Putin's Dark Lord Keeps Power in Oil Patch

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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Russia's leaders have unveiled a new government that is notable in the absence of one prominent figure: Igor Sechin, the dark lord responsible for dismantling the oil empire of oligarch-turned-prisoner Mikhail Khodorkovsky.

Sadly, Sechin's departure does not augur a fresh start. Rather, it demonstrates where the true power in Russia lies. Hint: It’s not in the government.

When newly inaugurated President Vladimir Putin and his predecessor, now Prime Minister Dmitri Medvedev, announced the new cabinet, Medvedev proudly noted that he had changed three quarters of its members. The fresh appointments are supposed to signal Medvedev's desire to promote younger, more modern professionals without Soviet experience.

Newer, though, doesn’t always mean better. Consider Culture Minister Vladimir Medinsky, who earned his position as an activist for the ruling United Russia party: The self-styled historian received a doctorate last year despite well-documented plagiarism in his thesis.

The appointment attracted much ridicule in the blogosphere. “I am ecstatic at Mr. Medinsky's appointment because it confirms my hypothesis: The closer the system is to collapse, the crazier its decisions,” opposition journalist Yulia Latynina wrote.

Two other newcomers stand out in a more positive light: Interior Minister Vladimir Kolokoltsev and Arkady Dvorkovich, deputy prime minister in charge of trade, energy, industry, transport and agriculture.

Kolokoltsev is reputed to be that rare animal in Russian law enforcement: an "honest cop," according to Kirill Kabanov, head of a nongovernmental organization called the National Anti-Corruption Committee. He replaces a minister who had done little to combat corruption in Russia's vast police force (9.7 officers per 1000 residents, compared with 2.7 in the United States). As Moscow's police chief during the recent anti-government protests, he demonstrated his loyalty to Putin. Although his record has been marred by the street fighting that broke out on May 6 and the subsequent chaotic arrests of opposition activists, he has generally kept the use of force to a minimum. The protests have not resulted in a single casualty apart from the death of a photographer who fell off a fire escape trying to line up a good shot.

The choice of Dvorkovich, Medvedev's erstwhile economics adviser, cheered investors who saw the 40-year-old intellectual as a good trade for Sechin, whose post he will occupy. Analysts at Citibank called the switch the “most important piece of positive news” in the cabinet announcement. Dvorkovich is decidedly a Medvedev man. He was the former president's sherpa in Group of Eight negotiations, and the two are said to be close.

The cabinet retains quite a few familiar faces. First Deputy Prime Minister Igor Shuvalov was back in charge of economics and finance, despite recent revelations concerning his joint business dealings with some of the nation's wealthiest businessmen. Vladislav Surkov, the man who helped Putin build United Russia, remained deputy prime minister in charge of science, culture and innovations. Nationalist Dmitri Rogozin kept his job as deputy prime minister in charge of the defense industry. Millionaire Alexander Khloponin stayed on as the top official in charge of the rebellious Caucasus region.

The relevance of the cabinet appointments, though, is limited. Putin looks set to govern from the Kremlin, using Medvedev's government as a foil. Many of the new ministers look disposable, and most of the former cabinet's top brass have joined the presidential staff. They include Tatyana Golikova, who was responsible for health and social issues in the old cabinet, ex-economics minister Elvira Nabiullina, former education minister Andrei Fursenko and Yury Trutnev, until recently in charge of natural resources. “The heavyweights of the old cabinet are moving to the Kremlin, and they are not going to let go of the levers” of power, wrote commentator Mikhail Fishman.

What, however, of Sechin, the gray cardinal who has been Putin's right-hand man since their time together in the St. Petersburg city government in the 1990s? He became head of Rosneft, the state-owned oil company that swallowed up the assets of Khodorkovsky's oil company, Yukos. “I think you have the right to enjoy the results of your work,” Medvedev told Sechin. Just days before Sechin's appointment, Putin quietly made the government's controlling stake in Rosneft immune from privatization.

Sechin's move offers a glimpse of the true nature of power in today's Russia. Being a minister does not count for much in a country run by a close-knit group of Putin's friends and business associates. It is the resources one commands, and the phone numbers one can call, that determine one's true influence.

"Power lies where oil lies," wrote columnist Dmitry Butrin in the daily Kommersant. "Where is the oil? We won't tell you, but all the right people know.”

(Leonid Bershidsky, an editor and novelist, is Moscow and Kiev correspondent for World View. Opinions expressed are his own.)



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To contact the author of this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

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Mark Whitehouse at mwhitehouse1@bloomberg.net