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 21th 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.
