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. Last Updated: 07/27/2016

A Vodka Shot In the Arm of Power Vertical

Last week a search was launched for Yury Shefler, the vodka magnate and head of S.P.I. Group.

Shefler owned the Stolichnaya and Moskovskaya vodka trademarks. A year ago, the state confiscated them and transferred the brands to the state enterprise Soyuzplodoimport headed by Vladimir Loginov, former co-owner of Russky Sakhar and later a deputy agriculture minister. Even with Russia's "strange" court system, the state hasn't been able to prove that the brands were transferred legally. Then Loginov claimed that Shefler had threatened to have him killed, and the search order for Shefler was issued.

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Shefler acquired the former Soviet food and beverage import/export agency in 1996 (also called Soyuzplodoimport). At the time, the company had $50 million in debts and had squandered its rights to just about everything, including the Stolichnaya and Moskovskaya trademarks. Shefler restored to the company the rights to these brands, and by doing so he rubbed a number of underground vodka producers the wrong way, since they had been raking it in palming off industrial spirit as Stolichnaya vodka. These producers complained to their business partners -- high-ranking Interior Ministry officials, who, in turn, paid Shefler a visit and offered him their protection. But Shefler declined.

Then in 1999, a report landed on the desk of then-Prime Minister Vladimir Putin, signed by then-Interior Minister Vladimir Rushailo, unmasking Shefler; and the RUBOP under his control stepped up its searches of Shefler's office. At the time Rushailo, as a protege of "the family," had powerful enemies in the St. Petersburg chekists. The chekists were raring to restore the "executive vertical of power" and to purge the Interior Ministry of rotten elements. They offered to help Shefler, but he declined. That turned out to be a mistake: Once a businessman has attracted the attention of the "racketeers in epaulets," his days are numbered. And when Rushailo was removed from the Interior Ministry, the St. Petersburg chekists continued to stalk Shefler.

What is so striking, though, is the futility of the whole exercise. The lion's share of earnings from Stolichnaya are generated by sales in the West. While Shefler was being pursued, the licenses to produce vodka were sold to Western companies, and any attempt to export state-produced Stolichnaya vodka to the United States, for example, would result in a multimillion-dollar lawsuit not only against Soyuzplodoimport, but against Russia as well.

It is hard to view Loginov as an independent player. He is clearly going into battle on orders from above. Over his head hangs the sword of Damocles in the form of $100 million of Russky Sakhar debts to the state and a handwritten confession to having given bribes to former Justice Minister Valentin Kovalyov to the tune of $200,000.

By and large, the interests of the executive vertical of power are defended by a specific breed of businessmen, recruited on the same principle as informers were in the 1970s. The more dirt there is on them, the shorter the leash they can be kept on by the security organs.

In this country, there is an ongoing battle for control of property. However, when oligarchs are waging a war, criminal charges are little more than a footnote in the general onslaught. And the war ends with the oligarch seizing someone's business.

When the St. Petersburg chekists wage war, they have no other ammunition except for criminal charges. And as a result, the battle ends with the destruction of the business. The Petersburgers aren't after profit -- their main goal is to make an example of a few businessmen so as to put the frighteners on the oligarchs: "If you don't pay up, we'll rip you to shreds like we did with Shefler."

The rationale is that if you do in 10 businessmen, then the 11th will cough up. And that in a nutshell is strengthening the executive vertical of power ? la russe. From now on, you don't have to be a Gusinsky or a Berezovsky to be a target -- it's sufficient just to have a business.

Yulia Latynina is a journalist with ORT.