I, as plant director, do nothing, the entire conglomerate will grind to a dead halt by next spring. When it comes to that, who is going to take responsibility for those workers?”

His reasoning sounded sound and watertight. Before leaving, he made sure to place a business card with gold foil lettering on the desk, politely stating that he would be ready to submit any supplementary materials at any time.

Korolyov placed the document on the corner of his desk, his eyes lingering on the exquisite business card for a moment.

Over these past few months, more and more people had grown desperate to find a new way out.

Some clamored for operational autonomy, some rushed to set up independent foreign trade corporations, and others pulled strings everywhere looking for foreign partners willing to settle in US dollars.

As for how much these individuals stood to gain from enterprise restructuring down the road, nobody could say for sure right now.

He picked up his pen and added another entry for the enterprise in the registry.

Before he could even cap the pen, the phone on his desk began ringing shrilly once more.

…

The same day, Washington.

“Why is this list longer than last week’s?”

In a meeting room at the Pentagon, a Department of Defense official tossed a document onto the table.

The colleague sitting opposite him flipped open the top page.

“Because we now have to deal with several different republics separately. We used to only deal with Moscow, but now Ukraine, Kazakhstan, and Belarus all have ideas of their own.”

“What about the strategic weapons?”

“Alma-Ata agreed in principle to maintain unified control. As for how to implement it specifically, we still need to negotiate.”

The official lowered his head, staring at the dense list of facility identification numbers in the file.

On December 12, President Bush had signed legislation regarding Soviet nuclear threat reduction.

Congress was willing to fund the securing, transport, and dismantlement of hazardous weapons, but getting equipment and personnel into those facilities presented a long list of problems.

Especially the personnel.

Top-secret research institutes across the country had been unable to pay full salaries for months. The nuclear physicists and missile guidance engineers trained at enormous expense by the Soviet Union were now likely unable to even pay their home heating bills.

“What if they get an offer from the Iraqis?”

“That’s precisely why we need this program.”

“The bill is signed, I know that,” the official interrupted. “What I’m asking is: when will those US dollars actually reach their hands?”

Silence fell over the conference table; no one had an answer.

Just then, a secretary briskly brought in a briefing from a diplomatic delegation abroad.

The Department of Defense official idly flipped to the second page.

The Leningrad State Optical Institute had reached a technical cooperation agreement with a Japanese commercial entity. Several sensitive experts in aerospace optics and high-precision machining were on the list, and US authorities were coordinating channels for security reporting and technical inquiries.

Gripping his pen, he drew a red line next to that sentence.

“At least someone is paying to support this batch for now.”

“The Japanese?”

“Yes. As long as we can monitor where they are and what they’re doing every day, it’s fine.”

He tossed the file onto the top of the pending case pile.

Dozens of similar reports lay scattered across the table. Compared to the Soviet Union’s vast strategic weapons infrastructure, the whereabouts of these few optical experts barely filled half a page.

Yet even that was enough to keep Washington occupied for the better part of a day.

…

Meanwhile, in the American energy sector, an entirely different group of people cared about something else entirely.

In a conference room at a major oil company in San Francisco, a map of Kazakhstan covered almost an entire wall.

The location of the Tengiz Oilfield was heavily circled in red, surrounded by pinned reserve evaluation reports, pipeline route maps, and a thick stack of negotiation records.

The coffee on the table had long gone cold, but the project director was still anxiously pressing his subordinates to establish contact with Alma-Ata.

“I don’t care whether that place is called the Soviet Union or Kazakhstan right now.”

He jabbed at the map with the tip of his pen.

“We’ve spent four solid years running through the ministerial corridors in Moscow for this oilfield. Now that the most troublesome layer of bureaucrats is finally out of the picture, are we supposed to wait until Shell or the British sign the contracts, and then go congratulate them?”

At the other end of the conference table, the engineer in charge of storage and transport pipelines pointed to a dead end on the schematic:

“At the end of the day, the Caspian Sea is just a giant landlocked puddle with no outlet to the open ocean. Even if we pump the oil, getting it out still requires using the Russians’ old pipeline network to reach the Black Sea.”

“Moscow might be falling apart, but the oil transit valves are still in their hands. A transit quota could choke us off halfway at any moment.”

“Then keep negotiating.”

The director didn’t even blink, his tone curt and unyielding.

“Equity split, pipeline transit fees, ten-year tax exemptions… grind them down item by item. Moscow is starved for foreign exchange, and the new Kazakh government is even more desperate. As long as our US dollar checks are fat enough, I refuse to believe we can’t turn their valves.”

He grabbed the telephone receiver from the desk and pressed the speakerphone button:

“Tell our people in Alma-Ata not to sleep tonight. Camp outside their hotels or leverage personal connections—whatever it takes. Before the New Year’s bells ring, I must see a definitive answer come through that fax machine.”

A long, garbled series of international dial tones echoed from the receiver.

While officials in Washington were pulling their hair out over scattered nuclear warheads, everyone in this conference room had their eyes glued strictly to the proven reserve numbers on the wall.

As for what name the country would carry in tomorrow morning’s newspapers, they didn’t care in the slightest.

…

Frankfurt, Germany.

For the few Germans seated in the bank’s conference room, the collapse of the Soviet Union brought precious little excitement.

A debt notification from Vneshekonombank, the Soviet Bank for Foreign Economic Affairs, lay squarely before them.

Across the Western world, German banking circles were the Soviet Union’s biggest creditors. Tens of billions of Deutsche Marks in loans remained uncollected on their books, yet the borrowing entity was on the verge of being erased from the map.

Once the state collapsed, whom were they supposed to collect this colossal sum from?

“They declared a moratorium on principal repayments in early December, and now the debtor nation itself is practically gone.”

A manager in charge of Eastern European business took off his glasses and wiped them with a handkerchief.

“When we signed those loan agreements in black and white, the politicians in Bonn never warned us that this day would come.”

Across the table, the head of risk control opened a repayment plan covered in red annotations:

“The G7 agreed in principle to an extension a while ago, and Moscow now hopes commercial banks will offer similar arrangements. But the problem is: who exactly do we pursue for the money next?”

“Ukraine is busy dividing the Black Sea Fleet, the Kazakhs are calculating oilfield stakes, and as for Russia—their fiscal deficit is so massive they can barely afford paper for the mints.”

The manager opened his mouth, unsure of what to say.

“…The Russians must acknowledge at least a portion of it, surely.”

“Acknowledge how much? Repay when? And repay with what?”

With three questions hammered down in rapid succession, silence descended on the conference room once more.

Over the past few years, Ruhr machinery, turnkey production lines, and BASF chemical technology had poured steadily into the Soviet Union, financed by massive export credits.

Now, this bank alone held over a billion marks in Soviet credit exposure on its books. If written off in full as bad debt, this year’s annual report would look catastrophic.

“My recommendation is to freeze all new credit facilities immediately,” the risk control chief said, placing his pen on the desk. “Wait until the folks in Moscow sort out the debt inheritance framework before doing anything else. Until then, not a single Pfennig leaves Frankfurt.”

“And then what? Just sit in our offices and twiddle our thumbs?”

On the other side of the long table, the director of corporate finance tapped his fingers on the desk.

“It’s precisely because they lack hard currency that they’ll be even more reliant on external financing going forward.”

He reached out and slid an industrial map of Eastern Europe to the center of the table.

“The country may have shattered, but the oil, natural gas, and timber of Siberia are still there, along with tens of thousands of aging factories desperate for technical retrofitting.”

He traced a line across the map.

“If we collateralize future export equipment directly against their energy contracts or foreign exchange settlements, there’s still good business to be done.”

“What about the current old debts? Are we just going to let them rot on the balance sheet?”

“We’ll certainly demand repayment of the old debts. The Paris Club and the government will negotiate with Yeltsin.”

The man closed his folder.

“But if we tie our own hands and feet because of the past, banks on Wall Street and in London will snatch up every signable deal in Moscow and Alma-Ata by tomorrow.”

The manager in charge of Eastern European business placed his cleaned glasses back onto the bridge of his nose.

He glanced at the overdue repayment schedule by his hand, then at the proposal for the new project freshly delivered to the desk, and finally told his secretary to keep both files.

The old debts had to be collected.

And the new business had to be pursued.