Professional Documents
Culture Documents
P. 1-5
KREMLIN cThe war of the kings continues unabated SECRET SERVICES cJust where will PatrushevCherkesov war lead ? c Alexandre Grigorev, Nikolay Patrushevs horse BEHIND THE SCENE c The return linflation worries the Kremlin FOCUS c The unknowns of the Putin plan DIPLOMACY c A major Russo-American bargain in view ALERTS c Franois Prol c Sergey Naryshkin c Mikhail Margelov
The world of politics in Moscow continues to live these days at the rhythm of the Cherkesov/Patrushev serialised melodrama, named after the two figureheads who have hurled a nearly-public challenge to each other by means of spectacular arrests and reciprocal accusations of corruption and profiteering (Russia Intelligence n63 of October 11). We are naturally following ever closely this conflict where one of the stakes is the National security council, whose leadership is vacant at the moment. Viktor Cherkesov has the ambition to take over in order to support Sergey Ivanov in his presidential aspirations. This is one of the outcomes impossible to accept by the Patrushev/Sechin clan which naturally wants to preserve this highly strategic post. This war has made its collateral victims, notably in the press, where each camp possesses its supporters. The wife of Viktor Cherkesov is a very well-known journalist in Saint Petersburg and Moscow, Natalya Chaplina, whom he met in the northern capital in the early 1990s. But Cherkesov is also the beneficiary of support in other press organs, and certain journalists find themselves by chance, accused of shady deals. One of them had the surprise of noticing that an off-shore account had been opened in his name and that a generous benefactor had credited him with several million dollars, another was accused of supposed links to Vladimir Barsukov, alias Kumarin, currently enprisoned as the presumed chief of the Tambov gang. In brief, in this war inside the services which concerns individuals reputedly close to Vladimir Putin, all blows are permitted. The prudent reservation in which the Russian president has camped is unusual for him in this type of circumstance. The most pervasive of confusion reigns in his immediate circle as a result of these events. The new Prime minister Viktor Zubkov, has adopted a fairly disconcerting, lecturing style of government without sensitivity, with ministers and officials, sometimes in front of television cameras. Because of his Saint Petersburg and Poutinian past, Zubkov can count on allies in all camps. During his time in the Saint Petersbug municipal government, he helped Cherkesov and Patrushev to find appropriate dachas in the region of the northern capital. He is said to be on friendly terms with Nikolay Patrushev and Sergei Ivanov, but his relations with Cherkesov remain good. The fact that the Kremlin has not intervened on one side or another (it has even consolidated in a way the position of Cherkesov, as we relate on page 2) is also a sign that concerning the succession of Vladimir Putin, nothing has been decided. In the aftermath of the intitiatives and spectacular declarations of recent weeks, which we described (the consecration of Zubkov as a possible successor, Putins accord to lead the United Russia list in the December legislative elections, suggestion of a possible role as Prime minister for the current president), new scenarios have circulated. As we analysed in our last mailing (Russia Intelligence n63 of October 11), the scenario of Putin as Prime minister is perhaps not the most credible in view of the fact that the balance of power that exists today clearly favours the president. One thing seems assured according to those knowledgeable about the Kremlin we have consulted in Moscow in recent days : Vladimir Putin wants an new term. For this wish to be fulfilled, he must manage the period between the two elections, or at least four years if the president elected in March 2008 does not stay in office for its entire term. Four years in the current Russian political climate can seem like an eternity. Suddenly strategists working for the Russian president foresee another solution : Vladimir Putin will be a member of the Duma after the presidential ballot, without a doubt. If he resigns his post immediately after having been elected to remain in the Kremlin, he conserves the possibility of returning to the Duma, even several months later. Returning to his seat in the Duma after the presidential vote, he would become the president, a symbolic and popular figure whose shadow would no doubt spill over the occupant of Kremlin, especially if that person is Viktor Zubkov. Would the latter play the game and relinquish his post if he were gently requested? That is the question. In brief, rarely has a succession process been so hectic, uncertain and managed with so much approximation. d
P. 6-8
ALERTS c PKN Orlen c Oleg Deripaska FOCUS c Yuri Yarov, the new strong man of the naval sector BEHIND THE SCENE
c Chemezov weaves his web
in the Defence ministry INDUSTRY c The strange two-step by Moscow and New Delhi c The Russo-Indian accord on the 5th generation fighter has indeed been signed
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RUSSIA INTELLIGENCE
SECRET SERVICES c Just where will
Po l i t i c s & G ov e r n m e n t
The open war raging in Moscow between the director of the FSB, Nikolay Patrushev, the boss of the federal anti-narcotics service, Viktor Cherkesov, and their respective allies (Igor Sechin, Vladimir Ustinov and Alexandree Bastyrkin for the first, Yuri Chayka, Viktor Zolotov and Yevgeny Murov for the second read Russia Intelligence n63 of October 11 2007) has witnessed some new developments. The lines of fissure between the main power structures in the country have crystalised, while an extension of the battleground into the national Security council is also evident. The power centre where the division between those who were for long in a very simplified way referred to as silovikis in the Western press is without a doubt the prosecutors office. On October 15, it was learned that the services under Yuri Chayka had filed an appeal to obtain the release of General Bulbov, the right-hand man of Viktor Cherkesov detained since early October.Probably unheard of before in Russian judicial history, the Prosecutors office and the lawyers of an accused esablished a common front, in this case against the Investigating committee (SK) of Alexandree Bastyrkin, who was behind the detention. Another of Viktor Cherkesovs assistants, Vladimir Zubrin (ex-deputy prosecutor from 2002-2004), followed the complete public unfolding between the services by giving a press conference on October 11. Apparently sure of his strength, the FSB director also entered into the media debate, not to cross swords with his foes, but to present the results of his services in counter-espionage operations. But he did not lose sight of his true objective the downfall of Cherkesov and his allies. The director of the FSB scored a hit by having one of his close associates, General Yuri Nyrkov, named as a deputy to Alexandree Bastyrkin. The clean-up of the FSB Investigating committee, which Russia Intelligence underscored in its last edition, was thus confirmed. Faithful to the good old KGB methods again recently applied during the Gutseriev affair (Russia Intelligence n60 of September 30, 2007) the FSB has also put pressure on the family of General Bulbov. His son was handed a citation to appear in the midst of his studies at the FSB Academy. For the best impact undoubtedly for the pursuit of his career. Evrobalt-Tour, a tourism agency
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RUSSIA INTELLIGENCE
CLANS c The little
Po l i t i c s & G ov e r n m e n t
Who controls what ? A beginners geography of the economic interests of the Sechin/Patrushev and Cherkesov/Zolotov clans. The most important asset of the Sechin group is without hesitation the public oil company Rosneft. It is on the other hand not commonly known that Sechin controls certain departmens or subsidiaries of Gazprom, which is theoretically within the sphere of influence of Dmitry Medvedev. It is notably the case of Gazprombank. The Patrushev group itself also has a priviledged connection in Gazprom in the person of Valery Golubev, the n2 of the directorate in charge of relations with the CIS. Golubovs first wife was the cousin of Patrushev, and the two older sons of Golubov work in the FSB. A number of high-level FSB personnel also hold interest in certain commercial firms. The true owner of the firms Tri kita and Grand, implicated in smuggling cases (Russia Intelligence n63 of October 11 2007), is none other than the ex-n2 of the FSB in charge of economic security, Yuri Zaostrovtsev. The father of the latter, Yevgeny today an influencial personality in the field of private security had helped Patrushev at the beginning of his career in the KGB in Carelia in the 1980s. The officers close to general Alexandre Kupryazhkin, ex-boss of the FSB internal security, were themselves more specifically occupied with operations in China. Viktor Zolotov, the director of the FSO the Russian equivalent of the secret service maintained for his part friendly and business relations with Roman Tsepov one of the godfathers of the Petersburg underworld who died in suspicious conditions in 2004 (Russia Intelligence n 33 of May 18 2006). He is equally close to Vladimir Barsukov alias Kumarin, whose arrest set fire to the powderkeg (Russia Intelligence n 61 of September 13 2007), and the Rotenberg family which notably controls the bank Severny morskoy put (Northern maritime route). Viktor Zolotov especially has business dealings with Semyon Vaynshtok, the former boss of the public operator Transneft, recently named by Vladimir Putin to the head of Olympstroy (the state establishment charged with construction of the infrastructure for the winter Olympics in Sochi in 2014). Zolotov and Vaynshtok are considered as the true owners of the oil terminal n 3 in Primorsk, at the Finnish frontier. In addition, Viktor Cherkesov and his right-hand man, Alexandre Bulbov arrested October 1 by the FSB protect East-Line, the second air freight line after Aeroflot, officially controlled by Dimitry Kamenshchik.
Following these events, the Sechin and Patrushev groups forged a united front (which was not the case before) against Cherkesov and his allies. The first results of this alliance were noticeable in the summer of 2007. Last June, Sechin (who does not particularly appreciate Valentina Matvienko) helps Patrushev and Viktor Ivanov to checkmate the intrigues by Zolotov and Cherkesov against the governor of Saint Petersburg. The Sechin-Patrushev-Ivanov (Viktor) trio neutralised the attempts by Cherkesov aiming at taking over the head of the national security council (read article opposite). He also draws closer to Alexandre Bastyrkin, the undisputed boss of the investigating committee newly created (Russia Intelligence n 58 of June 28). Supposedly neutral, Bastyrkin is quickly revealed to be a satellite of the Sechin group. He plays a front line role in the arrests of Kumarin and general Bulbov. In October, Vaynshtok leaves Transneft and is replaced by Nikolay Tokarev, the director general of Zarubezhneft (read his biographic profile in Russia Intelligence n46-47 of January 19 2007). Tokarev worked with Vladimir Putin in the KGB Dresden residence during the mid-1980s and is reputed to be close to the oil trader Gennady Timchenko (Gunvor), himself linked to Rosneft, for which he commercialises part of the crude oil. Finally, since a few days ago, a press campaign was launched against EastLine. The war of the clans, as we can see, is far from finished. d
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BEHIND THE SCENE
The return linflation on the eve of elections worries the Kremlin
During his direct line with the population Thursday October 18 (read article opposite), the Russian president once again expressed his satisfaction with the countrys vigorous growth which this year should reach 7.7% against the 6.7% originally forecast and sought to reassure regarding the countrys economic situation. The sustained high level of oil prices of course bolsters a general optimism and allows the Russian central bank to accumulate unprecedented foreign exchange reserves (434 billion dollars in mid-October). Some indicators nevertheless are beginning to seriously worry the government economic authorities. At the same time that Vladimir Putin was expressing himself on television, the vice minister for Economic development and commerce, Andrey Belousov, was intervening during a conference on capital markets, making a speech that was rather pessimistic, even alarmist, in tone. According to him, the Russian economy will be confronted with several major risks by 2010 : overheating of consumption and credit to individuals (+37% over the first 9 months of the year), erosion of the balance of payments and especially, inflationary risks. There is now hardly any doubt that the increase in prices for 2007 will exceed 10%, or two points more than predictions by the government early in the year. The vice minister in charge of finances, Alexey Kudrin, admitted it at the end of the Council of ministers October 18. He also confirmed that Russian had not been spared by the international financial crisis of this summer and that Russian banks were experiencing some difficulties for refinancing. A few days earlier, it was Elvira Nabiullina, the new minister of Economic development and commerce, who rang this alarm bell. The increase in prices worries more the government in that it concerns food products and that they are taking place on the eve of the elections. Certainly nothing indicates at this stage that the situation could contradict the expected success of Vladimir Putin in the legislative elections (the United Russia party list he will lead is credited with 54% of the votes). But the return of a two-digit inflation is not the most favourable signal in a time presenting records to the electorate. Quickly, the government has multiplied its warnings against speculators, while certain regional authorities are considering a freeze on prices, as in the heyday of Gosplan and the command economy. d
Po l i t i c s & G ov e r n m e n t
RUSSIA INTELLIGENCE
c cFOCUS
Iran, antimissile defence, NATO : a major Russo-American bargain in view
The widely-noticed speech by American vice president Dick Cheney in Vilnius in early May 2006, and especially the address by Vladimir Putin during the annual Munich security conference last February, had confirmed the profound degradation of bilateral relations between Moscow and Washington. Bringing to an end the deceptive years of the 1990s and the period immediately after September 11, the leaders of the two countries had chosen to publicly express their respective complaints, whether about NATO enlargement, the antimissile defence, Georgia, Iran or the evolution of the internal situation in Russia. It is still too early to say whether we may be in the process of leaving the viscious circle of mutual defiance, but several indications show that in any case the United states are ready to engage in a logic of a grand bargain with Russia. In a visit to Prague October 23, the American Defence minister, Robert Gates, had indeed proposed to put on stand-by a number of elements of the future antimissile defence which would still be built but would only be activated at a time when the ballistic missile threat became tangible. According to certain information, these proposals would have been officially presented to the Russian side during the visit by Robert Gates and Condoleeza Rice in Moscow October 12 and 13. Another sign was sent by Daniel Fried, the n 2 of the State deparment in charge of Europe and Eurasia, known for his intransigence in his position toward Russia.Expressing himself in a press conference in Brussels October 18, he let it be understood that an evolution of the Iranian position on the issue of uranium enrichment could not fail to be taken into account in the context of the antimissile defence. The Americans are apparently ready to put on the table other issues that are sensitive in Moscow. On the occasion of an interview granted to Radio Liberty October 23, Robert Gates declared that he did not consider the entry of Ukraine in NATO as probable in the short-term.This contradicts the resurgence of Atlantist euphoria visible in the circles close to president Viktor Yushchenko since the legislative elections of October 30. It obviously remains to be see how Moscow follows up these American overtures. For the president of the Foreign affairs commission in the Duma, Konstantin Kosachev, questioned by the Russian public television October 23, it represents a first step in the right direction. The Foreign affaits minister for his part says that he awaits for these proposals to be officially transmitted by diplomatic channels. The Kremlin had not reacted by the time we printed this edition. The other major question relates to the Russian policy toward Iran. What does the Kremlin really want and what is it capable of achieving in Teheran ? In a previous edition (Russia Intelligence n 51 of March 2007), we underlined that the path for Russian diplomacy in this case was very limited. Wanting to prevent a military intervention against Iran the only country in the Gulf not to be in one way or another under American influence , Moscow has no confidence in the Iranian leadership and has no desire to see a new nuclear power near its borders. During the visit to Teheran October 15 and 16, Vladimir Putin tried to preserve this fragile balance. He firmly warned against a military intervention, recalled the right of every country signator of the Non-proliferation treaty to have access to civilian nuclear energy and underlined his position on the undesirable presence of third countries in the region. Certain Russian sources also put forward the signature of an accord concerning the delivery of fifty RD-33 engines to power the future Iranian Azarakhsh fighter. But president Putin provided no precision on the date of delivery of fuel for the Bushehr nuclear facility. He would have also transmitted a firm message to Guide Ali Khamenei. As much as we can know, Prime minister Ehud Olmert, who Vladimir Putin wanted to receive in the Kremlin on his return from Teheran, left Russia more reassured about Russian intentions. d Russia Intelligence N64 j October 25 2007
Po l i t i c s & G ov e r n m e n t
ALERTS
Franois Prol, Mr. Russia at the elysean Palace
According to information collected by Russia Intelligence, Nicolas Sarkozy and Vladimir Putin decided, during their meetings on October 9 and 10 in Moscow, to assign the follow-up of their bilateral economic relations to two trusted associates. On the Russian side, vice Prime minister Sergey Naryshkin has been chosen. The French president also proposed Franois Prol. Aged 43, this inspector of finance graduate of HEC and ENA worked on the staff of Francis Mer and then Nicolas Sarkozy at the Economics and Finance ministry before joining Rotshschild & Cie Banque in 2004. Named deputy secretary general of the presidency last May, Francois Prol keeps a steady hand on the major industrial issues of the moment (GDF-Suez, Alstom-Areva, etc...)
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RUSSIA INTELLIGENCE
ALERTS
PKN Orlen and the Russian threat
The Polish counter-espionage services (ABW) recently alerted the government of Jaroslaw Kaczinski about the risks of a hostile takeover of PKN Orlen by Russian oil groups. That is in any case what was revealed by the daily Rzeczpostpolita in its October 11 edition.PKN Orlen today controls 7 refineries (including two in the Czech republic and one in Mazekiu in Lithuania) with a total annual capacity of 32Mt. The Polish state directly controls 10.2% of the capital, to which can be added the 17.32% of Nafta Polska. The floating remainder or 72.48% of the capital is listed on the Warsaw stock exchange. But ABW analysts have monitored an unprecedented activity in the shares of PKN Orlen. 9% of the capital may have changed hands during the month of July alone. The price of the shares on the other hand has increased by about 13% since the beginning of the year. Representatives of the ABW and PKN Orlen have declared they dont know the identity of the buyers of the shares of the Polish oil group, but the Polish press quickly got into the act a few days before the early legislative elections by pointing to Lukoil as the potential predator.
RUSSIA INTELLIGENCE
c cFOCUS
Yuri Yarov, the new strong man of the Russian naval sector
It should be remembered that the new Russia Prime minister Viktor Zubkov had been unable to dictate his choices during the composition of the government formed directly by the Kremlin (Russia Intelligence n 62 of september 27, 2007). Most observers had concluded that he would have no voice in the exercise devoted to nominations. A bit hastily, it seems. Viktor Zubkov has just in fact placed one of his close associates at the head of one of the strategic sectors of Russian industry, whose restructuring has frequently been cited as a priority by Vladimir Putin the navy. It should also be recalled that the Russian president signed on March 21, an oukase concerning the creation of OSK (United naval constructions corporation). Seeing itself as a twin to OAK, the consortium of Russian aircraft manufacturers which saw the day in late 2006, OSK has as its mission to consolidate all state assets ( research institutes, consultants, shipyards and repair facilities) around three geographic poles (Far east, Baltic and Northern). As in the aerospace sector, the aim of the Russian authorities is to rationalise an industrial tool inherited from the Soviet Union with an overcapacity and to rebalance its activities to the advantage of the civilian side, notably thanks to major investments by hydrocarbon companies (Gazprom has therefore just placed an order for two drilling platforms with the Vyborg shipyards read Russia Intelligence n61 of september 15, 2007). Alexandre Burutin the former military adviser to the president had been entrusted with the presidency of OSK last April. It had been vacant, however, since the recent promotion of Alexandree Burutin to the n2 post in the General staff (which in passing places him as the favourite to succeed Yuri Baluevsky, 61, said to be one the way out). At least four men were candidates for the OSK presidency : Andrey Dementev, the vice minister for Industry and energy, who was backed by Viktor Khristenko; Andrey Dutov, the n2 of the Federal industry agency (Rosprom) in charge of naval affairs; General Vladislav Putilin, assistant to Sergey Ivanov at the military-industrial commission (VPK); Yuri Yarov, the director of the consultants Severnoe, specialised in the design of warships. It was finally the candidacy of the latter which Viktor Zubov backed. It must be said that the two men have been friends for a long time : Yarov, in the late 1980s had been the secretary of the executve committee of the Communist party for the Leningrad region. His assistant was none other than the new Prime minister. The nomination of Yuri Yarov, 65, was surprising. It was generally considered that the careeer of the former representative of Boris Yeltsin in Saint Petersburg (1991), who was also vice Prime minister in the government of Viktor Chernomyrdin (1993-1996) and the deputy to Anatoly Chubais and Valentin Yumashev in the presidential administration (1996-1998) was behind him. Yuri Yarov will have as his mission to get back on track the reform of the naval sector, which has been severely delayed (OSK has still not been officially registered, while this should have been done by the end of summer). He is best able to accomplish this since, according to our information, he played a determinant role in the drafting of the restructuring plans accepted by the Kremlin last spring. One of the questions that is sure to quickly arise for Yuri Yarov concerns the modus vivendi with the private group OPK of Sergey Pugachev, which controls two of the most important shipyards of the northern capital (the Baltic factory and the Northern shipyards). We recall that in the spring of 2006, Rososboronexport had made a bid for these assets, an offer that was brusquely rejected by Sergey Pugachev. The latter had then announced an ambitious modernisation project of his Saint Petersburg yards, which would notably pass through a regrouping of activities at the site of the Northern shipyards and an investment of 500 million dollars. Sergey Pugachev is even less inclined to sell his assets since he should be awaiting an important order both from the Russian combat navy ( a ocean-going multi-mission 22350 frigate project) and two clients (Algeria, among others for the modernisation of two vessels and construction of two others in the Northern shipyards for 900 million dollars). d
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RUSSIA INTELLIGENCE
The Russo-Indian accord on the 5th generation fighter has indeed been signed
Indian sources had announced that the recent visit to Moscow by the Defence minister, A.K. Antony, would lead to the signing of an ambitious cooperation accord on the 5th generation fighter. Whats happened, exactly? Yes, in fact, this accord has indeed been signed and represents a first degree victory for the Kremlin, but also for the boss of AKhK Sukhoi, Mikhail Pogosyan. There nevertheless exists a risk that this decision by New Delhi will lead to the cancellation of the Indian Defence ministry for 126 light fighters [ for which the MiG-35 was well placed]. The Indian military have recently demonstrated their disappointment concerning the delay in the implementation of the contract for the aircraft carrier Admiral Gorshkov and project for an MTA military transport aircraft. What is your general view of technical-military cooperation between Moscow and New Delhi? Indeed, recently the InRuslan Pukhov, dian side regularly expresses it displeasure concerdirector of the Centre for ning the fulfillment of Analysis of Strate- certain contracts signed gies and Techwith Rosobonexport. This nologies (CAST) situation stems from two factors. First, the degradation of a certain number of Russian firms that produce hightechnology components, especially for naval systems. The naval industries (like those linked to space as well) have had lots of difficulties in adapting to the new post-communist economic environment. The other is the very low profitability of the contracts signed with India. As a result, Moscow delivers the major part of these armaments at break-even prices. But the Indian military orders exclusive systems (Talwar frigates, Su-30MKI, etc...) which leads to excess costs and delivery delays longer than for standard equipment. The signature this summer of a technical cooperation agreement between France and Libya aroused certain debate in Paris. What can you tell us about Russian arms sales to Libya ? A visit by Vladimir Putin to Tripoli is expected before the end of the year. We expect that on this occasion a series of accords will be signed that are close in their structure, to the accords concluded with Algeria in March 2006 (combat aircraft, anti-air systems, tanks). We nevertheless have the impression for several weeks that this presidential visit could be delayed sine die. Which could obviously compromise the signature of this mega-contract. d
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