Russia's (now) Prime Minister Vladimir Putin rose to the Russian presidency a decade ago in part on a wave of popular revulsion toward US efforts to remake Russia in its image during the Clinton Administration. As Janine Wedel points out in her path breaking new book, "Shadow Elite: How the World's New Power Brokers Undermine Democracy, Government, and the Free Market", a group of Harvard and Russian economists, US government officials, and lobbyists joined together to help privatize the post-Soviet economy. The result was an economic and political disaster: the impoverishment of large swathes of the Russian population, massive corruption in the Russian government, and accusations that the Harvard team had illegally misappropriated US taxpayer money. The Russian people voted for Putin in part because of their resentment at what they believed to be US interference in their internal affairs; in part because they believed he would rout out the "Oligarchs" -- the well-connected big businessmen who had enriched themselves through insider connections during the Yeltsin years.
In fact, a close reading of the Putin presidency shows that the intermingling of power and money so characteristic of the Yeltsin era remains at the core of Russian politics. Putin has indeed driven the oligarchs from power, but he has replaced them with other cronies -- Wedel might call them "flexians" -- insiders who combine access to the Kremlin with a variety of public and private hats and the ability to tap into huge amounts of state and foreign money, often earned from the sale of raw materials. Perhaps the best example of the new breed of Russian flexian is Igor Sechin, the tough Deputy Prime Minister who reportedly has a background, like Putin, in the intelligence services. With excellent connections to the Prime Minister, the energy portfolio and leadership of the Rosneft oil conglomerate, Sechin is accountable to no one but Putin, and his many hats enable him the flexibility to pursue his various agendas.
The global financial crisis hit Team Putin hard, but Russia's shadow elite appears well positioned to survive. Longtime Kremlin stalwart Oleg Deripaska, king of Russian metals, was quickly toppled from his position as the richest man in Russia as the stock market collapsed and was publicly humiliated when Putin berated him for not paying his employees. Despite the scolding, the Kremlin bailed out Deripaska's ailing businesses with billions of dollars in state money. The process strongly resembled the "Too Big to Fail" approach that marked the support many Western democracies provided to their business sectors.
Even Western flexians needed Deripaska, despite his huge losses, during the crisis. Despite allegations that he had been involved in criminal activity in the '90s -- the State Department had revoked his visa in the during the second Bush term -- Deripaska was allowed to visit the US last fall amid reports he might come to the aid of the ailing US auto industry (an FBI source told me that the Bureau sometimes comes under political pressure to "clear" -- at least temporarily -- dubious individuals to enter the country).
There was an additional sign in recent weeks that Deripaska remains a fully fledged member of the transnational elite, whose money is attractive to Hong Kong investors. Despite his past and despite (or maybe because of) his ties to the Kremlin, Derispaska's Rusal sought an initial public offering in Hong Kong. Stock market officials delayed their approval for the aluminum company's listing, the first in Hong Kong by a Russian business, amid concerns posed by the company's large, $14.9 billion, debt load. (Some observers had also criticized Deripaska's annual base salary of $10 million.) In the end, however, it appeared a compromise would enable the deal to go through: security regulators eliminated the public subscription side to the deal. Critics have suggested that regulators cut a compromise to allow an offering in Hong Kong from a firm that otherwise would not have passed muster. They made it tough for anyone other than professionals and the rich to take part in the action, something never before done with a new share offering on the exchange. While Hong Kong's Securities and Futures Commission said it wants to protect small investors from what might be a risky stock, it simultaneously prevents them from enjoying the same opportunity to profit as fund managers and rich investors.
The noted political scientist Lilia Shevtsova has identified a paradox in the Russian elite. They ideologically denounce the West and boast of Russia's special path toward development, even as they summer in the south of France, invest in Western firms and send their children to school in London. In short, they are an integral part of the new breed of players Wedel writes about in her new book, "who operate at the nexus of official and private power, cannot only co-opt public policy agendas, crafting policy with their own purposes in mind. They test the time-honored principles of both the canons of accountability of the modern state and codes of competition of the free market." How rewarding to people like Deripaska, therefore, that after the indignities Russia suffered at the hands of the West in the 90s, they today see the flow of power and money in the opposite direction.