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. Last Updated: 07/27/2016

A Friend in Need

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President Vladimir Putin still hasn't declared his final intentions regarding the presidential election in March, and all of this uncertainty is driving the Kremlin elite crazy.

The most serious economic consequence of Putin's presidency is that many of his friends have acquired tremendous wealth over the past seven years. If, for example, oil pumped by Yuganskneftegaz was previously exported by Yukos or one of its offshore subsidiaries, now the same oil is exported by Gunvor, which has capital reserves that are estimated to be about $20 billion. Gunvor is a Geneva-based oil-trading company co-founded by Russian businessman Gennady Timchenko, who is reportedly Putin's close friend.

Putin's reputation in the West took a serious blow after Yukos was dismantled and its CEO, Mikhail Khodorkovsky, was jailed. This means that either Putin generously let his reputation suffer in order to help Timchenko strike it rich, or else he jailed Khodorkovsky in order to channel Yukos oil to another friend.

Gunvor is by no means an isolated case. One way or another, the Kremlin has gained control of the Russian economy using various opaque schemes.

If Putin stays on for a third term -- which is a euphemistic way of saying "for life"-- it will represent a violation of the Constitution. The West is not very fond of governments that violate their constitutions. If Russia violated its Constitution, economic sanctions from the West could follow. This would not become an abstract legal or political issue; it could put the very wealth that the current Kremlin elite has accumulated at risk.

On one hand, Putin cannot remain in office because this would transform him into a dictator, which could lead to catastrophic consequences for companies such as Gunvor. On the other hand, if Putin steps down, the consequences could be equally catastrophic.

Regardless of how the new Russian offshore companies are structured, it would be naive to imagine that even a single penny in those accounts is registered personally in Putin's name. Therefore, Putin can always claim, "None of my friends' assets belong to me," and he would have all of the documentation to back it up.

The only problem with this is that if Putin is no longer president, his friends might take that statement at full value and gladly agree: "It's true -- none of it is yours."

There are indeed precedents for this type of scenario. When Oleg Soskovets was first deputy prime minister under President Boris Yeltsin, he consistently denied that he owned a stake in TransWorld Group. When Soskovets was fired, TWG happily went along. Moreover, TWG did everything in its power to prevent Soskovets from returning to office, knowing that he would not forgive a company that turned on him despite everything he had done for it. Thus, it is just as problematic to stay in office as it is to leave.

Of course, it would be possible for Putin to step down formally while attempting to retain control from a different position. He could become prime minister, but this is an official who can be called to the Kremlin at any moment and informed that he has just "voluntarily" resigned from his job.

If Putin does, in fact, step down from his presidential post, the new elite will formally become the owners of Russia since they will control the offshore companies. With tens of billions of dollars at stake, the new owners will have a strong vested interest in making sure that whoever helped them along the way will not come back asking for a piece of the action or some type of compensation out of a sense of gratitude.

If Putin steps down but remains as an informal national leader, how long will it take for the new president to realize that the presidency is the only functioning political institution in Russia?

Yulia Latynina hosts a political talk show on Ekho Moskvy radio.