Russia: Has Putin Won the Battle Against Oligarchs?

by R.G. Gidadhubli

The Russian President, Vladimir Putin, has complex relations with the Russian oligarchs, the ‘New Class of Billionaires’. Being an experienced wrestler, he has displayed his total control over those who have confronted and challenged him. For instance, Boris Berezovsky, who committed suicide in March 2013 in England, was once acclaimed as the ‘Godfather of the Kremlin’ and ‘King Maker’ in Russia during Boris Yeltsin’s era since he could pull down regional governments at his will, being a master in political intrigues. In fact, it is he who brought the former KGB agent, Putin, into the Kremlin Family which comprised a small clique of insiders, also called by Western critics as the ‘Deep State’. No doubt being a part of the Family helped Putin to be close to Yeltsin and rise to power.

While credit needs to be given to Putin’s leadership qualities as he emerged as the elected President of Russia in March 2000 and has been in power during the last 13 years, Berezovsky fell apart from Putin on certain issues including tax evasion, left Russia and lived in exile as many other oligarchs. Berezovsky’s last desire to return to Russia remained a dream, even as he apologised to Putin for trying to stage a coup more than a decade back to oust him from power. He also committed blunders in his personal and family life by squandering his wealth in litigation and was impoverished leading to his misery and death. Similarly, Russia’s another oligarch, ‘Media Baron’ Vladimir Gussinsky of the 1990s, also left the country for his alleged opposition to Putin’s policies of controlling freedom of the press.

The case of the one-time richest Russian oligarch, Mikhail Khodorkovsky, who was controlling the Yukos oil and a few more companies, is different and unique. He, of course, might be repenting for not leaving the country as he was arrested in 2003 and has been languishing in jail in Russia since 2005. He was alleged to have funded political leaders and parties that opposed Putin and some analysts even speculated that he wanted to contest the presidential election in 2005 against Putin. Khodorkovsky has also been alleged to have evaded payment of taxes, which he has denied, and even money laundering for which he is undergoing a nine-year jail term. While a majority of ordinary Russians do not have sympathy for the oligarchs, what seems to be agitating a section of Russia’s educated class is the fact that in December 2012 Mikhail Subbotin and a new legal advisory team, that was formed by Dmitry Medvedev to give opinion about prevailing criticism about irregularities in the prosecution of Khodorkovsky, have been targeted by the Investigating Committee of the Russian Government, by the officials sent for searching their houses and even confiscating their computers etc.

It is evident that Putin, having close ties with the Siloviki (Security group), is controlling the case to his advantage. But this might alienate certain sections of the society which might hold their views against Putin’s policies. Some groups and a section of the media are even critical of the absence of the Rule of Law in the country, lack of freedom for civil societies and for exerting severe punitive actions on human rights organisations, on which Western analysts and political leaders are already very vocal and critical of Putin’s leadership. In fact there is even speculation that Khodorkovsky might face fresh charges for using his money laundered abroad and funding human rights organisations in Russia to support the case for his release. This is all the more plausible and relevant since Putin has brought a new bill, in March 2013, relating to foreign money received by certain NGOs and for allegedly working against national interest as perceived by official circles. To counter this, the Russian Government has decided to earmark $ 75 million for providing funds to those NGOs which work for national interest. Hence critics contend that by using this new provision there is a likelihood that the authorities, guided by Putin, might further extend Khodorkovsky’s jail term by an additional five-to-six more years.

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In contrast to these cases, Putin has compromised with another group of oligarchs who have displayed loyalty to the Kremlin and Putin’s authority in Russia’s politics. Alexei Miller, Oleg Deripaska, Vladimir Potanin, Abramovich belong to this group. No doubt they had enriched themselves during Yeltsin’s presidency and continue to flourish due to their close ties with Putin as they serve mutually beneficial interests. For instance, Alexei Miller is the CEO of the natural gas company, Gazprom, which possesses about 20-25 per cent of global natural gas resources in which the Russian state has also substantial share. Russia’s geo-political objectives and Gazprom’s geo-economic interests are working in tandem, which apparently bring Putin-Miller close for acquiring natural gas resources both in Russia and abroad and exporting gas to Europe and China to earn the much needed petrodollars. Hence there are billionaire oligarchs in Russia, while Putin and Medvedev have also become rich and might fall in the category of millionaires in the county.

At the same time as in any capitalist country, there are business rivalries and competition among oligarchs which is evident as Deripaska and Potanin are engaged in a legal battle to gain control over the Norisk Nickel company which has richest reserves of nickel even as Abramovich is trying to settle the issue. Oligarchs close to Putin claim that they have kept their money in Russia but, as opined by several analysts, many of them are reported to own properties and villas in the West European countries while Abramovich continues to hold his major stake in the Chelsea Soccer Club in England.

The fact remains that a section of Russian oligarchs seem to have kept money in Europe and possibly that money might have been used from time to time in Russia’s inflow and out-flow of foreign capital. In 2012 the outflow of capital was more than the inflow and hence Putin’s criticism has legitimacy since a substantial part of Russia’s wealth has been siphoned off to the West after the Soviet breakup even as Russia is struggling to find resources to develop and modernise its economy. But Putin has not succeeded so far in evolving attractive and convincing policy measures to persuade the oligarchs to invest their capital in Russia for a long period. Thus there is a persisting trust deficit among them. It is ironical that at a time when the Russian Government is interested in getting foreign capital, in March 2013 some of the oligarchs who have settled in Europe are learnt to have used their money to bail out Cyprus from its current financial crisis. While Putin has not totally won the battle against the oligarchs, he may have the satis-faction that he has won half the battle.

Dr Gidadhubli is a Professor and former Director, Centre for Central Eurasian Studies, Univesity of Mumbai.