Commentary on Political Economy

Tuesday, 8 March 2022

 

To defeat Putin, you have to know how the Kremlin works

Olga Chyzh

The west misunderstands the Russian concept of oligarchy, which leaves these powerful actors more beholden to the state

Boris Berezovsky, left, and Roman Abramovich in the state duma in 2000. Berezovsky was forced into exile after he turned on Putin.

Western states hit Russia with a package of sanctions so unprecedented that they were described as a “declaration of war” by Russia’s president, Vladimir Putin. The hope was that beyond the measures targeting the Russian central bank and financial institutions, asset freezes and travel bans would “entice” powerful oligarchs and members of Putin’s inner circle to influence the Russian leader to call off the invasion. Some even suggested that sanctions might topple the regime.

But while the world rejoiced at the spectacle of seized lavish superyachts and secluded chalets, Russian troops continued making inroads and attacking Ukrainian cities. Only two of the sanctioned individuals expressed their rather reserved disapproval of the war – hardly the “mounting pressure” that the west might have envisioned.

Russian oligarchs will not put pressure on Putin, not now and not anytime soon. They stay silent, even as they watch their assets and fortunes dwindle. We should have expected this. The west misunderstands the concept of oligarchy in modern Russia, which leaves these powerful actors more beholden to the state – or president – than any outside influence, and prevents the jet-set tycoons we see in the western media from wielding real political power.

What the west calls “Russian oligarchs” are not a homogenous group in terms of their interests, functions within the state, or political influence. Those who have direct access to the president fall into two broad categories: the economic oligarchs and the strongmen.

The first group – the economic oligarchs – are essentially trustees who manage day-to-day operations of various industries within the Russian economy, such as banking or oil extraction . Beyond the gaudy decor, private jets and extravagant parties, there are two important factors that characterise this group: their dependence on the status quo, and a total mismatch between their wealth and political influence.

First, the economic oligarchs’ position within Russian society is surprisingly precarious, as it is entirely predicated on their relationship with President Putin. Practically all assets the oligarchs manage ultimately belong to the state, with Putin as the final arbiter. The economic oligarchs lack ways to legitimate their position beyond the current regime: their biggest asset – their personal connection to Putin – is not something they can pass on to their children or carry over past Putin’s regime.

And the domain of these oligarchs is strictly economic – they are expected to stay out of politics. This is the well-understood price for gallivanting across Europe, buying football clubs, and working with western business partners.

The proof of this system can be seen in the cases of those who violate it: when the media oligarch Boris Berezovsky turned on Putin in the early 2000s, he was forced into exile and his massive Russian media empire – gifted to him in the privatisation boom of the 1990s – was taken back by the state.

As far as the economic oligarchs are concerned, Putin’s continued support, and his continuation in power, guarantee their wealth and safety. As long as they fulfil their part of the deal and stay out of politics, they get to keep their remaining assets in Russia. Should they speak up, they risk losing not only their remaining wealth, but may also face criminal charges and prosecution. However sad they are to let go of their western assets, the economic oligarchs have even more to lose by speaking out against the war. So they stay quiet.

The second group, the strongmen, consists of Putin’s St Petersburg political connections . Originally middle managers, low-level administrators, special ops, scientists, athletes and criminal thugs, these individuals are now holding key government and other power positions. These are Putin’s most loyal supporters, who also hold the most political influence.

This group, on balance, are ideologically conservative and hostile towards the West. They view economics as a tool of the state and are unconcerned with western sanctions. If anything, they view Russia’s looming isolation and the forced return of the economic oligarchs to Russia as a benefit. Autarky and isolation facilitate repression, and further strengthen their status. Strongmen have no reason to remove Putin now – he is fulfilling their dream of a ruthless police state.

The above description is simplified, a rough sketch of the power dynamics in today’s Russia, but it offers important insights. These latest sanctions are unlikely to topple the regime because they do not prevent Putin from distributing rents to his core supporters. They decrease the size of the pie but the pie is still very large, and as long as he can do this, his inner circle will stand by him.

The central flaw in the design of western sanctions is the premise that putting economic pressure on the inner circle of Russia’s president will cause them to demand change. The economic oligarchs feel some pain, however, both groups will still watch, and one will cheer, as Russian troops encircle Ukrainian cities.

What the sanctions do achieve is the weakening of Russia’s economy, and with that, its military capacity. It is only a matter of time before the state can no longer pay its entitlements and employees – doctors, teachers, administrators, but also the police and the military-industrial complex. No new tanks, destroyers or howitzers, and no soldiers to shoot them either.

Whether it is going to be weeks or months depends on how Russia plays its remaining cards, such as cooperation with China, and how effectively it exploits its existing resource monopolies. In the meantime, Putin’s war will continue unchecked.

  • Olga Chyzh researches political violence and repressive regimes, she is an assistant professor in the Department of Political Science at the University of Toronto

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