If, beyond its borders, Putin’s Russia was posing an increasing threat to the Western liberal order, internally the system of KGB capitalism appeared to be calcifying and perhaps becoming unsustainable. The mafia system of tight control and corruption was penetrating every crevice of society, every political decision and every business deal. After the takedown of Yukos and Mikhail Khodorkovsky, the power of the security men had expanded to such a degree that the FSB had leverage over almost every businessman, and every regional politician, no matter how low in the food chain. It was a system of warring clans – including even different branches of law enforcement – fighting over slices of the country’s wealth, in which to survive meant you had to cooperate. Those who rebelled found themselves in jail. The story of one comparatively lowly bureaucrat exemplifies the system’s workings. Unlike the thousands of others who disappeared without trace after being thrown in pre-trial detention, this bureaucrat published damaging documentary evidence that revealed the corrupt intertwining of the security services and organised crime determining even the minutest questions of regional power. The trail he disclosed led to the FSB general who worked with Felix Sater’s friend Yevgeny Dvoskin on the black-cash schemes.
Alexander Shestun was the head of the Serpukhov district, a small slice of countryside about a hundred kilometres south of Moscow. In Russia’s rough-and-tumble capitalism of the nineties his success as a hard-bitten seller of construction materials made him one of the area’s richest businessmen, a big fish in a small pond.[1] Ever since his election as the region’s head in 2003, he had made every effort to demonstrate his fealty to Putin’s state. He joined the pro-Kremlin Unity Party, and worked closely with the FSB. Shestun was what the FSB called a ‘torpedo’. He agreed to secretly record conversations with local businessmen and officials to provide the FSB with compromising information that could sink their rivals. It was almost a replication of the Soviet system of informants, when citizens told tales on their neighbours in order to stay on the right side of the authorities and out of prison – only now it was a hundred times more sophisticated.
Shestun’s work had proved extremely valuable to the FSB; he helped it maintain its ascendancy when he informed on a ring of regional prosecutors running an illegal casino business.[2] But when a powerful new governor of the Moscow region was appointed in 2013, his days as head of the district were numbered. The new governor was a former deputy to the defence minister, Sergei Shoigu. Putin’s close ally Gennady Timchenko had invested in his family’s business, and he wanted the slice of prime real estate Shestun controlled for himself. As Shestun’s term as district head drew to a close, the FSB opened a criminal investigation into his purchase of the land on which he had built his home. But instead of bowing to the inevitable, Shestun dug in his heels. When Ivan Tkachev, the FSB general he’d formerly cooperated with, began blackmailing him over the case, Shestun taped their conversations, and later downloaded some of them on YouTube.
Tkachev was the head of the FSB’s powerful Department K, which was ostensibly meant to investigate financial crimes, but actually oversaw many of the black-cash schemes. According to a former senior banker who knew Yevgeny Dvoskin, he had worked closely with Dvoskin and Ivan Myazin to run many of the black-cash transfer schemes.[3] Shestun later said he’d often seen Tkachev in the company of Dvoskin, as well as with another banker who’d run connected money-laundering schemes that funnelled tens of billions of roubles into accounts in the West.[4] Tkachev had also used his position to prevent an interior ministry investigation into some of these schemes. When two police investigators, Denis Sugrobov and Boris Kolesnikov, got too close in 2014, Tkachev organised their arrest. Kolesnikov fell to his death from a balcony while he was in custody.
In one of the tapes Shestun downloaded, Tkachev and a senior official from the Kremlin administration referred to the police officers’ fate as he tried to force Shestun out of his post. ‘You won’t be left in peace,’ Tkachev threatened. ‘The matter has been taken to the president. The head of the FSB, the head of the presidential administration have all spoken about this. If you mess about they will run you over with a steamroller. Didn’t you see what happened to Sugrobov? … Why do you need this? Why do you, or your wife or your children need such problems? They will put you in jail anyway, and you will sit there for as long as they keep you there. You must understand this.’ He then told him he’d already jailed a string of far more powerful regional governors who dug in their heels over being replaced, and listed them one by one. ‘Show me Udmurtia – he was the tsar and god there. Show me Mari El, also the tsar and god. Sakhalin, Vladivostok – he was the coolest, but I carried him out with my bare hands. I worked with all the governors, with all the regional chiefs.’[5]
Tkachev told Shestun he would stand a better chance of surviving if he was in conflict with organised crime, and not with Putin’s state: ‘You’re a normal guy. You’re not a traitor. You always knew how to take a blow. But now you really really have fallen under the steamroller. It would be better for you if you were tangling with bandits.’[6] In any case, he told him, Putin was in touch with the head of one local organised-crime group, Sergei Lalakin, otherwise known as Luchok. ‘The president speaks with him. He received a medal. How could he not speak with him? Life is such, you understand.’[7]
It was a system, one Kremlin insider said, that was becoming unsustainable.[8] The success of Putin’s foreign policy exploits had long propelled the president far above the rest of his inner circle. But among Putin’s security men infighting was escalating. The economic slowdown resulting from Western sanctions was leading to an ever more bitter struggle to control resources and wealth. Igor Sechin, the Kremlin insider whispered, was rapidly gaining power. Swiftly, and without fanfare, he’d attained one of the highest ranks in the FSB, that of general colonel, and had appointed his own followers, who carried out his orders, to senior posts in the FSB. The once-mighty former Russian Railways chief and close Putin ally Vladimir Yakunin, for one, seemed to be struggling. His close associates were being rounded up and arrested. One Russian tycoon speculated that they were just a signature away from testifying against Yakunin himself.[9] At the same time, corruption pervaded every part of the system, right down to crony deals at inflated prices for supplies of sausages and other foodstuffs to Putin’s elite personal security force, the national guard.[10]
Amid the intensifying struggle and Russia’s increasing isolation, ‘those that used to worry about what the West might think have long forgotten about all that,’ said a Russian tycoon. ‘Now it’s only a battle for survival.’ One senior Moscow judge, who’d once cared about at least the appearance of following the rule of law, had long been swallowed into the system. Her daughter was earning an enormous salary at Rosneft, the state oil champion, and she wouldn’t do anything to jeopardise that. ‘These people, they have changed,’ said the tycoon. ‘It’s like she’s drunk blood. She is totally part of the system. Now they only think about how they can be tougher and crueller than the rest.’[11]
Russian officials seemed to care so little about Western investment following the sanctions that they even arrested one of the few Western investors remaining in Russia, Michael Calvey, in February 2019, freezing his fund’s assets, ready for takeover by Putin’s security men.
But the sanctions, the infighting and the near monopoly reach of Putin’s men were proving an incessant drag on the economy. Before the Crimea campaign, one Western lawyer wryly noted, Russia had been on track to be the world’s fifth-largest economy by 2020.[12] Now, he said, it was going to be lucky to make number thirteen, and no one seemed to care. Growth was stagnating at just over 1 per cent. If, before, most of his clients had been private businessmen, now they all seemed to be acting in some capacity on behalf of Putin’s state, he said.
‘This is what happens when the KGB come to power. All they know is how to run black operations,’ said a former senior government official.[13]
The surge in patriotism and pride after Russia’s annexation of Crimea had remained in force just long enough to carry Putin through to re-election in March 2018, with 77 per cent of the vote. But soon afterwards inside Russia public support for Putin finally began to fall. The unwritten pact that had allowed him and his circle to rule as they wished, as long as incomes were rising, was fraying.
Just as in Soviet times, Putin’s Russia was focusing on influence operations and restoring the country’s clout abroad, while neglecting to develop the domestic economy. Putin’s government was ever more openly increasing spending on displays of military power in the Middle East, and on political support for friendly nations as it sought to fracture Western alliances. A report by the independent TVRain put the cost of the country’s expenditure on its military campaign in Syria at $3 billion, while a further $1 billion was pledged for restoring Syrian infrastructure.[14] At the same time, Russia was wheeling out new generations of missiles. Loans were being handed out to developing countries – Venezuela had received more than $20 billion – in hopes that they would support Russia’s cause against the liberal West. All this was on top of the untold amounts of black cash being siphoned out of the country to spend on covert operations to buy foreign politicians and influence.
But at the same time, in 2018 the government told the population that the funds to pay pensions were dwindling, and it would have to raise the retirement age. ‘People understand the regime has a lot of money,’ said the former deputy energy minister and now opposition politician Vladimir Milov, ‘and against this background, for the government to say we have no money for pensions is a big mistake. Pensions are one of the main guarantees that the state is meant to give the population. People have built their entire life strategy around this. The Kremlin thought the people’s support for Putin was unconditional, like for a great tsar. But they are not going to forgive him for everything.’[15]
As Moscow headed towards local elections in September 2019, the first signs that one day there could be a critical standoff between the tsar and his people appeared. That summer, riot police forcibly detained hundreds of protesters as they took to the streets to demonstrate against the barring of opposition candidates, threatening some with fifteen-year jail sentences under draconian new laws, while opposition leaders were rounded up and held for weeks in jail. The heavy-handed responses to the peaceful protests meant only one thing: fear was setting in among Putin’s security men. Public trust in Putin fell to a low of 31.7 per cent – until the Kremlin hastily ordered a revamp of the polling methodology.
The unrest soon died down, and, steadied by a constant diet of state propaganda and budget handouts, Putin’s ratings started to climb again. But Putin and his security men took the warning signs seriously. Putin would soon be running into another constitutional limit on his hold on power: this time in 2024 – the end of his second consecutive term as president since his return in 2012 – when the constitution dictated he step down. Increasing uncertainty over who would replace him was already deepening infighting among the elite, and Putin’s people understood all too acutely the dangers of any transfer of power. They’d seen the jeopardy the Yeltsin Family faced as it entered the final year of Yeltsin’s rule. And with each year that passed of Putin’s own twenty-year rule, the potential threats he – or any of his security men – could personally face went far beyond anything that had confronted the Yeltsin Family. Any handover, even within the ruling elite, was fraught with peril. There were the apartment bombings, the Dubrovka theatre siege, the handling of the Beslan terror attack, the takedown of Russia’s one-time richest man, and then the subversion of the country’s legal system and economy, and the hundreds of billions of dollars they’d seized command of as they shored up their own power and then projected it abroad. There was no telling where a backlash might lead. The lengths they’d gone to to forge their own fortress of power had dragged Putin and his security men so deeply into a web of compromise and criminality that the only way to secure their position was to find a way to prolong Putin’s rule – or at the very least a way to drag out the transition.
They’d already tightened their hold over the country’s political system to such a degree that any outside challenge appeared a remote possibility. But the uncertainty and infighting within their own ranks were creating vulnerabilities, while flailing support for the Kremlin’s ruling party United Russia was posing an ever greater risk. On January 15 2020, Putin stepped forward with a surprise announcement: he was proposing changes to the constitution that would leave the way open for him to maintain his grip on the political system. The powers of parliament would be boosted, giving it greater oversight over government, but more importantly so would those of the president. Future presidents would be able to fire judges, ministers and the prime minister at will. Most importantly, the announcement left the way open for Putin to stay on as president, should growing social unrest or mounting infighting make it impossible for him to secure a safe exit from power. Under a new constitution, he could run for another two terms as president, allowing him essentially to rule Russia for life. Alternatively, the proposed amendments also allowed for Putin to continue to oversee policy-making from a great height: as a father of the nation-type figure heading up a newly empowered State Council. This had at first seemed the more likely route, but eventually it seemed ruled out. It could only be taken should Putin believe it was safe to start gradually withdrawing from more active politics. Putin, however, began clearly signalling he didn’t believe that was the case, portraying the constitutional amendments as necessary in order to stabilise the country in a time of ‘extreme turbulence’.
In one swoop, Putin seemed to be seeking to pre-empt any potential political challenge. Never before had he dared to entertain formally tinkering with the country’s constitution. Though in essence his men had already ridden roughshod over its contents, it had always been guarded as the bedrock of the country’s stability. What’s more, as if foretelling potential external threats, Putin also boldly stated that Russia would no longer abide by the rulings of international courts, further deepening his country’s isolation – this time through his regime’s own choice.
The rule of his men looked to be calcifying. But now that he’d opened a Pandora’s box of constitutional change, it was also in danger of becoming more brittle by the day.
When Vladimir Putin agreed in December 2013 to the early release of Mikhail Khodorkovsky after ten years in a Siberian prison camp, it was the last grand gesture of a magnanimous tsar. It was the eve of the Winter Olympics in Sochi, in what now looks like a different world. This was the era before sanctions, before the world had woken up to the corrosive power of Russian black cash and the revival of Russia’s ambitions on the global stage. But even then, perhaps as a symbol of all that was to come, Khodorkovsky’s release was an echo of a Cold War-era prisoner swap.
For ten years Khodorkovsky had survived on a diet of thin gruel and potatoes, assembling paper folders in a vast, draughty hangar in Russia’s icebound far north while surveillance cameras whirred above his head, watching his every move. Without warning he was bundled into a prison van that rattled through snow-covered forest to a small icy airstrip where a twin-engined plane was waiting for him. He was flown to Schönefeld, the drab airport south of Berlin that was once the westernmost outpost of Soviet rule, where he was greeted by Hans-Dietrich Genscher, the former German foreign minister who’d once been at the centre of negotiations on reunifying Germany. The next morning, after a brief rest and an emotional reunion with his parents, he headed for the Checkpoint Charlie museum, on the site of the notorious Cold War crossing point between East and West.
There he greeted a select group of journalists he’d known before his imprisonment. With his slight smile, immaculate shave and crisp Armani suit, he looked at first glance as if he’d just walked straight out of a boardroom. But his pale-grey pallor and anxious eyes betrayed the gruelling path that had led him there. His hair was neatly cropped, but it had turned white in the years that had passed. ‘I last saw most of you ten years ago,’ he said. ‘For me, this meeting is a kind of bridge to freedom. I want to speak first to the people that I know.’ He answered questions about his time in jail and the events that had led him there. The question that gave him most pause was about the West’s reaction to his arrest. He stumbled over his answer, reddening and saying he’d been disappointed by the actions of some.
When we spoke almost four years later in the comfort of his office in London’s Hanover Square, the question of the Western banks’ and energy majors’ participation and facilitation of the Yukos takeover still deeply irked him. I asked if the West, by these actions, had to some degree prepared the ground for Russia’s subsequent attempts to undermine Western institutions. ‘It was a strategic mistake of some Western institutions to think they could live without principles,’ he replied. ‘They thought it was great – “We will work with Putin, because we can make money from this.” But it turned out to be not such a good idea. This lack of principles has brought the West to the consequences it is experiencing now. This constant changing in saying what is good and what is bad has caused society to lose these principles for itself. And now we have a situation where populists are coming to power. Everything is being turned on its head. They point to the example of Putin, and say, “Look he deceived everyone, but he still had political success.”’[16]
Though Khodorkovsky is no saint, and makes an unlikely freedom fighter, the West’s backing of the Kremlin’s takeover of his company and its usurping of the rule of law facilitated the domination of Putin’s security men, and furthered their integration into Western financial markets. The weakness of the Western capitalist system, in which money ultimately outweighed all other considerations, left it wide open for the Kremlin to manipulate.
In Russia, the West’s willing complicity had helped produce a KGB simulation of a normal market economy. Institutions of power and the market that were meant to be independent were in fact no more than Kremlin fronts. The rulings handed down by Russian courts looked, on paper, as if they could be legitimate. In the Khodorkovsky case, the oil tycoon went through more than two years of court hearings and two sets of criminal charges, the second of which accused him of stealing all the oil Yukos had ever produced, the same oil that he’d previously been charged with evading taxes on. But in reality, the court’s rulings were not rulings, but Kremlin directives. The court system was not a court system, it was an arm of the Kremlin. The same went for the parliament, for elections, and for the oligarchy. Putin’s KGB men controlled all of them. It was a phantom system of phantom rights, for both individuals and businesses. Anyone who crossed the Kremlin could be jailed at any moment on rigged or trumped-up charges. Property rights were conditional on fealty to the Kremlin.
In a system where stealing was pervasive, where property was constantly being divided up on a nod and a bribe to the relevant person in the Kremlin and in law enforcement, Putin’s men had compromising information on everyone. The country had returned to the time of informants. Everyone was taping each other. Everything was known to be bugged. In December 2017 the economic development minister Alexei Ulyukaev, caught on camera receiving a $2 million bribe from Sechin in a sting operation to remove him as a political rival that had been set up by Sechin himself, was sentenced to eight years in prison. The Magomedov brothers, once prominent oligarchs at the top of the strategic port industry, were jailed in March 2018, ostensibly for racketeering and stealing state funds. But their real crime, according to a senior Russian banker, had been outstaying their welcome: ‘They went too far. It’s all very simple: when the film ends you need to get out of the cinema hall. You don’t stay and wait for the next show.’[17] ‘They can make anyone disappear now,’ said another tycoon. ‘Oligarchs, ministers. No one knows what’s happening in the Magomedov brothers’ case. They were super oligarchs, and now no one knows where they are.’[18]
Everyone was hostage to the system, including the Yeltsin-era powerbrokers who opened the way for the rise to power of Putin’s security men. Former Kremlin officials like Alexander Voloshin and former prime minister Mikhail Kasyanov would never be free to speak or act freely. Putin had told them clearly when they stepped down from power that he knew where their money was.[19]
Putin and his security men were the most tightly locked of all to the system. After everything they’d done to shore up their own power, they couldn’t trust anyone, even within their own circle, while Putin, by steadfastly eliminating all political rivals and concentrating power in his own hands, had also boxed himself in to such a degree that there was almost no way out for him.
Even those who’d fled Russia, like Sergei Pugachev, knew they could never truly escape the system’s reach. For Pugachev, his manoeuvring and manipulation to help propel Putin to power twenty years ago are now a constant source of remorse and regret. ‘I’ve learned an important lesson,’ he said when we talked at his home in France amid the latest legal onslaught against him. ‘And that is, power is sacred. When you believe the people are stupid, and that if you don’t act they will vote in the Communists, that was a big mistake. We all thought the people weren’t ready, and we would install Putin. But power comes from God. And if power comes from God, then there is no need to interfere … The people knew nothing about Putin. And in three months he became president. Of course, we thought it was cool. We thought we’d saved the country from the Communists, from Primakov and Luzhkov. But now it’s not clear which outcome would have been worse. It would have been better had Primakov come to power. He would have been ousted in a year. When I left Russia I thought I’d left all that behind me. But still this follows me everywhere. My fate is attached to Putin’s … We are tied to each other, no matter what.’[20]
In the rush to help install his man in power, and to save the Yeltsin Family from arrest, Pugachev had ignored warnings from Boris Berezovsky that appointing someone from the KGB was ‘to enter a vicious circle. They can’t change anything.’ He ignored the shocked reaction of Putin’s former mentor Anatoly Sobchak, who on hearing that Putin was to be appointed prime minister said, ‘Don’t frighten me!’ ‘I thought maybe he was jealous,’ said a crestfallen Pugachev, his cheeks still reddening at the memory. ‘But of course he knew everything. I’m in horror now myself.’[21]
But in many ways the recent history of Russia had been written long before him. The die had already been cast. The KGB were still everywhere in Russia’s ruling elite. The idea of lustration – a ban on official posts for anyone who’d worked with the KGB – had been raised by Yeltsin, but had been swiftly set aside by the senior officials in his administration, all of them KGB men of differing experience and rank. ‘They told him this would be impossible,’ said Pugachev. ‘There would be no one left to work. It would have hit 90 per cent of the ruling elite. People who didn’t cooperate in some way were very few.’[22]
Russia’s revolution had come full circle. The reformers who declared to the world with such great promise nearly thirty years ago that the country was on a new market path towards global integration were either soon compromised, or had been working with the KGB on Russia’s transition all along. Those who believed they were working to introduce a free market had underestimated the enduring power of the security men. ‘This is the tragedy of twentieth-century Russia,’ said Pugachev. ‘The revolution was never complete.’ From the beginning, the security men had been laying down roots for revanche. But from the beginning, it seems, they’d been doomed to repeat the mistakes of the past.