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Putin’s friends want to build fortress Russia

by Leonid Bershidsky

Bloomberg

If anyone expected Western sanctions against Russia to give President Vladimir Putin pause or damp his imperialist fervor, they were wrong. Since the middle ages, Russian elites have acted the way a hedgehog does when threatened: roll into a ball and stick out quills.

Gennady Timchenko, a billionaire friend of Putin’s, provides a fascinating insight into that kind of thinking in a rare interview with the state-owned information agency ITAR-TASS.

Timchenko, worth an estimated $8.9 billion, is not just any oligarch. His Labrador retriever, Romi, is the daughter of Putin’s Connie. (“I had never been a dog person but Vladimir Vladimirovich apparently wanted to give a puppy into good hands, so naturally I agreed,” he explained.)

Whether the dog has anything to do with it, he is one of the top beneficiaries of the Russian government’s purchasing system. He has been on the U.S. sanctions list since March, when the U.S. government decided to go after Putin’s friends, apparently expecting to inflict personal pain on the Russian dictator.

In the interview, Timchenko, who has Russian and Finnish citizenship and pays most of his taxes in Switzerland, complains about being separated from Romi, who’s in the South of France with most of the billionaire’s family. Nothing is stopping Timchenko from joining them — he isn’t sanctioned by the European Union — but “there are reasons to seriously fear provocations on the part of U.S. special services,” he said.

Similar fears have prompted the Russian foreign ministry to ask Russians to refrain from overseas travel. For many bureaucrats and law enforcement agency personnel, the request turned into an unofficial ban. When the large Russian tour operator Neva went out of business last month, its chief executive Maxim Pirogov explained that the travel restrictions for police and public officials caused the firm’s sales to drop by about a quarter this year compared with 2013.

Timchenko’s other travel problem is that Gulfstream Aerospace Corp., the maker of his jet, has withdrawn technical service because of the sanctions, and the plane is stuck in Moscow. A similar issue has grounded Dobrolyot, the newly established discount arm of Russia’s biggest airline, Aeroflot. Dobrolyot has been sanctioned by the EU for flying to Crimea, and Germany’s Lufthansa Technic, which had serviced its planes, refused to continue doing so. Dobrolyot has canceled flights and stopped selling tickets until it can find new maintenance and leasing partners.

Timchenko also complained he had had difficulty paying for his wife’s surgery in Germany because U.S. State Department officials “call the top managers of European banks directly and dictate which Russians’ accounts to block. Many prefer to avoid the risk and follow the persistent ‘advice’ from partners across the ocean.” So now the Russian billionaire doesn’t use MasterCard or Visa, just a Chinese Union Card, and carries a wallet full of cash. “At least the Americans cannot reach me,” he says.

His paranoia extends to the mobile phone, citing the revelations from Edward Snowden, the former U.S. security contractor currently in asylum in Russia: “Mr. Snowden taught us to be careful with that equipment. We are being watched.”

As if acting on Timchenko’s fears, Russia has already moved against the U.S. payment systems and made plans to cut down on purchases of U.S. hardware and software.

Russian policy during the new Cold War tends to echo Timchenko’s hurts and phobias. That’s because Putin’s Russia is Timchenko’s Russia, a corporate state in which the executives stand up for one another. Putin, in fact, cited the episode of Timchenko’s wife’s surgery during a call-in show with voters. Timchenko, for his part, said in the interview he was willing to hand over all his assets to the Russian state if needed — an empty promise that other Russian oligarchs have made before, but also a sign that Putin’s friends, masters of the Russia he has built, only see themselves as proxies for the Kremlin rather than independent actors.

It is therefore naive to hope these people — or anyone at all to whom Putin might listen — might tell him to desist in Ukraine so that the West would ease sanctions.

As Timchenko said: “Russia is a sovereign state that protects national interests. I think what makes America mad is that we didn’t lie down for it obediently the way others do.”

Timchenko and others on various sanction lists are pushing Putin to turn Russia into a fortress.

“Russia doesn’t care about the economy now,” political commentator Konstantin Gaaze wrote on Slon.ru. “It doesn’t care about growth, textbook rules and other highbrow concepts. The economy, its quality and its future, is now in another world, and it’s left the top offices until better times.”

If the purpose of sanctions was to destroy Russian growth, it’s hard to see how it fits the West’s interests. It is, however, probably too late to change anything at this point. The sanctions have set off a political chain reaction in Moscow, and peace in Ukraine is not on the Kremlin’s priority list: Building bastions against a hostile West is.

Leonid Bershidsky is a Bloomberg View contributor based in Berlin.