October 25, 2001

October 25, 2001 | Commentary on Russia

Putin Squeezes Out Yeltsin

Bolstered by an impressive performance at the Asia Pacific Economic Cooperation summit in Shanghai, Russian President Vladimir Putin has returned to Moscow to clean house -- with a vengeance.

Last Friday, a once-powerful railroads minister, Nikolay Aksyonenko received the Russian political equivalent of a dead horse's head in the bed -- an interrogation at the Prosecutor General's office and a demand to sign a document promising not to leave Moscow.

Aksyonenko, at one time a deputy prime minister in President Boris Yeltsin's cabinet, and a one-time candidate to become Yeltsin's heir apparent, was on his way out since his political godfather, the exiled tycoon Boris Berezovsky, lost Putin's favor.

Aksyonenko is accused of abuse of office, a criminal offense. Specifically, he is charged with misspending $2.3 million and ministry's tax debt of $370 million.

But this is not all: the Russian media has been full of accusations of waste, fraud and abuse in the gargantuan and ineffectual Russian railroad state monopoly for two years. Aksyonenko decided not to go down quietly and did not resign. A public scandal around the attempts to get rid of the minister-oligarch is anticipated.

Julie A. Corwin, Editor of the Radio Liberty-published Russian Political Weekly noted that by opening criminal proceedings against Aksyonenko, Putin has not followed his earlier modus operandi. He did not find a high-level Yeltsin-era official another sinecure, as he did with former Defense Minister Igor Sergeyev, and Interior Minister Vladimir Rushailo. Sergeev is now Putin's advisor on arms control, whereas Rushailo is Secretary of the Russian Security Council.

In March 2001, Putin moved against another Yeltsin-era minister widely accused of corruption, Yevgeny Adamov, minister of nuclear industry, known as Minatom. He reportedly created a number of privately held off-shore companies which were used as receptacles to siphon off Minatom's profits. However, Adamov was never prosecuted.

Simultaneously, Putin delivered another blow to Berezovsky's dreams of returning to Russia: Prosecutor General Vladimir Ustinov issued an order for his arrest.

Berezovsky, the billionaire oligarch eminence grise of the Yeltsin era, is accused of defrauding Russian companies, such as the national airline Aeroflot and TV Channel One, known as ORT, of hundreds of millions of dollars.

According to veteran Russian affairs analyst Victor Yassman at the conservative American Foreign Policy Council, Berezovsky, who now is in exile in Cape D'Antibe in the French Riviera, is also accused -- together with his associates, who are under arrest in Moscow -- of having been involved in money laundering the funds from Aeroflot through the front companies Andava and Forus in Switzerland.

In late September, a Moscow court recognized a claim by a minority shareholder to declare Berezovsky's TV-6 opposition channel bankrupt. TV-6, the last remaining TV channel not under direct or indirect government control has shown a profit so far in 2001, and the claim leading to bankruptcy was regarded as spurious by Russia's media watchdogs and political observers.

The criminal investigation against Aksyonenko was long overdue for two reasons. First, an important precedent is waiting to happen: the senior ministers of the Yeltsin era remained immune to accusations of corruption, and none of them served any jail time. Yet the Yeltsin era was a time when multi-million dollar fortunes were allegedly created by the likes of the former Prime Minister Victor Chernomyrdin and lesser mortals. To this day, many Russians passionately believe that their country desperately needs to clear the atmosphere of widespread corruption left behind by Yeltsin's rule.

Secondly, Aksyonenko was publicly resisting an economic reform of his railroad fiefdom proposed by the Minister of Economic Development German Gref.

According to the pro-reform Moscow Times, the minister resisted attempts in July to eliminate hidden subsidies to the industry through referential railroad tariffs. He demanded $785 million in state subsidies to cover alleged losses, and was planning to turn profitable parts of the ministry into a for-profit corporation, over which he and his cronies would have control.

His departure would open doors to reform yet another Soviet-era industrial dinosaur, the outmoded railroad system which sprawls over 11 of the world's 24 time zones.

The arrest warrant against the unpopular Berezovsky is also hardly surprising and may be applauded in many quarters in Moscow. It ensures that he will not volunteer to return to Russia in the foreseeable future, and might even create unpleasantness for him in his luxurious exile, as the Kremlin is likely to approach Interpol in an attempt to extradite him.

It is doubtful whether France will cooperate. In the past, French governments have refused to extradite even Russian businessmen accused of murder. But Putin may be targeting Berezovsky and if so, he could prove ready to escalate the case all the way up to French President Jacques Chirac.

Putin has good reason to distrust Berezovsky and want him discredited. For Berezovsky knows too much about Putin's rise to power and the internal workings of the Yeltsin regime, of which Putin was part and parcel.

Today, Berezovsky is an active proponent of the conspiracy theory, which pins responsibility for setting off the 1999 apartment building terrorist explosions in Moscow on the Russian secret services.

Until the World Trade Center attacks, they caused the most loss of life of any terrorist attack in a major industrialized country in modern times. And they provided the political justification for the 1999 invasion of Chechnya that boosted Putin's popularity as prime minister and lined him up as Yeltsin's heir and successor in the presidency.

Putin's new drive against the oligarchs already looks likley further strengthen his already dominant position. In the past, Boris Yeltsin has maintained a balance of power between the so-called "young reformers" -- politicians like Anatoly Chubais, Yegor Gaidar and Boris Nemtsov -- and the oligarchs and Soviet-era political managers like former Prime Minister Chernomyrdin.

By getting rid of the remnants of the Yeltsin "Family," Putin is left with an administration dominated by his clones, the former KGB secret police officers from Leningrad, now again known by its ancient name, St. Petersburg. These are predominantly intelligence professionals, skilled in political intrigues of both the communist apparatus and secret police variety.

Berezovsky may or may not be culpable of the crimes he is accused of. But his loud political conflict with Putin and the earlier persecution of NTV suggest that no Russian court today is capable of rendering an impartial judgment against him.

As in the case of another oligarch, Vladimir Gusinsky, Moscow political insiders believe that any Russian court, first and foremost may well see Berezovsky as Putin's political enemy -- and will mete out "justice" accordingly.

Putin's latest moves against the oligarchs are likely to prove popular with the Russian public who believe such probes into the corruption of the Yeltsin era are long overdue. But Russian reformers fear that Berezovsky's potential fiscal and legal demise, and the court decision to bankrupt TV-6, it is Russia's freedom of the press which may be the real victim of Putin's latest anti-oligarch campaign.

Ariel Cohen, Ph.D., is a Research Fellow at The Heritage Foundation.

About the Author

Ariel Cohen, Ph.D. Visiting Fellow in Russian and Eurasian Studies and International Energy Policy in the Douglas and Sarah Allison Center for Foreign and National Security Policy, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation
Douglas and Sarah Allison Center for Foreign and National Security Policy

Distributed nationally by United Press International