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. Last Updated: 07/27/2016

Kremlin Infighting Flares Up

MTGleb Pavlovsky
Infighting between Kremlin clans for the heart and mind of the president ahead of elections is flaring up again, with Mezhprombank founder Sergei Pugachyov threatening to sue spin doctor Gleb Pavlovsky for publishing a report accusing the former banker of being behind a dangerous power grab.

The spat appears to be part of a vicious Kremlin power struggle that first broke into the open with the arrest of key Yukos shareholder Platon Lebedev in July on charges of theft of state property. Back then, Yukos CEO Mikhail Khodorkovsky said the arrest was the result of inter-clan fighting.

Analysts say the onslaught against Yukos is an attempt by the new elite that moved into the Kremlin with President Vladimir Putin, the so-called siloviki, to push out the old elite that came to power under the free-for-all market economics of the Boris Yeltsin years.

Pavlovsky names names in his Aug. 29 report, which he says he wrote for Kremlin chief of staff Alexander Voloshin -- a member of the old elite. He accuses a group led by Pugachyov and Kremlin officials Igor Sechin and Viktor Ivanov of mounting "a creeping coup" and creating a "parallel center of power."

Pavlovsky has long been known as one of Russia's most influential political spin doctors. He was a key public relations guru for Putin's 2000 election campaign and one of the guiding forces behind Unity's State Duma campaign in 1999. Before that, he helped demonize the Communists for Yeltsin's 1996 re-election bid. Now, he appears to be firmly in the camp of the old elite as an aide to Voloshin.

Pavlovsky's report says the main aim of the "systemic opposition" is "a redistribution of property in their own favor and a mass change in elites on a federal and regional level" that, if allowed to continue, will lead to Putin becoming "a hostage to the policies of the group," "a breakdown in economic growth" and a return to "the instability that marked the end of the '90s."

Pugachyov's response to these claims, which were later published on www.kreml.org, came Wednesday night. The man who has been named "Putin's banker" and the "new gray cardinal" of the Kremlin -- but whose actual only official position now is as a senator in the Federation Council -- said in a statement that the report contains "a whole series of fabricated, insulting, wittingly untrue and slanderous accusations about me." What Pavlovsky wrote "is of a criminal and illegal nature," he said.

Pugachyov's aide Oleg Grachyov, who distributed the statement, could not say Thursday whether Pugachyov would go ahead with his threat to sue.

Pavlovsky was unavailable for comment Thursday.

Pavlovsky's report says Pugachyov's group is based on an economic clan consisting of state-owned oil firm Rosneft, Mezhprombank and parts of state-controlled gas monopoly Gazprom, which is trying to lay claim to greater political and economic power.

Pugachyov has long been seen as allied with Rosneft. He launched an abortive bid for control of then-state-owned Slavneft together with other Rosneft managers in summer 2002, but lost out to Sibneft in an armed boardroom showdown. Sibneft's owners are key players in the old elite, known as the Family, and they, together with privately owned Tyumen Oil Co., went on to beat Rosneft for the state's 75 percent stake in Slavneft in a controversial privatization auction last December.

Yukos this year also wrestled with Rosneft. Rosneft accused Yukos of making off with a stake in an eastern Siberian oil field, and Khodorkovsky openly accused the company of corruption in a televised meeting with Putin.

Pavlovsky said in his report that the Pugachyov group was trying to pull many sectors of the economy into its orbit, including transportation, banking, oil and coal.

He said Pugachyov's main idea was to build "state-oriented capitalism" in which all owners were completely loyal to the state. If owners were not loyal, he said, they would be subjugated by force, as seen in the attack on Yukos. Under the plan, "business itself would remain private, but the role of the state in running it should be high," he said.

He also claimed the group was seeking to reorient the economy from its free market base and alter Putin's course to create strong state-owned monopolies in the most attractive sectors, redistribute resources and property in raw-materials sectors, tighten control over business and turn the siloviki into Putin's main power base.

"There is a growing tendency for a redistribution of property in the interests of this group, which is hiding under the flag of state interests," the report said. "In place of the destroyed oligarchic system, a new 'silovaya' oligarchy consisting of members of this group and their frontmen will take its place."

Hitting the president where it might hurt most, Pavlovsky claimed the group was trying to push Putin into supporting them by publicly complaining of his "weakness" and "indecision" in not breaking off ties with the Family and the oligarchs and accusing him of turning into Gorbachev.

But, he said, the use of force in redistributing property would "eat into trust and support for Putin among the masses."

Another danger would be that an anti-oligarch campaign might prompt a wave of ultranationalist sentiment, he said.

Pavlovsky's report claims Pugachyov's group is trying to derail United Russia's campaign and is pushing for the People's Party.

The report appears to be a direct response to a study written by rival spin doctor Stanislav Belkovsky earlier this year that warned of a "creeping oligarchic coup." Many analysts saw that report, which pinpointed Khodorkovsky as a major threat, as a possible trigger for the legal attack on his company.