NATIONAL CHAMPIONS
This thesis was written considerably before Putin became head of the FSB. No one, including Putin, could have dreamed in 1996 or 1997 that he might someday be appointed prime minister as he was in August 1999, much less acting president five months later. In this thesis, Putin emphasized the concept of what he and others have come to call “national champions.” But Clifford Gaddy of the Brookings Institution, has found that this notion of “national champions,” which became so important during Putin’s presidency, actually did not originate with Putin. In a remarkable piece of textual detective work, Gaddy and his Russian assistant, Igor Danchenko, discovered that almost sixteen pages of Putin’s dissertation, “The Strategic Planning of the Reproduction of the Resource Bases,” were copied almost intact from an earlier 1978 study entitled, “Strategic Planning and Policy,” written by two University of Pittsburgh analysts, William King and David Cleland.6 Their book was subsequently translated into Russian and Putin includes it in his bibliography, but there is only a single citation of it in the text.7
Regardless of whose idea it was originally (Charles de Gaulle advocated something similar when he was president of France in the 1950s), as soon as he became president, Putin took it as his own and began to create his own national champions. As he envisaged it, these national champions would put promotion of the state’s interest over profit maximization. At home that might mean keeping energy prices low as a form of subsidy for the public. Outside Russia, it might mean suspending deliveries to countries that refuse to support Russian foreign policy or advance its interests. These national champions would most likely be more than 50 percent owned by the Russian government. But with the right type of guidance and pressure, there was no reason that predominantly private companies could not also serve as national champions. Should there be times when a private company might decide to rebuff state guidance, the state should use its powers to induce compliance. That might involve sending in state tax auditors or inspectors from the environmental agencies to check for wrongdoing. In the case of petroleum or gas producers, refusal to go along with the state or advocating undesired initiatives could be remedied by refusing such mavericks access to Russia’s oil and gas pipeline monopolies that control shipment to both domestic and foreign markets.
FROM BLUEPRINT TO ACTION
As a first task in initiating his national champion program, Putin staffed Russian state-owned companies with leaders who would be more amenable to doing his and the state’s bidding. This meant that he had to remove some of Russia’s more notable and powerful oligarchs from their only recently privatized companies. As an indicator of Putin’s success in reclaiming the state’s ownership of the country’s oil output, when he took over as president in 2000, the state’s share of total crude oil production was 16 percent; by late 2007, it had increased to about 50 percent.8
Almost immediately after his election as president in March 2000 Putin set to work. Just three months later in June 2000, he forced Viktor Chernomyrdin out of his sinecure as chairman of Gazprom’s board of directors, a post he had acquired only a year earlier in mid-1999 (see Table 5.2). In the Soviet era, Chernomyrdin had been minister of the Gas Industry. In 1989, only two years before the collapse of the Soviet system, he took the initiative in transforming his ministry into “Gazprom Konsern,” making himself its president in the process. In late 1992, Gazprom Konsern was carried one step further and became the Russian joint stock company, Gazprom (RAO Gazprom).9 Described by Jonathan P. Stern as the “partly privatized joint stock company,” RAO Gazprom in February 1993 was in turn transformed into OAO Gazprom, an Open Joint Stock Company.10 As we saw in Chapter 4, until mid-2005 when Putin arranged for the state to buy 50 percent plus one share of Gazprom’s stock, the Russian government held only 35–40 percent of the company’s shares.11
Appointed by Yeltsin as deputy prime minister of Russia in mid-1992, Chernomyrdin made sure that in his absence Gazprom was well provided for. Rem Vyakhirev, who had served under Chernomyrdin as vice chairman of the Ministry of the Gas Industry, succeeded Chernomyrdin at Gazprom and in mid-1992 became its CEO. A few months later Yeltsin promoted Chernomyrdin to the post of Russia’s prime minister. Given the incestuousness of all these arrangements, it was not much of a surprise to learn that Gazprom under Vyakhirev became one of the largest financial angels backing Chernomyrdin’s party in the December 1995 election for the Duma. It did the same a few months later in June 1996 when Yeltsin ran for reelection as president. Reflecting the closeness of their relationship, wags transformed Chernomyrdin’s party slogan, “Nash Dom, Vash Dom (Our Home, Your Home),” into “Nash Dom, Gazprom (Our Home, Gazprom).”
By March 1998, Yeltsin had begun to suspect that Chernomyrdin was taking his job for granted and on a growing number of occasions had begun to act as if he were president, not Yeltsin. Consequently, Yeltsin removed him as prime minister. To soften the blow, Yeltsin made Chernomyrdin chairman of Gazprom, a homecoming of sorts. That was all pre-Putin.
The care and feeding of the Gazprom executives that characterized the Yeltsin and Chernomyrdin years changed abruptly in June 2000 after Putin won election as president. At the time it did not seem as though Putin was accomplishing very much, but looking back at his first year in office, the firing of Chernomyrdin that June was just the kickoff of a concerted campaign.
During the same month, Putin also went after the first of the “upstart” or non-”nomenclatura” oligarchs (see Table 5.2). For the most part, these were newly rich oligarchs who in Soviet days had never been included in the party or government hierarchy, officially referred to as the nomenclatura. In fact, most had one non-Russian parent and in some cases should not have been listed as Russian on their internal passports, an important prerequisite for anyone in Russia seeking inclusion on the nomenclatura list that identified who was important in the Soviet Union. And as we saw, many had also been involved in private or black market activities—what the Soviet Union classified at the time as “economic crimes.”
RECLAIM THE TV NETWORKS
One of Putin’s first targets among this group was Vladimir Gusinsky. He headed Media-Most, a media company that encompassed NTV, the country’s largest private TV network, as well as several newspapers and magazines. Gusinsky had created that media empire in just a few years. To a Kremlin unused to a TV network that was not controlled by the state, Gusinsky had a well-deserved reputation in the Kremlin as “a pain in the neck.” Yeltsin was the first to feel his bite. Gusinsky’s NTV was particularly critical of the Yeltsin government’s 1994 war with the Chechens. In retaliation, in December 1994 Yeltsin’s bodyguards, led by Alexander Korzhakov, physically attacked Gusinsky’s bodyguards, forcing them to lie in the snow outside Gusinsky’s office in what became known as “the faces in the snow” incident. But as angry as Yeltsin and his family were over the way they were criticized and satirized by NTV, particularly in Kukely, a weekly puppet television show, Yeltsin never moved to close Gusinsky’s company or jail him.