Putin's Predator State

Putin’s rise to power has so many improbable elements--usually reported piecemeal—that the larger narrative is easy to miss.

It is a narrative worth telling though because Putin’s Russia is not only “the greatest catastrophe of the 21^th Century” for Russians, but, unchecked, Russia is the greatest threat to Western stability, exceeding that of even Islamic terrorism.

Things could have turned out differently.  Russia today is not a reflection of inevitable historical currents or catastrophic events, but a consequence of who and what Putin is.

Karen Dawisha in “Putin’s Kleptocracy” (2014) and David Satter in his new book “The Less You Know, The Better You Sleep” (2016) capture the larger narrative of a failing imperial Russia seized by Vladimir Putin and a small inner circle through revanchist political intrigue and unchecked criminal conspiracy.

The key characteristics of Putin’s predator state are worth keeping in mind because it is these characteristics--not the interests of state or of the Russian people--that motivate and define Putin’s Russia.

Putin’s criminality began early and was recognised as such.

Already as a minor KGB case officer in Dresden, East Germany, Putin showed signs of avarice, using contacts in the German Red Army Faction to steal Western audio equipment for him.  From his earliest days in the St. Petersburg city administration, Putin enriched himself and his friends as the instigator and the linchpin connecting political, government, private business and domestic and foreign criminal interests through foreign business licensing and various export and city development schemes using diverted government funds.

City officials realised what Putin was doing and attempted to stop him.  The city passed a parliamentary resolution in 1992 that Putin be dismissed.  Marina Sal’ye, the city parliamentarian who led the investigation, stated in an interview in 2000 quoted by Dawisha that Putin was,“head of a corrupt oligarchy who had worked in St. Petersburg with and through his partners of the shadow economy, criminal and mafia structures, and front companies.”  Other investigations of Putin’s criminal activities included Twentieth Trust (Case No. 144128) that used St. Petersburg city funds to build private residences in Spain, personally supervised by Putin, and an investigation into bribe taking, including by Putin (Case No. 18/238278-95). 

Eventually, Putin’s criminality was recognised internationally.  In 2000 a “sheaf of intelligence reports linking Putin to SPAG”, was responsible for Russia being put on an international money-laundering blacklist.  Putin directed SPAG’s (German-based St. Petersburg Real Estate Holding Co.) shady real estate dealings using St. Petersburg government funds.

Putin’s close associates at the time are too numerous to mention, but include well known, respected Russians such as former Minister of Finance, Alexsey Kudrin, who was linked to Putin through real estate dealings, and German Gref, CEO of Sherbank.  After St. Petersburg, Kudrin rose to serve like many of Putin’s St. Petersburg associates in national government, as both Minister of Finance and a member of the board of VTB bank—although not illegal, it is indicative of the weak rule of law that such conflicts in interest, as well as criminal activity, were possible for well-placed individuals.

Putin’s venality has grown with time and with his accumulation of power.

Putin systematically looted the Russian state through his St. Petersburg and security services connections.  Putin’s ownership of major stakes and controlling interest in a number of Russian corporations is difficult to trace because the government and private business’ interests are intertwined and tightly controlled by his friends and close associates who dominate senior positions in government and in these companies.

By the time Putin became president, Dawisha reports, he had over twenty residences, fifty-eight planes and four yachts as his disposal—as well as US$700,000 in watches—all on a modest public service salary.

This was nothing however compared to his estimated personal wealth, which the CIA estimated in 2007 at US$40 billion, including large personal shareholdings in Russian and Western companies, such as Russian energy giant Gazprom and energy trader Gunvor.  Putin is said to have a large personal stake in Gazprom and to exercise virtual control over its business decisions.

As detailed by Dawisha, Putin’s avarice is truly grandiose.  It includes, for instance, an understanding that a portion of contracts awarded to oligarchs would be put into foreign accounts under the “direct supervision” of Putin.  Oligarchs close to Putin even organised and funded the construction of a US$1 billion “dacha” for Putin near Sochi, complete with presidential seals and a replica of his Kremlin office.

Putin and his siloviki (criminals from within Russia’s KGB/FSB security services) took over Russia in a stealth coup.

Putin brought with him into the presidency a cadre of St. Petersburg associates implicated in his criminal activities.  The majority are former KGB/FSB associates known as the siloviki.  Motivated in part by patriotism they engage nevertheless in unbridled self-enrichment and criminal activities, including numerous murders of opponents and critics on behalf of or instructed by Putin.

Putin and his associates have had remarkable success because of their cohesion, which insulated their criminality with a disciplined set of  “clan” values, including absolute loyalty to each other and a code of silence.  They were further united by their revanchist convictions that they were the inheritors of the Russian state, and they already had exceptionally free access to state resources.  This gave them an advantage over other actors during that turbulent period ater the collapse of the Soviet Union that ensured their rise to power.

Through this cabal Putin’s approach to subjecting the Russian state to his personal interests is simple.  Dawisha writes, Putin “maintained weak rule of law in Russia, thus allowing them to maximise their profits through predation and raiding and then by investing these gains in strong, rule-or-law regimes in the West [with Putin taking his cut for personal and nonrelated state projects]…the guarantee of impunity before the law was the primary benefit of maintaining loyalty.”

This management of the state for personal enrichment subverted the rule of law and distorted its meaning.  A striking example is the opportunity for Putin loyalists to become “Honorary Consuls”, which conveys diplomatic-level privileges to oligarchs that allowed them to travel freely in and out of Russia without inspection of their persons or possessions, thereby enabling them to evade Russian law and to extend their criminal activities internationally.

There is substantial direct and circumstantial evidence of the Russian state’s and Putin’s personal involvement in domestic terrorist attacks.

Satter writes, circumstantial and direct evidence implicate Putin and the Russian security services--especially Putin’s old stomping ground, the FSB--in the 1999 bombing of four apartment buildings in Moscow, Buinaksk and Volgodonsk, and failed bombing in Ryazan, which propelled Putin’s election as president and provided the justification for Putin’s second Chechen war.  The bombings resulted in the deaths of hundreds of Russian civilians.  There is also substantial circumstantial evidence for the Russian security services’ involvement in the brief Chechen invasion of Dagestan in 1999 that served as an excuse to military action leading to the second Chechen war.

Satter also outlines culpability of the Russian security services in two major terrorist attacks in Russia.  One, the theatre siege in Moscow in 2002 and, two, the deaths of villagers and school children held by terrorists in Beslan in 2004, including the possibility in Beslan that the terrorists had been working in cooperation with Russia’s security services prior to the siege.

In a world saturated with terrorist events the Russian terrorist attacks may not stand out, but the involvement of Russian security services in the mass murder of Russian citizens puts Russia in the company of only a handful of rogue states, such as Syria and North Korea.

Putin stole the presidency and does not have the support in Russia he claims.

In each election Putin has won only through fraud and manipulation.

The run up to the 2000 elections during which Putin was elected president was an epic political battle for the soul of Russia.  Putin, a virtual unknown, gained enormous advantage through a tough law and democracy campaign in reaction to the apartment bombings in which he is implicated.  Even so, Dawisha and Satter write, there were other, competing values including the Communist’s “social justice” that might have defined Russia’s social evolution had Putin not stolen the election.  Dawisha writes there were “significant irregularities that cast doubt on whether Putin had won by majority in the first round”, as he claimed, and which propelled him into the presidency.

Dawisha makes the point that rather than voting for a vision of Eurasian culture as propounded by Putin, “Ordinary Russians voted for Putin precisely because they yearned for good government.”  Then they were robbed.  She writes that Putin’s group “…did not get lost on the path to democracy.  They never took that path.”   Although Putin ran on a law and democracy platform, he was in fact the lead practitioner of criminality and terrorism.

Satter writes, in 2011 in the state Duma elections, Putin’s United Russia official results were 49.3% of the vote, giving it a majority in the Duma, but analysts claimed the party “could not have gotten more than 35% of the vote.”   In the presidential election “in March 2012 Putin won with 63.8% of the vote, however election data suggested 50.75%.   Experts estimated Putin’s share at 45 to 50%, including all the state employees paid or compelled to vote for him.”  Election fraud and manipulation of the election process resulted in massive anti-corruption demonstrations, followed by state suppression of the demonstrators and political opposition, ensuring that Putin would continue to rule.

Dawisha writes that a document circulated internally at the time of Putin’s election in 2000 sets out his principles for governing, including that what was needed was not a “self-governing political system” but “a political structure (authority) within his administration, which will not only be able to forecast and create “necessary” political situations in Russia, but really manage social and political processes in the Russian Federation and in the countries of the near abroad.”  The agenda included “active agitation and propaganda” in support of the president, government, and their policies, as well as “direct political counter-propaganda aimed at discrediting the opposition.”

Putin was not just opportunistic.  He behaved according to a fixed plan where his vision of a Eurasian civilisation provided a facade for his personal enrichment and autocratic rule.  Putin’s defence of his version of a Eurasian civilisation seems to resonate with the Russian people, but much of this is froth from pervasive propaganda.  

An interesting footnote, Dawisha writes, is that Putin is claimed by his key backer in 1999, Boris Berezovsky, to have not been interested in NATO and that Putin “would not oppose NATO expansion.”  This suggests Putin’s claim there was an agreement not to expand NATO and his recent histrionics against NATO’s expansion are merely political posturing.

Putin’s corruption threatens the West.

Corruption in Russia is a threat to the West because, as Dawisha writes, it has the “potential to undermine not only Russia’s development but Western financial institutions, the banks, equity markets, real estate markets, and insurance companies that were showing signs of being undermined internally by employees eager to receive their commissions from these illicit transactions.”  She describes how “globalization would allow Russian elites to continue to maximise these goals by keeping domestic markets open for their predation while minimising their own personal risk by depositing profits in secure offshore accounts.”

Russian corruption is, in fact, more than a financial threat.  It is a societal threat also, affecting Western values and institutions and the conduct of politics and business.  The West has underestimated the corrosive influence of corrupt money from Russia and elsewhere.  Illicit money corrupts the provider and the receiver because the receiver must engage in corrupt practises in turn, or turn a blind eye to corruption by others.  As corrupt practises become embedded in the West, national political and economic elites adjust their behavior to accommodate the corruption out of fear of getting left out of opportunities for wealth and influence. 

Dawisha writes “Russian venality has a worthy partner among certain Western elites.”  Russian corruption has fuelled the growth of Western institutions and practises designed to facilitate and participate in Russian money laundering, tax evasion, illicit business activities and criminal financing.   Russian corruption also undermines Western decision making by corrupting officials and other leading figures, who become susceptible to coercion and blackmail.

Russia’s threat is evident from the daily use of a new lexicon in Russia-Western relations, including “hybrid war” and “weaponization” by Russia of everything from Syrian refugees to hacked documents leaked on the Internet.  It is also evident from the frequency in which the threat of inappropriate Russian influence arises in Western domestic politics, including the probability that Russia financed Marie Le Pen’s far right National Front in France, as well as others, and Russian security services released hacked Democratic National Committee (DNC) communications and Russia influenced changes in the Republican platform to eliminate support for defensive weapons for Ukraine, possibly weakening the Western response to Russian aggression.

None of what Putin did could be sustained without Western complicency in the form of obscure Western legal corporate entities, facilitation by Western law and accounting firms and elite actors, and a blind eye to the source of spectacular, improbable wealth of Russian government officials and private business.  Once the taste for outsized rewards was acquired by some in the West, a convenient quiescence with respect to corruption and inappropriate influence peddling settled in.  All one had to do is not to question.

Putin does not have strengths.  He has weaknesses.

Putin rose to power because his success based on corruption and coercion was underestimated—circumstances are different now.

Dawisha at her most eloquent writes “…increasing amounts of coercion will be required to maintain the system.  Additionally, reliance on Putin as arbiter can be maintained only to the extent that he is interested in the increasing effort and risk required to play this role over time…As predation’s rewards fall, the risks will become less attractive.”  As anticipated by Dawisha, “increasing amounts of coercion” are reflected in a steady stream of recent Russian legislation oppressing civil society, including the most recent “Yaroslava Laws” that substantially extend the criminalisation, as well as increasing the punishment for, social protest and government criticism.

Dawisha continues, in “the absence of trust, each person’s interest can be safeguarded only by caring only about his or her own fate and not about the group’s.”   The cohesion of the siloviki will erode as the current generation yields to the next generation, as is already evident from a recent Youtube video of FSB graduates parading though Moscow in a caravan of luxury Mercedes in a demonstration of unbridled personal venality and impunity, who will emphasize personal aggrandisement over group cohesion and duty to Putin’s hierarchy of interests.

For the moment the system is self-perpetuating.  Indictments in Spain in 2016 for criminal activities including by serving Russian officials illustrate the cohesion of the criminal class, which has suffered no apparent consequence in Russia as a result of the indictments.  However, Satter writes, “The resulting system…is not prepared to withstand external political and economic shocks.  It can be protected only through concealment or aggressive militarism if it is to stave off internal conflict and eventual collapse.”

The legacy of Putin’s Russia.

For ordinary Russians the impact of poor economic planning, weak governance structures and criminal capture of the state has been harsh.  Dawisha writes “in 2013 (before the current economic crisis)…50% of adults in Russia had total household wealth of $871 or lower.  This was compared with median wealth of $90,252 in Canada—with one-quarter the population and roughly the same latitude as Russia.”  The fall in energy prices and a pervasive and persistent pattern of overseas adventurism, resulting in Western-led sanctions for the seizure of Crimea and Russian invasion of eastern Ukraine, have deeply harmed the Russian economy and reduced the economic and social welfare of nearly all Russians except the most privileged.  The low and falling economic welfare reflects the decline in Russia’s economic power as it falls behind other economies.  The loss of prominence, prestige, influence and military power sets Russia apart from other major economies, except perhaps for Brazil, which also suffers from self-inflicted wounds due to corruption and economic mismanagement.

As Russia’s strength fades, and its people are further impoverished, a huge geopolitical void is opening in the heart of Eurasia.  With time perhaps Russia will reemerge strengthened after a period of moral, political and economic rebirth.   However, Putin’s economic and political mismanagement may result long before then in Russia’s dissolution.

In the meantime, Putin’s predator state continues to evolve from the hideous to the grotesque as the scale of social oppression increases.

(re-edited 09/17/2016)

Dirk Mattheisen is a writer and blogger on political economy with a focus on European affairs.  He is also an independent consultant on institutional governance of international economic and financial institutions.  Dirk Mattheisen is a former Assistant Corporate Secretary of The World Bank Group.