A Fallen Russia Oligarch Sends Warning to Rest of Putin Insiders

Vladimir Putin file photo with VOA logo; screen shot from video still

(Bloomberg – bloomberg.com – Irina Reznik – January 12, 2016)

He was one of the most powerful men in Russia for a decade, an old pal of the president who oversaw a million workers and a rail network spanning 11 time zones.

But then Vladimir Yakunin was suddenly out, ending a career that included a stint as an intelligence officer at the United Nations in New York during the Cold War. Now Yakunin, 67, has some parting advice for the remaining members of what he dismissed as Putin’s “so-called inner circle”: know your place.

“This circle will continue to rotate,” Yakunin said in his private office in Moscow during a 90-minute interview. Putin has yet to form a stable “ruling class like Russia had during czarist times,” the former head of state-owned Russian Railways JSC said.

The comments are a rare public admission from a longtime insider of the fragility of wealth and influence in the opaque and seemingly ironclad system of control Putin has built over 15 years. With that system under unprecedented pressure from plunging oil prices and international sanctions, any step Putin takes to maintain his grip on power reverberates far beyond Moscow.

Berezovsky Warning

Some insiders are making the mistake of viewing their property and privilege as inalienable rights, but everything they have hinges on Putin’s shifting views of what’s good for Russia, according to Yakunin. He offered two examples from the president’s first term to illustrate the dangers of overreach.

“Remember what happened to Boris Berezovsky and Vladimir Gusinsky,” he said, referring to two post-Soviet oligarchs who lost their fortunes trying to influence Putin’s Kremlin the way they did Boris Yeltsin’s.

Yakunin’s departure from the rail monopoly in August was the biggest shakeup in years within “the new politburo,” the highest authority under communism, and presages more to come, according to Olga Kryshtanovskaya, a sociologist who’s tracked the rise of the security services under retired KGB Colonel Putin.

“Rough resignations” by Putin loyalists are rare and Yakunin’s rejection of the customary senate seat as consolation is even more so, she said.

The U.S. blacklisted Yakunin in its initial round of sanctions over the Ukraine conflict in March 2014 for being both “a close confidant of Putin” and an influential government official; Russian Railways carries more than a billion passengers and a billion tons of cargo a year.

Dacha Buddies

Yakunin and other members of Putin’s St. Petersburg clique in the 1990s, including his chief of staff and fellow former spy Sergei Ivanov, constitute “the Russian leadership’s inner circle,” the Treasury Department said at the time.

“Yakunin and Putin were also neighbors in the elite dacha community on the shore of Lake Komsomolsk and they served as co-founders of the Ozero Dacha Cooperative in November 1996,” it said.

Another Ozero founder, Yuri Kovalchuk, was also among the first 20 Russians sanctioned, as were three other St. Petersburg businessmen who became billionaires after Putin came to power — Gennady Timchenko and the brothers Arkady and Boris Rotenberg.

The reasons Yakunin was kicked out of this exclusive club are disputed.

British Passport

He says publicly the decision to resign was his own and Putin approved it, but people familiar with the matter said the president felt betrayed when Yakunin’s eldest son obtained citizenship from the U.K. when that country was penalizing Russia over Ukraine.

The Kremlin was aware of the issue and nobody objected, Yakunin said.

“My son has lived in the U.K. for five years and had the right to obtain citizenship,” he said. “I made no secret of this from the country’s leadership.”

Putin’s spokesman, Dmitry Peskov, declined to comment.

Kryshtanovskaya, the sociologist, said it may have just been a matter of mismanagement at Russian Railways. The company had become bloated, inefficient and plagued by accusations of corruption, so new leadership was needed, especially with the economy mired in a recession, she said.

Safeguarding Wealth

The man picked to replace Yakunin, Oleg Belozerov, is a 46-year-old logistics specialist and deputy transport minister from St. Petersburg who has longstanding ties to the Rotenbergs.

Evgeny Minchenko, who runs the International Institute for Political Expertise in Moscow, said Yakunin was simply outmaneuvered by more aggressive insiders whose business interests were being hampered by the rail monopoly.

Whatever the cause, Minchenko said one thing is indisputable: People close to Putin, who could extend his rule to a quarter century if he wins re-election in 2018, are increasingly focused on safeguarding their wealth and status to pass them on to their offspring.

Putin In-Law

Some are even joining Putin’s family.

Kirill Shamalov, the son of Nikolay Shamalov, another co-founder of the dacha cooperative cited by the Treasury Department, married Putin’s youngest daughter Katerina in 2013 and then became a tycoon in his own right, thanks mainly to a stake in a petrochemical company he acquired from Timchenko with financing from a state bank.

Still, nobody’s position but Putin’s will be secure until a governing elite like the one that existed before the Bolsheviks swept to power a century ago is fully formed, a process that may take decades, according to Yakunin.

“Trying to measure influence by proximity to political resources is a relic of the Soviet system,” he said.

Article ©2016 Bloomberg L.P. All Rights Reserved. Article also appeared at bloomberg.com/news/articles/2016-01-13/a-fallen-russia-oligarch-sends-warning-to-rest-of-putin-insiders