Friday, October 24, 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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17:49

EVENING NEWS ROUNDUP

From RFE/RL's News Desk:

PUTIN ACCUSES UNITED STATES OF 'UNILATERAL DIKTAT'

Russian President Vladimir Putin has accused the United States of escalating conflicts around the world by imposing what he called a "unilateral diktat."

Putin made the remarks in a combative speech to political experts at the Valdai International Discussion Club, in Russia's Black Sea resort of Sochi.

Putin said the United States has been "fighting against the results of its own policy" in Iraq, Libya and Syria.

He said risks of serious conflicts involving major countries have risen, as well as risks of arms treaties being violated.

He also dismissed international sanctions over Russia's actions in Ukraine as a "mistake," saying they aimed at pushing Russia into isolation and would end up "hurting everyone."

We did not start this," he added, referring to rising tensions between Russia and the West.

(Based on reporting by Reuters, AP, Interfax, TASS)

MERKEL URGES PUTIN TO SOLVE UKRAINIAN GAS DISPUTE

German Chancellor Angela Merkel has urged Russian President Vladimir Putin in a telephone call to push for a quick resolution of the ongoing gas dispute with Ukraine as winter looms.

The call by Merkel to Putin on October 24 comes as representatives of the EU, Russia, and Ukraine are due to meet again next week in EU brokered talks aimed at solving the gas dispute between Kyiv and Moscow.

Merkel also underlined that upcoming elections in areas of eastern Ukraine controlled by Russian-backed separatists must respect Ukrainian national law.

Pro-Russian insurgent leaders are boycotting a parliamentary snap poll on October 26 in Ukraine and are holding their own election in the Lugansk and Donetsk regions, home to nearly three million people, on the same day instead.

(Based on reporting by AFP and Reuters)

UNHCR SAYS MORE THAN 800,000 DISPLACED IN UKRAINE CONFLICT

By RFE/RL

The United Nations says the conflict in Ukraine has forced more than 800,000 people from their homes.

Around 95 percent of displaced people come from eastern Ukraine, where government troops have been battling pro-Russian separatists.

UNHCR, the UN refugee agency, told a briefing in Geneva that an estimated 430,000 people were currently displaced within Ukraine -- 170,000 more than at the start of September.

It said at least 387,000 other people have asked for refugee status, temporary asylum, or other forms of residency permits in Russia.

Another 6,600 have applied for asylum in the European Union and 581 in Belarus.

The agency said it was "racing to help some of the most vulnerable displaced people" as winter approaches.

It also said the number of displaced people is expected to rise further due to ongoing fighting in eastern Ukraine.

THREE ALLEGED MILITANTS KILLED IN NORTH CAUCASUS

Three alleged militants have been killed by security forces in Russia's volatile North Caucasus region.

Russia's National Antiterrorism Committee says that two suspects were killed in the village of Charoda in Daghestan on October 24 after they refused to leave an apartment and opened fire at police and security troops.

One police officer was wounded.

Also on October 24, police in another North Caucasus region, Kabardino-Balkaria, killed a suspected militant after he refused to identify himself, threw a grenade towards police, and opened fire with a pistol.

A police officer was wounded in that incident.

Violence is common in Russia's North Caucasus region, which includes the restive republics of Daghestan, Kabardino-Balkaria, Ingushetia, and Chechnya.

Islamic militants and criminal groups routinely target Russian military personnel and local officials.

(Based on reporting by Interfax and TASS)

MOSCOW LAWYER IN HIGH PROFILE ORGANIZED CRIME CASE KILLED

A lawyer, who represented an alleged victim of the notorious Orekhovo criminal group in Moscow, has been assassinated.

Police in the Russian capital say that Vitaly Moiseyev and his wife were found dead with gunshot wounds in a car near Moscow on October 24.

Moiseyev was representing Sergei Zhurba, an alleged victim of the Orekhovo gang and a key witness in a case against one of the gang's leaders Dmitry Belkin.

Belkin was sentenced to life in prison on October 23 for multiple murders and extortion.

Last month, another of Zhurba's lawyers, Tatyana Akimtseva (eds: a woman), was shot dead by unknown individuals.

The Orekhovo group was one of the most powerful crime gangs of the Moscow region and in Russia in the 1990s. Its members are believed to be responsible for dozens of murders.

(Based on reporting by TASS and Interfax)

17:27

LITTLE GREES VOTERS, ANYONE?

17:26

SPY VS. SPY

08:29

MORNING NEWS ROUNDUP

From RFE/RL's News Desk:

UKRAINIAN PM WARNS OF RUSSIAN DESTABILIZATION OF ELECTIONS

Ukrainian Prime Minister Arseniy Yatsenyuk is warning that Russia could attempt to disrupt Ukraine's parliamentary elections scheduled for October 26.

Yatsenyuk told a meeting of top security officials and election monitors on October 23 that "It is absolutely clear that attempts to destabilize the situation will continue and will be provoked by Russia."

Yatsenyuk said "we are in a state of Russian aggression and we have before us one more challenge -- to hold parliamentary elections."

The prime minister said Ukraine needs the "full mobilization of the entire law-enforcement system to prevent violations of the election process and attempts at terrorist acts during the elections."

Interior Minister Arsen Avakov said authorities have ordered some 82,000 policemen on duty for election day.

He said 4,000 members of a special reaction force would be among those maintaining order during polling hours and would be concentrated in "those precincts where there is a risk of some terrorist acts or aggressive actions by some...candidates."

The warning by Yatsenyuk comes on the heels of three violent attacks on parliamentary candidates in the past week.

The latest, against Volodymyr Borysenko, a member of Yatsenyuk's People's Front Party, occurred on October 20 when Borysenko was shot at and had an explosive thrown at him.

He allegedly survived the attack only because he was wearing body armor due to numerous death threats he had recently received.

Elections to the Verkhovna Rada, the parliament, will be held despite continued fighting in the eastern part of the country between Ukrainian government forces and pro-Russian separatists.

Voting will not take place in 14 districts of eastern Ukraine currently under the control of the separatists.

Those separatist-held areas -- in the Donetsk and Luhansk regions -- are planning on holding their own elections in November.

Additionally, Russia's illegal annexation of Crimea in March means the loss of 12 seats from the 450-seat parliament.

Polls show President Petro Poroshenko's party leading with some 30 percent of respondents saying they would cast their vote for the Petro Poroshenko Bloc.

It that percentage holds on election day it would mean Poroshenko's bloc would have to form a coalition government, likely with nationalist groups who oppose conducting peace talks over fighting in the east.

(Based on reporting by Reuters and Interfax)

RUSSIA DENIES ESTONIAN AIRSPACE VIOLATIONS

By RFE/RL

Moscow has denied claims of an incursion by a Russian military plane into Estonia's airspace.

A Russian Defense Ministry spokesman told Interfax news agency on October 23 that the Ilyushin-20 took off from Khrabrovo airfield in the Russian enclave of Kaliningrad on October 21.

The spokesman said the reconnaissance plane flew "over neutral waters of the Baltic Sea" while on a training flight.

On October 22, Estonia’s Foreign Ministry summoned the Russian ambassador in Tallinn, Yury Merzlakov, after the Estonian military said the Russian plane had entered its air space.

In a statement, NATO said the Ilyushin-20 was first intercepted by Danish jets when it approached Denmark, before flying toward non-NATO member Sweden.

Intercepted by Swedish planes, the alliance said the Ilyushin entered Estonian airspace for “less than one minute” and was escorted out by Portuguese jets.

NATO has stepped up its Baltic air patrols and Moscow has been accused of several recent border violations in the region amid heightened tensions between Russia and the West over the Ukraine conflict.

Last month, Estonia accused Russia of abducting one of its police officers on the border.

Russia claims Eston Kohver was seized inside Russia on September 5, while Estonian officials say he was captured at gunpoint in Estonia near the border and taken to Russia.

The European Union and United States have called for the immediate release of the Estonian security official, who is facing espionage charges in Russia.

Meanwhile, the Swedish Navy has been searching for a suspected submarine sighted six days ago some 50 kilometers from the capital, Stockholm, although it said on October 22 it was pulling back some of its ships.

Swedish officials have not linked any particular country to the suspected intrusion and Moscow has denied involvement.

(With reporting by Interfax, TASS, and the BBC)

RUSSIAN COURT POSTPONES RULING ON OIL FIRM BASHNEFT

A Moscow court postponed to next week a ruling on a move to take control of Bashneft, an oil company from tycoon Vladimir Yevtushenkov.

The judge said on October 23 that the next hearing will take place on October 30 after the prosecution requested more time to prepare its case.

Prosecutors filed the suit in September to regain state ownership of Bashneft, citing alleged violations in the privatization and subsequent sale of the company to AFK Sistema investment group.

Yevtushenkov, the main shareholder of the conglomerate, is under house arrest on suspicion of money laundering during the firm's acquisition in 2009.

Yevtushenkov, 66, was arrested on September 16.

He is ranked Russia's 15th richest man by U.S. magazine Forbes, with an estimated fortune of $9 billion.

(Based on reporting by Reuters and TASS)

11:11 October 23, 2014

THERE IS NO RUSSIA WITHOUT PUTIN?

According to a report in the pro-Kremlin daily "Izvestia," deputy Kremlin chief of staff Vyacheslav Volodin told a meeting of the Valdai Discussion Club in Sochi that Western politicians "do not understand the essence of Russia."

"Volodin stated the key thesis about the current state of our country: As long as there is Putin there is Russia. If there is no Putin, there is no Russia," Konstantin Kostin, head of the Foundation for the Development of Civil Society, told "Izvestia."

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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