Who is Vladimir Putin?

By bne IntelliNews March 31, 2014

Ben Aris in Moscow -

When he first assumed power in 2000, the press corps spent the first six months asking the same question: "Who is Vladimir Putin?"

At first the media speculated he was merely a puppet of the oligarchs because he had clearly been handpicked by oligarch Roman Abramovich and Boris Yeltsin's daughter Tatyana Dyachenko, who at that time were effectively running the country. But after Putin moved forcefully to sweep the businessmen out of the corridors of power and return political control of the country to the centre, everyone had to recalibrate.

"Putin arrived at the famous oligarch meeting [in 2001] and figuratively dumped two bodies on the table – Boris Berezovsky and Vladimir Gusinsky [both of whom owned major TV stations]. Then he made his offer," Stephen Jennings, the founder of Renaissance Capital told <i>bne</i> at the time. "Keep what you have, but stop the stealing."

Putin followed this by effectively disbanding the Federation Council, the upper house of parliament, which was stuffed full of oligarch proxies who lobbied for their interests and state contracts. But the international press ignored the obvious corruption and focused instead on the fact the deputies had been elected: Putin may have broken the boyars hold on power and retaken control of the political process, but he left his democratic credentials in tatters.

Now Putin has done it again. Russia has made astonishing progress over the past decade and half and is today more-or-less a normal country. However, with the de-facto annexation of Crimea Putin has destroyed what little international credibility he has built up in recent years.

Behind the headlines about the crisis in the Crimea stands a spectrum of fears: Putin is Stalin and wants to rebuild the Soviet Union; Putin is Hitler and wants to conquer Europe; Putin is corrupt and wants to steal assets in other countries; Putin is the Party Chairman and wants to right Cold War wrongs; Putin is a macho, homophobic murderer and is just plain evil. But clearly none of these descriptions is complete, although there is probably some truth in all of them. Politico magazine summed up the West's confusion in an op-ed that asked: "Why are we so utterly perplexed by Vladimir Putin?"

Everyone was expecting Russia to impose economic pain on Ukraine if it chose to go down the European path, but Putin's decision to use force was a shock. However, the even bigger shock was the West's realisation that there is almost nothing it can do to stop or punish him. The Russian president has totally wrong-footed everyone and left the press corps once more asking the question: "Who is Vladimir Putin?"


The Chinese general Sun Tzu advised, "know your enemy." So putting aside the rights and wrongs for a moment, try to see the world through the Kremlin's prism to understand how the world finds itself in this mess.

Putin's first term as president got off to a very good start. His first trip in 2000 was to the UK, which culminated in him standing on the floor of the House of Commons with then prime minister Tony Blair to announce the creation of the TNK-BP oil joint in 2000 – amazingly a straight 50-50 split that caused so much trouble later on. "Russian-British relations have never been so good," a British diplomat gushed to bne at the time.

Relations with Washington were excellent too. George W. Bush visited Moscow in 2001 and famously saw Putin's soul. Journalist Ron Fournier asked the US president if he could trust Putin at a subsequent press conference. "Yes," Bush replied, before allowing Putin to answer a separate question. A few minutes later, the US president elaborated: "I looked the man in the eye. I found him to be very straightforward and trustworthy. We had a very good dialogue. I was able to get a sense of his soul, a man deeply committed to his country and the best interests of his country," Bush said, adding a few sentences later, "I wouldn't have invited him to my ranch if I didn't trust him."

In those early days Putin was trying hard to build a strong, working relationship with the West, even to the point of joining both the EU and Nato.

Putin's former economics adviser Andrei Illarionov told <i>Ukrainskaya Pravda</i> in October 2013: "Putin's personal conviction was that for Russia the most secure and comfortable place would be membership of the western alliance," Illarianov said. "Putin said on several occasions that he wanted Russia to join Nato – both privately and in public. For one and a half years this was Russia's official position."

Putin also secretly knocked on the EU's door, according to reports at the time. "A few weeks ago, when President Putin's visit to Brussels was prepared, his officials asked me what I thought of a possible Russian accession to the Union," then EU president Romano Prodi told Dutch paper De Volkskrant in 2002. "There had been a poll that showed that more than 50% of Russians favoured joining the EU. When President Putin was visiting us, he asked again. I immediately made clear to him, no, you're too big."

It was the first of several slaps in the face that Putin would receive at the hands of the EU. The honeymoon ended in tears following the arrest and eventual jailing of Yukos' owner Mikhail Khodorkovsky in 2003. You can draw a straight line in the downward trajectory of relations from the storming of Khodorkovsky's plane on the tarmac of Novosibirsk's airport in October 2003 to the annexation of Crimea in March 2014.

The other man's shoes

Two themes run through the souring of the relationship between Russia and the West. The first is the latter's refusal to countenance Russia's interests, and the second is its failure to encourage and develop economic ties based on anything deeper than commodities.

It didn’t used to be like that. The West seems to have forgotten the advice of Germany's greatest politician and the newly minted country's first prime minister, Otto von Bismarck: "The secret to politics is to make a good treaty with Russia."

Russia's interests were easy to ignore in the 1990s when the country was on its knees. Yeltsin's administration was living hand-to-mouth on International Monetary Fund (IMF) cash. Putin, who was brought into the administration of Yeltsin in 1996, had a ringside seat to the chaos and the US policymakers' riding roughshod over the Kremlin's wishes. "The White House got used to pushing the Kremlin around under the post-Soviet era "The White House got used to pushing the Kremlin around under Yeltsin," writes Stephen Cohen, the veteran Russian scholar at New York University, in his book "Soviet Fates and Lost Alternatives: From Stalinism to the New Cold War". "The Clinton administration adopted an aggressive triumphalist approach to Moscow. That administration tried to dictate Russia's post-Communist development and to turn it into a US client state."

Under Yeltsin, the golden rule was never to listen to what any politician said, but to watch carefully what they did. That changed with Putin, who was arguably the first Russian politician in the post-Soviet era who actually tried to do what he said he was going to do. Looking back over the last decade, he has consistently stuck to the same message: Russia is back as a world power (albeit still slightly wobbly on its feet) and the rest of the world needs to take its interests into account. As British statesman Lord Palmerston once said: "Nations have no permanent friends or allies. They only have permanent interests." The invasion of Crimea is borne out of Putin's frustration with the rest of the world's refusal to listen to him.

"Russia strived to engage in dialogue with our colleagues in the West. We are constantly proposing cooperation on all key issues... But we saw no reciprocal steps," Putin said in what is already being called an historic speech on March 18 that announced the annexation of Crimea. "On the contrary, they have lied to us many times, made decisions behind our backs, placed us before an accomplished fact. This happened with Nato's expansion to the east, as well as the deployment of military infrastructure at our borders. They kept telling us the same thing: 'Well, this does not concern you'."

Throwing down the gauntlet

Putin has been warning that Russia was getting fed up with being side-lined for years. In his famous Munich speech in 2007, he claimed Nato had promised not to move up to Russia's borders, though in the meantime Bulgaria, Slovakia, Slovenia, Romania, Estonia, Lithuania and Latvia were all admitted into the alliance. Now there is talk of adding Georgia and maybe even Ukraine. "This is a provocation," Putin said in 2007, "yet we have done nothing in response."

The Bush administration made things even worse by first rolling back the 1972 Anti-Ballistic Missile Treaty, "which Moscow regarded as the lynchpin of its nuclear security," says Professor Cohen, and then insisting on building a missile defence system in countries like Poland. Despite Russia's vigorous protestations and even the offer to use a Russian base in the Mediterranean (that is a lot closer to North Korea than Poland), Washington has simply brushed aside Moscow's complaints.

The election of the more western- friendly Dmitry Medvedev as president in 2008 was another opportunity to make a fresh start, but US President Barack Obama arguably fluffed his own "reset" by sticking to the same policies of containment. "The Obama administration is squandering the third opportunity to 'reset' by refusing to respond to Moscow's concessions on Afghanistan and Iran with reciprocal agreements on Russia's top priorities, Nato expansion and missile defense," says Professor Cohen.

When Medvedev went to Europe on his first overseas trip in 2008 with a proposal to enshrine the "reset" in a badly needed new European Security Treaty, the idea was politely ignored, according to bne's sources.

Exactly the same thing has been happening in business. The Kremlin was hoping to use its newfound petro-wealth to buy western technology to help modernise its own knackered industrial base. Instead, it was shut out of several strategic deals.

Germany's state president of Bavaria, Edmund Stoiber, baldly told Putin that the Germans would never sell Russia stakes in sensitive European industries after Russia bid for more shares in the European aviation giant EADS in October 2006. "I asked him to understand that in some strategic industries there are limits to taking reciprocal stakes," Stoiber said at the time. "We must both respect each other's interests."

Putin saw it differently: the refusal was all about Germany's desire to remain top dog in European aviation and ensure Russia couldn’t compete. Putin was forced to do it the hard way, rebuilding the sector from scratch through the creation of the United Aviation Corporation.

The same thing happened with cars. A consortium of leading Russian banks together with Canadian parts maker Magna struck a deal to take over General Motors' struggling Opel subsidiary in November 2009. The German government killed the deal at the last moment.

By 2012, Putin was calling for the G20, which includes large emerging markets, to take over from the G8 as the main forum for discussing key issues in the global economy. "The time has come for the G20 to take on the full responsibility of effective leadership," he told the St Petersburg International Economic Forum in June 2012. "This means that the G20 should not turn into another elite club that cares only about its members. Selfishness and backroom deals do not add to stability and confidence," he added caustically.

Playing domestic politics

Russia and the West are speaking different languages. Putin, like any politician, needs to play to the gallery, but as Russia was behind the Iron Curtain in the 1960s-1970s it missed out on the liberal revolution and western values remain alien. Putin is ridiculed in the West for riding about on horses with his top off, but it goes down well with his core blue-collar supporters. Russians are still new to the voting game and let's just say they are not the most sophisticated electorate in the world.

Putin was roasted for the so-called "gay propaganda" law, but numerous surveys show that some three-quarters of Russians agree with it and see homosexuality as a "sickness" or "perversion." Likewise, the punk rock group Pussy Riot has been held up in the western world as dissident heroes, but 80% of Russians are Orthodox Christians and were genuinely shocked by the band's "desecration" of the altar in the Moscow cathedral.

Putin's decision to annex Crimea has been immensely popular at home. His rating immediately skyrocketed to an all-time high of 75% even as the economy is sinking. At a stroke he has restored Russia's sense of pride after 20 years of shame: the independent Levada Centre found 63% of respondents said modern Russia has regained the status of a superpower, the highest level in the history of the poll.

And the side effect of this groundswell in patriotic fervour is the opposition movement has been side lined; only one opposition leader, Ilya Ponomarev, voted against the annexation of Crimea. Putin appears to have recaptured the political initiative that he lost following the street protests of December 2011.

Russia is back

What the West has lost sight of is Russia has more-or-less recovered from the collapse of the Soviet Union. Average income levels have overtaken those of Portugal, and Russians are by far the richest population of any emerging market; last year the UN Development Programme upgraded Russia to the "high income" category – putting it into the same bracket as the likes of the UK and the US. But the West continues to treat Russia as a helpless economic basket case.

The EU's attempt to "take in" Ukraine, in the sense that a deal with the EU explicitly excludes a deal to join Russia's Customs Union, was a bridge too

far. Ukraine shares over 1,000 years of cultural, historic and ethnic ties with Russia, while Russia has major economic and strategic interests in Ukraine, most importantly the Druzhba gas export pipeline that runs through Ukraine and carries half of all Russian gas exports to its customers in Europe, and the Crimean base of Russia's Black Sea   fleet.

Neither side can claim the moral high ground. The Crimean "independence referendum" was rushed through as fast as the decision by the interim Ukrainian government to sign the EU's Association Agreement a little over a week later. The dispute between the two sides has long ago turned into a straightforward slugfest of raw geopolitical power. The surprise is that Russia has become a geopolitically significant country again and decided to use some of this power

– but that is exactly the point Putin has been trying to make all along.

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.