Insider Groups. The power-struggles behind Operation Successor

The succession race involving Dmitri Medvedev, Sergei Ivanov, and various unknowns is particularly stressful for the managers of state-controlled corporations and officials associated with them. A new research report has identified seven politically influential financial-bureaucratic groups.

The succession race involving Dmitri Medvedev, Sergei Ivanov, and various unknowns is particularly stressful for the managers of state-controlled corporations and officials associated with them. They are all aware of an unfortunate example from the past: the formerly omnipotent Rem Vyakhirev, de facto owner of Gazprom in the late 1990s, who lost everything overnight. When Vladimir Putin came to power, he decided to get rid of Vyakhirev - despite predictions that Gazprom would be unable to function if Vyakhirev's supporters were to sabotage it.

Yakov Pappe, a researcher from the Economic Forecasting Institute (Russian Academy of Sciences), specializes in studying big business in Russia. In his view, a single presidential decree would still suffice to produce the same effect as in the Vyakhirev case.

The stakes will be even higher in 2008. The oligarchic "seven bankers system" that played a very active role in the 1996 and 2000 presidential elections is now gone. A report from the Russian Political Conjuncture Center (TsPKR) maintains that the "seven bankers system" has been replaced by seven politically influential financial-bureaucratic groups. "And they all understand that the presidential changeover entails the risk of changes among the management and shareholders of Russia's largest state-controlled companies," says Dmitri Badkovsky from the Social Systems Research Institute. "So the presidential election is equivalent to electing the chief executives of Russia's largest companies."

The nuclei of the seven groups are the largest state-controlled companies: Russian Railroads, Gazprom, Rosneft, Rossiya Bank/ Surgutneftegaz, Rosoboroneksport (Russian Defense Exports), and two private structures controlled by Roman Abramovich and Oleg Deripaska. "This is more like a '5 + 2' arrangement, of course," says TsPKR Director Konstantin Simonov. "Abramovich and Deripaska have been included in the report because they are the most active in terms of economic expansion in Russia and abroad - and consequently, they are the most likely to discuss their 'deals of the century' with the president. Abramovich, at least, does participate in politics - rumor has it that he was backing Medvedev at first, but then switched to Ivanov."

Other analysts tend to agree with the TsPKR report's conclusions. Vladimir Pribylovsky, president of the Panorama Information Center, has been studying Kremlin factions for a long time. He says: "What you have to bear in mind is that Rosneft, for example, really is controlled by Igor Sechin, deputy head of the presidential administration - but Gazprom is collective property, with its shareholders and managers including representatives of several Kremlin factions." Pribylovsky questions the report's classification of FSB Director Nikolai Patrushev as part of the Rosneft group: "It's clear that Patrushev, Boris Gryzlov, and presidential aide Viktor Ivanov are all one faction, they've known each other for many years - but Sechin, Prime Minister Mikhail Fradkov, and Justice Minister Vladimir Ustinov aren't part of that faction at all." In Pribylovsky's view, the formerly-united faction of "St. Petersburg chekists" has split over the past two years: now there is a Sechin-led group associated with the Rosneft oil company, and a Patrushev-Ivanov group with no major financial bulwarks.

Simonov agrees that relations between the factions are unstable. Some of them may join forces, due to their similar ideological views: for example, Russian Railroads and the Rossiya Bank group - both in favor of centralizing the economy around a few companies and supporting Russian Orthodox nationalism in politics. The "St. Petersburg lawyers" from Gazprom could be reinforced by a like-minded group of ministers from the Cabinet's economic bloc - Alexei Kudrin, Herman Gref, and Anatoly Chubais - who would bring along the assets they control, such as the Alrosa diamond company and the remnants of RAO Unified Energy Systems.

Some of these groups have their own successor candidates; others do not. In any case, no group is strong enough to win the battle for the vote of Russia's one and only voter: President Putin. Instead, their priority is to ensure that no one from a hostile group becomes the successor. They are far more relaxed about the idea of a compromise candidate; in that sense, says Simonov, the chances of Sergei Ivanov look better, since he has never been closely linked to any state-controlled company. Besides, Putin intends to retain the role of supreme arbiter, one way or another.

This is what the executives from state-controlled corporations are counting on: they want to be key elements in Putin's arbitraton system. The ex-president would work through them to retain operational control over Russia, directly influencing economic decisions. For these people, such an arrangement would offer the strongest guarantee of keeping their jobs: even after Putin leaves office, the entire personnel system would still be tied in to Putin, not his successor.

Oddly enough, says Badovsky, panicked fear of "a new redistribution of assets" might even lead to a political thaw: "A continually tense status quo cannot last long - either there will be renewed battles over property, or the nomenklatura factions will attempt to develop independent courts and media, as guarantees of a non-aggression pact for themselves and their property rights." The word "thaw" entered our country's political vocabulary after the death of Stalin. At the time, intra-Party factions feared the prospect of renewed purges if any one of them took power - so they reached a "collective leadership" agreement and permitted some relaxation of restrictions in public life.

Author: Anton Zlobin

Source: Newsweek Russia, June 11-17, 2007