From the FT. You can fade the obligatory quotes from Khodorkovsky, but they are beginning to get the point: Sanctions have been a major own-goal from the economic, political and strategic standpoints, strengthening Russias resolve - and its not over yet! Sanctions extend influence of hardmen in Putin’s Kremlin Financial TimesBy Kathrin Hille in Moscow Russia’s business community and economic officials are in shock over the arrest of Vladimir Yevtushenkov, one of the country’s leading industrialists, and they are afraid. When Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, the country’s big business club, sent a petition in support of Mr Yevtushenkov to President Vladimir Putin, he thought it wiser to do so by courier than in person. Mr Yevtushenkov, one of the country’s richest men and main shareholder of the conglomerate Sistema, was put under house arrest on Tuesday on charges of money laundering in a case involving Sistema’s affiliate Bashneft, which state oil firm Rosneft had tried to buy. While the government fiercely rejects any suggestions that this is a political case, businesspeople and reform advocates in the government say it illustrates how the geopolitical crisis surrounding Ukraine and the pressure wrought by sanctions have changed the game in Russia’s corridors of power. “It is a tectonic change,” said Igor Yurgens, a former adviser to prime minister Dmitry Medvedev who chairs the Institute for Contemporary Development, a Moscow think-tank. “This marks the beginning of a creeping nationalisation in the oil and gas sector, and that is a direct consequence of the sanctions, the logical answer of a country that has always relied on its resources for security.” During much of his 14 years in power, Mr Putin has instinctively sought to strengthen the state. His popularity during his first two presidential terms largely stemmed from the perception that he had re-established the state’s authority and resurrected its institutions following the country’s robber-baron transition from socialism in the 1990s. Many of Mr Putin’s most trusted confidantes, such as Rosneft chief Igor Sechin or Vladimir Yakunin, head of Russian Railways, who like him started their careers in the security services, have reinforced his statist inclination. But for a long time their influence was tempered by technocrats and economic advisers. Under the influence of Mr Medvedev and Igor Shuvalov, deputy prime minister who is praised by foreign businesses as a pragmatic interlocutor, Mr Putin has at times championed private business and urged an improvement of the country’s investment climate. In depth However, as the Ukraine crisis spiralled into a full-scale stand-off between Russia and the west and sanctions from the US and the EU put growing pressure on Moscow, such pragmatic advisers are struggling to make themselves heard. “In the absence of good assets, easy credit money, easily available foreign investment and under sanctions, they have little to offer,” said Mr Yurgens. It is precisely the opposite of what western governments hoped to achieve. “You [in the west] reason that the sanctions will split the elite and force Putin to change course, but that’s not what is happening,” said a billionaire investor. “On the contrary, you are destroying those in Russia who are the friends of the west. The siloviki have been strengthened more than ever before, they are out of control now.” Alexei Ulyukaev, economy minister, warned on Thursday that the Yevtushenkov case risked adding to capital outflows and dampening investment activity. But he hurried to say that it was inappropriate to compare the case to that of Mikhail Khodorkovsky, the former oligarch who after falling out with Mr Putin was jailed for a decade and lost his Yukos group to Rosneft. Mr Khodorkovsky argues Mr Putin’s decision-making system has turned dysfunctional under pressure of the sanctions. “The system is focused on him alone, and therefore, when he doesn’t say anything, things either don’t get decided at all or they get decided by people who are not authorized by anyone and who have selfish motives,” he told Russian media this week. People briefed on internal policy discussions said both Mr Medvedev and Mr Shuvalov, who try to prioritise the economy over politics, had become very subdued. “They deliver the message but in a very cautious, loyal way,” said a source close to Mr Medvedev. Their caution is understandable. The Kremlin leadership has already shown zero tolerance for those breaking ranks. Last month, Sergei Belyakov was fired as deputy economy minister just hours after criticising in a Facebook post a government decision to divert pension savings to the budget for a second year. In addition, there are once again rumours that Mr Medvedev could be replaced as prime minister later this year. Such predictions have proved wrong many times before. But earlier this week, a meeting between Mr Putin and Tatyana Golikova, head of the Accounts Chamber, a financial control body, raised eyebrows. Ms Golikova said Russia had to adjust its economic development policies to respond to the sanctions, and Mr Putin replied that he expected her to work out a programme along those lines – remarks interpreted by some as a hint of a prime ministerial role
Posted on: Fri, 19 Sep 2014 01:07:00 +0000
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