Should We Expect A Shakeup In Putin’s Inner Circle?

Vladimir Yakunin’s ouster as director of Russian Railways has stirred predictions of a shakeup to Putin’s inner circle. But Putin, as history shows, doesn’t swap horses in midstream.

August 19, 2015

By Sergey Aleksashenko

News of Vladimir Yakunin’s ouster as director of Russian Railways, Russia’s national railway company, led many experts to speculate about the possibility of a serious shakeup in Russian President Vladimir Putin’s inner circle. In my view, such a hypothesis is too weakly founded, and its authors are most likely confusing their desires with reality.

First of all, in the mid-1990s, Yakunin was one of the founders of the Ozero (“Lake”) cooperative and was a close friend of President Putin, who in fact was responsible for building Yakunin’s career from the year 1997 on (when Putin was appointed Deputy Chief of Staff of the Presidential Administration). However, the peak of Yakunin’s influence fell on Putin’s first two terms as president. During that time Yakunin was a frequent guest on federal TV channels, and his lengthy interviews on a broad range of topics would appear in numerous magazines. But his exceptional closeness to President Putin apparently came to an end in 2007, when Putin launched operation “Successor.” At that moment, Yakunin began to position himself as the only worthy candidate to the presidential post and started to build a bureaucratic bloc in his support. By all appearances, Putin didn’t like the strengthened position of one of the members of his team – in general, Putin seems to believe his team shouldn’t have a No. 2 – and after that Yakunin’s influence embarked on a sharp decline.

Secondly, talk of Yakunin’s dismissal had already begun long ago and sharply intensified last year, when Prime Minister Dmitry Medvedev held off for more than a month on signing a new contract with Yakunin as head of Russian Railways, despite the fact that the company’s board of directors (who voted according to a directive passed down from the Russian government) had approved its renewal. The reason was that, in the years following the 2008 financial crisis, the list of grievances against Yakunin as the company director had steadily grown. I’ll list a few of the main ones here:

  • While the company brought in a profit before the crisis, after the crisis it constantly demanded subsidies from the federal budget. Yakunin turned out to be unable to reform the railway tariff system, and instead proposed constant tariff increases for exporters, which multiplied his enemies in the business community.
  • Company reforms were frozen and a series of issues were left suspended with no solution. In this way, for example, an unfinished effort to reform regional commuter train lines led to a massive shutdown of their services in late 2014-early 2015, which elevated public discontent.
  • Yakunin became one of two state-run company directors (the other being Igor Sechin, the head of Rosneft) who flatly refused to carry out a government directive requiring heads of state companies to publicize their earnings. This decision was taken on the initiative of Prime Minister Medvedev, and in refusing to follow it, Yakunin de facto repeated the conflict between Medvedev and Kudrin that took place in 2011. In both cases Putin sided with Medvedev, since the latter was and continues to be the president’s “political insurance.”

 

Thirdly, my analysis of the power system built by Vladimir Putin tells me that Putin doesn’t have a constant circle of confidants whom he assembles in order to discuss existing problems. Putin’s team is best described by a phrase attributed to Russian Emperor Paul I: “A nobleman in Russia is only he who I’m speaking to, and only as long as I’m speaking to him.”[1] For this exact reason, we shouldn’t conclude from Yakunin’s dismissal that he has been banished from Putin’s circle of influence. Just as he had experienced both exceptionally close and significantly weak ties with the president during his time as director of Russian Railways, Yakunin could similarly find himself either close or removed from the Russian president in his new honorary position in the Federation Council.

In regards to the hypothesis about a radical restructuring of Putin’s circle, past experience shows that Putin isn’t keen on swapping horses in midstream. When he has had to make changes to his team, he has done so at the start of a new presidential term. And that, as we know, will take place on the Russian political calendar in spring of 2018.

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Sergey Aleksashenko is the former Deputy Finance Minister of Russia and former Deputy Chairman of the Russian Central Bank. He is a Non-Resident Senior Fellow at the Brookings Institution. [1]

An alternate version of this quote reads as follows: “Every person has importance when I speak to him, and until the moment when we finish speaking.”

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