Putin is the luckiest of Russian rulers. In his wildest dreams he could not have had a better year than 2000 to enter the presidency. From the mid-1980s until almost the end of the century, the global price for hydrocarbons had been in uninterrupted fall. Gorbachëv came to power when oil prices started to collapse; Yeltsin had to cope with inadequate fiscal returns from the export trade. In mid-1999, exactly when Putin became prime minister, the trend went into reverse and continued upwards through to mid-2014, and providence blessed Putin with a buoyant budget.
He had watched with disgust how under Yeltsin the leaders of Russian big business had tried to redraw the contours of politics. He and his supporters had no intention of suffering the same indignity. In July 2000, two months after the presidential inauguration ceremony, he invited nearly two dozen business leaders to the Kremlin. Seated at a vast round table, he started calmly. For a few minutes some of those gathered were deluded into thinking he wanted to treat them as his equals. But the dry, matter-of-fact delivery and the frequent pauses soon signalled something less friendly. The atmosphere turned icy. When Putin wanted to emphasize a point, he lowered his eyelids or pursed his lips. His phlegmatic gestures showed he was in no hurry. State interests, he announced, would regain the priority they had lost after 1996, when Yeltsin had had to allow the ‘oligarchs’ control of large swathes of Russia’s natural resources in return for their support in the presidential campaign. Putin was getting his audience to realize that he would brook no defiance. He was the master in his new house.1
There had been plenty of hints of Putin’s intentions in his dissertation at the St Petersburg Mining Institute in 1997, and in his reports as FSB director in 1998–9.2 His first prime minister, Kasyanov, was firmly in favour, and Kudrin at the Finance Ministry had long believed that the only way to establish a dynamic market economy was by strengthening the powers of central government. He had said as much in the late 1990s, at a time when businessmen like Berezovski were rampaging through public life.3
Putin had no intention of renationalizing the economy. He understood the necessity of encouraging private enterprise if Russia was going to recover its position as a world power. But the business tycoons had to know their place. They also had to pay their taxes. If he was to bring stability and efficiency to the country’s governance, he needed a larger and more dependable stream of revenues than was available when the average Russian tycoon thought fiscal obligations were something that only applied to others.
After the humbling of Gusinski, Berezovski and Khodorkovski in 2000–4,4 everyone knew the rules of the game had changed. This, Putin argued, was all for the benefit of the Russian people. Taxes raised meant welfare expanded, and businessmen had to be brought down to earth so the government could secure its finances. When he criticized the tycoons of trade and banking, he always had particular individuals in his sights. Not once did he focus on his own appointees, such as Sechin at Rosneft or Miller at Gazprom: Rosneft and Gazprom lie inside regular state control, and their leading personnel can be replaced at his whim (as indeed happened to Yakunin at Russian Railways in 2015). Independent entrepreneurs, however, are fair game. They operate in an economy where they depend on Putin and his ministers to approve their licences and dole out contracts. Their autonomy from government is only partial. When the Kremlin finds fault with some particular deal the business concerned can soon become the butt of political anger.
An example of this came in 2009 when, as prime minister, Putin toured a derelict factory in Pikalëvo, 160 miles west of St Petersburg, in the company of businessman Oleg Deripaska, who controlled the shares of the conglomerate that owned it. Mass lay-offs had devastated life in the town, and the protests caused a traffic jam that stretched over 250 miles. Putin assured everyone that he understood their feelings. With the TV cameras on him, he turned on Deripaska. Why, he demanded, had the regional authorities failed to make the necessary investment? He ordered Deripaska to sign an agreement on the spot to resume production – here was a contract already prepared. Deripaska signed, but Putin pretended he could not see the signature. Deripaska wrote out his name again. ‘Give me my pen back,’ muttered Putin. The Russian TV news channels broadcast the whole spectacle.
Whether it led to an improvement in the local economy is doubtful, and there is little sign that Deripaska stumped up the promised funds, even though he continued to enjoy a close association with Putin and other Kremlin leaders. The little drama at Pikalëvo had been arranged merely to propagate the image of Putin as the protector of ordinary employees.5
The handling of Deripaska was mild in comparison to the fate of American businessman and investor Bill Browder. As the chairman of Hermitage Capital, Browder had famously overseen the largest inflow of foreign funds into the Russian economy. But in so doing he fell foul in 2007 of those in the ruling elite who resented his success in their country and retaliated by levelling tax-evasion charges against him. Their aim was also to get hold of the Russian assets he had accumulated. Browder, however, was made of strong stuff: his grandfather Earl had led the Communist Party of the USA before Stalin removed him, and mental toughness had been handed down through the generations. Most of Russia’s successful businessmen had exploited loopholes in fiscal legislation, and Browder was reputedly no different.6 He had reason to feel that he was being singled out for persecution: until then he had been known as a supporter of Putin’s leadership – had never criticized his policies. In 2003–5 he had even endorsed the chasing down of Khodorkovski, seeming to accept, like others, that the Russian authorities were genuinely interested in comprehensive reform of Russian business governance.7
Browder saw things differently when influential Russians turned the heat on him. Rather than submit to legal threats, and rolling over to accept a dent in his finances, he fought back through the courts, even Russian courts.
In 2008 the police arrested Browder’s lawyer, Sergei Magnitski. Browder’s protests – by then he was working abroad – made no difference. Magnitski was held in Moscow’s Butyrki prison, where he was denied adequate medical attention for gall stones, pancreatitis and a blocked gall bladder. After nearly a year of maltreatment he died an agonizing death. A Kremlin-appointed human rights council confirmed he had experienced physical assault. An indignant Browder lobbied Washington for sanctions against those Russian officials regarded as complicit in bringing the case against his lawyer. In late 2012 President Obama signed into law the Magnitsky Act, which blackballed them from entering the United States or using the American banking system.8 In Russia, the powerful figures with links to Russian government and policing agencies continued to enjoy their victory over Browder and to blacken the name of Magnitski. Indeed, in 2013 there was a bizarre trial of the deceased Magnitski, which revived a gruesome ancient precedent. The result was never in doubt: Magnitski was found guilty of tax evasion. At a further trial, Browder was sentenced in absentia to nine years’ imprisonment.9 He had already lost millions of dollars through the collapse of Hermitage Capital. But the Russian authorities, who were striving to encourage foreigners to invest their funds in the country, suffered greater long-term damage when potential investors drew the conclusion that Russia was no longer a safe bet.10
Like Browder, businessman Boris Berezovski stayed away from Russia and never ceased to publicize the iniquities of Russian governance. In 2003 Berezovski received political asylum in the United Kingdom. Seldom questioned in the 1990s about his own business ethics, he appeared frequently on BBC news programmes and at British student gatherings to denounce Putin as the devil incarnate. He also financed anti-Kremlin activity in the former USSR. To Putin’s annoyance, he intervened in Ukrainian politics by making funds available to the Opposition that in 2004 won the so-called ‘Orange Revolution’ in Kyiv and elevated to the presidency Viktor Yushchenko, who had campaigned to free the country from subordination to Russia. Berezovski, still a rich man, bought tapes that threw suspicion on Putin for meddling improperly in Ukrainian affairs, and released them for public attention.11 He also gave Alexander Litvinenko – a Russian former intelligence officer who fled Russia in 1999 after accusing Putin of illegal activity when FSB director – financial support that enabled him to live comfortably in north London and send his young son to a prestigious private school.
‘We need to use force to change this regime,’ Berezovski told the Guardian newspaper in 2007. ‘It isn’t possible to change this regime through democratic means. There can be no change without force, pressure.’12 When asked whether he was fomenting revolution in Russia, he replied, ‘You are absolutely correct.’ Pressed to describe the measures he was taking, Berezovski went on, ‘If one part of the political elite disagrees with another part of the political elite – that is the only way in Russia to change the regime. I try to move that.’ He refused to give the names of his contacts, explaining that they would be murdered if identified. Berezovski insisted that he was providing his ‘experience and ideology’ to people in the political elite and advising on ‘my understanding of how it could be done’, adding, ‘There are also practical steps which I am doing now, and mostly it is financial.’13 This bombast – there is no sign that he was in touch with the elite’s members – could only invite trouble from Moscow. Already a marked man, Berezovski stood in plain view and dared the Kremlin’s rulers to come after him.
In 2011 Berezovski started proceedings in London’s High Court to demand restitution of the money he’d lost through the forced sale of his main Russian companies to Roman Abramovich. Abramovich offered Berezovski a large settlement out of court, but Berezovski had resolved to regain all he had surrendered. His case now rested on the allegation that it had been Abramovich, not Putin, who had been the prime mover in forcing him to sell up his assets in Russia at knockdown prices. This represented a complete about-turn: until then Berezovski had ranted against Putin’s diabolical powers; now he was suddenly alleging that Putin had been putty in Abramovich’s hands.
Berezovski behaved as though winning over any British judge would be as easy as obtaining asylum from the Home Secretary. His confidence was unquenchable: unlike Abramovich, he insisted on speaking in English in court, which put him at a disadvantage under cross-examination and prevented him putting his case with complete lucidity. The mid-morning breaks saw him more intent on swaggering round the foyer than on focusing on how to present a solid argument; he seemed to enjoy sitting alongside his Chechen bodyguards and glowering at hostile witnesses.14 The contrast with Abramovich, who had let his lawyers prep him about how to behave in court, was marked. Abramovich answered the questions put to him without prevarication.
These were high-stakes proceedings. Putin’s former Chief of Staff, Alexander Voloshin, came to the United Kingdom to testify on Abramovich’s behalf. Voloshin was a busy man who had become a director of Yandex and sundry other large Russian companies after leaving the Presidential Administration: his appearance at the High Court was a sign of Putin’s determination to trounce his leading enemy abroad.
While the case rumbled slowly to its conclusion, Berezovski continued his political offensive. In January 2012 he sent a letter to Patriarch Kirill of the Russian Orthodox Church. ‘Help Putin come to his senses,’ it pleaded. ‘Deliver the voice of the people to him. And when Putin hears you, take power out of his hands and hand it over to the people peacefully, wisely and in a Christian fashion.’ This was the product of a mind that had lost touch with the realities of public life in Russia. The patriarch ignored the request.15
As well as the vacuous claim that power in the Kremlin after Yeltsin’s retirement lay not with Putin but the businessman Abramovich, Berezovski had also accused Abramovich of swindling him in business deals, but he had no proof because, even in his own version of events, the deals in question had been done verbally. In court, he had made a bad case worse, frequently contradicting himself and making allegations that were easy to refute. In August that year Judge Elizabeth Gloster found against Berezovski.
Having failed to prepare himself for the possibility of defeat, he walked from court in a state of shock. ‘I’m absolutely amazed what happened today,’ he explained outside on the pavement. ‘I’m surprised completely.’ His voice ringing with resentment, he told reporters, ‘Sometimes I had the impression Putin himself wrote this judgment.’ With that he sped off in his chauffeur-driven limousine, which had often been seen illegally parked while the case had been going on.16 Now he faced the ruinous costs of the whole trial. As his money ran out, so did his verve. Concluding that his public career was over, he wrote three miserable letters to Putin in which he admitted his mistakes and sought permission to return home.17
In March 2013 Berezovski was found hanging by his belt in the bathroom of his Ascot residence in the Surrey countryside. The inquest recorded an open verdict. Some of his friends doubted it was suicide. But if it was a hit job, no clues appeared as to the killer’s identity or paymaster.
Now only Khodorkovski remained of the 1990s business tycoons who continued to oppose Putin from abroad, Gusinski having become politically inactive. Khodorkovski, settled in western Europe following his release from Siberian captivity in December 2013, did win a court ruling in The Hague for the restoration of $50 billion to himself and other Yukos oil company shareholders, but this was turned down on appeal. He remained wealthy enough to subsidize the Open Russia Foundation to promote the cause of freedom for Russia.
With Khodorkovski never achieving Berezovski’s international impact, Putin seemed to have confirmed his reputation as the ‘terror of the oligarchs’. But this was only half true. The term had been repurposed from its dictionary definition of someone belonging to a small ruling group and now characterized any big businessman of Russian nationality. While Putin had cut down Gusinski, Berezovski and Khodorkovski, it was never his ambition to remove all the many super-rich entrepreneurs from Russian public life. In fact he encouraged them to play a part in it. Some, with Putin’s assent, became members of the Federation Assembly, and Roman Abramovich was elected governor of Chukotka in eastern Siberia.18 Putin was not against opulent entrepreneurs, only those who challenged the ruling group’s authority and policies. Owners and directors of the great companies could enjoy their superflux of income, and so could cabinet ministers.
Indeed, they were frequently found side by side. In February 2018 an opposition video featuring Alexei Navalny included the Instagram account and memoirs of ‘sex guru’ Nastya Rybka (real name Anastasia Vashukevich), who had surreptitiously filmed her experiences on a yachting trip to Norway two years earlier. Along with other young women, she had been paid to spend time on board. Rybka videoed businessman Oleg Deripaska on his yacht – the same Deripaska who had been the butt of Putin’s staged anger in Pikalëvo – as he sat on deck talking with deputy prime minister Sergei Prikhodko.19 This shaming material was compounded by a drone flight over an estate outside Moscow where Prikhodko, despite having held posts in government at far from enormous salaries, was shown as possessing a mansion of 1,540 square metres, as well as sumptuous apartments in the capital. Nor was it easy to explain, noted Navalny, how Prikhodko’s wife had accumulated so much money and property, unless Prikhodko was on the take from businessmen like Deripaska.20
Since Putin had, as prime minister in 1999, demanded the resignation of Prosecutor-General Yuri Skuratov after a video showing him engaging in illicit sexual intercourse, Navalny asked why no action was being taken against Prikhodko.21 Both Deripaska and Prikhodko meanwhile issued robust denials of all the allegations made against them.22
The controversy died away. Navalny had never truly imagined that his campaign would succeed. He knew that Russia’s economy at its commanding heights operates in a framework of state capitalism. This means that no great corporation can flourish without active political support. Private companies and state-owned or state-controlled companies coexist and both kinds have to maintain good relations with the government – and if that fails, then with Putin. Deripaska is a billionaire entrepreneur who knows how to stay in official favour. The rivalries between privateers like Deripaska and statists like Sechin turn to unity, in any case, when it comes to what they consider is their right to cream off huge personal incomes from their businesses. And while Putin prefers them to keep their fortunes invested in Russia, he has to make it worth their while. When state contracts are on offer, therefore, they expect and receive first bite at the cherry.
Their place in the queue was inadvertently made more secure by the West tightening economic sanctions on Russia, deepening the country’s dependence on native capital. To that extent Putin was not just the giver of orders and dispenser of job appointments: the economy relied on the willingness of ‘oligarchs’ – the old compliant ones and the new ones he had promoted – to help him make Russia great.
It is a paradox that while Putin is master of Russia and can cull the herd whenever one of its bulls snorts at him, his political fortunes are linked to the country’s prosperity. As yet the Russian people have accepted their fate under Putin with remarkable quiescence, but Putin and his ministers cannot take the situation for granted, and though he can humiliate Deripaska, as he did in 2009, his own prospects are entwined with the degree of consent he can obtain from him and the other billionaires. This is the price of his apparent autocracy, and he has never been unwilling to pay it. He needs the ‘oligarchs’ just as much as they need him. Putin understands which side his bread is buttered.