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Friday, March 2, 2012

Putin’s Pals: Billionaire Junkies

Arkady Rotenberg, a former judo coach, became a billionaire industrialist by selling pipe to the state-owned gas monopoly, Gazprom. Meanwhile, owning a minority state in a small bank in St. Petersburg that won control of another of Gazprom subsidiaries, Yuri Kovalchuk gained a net worth of $1.5 billion. Gennady Timchenko, “once the little-known sales manager of a local oil refinery,” went on to become one of the richest men in the world by co-owning “a commodity trading company that moves about $70 billion of crude oil a year, much of it through major contracts with Rosneft, the Russian national oil company.” What these billionaires shared besides getting rich was a certain connection—namely to Vladimir Putin in particular.

                           Vladimir Putin arrives for a campaign rally in Moscow.  Agence France-Presse/Getty Images

The New York Times goes on to observe that “these relationships are evidence of deeply entrenched corruption.” Critics view the billionaires as examples of what was essentially government-sanctioned theft connected to Russia’s abundant natural resources. “The basic point is that these guys have benefitted and made their fortunes through deals which involved state-controlled companies, which were operating under the direct control of government and the president,” said Vladimir Milov, a former deputy energy minister who turned into an opposition leader. For his part, Putin denied any role in enriching his friends into billionaires. He also denied involvement in their project to build him a “palace” on the Black Sea—a “sprawling resort complex” costing as much as $1 billion. Even so, Sergei Kolesnikov, one of Putin’s former associates from St. Petersburg, fled Russia with a trove of documents that support the contention that Putin was connected to the resort being built for him. Kolesnikov has also described other business dealings in which money had been funneled, often as loans, to businesses controlled by Putin’s friends or relatives.

According to the New York Times, the dealings between Putin and his acquaintances would likely come under even more scrutiny with the growth of the opposition and its increased pressure for governmental reforms. At the same time—just before the Russian presidential election in March 2012—the Western media was reporting that Putin was almost certain to win the election even in spite of the huge protests. Even though this could simply mean that conservatives across Russia greatly outnumber the protesters, I suspect that the election of a man amid such documented corruption says something more generally about the strength of accountability in a democracy.

Meanwhile in the U.S., the Huffington Post was running a headline saying that people who invest in SuperPacs for Mitt Romney could see their “investments” in him pay off handsomely. As the story goes, a campaign contribution buys the ability to get the office-holder’s ear (or that of an aide). The examples of new wealth in Russia conveniently connected to Putin suggests that far more is involved in the return on investment. Neither Putin nor Romney seemed hurt by the (at the very least) unseemly mix of contributors or connections already having benefitted or expecting huge “dividends.” In Romney’s case, his close ties with Wall Street both personally and in business as well as political contributions did not seem to bother many people even though Wall Street had been culpable in the financial crisis of 2008. It is enough, it seems, to be a pretty boy with connections in the establishment; the lack of ideological substance, or vision, in a candidate-fixated electoral culture enables such candidates. Their support becomes a self-fulfilling prophesy, with well-connected backers in it with the expectation of a huge economic payoff.

The real culprit, I’m afraid, is neither Putin nor Romney. Rather, it may go back to the premise of John Adams and Thomas Jefferson that a viable republic depends on an educated and virtuous self-governing citizenry—that is to say, an electorate that is not easily manipulated or hoodwinked. How Putin could be poised to win even on the first round in spite of the corruption, and how the Republican Party establishment (rather than the rank and file) could manage the primaries with the Wall Street candidate being favored so soon after 2008 suggests to me that democracy is either weak or deeply flawed—conveniently tilted to the establishment rather than the people. Yet it could also be that too many voters, both Russian and American, vote as though the three blind men in the opening of James Bond’s Dr. No. I suspect the tilting toward the “men on top” dovetails with an enabling electorate, and this in turn provides a default wherein corruption is the norm. In other words, the corrupt are too ensconced—too comfortable as they know they are beyond being touched.

Faced with such corrupt people in power beyond the reach of an electorate, the ordinary person is understandably frustrated, as there is literally nothing that can be done about it. While staying at a Days Inn once, I was repeatedly awakened in the middle of the night by noise coming from the room above mine. The hotel’s manager must have told his front desk employees to ignore noise complaints because mine were ignored—one employee said as much (this is how arrogant corruption can be). Meanwhile, the franchisee had likely paid off the local police department—with the possible knowledge of the corporate headquarters at Wyndham Group—because my noise complaint to the police was inexplicably delayed—the dispatcher having forgotten where the hotel was located in the small town—and then evaded. I was stunned when the local manager went after me for pursuing the complaint with customer service. He refused to give me any refund—even threatening a penalty should I physically leave his hotel before the last day of my paid stay.

When I have told the Days Inn story to people, they have inveritably blurted out something like, “How could that even happen? How could they get away with treating customers that way and stay in business?” Exactly my point, though Days Inn continues right along (and that local hotel is presumably still in business). I was stunned too, particularly in recognizing that the system of corruption was so engrained and beyond reproach not only within Days Inn but also in that particular hotel’s locality. It occurs to me that the local officeholders must have known of the franchisee’s way of doing business, and could even shield the franchisee without fear of being voted out of office. Indeed, I would not be surprised if the franchisee had made political contributions as well as “contributions” to the local police department. From the standpoint of being a customer and a citizen, I felt utterly unprotected during my stay and frustrated at the utter lack of accountability—even the brazenness of the local manager lying about me in order to cover up for his refusal to act on noise complaints.

Beyond giving business ethics a bad name, the Putin billionaires, the Romney contributors from Wall Street, and the Days Inn division of the Wyndham Group reflect badly on democracy because they take advantage of its lapses in accountability. Ultimately, We the People could do much better were we to get off our sofas, turn off the remotes, and vote the bastards out and put in people who would go after the connections and bad businesses that have been enabled for far too long. This would undoubtedly take more than one election cycle of replacements before those in power get the message that maintaining the status quo is no longer sufficient. Yet even as I write these lines, I can feel the weight of the status quo bearing down on me. I can sense the herd-like mentality of the vast majority of the voters in any country continuing to chew the cud even if they do happen to hear bits and pieces on how established connections enrich themselves and even attack other people with impunity.


Andrew Kramer and David Herszenhorn, “Midas Touch in St. Petersburg: Friends of Putin Glow Brightly,” The New York Times, March 2, 2012.