Putin's Kleptocracy_Who Owns Russia?

by Karen Dawisha

  Mirilashvili: We need to talk today. We will not use the telephone . . .

  Narusova (interrupting): . . . It is already becoming simply indecent . . .XI

  Mirilashvili (calming): I understand, let’s talk about it today . . .

  Narusova (interrupting): We have to act very hard . . .XII

  Mirilashvili: OK, but to me . . .

  Narusova: Call today at ten.65, XIII

  Putin’s apparent loyalty to Sobchak and Narusova would be remembered by those in the Yel’tsin Family who were similarly coming under investigation,69 but Putin was able to deal with his own problems with Skuratov by getting Sobchak abroad. Without Sobchak, Skuratov was unable to pursue the case, and it was dropped.70 As Putin himself reflected, Sobchak “had been implicated in this murky story of the apartment. A case was opened up, but it fell apart in the end.”71 What Putin fails to mention is that he also was charged with receiving an apartment in return for city contracts; indeed he also acquired an apartment on the prestigious Vasil’yevskiy Island at this time, the address that would be listed as his personal address—apartment 24 in building 17 on Second Line Avenue—on the document establishing the Ozero Cooperative.72

  This was not the only St. Petersburg scandal that Putin was alleged to have been involved in during this period. Russkoye Video was one of the original shareholders in Bank Rossiya. Vladimir Pribylovskiy claims that, as with Bank Rossiya, Russkoye Video’s founding capital of 13 million rubles also came from the Leningrad regional executive committee (obkom).73 It was headed by Andrey Balyasnikov, who had worked in the city’s Ideology Department during the Soviet period. Vladislav Reznik was his deputy—another cofounder of Bank Rossiya and a founding member of United Russia, whose house in Spain was next door to Gennadiy Petrov’s, described as the leader of “one of the four largest OC [organized crime] networks in the world.”74

  Further commentary is provided by Chief Investigator Andrey Zykov, who claims that “during privatization of the St. Petersburg Channel Eleven and its sale to ‘Russkoye Video,’ which involved Putin, the law on privatization was violated. Given the evidence, a criminal case was opened on ‘Russkoye Video’ which was under the supervision of a senior investigator for particularly important cases of the Procurator General’s office, Yuriy M. Vanyushin. On the basis of the evidence, D. Rozhdestvenskiy was arrested—he was the General Director of ‘Russkoye Video’ and had funded trips abroad by Putin’s wife.”75 According to the materials of the case, Pribylovskiy and the Russian historian Yuriy Felshtinskiy quote from a document that additionally claims not only that Russkoye Video paid for Lyudmila Putina’s foreign trips but also that “the Russkoye Video Company illegally produced pornographic movies. The work was handled by D. Rozhdestvenskiy. . . . The materials of the case are in the possession of V. A. Lyseiko, deputy head of the Directorate for the Investigation of Cases of Special Importance at the General Procurator’s Office and the head of the investigative team. Deputy General Procurator Katyshev is acquainted with the facts of the Russkoye Video case. Putin is trying . . . to influence the outcome of the investigation.”76 Roughly the same charges were laid out in an article by Oleg Lur’ye and Inga Savel’eva in a Versiya piece in 1999 titled “Four Questions for the Heir to the Throne.”77 Masha Gessen claims that the procurator in charge of the case, Yuriy Vanyushin, was also a classmate of Putin. Rozhdestvenskiy was subjected to audits, daily interrogations, and periods of imprisonment beginning in 1997. He was charged with a variety of economic crimes, none of which stuck. He was eventually released from prison but died at the age of forty-eight, his health broken. Most commentators conclude that Russkoye Video’s secrets somehow involve Putin. When Gessen called Procurator Vanyushin to interview him about the case in February 2000, he warned, “Leave it alone. Believe me, Masha; you don’t want to get any deeper into this. Or you’ll be sorry.” Surveillance of her apartment began soon after, and Gessen took a vacation abroad and dropped the story.78

  Novaya gazeta investigated eyewitness allegations that on December 12, 1997, the SUV Jeep in which Putin was traveling, with the typical rooftop flashing blue migalka used by high government officials, and much resented by the population, was involved in a high-speed traffic accident at kilometer 17 along the Moscow-to-Minsk highway that killed five-year-old Denis Lapshin, who died shortly after the accident in Moscow’s Hospital No. 71.79 Journalist David Satter, who investigated the case, reported, “According to eyewitnesses, in the aftermath of the crash, plainclothesmen not only removed Denis’s body from the area without the permission of his relatives, they also tried to alter the accident scene to make it look as if Putin’s car had not been responsible.”80 Initially Putin’s driver, Boris Zykov, was not arrested, but when the boy’s family took up the case, he was eventually charged under Article 264.2 of the Criminal Code, on Violation of the Rules for Traffic Safety and Operation of Transport Vehicle, resulting in death, which is punishable by up to five years in prison.81 But Zykov did not even appear in court and was in fact subsequently amnestied, although never convicted.82 He also apparently did not appear in a subsequent civil court case that the enraged family brought in February 2000, after Putin was already acting president.83 Despite the fact that Novaya gazeta took up the case and submitted materials to the procurator general,84 ultimately they were forced to issue a retraction, stating that the use of the term killer to describe Zykov was “incorrect from any point of view” and that Putin’s presence in the car “had not been confirmed” by investigative agencies.85 The fact that more than three years passed between the incident and the retraction, filled with both a criminal and a civil case, certainly underlined the amount of effort that would have been required to make such claims go away.

  First Deputy Chief of Staff in Charge of Russian Regions: May 25, 1998–July 25, 1998

  After Chubays moved on to become head of the Russian state power utility RAO UES, Valentin Yumashev replaced him as chief of staff in the Presidential Administration. Putin too received a promotion, becoming first deputy chief of the presidential staff with special responsibility for the regions, a position he used to reassert central control.86 In this new position, Putin replaced Sergey Shakhray, who had used his considerable knowledge of interethnic relations to sign forty-two bilateral compacts between Moscow and the regions designed to demarcate federal jurisdictions and give the regions a legal basis for the trend toward decentralization. Putin would sign none during his short tenure, reportedly believing that the process had gone too far.87 This is the post that he found most interesting prior to becoming president: “To this day I think that was the most interesting job. I developed relationships with many of the governors at that time. It was clear to me that work with the regional leaders was one of the most important lines of work in the country. Everyone was saying that the vertikal, the vertical chain of government, had been destroyed and that it had to be restored.” He conceded that not all the governors agreed with this approach, but “you can’t please everybody.”88 Yel’tsin had encouraged the emergence of a federation in which regions would take the kind of independence they could handle within the framework of the Constitution; in contrast, Putin’s view was that only because of the weakness of central authority, regional independence would have to be tolerated for the time being. The contacts Putin established with governors during this period would come in handy in the summer of 1999, when twenty-four of them sent appeals to Yel’tsin to step down in favor of Putin.89

  Head of the FSB, July 25, 1998–August 9, 1999, and Secretary of the Kremlin Security Council, March 29, 1999–August 9, 1999

  Though Putin said he didn’t know that he was being considered for FSB chief,90 it is hard to imagine that any appointment of this magnitude—in any country—would not have its backstory. Some reported that he came to Yel’tsin’s attention because of his straightforward and professional reports about the situation in the regions. Other Russian reporters at the time noted that “knowledgeable people say that Putin stubbornl
y cherished the dream to become the director of the FSB. The first rumors of his possible arrival began to circulate in the summer of ’97. The authors well remember talk in the Lubyanka corridors about a certain presidential crony who is dreaming of becoming the director.”91

  When Putin arrived at the FSB on July 25, 1998, replacing the professional KGB appointee Nikolay Kovalev, he was the fifth head of this agency in as many years. One estimate stated that the FSB had lost more top leaders to forced retirements during the Yel’tsin period than the security organs had during World War II.92 Nevertheless Yel’tsin is on record as saying that it needed more such retirements.93 Kovalev had come under criticism for losing control of the FSB’s Directorate for Combating the Activities of Organized Crime Groups (URPO), whose chief had been accused of graft and of ordering a special unit to take an oath that they would carry out any order, including illegal ones, up to and including murder—the charge was made by journalist and opposition parliamentarian Yuriy Shchekochikhin, who himself died of what appeared to be deliberate radioactive poisoning in 2003.94 Noted Russian security specialist Andrey Soldatov called URPO an example of “Russian death squads.”95 It was members of this unit, which included Aleksandr Litvinenko, who later in 1998 held a press conference stating that they had refused an order to assassinate Boris Berezovskiy. And it was Putin, according to Mikhayl Trepashkin, a KGB and then FSB investigator who later broke with Putin, who personally fired and then ordered the prosecution of Litvinenko for going public with the scandal and provoking the URPO dismissals. Litvinenko served nine months in prison for “abuse of authority” and then escaped to England after his release.96

  Putin used his time at the FSB to completely restructure the agency and bring in his cohort of KGB classmates from Petersburg, the so-called piterskiy echelon,97 who would help support his ascendancy, while at the same time promoting their own.98 Specifically two key agencies within the FSB were eliminated by Putin: the Directorate for Economic Counter-Intelligence and the Directorate for Counter-Intelligence Protection of Strategic Sites. These were the agencies charged with investigation of high-level economic crimes, such as those surrounding the oligarchs and the Family, including the allegations of kickbacks from the Swiss company Mabetex and other investigations of Berezovskiy taking place at that time associated with his takeover of Aeroflot and his running of AvtoVAZ, as well as the protection of strategic sites, including all nuclear facilities and closed labs. Russian political commentator and politician Aleksandr Khinshteyn notes that they and many other long-serving professional “chekisty of the old echelon, persons not accustomed to vacillating with the course of the dollar,”99 were obliged to retire. These two directorates were replaced with six new ones, filled with Putin loyalists from Petersburg, including Viktor Cherkesov, Aleksandr Grigor’yev, Sergey Chemezov, Sergey Ivanov, and Nikolay Patrushev. Cherkesov became first deputy director in August 1998; Grigor’yev took one of the deputy directorships while maintaining his position as head of the FSB in St. Petersburg.100 Ivanov was named deputy director in charge of the Department for Analysis, Prognosis and Strategic Planning, given the role of preparing the daily briefings for the Kremlin.101 And Patrushev followed Putin out of the GKU in July 1998 and became head of the Directorate for Economic Security; he became first deputy director under Putin in April 1999 and then succeeded him as director when Putin became prime minister in August of that year. Patrushev brought along Rashid Nurgaliyev, who had been his deputy in Karelia, to the north of St. Petersburg. Nurgaliyev would rise to become minister of internal affairs after 2003.102 Some sources say that Igor Sechin accompanied Putin into the FSB103 as his factotum prior to being named as head of Putin’s secretariat at the office of the prime minister, but his biographies, official and online, are silent on this episode. In the process the FSB deputy directors in charge of these directorates were forced out, and similar changes occurred in the Ministry of Internal Affairs and the Office of the Procurator General (where Mikhayl Katyshev, who had opened many of the cases against Berezovskiy, was forced out).104

  There are many other examples of Putin associates making their way to Moscow at this time. Their unity was critical as they faced the beginning of a decisive period for them and for Russia. In May 1999 Dmitriy Kozak joined the Presidential Administration working on legal affairs, having been deputy governor of St. Petersburg.105 In July 1999 Viktor Zubkov was named chief of the State Tax Inspectorate for St. Petersburg and simultaneously deputy chief of the federal-level Russian State Tax Service.106 Leonid Reyman became deputy chairman of the State Committee for Telecommunications in July 1999, and then its chairman in August. Putin subsequently admitted to meeting with the former KGB chief Kryuchkov at this time, and once he became president he conceded, “I was working rather actively with the long-time veterans.”107 So while he put his own people into line positions, he also was carefully proceeding with the support of the former senior KGB leadership.108

  At this time Yel’tsin claimed that the “inner circle” consisted of himself, his daughter, the head of the Presidential Administration (until December 1998) Valentin Yumashev, and Aleksandr Voloshin, who became head of the Presidential Administration in March 1999.109 Nikolay Bordyuzha, a onetime chief of the federal border guards who most recently had been secretary of the Security Council, stepped in to head the Presidential Administration briefly in early 1999 but was never part of the inner circle. There were other key players, mentioned in every chronicle of the divisive politics of this period. But the key issues facing Yel’tsin in what the New York Times called the “bleeding away of his political authority”110 were the protection of his legacy amid persistent rumors of his own physical incapacity and corruption within his circle, and the need to strengthen this inner core and either keep them in power after the planned 2000 elections or secure immunity for them and for him so as to avoid arrest. These aims had to be achieved without the benefit of public support, given the generalized collapse in sympathy for Yel’tsin after the August 1998 banking crisis, which led to an estimated $25 billion in capital flight, a 64 percent drop in the value of the ruble, and a 41 percent increase in consumer prices.111 As a result, in the critical year between the August banking crisis and the appointment of Putin as prime minister a year later, Yel’tsin had to defeat his opponents despite the fact that his ratings in the public opinion polls had virtually collapsed.XIV As such, politics left the public sphere and went into the backrooms. In this behind-the-scenes struggle, Putin would be invaluable.

  In the wake of the August 1998 financial crisis, Yel’tsin was obliged to appoint as prime minister Yevgeniy Primakov, the only candidate deemed acceptable to the Duma, which, even before the financial meltdown, had instituted impeachment proceedings against Yel’tsin. These proceedings would continue until May 1999 and would serve as a continuing backdrop to the poisoned relationship among the Duma, the prime minister, and the president.113 Primakov was persuaded to take the position after Viktor Chernomyrdin was turned down twice by the Duma and it faced dissolution if they voted against Yel’tsin’s choice a third time. According to Yel’tsin’s daughter, except for Primakov, many felt that only Moscow’s mayor Yuriy Luzhkov, who was known throughout the country, would be acceptable to the Duma.

  But the Family had grave reservations about Luzhkov’s credentials and loyalty.114 Berezovskiy still had tremendous influence in the Kremlin, and he and the other oligarchs still had enormous power in financial and media circles. But with the appointment of Primakov and the resultant increase in the power of the Communists in the Duma, they were struggling to find top-level officials who would conform to their own interests. They too used this period to find good candidates who would represent them in the post-Yel’tsin period, including at this time General Aleksandr Lebed, and they were determined to avoid a presidency by either Primakov or Luzhkov. In the post-Soviet period, Primakov had been director of the Foreign Intelligence Service (SVR) from 1991 to 1996 and had had two years as foreign minister, during which time
he rallied public opinion against the buildup of NATO pressure on Serbian forces in the Yugoslav war. Thus he had a real support base not only among professional intelligence elites but also among the nationalists and the Communists, and indeed among many sectors of society simply exhausted from reading daily accounts about the untrammeled influence of the oligarchs over Kremlin policy. The day after his confirmation, Primakov gathered the heads of law enforcement agencies and announced a sweeping fight against crime and corruption. This created the atmosphere that allowed Yuriy Skuratov in the Procurator General’s Office to proceed with investigations into the corruption within the Family.

  Primakov evidently fought against Putin’s appointment from the very beginning. Yel’tsin’s daughter later related in her blog that Primakov didn’t like Putin, intervened with Yel’tsin to have him replaced, and blamed him in particular for “the defeat of professional cadres in the FSB.”115 She also said that Putin refused to use his position as FSB director to aid Primakov politically, including going to Yel’tsin to report that he had refused Primakov’s request to eavesdrop on Yabloko Party chief Grigoriy Yavlinskiy.116 In Primakov’s larger struggle with the Family, and with Berezovskiy above all, Putin clearly sided with Berezovskiy from the beginning.

  Putin was also dragged into a controversy when, in November 1998, Berezovskiy alleged in an open letter to Putin published in Kommersant that the FSB senior leadership had conspired to have him assassinated. The letter went on to state that this information had come out when the group tasked with carrying out the operation refused to do so and instead informed Berezovskiy. Among those allegedly assigned to be in the “hit squad” was Lieutenant Colonel Aleksandr Litvinenko, who had previously moonlighted as Berezovskiy’s bodyguard. Kommersant observed that when the FSB refused to “prosecute people in high places who ordered a murder that never took place,” Berezovskiy decided to go public and publish the allegations in an open letter to Putin.117 This was the first time that Litvinenko, who would die from polonium-210 poisoning in London in November 2006, made public allegations about the misdeeds at the highest reaches of the FSB. Kommersant reported that while his statements were investigated and generally regarded as valid, “the Chief Military Procurator’s Office, after hearing witnesses’ testimony, decided that telling someone to murder Berezovskiy is not a crime.”118 In an article released two days after his death, Litvinenko stated that while Berezovskiy had sought to pressure Putin to clean out the highest ranks of the FSB, unbeknown to Berezovskiy, Putin had his own obligations to some of the senior FSB officers who had been involved in working with organized crime in the early 1990s to smuggle rare metals out of Russia via St. Petersburg. As head of the Committee for Foreign Liaison, Putin had the task of licensing this activity so that the goods could legally cross the border. According to Litvinenko, Putin worked with the mafia and top KGB officials in taking these metals out of Russia, and, according to his informant in St. Petersburg city hall, “all his licenses were mob fronts.” Litvinenko claimed that when Berezovskiy asked him to produce all the information on corruption in the top levels of the FSB, Berezovskiy did not know that Putin was connected with some of their schemes, and that this was the reason Putin did not pursue any of these investigations and also made sure that Litvinenko was himself investigated, hounded out of the agency, and ultimately forced to flee abroad.119