Along with these sectoral shifts came changes in the social and demographic profile of the business elite, and a recalibration of the balance between ‘insiders’ and ‘outsiders’. As industrial and extractive concerns became more prominent in the 2000s, the predominance of Moscow decreased and the influence of industrial and resource-rich regions such as the Urals and Western Siberia rose. By 2007, only seven of the top forty oligarchs came from Moscow; most of the rest were from cities or smaller towns in the country’s vast hinterland. This signified a tilt, too, in favour of ‘insiders’: as domestic industry revived and natural-resource prices rocketed, the assets that had been seized a decade earlier by former factory managers, ‘red directors’ and members of the old apparat became highly lucrative, bumping their owners much further up the rich list.
At the same time, the weight and role of the state in private profit-making also underwent a mutation. But this did not happen because of a statist takeover or ‘business capture’. Instead, ‘insiders’ and, increasingly, state functionaries themselves turned the apparatus of the state – no longer in such disarray as it had been in the 1990s – into an instrument for private profit. That is, they were doing what the ‘outsiders’ had done in the 1990s, but from a different starting position: close to or inside the state. In fact, one of the striking things about the apparent ‘statist’ turn of the 2000s was the degree to which participants replicated the modus operandi of private companies in the 1990s. State-owned companies used the tax-avoidance strategies pioneered by the oligarchs, parking shares in offshore companies or routing transactions through intermediaries. Once again, this was accompanied by corrupt privatizations, asset-stripping, and threats of violence. In 2002, for example, there was a period when the state-owned oil company Slavneft had two chief executives, each equipped with a court order and a small private army.{28}
The Yukos affair was perhaps the starkest example of how standard business practices of the 1990s seeped into the state sector in the 2000s. The seizure and dismantling of the company was not so much a forcible re-nationalization as a colossal state-directed piece of reiderstvo, the post-Soviet version of corporate raiding. Assets were acquired cheaply by coercive means, with raiders often making physical threats to force the transfer of shares, or else bribing a bureaucrat to issue a court order or start bankruptcy proceedings. They were then resold at a huge profit. The use of state resources was central to these operations. In the 1990s, it was the raiders who bribed the state. Under Putin, state functionaries themselves seized companies, hiring raiders to act on their behalf.
Many explanations for the fate of Yukos have been advanced: Khodorkovsky’s attempts to sell a stake to the US oil major Chevron; his plans to build a private pipeline to China, competing with the state’s line to Japan; his support for opposition parties and apparent desire to run for president in 2008; the personal disrespect he is alleged to have shown to Putin. All of these likely contributed to his downfall.{29} But more than anything, his ruin was intended as a raw demonstration of state power, and to lay out a new elite bargain in which those with links to state power had the upper hand over those who simply had money. Yukos was one of several companies put under pressure by the tax authorities during 2003; others included Norilsk Nickel, Sibneft and Vimpelcom. Within weeks of Khodorkovsky’s arrest, the Federal Assembly’s Accounts Chamber announced it was ‘revisiting’ the outcomes of the 1990s privatizations, while Putin and other officials made statements to the effect that business needed to show ‘social responsibility’, ‘assisting’ the state in its ‘priority tasks’.
This did not mean, however, that those now pressing home their advantage were advancing the interests of the state, let alone those of the public. State companies pursued what were effectively private agendas. During the 2000s, for example, Russia’s state-owned enterprises went on a buying spree, loading themselves with debt in order to acquire more and more assets, not in pursuit of national policy goals but to increase the value of their stocks.{30} As OECD economist William Tompson put it, although the state sector did indeed act independently of big business, ‘it did not necessarily act differently’.{31}
There was, then, an increasing convergence in the logic and practices of the state and private sectors of the economy. This phenomenon was rooted in the close entanglement of business and government over the whole post-Soviet era. While this initially took the form of a parasitic dependency of business on the state, by the mid-1990s the business elite had begun to penetrate the state and indeed aspire to control it. The reassertion of state authority after 2000, and increased hydrocarbon revenues, changed the terms of the equation. But what took place under Putin was not simply a push in the opposite direction from the 1990s. Rather, there was a synthesis of the realms of government and business – the features of one merging with those of the other. This melding of state and business spheres accounts for many of the most damaging aspects of the way Russia is ruled today; it also means that we need to think differently about who is doing the ruling.
Over the course of the 2000s, a widespread consensus developed that Putin had set in place a ‘neo-KGB state’, a ‘praetorian regime run by people from the secret services’ whose authoritarian instincts explained the darkening prospects for democracy and free speech in Russia.{32} After all, Putin himself had come from the ranks of the KGB, and he steadily recruited more men from the security services into his government. The siloviki, as they were known – after the ‘power structures’, silovye struktury, from which they originated – included some of Putin’s closest allies: Igor Sechin, chairman of Rosneft; Sergei Ivanov, defence minister from 2001 to 2007 and later Putin’s chief of staff; and Viktor Ivanov, who from 2008 to 2016 was head of the FSKN, the federal anti-drug agency. But there were many more, all the way down the chain of command.
The empirical basis for the idea of a creeping silovik takeover came from Olga Kryshtanovskaia and Stephen White, who in a series of influential articles characterized Putin’s rule as a ‘militocracy’. In 2003, they calculated that across several key sectors of government, the proportion of current and former security service personnel had risen sharply from the Yeltsin era, accounting for a quarter of the political elite; in 2009, they argued that the proportion had increased to almost one-third.{33}
The idea seemed plausible, especially given Putin’s own background and the macho security-service language that set the tone for much of his time in office. It certainly resonated strongly far beyond academic and policymaking circles, both in Russia and in the West. For two Russian journalists, Andrei Soldatov and Irina Borogan, this cluster of uniforms constituted a ‘new nobility’. In a grim satire set in 2028, Vladimir Sorokin, enfant terrible of Russian literature, reimagined them as a deeper throwback, to the oprichnina, Ivan the Terrible’s private army, which terrorized Muscovy in the late sixteenth century.{34} In another phantasmagorical satire on post-Soviet reality, novelist Viktor Pelevin took a trope in wide circulation at the time, the ‘werewolf in epaulets’, and made it literal, depicting Russia’s current rulers as petroleum-worshipping beasts in KGB attire, howling at the earth to deliver the bounty on which their power depended.{35}