Russia's President Fights to Keep Control
By: Analysis | Stratfor.comAugust 4, 2016

Summary

Behind the walls of Moscow's Kremlin is a shadowy world of subterfuge and intrigue. In a place where cloak and dagger tactics are the norm, the past month has been particularly chaotic for the elites controlling Russia. Raids, arrests, forced resignations and reshufflings have left the political battlefield littered with the fallen. The world of the Kremlin is intentionally opaque, but one common theme is emerging: There is a grab underway by the Federal Security Service (FSB) to control Russia's financial flows and assets. Furthermore, one particularly formidable FSB elite is consolidating power in and beyond the FSB — a move that is not only personally dangerous but could also challenge President Vladimir Putin's authority at a time when Russia's strongman faces many intersecting crises. 

Analysis

Russia is undeniably a country with problems. A persistent recession is cultivating resentment among the Russian population, Western sanctions continue to bite, Moscow is embroiled in conflicts in places such as Ukraine and Syria, and the Kremlin faces a critical test in upcoming parliamentary elections in September. This perfect storm of crises has deepened existing fractures in the Kremlin, especially between its liberal and hawkish factions, leaving Putin vulnerable on all sides.

Traditionally, high-ranking elites do not criticize the president's policies. Recent months, however, were punctuated by a string of rants by hawks and liberals alike, questioning Putin's policies and the shrinking rewards that he can offer elites and loyalists in light of Russia's dire economic situation. Putin built his cabal on a crony system, placing his trustworthy and influential inner circle at the helm of Russia's most strategic and lucrative assets. The system has permeated nearly all aspects of Russian business and government, but it is buckling under the pressures on the country and its leader. 

Mapping Out Events

Russia is no stranger to reshufflings. But on July 28, Putin unexpectedly launched his largest reorganization of Russia's regional leadership in the past decade, sanctioning 13 resignations and nine new appointments. Though Russian presidential spokesman Dmitri Peskov called the shake-up a "normal rotation," nearly all the appointments were made from among the security services — FSB officials, former KGB personnel and members of the National Guard. Now, at least one in five of Russia's regional leaders hails from the security services. The changes may be the Kremlin's attempt to install people at the regional level who can draw out supporters for Putin's ruling United Russia party in September's elections while also preventing protests.

As security service personnel take over regional governments across Russia, the FSB has been broadcasting its dominance across the country's security sector. FSB operatives raided the Moscow offices of the Investigative Committee on July 19, arresting the head of its Moscow branch, his deputy and the internal affairs division chief. The detainees, who are among Russia's most prominent investigators (having worked on high-profile cases including the proceedings against the now-defunct oil giant Yukos), face charges of corruption, accused of taking bribes from notorious organized crime leader Zakhar Kalashov (aka Young Shakro). Seven other federal investigators, meanwhile, are also under investigation. 

Because the Investigative Committee has the power to prosecute some of Russia's most powerful people, influence over the organ has long been highly coveted among the security services. The committee's current chief, Alexander Bastrykin, a controversial and rabidly hawkish figure in Russia, has long lobbied for increased powers for his organization. In 2014, he proposed that the Investigative Committee absorb all other security services' financial crimes units, something the FSB bucked against, and in recent months, he has been a vocal critic of Putin, the security services and the military. The FSB crackdown on Bastrykin's team could be another attempt to consolidate power over the committee while silencing its chief. In the days after the arrests, Bastrykin denounced his former officers, falling in line with the FSB investigation. A report from Russia's RBC TV (which regularly receives credible leaks from within the Kremlin) claims that the FSB informed Putin of the raid — and not that Putin consented or ordered the move. If true, this means that the FSB made a very high-level strike before consulting with Russia's president, something unimaginable to the elite ranks of the Kremlin.

The week after the raid on the Investigative Committee, the FSB launched yet another high-level crackdown, targeting the longtime head of Russia's Federal Customs Service, Andrei Belyaninov. A series of photographs documented the raid on Belyaninov's home, revealing shoe boxes piled high with cash, millions of rubles and hundreds of thousands of euros laid out over a red tablecloth, and expensive art collections. One of Putin's close friends, having served with the Russian leader in the KGB in East Germany in the 1980s, Belyaninov is the highest-ranking government official included in the FSB's anti-corruption campaign.

The crackdowns are not just about power; they also aim to increase the FSB's control over economic and financial decisions and assets. And the FSB is not just going after its rivals. It is also consolidating from within, which could put one its most powerful leaders — FSB alum and Rosneft chief Igor Sechin — more and more at odds with Putin.

Setting Conditions for a Purge

Before the FSB began raiding competing security services, it undertook a major purge of its own ranks. In particular, the sweep targeted the organ's Economic Security Service, whose commanding generals typically handle financial crimes, but it also ousted the FSB's deputy director and officials from several other departments. Though the purge was seen as a sign that the FSB was preparing to crack down on big businesses, in recent weeks thе remit has expanded to include other security services.

Adding to the murkiness, the purged generals were replaced by members of the Internal Security Directorate's 6th Service, a section of the FSB nicknamed "Sechin's task force." Sechin set up the 6th Service in 2004, when he was deputy chief of the presidential administration, to expand his power base through increased influence over energy firms, security loyalists and businessmen. The question now is whether Putin sanctioned Sechin's power grab within the FSB, a move that will not only further empower his loyalists but also give Sechin the power to target money and assets across the country.

A Dangerous Feud

It seems that Putin and Sechin have been at odds in recent years — not that Russia's two most influential men would publicly display such a rift. Since low oil prices plunged Russia into recession, the Kremlin has increasingly leaned on Sechin's primary asset, Rosneft. Subsequently, Rosneft and the Kremlin have disagreed over taxes, how much the state can pilfer from the firm and the state oil company's ability to bring in foreign partners. More signs of a split emerged in the past two weeks when Rosneft began to draw up a bid for Bashneft, Russia's sixth-largest oil firm. Many oil companies and investors have been eyeing Bashneft since its privatization was approved in May. But Russia's deputy prime minister reportedly barred Rosneft from taking part in the bidding, on Putin's orders. Rosneft has since announced that it will not obey the Kremlin's directive, setting the opposing sides up for a bitter stalemate. Sechin could still find a way to defy the president less directly, though. Eduard Khudainatov, a Sechin loyalist who runs Russia's Independent Petroleum Co., could make a bid for Bashneft instead, much as he did when he bid on Yukos asset Yuganskneftegaz before reselling it to Rosneft.

The Kremlin's pushback followed Sechin's suggestion that he may not be on board with Moscow's plans to privatize a stake in his beloved Rosneft later this year. Even though the Kremlin insists that the government's budget will not remain balanced without the sale, Sechin will not sell another stake in his firm without receiving significant compensation.

But in challenging the Kremlin, Sechin could find himself on thin ice. Putin has already demonstrated that no member of the Russian elite is beyond reproach. Last October, the president fired Vladimir Yakunin, a longtime partisan and influential silovarch, from a position at the head of Russian Railways, shocking Putin's inner circle and Kremlin-watchers alike. Putin had been pressuring Yakunin to dial down his company's expenditures and his own flagrant displays of wealth, but Yakunin defied the president, a move that ultimately cost him. Though Yakunin's takedown was seen at the time as a stern warning to Sechin, it apparently was not heeded. If Sechin is following Putin's orders, he has a strange way of going about it. The oil baron is beginning to flaunt his exorbitant wealth, reportedly building a $60 million mansion outside Moscow. Even so, Putin seems to be wary of confronting Sechin.

A Bulldog Fight Under a Rug

In fact, the Russian leader seems to be wary in general. Putin created his own exclusive military in April and appointed his personal head of security, Gen. Viktor Zolotov, to lead the force. Stories of Zolotov's clashes with the FSB have swirled for years. But the gossip reached new heights in 2015, when Putin went missing for 10 days after rumored infighting among the FSB, Zolotov, Putin and Chechen President Ramzan Kadyrov, following the assassination of opposition leader Boris Nemtsov

Two weeks ago, Putin abruptly canceled a string of domestic trips, leading to speculation as to why he was suddenly refusing to leave Moscow. Perhaps Putin remembers the "vacations" Soviet Premier Nikita Khrushchev was forced to take before he was removed from his post. The presidential spokesman told the media July 28 that the Kremlin would no longer be publicizing the president's travel schedule, another sign that Putin may need to remain at his home base. Amid what looks to be another Kremlin intrigue like that of 2015, opposition heavyweight Roman Dobrokhotov tweeted last week: "Cops are afraid of the prosecutors, prosecutors are afraid of the Investigative Committee, Investigative Committee is afraid of the FSB, FSB is afraid of Kadyrov, Kadyrov is afraid of Putin, and Putin is afraid of everybody."

The murky domain of Kremlinology rarely delivers answers until a clear victor emerges. As Winston Churchill famously said, "Kremlin political intrigues are comparable to a bulldog fight under a rug. An outsider only hears the growling, and when he sees the bones fly out from beneath it is obvious who won." Today, the story looks to be that of a panicked security service hoping to control Russia's shrinking financial assets, if only to bolster its own power and wealth. Whether the power grabs will put these security elites in Putin's crosshairs or strengthen them enough to challenge the Russian leader remains to be seen. Regardless, the infighting is yet another major stressor on the Kremlin at a time when the crises just keep piling up. 

This article originally appeared on Stratfor.com

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