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. Last Updated: 07/27/2016

Petersburgers Aren't Cutting the Mustard

After two years with Vladimir Putin at the helm, freedom in Russia is on the wane, but order is not on the rise. Putin's main lever for maintaining control over society has been a war waged by several groups close to the president.

This is perfectly natural in a country where the remaining institutions of government and control -- the State Duma, the Prosecutor General's Office and the Interior Ministry -- are for sale to the highest bidder. A ruler can only really rely on a single team in a democracy. In an authoritarian society the leadership needs at least two. In Putin's case, they are the St. Petersburg network and the "family."

The Petersburg clan notched its biggest victories in the corridors of power: Its members are installed throughout the "power ministries," and not only in the top jobs but also in the upper ranks dealing with the mid-level bureaucracy. This has destroyed the infrastructure that once served the interests of many oligarchs, primarily those within the "family."

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The battle for major power requires major financial resources, however, and here the Petersburg clan comes up short. Its successes in the business world are negligible. This point was hammered home last year during the bare-knuckle brawls for control of natural gas producer Rospan International, the Nosta metals plant, the Karabash copper smelting works and Kuzbasugol.

In each case shareholders or creditors, fed up with one group of oligarchs, went cap in hand to other oligarchs instead of to the siloviki, even though hundreds of millions of dollars were at stake and control over the companies could have been attained by the judicious flexing of administrative muscle. This choice was apparently determined by the level of service provided by the "new Petersburgers." As far as I know, some of the parties involved in these property fights did in fact turn to the siloviki for help, but the officials they encountered were hopelessly incompetent. They couldn't master any of the economic issues involved, instead suggesting a "radical solution to the problem" or asking those lodging the complaint to track their opponent's offshore accounts, since they didn't have the wherewithal to do it themselves. When the dissatisfied clients went elsewhere, all the information they had provided was handed over to their opponents.

It's not surprising, then, that only those Petersburgers who have had their hand held by the president have managed to put down roots -- Alexei Miller at Gazprom, Sergei Zivenko at Rosspirtprom and Valery Yashin at Svyazinvest. However, these appointees have scored as few successes as humanly possible in their new posts.

The siloviki in short, are not a rope around the neck of enterprising oligarchs, just a run-of-the-mill muzzle meant to keep them from biting anyone.

The regime's economic strategy seems much more dangerous. It's pointless to describe what's happening in terms of bribery and corruption. The decision to replace Rem Vyakhirev with Alexei Miller atop Gazprom, rather than making the company transparent, indicates that the Kremlin is happy with the way Gazprom does business. The only thing the Kremlin wasn't happy about was the issue of whose pocket was being filled.

A system like this obviously makes any real reform impossible. No one is interested in lowering taxes, because high taxes are what forces the oligarchs to hide their profits and keeps them on tenterhooks. No one is interested in restoring order to the natural monopolies, because they are the most effective means of milking the business community. No one is interested in straightening up the legal system, because when laws contradict one another the only real law is the will of the ruler.

This system was created by the oligarchs to satisfy their slightest needs. Nationalizing this system -- rather than eliminating it -- has been the new administration's greatest success.

Yulia Latynina is a journalist with ORT.