The Kremlin Wars (Special Series), Part 4: Surkov Presses Home

14 MINS READOct 27, 2009 | 11:38 GMT
Vladislav Surkov, who serves as Russian President Dmitri Medvedev's deputy chief of staff and leads one of the Kremlin's two main political clans, has given his support to a plan to reform the Russian economy. The plan, proposed by a group of liberal-leaning economists called the civiliki, would help Surkov divest Deputy Prime Minister Igor Sechin, the rival clan leader, of power. Surkov has a specific list of goals that would help him tip the balance of power in Russia in his favor. Editor's Note: This is part four in a five-part series examining the Russian political clans and the coming conflict between them.
Click here to download a PDF of this report Since the current recession has exposed the weaknesses in the Russian economy, the reform plans designed by Russian Finance Minister Alexei Kudrin and a class of liberal-leaning economists called the civiliki have caught Russian Prime Minister Vladimir Putin's attention. But before Putin could take Kudrin's plan seriously, the civiliki needed support from a major power player in the Kremlin. That man is none other than Russian President Dmitri Medvedev's deputy chief of staff and one of the two major Kremlin clan leaders, Vladislav Surkov. Surkov's motivation for supporting the civiliki plan is not the same as Kudrin's, however; the finance minister seeks a technical overhaul of the system, while Surkov's goal is to further his own political ambitions.

Surkov: The Gray Cardinal

Surkov is a unique player within the Kremlin. Being half Chechen and half Jewish, Surkov has long known that his pedigree would hinder him from ever holding Russia's top offices. Instead, he has positioned himself as the "gray cardinal" — the one who masterminds power behind the scenes — for Russia's leaders. Surkov came to this position by methodically climbing up the ranks and leaving a long list of former bosses behind him. Some of the most notable heavyweights Surkov helped bring down are Chechen President Dzhokhar Dudayev and oil oligarch Mikhail Khodorkovsky. Among his experience is a reportedly long and deep history with the shadowy Russian Military Intelligence Directorate (GRU) in the former Soviet states and Central Europe. He is now the GRU's chief strategist. Surkov has diversified his power base inside the Kremlin by securing the loyalty of the civiliki. These economically Western-leaning technocrats — lawyers, economists and financial experts — have been a powerful group since the fall of the Soviet Union, but have been leaderless since the 1990s after they were blamed for many of the economic troubles that wracked the country. Surkov recognized the liberal reformers' potential and offered them protection as part of his growing political clan. The civiliki's loyalty has given Surkov an alternative power base to the GRU-linked bureaucrats and a new group of followers to maneuver into key positions in the Kremlin. A key example is Medvedev — a civil lawyer by trade — whom Surkov groomed to succeed Putin as president in 2008 to prevent another security official from taking the position. Not only did Surkov consolidate the liberal economists into one group but also came up with the term "civiliki" as a kind of play on words with the term "siloviki," which is the common name for Deputy Prime Minister Igor Sechin's clan and those in the FSB. The term civiliki stems from Medvedev's civil law degree and Surkov's desire to mold Russia's civil society. Surkov has also sought to diversify his power across Russia. He is the chief ideologist behind the spread of nationalism throughout the country. He planted the seeds for a stronger Russia among the upcoming generations by creating the Nashi youth movement, which is reminiscent of the Soviet Komsomol youth. The Nashi — estimated to number at 600,000 — are tasked with promoting nationalism and loyalty to the state and helping to rid Russia of its enemies. They are a formidable force in the country and have been known to prevent anti-government rallies, pressure media critical of the Kremlin and make life difficult for foreigners and their businesses in Russia. The Nashi also promote academic achievement and hope to create the next generation of business and government leaders. They are fiercely loyal to Surkov, though he cannot legally be part of the organization because he is a government worker. While Surkov has expanded his power throughout Russia, his greatest obstacle has been the rival clan led by Igor Sechin, which derives its power from the Federal Security Services (FSB, formerly KGB). It has never been a secret that the GRU and FSB have been adversaries since the creation of Soviet Russia, and it is only natural that Russia's two main clans are based within its two formidable intelligence agencies. Of course, Putin also had a hand in designing the current clan structure, splitting most government, economic and business institutions between the clans in order to balance them and prevent either the GRU or the FSB from becoming dominant. But Surkov has been working to shift this balance by diversifying his clan away from the GRU and enveloping many different groups throughout Russia.

Tipping the Balance

The civiliki's plan to fix the Russian economy is based partially on purging forces that have placed personal interests above economic soundness. In this, they are mostly targeting members of Sechin's clan — the siloviki, or "strong men," who are former FSB agents put in positions of financial or business leadership. It is not clear that this is an entirely fair assessment, since so many in Russia were guilty of gorging on cheap credit during the boom years preceding the financial crisis. Regardless, the motivation for the civiliki's desire to purge the siloviki is not political; rather, it is because the reformers see no reason for FSB intelligence operatives to run businesses or financial institutions in Russia because they lack the applicable business skills. Surkov has latched onto this concept as a way to finally eliminate much of the Sechin clan's power. Typically, the civiliki would be wary of Surkov's politicization of their plan. However, over the summer the gray cardinal approached Kudrin — the architect of the civiliki plan — with a deal: Surkov would support the civiliki's reform plan if Kudrin helped Surkov with certain aspects of his plan to purge Sechin's clan from power. But Surkov's plan is very risky and complicated, and involves infiltrating all the proper channels through which he can pursue his enemies in the Kremlin and its companies and industries. Surkov's plan has two parts — one that targets the siloviki's economic institutions, and one that targets their positions in the Kremlin.

Part 1: The Witch Hunt

First, Surkov intends to go after the main companies and institutions from which Sechin's clan derives either power or funds. Under the civiliki's plan, companies that have been mismanaged or are financially unsound — according to their assessments — would be privatized. Surkov is taking this a step further and wants to launch a series of inquiries and audits targeting very specific state corporations all controlled by the Sechin clan. In Russia, it is common for companies being targeted by the Kremlin to face audits, tax lawsuits and other legal investigations intended to pressure the companies or lead them to being purged or swallowed up by the state. The problem is that for Surkov to attempt to use such a tactic against either state or pro-Kremlin companies, he would have to go through the Federal Tax Service or Federal Customs Service, which are run by Sechin's people. But this looks like it could soon change. As part of Surkov's clan, Medvedev has jumped on the civiliki's economic reform bandwagon. Publicly, the president has recently started suggesting that he could begin investigating Russian firms he deems inadequately run. He said on Oct. 23 that there will be changes in how state firms are organized and even hinted that some firms could be shut down if they do not comply. This is occurring because over the summer, Medvedev and Surkov worked on drafting legislation through the Presidential Council on Legal Codification that would allow the government to "eliminate certain state corporations" — meaning these new maneuvers would not require going through the usual proper channels. All the details on Medvedev and Surkov's ability to target firms are not known, but quite a few details have been leaked to STRATFOR that indicate Surkov's seriousness. Instead of trying to purge Sechin's control over the Federal Tax Service and Federal Customs Service, Surkov has started to create alternative avenues for investigations into powerful Sechin-linked and state-owned companies by going through the Prosecutor General's office, run by Surkov clan member Yuri Chaika, and Russia's Supreme Arbitrage Court, which was taken over recently by pro-Surkov official Anton Ivanov. Also in recent months, the Prosecutor General's office has bolstered its legal authority to work with the Audit Chamber and Federal Antimonopoly Service — both run by Surkov loyalists, Sergei Stepashin and Igor Artemev. These bodies are very powerful and important tools necessary to effectively targeting weighty state firms. According to STRATFOR sources, preparations to start the paperwork on these investigations into certain state and Sechin-linked companies could begin as early as Nov. 10. This will be the test for Surkov to see if he can legally purge Sechin's influence.

The Checklist

Surkov has a very precise list of companies and agencies to investigate. At the top of the list is Rosoboronexport, the state defense exports, technologies and industrial unit. Rosoboronexport is one of the largest moneymakers for the state after energy, earning $7 billion in foreign arms sales in 2009 with another possible $27 billion in contracted orders. Rosoboronexport is led by one of the larger FSB personalities, Sergei Chemezov, who uses arms sales and production for the FSB's political agenda. However, the agency has been accused of hindering the arms industry's ability to keep up with sales and of making it harder for Russia to gain new military technology. Rosoboronexport has also grown unwieldy in that it also now controls non-defense assets like carmakers and metallurgical companies. Furthermore, Surkov does not like the FSB overseeing an organization that should in theory fall under the GRU, since it is military-related. Next on the list is Russian oil giant Rosneft, which is considered the rival to the Surkov clan's natural gas giant Gazprom. The two companies have been in competition since an attempted merger between them failed in 2005. The competition heated up when each company crossed into the other's territory, with Gazprom opening an oil subsidiary and Rosneft purchasing natural gas assets. Rosneft would be one of the more difficult companies for Surkov's group to target, since symbolically it is considered one of the state champions. It is also the key moneymaking enterprise for the Sechin clan. After Rosneft are two government bodies that handle a large percentage of the state's money and are overseen by siloviki or Sechin-linked people. The Housing Maintenance Fund, which handles between $3 billion to $5 billion annually, is facing accusations that no one independent from Sechin has checked on where the funds are being spent and that the fund is simply a front for the FSB's activities in Russia. The second body is the large Deposit Insurance Agency (DIA), which oversees all registrations of deposits into banks in Russia and insures most of the country's banks — an incredibly powerful tool for the FSB. Kudrin has been so incensed by what he has called the mismanagement and misuse of the DIA that he placed himself on the agency's board over the summer. But now Kudrin and the rest of Surkov's group want to purge the siloviki from these institutions. Also on Surkov's list are:
  • State nuclear corporation Rosatom, which controls nuclear power, nuclear weapons companies and other nuclear agencies
  • Olympstroy, the state corporation responsible for construction for the 2014 Olympics
  • State-owned Russian Railways, one of the largest railway companies in the world, which is run by Sechin loyalist Vladimir Yakunin
  • Avtodor, a new state-owned company responsible for revamping Russia's crumbling roads and highways (and therefore slated for vast amounts of investment to flow into its coffers)
  • Aeroflot, Russia's largest passenger airline, which is chaired by former KGB agent Viktor Ivanov and has been struggling during the financial crisis
It isn't clear what Surkov's ultimate goal is in investigating these companies — whether he intends to destroy them, dismantle them, bring them under the control of his own clan or just privatize them so they are no longer in Sechin's grasp, or a mixture of these options. It is, however, clear that if he succeeds, Surkov would wipe out the siloviki's economic base and take away many of the tools they now use to operate effectively in the country.

Part 2: Kremlin Power Positions

The second part of the plan has to do with Surkov's goal of purging a few key Kremlin politicians from their positions in order to tip the balance of power in his favor. The positions on this list include the president's chief of staff, the interior minister and Kremlin speechwriters. Rumors are already beginning to fly around Moscow that Sechin loyalist Sergei Naryshkin, who had until recently been considered a rising star within the Kremlin, will be soon ousted from his place as Medvedev's chief of staff. Surkov sees Naryshkin's placement just under the president and over Surkov as a major infiltration by the Sechin clan into his realm. STRATFOR sources have indicated that Naryshkin will be ousted on the grounds that he never successfully implemented Medvedev's anti-corruption campaign. Next on the list is the Interior Ministry, led by FSB agent Rashid Nurgaliyev. As interior minister, Nurgaliyev oversees 250,000 troops and his own police units. Recently, certain powerful pieces of the ministry, such as the Ministry for Emergency Situations, have been broken off and are now outside Sechin's control. Lastly, within the Kremlin, pro-Sechin and FSB-trained speechwriters have been sidelined. These longtime writers, like Dzhakhan Polliyev, are being pushed aside and new Surkov-trained writers like Eva Vasilevskaya and Alexei Chadaev are now writing speeches for Medvedev, Putin and others. This is very important in how the leaders portray the small nuances of power within and beyond Russia. The point of the governmental changes is for Surkov to get his people into positions of power so that his group can actually change policy and tip the balance of power inside Russia. Surkov is not looking to make Russia more efficient, like the civiliki are — though it is the civiliki's plans giving Surkov the tools and opportunity to try to achieve his goals. Surkov has legitimate justification for quite a few of his changes, based on the civiliki's recommendations to fix the economy, but the rest of the changes are an incredibly bold step to tip the balance of power. Putin has noticed this boldness. Moreover, Putin has noticed a lot of the large changes Surkov has made over the past few years to get more power for himself and his clan and diversify his power base inside Russia. The issues now are how much further Putin will allow Surkov to go, and what Putin is willing to sacrifice to clip the wings of the gray cardinal.

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