The Putin Mystique: Inside Russia’s Power Cult

by Anna Arutunyan

  When, as president, Vladimir Putin did just that (first with Gusinsky, then with Berezovsky, and then with Khodorkovsky), many feigned shock, as though they had forgotten in what “incestuous” circumstances this wealth had been acquired in the first place. Those who lauded the move, like William Browder, mistakenly thought of it as part of a policy of renationalization and an attempt to implement justice, rather than the Tsar exercising his right based on the unspoken rules that had been established between him and his boyars in the absence of the rule of law.

  Those rules have evolved, under Putin, into a curious mix of the ancient and the new, where the favour of the sovereign is jealously guarded and where capital is built with his approval – but where everyone wears Brioni business suits and despises cheap flattery, opting for a staunchly postmodern demeanour to attract investors.

  3.

  After standing for hours in the rain outside their factory on June 4, 2009, the workers of Pikalevo heard Vladimir Putin shout to them, “Don’t worry, your factories will start working, I promise,” and went home to their television sets, relieved. It was there that they saw the public thrashing of Oleg Deripaska, the oligarch who owned the plant where they worked. Despite Putin’s soothing wrath (for they were unabashedly delighted to see a baron getting what they felt he deserved), many of the workers who had taken part in the protest later described the pen-throwing incident as “just a game.”

  Even without knowing the details, the workers of Pikalevo seemed to sense that Putin was lying as he referred to plant managers as “cockroaches,” because they saw Deripaska’s wealth, much like that of any oligarch in Russia, not as something earned by hard work, but merely a token of the favour of the Tsar.

  Deripaska has prided himself on not taking part in the shameful loans for shares auctions. After founding an investment company in 1990, when he was just twenty-two, he started buying up shares in Siberian aluminium plants, gradually building up his RusAl aluminium empire and his Basic Element minerals holding. Slightly younger than the members of the Seven Bankers and untainted by the loans for shares auction, Deripaska has enjoyed a somewhat favoured status in Putin’s circle, and the residents of Pikalevo, who understood the structural relationship and the unspoken rules that governed this favour, clearly sensed this.

  In October 2008, when the global financial meltdown reached Russia, Deripaska had already become the beneficiary of an unprecedented $4.5 billion state loan by the VEB (Vneshekonombank, the state economic development bank) – part of a $10 billion government bailout to several companies, including $2 billion for Mikhail Fridman’s Alfa Group. But the handout to Deripaska exceeded VEB’s $2.5 billion limit on loans to a single company by nearly two-fold.175 And while analysts attributed the favour to RusAl’s aggressive lobbying, “lobbying” doesn’t appear to be the right word for the interaction between RusAl and the government, for an exceedingly simple reason: the chairman of the supervisory board of the VEB who approved the loan happens to be Vladimir Putin.176 Deripaska did not need to hire lobbyists to remind legislators in Parliament of their constituency or the sources of their campaign funds. He just needed to bring up the issue with Putin directly at one of their many public (and private) meetings.

  Letters published by Russian media later in 2009 evidenced what the residents of Pikalevo knew all too well: that, Deripaska’s televised shaming notwithstanding, the minerals magnate was receiving not one, but a series of bailouts that were brokered by Putin personally.

  It is informative to take a close look at how Deripaska went about asking Putin to extend the VEB loan into 2013. Addressing Putin in his capacity as the chairman of the VEB’s supervisory board, Deripaska first pointed out how the August 2009 explosion at the Sayano-Shushenskaya Hydro-Electric Plant – which claimed over fifty lives and paralyzed energy supplies in Western Siberia – was taking its toll on RusAl’s aluminium factories in the area.

  “Despite the difficult situation,” Deripaska wrote, “RusAl has not withdrawn from the responsibilities taken on together with RusHydro to complete the building of the Boguchanskya Hydroelectric Plant and the Boguchansk Aluminium Factory in the Irkutsk region.” He added later that “the building and subsequent functioning of these factories carries enormous socio-economic importance for the development of Western Siberia,”177 as if Putin was not already aware of this importance.

  In light of these “circumstances,” Deripaska requested the bank to extend the loan into 2013, concluding, “I ask you as the Chairman of the Supervisory Board of VEB to support RusAl’s appeal to VEB and other government banks.”

  Across the top of the letter, in large, spidery script, is Putin’s inscription: “To I. I. Sechin. Consider and report back.”

  The loan was not extended, but several of more than a dozen similar requests addressed either to Putin or to senior members of his cabinet that year were fulfilled – including a request to apply leverage on the government of Guinea, which was suing Deripaska over his aluminium interests there. Putin approved an additional handout of nearly $1 billion to Deripaska’s struggling GAZ auto production sector, and an $8.3 million to BaselCement Pikalevo.

  In that light, the eventual fate of the Pikalevo factories themselves is also revealing of the mechanisms Putin uses to ensure that key assets go to the people of his choosing.

  The public spectacle of Deripaska’s humiliation in Pikalevo was followed by revelations of a whole slew of monetary favours from Putin. But even this ambivalence wound up concealing a more complicated process by which, gradually, Putin was in fact trying to unify the three factories of Pikalevo.

  There were at least two reasons why this was happening. On the surface, it was clear that Putin had to recognize, as did the workers themselves, that a production process built around three joined units could not function efficiently as long as those units belonged to different owners.

  But as often happens in Russian business, an ulterior motive may have played a role in the public spectacle of Pikalevo – and in a quieter development that occurred long after the town drifted out of the public eye.

  In the summer of 2011, the PhosAgro chemicals holding moved in to take control of the Pikalyovskaya Soda plant in Pikalevo – the potash production unit that was one of the three connected factories in the town. No one paid much notice of the takeover, because it was hardly representative of the bigger picture.

  But according to a source in BaselCement Pikalevo, the June 2011 purchase of Pikalyovskaya Soda by PhosAgro from Alexander Bronshtein was actually part of a longer-term project to eventually unify the plants. That summer, the source said, speaking on conditions of anonymity, negotiations were already underway for PhosAgro to buy out the two other plants as well – including the Pikalevo Alumina Factory, which was still part of Deripaska’s Basel empire. By that autumn, PhosAgro was in talks with BaselCement to form a joint venture that would control the alumina production plant.178

  The company’s role in unifying the three factories is significant for another reason: the chairman of the board of one of its subsidiaries is a senior official in Putin’s government.

  It was no accident, after all, that Putin handpicked Denis Manturov, Deputy Minister for Industry and Trade, to head a crisis committee on Pikalevo immediately after his own visit to the town – as chairman of the board at Apatit, Manturov had a vested interest in expanding the company. Far from posing a risk as a conflict of interest, from Putin’s perspective Manturov’s position as a state official and a financial beneficiary served only to cement his loyalty on both fronts.

  How an association that would appear to be conflicting by many Western standards turns out to be not only acceptable but even necessary has less to do with Putin’s preference for personal trust and more to do with historical and geographical necessity – a necessity that went far beyond the Soviet planned economy.

  In fact, the very idea of managed capitalism – applied normally as a critique of Putin’s regime and seen as a vestige of Soviet rule – w
as integral to the very creation and survival of the Russian empire’s expansion.

  In 1558, when Ivan the Terrible gave Anika Stroganov and his three sons a mandate to build a salt mine in the Urals, he had to sweeten the deal with a degree of autonomy unheard of in Europe at the time. Too far away to ensure security for Stroganov’s enterprise, Ivan mandated that Stroganov keep his own army and establish customs, and entrusted foreign trade to him alone, creating what was, for all purposes, a state within a state. It was a level of trust that only a minister could equal, and by giving so much, the collateral was raised as well – not just the land and property of the vassal, but his very life, if not his soul.

  Carried over into the modern sense, the fiefdoms are not regulated by laws, which carry little weight in distant realms where local customs and geography render them obsolete. But to ensure that these “states within states” do not break away and trigger the disintegration of the country itself, they must be regulated through personal trust and favour – not just by state officials, but by businessmen close to state power.

  Chapter 11

  In Favour

  If you plan to lie down under the Kremlin, then be prepared to have the organ of your personal worth amputated. If you want to be free, do not get involved with the Kremlin.

  - Stanislav Belkovsky

  In the past, whenever I had the need to meet with the president or the prime minister, I would get in within seven or ten days. So I hope nothing has changed.

  - Mikhail Prokhorov

  1.

  IN SPRING 2011, billionaire Mikhail Prokhorov, a young oligarch who earned his fortune as a partner of one of the original Seven Bankers, Vladimir Potanin, was shown clear signs of favour for his loyalty, his efficiency, and his penchant for saying all the right things during President Medvedev’s liberal regency: he was given a small, personal fiefdom in the form of a pro-business political party – and an apparent green light to campaign for a parliamentary mandate.

  Jailed oil tycoon Mikhail Khodorkovsky showed the world what happens when a Russian oligarch falls out of favour. But the story of Mikhail Prokhorov showed an oligarch who dabbled in politics with the Kremlin’s blessing – and managed to retain his favour despite a scandal that shook the political establishment.

  Less than three months after it was given to him, Prokhorov’s little fiefdom would be snatched away. But the pill would be sweetened later with the apparent permission to run for president against Putin, albeit as a candidate unlikely to get more than a few percentage points.

  In summer 2011, Prokhorov’s ascension to the leadership of Pravoye Delo, or Right Cause – which the Kremlin had covertly (it was an open secret) cobbled together from the ruins of Russia’s fractured, perennially leaderless liberal opposition – raised eyebrows and hope. Over the last decade, the liberals had proved that they couldn’t even unite around their opposition to the Kremlin. That their newly chosen leader was a businessman with a modicum of charisma and, most of all, had the apparent blessing of the Kremlin, suggested there was the chance of a liberal party for the first time since 2003.

  But that one hopeful signal in the 2011 political season ultimately turned into a disgrace for everyone involved: during a convention in September, Prokhorov was ousted from his own party by what he described as “raiders from the Presidential Administration.”179

  It was a practice he knew well from his business days, he said when he called a snap press conference on September 14, the day he learned that party delegates were being barred from their own convention by strange men with ties to the Kremlin. An experienced businessman who knew what “raids” were and how to fight them, he was not about to kowtow to bureaucrats in the Presidential Administration.

  “I’m disbanding the executive committee,” he said, ostentatiously picking up a pen and signing the dismissal to the cheers and applause of the journalists.

  The gesture – made to a frenzy of camera shots – heartened the supporters crowded in his oval office on the top floors of his Onexim Group building. But if there were any illusions that Prokhorov was about to become a genuine opposition force, they were utterly shattered by one question from the barrage that cut through to the heart of the matter.

  “Does Putin know?” someone asked.

  2.

  It took less than five days for Prokhorov, who had set his sights on the post of prime minister and who was dubbed by supporters as “the Tsar and god” of his party, to temporarily disappear from the media amid whispers of another Khodorkovsky affair. For two months, he remained in the shadows, as if his fate was being decided and his usefulness analysed amid growing dissent from that same middle class the Kremlin was coveting so much. When he re-emerged in early December as a presidential candidate, the news was welcomed by whatever constituents he had – and it was clear that he had remained in favour. The real effect of the Prokhorov scandal in September 2011 was to lift the curtain and demonstrate, for all to see, the “kitchen” of how politics is really played, the strings that were attached to the players on the stage, and the small group of people – no more – who were privy to take turns holding the strings.

  The key director of that drama wasn’t Prokhorov at all. It was an official that Prokhorov had at one point mistakenly identified as a bureaucrat executing someone else’s will. Vladislav Surkov, the first deputy chief of staff and Vladimir Putin’s ideologist, was no mere official. In a power structure where Putin’s ministers and aides were delegated the task of allotting assets to the right vassals, the realm of political fiefdoms was overseen by that strange dark bird, a master manipulator and a one-man PR machine who was credited with standing behind every major and minor mystification in modern Russia.

  Transferred to the Kremlin in 1999 after a series of executive PR posts in Mikhail Khodorkovsky’s Yukos empire, Alfa Bank, and Channel 1 television, by 2004 Vladislav Surkov had successfully positioned himself as the Kremlin’s grey cardinal, a role vacated first by the disgraced Boris Berezovsky in 2000, and then by one of Berezovsky’s protégés, chief of staff Alexander Voloshin in 2004. Surkov did this from the quiet post of first deputy chief of staff, a position he occupied without change for more than a decade, until he was reassigned following the tumult of the December 2011 parliamentary elections.

  A pale, dark-haired, dark-eyed half-Chechen once described as cherubic and demonic all at once,180 Surkov stayed in the background even as he dabbled in avant-garde literature (there is a recording of him reading Allen Ginsberg in English, while in 2009 he wrote a fairly decent novel, maddeningly switching from denying to accepting and then denying again its authorship). Early on he revived the Soviet Communist Youth tradition by creating an army of young Kremlin supporters – postmodern acolytes of Putin’s personality cult with a darker side that allegedly included outright thugs (who may or may not have been the ones who beat journalist Oleg Kashin nearly to death in 2010).

  Surkov saw straight through to the heart of power, grasping early on that there were only two instruments of ruling Russia – the mystical and the economic. Putin, he repeated in several interviews, was sent to Russia by God to save its people.181 As for political parties, Surkov seemed to view them as businesses to be efficiently managed and the masses as mindless, slavish and ultimately ungrateful bio-resources in the government’s grand mission to better their lot. As the invisible hand that helped create the pro-Kremlin United Russia, he once harangued party functionaries in 2002 as too old and bureaucratic, instructing them to treat their posts as “a job in a firm. If you have been invested in, then bring profit!”182

  As the organizing force behind President Medvedev’s Skolkovo innovation hub (an attempt to create a Russian Silicon Valley from the top), Surkov summed up exquisitely the spiritually edifying role in which state power saw itself in relation to both its people and its natural resources: “We need positive creative energy. Extracting it from society is the aim of the new policy.”183 Poet Alexander Pushkin once called the government Russia’s “on
ly European,” a government that assumed a mission to civilize and Westernize the unwilling masses. Surkov seemed happy to assume that divine arrogance as a matter of policy. Russia must be “like Sweden,” he once said in response to one of my questions about building Skolkovo,184 but the top-down attempt to modernize such a huge country meant that everything and everyone had to be kept under control. To that end, he held regular (weekly, some say) meetings not just with members of his pro-Kremlin youth group, but with the heads of federal television stations and newspapers. If Putin’s propaganda ever had a name, it was Surkov.

  Like Putin, he was deeply committed to maintaining the façade of democratic institutions that had existed as mere props in the Soviet era, only to get refurbished with a more realistic gloss under Yeltsin. Whether or not they would ever develop into the real thing, for now they were an important component of Russia’s PR policy to present itself as a vibrant, investor-friendly developing market that had a place in all the right international clubs (like the G8 and, eventually, the World Trade Organization).

  Armed with that understanding, Surkov went about forging his “sovereign democracy” doctrine: a curiously cynical, eclectic ideology of empire-building based on money, the exploitation of resources (human and hydrocarbon), and the contemptuous haughtiness that has historically characterized the Russian government.

  Through it all, however, he managed his political sphere – the “democratic” façade of Russian power – very much in accordance with how Putin ruled the country: as a patrimonial dominion to be partitioned at the pleasure of the sovereign, and only among those who could be entrusted with “managing” the assets.