BOOK REVIEW: Russia’s Mobutu?
(Business New Europe – bne.eu – Derek Brower in London – January 13, 2015)
Corruption in Vladimir Putin’s Russia has sprouted its own sub-genre for Western publishers. Few of the many books, though, have the laser-like focus or amass the same devastating detail as Karen Dawisha’s “Putin’s Kleptocracy: Who Owns Russia?” (Simon & Schuster, New York: 2014).
Thanks to Britain’s libel laws, the book is already notorious. Cambridge University Press, Dawisha’s long-term publisher, probably feared the inevitable lawsuits when it turned down the manuscript. Dawisha, an academic at Ohio’s Miami University, found an American publisher, and the timing was good. Her book explains why the US government, responding to Russian involvement in Ukraine, has issued sanctions not against the Russian state itself but against a host of men and companies close to its president.
For Dawisha, these men are the Russian state, and they designed their elaborate sistema to plunder the country and enrich themselves. That’s a familiar theme in Western writing about Putin’s Russia. But Dawisha goes further: this was, she argues, always Putin’s purpose. He planted the roots in Dresden, watered them as the “grey cardinal” in Anatoly Sobchak’s corrupt St Petersburg mayoralty in the 1990s, and ensured they would flourish in Moscow first as prime minister and then with the Kremlin’s power behind him.
This teleology won’t convince all readers. No one, perhaps least of all the humourless St Petersburg bureaucrat himself, expected in the 1990s that Putin would so quickly rise to the top of Russian politics. Charting it all almost solely in terms of greed and graft doesn’t wholly explain Putin’s success in bending Russia to his will or his genuine popularity.
The book’s scope is narrower than that. Its relentless focus is Putin, his cronies and how they pulled off their heist. It yields a forensic catalogue of the graft. Dawisha rejects the dewy-eyed view of the Yeltsin era found in many accounts of modern Russia – the 1990s were a “gangster’s paradise,” she writes – but in chronicling Putin’s misdemeanours in the St Petersburg days, the book says little about the wholesale appropriation of state assets that was already underway in Moscow. That sale of the century is probably old hat for many readers of Dawisha’s book. But compared with all that, Putin’s alleged behaviour in St Petersburg was pick-pocket stuff.
Nonetheless, in Dawisha’s account it was in Dresden and St Petersburg that Putin established both his behaviour and the coterie of fellow plunderers that she says now runs – and owns – most of Russia. Among his St Petersburg chums were Dmitry Medvedev, who would become chairman of Gazprom, a prime minister and president of the country; Igor Sechin, who would run Russia’s oil sector and become chief executive of Rosneft; Victor Zubkov, another prime minister; Viktor Ivanov, now head of Aeroflot; German Gref, formerly the economy minster and now head of Sberbank; and Aleksei Miller, chief executive of Gazprom. Others, such as Nikolai Tokarev and the ex-Stasi member Matthias Warnig, worked with Putin when he was a foreign intelligence agent in Dresden. Tokarev now runs Transneft, the Russian pipeline firm, and Warnig is managing director of Nord Stream, which built and operates the pipeline between Russia and Germany.
The power and wealth of these men is well known. Many are now under sanctions. Putin was loyal to his cadre. The president’s own wealth is also alleged to have flourished. Dawisha repeats many of the rumours: the stakes in Gazprom and Surgutneftegaz, the luxury watches, the 58 planes, the 20 presidential palaces. Dawisha recounts how Gennady Timchenko and Putin forged their relationship when the former was involved with the Kirishi refinery in St Petersburg. His co-owned trading firm, Gunvor, rose to global prominence, alongside Rosneft, following the destruction of Yukos. Putin, claims Dawisha, owns as much as 50% of Gunvor.
Proving all this or other claims in her book is difficult, as any recipient of a threatening letter from London libel lawyers can attest. This is why UK publishers won’t touch the book, the initial pages of which would hardly pass a British lawyer’s sniff test. Many of Dawisha’s claims rely on material published elsewhere. She joins the dots with aplomb, but a crime-scene of smoking guns the book is not.
Russia is also more complex than it seems in Dawisha’s book. She rightly traces the origins of the clampdown on free media to the assault on Vladimir Gusinsky’s Media-Most empire in mid-2000, seeing it as part of Putin’s campaign to establish the “vertical of power” on which state corruption would thrive. But much of Dawisha’s own research relies on Russian reporting, or the work of the anti-corruption activist Alexei Navalny. For Dawisha, Putin has subjugated an entire country. But her own work shows this job is not complete.
The imposition of sanctions against many of the rogues in Dawisha’s gallery suggests the West’s eyes have at last opened to Kremlin-sponsored malfeasance – but too late. “There has been a partner in this kleptocracy, and that partner is the West,” writes Dawisha, a couple of paragraphs into the book before a picture of a grinning Gerhard Schröder, the ex-chancellor of Germany who now works for Nord Stream. Western intelligence had long known of the rampant corruption in Putin’s circle, she claims. It was only recently, following Russia’s aggression in Ukraine, that governments began to act.
Does the corruption matter or is Russia simply another country that will muddle along despite its rapacious elite?
Tenuously, Dawisha links Russia’s low birth rate to the graft. More plausibly, she calculates the opportunity cost. Itera and Eural Trans Gas, two intermediaries for Gazprom gas sales, siphoned off wads of cash that should have gone to the Russian treasury, she alleges. Half of the $50bn spent on the Sochi Olympics passed into the hands of Putin cronies, she says. Construction of Germany’s half of the Nord Stream pipeline cost €2.1mn per kilometre; Russia’s cost €5.8mn. Money that could have been spent in the Russian economy on schools, hospitals, or infrastructure, instead sustained the country’s billionaires. Given the rampant capital flight from the economy in recent months, not much of their cash has been recycled locally either.
For some readers, these claims will be old news. But the scale and breadth of Dawisha’s allegations are still shocking. It wasn’t just Gunvor, she suggests – over decades Putin’s fingers have reached into many pies, from gambling to real estate to energy and banking. In Dawisha’s account, Russia’s president was a cheat in Dresden, a crook in Petersburg and a fraud in the Kremlin. “If you want to steal, steal a little in a nice way,” said Sese Seko Mobutu, the Zairian president who despoiled his entire country. The thieving in Putin’s Russia has been neither nice nor little.