Putinomics: How the Kremlin Damages the Russian Economy by Albrecht Rothacher

Author:Albrecht Rothacher [Rothacher, Albrecht]
Language: eng
Format: epub
ISBN: 9783030740771

3.12.1 The Riches of Putinism

It was only after 2004 that Putin and his cronies became really rich, with Gazprom being the main source. As a result, in Russia 110 billionaires (including Putin’s cronies) control 35% of national wealth, while 50% of Russian households enjoyed a “wealth” of $870 or below.148 Again this is a civilized European country, not a Third World petro-state, like Angola, Nigeria or Saudi Arabia. Obviously, it is also not a functional state. Reportedly Putin’s share of all crony deals was 50%, the logic being, why should he allow them to get rich without any inhibitions and get nothing for himself.

But where did the money go? The Panama papers, for instance, mention Igor Putin, a cousin, Putin’s butcher Petr Kolbin and his cellist friend Sergei Roldugin with $2 billion, for instance, of which he appeared genuinely unaware of.149 This is small fry and clearly they are strawmen. The money flows firstly via Cyprus, the Channel Islands, Malta, Bermuda and the Isle of Man into some twenty to thirty shell companies in the Caribbean, the Virgin Islands and Cayman Islands mostly. Once laundered it is invested in anonymous limited liability companies in Delaware, Nevada, Wyoming and South Dakota—using the “attorney-client privilege” for subsequent purchases for real estate in Miami, Palm Beach, L.A. and New York, including the Trump properties which are to the taste of Arab sheiks and Russian oligarchs, and in the UK. Financially, of course, these investments are dead weight and only incur maintenance costs.

Basically, we witness a purposefully designed neofeudal, patrimonial and plutocratic system, in which democracy, the division of powers, the rule of law and property rights have been demolished. It is easy to argue for more productive investments, to restore local self-government, to implement a stronger anti-monopoly policy and to shift military expenditure more productively to health, education and infrastructure. Yet this is not Kremlin policy.

According to rough estimates to maintain client regimes in Belarus, Transnistria, Abkhazia, Southern Ossetia, the Crimea and the Donbas amounts to at least to some $4 billion per year. Add on the military expenditure of 2% of GDP per year. So in total, some 4% of GDP are wasted unproductively in a country with the economic size equivalent to the GDP of Spain and which has serious demographic and competitive problems which remain unaddressed.

In the end in an autocratic rule in place since 2010, it all boils down to something very banal, which we know since Czarist history: The character of the ruler himself. George Bush apparently has seen into his eyes and saw his soul.150 Yet Putin is a judoka and not a chess player, hence a risk-taker. A chess player carefully reflects every move according to pre-thought strategy, but a judoka uses the right moment to distract his opponent, to catch him off-guard, to throw him off balance and then to squeeze him mercilessly until he throws the towel. The rules are win or lose. “Win-win” or compromises are not foreseen. No wonder that this is Putin’s favourite sport.

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