Ben Judah - Fragile Empire - How Russia Fell in and Out of Love With Vladimir Putin

Kolesnikov says he was profoundly shaken: ‘After Shamalov told us who we really were, I started thinking. It is not just me who is a serf! I spent twenty years of my life in the Soviet Union. All my education has been about not being a serf… and I realized that if I am a serf, then everyone is a serf. I realized that Putin is not the “tsar”. We had only called him that. Because a tsar has a dynasty, and cares for the country because it will one day belong to his son. A tsar cares for his people. I realized that Putin is a dictator. He cannot create a dynasty. And in the end all dictators end up the same way.’

By now Kolesnikov claims he was locked in a serious dispute with Shamalov: ‘I thought I could just leave the system. But I couldn’t. They wanted to make an example of me. They wanted to destroy me. So I fled to Turkey and then to the United States. I had heard from my friends in the system that they were planning to leave drugs in my car and have me arrested. I knew that if that happened… I would end up dead.’

Putin’s spokesman and Mr Shamalov dismissed these claims. According to Kolesnikov, the palace cost as much as $1 billion. The authorities, of course, deny any connection with this Italianate property. Maybe, this could be because ‘Project South’ gets to the heart of who Putin really is. That he should have blurred the boundaries between profit and politics in 1990s St Petersburg is unsurprising. This simply made him a man of his time.

What the Kolesnikov documents seem to show us is that Putin never changed. Instead, as he has grown more powerful, he grew ever more corrupt. This means that Putin has never stopped behaving like a 1990s politician. He cannot change – and as long as he is in power, neither can Russia. Nor can the incestuous relationship of power and corruption that spiralled out of control under Yeltsin ever end.

Putin is a family man. He may have come to power promising to ‘liquidate the oligarchs as a class’, but instead his rule has seen friends become oligarchs. Everybody who has worked with Putin mentions his incredible loyalty to those he trusts. Some say he has had this since childhood. His schoolteacher Vera Gurevich thinks this might even be the defining line of his personality:

‘You see, at school he never betrayed his friends. He was the strongest at school and everyone was frightened of him. He was always the leader – but a secret, discreet one – who could organize people and rally them to do things. He wasn’t ever crowing or shouting out like some of the boys.’

The Russian opposition alleges that those who knew him well in St Petersburg have prospered. Boris and Arkady Rottenberg used to work on their judo with Putin at the Yavara-Neva Judo club in the city, the sport he adores. Arkady Rottenberg was Putin’s personal trainer and sparring partner. Now they are billionaires selling pipes to the government-controlled monopoly Gazprom. Gennady Timchenko used to be a member of the same club. Now he runs Gunvor, the third largest oil trader in the world. At one point it handled roughly one-third of Russia’s sea-bound oil. 3Timchenko denies that he has benefited from Putin’s rise to power, that they are friends or that having sponsored the Yavara-Neva constitutes proximity. 4Putin is the club’s president. ‘The relationship is one of casual acquaintanceship and not close friendship,’ attests his spokesman. 5However, when Gunvor was awarded rights to sell the oil that Rosneft had acquired from Yukos, at first no public tenders were held, to see if another company would offer a better price. 6At great loss to the Russian taxpayer, Gunvor is based in Switzerland.

These men have done nothing illegal. Yet the Russian opposition points to the fact that many of the new oligarchs referred to as Putin’s ‘friends’ made their money from state contracts, with state corporations, directly under the control of the president or the prime minister. The careers of the men with whom Putin founded the mysterious Ozero dacha cooperative in 1996, where the friends pooled utility bills, are even starker – of the original eight members all have become extraordinarily rich since Putin became president. Amongst the dacha friends, Vladimir Yakunin became head of Russian Railways, with its enormous annual turnover. Yury Kovalchuk is now a billionaire and major shareholder in Bank Rossiya, alongside fellow dacha owners Nikolai Shamalov and Viktor Myachin; their financial institution had built up its capital through a series of deals involving Gazprom. Meanwhile, Vladimir Smirnov has enjoyed roles managing lucrative posts, including overseeing export in the commercial arm of the Ministry of Atomic Energy. Sergey Fursensko has become a media magnate as head of the National Media Group, owned by Bank Rossiya, with key stakes in major channels NTV, Channel 1 and the newspaper Izvestia . His brother Andrei Fursenko has served in several ministerial capacities and is currently a Putin aide. The Russian opposition allege that Bank Rossiya is dominated by this ‘gang’, and that it is not really a bank, but an instrument used by Putin and friends for control and embezzlement.

If one adds up the assets of Putin’s dacha associates, his acquaintances from the judo club with a few relatives, friends and former KGB agents, their wealth is in excess of $180 billion. 7As a result, it is widely believed that Putin, through his friends, has established an immense personal fortune through their stakes in Russia’s oil and gas industry. One speculative financial trail estimated he had become the richest man in Europe.

Those involved in Russian finance make investment decisions based on which companies are presumed to be ‘Putin assets’, which get preferential legal and political treatment. It is standard practice in the upper echelons of Moscow business to work out which ministers own what – and what Putin owns – and plot profit and loss accordingly. When being approached to join a corporate board, it is standard procedure to be told who the ‘real owner’ is.

Corruption in post-Soviet Russia is not just about theft, it is about power – used to consolidate both Yeltsin and Putin’s regimes. The Russian opposition claims that the economy is now so distorted to the advantage of this group that they cannot only be accused of corruption – but state capture. In a pamphlet condemning Putin’s embezzlement entitled ‘Putin: Corruption’, the opposition politicians Vladimir Milov and Boris Nemtsov lamented:

The Putin system is remarkable for its ubiquitous and open merging of the civil services, and business, its use of relatives, friends and acquaintances to absorb budgetary expenditure and then take over state property, and the way it stays and sticks in power whilst functioning with near total opacity. 8

The Kremlin is a court more than an administration. Like any court, it is a venal and unideological place where personal ties and patronage, factions and feuding, are the arithmetic of power. Though most ministers are courtiers, not all courtiers are ministers. Putin’s court is a place where influence is played for between the oil oligarchs and mining magnates, coveted by his ‘friends’ and craved by the ‘families’ of his favourites. It is a society of palatial estates in the woods over the Moscow ring road, dynastic marriages, grey cardinals, pillaged fortunes and nepotism shrouded in paranoia – against a backdrop of assassinations, exiled intriguers and the imprisoned oligarch.

This court is a far cry from Russia’s democratic or socialist dreams. We see an opulent rococo palace built from funds skimmed from donations for urgently needed medical equipment. A coterie of ‘liberal modernizers’ with crooked embezzlement trails. A clan of anti-Western ‘siloviks’ whose pastimes include luxurious holidays on the Côte d’Azur and buying up the mansions of Mayfair. An ideologist who smiles on television one day that Putin was ‘sent by God’, only the next to fail to deny he is in fact author of a theatre piece where a ‘vulgar Hamlet’ decries his country’s corrosive corruption. A cabinet where a former furniture salesman can be a defence minister, where ministers are married to one another and most of its former KGB agents had mere walk-on roles in the Cold War. This is a court stuffed by more men from St Petersburg, almost all associates of the man they sometimes dub the ‘tsar’, than at any point since the Romanovs. This is Putin’s court, a place where any major decision requires his stamp of approval or signal of acquiescence.