Russia stepped decisively off a path of western-led global integration on the morning of 25 October 2003. Mikhail Khodorkovsky, the country’s richest man and the chief shareholder in its largest energy company, Yukos, had touched down to refuel his private jet in Novosibirsk when Russian Federal Security Service commandos forced their way on to the aircraft and arrested him on trumped up charges of fraud and tax evasion. Khodorkovsky was swiftly remanded in Moscow’s notorious Matrosskaya Tishina jail while the Kremlin put the finishing touches on a show trial that would see the oligarch sentenced to nine years in a Siberian prison.
Khodorkovsky was no saint: he had amassed a vast fortune during the chaotic and corrupt privatisations of the Yeltsin years while most of the country was reduced to poverty, and few mourned his downfall. But the unceremonious seizure and dismemberment of his business empire by a shadowy clique of men surrounding the president Vladimir Putin ushered in a disturbing new era in Russian politics. The Kremlin’s destruction of Yukos forms the central chapter in Catherine Belton’s fearless and fascinating account of the emergence of the Putin regime from the ashes of the Soviet Union.
A renowned business journalist who spent years covering Russia for the Financial Times, Belton follows the money. She has an unrivalled command of the labyrinthine history of share schemes, refinancing packages, mergers, shell companies, and offshore accounts that lay bare the stealthy capture of the post-Soviet economy and state institutions by a coterie of former KGB officers, or siloviki. Belton combines this financial history with testimony from a dazzling array of Kremlin insiders, diplomats, intelligence officers, prosecutors, mobsters and oligarchs. The result reads at times like a John le Carré novel.
Hazy invocations of Putin’s KGB past have become something of a journalistic cliche. Belton, however, gives a granular account of Putin’s early years as an agent in Dresden not simply as an ominous feature of his biography but as the seedbed of the regime over which he would preside. Like Putin, the siloviki who came to form his inner circle cut their teeth in the KGB’s clandestine operations in the final years of the cold war. They learned sophisticated techniques for washing money through fake companies abroad in order to finance Kremlin-friendly political movements and developed illicit networks for smuggling sanctioned western technology back into the Soviet Union. They sowed disinformation to discredit western leaders, perfected the use of kompromat to blackmail businessmen and officials and forged alliances with terrorist groups and organised crime. Updated for an era of globalisation and the internet, this toolkit now supports the Kremlin’s grip on power at home and its long political reach abroad.
Yet Putin does not emerge from these pages as an evil, cat-stroking mastermind plotting his moves years in advance. Rather he appears an unscrupulous and resourceful operator, ready to deploy any weapon, break any rule and subvert any system to consolidate his power, wealth and international prestige. The siloviki worked things out as they went along. As the Soviet Union began to unravel, they siphoned off vast sums from the dwindling economy to ensure the survival of their networks at home and abroad. The 1990s saw them shut out of power as pro-western oligarchs such as Khodorkovsky held sway in the Kremlin. But they bided their time, and they plotted.
Although he is often portrayed as the “accidental president”, Putin’s rise to the presidency did not have “much to do with chance”. In 1999, the siloviki launched a coordinated attack on Yeltsin’s “family” of relatives, advisers and oligarchs, leaking damaging evidence of corruption to prosecutors at home and abroad. Mired in scandal and fearful of an old guard restoration led by former communists, the family cast around for a biddable figure to replace the ailing and erratic president and protect their interests. The Kremlin’s fixer-in-chief Sergei Pugachev pushed his protege Putin, who had proved himself an effective bureaucrat and whose principal charm lay in the fact that “he was as obedient as a dog”. Turning a blind eye to Putin’s own background in the security services, the family anointed him prime minister in August 1999 and then, when Yeltsin abruptly resigned on the eve of the new millennium, president of the Russian Federation. Fearing a “coup by forces from the communist past, what the Yeltsin family had in fact succumbed to,” Belton writes, “was a creeping coup by the security men.” The fox was in the hen house.
With their man now installed in the Kremlin, the siloviki began “to carve up the country’s strategic assets for themselves”. They targeted one company after another, probing weaknesses and exploiting the chequered past of every businessman who had made a fortune in the chaos of the preceding decade. They saw the role of state institutions – the tax office, law enforcement, the judiciary – not as upholding certain rules by which all economic actors had to operate, but rather as a “predatory machine” that could be used to destroy rivals and seize their assets.
Under Putin, the siloviki have amassed a vast slush fund that serves both personal avarice and geopolitical strategy. The soaring fortunes of Putin’s inner circle, glimpsed in the revelations of the Panama Papers, are indistinguishable from the vast off-the-books war chest that the Kremlin draws on to finance its subterfuge and interventions abroad. And if there is an ideological glue that binds the siloviki together, it is their dream of a restoration of Moscow’s imperial might and the conviction that the west is out to get Russia. The revolutions in Georgia and Ukraine of 2004-5 fed Putin’s “dark paranoia” that the Kremlin was threatened by a western plot to topple his regime. The Kremlin has subsequently revelled in escalating conflicts with the western powers as a marker of Russia’s newly regained stature on the world stage. At home, a slavish media celebrates Russian military exploits in Ukraine and Syria, while abroad, the Kremlin’s media networks spew a stream of innuendo and obfuscation that creates mistrust in western governments and institutions.
At the same time, Putin’s regime has held up an unflattering mirror to the west. Belton shows how western governments that preach the rule of the law, free markets and respect for private property have turned a blind eye to the plunder of Russian businesses by the Kremlin and its allies. Western companies have rushed to sign new deals that legitimised the proceeds of these corporate raids; western banks have laundered the Kremlin’s money and allowed it to penetrate into the economies of Europe and the US; western political parties and institutions have shown themselves ready to accept donations of dirty Russian money. “It looks like the whole of US politics is for sale,” one former senior Russian banker tells Belton. “We believed in western values … But it turned out everything depended on money, and all these values were pure hypocrisy.”
A groundbreaking and meticulously researched anatomy of the Putin regime, Belton’s book shines a light on the pernicious threats Russian money and influence now pose to the west. Deepening social inequality and the rise of populist movements in the wake of the 2008 financial crisis have “left the west wide open to Russia’s aggressive new tactics of fuelling the far right and the far left”. Kremlin largesse has funded political parties across the continent, from the National Front in France to Jobbik in Hungary and the Five Star movement in Italy, which are united in their hostility to both the EU and Nato. The Kremlin’s “black cash”, former Kremlin insider Sergei Pugachev laments, “is like a dirty atomic bomb. In some ways it’s there, in some ways it’s not. Nowadays it’s much harder to trace.” Putin’s People lays bare the scale of the challenge if the west is to decontaminate its politics.