Publication: Prism Volume: 7 Issue: 9

By Aleksandr Tsipko

One has to hand it to President Vladimir Putin that he is determined to show Russia and the world that he is a unique political figure, that there is something special about him. Putin’s pilgrimage in August to the holy places of Russian Orthodoxy was a notable political event in Russia: In Valdai, Solovki and Novgorod the Great Putin appeared before us as an Orthodox patriot who reveres the Russian Church and its shrines, one who is disposed to serious discussions about the role of religion in the life of our multiethnic state. The personal union between the president and the Patriarch of All Russia, Aleksy II, has been evident everywhere recently.

Further demonstration that Putin is an independent politician came when he bowed his head before the grave of Carl Mannerheim, an enemy of the Soviet Union and Stalin, during his recent visit to Finland. True, Putin was not taking too much of a risk: Carl Mannerheim was a major general in the tzarist army, and was always loyal to his military oath and to Russian Emperor Nicholas II. But I think this transcendentalism of Putin’s–his detachment from worldly things and his desire to do significant deeds–attests to his insufficient immanence, to the fact that his influence on day-to-day Russian politics is actually minimal. Putin is failing to change the economic situation in Russia, to create a new history or to change Yeltsin’s regime in any radical way.

Putin has thus far failed to solve his main problem: How to break away from the “Family” that brought him to power in 1999. Just as under Yeltsin, Russia is still ruled by a group of oligarchs via their proteges in the president’s administration, the government and the security services. Of the many oligarchs only one–Vladimir Gusinsky–has been effectively ousted from the Kremlin. Boris Berezovsky himself does not figure personally on Russia’s political scene, but his people–the oligarch Roman Abramovich and the president’s chief of staff Aleksandr Voloshin–are key political figures in Russia. Berezovsky’s people control a significant portion of the Russian economy and a major section of the media. Since Siberian Aluminum boss Oleg Deripaska married the daughter of the Family’s ideologue and kingmaker, Valentin Yumashev, the aluminum king has become one of the Family’s three key economic heavyweights, alongside Abramovich and Mamut. Over the past month analysts have been unanimous in their assessment that the Family has not only consolidated its position, but has also had sole influence on Putin’s recent decisions. There is much evidence to support this.

The newly created single tariff body, which controls prices in the natural monopolies, is run by a member of the Family, the head of the federal energy company Grigory Kutovoi. Independent experts estimate that 65 percent of the Russian economy is indirectly regulated by this new body. It is said that the Family achieved this by means of a series of compromises with a group of managers close to Putin. For example, Kutovoi and his commission were tolerant of Gazprom’s recent tariff increases, but at the same time deemed as unacceptable the demands of UES boss Anatoly Chubais to raise electricity tariffs again.

Gazprom’s interests were being looked after in a clear effort to please Putin, which explains the meteoric rise of Kutovoi, Chubais’ sworn enemy. In fact, this in itself confirms Putin’s determination to distance himself from Anatoly Chubais and Union of Right Forces (SPS).

It is noticeable that the siloviki–even those from St. Petersburg–are not playing much of a role in this struggle between the Family and the liberals in Putin’s entourage. This once again confirms the theory that the press both in Russia and the West overestimated the political clout of the siloviki, particularly former KGB officers. As it turned out, they were ill-prepared for a serious struggle for power in Russia. All efforts by the siloviki to remove chief of staff Aleksandr Voloshin were futile. The attempt to replace the Family’s placeman Kasyanov with a prime minister from the military also ended in failure. Notably, the influence of the generals who act as the president’s envoys in the federal districts has sharply declined in recent months. The siloviki only have themselves to blame for the fact that they have been left by the wayside of political life. Their battle with the oligarchs was very half-hearted; they did not want to take any risks, and indeed it wasn’t power they wanted so much as money–a share in the new division of property. They were constantly looking over their shoulder, worrying about their ability to retreat, and it was this that let them down. The siloviki did not have their own team of experts, and had no experience of public life or serious financial support. As it turns out, neither are they able to agree amongst themselves. A coalition has emerged recently between Interior Minister Gryzlov and FSB chief Patrushev, rumored to be targeted against the No. 2 in the country, defense minister Sergei Ivanov. In my opinion, Ivanov was greatly damaged by Left opposition’s “appeal of the 43,” which clumsily contrasted the “patriotic” defense minister with a president who was supposedly surrounded by “enemies of Russia.”

Under these circumstances, when the political influence of Petersburg siloviki is on the wane, the Kremlin old guard–that is, the Family–can easily outplay the wing of Putin’s team represented by Chubais, German Gref and Aleksei Kudrin.

There are many domestic and foreign policy implications in this struggle between the Family and the Petersburg liberals. It is a question of alternative paths of development for the market economy in Russia. As we know, the Family and Berezovsky advocate a form of closed, national capitalism, envisaging a division of ownership between national oligarch clans. Meanwhile, the Petersburg team, particularly Chubais, support the idea of open, competitive capitalism, envisaging an influx of foreign capital into the country. The St. Petersburgers are more interested in integrating Russia into the western economy than the Kremlin old guard. But today it would seem that the old guard and its related financial structures, which are trying to keep the entire Russian economy in their hands, are winning the race.

The financial stronghold of Russia’s liberals, Alfa-Bank, has been subjected to a powerful attack by the Kremlin old guard. The Alfa group is losing out to Family oligarchs both in participation in the privatization of UES, and in the battle for control of the oil company Onakop and of aluminum production. The obvious management crisis in Alfa-Bank is a consequence of this. More of its senior employees recently joined the Mamut’s Family banks, following in the footsteps of the former deputy chairman of Alfa-Bank A. Sokolov, who moved from Alfa to Konversbank in December 2000. According to media reports, the turncoats were attracted mainly by the huge salaries on offer at MDM, which Alfa, weighed down by debt, can ill afford to match. Analysts believe that MDM is trying to expose Alfa’s precarious position by enticing staff away from Alfa.

The other main prong of the Family’s economic attack was the broadside against UES and Anatoly Chubais, which was supported by Yury Luzhkov’s group. According to the media, the Family in turn took Luzhkov’s side in the Mosenergo furor. To all appearances, Putin thought it sensible to support the stronger players, which explains why he not only appeared at the Moscow day celebrations, but even publicly praised Yury Luzhkov both as a man and as an economic manager, even comparing him to Moscow’s founder Yury Dolgoruky. At the same time it emerged that the president’s chief of staff Aleksandr Voloshin had called upon Chubais to compromise in his conflict with Luzhkov and Mosenergo bosses.

Chubais’ career as the leader of the group of energy bosses is on the brink of collapse. The family is rumored to have warned him that if he continues to resist their plans, including those to take control of Moscow, to involve “Family capital” in the privatization of the energy system and so on, he will be jeopardizing not only his own position but also that of his people in the government.

In connection with this, last week the press once again began discussing possible changes in the government in respect of the so-called latent conflict in the cabinet between the prime minister–a Family man, as Kasyanov is usually thought to be–and his deputies, Kudrin and Gref, who are close to Chubais. Further fuel was added to this conflict by discussions of the project to reform the banking system, supported by Kasyanov but vehemently opposed by the ministry of finance (Kudrin) and the ministry of economic development (Gref), which support the head of the Central Bank, Gerashchenko, and entered into a tactical alliance with him at the end of August. A particular feature of last week was the clear change of tune in the press regarding the outcome of this conflict. Whereas previously discussion mainly centered around the dismissal of Kasyanov and who would secure the prime minister’s job, last week the press turned their attention to the question of who would succeed Kudrin, whom Kasyanov supposedly planned to keep on as vice premier, but without his ministerial portfolio.

But the central question in all this is: What view does Vladimir Putin take of these victories by the Family over Chubais and the financial structures behind him? The impression is that at least for the time being Putin is deliberately distancing himself from Chubais and from all the political and financial structures connected to him, and so the growing influence of the Family now suits the president.

Russia’s liberals have been damaged by their declared intention to put up a candidate against Putin at the next presidential elections. Meanwhile, it emerges that the Family has backed down from its earlier plans to put up a general of some description (Lebed or Shamanov) against Putin. Khodorkovsky, an oligarch close to the Family, said recently that he and the structures connected to him would support the incumbent president at the forthcoming elections. Under these circumstances, there is nothing Putin can do but maintain his old alliance with the Family and rely on these experienced hands, including Voloshin.

Analysts believe that the imminent government reshuffle will reveal Putin’s plans once and for all. If, as many predict, the members of the Family manage to squeeze the Petersburg liberal Kudrin out of the financial block, it may be said that victory is finally theirs.

Aleksandr Tsipko is a senior associate at the Russian Academy of Sciences’ Institute for International Economic and Political Research and a columnist for Literaturnaya Gazeta.