STRATFOR ANALYSIS

The fate of Russia’s Liberals

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Russia’s economic and political problems are piling up, and they may be putting members of the country’s more liberal circles at risk. In the most high-profile arrest to be made in post-Soviet Russia — and arguably, since the 1950s — Economic Minister Alexei Ulyukayev was detained Tuesday Nov. 15 on charges of bribery and extortion. According to Russian authorities, Ulyukayev received $2 million from state-owned oil giant Rosneft in exchange for approving the company’s purchase of the Bashneft oil firm. The sudden arrest has topped the headlines throughout the day. Ulyukayev was paraded through court, and a stream of Kremlin officials expressed their shock at the accusations against him. But the arrest has also raised some disturbing questions about President Vladimir Putin’s involvement in the incident and the fate of the country’s remaining liberal elites.

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Ulyukayev has been a prominent figure in Russian politics for 25 years, rising through the ranks of Putin’s administration to reach the top of the Ministry of Economic Development in 2013. Widely viewed as one of Russia’s most liberal economic minds, Ulyukayev has pushed for deep structural reforms that include reducing the state’s control over and intervention in the economy. Under pressure from the government’s more hawkish factions, however, he has been repeatedly forced to revise his proposals for change.

One of the minister’s biggest political battles has centered on his bid to partially privatize Rosneft. The controversial move, intended to loosen the Kremlin’s grip on the oil firm, has pitted him against one of Russia’s most powerful politicians: Rosneft chief Igor Sechin. But the oil tycoon recently offered the Kremlin a deal. In return for Moscow’s permission to take over Bashneft, the country’s sixth-largest oil firm, he would agree to allow Rosneft’s partial privatization. Ulyukayev, along with many other liberal economists (and at the time, Putin himself), vocally opposed the deal, which he considered to be an attempt by Sechin to expand his own power base. In the past few weeks, however, Ulyukayev appeared to be reconsidering his stance before suddenly throwing a wrench in the talks by threatening to privatize an even larger share of Rosneft in 2017. The threat, which would have left the government with a minority stake in the company, was peculiar: It came at a time when the Kremlin and Rosneft seemed to have reached a temporary truce, and Ulyukayev seemed to be acting alone.

Regardless, it is clear that Ulyukayev crossed Sechin and is now paying dearly for it. The investigation against the economy minister has been in the works for months, and it has been spearheaded by the Federal Security Service’s economic crimes unit — a group that was purged at the end of July and replenished by Sechin’s closest supporters. (The unit is even known as Sechin’s “personal task force.”) Weeks later, the Investigative Committee (the force that made today’s arrest) was similarly cleared out and restaffed in what many saw as a power grab by Sechin, giving him the tools to target high-ranking officials for financial crimes.

According to the allegations being leveled against Ulyukayev, he received $2 million in bribes from Rosneft just before his arrest. The charges are questionable, however, for a number of reasons. For one, Ulyukayev would have known that threatening Sechin had its risks, and the amount of money in question is fairly small compared with the massive funds at Rosneft’s and Sechin’s disposal. If the charges stick, Ulyukayev will become the highest-ranking Kremliner to be found guilty of criminal charges since the arrest and execution of Soviet security chief Lavrentiy Beria in 1953. Even the members of the “Gang of Eight,” who attempted to launch a coup against Mikhail Gorbachev in 1991 before the Soviet Union fell, were nearly all given amnesty or acquitted. (One of the gang’s members committed suicide.) In fact, when Russian ministers or elites fall, they are almost always shuffled into different posts instead of forced out in disgrace.

Tuesday’s arrest (Nov. 15) marked an unexpected and extreme exception that was put on display for all to see. Whereas Sechin’s role in Ulyukayev’s reversal of fortunes is fairly obvious, Putin’s is not. Presidential spokesman Dmitry Peskov said Putin was aware of the investigation, but he gave no hint as to whether the president backed or pursued it. Either way, the Kremlin will undoubtedly spin the arrest as proof of the government’s toughness on corruption, no matter the rank of those implicated. But if Sechin built his case against Ulyukayev without first getting Putin’s blessing, it would be a notable demonstration of Sechin’s power at a time when the president is growing concerned by challenges to his reign emanating from the Russian elite. Should Sechin have acted on his own, Putin may choose to put him in his place by forcing him to drop the charges, arranging for Ulyukayev’s acquittal, or curbing Rosneft’s clout.

Alternatively, Sechin could have coordinated the arrest with Putin, a troubling sign of a crackdown on Russia’s liberal circles to come. As the country’s economic and demographic problems worsen, Moscow is becoming more hawkish and autocratic in its policies at home and abroad. Ulyukayev may just be the first victim of a sweeping effort to target the reformist and progressive figureheads among the Russian elite. But until more information emerges, the question of whether Ulyukayev was simply caught in a struggle between Russia’s most powerful men or was made an example of by an increasingly aggressive Kremlin will go unanswered.

©STRATFOR

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