Putin’s Private Empire

Some outside observers compare today’s Russia with the Soviet Union. But there is a fundamental contradiction between these entities: If the Soviet Union, with its communist ideology, fought against private property, then post-Soviet Russia, paradoxically, has turned out to be a “private state.”

This state of affairs in Russia began to take shape in the 1990s. In 1998, then–Deputy Prime Minister Boris Nemtsov published an article titled “The Future of Russia: Oligarchy or Democracy?” (Nemtsov.ru, March 17, 1998). In it, he warned of the dangers of prominent businesspeople using regional budgets and resources for their own enrichment. This in turn could lead to the “privatization of power” in which these individuals control state officials. There is a coalescence of authorities and business, and, ultimately, democracy disappears.

However, Nemtsov’s warnings were not heeded. During the Vladimir Putin era, this picture has worsened. In 2015, the same year Nemtsov was killed, the Russian Federation adopted the law on “state-private partnership,” which provided for a mutual delegation of powers between authorities and businesses (Consultant.ru, July 13, 2015). It has the potential to be arbitrarily broad—that is, the specific framework governing the interactions between government officials and businesspeople was not prescribed, which directly legitimized comprehensive corruption.

Moreover, this law did not necessarily create a new legal reality; it merely formalized the already established practice. For example, in 2010, then–Russian Minister of Defense Anatoly Serdyukov ordered the army’s food supply to be outsourced, arguing that the military should be freed from everyday problems and instead focused on their direct official duties. However, this decision quickly resulted in the interested private businesses simply making the army dependent on their services. As reported in a Russian Forbes investigation 10 years ago, already by 2013, 92 percent of the army’s food supply was provided by the infamous mercenary leader Yevgeny Prigozhin and his Concord catering company (Forbes.ru, March 18, 2013).

The very next year, in 2014, Prigozhin, widely referred to as “chief army cook,” created his own private military company (PMC), Wagner, thus abolishing the state’s monopoly on violence. Moreover, the state itself turned a blind eye to the appearance of this PMC, despite the fact that such formations are expressly prohibited by Russian law. And its creator was even granted extraordinary powers: he traveled to Russian prisons as a private person and simply “pardoned” prisoners, recruiting them into his own army (Riddle Russia, March 7).

The purpose of this unit was to provide the Kremlin with an unofficial military force that could be deployed in situations where the participation of regular Russian troops would be difficult or risky. And the Wagnerites willingly participated in the creation of pro-Kremlin “people’s republics” in Ukraine’s Donbas region in 2014. When asked about the Russian military’s role there, Putin’s press secretary Dmitry Peskov uttered the infamous words: “They are not there!” Indeed, the PMC then went on to carry out confidential assignments for Moscow in Syria and Africa.

As witnessed, this “state-private partnership” turned out to be quite mutually beneficial. Recently, after the failure of Prigozhin’s mutiny, one of the leading Kremlin television propagandists, Dmitry Kiselyov, stated that the Wagner Group had received state contracts worth 858 billion rubles (approximately $10 billion) (Meduza, July 2)—even the oligarchs of the “dashing 90s” could never dream of such sums.

Prigozhin’s heated conflict with Defense Minister Sergei Shoigu most likely came to pass because the Wagner chief refused to bring the PMC under the control of the Russian Ministry of Defense, seeking to preserve its private nature (Radio Free Europe/Radio Liberty, June 11). Shoigu was also dissatisfied with Concord’s de facto monopoly on the army’s food and sought to diversify supplies, threatening Prigozhin with the loss of billions in profits.

Prigozhin’s spontaneous mutiny clearly demonstrated the crisis of Putin’s management model, in which his close associates, who formally do not hold any official positions, are, in fact, above state structures. These include Yuri Kovalchuk, Gennady Timchenko and the Rotenberg brothers (Arkady and Boris), among others (Meduza, February 21, 2022). Prigozhin, of course, is included in this small circle. But when he attempted to rebel, Putin urgently sought support from the army and other official levers of force.

However, it seems Prigozhin has not fallen out of this circle, but only, as they said in Tsarist times, “fell into disgrace.” It has been a rather soft response from the Kremlin, showing that Putin “does not abandon his own.” The criminal case for the mutiny was canceled, and all the money and weapons confiscated from him were returned to Prigozhin (RBC, July 5). And, despite the announced “departure for Belarus,” he freely went to his native St. Petersburg and, even just five days after the rebellion, met Putin in the Kremlin (Gazeta.ru, July 10).

Therefore, it is unlikely that Putin will revise his paradigm, despite the failure in its effectiveness. He simply cannot escape this system, as well as the war in Ukraine, without ceasing to be himself. The Russian president cannot give up the habit of having the private interests of his entourage outweigh state interests. For example, In 2016, one of Putin’s long-time friends, musician Sergei Roldugin, became involved in an offshore multibillion-dollar money laundering scheme (The Week, March 4, 2019). In general, Putin’s model looks like a vicious circle—state structures suppress independent private enterprises, but “private persons close to the body” stand above the state.

In general, Putin’s oligarchs differ significantly from Yeltsin’s in the 1990s. Boris Berezovsky, Vladimir Gusinsky and Mikhail Khodorkovsky were similar in that they bought Soviet state property on the cheap, often through fraud. But still, they were completely different people and competed against one another. They owned various television channels and other media, and in such a paradoxical manner, freedom of speech was preserved in Russia. In the early 2000s, Putin removed them from power; instead, he handed the management of Russia’s large enterprises, resources and finances to his career friends from St. Petersburg.

One of the decisive tasks in overcoming “Putinism” is to liquidate its “private empire.” With the maximum encouragement of private initiatives in the economy, public interests can come to supersede politics. Society can no longer allow the “privatization” of the state by some oligarchs, as this not only robs all Russians but also makes them dependent on the militaristic-imperial ambitions of an unelected “elite.”

Such a transformation will most likely begin not at the “center” in Moscow, but at the municipal and regional levels, where voters are more demanding of local authorities (Svoboda, June 26). Thus, it is no coincidence that Putin has canceled the free election of most Russian mayors, as he understands that one of the primary dangers to his private empire comes from direct local democracy.