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thirtysomething, or Fathers And Children

Putin (left) and Mikhail Fradkov chat while Sergei Ivanov gives a speech in 2006.

Putin (left) and Mikhail Fradkov chat while Sergei Ivanov gives a speech in 2006.

The scandal of the 11 accused Russian “illegals” who were purportedly unregistered agents of the Russian government in the United States (working for the Foreign Intelligence Service or SVR) has certainly generated a lot of chuckling and more than a few bewildered, if bemused, shrugs of the shoulder. No one can quite seem to figure out why the Russians would put so much effort into something that never got near any significant secrets.

The focus of attention has been on Anna Chapman, the sultry, 28-year-old businesswoman who has literally become the face of this scandal. Many observers have had a lot of fun mocking her activities, but it has now come out that her father was a KGB officer who worked under diplomatic cover in Africa as late as 2002. Chapman’s ex-husband has told journalists that he was surprised she was arrested for spying, that her father “controlled everything in her life,” and that she was “very secretive.”

But maybe they are right to focus on her, not because her pictures sell newspapers but because she is the newest addition to this alleged spy ring, which the FBI has reportedly been following for about a decade. She evidently began her spying career no later than 2002 and didn’t arrive on U.S. shores until the beginning of this year.

Maybe the general bewilderment about the alleged spy ring stems from the fact that many observers are looking at the latest case from the perspective of the Cold War. Certainly, sending people out to set up Facebook pages and network in the exciting world of venchur kapital and startupi doesn’t make a lot of sense if you continue looking at Russia as an ideologically motivated empire.

But if you remember that Russia today is probably a lot more accurately described as a clan-based kleptocracy, then maybe the “illegals” network makes more sense.

In a provocative piece on, analyst Dmitry Shusharin starts to flesh out the argument that what Russia’s ruling elite is doing now (and I’m not talking about the 25,000 promising young Russians who pay their taxes and now have Nashi’s stamp of approval) is working to legitimize the assets they have gained through massive corruption. And one way of doing that is to funnel state money into banks run by children of the elite, who can then invest it in projects that will be protected and nurtured by the state like, say, the Skolkovo Silicon Valley project.

Shusharin points to a recent study by the Center for Development of the Higher School of Economics (the study apparently is still in draft form and, considering its findings, might well not get any further than that). The researchers determined that at least one-third of the 1.2 trillion rubles ($38.4 billion) that the government spent on “anticrisis” measures in 2009 was wasted. A small part of that – 92 million rubles – was used to “boost demand” by ordering new automobiles for the state and by providing subsidies to Russian Railways. (Russian Railways, by the way, is headed by leading kleptocrat and Putin comrade Vladimir Yakunin. I have always wondered how much Moscow’s willingness to let NATO supply forces in Afghanistan by overland routes across Russia is lubricated by the possibility that the policy lines the pockets of Yakunin and his patron.)

Most of the seemingly wasted money – 360 billion rubles -- was handed out directly to various state-connected financial institutions, particularly Rosselkhozbank, Vneshekonombank, VTB (formerly, Vneshtorgbank), and Rosagrolizing.

Are these just banks? Well, Vneshekonombank is headed by Vladimir Putin. One of its deputy directors is 32-year-old Pyotr Fradkov, the son of former Prime Minister Mikhail Fradkov. Fradkov, an “economist” who worked in the Soviet Embassy in India in the 1970s, is now the head of the SVR, which purportedly ran the U.S. spy ring. Fradkov’s younger son, 28-year-old Pavel, graduated from the FSB’s academy and joined the Foreign Ministry, where he works in the department responsible for ties to the European Union and the G8.

(Vneshekonombank is also the bank that provided the financing for former KGB officer Aleksandr Lebedev to purchase the British daily “The Independent.” It has also been the target of intrepid muckraking minority shareholder Aleksei Navalny: if you speak Russian, watch this video alleging that the bank laundered money through a bogus leasing deal with China.)

Also among the state financial institutions to get “anticrisis” assistance was Rosselkhozbank (the fourth-largest bank in Russia). Rosselkhozbank’s CEO is 32-year-old Dmitry Patrushev, son of kleptocrat and Putin insider Nikolai Patrushev. Patrushev the elder is an “engineer” who joined the KGB in the 1970s and worked his way up to head the FSB from 1999 (preceded by Putin) until 2008. He is now head of the State Security Council.

Kleptocrat and Putin comrade Sergei Ivanov – who joined the KGB in the 1970s and is now first deputy prime minister – has two sons. Until earlier this year, 32-year-old Aleksandr Ivanov worked at Vneshekonombank. Little 29-year-old Sergei Sergeyevich Ivanov is deputy director of Gazprombank.

Sergei Matviyenko
, son of St. Petersburg Governor Valentina Matviyenko, is a vice president of a VTB subsidiary. The 27-year-old son of Rosatom head Sergei Kiriyenko, Vladimir Kiriyenko, is chairman of the board of directors of Sarovbiznesbank (Sarov is closed nuclear-research city in Nizhny Novgorod Oblast, but I’m sure that’s just a coincidence.)

And so on. For a more complete list of where some of Russia’s key thirtysomethings are today, see this article.

The point is that the nexus between corruption earnings, Russia’s security agencies, and Russian state and “private” business is pretty well-established. And it is moving abroad in a way that may or may not be alarming, depending on your point of view.

In my last Power Vertical post, I highlighted a recent report by the main Czech security organization on the activities of Russian intelligence operatives in business ventures in the Czech Republic. I ended that post with a quotation from the report that seems just as appropriate as an ending for this one:

"Such projects are per se quite legitimate and beneficial. However, given there are Russian intelligence officers under diplomatic cover preparing and coordinating the projects, one can question the Russians’ open and sincere approach to the cooperation.”

-- Robert Coalson

About This Blog

The Power Vertical
The Power Vertical

The Power Vertical is a blog written especially for Russia wonks and obsessive Kremlin watchers by Brian Whitmore. It offers Brian's personal take on emerging and developing trends in Russian politics, shining a spotlight on the high-stakes power struggles, machinations, and clashing interests that shape Kremlin policy today. Check out The Power Vertical Facebook page or


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