The Kremlin Corporation and Putin Forever?

In December 2007, The Wall Street Journal published a story suggesting that Putin's personal wealth, if measured by the value of the assets that he is believed to control personally, may approach $40 billion. This would have been about double the net worth of the officially richest Russian at the time, Roman Abramovich. This may be either an overstatement or an understatement. Personal wealth is a sensitive issue, and little is known in present-day Russia about who owns exactly what. To be sure, the president should be the last person to be poor, the way the cards are stacked. Most big companies now have shareholders, many of whom are registered under fictitious names or are represented by murky offshore firms. Who else but the president would know who all these people are?

Putin systematically appointed his most trusted friends from St. Petersburg (KGB buddies, or colleagues from his former job as vice-mayor there) to the top positions in his administration. Many of these people also ended up controlling key government ministries or regions. A few have been chosen to sit on boards of the wealthiest semiprivate or state corporations. It has never been known what proportion of the privately issued stock of these companies these people control, but, more importantly, they also control the state's packets of shares. If the Kremlin shareholders consisting of Putin's closest friends constituted a corporation, they would control 20–30% of the country's GDP, as estimated by Novaya Gazeta experts in a series of articles on corruption. This is a smaller proportion than that claimed by the seven top oligarchs in 1996, but back then only a handful of enterprises had been privatized, while today over 75% have been. The GDP itself had also returned to its 1990 level by 2007.

Further changes began in early 2008, when Dimitry Medvedev won the presidential elections with 70% of the votes, against 18% for the main Communist contender. In the absence of any real opportunity for other candidates to campaign, the result was predictable. Putin remained in power, however, by becoming the head of the majority party (United Russia) and agreeing to become a national “leader” and the prime minister. This allowed him not only to save face and to avoid changing the constitution, but also to keep an eye on Medvedev. The truth is that the Kremlin Corporation, in all likelihood, is very unlikely ever to step down voluntarily. Unlike Ukraine and Moldova, which have seen post-Soviet swings from one political party to another and have real competition within their elites, Russia has been dominated by the blue color (United Russia) for fear of the red (the Communist Party). The ironic thing is that the same former nomenklatura (or KGB) members are still sitting in power, but under different colors. The future of Russia—at least for now, while petroleum prices are high—seems to be in the hands of intelligence men turned oilmen.

The first two years of Dmitry Medvedev's presidency have not changed the overall situation dramatically, despite some early hopes. The control of the government, and in reality, much of the country, seems to remain largely in the hands of now-Prime Minister Vladimir Putin, who is still considered to be the most influential politician based on expert polls. Medvedev did announce a number of important initiatives in modernizing Russia's domestic economy and in deeper engagement with the European Union and the United States. Medvedev has been frequently portrayed in the media as a “moderate” and even a “liberal” in contrast to Mr. Putin. In reality, however, the two men share much in common, and even closest sympathizers of Medvedev have little doubt that the so-called tandem in power is little more than a facade covering up the increasingly autocratic and extremely corrupt top of the Russian oil-and-gas driven bureaucracy headed by Vladimir Putin.