Just days after being pushed out of office as chancellor of Germany in November 2005, Schroder made sure he wouldn’t add to the high rate of unemployment he left behind. He accepted a top post with Russian energy giant Gazprom, which was the company in charge of a controversial gas pipeline project that Schroder actively supported as chancellor. The dubious ethics of this move and the speed with which it was made led to many obvious questions about whether or not Schroder abused his office to set up the deal, especially as he was trailing badly in the polls for most of the campaign against Angela Merkel. But the groundwork for Schroder’s new job was laid out in advance as part of a well-organized operation that brought in capital before personnel.
Matthias Warnig, as head of Russian operations for Germany’s Dresdner Bank, first brought in a deal to purchase 33 percent of Gazprombank in August. (Dresdner also helped the Kremlin pick the bones of Yukos.) Accordingly, Warnig was given a top position at the North European Gas Pipeline Company. Finally everything was ready for the arrival of Mr. Schroder.
The deal also kept everything in the family as Warnig was a spy for the East German secret police, the Stasi, at the same time Putin was running agents for the KGB in Dresden. As Putin himself has said, there is no such thing as a former KGB agent. In reality this was the lesser story: that Germany’s most powerful politicians and businessmen could be purchased the way a Russian oligarch might buy an aristocratic Bavarian estate to gain entry to high society The larger and darker picture was how Putin has made the nation’s energy resources the center of his ruling clique. They completely erased the lines between public and private power and assets.
In Russia everyone was wondering, “Does the state run Gazprom or does Gazprom run the state?” Putin made a priority of tightening the unholy bond between his regime’s internal and external goals and the company that provides most of the natural gas to Central and Eastern Europe. They are not state-run companies; they are the state. Gazprom’s chairman at the time was Dmitry Medvedev, who had recently been named first deputy prime minister. Putin’s deputy chief of staff Igor Sechin headed the other Russian energy goliath, Rosneft. But that wasn’t the only reason Rosneft wasn’t investigated for its shady takeover of Yukos’s prime asset, Yuganskneftegaz, in a bogus auction. Taking la famiglia literally, Sechin’s daughter was married to the son of then-Russian attorney general Vladimir Ustinov.
So Schroder didn’t just join a Russian company; he joined the Putin administration. For Schroder’s price, Gazprom and Putin’s regime bought legitimacy in the eyes of the West. Deals like that one also provided Putin with priceless propaganda fodder. He could trumpet this coup of putting a former German chancellor in his pocket while at the same time the state-controlled media presented it as an example of how the West was only after money and oil.
Totalitarian regimes everywhere love to tell their citizens that for all their professed interest in democracy and human rights, Americans and Western Europeans are just as corrupt as their own leaders. It does tremendous damage to the pro-democracy cause in Russia, and elsewhere, when a figure like Schroder, the former leader of the third-largest industrial democratic nation, enthusiastically allies himself with authoritarian thugs. Using energy as a political weapon is a tried and true tactic, and the hiring of Schroder allowed Gazprom to act with even more impunity.
This was the new Kremlin strategy: to co-opt and quiet the West by recruiting prominent individuals. When everyone is guilty, no one is guilty, goes the logic. We already had seen the price paid for these see-no-evil policies on civil liberties and in Chechnya. With this new tactic, Western leaders had to resist the calls of their bank accounts, not only the calls of conscience. Everyone was engulfed in the same toxic cloud of oil, gas, politics, intimidation, and repression.
Those of us in the Russian opposition had been saying for a long time that while Putin was our problem, soon he would be the world’s problem. Our warnings went largely ignored. After years of rumbling warning signs, when the threats materialized in 2008 in the form of Russian tanks entering Georgia, the leaders of the free world were totally unprepared to deal with it. Engagement had failed but they didn’t know any other tricks to try. Expelling diplomats and limiting official visits was not going to have an impact. My suggestion then was the same as it is today: simultaneously curtail engagement and use the economic leverage of existing engagement to pressure its beneficiaries in Russia.
Ironically, Putin’s elites liked to keep their money where they could trust in the rule of law, and after the G8 lovefest in St. Petersburg, Putin and his wealthy supporters had every reason to believe their money was safe in the West. Limiting that access, or even threatening to do so, would have had a dramatic deterrent effect. Instead, it was business and appeasement as usual. The central myths of engagement are that it (1) liberalizes the unfree states and (2) provides leverage over them if they don’t liberalize. The first has proven false. The second has failed because the free world refuses to exploit its leverage the way dictatorships are so eager to do.
I have never called for a boycott of Russia, by the way. The free world also does big business with China, Saudi Arabia, and other autocracies without providing their leaders with democratic credentials the way they did with Putin. And it’s hard to imagine the elites who run another belligerent rogue state living in luxury in Western capitals. The minions and the oligarchs are loyal to Putin because he is the capo di tutti capi and he offers them protection. They can do as they like in Russia, and as long as they stay loyal they can get rich and take their money to America, to London, wherever. This is why I pushed for legislation to cut off that pipeline and damage Putin’s ability to protect his gang—and it’s why Russia fought so hard to prevent such legislation from gaining ground.
There was no reason to cease doing business with Russia. The delusion was that it could ever be more than that. The mafia takes and takes, and it only gives with many strings attached.
OPERATION MEDVEDEV
Boris Yeltsin died on April 23, 2007. I already eulogized him and his legacy in chapter 5, but I would like to focus on an overlooked aspect of his passing. As was likely required by both his health and his peace treaty with Putin, Yeltsin had kept a very low profile after leaving office on December 31, 1999. The only time I can recall his name in the news after that was when he and Mikhail Gorbachev publicly, if mildly, criticized Putin’s power-grabbing reforms after Beslan.
Putin also seemed to uphold his side of their bargain. No member of Yeltsin’s family, or his extended “Family” of allies and cronies, has ever been pursued by Putin’s government. Although Yeltsin stayed out of the limelight, I think his presence weighed on Putin’s mind. Putin may have become the Godfather, but Yeltsin was the founding father of Russian independence and democracy. Destroying Yeltsin’s legacy completely while the man was still alive might have been risky even for Putin. With Yeltsin gone, another of the thin restraints holding Putin back from totalitarianism was severed. Yeltsin had limited himself to two terms and surely would have expected his successor to leave power as well.
This mattered because in 2007 Putin was faced with the biggest decision of his life. His second term as president was coming to an end the next year, and according to the Russian constitution he couldn’t run again. The election would take place on March 2. First there was the matter of the Duma elections on December 2, 2007. It was a foregone conclusion that Putin’s United Russia Party would win overwhelmingly, but we did our best to track the “irregularities” that took place anyway. The art of rigging an election, you see, lies in making the election itself entirely meaningless. You don’t have to worry about who votes, or even who counts the votes, if you control the entire process and who appears on the ballot to begin with.