Putin's People - The origins of Putin's worldview and the rise of Russia's new ruling class

  

 

Rising Pakistan Institute: Weekly Book Review

Putin's People

The origins of Putin's worldview—and the rise of Russia's new ruling class

 by Catherine Belton

Reviewed by: Team Rising Pakistan Institute

Vladimir Putin has often been described as Russia's "accidental president." On the surface, this seems like an appropriate term. His rise to power did happen extraordinarily quickly. After his appointment as Russia's prime minister, many were shocked that a grey-suited nobody like Putin had suddenly found himself with so much power.

Nevertheless, Putin's ascension was not a matter of chance at all. Former KGB agents had been closely observing his career ever since he joined the mayoral administration of Leningrad. They had been testing his loyalties and noting the sort of image he projected in public appearances.

Putin has hobnobbed with KGB agents before, and throughout his time in politics, Putin has hobnobbed with KGB agents. His presidency has ensured that their power is cemented in Russian politics. In this review, readers will find out exactly how that happened – and how it affects both Russians and Westerners today.

Before entering politics, Vladimir Putin was a member of the KGB.

From childhood, Vladimir Putin dreamed of joining the KGB, the Soviet Union's secret police force. He was eager to follow in his father's footsteps – so eager that he called up the local Leningrad KGB office and asked to join before he had even graduated school.

Putin was careful to enrol in the programs and classes that the KGB office directed him toward throughout his education. He followed their orders with the utmost precision. All the while, he vented his aggression by practising judo.

As a newly minted member of the KGB, Putin arrived in Dresden, East Germany, in 1985. There, he first encountered secret missions, smuggling, and assassinations.

From being an agent to state's face: the beginning of the journey: 

When Vladimir Putin arrived in Dresden, the city was known as little more than an East German backwater. In total, there were just six KGB officers posted there. Meanwhile, East Germany was on the verge of bankruptcy, and the ruling Communist Party was in danger of collapse.

Sensing these issues, the KGB launched a secret mission called Operation Luch. Its goal was to build up a network of agents to join political circles. The KGB's presence in Germany would survive, even if the country were reunified.

Much of Putin's role in this operation remains a mystery. Nonetheless, we know that Putin eventually became the main KGB liaison officer with the Stasi, the East German secret police. He even had his own Stasi identification card. That gave him access to Stasi buildings and made recruiting agents for Operation Luch easier.

Terrorism was also a major part of the mission. In particular, the secret police were deeply involved with the Red Army Faction, a Marxist group in West Germany that helped protect KGB interests. On one occasion, the chairman of the major financial institution Deutsche Bank was driving to work when a grenade in his car was detonated, killing him instantly. It is believed that a Red Army Faction member triggered the blast, and we know that this group learned precise military detonation techniques at training camps connected to the Stasi. With the chairman's death, Deutsche Bank was weakened, and a Stasi-affiliated bank had an opportunity to gain strength.

These secret operations with the KGB and the Stasi were just the start of Putin's long rise to power.

In the 1990s, a group of young business tycoons began to gain more power than the KGB.

At the time of the Soviet Union, the ruling Communist Party and the KGB were like peas in a pod. The laundry list of financial crimes they committed together is practically endless.

One of their joint schemes involved the KGB physically smuggling millions of dollars to left-leaning groups abroad. These funds had to be pulled from donations to the Communist Party. So, the government sent its own money to Communist Party members. Then they transferred it abroad via the KGB.

Through the Communist Party, the KGB was essentially in control of the entire country's finances and economy. However, everything changed in the age of liberal reforms under Boris Yeltsin. He took over the presidency from Mikhail Gorbachev in 1991.

In October 1991, President Yeltsin signed an order abolishing the KGB. He broke it up into four separate domestic departments. Despite this change, former KGB operatives served as advisors, held government positions, and controlled the oil sector throughout the first half of the 1990s.

However, soon, the agents' power began to erode. Thanks to Yeltsin's sweeping democratic reforms. These included the privatisation of several industries. Suddenly, a group of young business tycoons – later known as oligarchs – started gaining power.

Despite his attempts at reform, Yeltsin's state coffers were running dry. In response, a banker named Vladimir Potanin proposed an ingenious scheme. It became known as loans-for-shares privatisation. In exchange for helping out the Russian government with loans, he and his fellow tycoons would receive stakes in some of the nation's biggest oil and other resources enterprises.

The loans-for-shares privatisations allowed the tycoons to gain enormous power and influence, far eclipsing former KGB officials. One of these deals, for instance, gave Potanin a controlling stake in Norilsk Nickel, a company whose profits were $1.2 billion in 1995. He had to loan $170 million to the government to get that stake. As expected, the government defaulted on the loan. So Potanin got the share in Norilsk Nickel for little more than the loan price.

The new oligarchs now held massive power over Russia's various industries. However, in St. Petersburg, KGB agents still exerted their control nearby.

Thanks to Vladimir Putin, the KGB was heavily involved in St. Petersburg's economy.

Early in 1990, as the Soviet Union was collapsing, Vladimir Putin was ordered to return to Leningrad, as St. Petersburg was then known. There, he set his sights on Leningrad's burgeoning pro-democracy movement. The movement seemed dangerously likely to disrupt the Communist Party's dominance over the city's politics.

Soon, Putin became the liaison between the KGB and a man named Anatoly Sobchak. Sobchak was a charismatic law professor who frequently spoke in favour of democracy and against the KGB in public. However, he may have had unofficial dealings with the organisation in private. By May of that year, Sobchak was appointed the new city council chairman, with Putin as his right-hand man.

Soon, Sobchak became mayor, and the city was in bad shape. Its coffers were empty, shop shelves contained little more than pickled cucumbers, and policing was lax, which meant organised crime groups had free reign to extort local businesses.

It was nothing less than chaos. However, what emerged from that chaos was an alliance between Putin and the KGB that allowed the organisation to run the city's economy for itself.

The KGB's enrichment began with creating a slush fund, or Sobchak. This fund could funnel cash to the KGB for its personal use and strategic operations.

Putin's committee gave $95 million worth of export licenses to a series of front companies to create this Sobchak. Ostensibly, the companies would bring in food imports. The starving city desperately needed the food – but almost none of it ever arrived. The money had gone into the Sobchak instead.

Along with the Sobchak, the KGB also took control of the Leningrad seaport, run by Viktor Kharchenko. One day in 1993, Kharchenko was stopped by police. They hauled him off the train he was travelling on and charged him with embezzlement. Though he was eventually released, Putin's KGB men nonetheless installed their own man in his place.

Finally, KGB officers took control of Leningrad's seaport and oil terminal through Ilya Traber, a man linked to the Tambov organised crime group. Putin and his deputy issued licenses that allowed Traber to control the port and the oil terminal, along with one of Putin's KGB colleagues, Gennady Timchenko. All of these men went on to take senior executive positions in the country's strategic assets after Putin assumed the presidency.

Upon his move to Moscow, Putin quickly climbed the political ladder.

St. Petersburg's mayor, Anatoly Sobchak, lost his campaign for reelection in the summer of 1996. Vladimir Putin, loyal to Sobchak, immediately resigned from the city's administration.

Less than a month after his resignation, Putin was invited to Moscow. He was asked to take the deputy head of the Kremlin administration. He was ultimately blocked from that role. However, he became head of the Kremlin's foreign property department in its place. The position represented the core of Russia's imperial wealth. This was a major promotion for Putin.

However, it was far from the end of Putin's dramatic rise in the ranks.

Putin received several other promotions in quick succession after his promotion to head of the Kremlin's foreign property department. First, he became head of the Control Department. There, he was in charge of ensuring the president's orders were carried out within what were regarded as "unruly" regions. Three months later, he was appointed head of the FSB – the security services agency that succeeded the KGB. Then, on Monday, August 9, 1999, a shock announcement came: Putin was to become the nation's new prime minister.

How was Putin able to rise in the ranks so quickly? Looking back, it seems that former KGB generals were propelling him. They needed an individual willing to cooperate with them, follow orders, and appear strong on television. Putin was exactly that individual. However, he was still a nobody in the public's eye.

That all changed in September 1999, when three deadly bombings tore through apartment complexes across Russia. It caused a nationwide panic.

Amid the crisis, Vladimir Putin stepped up to the plate. He became, essentially, the country's commander-in-chief. The bombings had been blamed on Chechen fighters, so Putin led a campaign of airstrikes across Chechnya. He publicly addressed the Russian people, vowing to fight back and avenge the innocent Russians who had died.

Questions still swirl around these events. Some even believe that the FSB secretly coordinated the bombings. Whether this is true or not, the bombings certainly enabled Putin to garner major support from the public. In Putin, people saw a strong and tough leader. It was only a matter of time before Yeltsin handed him the presidency.

After taking over the media, Putin began a campaign to seize the oil industry by manipulating minds through MEDIA.

At the beginning of Putin's reign, few people predicted that the country was heading toward authoritarianism and kleptocracy. However, a few people did see the writing on the wall.

One of these prescient few was an oligarch named Boris Berezovsky. Among other businesses, he owned a television channel called ORT. The channel devoted much of its airtime to criticising Putin. On one occasion, it repeatedly played footage of Putin riding on a jet ski in the aftermath of a Russian submarine's tragic explosion.

Furious with how ORT had portrayed him, Putin ordered an investigation of Berezovsky over embezzlement claims. Eventually, these accusations forced Berezovsky to flee Russia. Putin's takedown of ORT signalled the beginning of his seizure of Russia's free media and the oligarchs that controlled it. Next, he set his sights on taking out the oil tycoons.

After the Soviet Union's collapse, the Russian state lost its monopoly over the oil industry, which promptly splintered into four separate companies: Lukoil, Yukos, Surgutneftegaz, and Rosneft. Thanks to Yeltsin's privatisations and the loans-for-shares scheme, the oil industry was firmly in the hands of the oligarchs.

When Putin took over from Yeltsin, oil prices had begun to surge, so the oligarch's massive fortunes increased. It became Putin's mission to wrest back control over the oil sector. Rosneft was already under state control, and the director of Surgutneftegaz was closely connected to the KGB. That left two companies to wrangle: Lukoil and Yukos.

Like Putin's media crackdown, his takeover of Lukoil began with a bogus investigation.

In 2000, one of Lukoil's directors, Vagit Alekperov, was accused of tax fraud. Then, two years later, Lukoil's first vice president was drugged and kidnapped by masked men wearing police uniforms. A week later, the government announced that Lukoil had agreed to pay the government $103 million in back taxes. Lukoil and the Kremlin seem to have reached an agreement: some of Alekperov's stake in Lukoil would secretly belong to Putin – although Lukoil denies this was the case. 

The last oil major left to take over was Yukos. However, the oil company's owner – who happened to be Russia's richest man at the time – would not hand over his business willingly.

Putin's takeover of Yukos signalled the KGB's triumph over the oligarchy.

Mikhail Khodorkovsky, the Russian oligarch once the chairman and CEO of the oil company Yukos, is a self-described adrenalinschik –adrenaline. In his youth, he was fond of rock-climbing without any equipment. Later, he slept soundly in prison even when threatened by knife attacks.

So when Vladimir Putin sought to take control of Yukos, Khodorkovsky refused to bend to the president's will. He hired Western executives and drilling equipment manufacturers to entrench the company in Western markets. Putin created Open Russia, a philanthropic organisation that taught Russian teenagers the principles of democracy. He even gave a presentation accusing the Russian government of corruption – at a meeting where Vladimir Putin was present.

However, despite Khodorkovsky's bold moves, Putin's crackdown proved too much for him to handle.

THE RISE of RUSSIAN OLIGARCHS 

Throughout the early 2000s, Khodorkovsky poured millions of dollars into funding Putin's political opponents, including those in the Communist Party. His political sway was considerable: he had secured enough parliamentary votes to block Kremlin bills from passing.

One evening, Putin ordered Khodorkovsky to stop funding the Communists at a private dinner. As expected, Khodorkovsky resisted. Putin quickly began taking major actions against the oligarch and Yukos.

First, the police arrested Yukos's security chief, Alexei Pichugin, and charged him with murder. Then, they arrested Khodorkovsky's right-hand man, Platon Lebedev. The investigations caused Yukos's stock to plummet. Then, a few months later, FSB commandos bearing machine guns began raiding Yukos-related locations across Moscow. Finally, Khodorkovsky himself was arrested.

Khodorkovsky was detained in a Moscow prison for eight months before his trial. He claimed this was an illegal abuse of power that set a dangerous precedent. Moreover, the court proceedings themselves – the trial was rushed, and laws were applied retroactively and selectively. Khodorkovsky was ultimately given an eight-year jail sentence for tax fraud.

In public, Putin and his men repeatedly insisted that Khodorkovsky's trial was not about a power grab; it was just about one rogue oligarch who needed to be brought to heel. Nonetheless, the proceedings ended with the Kremlin breaking up Yukos and seizing many of its assets. Before Yukos's breakup, 80 per cent of Russia's oil output had been in private hands. By the end, it was just 45 per cent.

Putin exploited terrorism to bolster his image.

On Wednesday, October 23, 2003, it was at Moscow's Dubrovka musical theatre, a few miles south of the Kremlin. Nine hundred audience members packed the seats as tap dancers leapt across the stage.

As the second act of the musical opened, the unthinkable happened: 40 armed Chechen fighters stormed into the theatre, firing warning shots from assault rifles into the air. They began to wire the building with explosives and sealed off the auditorium. Women wearing black hijabs and explosive belts positioned themselves amongst the rows.

The Chechen fighters occupying the theatre demanded an end to Russia's war in the Chechen Republic. They gave the government seven days to withdraw its troops – otherwise, they would blow up the theatre. However, was the situation as straightforward as it seemed?

Using Chechens bodies to rise to power- Putin and violence: 

Three days into the siege, Russian security services released a gas containing the opioid fentanyl into the auditorium. The gas was indiscriminately deadly: it knocked out the Chechens and killed 113 hostages. Moreover, rather than bringing them in for questioning, the FSB shot the Chechens dead.

The reason for the situation's mishandling is still shrouded in mystery. However, one Kremlin insider claims that the FSB chief had planned the attack at the time, Nikolai Patrushev, to increase national support for the Chechen war and paint Putin as a hero.

Whether this is true or not, the situation did cause global and local leaders to praise Putin. In their view, he had ensured that the situation did not turn out even worse. His ratings in Russia surged, the FSB was rewarded with an increase in funding, and the military was allowed to escalate its activity in Chechnya.

The apparent terrorist attack provided a useful myth to help Putin's regime forge a national identity. However, this was just one tactic used in this fashion.

Putin was also attempting to revive the Russian Orthodox religion, emphasising the great sacrifices and suffering Russia had endured throughout its history. On top of that, Putin sought to vilify the West, so he blamed another Chechen terrorist attack on Westerners – even though there was no proof whatsoever that the West was involved. Moreover, as pro-Western revolutions occurred in Russia's backyard – in Ukraine and Georgia – the anti-West rhetoric only continued to escalate.

The Kremlin created a slush fund to enrich itself and fund operations abroad.

In 2004, just when Yukos was being broken up and its assets vacuumed up by the Kremlin, a few other transactions on Moscow's stock exchange brought further power to Putin.

Shares in an insurance company called Sogaz – which belonged to the state-controlled Gazprom – were sold at a discounted price to three obscure companies. All three turned out to be connected to Bank Rossiya, a St. Petersburg bank that was the stronghold of Yury Kovalchuk, an old Putin ally.

The Gazprom transfers transformed Bank Rossiya into a major financial powerhouse. Moreover, the Kremlin could use it however it wanted.

In large part, this new Sobchak was used to enrich Putin and his KGB cronies personally. It provided the capital with which they could build lavish mansions. Putin's was four thousand square meters large and included three helipads, a marina, and a teahouse.

However, personal enrichment was not Sobchak's only function. It was also used to fund political operations abroad – starting with Ukraine.

In November 2005, a year had passed since the pro-Western candidate Victor Yushchenko won the Ukrainian presidency. Russia was angered and upset by this, so it retaliated. Knowing Ukraine still depended on Russia for gas, the Kremlin threatened to hike gas prices dramatically. Unless Ukraine agreed to a compromise deal, gas prices would remain cheap if Ukraine agreed to purchase more gas through a middleman company called RosUkrEnergo.

Ultimately, Yushchenko agreed. RosUkrEnergo was granted a monopoly on all gas supplies to Ukraine, plus access to half its domestic distribution market. It would make a profit of potentially billions of dollars for the company's primary shareholder and Putin's crony, Dmitriy Firtash.

Of course, it turned out that RosUkrEnergo was little more than a front company, used to provide kickbacks to Gazprom. More than that, the deal was widely viewed as having compromised President Yushchenko. Soon after, the Ukrainian parliament passed a no confidence in the government. By August 2006, the pro-Russia former presidential candidate, Victor Yanukovych, had become prime minister.

Russia's network of shady companies and slush funds was just beginning to expand internationally. Its next target was London.

Russia began to infiltrate London with a series of financial schemes.

Thanks to rising oil prices, Russia's fortunes grew throughout the early 2000s. A burgeoning middle class could now shop at Western-style malls cropping up in city centres. Even in remote Siberia, restaurants served lamb from New Zealand and wine from France.

These days, plenty also allowed Russian companies to slowly begin listing their shares on Western stock exchanges, especially in London. In 2005 alone, they gained more than $4 billion in share sales in the British capital. Comparatively, in the 13 years after the Soviet collapse, Russian company shares had only netted $1.4 billion in all markets combined.

Putin's recipe to infiltrate western capitalism with Soviet socialism: 

London's stock exchange was particularly enticing for the Russians. Compared to the requirements for companies to be listed on the New York Stock Exchange, London's requirements were lax. Still, many in the West believed that, by forcing the Russians to adhere to a Western standard of transparency, they would discourage shady financial dealings on the Russians' part.

However, the Russians' presence in London did exactly the opposite: it infected the West like a virus.

The infection began in many ways with Russian oligarch Roman Abramovich. He had risen to prominence during the Yeltsin era yet proved himself loyal to Putin.

So when Putin asked Abramovich to head to London and purchase Chelsea Football Club, Abramovich did as he was told. Putin had accurately guessed that getting British people to accept Russian presence could be done via their national sport, soccer.

By this time, the Russian government had a 51 per cent stake in several major Russian companies, like the savings bank Sberbank and the former Soviet trade bank, VTB. That meant that Westerners were free to divvy up the other 49 per cent of the stakes in each company.

Londoners were blinded by the cash flow that had become available. They ignored the fact that Russia had all but shunned its democracy. Even now, Russian cash flows through London via offshore front companies. Moreover, Russians continue to splash out for London real estate brokers while the city's lawyers and bankers rush to service the Russian oligarchs' billions of dollars.

Through London, Russia had flexed its financial might in the West. Next, it was time to make political moves.

Russia used Ukraine to wage a proxy war against the West.

After Putin's second term ended in 2008, Dmitry Medvedev assumed the Russian presidency. Many in the West hoped he would move his country's economy back to a freer market system. His willingness to cooperate with Western leaders seemed like a sign that liberalism was back on the rise in Russia.

Unfortunately, many of Russia's actions early in Medvedev's presidency undermined this hope. In August 2008, Russia escalated military action in the Western-leaning former Soviet republic of Georgia. This military adventurism ended any hope the country had of joining NATO. Moreover, Medvedev extended the term of his successor to six years instead of four. This abrupt political change was a clear signal that Putin was waiting in the wings to return as Russia's president. Moreover, this time, Putin was ready to extend his political reach even further.

Once Putin regained the presidency in 2012, his and his cronies' financial schemes continued full force. However, all was not well for Russia economically. Oil price growth was slowing, and businesspeople were afraid to invest in a system that could raid, threaten, or jail them at any moment. Rather than attempt any reforms, though, Putin chose to continue his project of imperial expansion.

In February 2014, Russia threatened to go to war with Ukraine over a Russian military base in Crimea if Ukraine did not reverse its pro-Western trajectory. On February 27, masked troops bearing no military insignia stormed the Crimean parliament. They hoisted a Russian flag over the building. A referendum was quickly called for a vote on Crimea joining Russia; Crimeans voted overwhelmingly in favour.

Europe and the US implemented sanctions targeting Putin's inner circle in response. Nevertheless, the conflict in Ukraine continued to escalate and spread to eastern Ukraine. Russian fighters – or "volunteers," as Russia cagily called them – were joined by local pro-Russia militants using Russian military hardware. Putin finally admitted that some of these so-called "volunteers" had been Russian troops only after the Crimean annexation was complete. The resulting death toll from the fighting stands at 13,000 today; a quarter of those killed have been civilians.

The annexation of Crimea and subsequent war in eastern Ukraine was nothing less than a proxy war against the West. What happened there was a warning sign of the turbulence the Russians were soon to create elsewhere.

After annexing Crimea, Putin continued to funnel cash and culture into the West.

Throughout the 2000s and 2010s, Putin and his men were funnelling black cash into the West through a series of complex money-laundering schemes.

These schemes involved offshore companies that received payments from tycoons close to Putin. Others involved shell companies signing fake loan agreements between themselves – agreements used to siphon money out of Russia. Then there were mirror trades. These allowed investors to buy Russian stocks in Russian rubles while seemingly unconnected companies sold the same amount of stock through Deutsche Bank in London.

With tricks like these, Russia funnelled money into the West. However, along with the cash, Putin also wanted to spread culture.

Western NGOs like George Soros's Open Society try to spread the principles of liberalism, democracy, and human rights across the world. Putin's KGB men began to form their own NGOs, taking inspiration from these organisations. Theirs, however, sought to cultivate an ideology based on the tenets of Russian Orthodoxy. It focused on tradition, subservience to the state, and intolerance of homosexuality.

To this end, Russian cash – both official and unofficial – was used to create a web of agencies. The agencies promoted the Kremlin's version of world events and popularised the Russian language and culture. The same cash was used to fund Russian Cossack paramilitary youth camps; a paramilitary biker group called the Night Wolves and the Foundation of Saint Vasily the Great, whose goal was supposed to spread Orthodox values in reality, funded pro-Kremlin separatists in Ukraine.

Along with spreading this particular flavour of Slavic culture through NGOs, Putin's men used slush funds to support European anti-establishment parties on the extreme left and right, particularly in the Czech Republic, Hungary, Bulgaria, and Austria.

By cultivating extremism in these countries, Russia aimed to weaken the EU and potentially break its consensus on sanctions against Russia. However, soon set its sights on bigger Western European targets like France, Germany, and Italy. Furthermore, in the UK, Kremlin cash poured into Tory coffers. Russia's security chief, Nikolai Patrushev, even developed a close relationship with Boris Johnson, the man spearheading the Brexit campaign that would further weaken the EU.

It did not take long before the US also came into Russia's crosshairs in the form of Donald Trump.

Russia found an ally in US President Donald Trump.

Long before Donald Trump ever announced his intentions to run for president, he had dealings with Russians.

It all started with Shalva Tchigirinsky; an antique smuggler rumoured to have ties to the infamous Solntsevskaya organised crime group. He first met Trump at the Taj Mahal in Atlantic City, New Jersey. He was impressed by the casino's glitz and glam.

Tchigirinsky was only the first in a long list of KGB-linked financiers Trump had dealings with, starting in the 1990s and continuing into the present.

Throughout the 1990s and 2000s, Trump became close to the Russian emigrant people in business who frequented his Taj Mahal casino. In one instance, emigrants Felix Sater and his partner, Tevfik Arif, offered to finance and build a series of luxury developments for Trump. Sater and Arif used the development projects to get cash into the US.

Many other businesspeople proposed projects to Trump; most of these failed to materialise. Nevertheless, as Trump made his bid for the presidency, beginning in 2015, the Russians ramped up their dealings with him. Sater developed a relationship with Trump's lawyer, Michael Cohen. They discussed a potential Trump Tower in Moscow. Sater wrote: "I will get Putin on this program, and we will get Donald elected."

Trump's family also began to get involved. In June 2016, an English journalist wrote to Donald Trump Jr., Trump's son, that he knew a Moscow lawyer who could offer dirt on Hillary Clinton – and Donald Jr. seemed interested. Initially, the offer seemed to be a bust. However, in mid-June 2016, a Russian hacker group called Guccifer 2.0 hacked the Democratic National Convention's computer servers. Then, a month before the election, WikiLeaks began releasing emails sent from Clinton's campaign chairman, John Podesta.

When the news broke in the Russian parliament that Trump had won the election, the entire hall erupted in applause.

Despite their celebrations, it does not seem as if Russia had pulled off a massive scheme to install a Kremlin-controlled candidate in the White House. For them, Trump's election victory was a win in itself. His populism and divisive messages have sown discontent within America; he has argued against NATO and encouraged Brexit. The beneficiaries of these policies are Putin and his circle of KGB cronies.