The New Tsar (49 page)

Ukraine’s election, coming in the wake of Beslan, proved to be a turning point for Putin and for Russia. His initial instinct to bring Russia into closer cooperation with the West, if not an actual alliance, had faded as steadily as his political and economic power had grown. When he delivered his annual address to the Duma and Federation Council in April, he appealed for a new national unity against those who would challenge the state, inside or outside Russia. He began with a preamble that the country needed to consider “the deeper meaning of such values
as freedom and democracy, justice and legality,” and went on to utter a sentence that to many confirmed the worst about Putin’s instincts: a lingering nostalgia for the glory of the Soviet Union.

“First of all,” he said, “it should be recognized that the collapse of the Soviet Union was the greatest geopolitical catastrophe of the century. For the Russian people, it became a real drama. Tens of millions of our fellow citizens and compatriots found themselves outside Russian territory. The epidemic of disintegration also spread to Russia itself.” Putin did not wish to restore the Soviet or Communist system—anyone who wants to, he had said, has no brain—but for the first time he began casting his leadership in a broader historical context. He meant to restore something much older, much richer and deeper: the idea of the Russian nation, the imperium of the “third Rome,” charting its own course, indifferent to the imposition of foreign values. It was an old Russian idea, and he found the model for it in the history books he was said to favor.

Far less noted at the time than Putin’s lament for the “catastrophe” of the Soviet collapse was his reference to Ivan Ilyin, a religious and political philosopher arrested repeatedly by the Bolsheviks and finally expelled in 1922. Ilyin’s ideas provided an intellectual foundation for Putin’s evolving understanding of Russia’s revival and would become more prominent in subsequent political debates. As a White Russian in exile, Ilyin embraced a vision of an Orthodox Russian identity that the secular Communist system was bent on destroying. In his writings Putin found much to sustain the state he wanted to create, even the notion of “sovereign democracy.” Putin was not lamenting the demise of the Soviet system, but the demise of the historical Russian idea. It was the first time Putin had quoted Ilyin, whose writings only began circulating openly in Russia after perestroika: “Let us not forget this,” Putin said. “Russia is a country that has chosen democracy through the will of its own people. It chose this road of its own accord and it will decide itself how best to ensure that the principles of freedom and democracy are realized here, taking into account our historic, geopolitical, and other particularities and respecting all fundamental democratic norms. As a sovereign nation, Russia can and will decide for itself the timeframe and conditions for its progress along this road.”

Putin’s reference to a philosopher little known outside or even inside Russia coincided with the repatriation of his remains, along with those of General Anton Denikin, a tsarist commander on the losing side
of the civil war. Ilyin had been buried in Switzerland; Denikin in the United States, but Putin supported the campaign to re-inter them in their homeland at the Donskoi Monastery in Moscow.
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He was said to have personally paid for Ilyin’s new headstone. All this led to a revival of interest in the man’s works. The Central Intelligence Agency scrambled to prepare an analysis examining their role in Putin’s thinking and what it might portend for the future. Ilyin advanced Orthodoxy, patriotism, the law, and private property as the foundations of a state. Writing from exile through Stalin’s reign and the Great Patriotic War, he eulogized the heroes of the civil war with a reverence and romanticism whose echoes reverberated in the new Russia. Putin could find much to like in Ilyin’s words. “The hero takes up the burden of his nation, the burden of its misfortunes, of its struggle, of its quest, and having taken up that burden, he wins—wins already by this alone, indicating to all the way to salvation. And his victory becomes a prototype and a beacon, an achievement and the call, the source of victory and the beginning of victory for everyone connected with him into one whole by patriotic love. That’s why he remains for his people a living source of cheer and joy, and his very name sounds like victory.”
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O
n May 9, 2005, the Kremlin celebrated the sixtieth anniversary of the victory in the Great Patriotic War with a ceremony more extravagant than ever. The grandiose plans included dozens of ceremonies and concerts and a military parade through Red Square, a tradition that Putin resumed after the years when Yeltsin played down Soviet holidays and traditions. The parade was attended by fifty-seven dignitaries, including the leaders of victorious and vanquished nations of the war—from George Bush to Gerhard Schröder, Silvio Berlusconi, and Junichiro Koizumi. For Putin, the war became the keynote of his new nationalism, one very much shaped by the memories he had of listening to his father’s stories. The anniversary’s approach had revived the debates over the Soviet subjugation of Eastern and Central Europe after the war, but Putin rebuffed calls for Russia to account for the darker aspects of the Soviet past, most notoriously the Molotov-Ribbentrop pact with Nazi Germany in 1939, which led to the Soviet occupation of part of Poland that year and the Baltic states a year later. The presidents of Lithuania and Estonia refused to attend as a result. The attendance of Latvia’s president, Vaira Vike-Freiberga, prompted raucous protests by Nashi activists outside the country’s embassy in Moscow. For his role in brokering talks
during the election in Ukraine, Aleksander Kwasniewski of Poland was conspicuously snubbed, relegated to the back row of the viewing stand that discreetly covered Lenin’s Tomb.
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Putin would no more concede Stalin’s failures during the war—including the prewar complicity with Hitler, the useless slaughter of ordinary soldiers, the maurading countermarch to Berlin—than Soviet propagandists had. The war of Putin’s new ideology was the war of his youth: honorable, righteous, unblemished, and unrepentant. “The battles of Moscow and Stalingrad, the courage of besieged Leningrad and the successes at Kursk and on the Dnieper decided the outcome of the Great Patriotic War,” he said. “Through the liberation of Europe and the battle for Berlin, the Red Army brought the war to its victorious conclusion. Dear friends! We never divided victory into ours and theirs.” He noted that the “common sacrifice” united the fifteen republics of the Soviet Union, now independent nations pursuing their own paths in the case of the Baltic countries, Georgia, and, much to Putin’s frustration, Ukraine. The reconciliation of Germany and Russia, he said, should be a model of international relations for the twenty-first century. Not far from the Kremlin, though, the Pushkin Museum commemorated the sixtieth anniversary with a display of 552 ancient works of art, including Greek bronzes, Etruscan figures, and fragments of Roman wall paintings that the Soviet Union had seized from a bunker in Berlin and that Russia still refused to return.
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CHAPTER 16

Kremlin, Inc.

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week before the second runoff of Ukraine’s presidential election in December 2004, Russia dismantled Yukos Oil. In his public remarks ever since the affair began, Putin had insisted that the Kremlin had no intention of doing so, and many people—the other tycoons, foreign investors, ordinary Russians—had believed him. They assumed that even if the entire prosecution stemmed from some animosity toward Khodorkovsky, Putin would not destroy the country’s richest company. As the prosecutorial assault continued on Khodorkovsky and Yukos itself, however, it became harder for Putin to protest his innocence or to deny what was becoming obvious. He may not have initiated the criminal and tax charges against Yukos, according to one Kremlin official, but “at some point he moved from observer to participant, and then the leader” of the final demolition of the company and the redistribution of its richest asset, the crown jewel of its oil empire.
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Yuganskneftegaz was Yukos’s main production unit. It was located on a tributary of the Ob River in western Siberia. The first wells were tapped during the Soviet oil boom of the 1960s, but production had steadily declined over time, grossly mismanaged in the years before and after the Soviet collapse. Khodorkovsky’s bank acquired the project as part of the notorious “shares for loans” deal that protected Yeltsin’s presidency. The bank’s investors paid a mere $150 million for Yuganskneftegaz, and after a turbulent few years they brought in foreign expertise and technology to turn it around.
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By the time of Khodorkovsky’s arrest, it was producing 60 percent of the company’s oil.

The Ministry of Justice announced that it would seize and auction off Yuganskneftegaz only five days after the trial of Mikhail Khodorkovsky and his partner, Platon Lebedev, opened in July 2004 inside a tiny, heavily guarded courtroom in northern Moscow. The prosecutors had not
yet finished their opening arguments on the eleven criminal charges Khodorkovsky faced, let alone convicted him of any wrongdoing, but the expropriation of the company’s most valuable asset would not wait. Khodorkovsky’s supporters gathered outside to protest on the day his trial began and would reappear periodically for the next ten months, even though the proceedings already seemed a foregone conclusion. The trial was so riddled with procedural violations, including harassment of the defendants and witnesses, as well as their lawyers, that it was reminiscent of a Soviet show trial. And like those earlier trials, the prosecutorial spectacle sent an intended chill through the political and economic elite, silencing even the few voices willing to speak out after Khodorkovsky’s arrest. Other major oil companies moved quickly to forswear the sort of tricks Yukos used to lower its taxes and instead took to boasting about how much in taxes they were willing to pay. Except for Khodorkovsky’s supporters, his spokespeople, his investors, his lawyers, his friends and family, fewer and fewer dared to openly confront Putin’s Kremlin on any issue. “I’m very scared to name names now,” Arkady Volsky, the head of the industrialists’ union, told a television network, saying he knew who was behind the Yukos affair. “I’m simply scared. I have six grandchildren, after all, and I want them to be alive.”
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For such candor, he was promptly replaced as the head of the union.

Publicly Putin maintained his distance from the proceedings, as if he did not approve them. The decision to seize and auction Yukos’s subsidiary, however, made it clear that removing Khodorkovsky from public life was no longer the sole objective: the breakup of Yukos itself now seemed inevitable, and a decision of that magnitude could only be made at the top. The subsidiary’s value far exceeded the $3.4 billion that the company allegedly owed the state for having underpaid its taxes. Yukos had already begun paying that debt in hopes of saving itself, but the tax authorities announced new audits and new fines for underpaying taxes in subsequent years and rebuffed efforts by Yukos’s managers to negotiate any payment plan. The debt soon ballooned to $24 billion, more than the company’s remaining worth. Putin had no interest in winning back taxes for the country’s flush coffers;
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he wanted the asset itself. On November 18, Russia’s property fund announced the opening price for bids on Yuganskneftegaz at $8.65 billion, considerably less than the valuation of $18 billion to $21 billion made by a German firm, Dresdner Bank, at the government’s request. And it set the auction for the earliest date possible under the law, December 19, and went ahead
even though the date fell on a Sunday. The only question was who the buyer would be.

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A
s the auction approached, Putin found himself mediating an avaricious struggle among the circle of loyalists whom he had lifted up to be the high officers of the state and industry. He no longer faced significant political challenges outside the Kremlin, but inside the factions closest to him maneuvered like the boyars had under the tsars. As with any court, the courtiers often were at odds, but in this case the conflict was not over ideology or vision between the “liberals” and the
siloviki
. This was about money and power. The courtiers circled the wounded Yukos like wolves, anticipating the profits that would come with the company’s largest asset. They included some of his most trusted aides, Dmitri Medvedev, and a “politburo” of hardliners—Igor Sechin, Viktor Ivanov, and Nikolai Patrushev—who advocated for the strengthening of state control over natural resources.
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Medvedev had served as chairman of Gazprom since 2000, working to exert greater government control over a company that was technically private, though the state owned 38 percent of its shares. Putin wanted full control of this energy giant, which possessed nearly a fifth of the world’s natural gas reserves and thousands of miles of pipelines that kept much of Europe warm, and his initial plan to accomplish that was to have Gazprom absorb Rosneft, the ailing state company that he had steadily favored with political support and licenses, especially in Chechnya, where no other company dared work after the second war began.
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Since Rosneft was wholly owned by the state, the merger would give the Kremlin a controlling stake in an energy juggernaut as rich as Exxon and as pliant as Saudi Arabia’s Aramco. The roots of the idea reached back to Putin’s days in Petersburg, when he and his friends oversaw provincial business deals and oil trades and wrote academic theses about the necessity of the steady hand of the state. Now, only a few years later, they were on the verge of realizing their vision on a national scale.