The Kremlin has turned anti-Western discourse into the main ingredient of its ideology, served up as the country’s staple fare while its leaders celebrate traditional values that are said to mark off Russia from the menacing, condescending, decadent West. Yet these same leaders are unable to resist the allure of the West themselves. This dichotomy took some years to be disclosed. After instigating the USSR’s collapse, Boris Yeltsin avoided referring to ‘the West’ because he wanted Russia to be welcomed into a global community of states.1 Along with his ministers and the new business elite, he even admired the Western style of life. But the political difficulties of securing approval saw Yeltsin’s popularity dip, and he concluded that he should pay greater attention to national sensibilities. In the early 2000s Putin too stressed that Russia is a European country; but as relations with America deteriorated, this soon gave way to the habit of baiting the Western powers and condemning Western culture. Leading public figures talked up Russia’s past, present and future.
Whatever they say in public, however, the dominant elite in politics and business retains its fondness for things foreign. The ‘new Russians’, whenever possible, deposit their income in Western banks in New York and London or in secretive offshore funds. Periodically the Russian government urged everyone to repatriate their money, and Putin looked askance at individuals choosing dual citizenship while working or living abroad. When the authorities in Cyprus offered a Cypriot passport to the billionaire Viktor Vekselberg, therefore, he turned it down: it was obvious to him that such a move would be deemed unpatriotic. His fellow billionaire Oleg Deripaska, though, apparently took the risk of accepting one.2 Deripaska was taking a gamble, but he was a businessman and at least it was not against the law for businessmen to stash away their profits abroad. For ministers and state officials it was a different matter. From May 2013 it was forbidden for them, and even their spouses or under-age children, to hold overseas accounts or other financial instruments.3 Putin wanted the money that members of his administration earned at home to stay at home. National economic development was the supreme goal.
Russian money, however, stayed abroad in huge quantities and was sheltered in the world’s financial capitals, especially London. In the 1990s Cyprus supplanted Crimea as a favourite spot for sunny vacations, but soon the entire northern shore of the Mediterranean was full of rich Russian visitors. In the winter months whole Alpine villages become Russian resorts. Many of the richest Russians send their children to British private schools. They buy up sumptuous residences in Western capitals. Back in Russia they purchase limousines, internal décor for their dachas, haute couture and domestic IT appliances from suppliers in the West. The wealthiest of them fly Western rock stars such as Elton John to Moscow or the Black Sea coast to entertain them on their birthdays. Materialism lies deep in the ethos of rulers who oscillate between flaunting their wealth and concealing it. In April 2015 Putin himself declared an income equivalent to less than $120,000 and ownership of two modest apartments as well as a shared garage.4 In April 2017 he claimed to have been paid a salary worth only $150,000 and to possess an apartment of 77 square metres, a plot of land covering 1,500 square metres, a garage and three cars, all of them of Russian manufacture.5 The number and whereabouts of Putin’s bank accounts still elude definitive scrutiny.
The leading liberal politician Boris Nemtsov exposed Putin’s penchant for luxury, though, by pointing to the twenty palaces, villas and other official residences at his disposal – ten times as many as the American president. Nine of the palaces, moreover, have been built since 2000. The Novo-Ogarëvo ‘dacha’ is two storeys high and has saunas, an aviary, swimming pool, helipad and stables.6 Nemtsov wrote also of the super-yacht Sirius and a Mercedes-Benz S600.7 Though he could not accuse Putin of holding these items as personal property, he argued that he had made other illicit gains by exploiting the advantage of high office and that ordinary Russians were picking up the bill. Putin sports expensive watches, and photographers with powerful lenses have zoomed in on his Lange & Söhne Tourbograph timepiece. He also possesses a Blancpain, a Bréguet Marine and a Patek Philippe. None of these are state property. His watches are so luxurious that Russian newspapers have run articles on them.8
Nemtsov held back from alleging anything that he had not witnessed or could not verify through documents, but Sergei Kolesnikov, who had worked with Putin in Leningrad in the 1990s, refused to stay quiet. On 21 December 2010 he wrote an open letter to President Medvedev alleging that Putin, at the time holding prime ministerial office, had been diverting state funds for the construction of a personal palace near the Black Sea at the tiny settlement of Praskoveevka in the Krasnodar region to the south-east of Crimea.9 How was it, Kolesnikov asked, that Putin could afford such a project on his salary? He also queried why gas pipes and electricity cables had been laid to the palace at state expense. For Kolesnikov, who continued his charges in the Russian national press after Medvedev refrained from replying to his letter, this was an additional sign of gross corruption at the highest level.10
Kolesnikov claimed to have been present at a meeting with Putin at his country house outside Moscow when the issue of the Black Sea palace was raised directly, and recounted that the Russian president had ordered deputy prime minister Igor Sechin to deal with it. Soon afterwards, according to Kolesnikov, Sechin called him in for a discussion of the details. According to Kolesnikov, he had many other meetings where Mr Putin’s instructions for fittings and furnishings were discussed with a senior FSB officer. More usually, he says, Putin passed on his preferences through his friend Nikolai Shamalov, Kolesnikov’s business partner, who, Kolesnikov maintained, ‘didn’t seek to justify it: he considered that whatever the tsar decided, it wasn’t our business to discuss it . . . There was a tsar – and there were slaves, who didn’t have their own opinion.’ All this remained secret until Kolesnikov, disgusted by the vast expenditure, broke off ties with Shamalov. ‘I hadn’t worked fifteen hours a day for ten years,’ he exclaimed, ‘to build a palace!’11
Kolesnikov added that the finances for all this had been channelled through Putin’s project to provide Russian hospitals with new equipment, to which several Russian business leaders, including the oil, nickel and aluminium magnate (and Chelsea Football Club owner) Roman Abramovich, had made sizeable donations. Kolesnikov had imported the medical equipment and his company obtained large discounts on the supplies. Millions of dollars, he contended, were acquired in this fashion, with much of the saved cash ending up in offshore companies – without the donors’ knowledge – for use in other projects. These allegedly included investments in some of Russia’s ailing industries such as shipbuilding – projects which Kolesnikov says he discussed directly with Putin. A great proportion of the funds, Kolesnikov recorded, was siphoned into ‘Project South’, the code name for the palace outside Praskoveevka.
Putin’s spokesman Dmitri Peskov was swift to reject the whole idea that Putin had any connection with the project.12 He said that Praskoveevka was owned by other unnamed individuals and that Kolesnikov was conducting an outrageous attack on Putin’s reputation – and in any case the property was to be reported in 2011 as having been resold to a reclusive billionaire, which bolstered Peskov’s argument.13
No further evidence came to light to prove or disprove Kolesnikov’s original charges, and Peskov treated the matter as closed. This did not stop the political opposition from continuing to condemn Putin for his friendships with several super-rich businessmen. One of them is Gennadi Timchenko, a Russian based in Finland since 1999,14 who has been close to Putin since his St Petersburg days and amassed a huge fortune through his oil export activity. Other old friends who have become extremely wealthy include Arkadi and Boris Rotenberg and Yuri Kovalchuk. Whereas Putin’s supporters saw nothing wrong for a president to have a cordial relationship with entrepreneurs, his enemies diagnosed an epidemic of corruption that enables cronies to gain privileged access to state-owned assets and make huge profits with no special skills or effort. The suggestion is that they transmit a portion of their winnings to Putin.15 Each side argued that the other lacked the necessary corroboration. But by 2014 the mutterings in the opposition media had embarrassed Putin into making public defence of his Petersburg chums. It was unfair to charge Timchenko, the Rotenberg brothers or Kovalchuk with illegality, he argued, because they did not make the bulk of their money in the crooked 1990s: each of them had earned his money legally.16
This only confirmed suspicions that, if they were not super-wealthy under Yeltsin, then it must have been Putin’s patronage that enabled their spectacular success. Putin’s fondness for the life of the moneyed elite was observed by US Ambassador Ronald Spogli, who in January 2009 wrote from Rome about the closeness between Italy’s prime minister Silvio Berlusconi and Putin. Berlusconi believed, according to Italian acquaintances, that Putin was drawn towards him as a fellow ‘tycoon’. Whenever they met, the two exchanged lavish gifts.17 (After falling from power and into disgrace, Berlusconi went on sending Putin birthday presents – in 2017 a duvet with a photoprint of them standing together.18) In 2003 Putin had taken his family on holiday to Berlusconi’s private Sardinian villa, where his host shielded him from Russian reporter Natalya Melikova’s questions about the rumours of an illicit affair. ‘I don’t hold with journalists who push their snotty nose into the private doings of other people,’ Berlusconi said, mimicking firing a rifle.19
Some estimates put Putin’s real assets at a staggering $40–50 billion, a figure that the Panama Papers published in 2016 appear to corroborate. But suspicion is not the same as proof – and Putin’s spokesman Dmitri Peskov dismissed the accusations as tittle-tattle. Journalists have been more effective in tracing the source of wealth for his daughters Yekaterina and Maria.20 As Moscow’s opposition press has noted, many sons and daughters of Kremlin leaders can be found in cushy positions in big business, and it seldom seems that their entrepreneurial qualifications have got them there.21 Their material success is typical of the new political elite that has featherbedded the next generation of their families. Yekaterina made the most of her father’s contacts and became head of the National Intellectual Development Foundation. She and her partner possess a large residence in Biarritz overlooking the beach.22 The current ruling group have joined a fledgling aristocracy without passing through a stage of mercantile endeavour, and expect to hand on their lifestyle and privileges to their offspring. They are the new upper class.
Navalny and his Fight against Corruption Foundation have also had greater success in chasing down the wealth accumulated by Putin’s entourage, possibly through contacts in the Kremlin motivated by disgust, personal ambition or factional calculation. Using drone technology, activists made videos of the sumptuous residences that Security Council Secretary Patrushev and Prime Minister Medvedev were building for themselves. Navalny published the images online, starting with Patrushev’s country palace. Pointing out that nothing in the FSB director’s career had involved commerce, he asked where Patrushev and his wife had got the money for such a towering edifice.23
The Fight against Corruption Foundation also published evidence about Medvedev’s multiple financial schemes. Navalny accused Medvedev of taking bribes and raising sweetheart loans from wealthy businessmen to buy his several palaces, yachts and vineyards around the country. To cap it all, volunteer investigators photographed what they called Medvedev’s ‘secret dacha’, lying close to the secluded settlement of Plës in Kostroma province near the banks of the River Volga. This was a fabulous mansion standing in grounds of two hundred acres on the old Milovka estate with a six-metre-high metal perimeter fence.24 Though Medvedev could keep snoopers off his land, the drone photography revealed a luxurious estate including three helicopter pads, some swimming pools and a boating pier.25 This time Navalny had gone too far. If he could finger Medvedev, he might be able to embarrass Putin. The authorities arrested twenty of the Foundation’s employees, and seized papers and cash from its offices.26
But the Fight against Corruption Foundation survived. In 2018 it acquired the latest quadcopter drone and flew it over deputy prime minister Igor Shuvalov’s palatial residence at Skolkovo outside Moscow. A wood screens the building from public view, and Shuvalov ensured that a new ‘elite’ apartment block was prohibited from having windows facing his property. As Navalny remarked, even Buckingham Palace and America’s White House were visible from nearby.27
But towards such attacks the Kremlin has a hide of leather. Former Railways Minister Vladimir Yakunin exemplifies the insouciance:
We created monsters during that era [of the 1990s]; and we fed them, too. They became fat and strong off Russia’s flesh and blood. When today I hear how some officials in the Putin administration are being criticized for corruption, for having improperly obtained two million rubles, I want desperately to remind them that tens of trillions were stolen during the 1990s: ‘appropriated’ by the so-called Democrats and Liberals, shapeshifters who lauded the state one moment, and the next were demanding that it should be reformed out of existence. They were the men who were lionized in the West because by making all the right noises about introducing a market economy they were perceived to be behaving correctly.28
Yakunin, one of the Russian super-rich, was ignoring the main point. Rather than face up to the corruption in public life since the turn of the millennium, he targeted the scandals of privatizations in the Yeltsin period, and the West’s approval of Yeltsin’s financial management – when the Western press at the time had been full of reports on fraudulent insider dealing.
Waste and graft abounded during the preparations for the Sochi Winter Olympics. Nemtsov and his colleague Leonid Martynyuk produced a booklet attacking Yakunin, champion of the project, for having amassed a fortune from it. Putin’s childhood friends Arkadi and Boris Rotenberg were also accused of benefiting inordinately. The booklet queried the very rationale for holding an international skiing and skating tournament in a subtropical climate: ‘There is no doubt that no one in Sochi plays ice hockey, goes skating or does figure skating. You can’t name a single biathlon competitor, skier or figure skater who comes from Sochi.’ Stadiums would predictably stand empty once the Olympics competitors departed. The permanent running costs of the infrastructure would remain huge. Harm to flora and fauna would be irreversible. Nemtsov and Martynyuk accused Putin of handing out juicy contracts to his friends and ignoring due procedure and the national interest.29 Martynyuk was briefly arrested, and Yakunin issued a writ for three million rubles alleging defamation of the Russian Railways company that he ran.30 Martynyuk fled to New York.
Putin loathes to be taken to task about high-level fraud. In November 2014 he shrugged off a finding by Transparency International, the global anti-bribery campaign organization, ranking Russia only 136th out of 170 countries in rooting out corruption, questioning whether the research was impartial. But he did not try to deny that Russia was riddled with corruption.31
On 15 June 2017 he grew tetchy with Danila Prilepa, a teenager who was in the TV audience for a live phone-in. Prilepa put up his hand: fraudulent ‘bureaucrats and ministers in the country’s government’, he remarked, ‘have not been a novelty for a long time’, and the occasional showy arrests failed to result in practical improvement. Putin, he went on, was ‘undermining the confidence of citizens’. The youngster’s boldness caught the president off guard: ‘Danila, you read out the question: did you prepare it earlier or did someone suggest it to you?’ Putin was all but accusing the youngster of bad faith. But Danila kept his nerve: ‘It was life itself that prepared me for this question.’ At that point Putin realized that he was making a poor impression. At last he squeezed out a smile and whinnied, ‘Well done, young fellow! [Molodets!]’ before taking the heat out of the occasion by describing the various steps the authorities were taking to pursue wrongdoers.32
Prilepa had pulled off his coup by disguising his purposes until the last moment. He knew how the show’s management did checks on audience members and telephone callers to prevent embarrassment for the president. He also was careful to avoid accusing Putin of personal corruption, only of being ineffective in rooting out corruption. He must have known that if he pressed any further his life could take a severe turn for the worse. But Prilepa was a hero for what he did.
He was not alone that day. The TV producers also failed to censor some of the text messages appearing at the bottom of the screen during Putin’s Q&A. A flavour of the impertinent questions is given here:
Putin, do you really think that the people fall for this circus with its planted questions?
When are you going to go off and retire? Alexander Chulkov, Perm.
Three terms of the presidency are enough!
How much longer are we going to hear: ‘There’s no money but be patient.’ Elena Valentinovna (pensioner).
The whole of Russia thinks you’ve sat on ‘the throne’ too long.33
One texter strayed into counter-revolutionary territory, ‘Why all this game of elections? A total waste of money and a thieving of the votes! Bring back the Tsar!’ Whether this was genuine exasperation or a satirical jibe is unclear, but it was definitely an affront to presidential dignity.
Most of the other text messages, however, showed no hostility to Putin. There was even a query as to why the summer had been so cold. Apart from the lapse with Danila Prilepa, Putin had reason to feel pleased with a polished performance.
He tries to maintain the same environment for his leading associates. When in 2016 a reporter asked whether he approved of Igor Sechin, Rosneft’s chairman and a former deputy prime minister, taking the Vedomosti newspaper to court for revealing the immense fortune he had acquired, including a residence of staggering opulence at Barvikha on Moscow’s outskirts, Putin replied that the press should respect personal privacy and changed the subject. The court, however, found that Sechin’s privacy had been invaded.34 The sole consolation for Vedomosti was that its reporters got off with a light fine and Sechin’s demand for damages was rejected.35
Putin pleaded for calm in discussing the verdict – a request authoritarian rulers often make when people are raising objections to authority – and implied his approval of its requirement for Vedomosti to destroy all copies of the offending edition and remove it from their website. For him, the important thing was for Kremlin leaders to be able to enjoy their assets safe from prying eyes.36 Throughout the Putin years, the leadership could assume that wealth gained in office would remain untouchable.
There have been a few scandals, as when in 2002 the Railways Minister Nikolai Aksënenko had to resign, accepting moral responsibility for the widespread fraud under his aegis. But Aksënenko was someone who had been in post in Yeltsin’s time – even considered as a candidate for the premiership. Putin was firing someone who did not belong to the new inner core. Even then, the Prosecutor-General refrained from taking Aksënenko to court: ministers caught committing some criminal offence faced nothing worse than being asked to quietly leave the building. By the time Aksënenko died in 2005 Putin had weeded out other ministers of undependable loyalty, and police and courts sat on their hands as his appointees continued to amass personal fortunes. When the judicial system did come into play, it was because the decision had been taken in the Kremlin. When the net was spread out to trawl for dishonest officials, it caught only the small fry. Procurator-General Yuri Chaika shamefully admitted that even when fines were imposed, they were rarely collected: only a thousandth was paid of what was owed.37
In 2012 the press got wind that Defence Minister Anatoli Serdyukov had been caught filching from the public purse, after a raid by Investigative Committee police on the apartment of Serdyukov’s mistress Yevgenia Vasileva, who was a director of the Oboronservis company that managed real estate properties for the Defence Ministry. Serdyukov was caught there in his dressing gown. Vasileva and others were charged with having siphoned off $100 million to bribe state officials and fund a lavish lifestyle for themselves. Although Serdyukov was fired from his post, he continued to benefit from his close connection with Putin’s St Petersburg friends: in late 2013 Putin revealed that Serdyukov would not face criminal charges. ‘Well, what of it?’ he added. ‘Are we now saying that he doesn’t have the right of employment anywhere?’38 Medvedev went further, stressing that Serdyukov had been ‘rather effective’ as Defence Minister. Serdyukov felt safe to ignore the Investigative Committee’s inquiries.39
But in November 2016 Oleg Feoktistov of the FSB sensationally organized the arrest of Minister of Economic Development Alexei Ulyukaev on a charge of bribery. Feoktistov led the Sixth Directorate responsible for inquiries into high-level corruption.40
The move would never have been made but for the brute insistence of Igor Sechin, Putin’s veteran associate who ran the Rosneft oil company. Sechin arranged with Feoktistov to set up a ‘sting’ at a meeting with Ulyukaev in Rosneft’s Moscow offices. Sechin handed over a package worth $2 million, it was alleged, which Ulyukaev greedily accepted as the agreed bribe in return for ministerial approval of Rosneft’s purchase of the huge Bashneft oil company. When Ulyukaev stepped outside for his waiting car, FSB officers took him into custody. Under interrogation, Ulyukaev protested his innocence, contending that he thought that Sechin had been handing him a present of wine or sausages.41 Kremlin politics are played for high stakes, and campaigns against corruption are often a masquerade for cliques in public life to mount covert attacks on each other42 – the ruling group fight among themselves like cats and dogs for influence. But Ulyukaev’s subordinates could not believe he would have been stupid enough to extort a bribe from one of his inveterate enemies.43
Sechin was a ferocious political beast who had already played it rough over the question of Bashneft’s ownership. In 2014 he had brought a money-laundering case against the billionaire Vladimir Yevtushenkov, whose real ‘crime’ was his refusal to sell Bashneft to Rosneft. Yevtushenkov was put under house arrest, and Bashneft was taken out of his control, even though the Moscow arbitration court found the criminal charges against him had no validity.44 Ulyukaev was Sechin’s next target. As Minister of Economic Development he had held up Rosneft’s acquisition of Bashneft, and Sechin was angry and impatient for resolution in his own favour.
Sechin’s motive was political as well as commercial. For years he had advocated state economic control, while Ulyukaev, a trained economist who had spent the late 1990s criticizing the stalling of reforms, proposed further liberalization.45 He had been one of the leading members of Russia’s Democratic Choice, a party led by the liberal former acting prime minister Yegor Gaidar. Sechin hated liberals and quasi-liberals; he also fought ruthlessly anyone who got in the way of his commercial interests. Everyone in the cabinet knew what he was like. But Ulyukaev was said to be no saint either. It was complained that his annual income of over $1 million vastly exceeded his governmental salary, and that he ran an illegal offshore bank account through other family members.46 But this formed no part of the court case, which was about Ulyukaev’s behaviour that day in the Rosneft offices: with his long experience of the wiles of Russian public life, was Ulyukaev likely to have grubbed a kickback from someone like Sechin?
Whatever the truth of the matter, Ulyukaev’s arrest left several other members of the uppermost elite feeling uncomfortable. If he could disappear into custody, who might be next? Evidently there were those who grumbled about the way things had been handled: when in August 2017 Feoktistov was fired, there was speculation that the Kremlin had slackened its determination to act against financial wrongdoing at the highest level.
But Ulyukaev still had to answer the accusation against him in open court. There had been nothing like this in Putin’s entire period in power: for the first time a high-ranking member of the Kremlin elite was being hauled before judges instead of being permitted to resign with minimal fuss. As the start of judicial proceedings approached, Putin apparently asked Sechin to arrange an ‘amicable’ settlement.47 Usually people did as the president bade them, but Sechin wanted total victory, and pressed for a judicial verdict. Having sent in his written testimony, however, he quixotically called for the wheels of justice to roll onward in his absence, replying to three successive summonses that his Rosneft duties demanded uninterrupted attention. It was as though it was beneath his dignity to submit to cross-examination – a grandiosity that came naturally to someone who considered himself exempt from the obligations of mere citizens.
The court case came to a sudden end on 15 December 2017 when Ulyukaev was found guilty and sentenced to nine years in a penal colony. The verdict seemed to come as a complete shock to him. Disquiet was voiced as to whether justice had been done. ‘Terrible, unjustified verdict,’48 tweeted ex-Finance Minister Kudrin. Although Kudrin did not mention Sechin by name, during Kudrin’s tenure at the Finance Ministry there had been no love lost between them. In 2014, three years after Kudrin had to leave office, Sechin still had it in for him, accusing ‘the Navalnys, Nemtsovs and Kudrins’ of acting as agents provocateurs against the interests of the Russian economy.49 Whereas Ulyukaev had paid a heavy price for being a vulnerable economic liberal, Kudrin remained the president’s friend and adviser, while Putin’s other great friend Sechin, had been permitted to devour the lesser prey, Ulyukaev. The affair had implications far outside the courtroom: in its war of attrition against the champions of private enterprise the state-power lobby had won another battle.
But for once Putin voiced criticism of Sechin.50 This was unusual, since he prefers to keep his disagreements in house. Sechin had thwarted his efforts to keep the settlement of disputes inside the ruling elite. The growing trend was for courts, not only in Moscow but also in London, to replace the violent spats that had marred the conduct of commercial business in Yeltsin’s time. Putin had also seen the Ulyukaev case as a chance to persuade the Russian people that the authorities were entrenching the rule of law. But Sechin’s antics had shown that at least one member of the inner elite could still treat due legal process with disdain and behave as if the rules were for others. Judicial progress in Russia had a long way to go.