There is no mystery about their growth and strength. The group includes a collegium of former Chekists who moved in with Putin from St. Petersburg and who first replaced the Yeltsin ‘Family’ and then the Chekists associated with Yeltsin; thereafter they moved to take on the oligarchs. They include among them Sergei Ivanov, Igor Sechin, Sergei Stepashin, Nikolai Patrushev, Vladimir Ustinov, Vladimir Yakunin, Nikolai Negodov, Yury Skuratov and many others. These, like Putin, moved over from the Organs to play a role in government; primarily as advisers and then as Ministers or officials.

When Mikhail Gorbachev abolished the Communist Party's monopoly of power, the KGB rushed in to fill the political void. Prior to the 1990 elections for the Congresses of People's Deputies in Russia and the other Soviet republics, the KGB set up a special task force to organize and manipulate the electoral processes. It held political organization training courses for favoured candidates, arming them with privileged information about their constituents' problems, needs and desires. Admitted KGB officers, some 2,758 in all, ran in races for local, regional and federal legislatures across the USSR; 86% won in the first round, according to an internal KGB newsletter.

It was these Chekists who chose the new oligarchs-to-be and established the first stock and commodities exchanges, "private" banks, and trading houses through which the Soviets' strategic stockpiles of minerals, metals, fuel and other wealth were sold. The West would not allow the Soviets to dump these reserves on the open market for fear of depressing world prices, so the KGB took the alternative route of selling these through organized criminal channels, to get the hard currency Moscow desperately needed.

The leaders of the First, Fifth and Sixth Directorates of the KGB developed a two pronged plan. The first part of the plan included inviting in foreign capitalists to prepay the expenses of the factories to get production moving. These capitalists would pay for raw materials, pay for transport and earn the right to sell the completed goods on the world market. They would pay, in addition, a fee or ‘toll’ to the factory for producing the goods. This system of tolling would only work if there were an internal currency which could be used to start the payment system and establish prices. There was no state mechanism capable of handling this. So, the planners decided on an ambitious, if risky, system. They would make an alliance with the small and disorganised criminal groups in Russia to develop a parallel system to the government’s business. They opened up the floodgates on a massive haemorrhage of roubles onto the world markets to get hard currency and to prime the rouble pump inside Russia.

Ordinary roubles became ‘gold roubles’ when they passed the border. These were gold roubles- because they were backed by gold held in the Russian Treasury. Between 1990 and 1992 the Soviet and then the Russian gold reserves had mysteriously disappeared. When Gregori Yavlinsky, the reformer, went to the September 1992 G-7 meeting in Bangkok he reported that of the 2,000 tons of gold in the Russian reserve only 240 tons were left. In November even these were gone. In a little over a year over US$22 billion in gold left Russia at a heavy discount to cover the massive rouble river costs.

When this money returned to Moscow it was directed into Chekist-guided businesses. The KGB and its allies, under the economy boss Ivan Silayev and the KGB chief Vladimir Kryuchkov, set up a system in which loyal and trusted members of the Komsomol system and chosen businessmen could form their own banks, ‘Russian’ banks. Men like Khodorkovsky, Aven, Fridman and others were chosen and set up in the money business.

The principal bank used to channel this parallel money in and out of Russia was Menatep (Khodorkovsky's bank). It was the vehicle through which almost all the transfers of serious money in and out of Russia took place from 1992 to 1998. As the ‘tolling’ business took shape the proceeds of the sales of aluminium, copper, steel, etc. in the West were paid into Menatep Bank. These transactions were guided by the Chief of the Committee on Operative Management of the People's Economy of the USSR (until Dec.26, 1991) Ivan Silayev, Deputy Prime Minister Oleg Soskovets, presidential aide Aleksandr Korzhakov and Speaker Ruslan Khasbulatov. Sometimes the money might go to Menatep Cyprus, sometimes Menatep Gibraltar, Menatep Finance Geneva, Menatep Inc. New York, etc. Only Menatep know exactly to whom these payments were going after the funds were deposited. These were not trivial sums; in the aluminium business payments often amounted to more than US$60 million a month. Menatep monitored the cash flow and directed the funds to the accounts of the highest powers in the land - the Presidency, the Government and the Chekists who staffed the parallel infrastructure. Menatep had been set up by these people and Khodorkovsky had been chosen to be at its head; not the other way round.

As Menatep grew, it expanded into non-banking businesses, acquiring numerous properties at a great discount during the early privatisations. With the collapse of Russian banking in 1997-1998 Menatep found itself seriously short of reserves. The bank managed to survive but cash reserves were short. Despite borrowings the windows of opportunity were closing. The August 1998 financial crisis dealt a mortal blow to Menatep bank, the financial core of Yukos-Rosprom group, and a top 10 Russian bank since 1990.

It was the St. Petersburg’s faction of the ‘siloviki’ which has been credited with creating and exploiting the banking crisis of June-July 2004. In mid-May, the Central Bank revoked the license of SodbiznesBank. This was strange as SodbiznesBank, a top-50 bank by capital and 88th by assets, according to Profil magazine, was one of the largest known contributors to President Vladimir Putin's re-election campaign. The Central Bank revoked its license for what it said was money laundering activities.

Then CreditTrust became the second politically connected bank to go under in less than a month. The bank, the nation's 70th-largest by assets with 8.9 billion roubles ($305 million), put itself into voluntary liquidation after a run by depositors sparked by the collapse of SodbiznesBank. The ownership structures of both banks are murky, but are widely believed to have the same beneficial owner, Alexander Slesarev. After that, the Federal Financial Monitoring Service chief Viktor Zubkov let it be understood that action would be taken against ten or so other banks. And although this statement was soon denied, the situation was already beyond help. A lack-of-confidence chain reaction began in the credit market; the inter-bank credit market was paralyzed, leading to serious trouble for several other banks; first the medium-sized banks (CreditTrust, Dialog Optim, Paveletsky, Merit Bank, KBS, PromeximBank); then a large bank (Guta Bank). Some closed their doors. The method of instilling the lack of confidence was the circulation of ‘blacklists’ of banks purportedly in danger. Most bankers were certain the crisis had been provoked by the Kremlin. A senior executive at one major commercial bank claimed that "Central Bank officials received orders from above, including the names of specific banks." The plot failed to have its full effect only because the crisis was "poorly orchestrated,"

The role of the ‘siloviki’ in trying to control the private sector’s expansion in the oil, banking, telecommunications and transport system may well be based on a reversionary Chekist philosophy, resulting from the old communist concept of the state-power. However, the primary motivator seems to be more of a universal principle – greed. To the present rulers of Russia wielding power is not enough, they also want to get rich on it.