The Putin Mystique: Inside Russia’s Power Cult

by Anna Arutunyan

  What this may suggest is that norms and practices termed as “corrupt” are not accepted as corrupt by everyone – only by those who suffer from them. In other words, certain norms may actually be accepted by large parts of a society, but outlawed on paper – it is this gap, in fact, that may account for many of the problems. One Western fund manager, who spoke on conditions of anonymity, described this collision: “In the Middle East, a company can’t get a contract without a local partner. You end up with a contract price that should be $100 million, but it ends up being $200 million because the local partner needs 50 percent. Is there a difference between that and bribery? There isn’t a difference in cost, but there is a difference in how you go about it. One is upfront and clear, the other is untransparent and shady.”

  As Galeotti argued, in many cases “corruption” winds up “humanizing” what is otherwise an enormously intimidating political system.157 It is significant that Galeotti was writing this in 1998, even as then President Boris Yeltsin was rhetorically decrying corruption in his country – with corruption already rampant. By the time Putin arrived in the Kremlin, being himself part of that corrupt system, he took a problem that he had no ability to eradicate and co-opted it for the benefit of the state.

  For a large part of the population, the unspoken rules that he was quietly offering, the possibility of private enrichment based on one’s government caste, even as he spoke publicly about “the dictatorship of the law”, was like an unexpected, endearing smile that flickered on a man at once cold, threatening and faceless. To succeed, you had to understand where you stood with regards to the inner circle.

  Chapter 10

  The Inner Circle

  That power which broke our own in fragments

  Binds us together, alone can bind us still:

  When strength is out, the body falls to dust.

  Our only chance of safety, Boyars, lies

  In going now, the whole assembled Council,

  To the Tzar at once, in falling at his knees,

  There to entreat him yet he give not up

  His throne, aye, that he yet save Russia.

  - Boris Godunov, from The Death of Ivan the Terrible, by Alexei Konstantinovich Tolstoy158

  1.

  ONE HUMID AUGUST evening in 2009, during the peak of the economic crisis, Andrei Kolesnikov, Kommersant’s star reporter and one of the only journalists in Russia who had exclusive access to Vladimir Putin’s ear, gathered his friends and colleagues in a fashionable Moscow gallery to muse on the meaning of life over champagne and caviar sandwiches.

  The featured guests, who included oligarchs like Alfa-Group chief Mikhail Fridman, former Kommersant editor Andrei Vasilyev and President Dmitry Medvedev’s diminutive economic advisor Arkady Dvorkovich, all had one thing in common: they had written essays for the current issue of Kolesnikov’s quarterly glossy, Russian Pioneer. The essays were loosely focused on a topic of Kolesnikov’s choosing, which happened to be “the meaning of life.”

  As the guests read out their pieces, they kept getting off the subject and talking, inadvertently, about the prime minister.

  There was at least one reason for the digressions. In the previous issue, in May, Kolesnikov outdid himself by talking Vladimir Putin into contributing a column to the magazine. The prime minister, in a text that read remarkably much like the way he spoke, revealed no sensational secrets about his private life nor gave any opinions on pet policy issues. Instead, Putin explained “Why it is difficult to fire a person.” The topic, Kolesnikov explained to me later, had been agreed together with the prime minister in a private conversation – as a veteran pool reporter and co-author of Putin’s 2000 biography, Kolesnikov had that privilege, even though he admitted he was loath to take advantage of it.

  Received by the public as a supposed glimpse into Putin’s inner world, the column didn’t really reveal anything the public did not already know from his nine years in the Kremlin – including the fact that Putin found it difficult to fire people. Instead, it was an artefact of stardom in the same way that any handiwork of the prime minister – whether an amateur painting (which was auctioned just that May), or a doodle in a notebook – attracted curiosity by virtue of simply having come out of his mind. At least, it was presented that way by the media – so much so that Kolesnikov found it difficult to enjoy his subsequent holiday in Venice because of the continuous pestering from journalists.

  Indeed, that was the whole principle of Russian Pioneer. Funded by billionaire Mikhail Prokhorov’s Onexim holding,159 it was written for and by the affluent elite (the Kremlin ideologist, Vladislav Surkov, was one of its authors) to give the hip and savvy a glimpse of what the masters of the universe could compose if given a proper platform. With a hefty dose of Soviet kitsch, the magazine brandished a nostalgic name and helped revive the obscure Soviet tradition of public readings – known as pioneer readings, after the pionery, the Communist youth groups of Kolesnikov’s childhood. Now doused in fine wine, with tuxedoed waiters with earrings in one ear, and a high concentration of oligarchs and TV celebrities, the constituents of the gallery bore little resemblance to the Soviet childhoods they were paying homage to.160

  Except for one small thing that no one seemed to be making much of: they kept returning, in jest and mock reverence, to the topic of the prime minister – as if fearing Big Brother was a fetish of sorts, even for those who consorted with him personally on a regular basis.

  Sitting in front of that inebriated audience, Kolesnikov shared a moment of doubt, as if getting Putin to contribute had served as an epiphany of sorts.

  “In the last issue, having secured Vladimir Putin as a columnist, I kind of got stuck,” Kolesnikov told his audience. “I mean, I reached the highest achievement any editor-in-chief could hope for. And that’s why I started thinking about the meaning of life.”

  The remarks were not without Kolesnikov’s trademark irony, for he seemed to be suggesting that when your day job involves looking over Vladimir Putin’s right shoulder, you start thinking about the meaning of life a lot sooner.

  Nevertheless, the continuity of that issue’s topic – its indirect connection with the prime minister – inevitably coloured much of what was said afterwards.

  When Andrei Vasilyev, the Kommersant editor, read his own column out loud, he paused over the word “shit.”

  “I’m sorry,” he joked, “But Putin isn’t in this issue, so it’s OK [to curse].”

  “No it’s not!” Kolesnikov retorted from the audience to a burst of laughter.

  But the joking reached an apotheosis with the appearance of Mikhail Fridman. Closely connected to Putin and the Kremlin, Fridman’s Alfa-Bank once sued Kommersant in 2004, alleging the newspaper exaggerated liquidity problems in the bank and provoked a massive cash flight as customers stormed ATM machines (Kommersant, then owned by exiled oligarch Boris Berezovsky, came out with blank pages in protest after losing the suit). Fridman was a close colleague of Pyotr Aven, who was an old friend of Putin. In July 2011, Fridman would be one of twenty-seven businessmen who sat in on a closed-door meeting with President Dmitry Medvedev, amid reports that Medvedev, sensing his own diminishing chances for a second presidential term, asked the businessmen to choose between him and Putin.161 And so he was firmly in the inner circle of the dozen or so members of the moneyed elite whose consensus, much as it had since the 16th century, determined who ruled Russia.

  Everyone knew this, and Kolesnikov knew that everyone knew this as well. As Fridman settled into the chair on the stage, Kolesnikov asked him, “Today is the 10th anniversary of Putin becoming prime minister [in 1999]. Is that, um… good?” (He sounded as if he had clearly run out of questions for comment on that illustrious fact).

  But Fridman recoiled in mock insult, his plump, ever-apologetic face appearing flustered. “I should stop talking to you after this,” he said, to more laughter. “You’re putting me on the spot.”

  But from the audience, Kolesnikov pressed on.

&nbs
p; “Of course it’s good!” Fridman finally managed to say.

  Was Fridman mocking his own support of Putin, or was he mocking his caution over constructive criticism, as if the imprisonment of Mikhail Khodorkovsky in 2003 (for completely different reasons from criticizing Putin, as we shall see later) hung as a Damocles sword over every oligarch in Russia? Or was he mocking the Damocles sword itself?

  In fact, the conceit of Putin’s sinister, Stalin-like authority was already a frequent punch-line among inside jokes for any community close to state power. And though it was not the 1930s – and the elites didn’t shy of such jokes publicly (as long as they did not ridicule Putin) – Kolesnikov saw it as symptomatic of a climate of fear that, however ironic or diluted, still did exist.

  “Actually, this is a pretty serious situation,” he told me when we met for an interview on the following day. “In the last several years, people have grown accustomed to talking about the president and the prime minister with caution. Television has conditioned them to talk like this. Because where there is no censorship there is self-censorship. And it even pops up at Russky Pioner readings. We joke about it, but in reality it exists.”

  That an oligarch like Fridman was in on the joke – and found himself expertly wriggling out of saying anything untoward, either too flattering or too critical – can reveal just how much concepts like ownership, capital, and favour are still irrevocably determined by the same kind of relationships that existed some five hundred years ago.

  2.

  Identifying patrimonialism as one of the three elements of modern Russia’s political culture, the historian Donald N. Jensen wrote, in 2000: “Political authority was viewed by traditional Russian elites as closely related to property ownership. The Tsar – who identified the state with himself – ‘owned’ the nation, its vast resources, and its citizens. He concentrated in his hands the most profitable branches of commerce and industry and granted favoured nobles economic privileges for their support.” Jensen goes on to point out that these patrimonial attitudes continue to characterize how prominent businessmen interact with the government.

  Writing in 2000, before Putin would prove just how closely his governance resembled that of his predecessor, Jensen was applying these elements to President Boris Yeltsin’s “court,” where the modern-day “Tsar” avoided “identifying with any single faction and instead balanced off ministers, business tycoons, and security chiefs, who in the absence of selected political rules of political competition, were in perpetual competition with one another for his favour.”162

  Two circumstances were pivotal in establishing the current balance of power and money in Russia: the loans for shares programme in 1995, and the subsequent decision of a few key members of the moneyed elite – headed by the most ambitious of them all, Boris Berezovsky – to prevail on the ailing President Boris Yeltsin to anoint Vladimir Putin as his successor in 1999.

  These two developments are connected because they rested on a very simple premise: an agreement (and it was possibly the only thing they would ultimately agree on) by the group of people close to President Boris Yeltsin – known as the Family – that they must maintain their assets, and hence their power, at all costs. They believed that Putin – with his respect for loyalty and his understanding of how business worked – was the best option to ensure that status quo.

  Among the chain of events that eventually connected Vladimir Putin to Boris Yeltsin was a little-known meeting, in 1991, with the man who would become the oligarch Boris Berezovsky. Putin, then the head of the International Relations Committee under St. Petersburg mayor Anatoly Sobchak, oversaw the flourishing of private business in the city – using his connections in the KGB to facilitate business deals with foreign companies, specializing in his favourite type of enterprise, the joint venture.163

  Berezovsky, then the head of a software company LogoVAZ, needed an official middleman to facilitate a St. Petersburg business venture. A mutual friend, Pyotr Aven, introduced the two. At the time, Aven was the chairman of the Foreign Economic Relations Committee and the all-out go-to man who was instrumental in helping Putin clinch the oil for food plan where lucrative export tenders were alleged to go to some of Putin’s friends in the oil processing industry while the food wound up mysteriously disappearing.164 Berezovsky, who would later become President Putin’s staunchest foe in exile, was impressed by the former KGB colonel who helped him out and didn’t even ask for a bribe.165 And he would remember his entrepreneurialism and his loyalty years later when recommending him as a successor to Yeltsin.

  By 1996, Berezovsky and Pyotr Aven would become part of what was called, as an inherently new type of power structure, the semibankirschina, or the Rule of the Seven Banks. Russians already recognized the parallels between how their country was ruled following the collapse of the USSR, and the leadership crisis during the Time of Troubles between 1598 and 1613. The rule of the Seven Boyars – the group of nobles who reigned in Russia for several months before inviting in the Polish King Wladislaw in 1610 – was easily translated into the rule of the Seven Bankers, together with its apparent sell-out to the West. Indeed, the term appeared soon after Berezovsky publicly named seven men, predominantly bankers, who controlled 50 percent of wealth in the country: Vladimir Potanin, Vladimir Gusinsky, Mikhail Khodorkovsky, Pyotr Aven, Mikhail Fridman, Alexander Smolensky, and Berezovsky himself. It was these men, according to journalist Andrei Fadin, who “form the will of the President.”166

  The Seven Boyars also included nobles who had formed the will of Tsars from Ivan the Terrible through to Boris Godunov. But the semibankirschina had a very specific reason for getting the bragging rights to forming President Boris Yeltsin’s “will”: they had ensured, using their media assets, that he beat his Communist foe, Gennady Zyuganov, against all odds during that summer’s presidential elections.

  There was another reason, too. Just a year before the elections – partly because Yeltsin would need their support and partially because his government was labouring under a fifty trillion rouble debt – these seven men wound up with the choicest spoils of Russia’s oil and gas industry for next to nothing.

  The mechanism by which this happened – called the loans for shares programme – was devised in summer 1995 by Vladimir Potanin and Alfred Kokh, another St. Petersburg acquaintance of Putin from the Leningrad Privatization Office who later became the director of the State Property Committee in Moscow. Created specifically to circumvent a State Duma ban on privatizing strategic oil assets, the plan entailed offering shares of oil refineries as collateral for loans to the state – loans that everyone knew the state would never pay back. Potanin’s Onexim Bank, since he was one of the authors of the plan, was first in line. It loaned the government $100 million in return for 38 percent of Norilsk Nickel and another $130 million in return for 51 percent of the Sidanko oil company (to understand just how undervalued that was, note that British Petroleum would pay $571 million for a mere 10 percent of Sidanco shares just the following year, in 1997).167 Mikhail Khodorkovsky’s Menatep bank would get the next best thing: 45 percent of the Yukos oil company for $159 million.168

  In all, between November and December of 1995, twelve enterprises were auctioned off to these seven bankers, who promptly sold the shares back to themselves through offshore and shell companies in a rigged privatization that few even pretended was fair.169

  Boris Berezovsky, the most power-hungry of the seven, who would go on to help secure Yeltsin’s re-election in 1996, jumped into the auction at the last minute, cornering Yeltsin’s bodyguard, Alexander Korzhakov, into approving a loan for shares of the Sibneft company.170 It was for these reasons – his loan for Sibneft and his central role in organizing the so-called Davos Pact that would bankroll Yeltsin’s re-election campaign – that Berezovsky would be in a position to broker first Putin’s appointment as prime minister in August 1999, and then help orchestrate his ascendency to the presidential seat.

  The loans for shares auction irrevocably
connected the oligarchs to the president and his successor in a vicious circle of mutual debt. And so the involvement of the government – which, however weak, still wielded the full force of the army and security structures (as the role of Yeltsin’s bodyguard, Korzhakov, demonstrates) – was far more central to the acquisition of wealth than the most corrupt robber barons of the 19th century West could imagine.

  Much as the mutual “compromising materials,” or kompromat, in the security structures bound its members into complaisance in case loyalty failed, the loans for shares scheme bound the Seven Bankers and the president through an extraordinary and unprecedented exchange of favours. The oligarchs had bailed out a cash-strapped president who was desperately struggling to pay pensioners, teachers, doctors and army officers to keep the country from collapsing. But they had also acquired strategic assets on the cheap – benefitting from what everyone, including the president, understood to be a rip-off. By both taking part in this rip-off, the government and the oligarchs were bound to one another in what the Australian Ambassador Glenn Waller called an “incestuous” relationship.171

  After such an exchange, devoid of either moral legitimacy or legality, the sovereign exercised the option of taking back the property he had temporarily given to a vassal:172 not as a matter of policy, but solely at his pleasure.

  The Seven Bankers understood this long before Putin came to power – though not all of them would adhere to this ancient wisdom. Soon after his acquisition of Yukos, Mikhail Khodorkovsky demonstrated his grasp of this feudal relationship with the state. Referring to the prime minister as his “boss,” he would joke that “I don’t own anything, I rent it.”173 He would explain that he would even step down as head of his own bank if the prime minister asked him – because the “state is the dominant force in the economy.”174