The Russian Federation, which once owned virtually all the country’s industry, has over its decade of existence privatized roughly 80 percent of its assets. The state realized virtually nothing from this massive transfer. Less than one-half of 1 percent of federal revenues in the 1990s came from privatizations. But a tiny handful of individuals made out like, well, bandits. These men–no women here–traded political favors for valuable state properties, which they leveraged into additional political power tradable for additional properties, in an expanding spiral that now seems to have reached its limits. During his campaign for Russia’s presidency, Vladimir Putin promised to “eliminate the oligarchs as a class.” He has not spoken on the subject since, but events may reveal his policy.

The arrest two weeks ago of Vladimir Gusinsky has been well reported, as has the deep antagonism between Gusinsky and rival oligarch Boris Berezovsky. Almost unreported outside of Russia was the challenge to another Berezovsky rival, Vladimir Potanin.

On June 21, a Moscow city prosecutor filed suit against Potanin and several of his companies, seeking to overturn Potanin’s 1995 acquisition of Norilsk Nickel. An arbitration court dismissed the suit on a technicality–too many defendants, the court said–but the prosecutor promises the suit will be re-filed in a matter of days.

Potanin’s background is worth recalling. A minor official in the Soviet foreign trade ministry, he used his Western connections to establish first the “International Finance Corporation” and then Oneksimbank, which in 1998 reported assets of over $3.4 billion, much of which was in short-term government notes (GKOs). Oneksimbank collapsed along with the GKOs in the August 1998, financial crash, but Potanin had moved the bank’s real assets to other companies, safely out of the reach of the bank’s creditors.

Norilsk Nickel, which began as a forced-labor camp in Stalin’s Gulag, is the world’s largest producer of nickel and palladium. Potanin acquired control of Norilsk Nickel in 1995, in a cash-free transaction in which Oneksimbank took NN shares as collateral for loans on which NN predictably defaulted. Not long after, Interior Minister Anatoly Kulikov called Norilsk Nickel “a criminal enterprise.”

Potanin has clashed repeatedly with fellow oligarch Boris Berezovsky, most notoriously in the 1997 struggle for Svyazinvest, a state-owned holding company that controls nearly all of Russia’s regional telecommunications companies. Potanin’s Izvestia newspaper (before August, 1998, every oligarch owned at least one newspaper, to distinguish himself from the merely rich who owned only Mercedes) attacked Berezovsky in political and personal terms. Potanin may also have encouraged then President Boris Yeltsin to fire Berezovsky as deputy secretary of the National Security Council in 1997.

Putin said last year that he would not attempt to overturn the results of Russia’s privatizations, although he would ensure that prospectively at least, the same laws apply to all. The moves against Gusinsky and Potanin suggest otherwise. In Gusinsky’s case, the laws are clearly being applied selectively and politically. In Potanin’s case, if the prosecution goes forward, the threat to the oligarchs is more profound. None of the privatizations of the 1990’s, whether by voucher, by auction, or by “loans for shares,” could survive close examination by a judge out to find irregularities. A Potanin prosecution is likely to inspire new waves of capital flight as protection against an evil day of future reckoning.

But not all oligarchs are trembling. While Gusinsky prepares his defense against charges of fraud, and Potanin works the phones with sweaty palms, Boris Berezovsky tightens his grip. On June 21, Berezovsky put his daughter and his favorite anchorman on the board of directors of ORT television, increasing the pro-Berezovsky board majority to seven out of eleven directors. Although the state holds 51 percent of Ort’s equity, Berezovsky so clearly runs the show that the network’s chief executive officer says he will sell state-owned shares unless the government comes up with additional funding. The Russian state has already loaned the network over $100 million, using its own shares as half the collateral. No coincidence, surely, that Berezovsky early on put his media empire at the complete disposal of Putin’s political team.