Russia Incorporated

...In this way, both economic and political power was concentrated in a single, ruling group...

...But if this battle continues, you can be sure they will start shooting at each other...

...In fact, the “power bloc” is not the only faction in the Russian leadership...

...Posters prepared in advance used a Soviet- era caricature depicting the United States as a bloated capitalist, referred to opposition fi gures as “traitors,” and said the United States wants to return Russia to the oligarchic rule of the 1990s when the country sold its oil and gas for virtually nothing...

...Either way, it is a very uncertain future that faces Russia— with the overwhelming endorsement last week of an indifferent electorate...

...Indeed, Mikhail Khodorkovsky, who as head of the Yukos Oil Company fi nanced opposition political parties, is now serving an eight-year sentence in a labor camp...

...The reason for the aggressiveness is the fragility of the system put in place by Putin as he nears the end of his second term: The next presidential election is scheduled for March 2. Buoyed by an unprecedented windfall from high energy prices, the regime appears strong, but internally it is weak, and those at the top of the Russian political pyramid know this...

...The report of a Hudson Institute study group on U.S.-Russian relations that he directed is available at www.Hudson.org...

...He said the organization encourages businesses to fulfi ll their “social responsibility” by donating money for the needs of the “power ministries,” including, besides the FSB and SVR, the Defense Ministry, the Emergency Situations Ministry, and the Interior Ministry...

...In other words, these companies gave the Russian Oil Group part of their markets...

...where they “partied on a grand scale,” but the others at the party said the two were fi ne when they left them...

...Last year, [Gunvor’s] turnover came to $40 billion and its profi ts $8 billion...

...Putin’s remarks were echoed in the preparations made by the pro-Kremlin youth group, Nashi, to deal with any protests that might take place after the expected United Russia victory...

...On December 2, United Russia, the party that listed President Vladimir Putin as its candidate, received 64 percent of the vote...

...It has long been believed that Russian offi cials want to use the Stabilization Fund for their personal investment projects...

...Among the cofounders of the Tri Kita stores were fi rms belonging to the father of Yuri Zaostrovtsev, a deputy director of the FSB...

...How carefully is a matter of doubt because Nashi, like other pro-Kremlin youth groups, is reported to have a group of fi ghters who have been trained on the bases of the OMON riot police (motto: “We know no mercy and do not ask for any...

...We nearly had a fi ght between two security agencies,” he said...

...There is also a “liberal” faction whose leader is Medvedev...

...If it becomes clear that Putin really intends to step down, a massive and seriously destabilizing fi ght over assets on the part of government offi cials may ensue...

...Petersburg...

...If he stays on, he will very likely become a prisoner of his offi ce, a president for life who cannot give up power without creating danger for himself...

...In his speech at Moscow’s Luzhniki Stadium on November 21, Putin referred repeatedly to internal “enemies,” accusing them of being “scavenging jackals” seeking funds from foreign embassies to destabilize Russia...

...He also spoke about plans to create a national debtcollecting agency using veterans of the Interior Ministry capable of working with minority shareholders to force out owners “who are not loyal to the government...

...The St...

...He also stated that it was impermissible for “warriors to turn into merchants,” an apparent reference to the commercial activities of high ranking offi cers of the FSB...

...Without civil society or reliable legal institutions, however, the confl icts between these groups and the factions within them can only be resolved by the president himself...

...He controls 37 percent of the shares of Surgutneftegaz [Russia’s fourth-largest oil producer] with the market value [of Putin’s putative stake] coming to $20 billion...

...Petersburgbased website Fontanka.ru quoted the police as saying that the two had been at a city caf...

...The two liberal parties, Yabloko and the Union of Right Forces, received 1 percent each, far below the 7 percent threshold needed to enter the new parliament...

...The elections were marked by grave abuses...

...After Cherkesov’s article appeared in Kommersant, Putin publicly criticized him, saying it is “wrong to bring these kinds of problems to the media...

...Finally, Putin could take the job of prime minister and use his majority in parliament to pass laws that would strengthen that offi ce...

...At the same time, there are signs that the economic good times in Russia may not last...

...Shvartsman described plans to develop a state corporation called “Social Investments” that would realize the concept of “velvet re-privatization” on behalf of Rosoboronexport, Russia’s state arms exporter...

...Bulbov was accused of bribery and illegal wiretapping...

...Petersburg ditch of the bodies of Konstantin Druzenko, an offi cer with the Federal Narcotics Control Service (FSKN), and Sergei Lomako, a former colleague, apparently victims of poisoning...

...Shvartsman said that his group’s assets, which were valued at $3.2 billion, included the Russian Oil Group, the Russian Diamond Group, and Russian Instrumental Technologies...

...For half the country’s families, expenditures for food will soon exceed their entire budget...

...The presidential administration is in charge of the export of seven million barrels of crude oil and oil products a day...

...One possibility is to use his majority in parliament to amend the constitution to allow a third consecutive term and then run again for the presidency...

...More recently, however, the organization began offering partnerships to businesses...

...In fact, he has considerable reason to want to hand over the leadership...

...The suppression of the revolt in Chechnya has led to new rebellions in Ingushetiya and Dagestan...

...This would evoke a negative response internationally, but despite this and Putin’s protestations that someone else will be in the Kremlin next year, it remains possible...

...For the fi rst time since the fall of the Soviet Union, the Russian parliament will take offi ce without a single deputy to represent the country’s liberal opposition...

...It is all part of a larger power struggle...

...Instead of seizing enterprises, it involved using administrative instruments, including accusations of nonpayment of taxes, to drive down the market price...

...Yet the following day, Putin created a new state committee to fi ght illegal drugs and named Cherkesov as its chief...

...An employee of the Toronto Globe and Mail who attended a meeting of Nashi posing as a member said that the group was told to occupy selected areas of Moscow where it was believed that antiPutin demonstrators would try to protest...

...Another possibility is that Putin will endorse a lackluster successor such as Viktor Zubkov, the present prime minister, who will then resign after a few months for health reasons, forcing new elections in which Putin could compete legally...

...In Chechnya, offi cial fi gures indicated that 99 percent of those eligible voted for United Russia, a claim that was greeted with amazement on the streets of Grozny...

...This time, the agents were able to keep their cool, and there was no gunfi ght...

...There was widespread ballot stuffi ng and multiple voting...

...Another 15 percent of the vote went to two Kremlin satellite parties, the Liberal Democratic party and Just Russia...

...Moreover, he controls 4.5 percent of the shares of Gazprom [Russia’s natural gas monopoly...

...Bosses all over the country threatened to fi re workers who did not vote for United Russia...

...Those who want to confront us,” Putin said, “need a weak and ill state...

...A former security service offi cer familiar with the circumstances surrounding the arrest of Bulbov and his fellow FSKN offi cers described the incident to the Moscow Times...

...First Deputy Premier Dmitri Medvedev, for example, is chairman of the board of Gazprom...

...Never get into a dialogue with an instigator...

...For example, the Russian Oil Group is the result of alliances with [the oil companies] Rosneft, TNK, and Lukoil...

...Putin is also a big businessman...

...This guaranteed it 315 seats in the 450-seat State Duma, more than enough to pass any legislation or amend the constitution...

...On October 9, the head of the FSKN, Viktor Cherkesov, wrote an article in Kommersant stating that the arrests were evidence of “infi ghting among the special services” and warning, “There can be no winners in this war...

...As a fi nal method, you can beat him...

...Putin has indicated that he intends to continue to play an important political role in Russia after the end of his second term, but no one knows what that role will be...

...It is estimated that those around Putin control companies accounting for 80 percent of the capitalization of the Russian stock market...

...Igor Sechin, deputy head of the Kremlin administration, is chairman of the Rosneft oil company...

...The apparent poisoning came against the backdrop of a confl ict between the FSB and the FSKN that became public after the arrest, on October 2, of General Alexander Bulbov, the head of the FSKN’s operational department, and several other FSKN offi cers...

...In an open letter, Bulbov charged that three FSB generals, whom he identifi ed as Kupryazhkin, Feoktistov, and Kharitonov, were behind his arrest and that his problems with the FSB started a year ago when he began investigating the Tri Kita case...

...An FSKN spokesman confi rmed that the two men were poisoned and said the circumstances were “strange...

...In the company Gunvor, which sells oil, Putin has [a] 50 percent [stake] through his representative Gennady Timchenko...

...The party for us is the power bloc [the faction in the leadership based on the power ministries], which is led by Igor Ivanovich Sechin...

...Under those circumstances, the possibility for violence is real...

...According to Stanislav Belkovsky, the head of the National Strategy Institute, this means that for families of moderate means—who make up half of the country’s population— expenditures for food will soon exceed their entire budget...

...But try to do it carefully...

...The illiberal and anti-Western mood in the country was refl ected in the run up to the elections...

...Some of the mystery about Russia’s future may be cleared up on December 17 when United Russia meets to nominate its candidate for president...

...Everywhere, high-ranking offi cials have been put on the boards of state-owned companies creating massive confl icts of interest...

...They want to have a divided society so they can carry on their deeds behind its back...

...And it would be diffi cult to stop...

...Thus, government offi cials besides Cherkesov have started to advance their claims publicly...

...Russia Incorporated Why Vladimir Putin dare not give up his position as capo BY DAVID SATTER Moscow Russia’s parliamentary elections last week eerily imitated the one-candidate elections of the Soviet period—back when the popular attitude was exemplifi ed by the remark of a worker who, holding a poster of Leonid Brezhnev, told a foreign correspondent, “Whatever they give me, I hold...

...Given all this, there are many people in the leadership who are determined to keep Putin in power no matter what...

...David Satter is affi liated with the Hoover Institution, the Hudson Institute, and the Johns Hopkins University School of Advanced International Studies...

...Yuri Shchekochikhin, a deputy in the State Duma and deputy editor of Novaya Gazeta who had been investigating the Tri Kita affair, died in July 2003, another victim of an apparent poisoning...

...He described this as a market form of absorbing strategic assets in regions that are dependent on state subsidies...

...When he was asked who initiated the creation of the agency, Shvartsman said, “The party...

...Nonetheless, even with the abuses taken into account, the illiberal vote was overwhelming...

...The system that Putin holds together, however, may not be able to withstand his voluntary surrender of offi ce...

...The internal confl icts of this group, however, were not visible to the general public...

...On November 30, however, the newspaper Kommersant published an interview with Oleg Shvartsman, the head of the Finansgroup, a fi nancial industrial group with ties to Sechin, in which he described how the Putin system worked...

...He and one of the other arrested FSKN offi cers had been leading the agency’s investigation of Tri Kita (“Three Whales”), a Moscow furniture store accused of running a smuggling operation that evaded millions of dollars in duties on goods imported from China...

...The price of food is increasing sharply and is expected to rise by 50 to 70 percent in the spring...

...The fi rst sign of how serious the confl icts between Kremlin factions may become was the discovery on October 27 in a St...

...The group worked under the general direction of Sechin, and its owners included companies based in offshore zones that were controlled by relatives of high-ranking members of the presidential administration as well as members of the Federal Security Service (FSB) and the Foreign Intelligence Service (SVR...

...Putin, however, personally controls 37 percent of the shares of Russia’s fourthlargest oil producer, 4.5 percent of the shares of Russia’s natural gas monopoly, and 50 percent of the oil company Gunvor...

...There is too much at stake...

...At the same time, uncertainty about the new distribution of power stirs ambitions on all sides...

...Putin appears to be trying to maintain a balance between the warring sides...

...Originally, the method used was straightforward extortion...

...We started to go to them with various proposals,” Shvartsman said, “and these resulted in joint activities...

...In an interview published November 12 in the German newspaper Die Welt, Belkovsky said, “The people sitting in the Kremlin are direct representatives and joint owners of large scale enterprises...

...Under any circumstances, while Putin ponders his options, the internal pressures in the government can only get worse...

...Partly under pressure from them, Putin has given indications that he is ready to continue to exercise ultimate authority in the regime...

...Our weapons are physical dominance and moral suppression,” said an instructor...

...Together with natural gas, these exports earned $190 billion last year...

...The most ominous sign of this has come from the security services, which are the mainstay of Putin’s power...

...Each of the suggested changes at the top threatens to disrupt the informal networks that allow government offi cials to grow rich on the strength of this national windfall...

...Of the parties that will be present in the Duma, only the Communists, with 11.6 percent of the vote, represent any sort of opposition...

...It includes many of the Yeltsinera oligarchs...

...Sergei Ivanov, another fi rst deputy premier, is chairman of the board of the United Aviation Corporation, a new aircraft industry monopoly...

...Shvartsman also spoke about a political organization called the Union of Social Justice of Russia where he is in charge of fi nances...

...Yeltsin-era oligarchs were allowed to keep their wealth but threatened with criminal prosecution if they showed the slightest political independence...

...Unfortunately, a new leader may not be capable of this type of mediation...

...Perhaps the most important reason that Putin may want to step down, however, is his desire to enjoy his massive private wealth...

...In late September, Sergei Chemizov, the head of Rosoboronexport, the arms-trading monopoly, and board chairman of the AvtoVAZ carmaker, who served with Putin in the KGB in Dresden, called for using the Stabilization Fund, set up in 2004 to protect Russia from a sudden downturn in energy prices, to provide credit for domestic industry...

...In Russia today, property and power are monopolized by a small group of people with ties to Putin from his days in the KGB and the government of St...