Wednesday, October 01, 2014


The Power Vertical

License To Steal -- A Bug Or A Feature?

President Vladimir Putin meeting with supporters in Moscow on December 10.
President Vladimir Putin meeting with supporters in Moscow on December 10.
In a meeting with supporters on December 10, President Vladimir Putin insisted the Kremlin's anticorruption campaign was the real deal and not just for show. Arrests would be made, he added, and punishment for crooked officials was "inevitable."

Should we believe him? There are, of course, plenty of reasons for skepticism. First among these is the fact that corruption is not a bug in Putin's operating system but a feature.

And an essential feature at that.

First and foremost, it's a feature that holds together the power vertical. As the Moscow Carnegie Center wrote in a report released last week, the unwritten contract among the ruling class can be summarized as follows: Officials pledge "fealty toward the Kremlin in exchange for a license to grow super-rich."

Put another way, loyalty buys you a license to steal. Take away that license and what else is there to compel loyalty?

The corruption feature also provides the Kremlin with an invaluable tool to control potentially wayward officials. If everybody is dirty to some degree, then everybody is vulnerable to a veiled threat -- or, if necessary, a targeted prosecution -- if they step out of line politically.
 
A true anticorruption campaign, Gazeta.ru wrote in a recent editorial, "could follow an unpredictable trajectory and overtake practically any member of the current or former political elite."

That, of course, would change the elite contract dramatically and make it increasingly difficult for Putin to remain above the fray.

"The campaign against corruption -- with or without high-profile resignations and imprisonments of high officials -- has enormous costs for the regime, despite all the popularity of anticorruption rhetoric among the masses," Gazeta.ru opined.

"After all, all these outrages did not simply take place before Putin's eyes but were carried out by his subordinates within the framework of the system created by him."

And yet despite this, something has changed. The rules of the game are suddenly different.

In a recent column in "Novaya gazeta," Yulia Latynina illustrated how different by contrasting two corruption cases that broke out back in 2007 to the situation today. (You can read the abridged English-language version from "The Moscow Times" here.)

The first involved Semyon Vainshtok, who resigned as head of Transneft after the Audit Chamber compiled a dossier on his shadowy business dealings. The report was, of course, made to order. The siloviki, the security service veterans surrounding Putin, had long wanted to remove Vainshtok and replace him with their preferred candidate, FSB General Nikolai Tokarev. But Putin insisted that this be done quietly, with no public scandal.

And it was. The Audit Chamber report wasn't made public at the time (although it was later leaked to anticorruption blogger Aleksei Navalny). And Putin rewarded Vainshtok for going quietly, naming him head of Olimpstroi, the state corporation in charge of building Olympic venues for the 2014 Winter Games in Sochi.

First the stick, then the carrot. And the license to steal remained intact.

"Tokarev didn't go public because Putin sent a clear signal: I decide everything and anybody who goes public will lose and will be smacked down immediately," Latynina wrote.

Another 2007 case, one that resulted in the so-called siloviki war, illustrates the costs of breaking this code of "omerta." When Viktor Cherkesov, a KGB veteran and longtime Putin ally who then headed the Federal Antinarcotics Service, went public with a "kompromat war" against other siloviki -- publishing a scandalous article in the daily "Kommersant" -- it eventually cost him his high-profile job (although he later resurfaced as head of a state corporation).

In contrast to five years ago, a whole slew of corruption scandals has gone very public and has gotten very nasty in the past few months -- apparently with Putin's blessing.

The most spectacular of these have been the sacking of Anatoly Serdyukov as defense minister over defense-procurement shenanigans, the firing of Yury Urlichich as head of the Glonass Global Satellite Navigation system over embezzlement allegations, and the documentary on state-run Channel One television about financial machinations involving former Agriculture Minister Yelena Skrynnik.

"The rules of the game have not just changed quickly, but with blinding speed," Latynina wrote.

"Five years ago, each of these scandals would have been resolved behind closed doors, just as the Transneft affair was. Putin would have been the sole arbiter and no compromising information would have been released to the public. This is a major change in Putin's behavior and that of his elite."

So why is Putin changing the rules? Why would he give up both a carrot and stick to control the elite? Why would he unleash potentially debilitating chaos among his subordinates? And why would he potentially put himself at risk?

One reason could be that there simply isn't enough money for servicing the elite's corruption habit to continue to be, for all intents and purposes, a line item in the budget.

And as the Moscow Carnegie Center pointed out in its report, this puts the entire Putin system in a bind:

Beneath the surface, the socioeconomic system of rent-based capitalism is developing cracks. World oil prices are still reasonably high but stagnant and possibly falling, putting the Russian economy at risk. With the economic pie shrinking, there is no more property to redistribute among new members of the elite. The government’s massive social obligations create economic tensions if they are honored and threaten a mass popular backlash if they cannot be met. The Kremlin’s attempt to reconsolidate the elite on the basis of “patriotic self-limitation” changes the rules of the game for those on whom the 'vertical of power' -- the structural hallmark of the Putin presidency -- rests.
 
In other words, economics dictates that the rules of the game for the elite must change. But the politics of the Putin system dictate that they cannot change.

-- Brian Whitmore

Tags: Vladimir Putin,Russia corruption

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Comment Sorting
Comments
     
by: Robert from: Prague
December 12, 2012 14:41
It seems to me that a good sign of a real anticorruption campaign would be if corrupt officials went to prison and the money they stole was returned to the state. What you are describing here is just a bunch of musical chairs. What kind of punishment is it to go from heading Transneft to heading Olimpstroi? Until that happens, I think all these incidents are a lot more about political infighting than they are about corruption.
In Response

by: Brian Whitmore from: Prague
December 13, 2012 12:44
Nobody, least of all me, is calling this a "real" anticorruption campaign. The point of the post is that since corruption in Russia is a feature, and not a bug, then a real anticorruption campaign is next to impossible without crashing the system.

As for the infighting aspect, I addressed that aspect here: http://www.rferl.org/content/a-kompromat-war-of-all-against-all/24785193.html

And here:http://www.rferl.org/content/podcast-anti-graft-campaign-clan-war-chaos/24786086.html

by: Ray F. from: Lawrence, KS
December 12, 2012 19:41
Nice article, although I have a different take on what has prompted this corruption-fight madness. Putin is smart and he can read the banners at the protests and listen to the chatter on the social media. Average Russians are increasingly sick of the rampant corruption, and hoping to take some of the wind out of the opposition’s sails, Putin has launched a campaign to prove that he’s serious about cleaning up the system. Who knows, maybe by targeting some of the more flagrant cases, other bureaucrats will get the message and become less greedy. Legal consciousness could be an evolutionary process, and as modern China appears to indicate, may not be dependent upon democratic elections.
In Response

by: Robert E. from: Arcata, CA
December 13, 2012 20:18
Ray F is on the right track. It is surprising to me that so called "analysts" have not connected the dots of the creation of a "superlative organ" to the FSB, SVR and GRU last year and the serious anticorruption campaign it is now engaged in. The Investigative Committee is only starting to clean house. Using the same forensic accounting procedures it runs on political opposition characters (looking for a money trail back to Virginia), they are taking on large scale corruption. The reason is that corruption has now become an actual existential threat to the State. Wake up, boys. You seem to be asleep at the switch !
In Response

by: Andras Toth-Czifra from: Brussels
December 14, 2012 13:17
I don't think that the two cannot be true at the same time. Putin clearly sees possibility of redefining his image through the fight against corruption. The problem is that he is not the only one to have the keys to the drawers any more. I called this the "kompromat bubble" a week ago in my detailed comments following a line of arguments similar to Brian's:

http://www.noyardstick.com/?p=140

by: Ben
December 17, 2012 20:37
Universal corruption bla bla : Latynina,the royal pirate disturb the Israeli Vainschtein dust as Frenkel`s in the past.And grave "developing cracks" from Carnegie....As always.

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The Power Vertical is a blog written especially for Russia wonks and obsessive Kremlin watchers by Brian Whitmore. It covers 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