The front page of the New York Times today has an article about the impact of the sanctions imposed by the USA on Russia; it concludes that, for now, the oligarchs in Moscow are still behind Vladimir Putin. Given that the Times is supposed to be capable of delving deeply into the news and reporting it in details that other media miss, this important story conveys a remarkable lack of understanding of Russia and the situation there.
First, let's start with the obvious. There have yet to be any meaningful sanctions against Russia. President Obama announced the freezing of assets in America of about two dozen Russian officials and other "businessmen" closely related to the Putin government. Of course, being Obama and not wanting to squeeze too tightly, the president only announced the sanctions after telling the world for many days that they would be coming. As a result, the people whose assets were frozen were able to remove their money from American banks and sell assets that might be affected by the freeze. For example, Gennady Timchenko sold his 43% stake in a Geneva based commodities trading firm to his Swedish partner just a day before the sanctions were put into place.
Second and more important, the Times has the relationship between the so called oligarchs in Moscow and Vladimir Putin backwards. Putin does not exist because of their support; they exist because of his. Russia is not run by a bunch of rich men. Russia is run by the state security machine. When the Soviet Union dissolved, the old KGB did not disappear. Instead, it changed into Russia's equivalent organization. That organization grew stronger and in 1996, then Russian president Boris Yeltsin ordered the reorganization of it into what is now the FSB. Yeltsin's move was intended to counter the growing strength of the FSB, but it did not work. The head of the FSB was none other than Vladimir Putin, and a few years later Yeltsin appointed Putin as prime minister, a clear recognition of the power Putin held as head of the FSB. In the next election, Putin won the presidency of Russia and has held power ever since. Indeed, even when he was barred by the Russian constitution from continuing in office, he put his protégé Medvedev into the presidency and became prime minister again for four years while still remaining in control.
It is important to understand that Putin owes his strength in Russia to the FSB. It controls all sorts of aspects of life in that country. There is no attempt at governmental control of the security services. Quite the contrary the control is exercised by the security services over the government. The FSB also exercises major control over all sorts of economic activity. These rich men who the Times calls oligarchs actually are people who have been rewarded by Putin with vast wealth. It is, however, wealth that Putin can take away in a moment. There is no chance that they would even consider turning on him.
Since I know that there will be those readers who not be willing to accept the truth of today's Russia, it is worth giving a few examples. Consider the story of William Browder head of Hermitage Capital, the largest Western investor in Russia as of four years ago. His hedge fund had enormous holdings in that country (over 4 billion dollars)which were in the form of investments in all sorts of Russian businesses. When he began to ask to see a return on his investments in the form of dividends or interest, he was deported from the country and barred from re-entry without explanation. His Russian lawyer tried to pursue the matter, but was arrested and eventually released only to be murdered within days of that release. Or consider the fate of Sergei Polonsky, a Russian construction magnate who was one of the men that the Times would consider an oligarch. Last year, Polonsky ran afoul of Putin and quickly found himself fleeing the country just ahead of the FSB. He ended up in jail in Cambodia which ultimately denied his extradition to Russia. The rapid fall from billionaire to "guest" in a foreign prison is not one which is lost on the other so called oligarchs.
The only way that Putin is likely to lose power is if the Russian people as a whole withdraw their support or if the FSB decides to shift its allegiance. Right now there is nothing whatsoever that indicates either cause is likely. Vladimir Putin is here to stay.
First, let's start with the obvious. There have yet to be any meaningful sanctions against Russia. President Obama announced the freezing of assets in America of about two dozen Russian officials and other "businessmen" closely related to the Putin government. Of course, being Obama and not wanting to squeeze too tightly, the president only announced the sanctions after telling the world for many days that they would be coming. As a result, the people whose assets were frozen were able to remove their money from American banks and sell assets that might be affected by the freeze. For example, Gennady Timchenko sold his 43% stake in a Geneva based commodities trading firm to his Swedish partner just a day before the sanctions were put into place.
Second and more important, the Times has the relationship between the so called oligarchs in Moscow and Vladimir Putin backwards. Putin does not exist because of their support; they exist because of his. Russia is not run by a bunch of rich men. Russia is run by the state security machine. When the Soviet Union dissolved, the old KGB did not disappear. Instead, it changed into Russia's equivalent organization. That organization grew stronger and in 1996, then Russian president Boris Yeltsin ordered the reorganization of it into what is now the FSB. Yeltsin's move was intended to counter the growing strength of the FSB, but it did not work. The head of the FSB was none other than Vladimir Putin, and a few years later Yeltsin appointed Putin as prime minister, a clear recognition of the power Putin held as head of the FSB. In the next election, Putin won the presidency of Russia and has held power ever since. Indeed, even when he was barred by the Russian constitution from continuing in office, he put his protégé Medvedev into the presidency and became prime minister again for four years while still remaining in control.
It is important to understand that Putin owes his strength in Russia to the FSB. It controls all sorts of aspects of life in that country. There is no attempt at governmental control of the security services. Quite the contrary the control is exercised by the security services over the government. The FSB also exercises major control over all sorts of economic activity. These rich men who the Times calls oligarchs actually are people who have been rewarded by Putin with vast wealth. It is, however, wealth that Putin can take away in a moment. There is no chance that they would even consider turning on him.
Since I know that there will be those readers who not be willing to accept the truth of today's Russia, it is worth giving a few examples. Consider the story of William Browder head of Hermitage Capital, the largest Western investor in Russia as of four years ago. His hedge fund had enormous holdings in that country (over 4 billion dollars)which were in the form of investments in all sorts of Russian businesses. When he began to ask to see a return on his investments in the form of dividends or interest, he was deported from the country and barred from re-entry without explanation. His Russian lawyer tried to pursue the matter, but was arrested and eventually released only to be murdered within days of that release. Or consider the fate of Sergei Polonsky, a Russian construction magnate who was one of the men that the Times would consider an oligarch. Last year, Polonsky ran afoul of Putin and quickly found himself fleeing the country just ahead of the FSB. He ended up in jail in Cambodia which ultimately denied his extradition to Russia. The rapid fall from billionaire to "guest" in a foreign prison is not one which is lost on the other so called oligarchs.
The only way that Putin is likely to lose power is if the Russian people as a whole withdraw their support or if the FSB decides to shift its allegiance. Right now there is nothing whatsoever that indicates either cause is likely. Vladimir Putin is here to stay.
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