#4 - RW 264
The Economist (UK)
July 12-18, 2003
Power struggle in the Kremlin
When an election result is all-but-guaranteed, what's left to fight for? In Russia, there's still a great deal

TWO explosions, one real and the other political, have kicked off Russia's election season. The real one, a suicide-bomb attack by Chechen rebels at a rock concert in Moscow on July 5th (see article), killed at least 16 people. A wave of such attacks in the run-up to next March's presidential election will remind Russians of Vladimir Putin's failure to end the conflict in the breakaway republic, nearly four years after they elected him on his promise to do so.

The political bomb, the arrest of a top businessman, was probably a bigger shock to foreign investors than to ordinary Russians. It too marks the start of an electoral campaign. But the campaign is not for the elections themselves: both Mr Putin's victory, and a majority for pro-Kremlin forces in the Duma (parliament's lower house) this December, seem assured. Rather this is a contest for the second tier of power: the job of managing the election campaigns for the Kremlin. The prize is influence in the next Duma and government, and thence on the presidential succession.

Platon Lebedev, a key shareholder in Yukos, Russia's biggest oil producer, was arrested on July 2nd, accused of illegally acquiring shares in a fertiliser company in 1994. In a country where powerful people are arrested only if they annoy someone more powerful, that seemed to break a pact that Mr Putin and the country's top businessmen had reached in 2000: that he would overlook any ill-gotten gains they might have made during the reckless privatisations of the 1990s, if they now stayed clean and out of politics. It was universally taken as a sign from the Kremlin that Mikhail Khodorkovsky, Yukos's boss, had overstepped the line by openly financing two political parties—the Union of Right Forces and Yabloko—while associates of his, he admitted, gave to the Communists.

Yet Mr Khodorkovsky thinks that if Mr Putin, who turfed two meddlesome magnates out of Russia early in his term, is annoyed with him, that was not the main reason for the arrest. Yukos, he said a couple of days later on television, “is the country's biggest company, and its most independent. That, we understand, is unpleasant, especially to people who think in the old style.” Such people, he hinted, are among those close to Mr Putin, and Mr Lebedev's arrest was “the start of a struggle for power which will have to be concluded after the [presidential] elections in March.”

The tensions in Mr Putin's circle have existed since his predecessor, Boris Yeltsin, plucked him from relative obscurity to become briefly prime minister and then acting president, before he was elected head of state. In an attempt to restore order and shake off Mr Yeltsin's influence, Mr Putin surrounded himself with trusted people, many of them “Chekists”, like him, from the security services. Russia's top businessmen, on the other hand, have closer links with the remnants of Mr Yeltsin's team, who ran the country when they got rich. Both groups must already be thinking about who will replace Mr Putin in 2008.

Bashing big businessmen is popular with ordinary Russians and could make the St Petersburgers look like smart electioneers. It would also weaken Mr Khodorkovsky, a multiple threat to them. Not only for his own ambitions—he has often said he will resign in 2007, without explaining what he would do next—nor because, by financing other parties, he threatens the pro-Kremlin majority, but also because Yukos's planned merger with Sibneft, another oil firm, will make his company so big as to be nearly untouchable.

Purely by chance?

It was surely no coincidence that after Mr Lebedev's arrest, Russia's antitrust commission said it would delay approval of the merger for another three weeks. Then the country's chief prosecutor said that Yukos's tax position would be examined. And a few days before, Rosneft, a state-owned oil firm whose boss and Mr Khodorkovsky were already at loggerheads, accused Yukos of illegally getting shares in one of its subsidiaries—though that, say both companies, is indeed a coincidence.

Mr Khodorkovsky has no doubt trodden on some toes in his career and may do so again, and his woes may be a settling of personal scores as much as anything. But they are a clear sign to other plutocrats. Just days before Mr Lebedev's arrest, another of them, Vladimir Potanin of the Interros group, made a public show of contrition for past excesses and of fealty to United Russia, the coalition in the Duma that backs the Kremlin.

So will the St Petersburgers win out? They are indeed strong. Under Mr Putin several government agencies, such as the narcotics squad and the wiretap service, have been brought back inside the fold of the Federal Security Service (FSB). This week, in the wake of the Moscow bombing, mobile-phone firms agreed to remove the scrambling on their systems to let the FSB listen in on calls. Top St Petersburgers include Igor Sechin, the deputy head of the presidential administration (who controls access to the president); Sergei Ivanov, the defence minister; and Boris Gryzlov, the interior minister. One of United Russia's leaders, Mr Gryzlov himself recently launched a vigorous pre-electoral campaign with a wave of high-profile arrests of non-political villains.

But they have opponents. The People's Deputy party, a component of United Russia dominated by Chekists, announced this month that it was breaking off, to run in the elections alone. This, says Nikolai Petrov at the Carnegie Endowment in Moscow, may be a sign that it failed to get control of the pro-Kremlin party. And wise heads may be counselling Mr Putin that such blatant manipulation of the legal system in a private or political feud looks bad for the country and has to be stopped.

At least, that is what Mr Khodorkovsky would like to think. Most intriguingly, Mikhail Kasyanov, the prime minister and a member of Mr Yeltsin's clan, is the most recent bigwig to have weighed in, describing Mr Lebedev's arrest as “excessive”.

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