BUSINESS

The KGB And Russia's Economy: How A Group Of Friends Gained Control

10/11/2008 05:12 am ET | Updated May 25, 2011

(Fortune Magazine) -- Long before the small group of men gained control of a $1.3 trillion economy, they could be found gathered at a lakeshore deep in the forest, trying to relax amid the upheaval of the new Russia. Lake Komsomolskoye, named after the youth wing of the Communist Party, lies about 60 miles north of St. Petersburg, just one of 700 lakes on the isthmus connecting Russia and Finland. There the group, many of whom helped run Russia's second-largest city, would retreat for weekends among the tall, lakeside cedars in a private compound of dachas, or country houses. Vladimir Putin, then head of external relations for the St. Petersburg mayor, was a member of the group. So was Vladimir Yakunin, who had revived a bank started by the Communist Party, and Igor Sechin, then Putin's chief of staff. The group called itself ozero, meaning "the lake," and one of its frequent guests was a bright young lawyer named Dmitry Medvedev who worked in the St. Petersburg government. One prime topic of their lakeside conversation back then: how much they disliked the unfolding chaos of Boris Yeltsin's Russia.

More than 15 years later, many of these same men (and some of their closest friends) now run the country. Since Putin became President in 2000, thanks to President Yeltsin's unexpected resignation, other members of the lake group have risen to the highest levels in Russian business and politics. Sechin, 47, now chairs Rosneft, the state-owned oil company; Yakunin, 60, heads Russian Railways. And Medvedev, 42, was chairman of Gazprom, Russia's largest company, until succeeding Putin as Russian President in March. While Putin, 55, stepped into the No. 2 role of Prime Minister, no one doubts that he has extended his regime.

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