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. Last Updated: 07/27/2016

New St. Petersburgers vs. Old Guard

Two events occurred last week. The public was able to hear the echoes of a behind-the-scenes war that has been declared by the St. Petersburgers against the oligarch old guard.

First, disgraced minister Nikolai Aksyonenko returned from vacation and went straight to a government meeting where the Railway Ministry's investment program was being discussed. The minister's appearance was closely watched; after all it was rumored that one month ago Aksyonenko was brought in for questioning directly from his favorite granddaughter's birthday party. They came for him in the evening in a black Volga.

It transpired that, while Aksyonenko had not been able to congratulate his granddaughter properly, he was alive, well and looking well-fed, as befits a minister whose ministry is planning to "assimilate" 161 billion rubles.

Second, the General Prosecutor's Office has filed a criminal suit against two highly placed customs officials who dared to accuse a chain of furniture stores of smuggling. These stores enjoy the special favor of Yury Zaostrovtsev, deputy director of the FSB and a man who lays claim to the title of economic brain in the new St. Petersburg team.

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One has to feel sorry for Aksyonenko's granddaughter of course, but it would be a sin to compare what happened with the events of 1937. The chekist in question is a bit of a small-fry and the Big Brother in this case is in a different league. His goal is also somewhat different: It's not to intimidate everyone by returning to totalitarian dictatorship, but rather to control everyone by means of a behind-the-scenes war both between clans and within them.

One can sympathize with the president. In an oligarchic country completely lacking a market, the president has to work not only with substandard human specimens, but with individuals who interpret the law as a means to realize their own grasping instincts.

The two teams differ only in that the oligarchs have charged to the finish line by pushing aside and gobbling up an improbable number of people, while the new St. Petersburgers politely brought Aksyonenko in for questioning in a government Volga.

And you can't say that the new system of the "invisible wars" isn't working. For example, today the wholesale redistribution of property would be impossible, as the party under attack would immediately find protectors. Fights such as these lead not to a change in ownership but to the law enforcement agencies receiving more money to sort the situation out.

However, this kind of medicine has serious side effects. The more conflicts between the oligarchs, the more money the law enforcement agencies make. The temptation, therefore, arises to provoke conflicts and there are already examples of this.

The new St. Petersburgers have yet to realize their full potential. They could corner the oligarchs with respect to the natural monopolies, or call upon the assistance of those who "lost" in previous oligarch wars. And finally, they could simply initiate a redistribution of property, not using quasi-economic means but by fabricating criminal charges.

The system of the invisible wars is perhaps better than the system of complete chaos that preceded it, but is far worse than anything resembling a market economy. You can't keep an eye on everyone, and the redistribution of property and constant requisitions from oligarchs is a nasty business.

Is there a way out of this vicious circle? Yes there is. Major Russian companies should declare (and the president should enforce compliance by all means at his disposal, including his "chekist resources") a new large-scale share issuance, including the sale of controlling stakes to a genuinely broad section of the population. Only a second mass privatization can protect the old oligarchs from a new redivision of property; and only establishing the practice of dividend payments and control over cash flows can guarantee the transparency of business and creation of a real market economy.

Yulia Latynina is a journalist with ORT.