Buckley and Ostrovsky pretty faithfully reflect the views of international investors and policymakers when they acknowedge that "Mr Putin was right to break the influence of the 1990s-era oligarchs, which was distorting competition and deforming the development of Russian capitalism", and also when they complain that the representation of government officials on company boards may introduce a destabilziing "vicious circle of property redistribution and mutating oligarchies". But they ignore that "mutating oligarchies" and property conflicts are also an essential feature of advanced capitalist economies where there is a more formal separation between the political and economic spheres, and that struggles between factions are able to be contained by the electoral system and other forms of bourgeois democracy, which the Russians are also well on the way to adopting. The article also blurs the distinction between Western corporate chieftans and the Putin appointees who, at least as yet, don't have meaningful ownership stakes in the state-controlled enterprises they supervise.
MG ================================== Putin's allies are turning Russia into a corporate state By Neil Buckley and Arkady Ostrovsky Financial Times June 18 2006
Leaders of Russian industry, lined up under company banners to greet President Vladimir Putin in St Petersburg last week, looked like soldiers standing to attention for their commanding officer. Some had flown hundreds of miles for a place in the parade.
A month before world leaders fly into the city for the summit of the Group of Eight industrialised nations, the investment forum in Mr Putin's home city was designed to showcase Russia's economic resurgence. As top executives oozed a confidence born of $70-a-barrel oil and the economic recovery it has generated, the message was clear: Russia is back - and is aggressively eager to use its natural resources as tools to regain its influence in the world.
Its renewed assertiveness could scarcely have been imagined eight years ago when, still in the throes of its post-Soviet transformation, the country defaulted on $40bn of debt and plunged into financial crisis.
But the forum also displayed the new economic order in Russia. Pride of place was given to the state-controlled giants: Gazprom, the natural gas producer that has a market worth of $225bn - bigger than Wal-Mart or Royal Dutch Shell; Rosneft, the oil company about to launch a $10bn initial public offering; and Russian Railways, also planning IPOs of some of its units.
Directors of these companies are intimately linked to the president. Alexei Miller, the Gazprom chief executive, worked with Mr Putin in the St Petersburg mayor's office in the 1990s. So, too, did Dmitry Medvedev, who combines his job as first deputy prime minister with chairing Gazprom, and Igor Sechin, who is the president's deputy chief of staff as well as Rosneft chairman. Dmitry Yakunin, chief executive of Russian Railways, also forged a bond with Mr Putin in the same period.
All are part of a network of Putin associates, either from his spell in Russia's second city or former fellow officers in the KGB secret police, who have quietly come to dominate state-controlled businesses - and who often double up as government ministers or senior Kremlin officials. Together, they form the quasiboard of what might be called Russia Inc, comprising the country's most lucrative assets not just in oil and gas but also nuclear power, diamonds, metals, arms, aviation and transport.
The dominant force in Russia is no longer the oligarchs of Boris Yeltsin's presidency, who hustled their way to wealth in murky post-Soviet privatisations, then parlayed their riches into political power. Mr Putin's associates have formed a new marriage of economic and political power. Add in the state's resumption of control of most mass media and, says Boris Nemtsov, the liberal former deputy prime minister, this group has all the resources that defined the old oligarchy.
"The 1990s oligarchs have ceased to be oligarchs and just become businessmen again," says Mr Nemtsov. "Now we have a chekist oligarchy," he says, using Russian slang for a secret policeman.
When Mr Putin succeeded Mr Yeltsin in March 2000, his goal was to reassert Kremlin control over a chaotic, cash-strapped state dominated by big businessmen powerful enough to shape legislation to their own advantage. Through a 1995 "loans for shares" scheme, in which some oligarchs lent money for the budget in return for stakes in the most coveted unprivatised businesses, and by funding Mr Yeltsin's 1996 presidential election victory, they established a hold over the then president.
By helping Mr Putin to power, they expected to hold similar sway over him. But, by making high-profile examples of some Yeltsin-era oligarchs, Mr Putin radically clipped the wings of the rest. Two, Boris Berezovsky and Vladimir Gusinsky, fled abroad in 2000 facing fraud charges after clashing with the president.
When Mikhail Khodorkovsky, owner of Yukos, was arrested three years later on fraud charges and his oil company was hit with a $28bn back tax bill, it seemed to be part of the same process. Mr Khodorkovsky had shown political ambitions and was financing opposition parties. It did not just open a new chapter in the wielding of Kremlin power but began a process of redistribution of assets that has been dogging Russia's economy ever since.
The president has not "liquidated the oligarchs as a class", as he once pledged - three of the big seven from the 1990s are still in business. Alongside the state companies in St Petersburg last week were leaders of private companies including Lukoil, the energy group, and Rusal, the aluminium giant.
But Mr Putin has made private businessmen loyal and pliant. The Yukos case taught them that they held their assets at the Kremlin's pleasure and became involved in politics at their peril. Asked if he has had any recent contacts with Mikhail Kasyanov, the former prime minister turned anti-Kremlin presidential candidate, one 1990s oligarch grimaces.
"Are you crazy? Seeing Kasyanov today would be like meeting the head of the CIA in the 1970s," he says.
(Continued in How the state...Part II)