Photo: Sasa Dzambic Photography/Shutterstock

Think It’s Just Putin Who Runs Russia? Guess Again

Russia News
by Dan Peleschuk Dec 31, 2014

What do a shadowy oil czar, a deeply religious railway boss and a billionaire judo enthusiast have in common?

They form most of what experts believe to be Vladimir Putin’s inner circle — a coterie of old allies and confidants that defines the country’s trademark system of crony capitalism.

Relying on Putin for their massive wealth and influence, they in turn shore up his power by controlling strategic sectors or resources.

Now that balance may be getting increasingly unsteady as the country veers toward an economic crisis — brought on by low oil prices and Western sanctions — that threatens to shake the stability Putin has long guaranteed.

Hints of that came into focus last week, when experts believe a massive, shadowy government bailout of the state-controlled oil giant Rosneft sent the ruble crashing to a 16-year low.

The company’s president, Igor Sechin, is one of Putin’s closest allies as well as the purported leader of a conservative faction that appears to hold tremendous sway inside the Kremlin.

Sechin is widely believed to be Russia’s second-most powerful person after the president.

Russia’s heavy reliance on natural resource exports means state energy firms play a key role in conducting foreign policy, which has grown increasingly aggressive since Moscow’s seizure of Crimea last spring.

That’s one of the reasons it’s difficult to turn down allies like Sechin when they come calling for cash — even with rumors abounding that the recent loan to Rosneft was aimed at buying dollars to repay the company’s massive foreign debt.

“The Central Bank started the printing press to help the Sechin-Putin business and gave Rosneft 625 billion newly printed rubles,” opposition politician Boris Nemtsov, a former deputy prime minister, wrote on Facebook last week. “The money immediately appeared on the currency market, and the rate collapsed.”

Sechin fiercely denied those charges, calling them a “provocation.”

He’s not the only one in Putin’s inner circle who’s asked for help in these trying times.

The group is largely comprised of Putin’s friends and colleagues who trace their relationships with the president to 1990s St. Petersburg, his hometown.

Asked by a reporter during an annual televised news conference last Thursday whether he fears a potential palace coup, Putin replied with typical swagger: “We have no palaces, which is why there can’t be any palace coups.”

The behemoth, state-owned Russian Railways conglomerate, headed by another Putin crony, Vladimir Yakunin, has also reportedly tapped into the country’s $80 billion National Wellbeing Fund to help fund major projects it says will boost the economy.

Russian Railway’s mega projects, including planned rail links connecting 2018 World Cup host cities or Moscow with Beijing, play a key role in the drive to enhance Russia’s geopolitical prestige.

Long a target for opposition activists who claim they uncovered a sprawling mansion belonging to the magnate, Yakunin is also widely seen as the bridge between Putin and the Russian Orthodox Church, an increasingly influential organization that has lent crucial support to the president’s conservative drive in recent years.

Mark Galeotti, a Russia expert at New York University, believes those men have profited immensely from their proximity to the Kremlin, which hands them lucrative state contracts and crucial loans.

But he says the tanking economy means there’s less state money to go around, which could stoke problems further down the road.

“What we’re going to increasingly see is this tension between a desire to stick together to keep the system running for a common interest and a desire to fight out their own personal economic and bureaucratic conflicts,” Galeotti says.

In the short term, the system appears to be chugging along despite the grim economic news.

A recent Bloomberg News investigation found key Kremlin allies — particularly construction magnate Arkady Rotenburg, Putin’s onetime Judo partner — continue to make a killing from government contracts.

Rotenburg has seen his business boom thanks to a $7 billion contract from the Sochi Winter Olympics. He’s also hoping to cash in on a new natural gas pipeline in Siberia.

But it remains to be seen how long the good times can last, with much probably depending on just how adventurous Russian foreign policy will be in the near future.

Most analysts agree that Putin typically consults his inner circle or at least considers their interests when making important decisions. But some suggest that may have changed in the past year as the Kremlin has grown increasingly confrontational with the West.

Most the president’s allies, including Sechin, Yakunin and Rotenburg, have ended up on sanctions lists.

“A year ago, it was difficult to imagine that Putin would make decisions that would hit his inner circle,” says Vladimir Pribylovksy, a Moscow-based political analyst who studies the Russian political elite.

For his part, Putin still exudes the confidence for which he’s well-known.

Asked by a reporter during an annual televised news conference last Thursday whether he fears a potential palace coup, Putin replied with typical swagger: “We have no palaces, which is why there can’t be any palace coups.”

But it’s becoming increasingly clear the economic crisis won’t disappear any time soon.

Crippling sanctions have already locked Russian banks out of the foreign capital market. Many other oligarchs — whom Putin convinced long ago to stay out of politics in exchange for maintaining their wealth — have also suffered considerable losses amid the economic downturn.

Galeotti, the NYU expert, believes the risk of a coup by the president’s closest allies is less likely than one by “everyone who actually runs the country for them.”

“If the elite begin to think that Putin is actually a liability rather than an asset,” he said, “that’s when they’ll be very tempted to do something about it.”

By Dan Peleschuk, GlobalPost

This article is syndicated from GlobalPost.

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