By John Helmer, Moscow
Vladimir Yakunin, the recently replaced boss of Russian Railways, says President Vladimir Putin saved his bacon when he was fired the first time in June 2013, and then a second time a year ago. But last month, Yakunin has been telling his friends, it was Putin who made a pig’s breakfast of himself. On August 18, the day after Yakunin disclosed what he claims was his resignation, Putin said the move had been Yakunin’s choice, adding: “I have yet to speak to him about it.”
For Yakunin to appear to have been driven out of Putin’s “inner circle” – the US Treasury uses that term; the White House prefers “cronies” – has triggered speculation in the Anglo-American media that the US campaign against the Kremlin has begun to produce the first signs of regime crack-up.
Yakunin is encouraging the speculation himself by telling his friends that his ouster is political, maybe ideological, but nothing to do with the state of Russian Railways (RZhD) or the capacity of the state budget to cover its rising costs and growing losses. Putin won’t listen to him any longer, Yakunin is confiding. The President is isolated more than ever before, he adds. For the usually loyal Yakunin to be saying this, even if quietly and to non-Russians, can only mean that reality is getting away from one of them. Some of Yakunin’s foreign friends like to think it’s Putin. The Russians think it’s Yakunin himself. “He’s lost his usefulness to the boss,” says one. “Age and the arrogance of power have overtaken his sense. He hasn’t been defeated by Putin’s enemies. He’s defeated himself.”
As Prime Minister, Dmitry Medvedev (below, left) holds the nominal power to appoint, reappoint, or remove the head of the state railways company. On June 19, 2013, he tried to fire Yakunin twelve months before his contract was due to expire. Yakunin tells the story that he and the president were meeting over dinner when Putin (right) told him an announcement had just come from Medvedev’s office that Yakunin had been removed. Putin then picked up the telephone and told Medvedev to rescind the move. Medvedev did what he was told.
Yakunin’s friends and the Russian media have embellished the story to claim it was Yakunin who broke the news to Putin, as they were tucking into a roast grouse Yakunin had shot himself. Whether the bird was Scottish, German, or Russian isn’t reported. Medvedev got the bird just the same.
The prime minister tried again in June of 2014, just before Yakunin’s term on his third 3-year contract ran out; his first contract commenced in 2005, and was renewed in 2008 and 2011. Medvedev authorized his spokesman to tell the press he hadn’t signed, and wasn’t intending to sign new documents to extend the appointment. Again Yakunin asked Putin to override Medvedev. He did, but while Medvedev was promising to comply, he dragged his feet. It wasn’t until August 25, 2014, that Yakunin received his new papers from Medvedev.
By then Yakunin had been targeted by US sanctions for several months. The US Treasury announcement of March 20, 2014, said: “Yakunin is being designated because of his official position in the Russian government, but he is also a close confidant of Putin. Yakunin regularly consults with Putin on issues regarding the Russian Railways company. In addition, Yakunin accompanies Putin on many domestic and international visits. Yakunin met Putin while both were working in St. Petersburg. Yakunin decided to create a business center in the city and contacted Putin for his support. In addition, Yakunin became a member of the board of the Baltic Maritime Steamship Company on Putin’s instructions. Yakunin and Putin were also neighbors in the elite dacha community on the shore of Lake Komsomolsk and they served as cofounders of the Ozero Dacha Cooperative in November 1996.”
No other government followed the US in sanctioning Yakunin, except for Australia. Noone in Medvedev’s “inner circle” was sanctioned by the US at the time, or since.
This past June, Yakunin thought he still had two years to run on his contract, and he said so publicly. “Of course, I feel closely connected with the work of Russian Railways, the work of their colleagues. But I know that sooner or later will come a time when I have to do something else. I cannot think about it and I see my task as not to retain the unfinished things.” He and Putin then agreed on a display of continuity, and also a put-down for Medvedev and his confidant, Deputy Prime Minister Arkady Dvorkovich, who had just moved himself into the seat of chairman of the RZhD board.
The Kremlin transcript of Putin’s meeting with Yakunin on July 1 records the president as asking: “what is happening with local trains? What has been done about the issues that people raised and the complaints made? I would like to hear not just about the situation with local trains, but about passenger traffic in general, taking into account that the summer holiday season is underway.”
Yakunin replied that he had done what he’d been told. “After you stepped in on the issue, the routes that had been cancelled with the regions’ approval were restored. There are still some outstanding matters to resolve, but they are related to the fact that on some of the routes, there really are no more than a dozen or so passengers using the local trains. In this situation, it simply is not viable to use electric commuter trains for passenger traffic on these routes.”
Putin wasn’t entirely satisfied, and let everybody know. “You need to be more attentive to such matters.”
As for Yakunin’s sensitivity to the rise in railway costs and in operating losses, he told Putin: “we are achieving all of the target indicators that were approved by the Government and the company’s board of directors. I also note that in accordance with your instructions, we are doing a lot of work now to manage costs and risks. For example, with inflation as it is currently calculated by the Economic Development Ministry, and the current growth in the industrial and consumer price indexes, we have managed to keep our cost increases at a level of 6.4 percent.” The transcript ends with Putin saying: “Good”.
Six weeks later Yakunin was out. His version of why he was removed has been circulating among his friends and foreign business associates. To the press Yakunin is saying he withdrew voluntarily to take the post of Federation Council senator for Kaliningrad. That was a last-minute improvisation because the incumbent Kaliningrad governor, Nikolai Tsukanov, had been circulating a list of several candidates – Yakunin wasn’t one of them. For good reason: apart from a family company investment in a Kaliningrad hotel, and the trains which run in and out, he’s had no connexion with the region.
A Federation Council appointment will also oblige Yakunin to disclose all the assets he, his sons Andrei and Victor, and other family members hold offshore – an obligation which may prove embarrassing to evade, and worse to comply with. For background on Yakunin’s business interests, start here. If there has been a steady accumulation of fortune offshore, as often rumoured, there is no evidence of the tell-tale trail of names and transfers.
Andrei Yakunin, 40, the older son (below, left), holds a British passport and lives and works in London. His London home is reportedly registered to a Panama entity. His work is managing hotels and investor money through his vehicle, Venture Investment and Yield Management (VIYM). He and the asset management business started with low-cost privatization of state property in St. Petersburg. Lead projects in the firm’s current portfolio remain in St. Petersburg, where Victor Yakunin (right) is in charge. Swiss sources deny Russian reports that Victor continues to maintain residential property in Geneva.
A Russian source well-known in the transportation sector says Yakunin Senior’s downfall was all his own doing. “It’s Yakunin’s fault because his public announcements about the patriotic and ascetic life caused irritation in the Kremlin. If he’s a crook, he should have kept silent, like others. If he’s not, how to explain his son’s preference to be British. Did Vladimir Ivanovich consider London to be his safe harbour also?”
In private Yakunin has intimated that Putin isn’t forthright enough towards the US-led war against Russia, and unwilling to see the conflict from Yakunin’s view that this is also a war of civilizations; that’s to say, of Orthodoxy and Russian morality against licentious barbarians. In none of Yakunin’s conversations has he conceded he’s feeling tired of fighting either for the RZhD budget or against Medvedev, Dvorkovich, and Washington. What strategizing he implies Putin won’t agree to, Yakunin isn’t explaining.
Moscow correspondents for the Financial Times and New York Times, lacking local sources with access to RZhD or to Yakunin, have led with an idée fixe. According to Katherine Hille, “big political changes lie ahead as Russia’s economy takes another turn for the worse and a lifting of sanctions imposed over the Ukraine crisis appears nowhere in sight.” Hille claimed “a source close to the Kremlin said such a move ‘could be part of larger changes’ ”. Her only name source, the certifiable Andrei Piontkovsky, she reported as “claim[ing]…that the president’s associates had even started searching for a replacement for the president.”
Andrew Kramer, the New York Times correspondent for Kiev, declared“one of the most significant shake-ups in domestic politics since the Russian economy slipped into recession last year.” For his source, Kramer employed Clifford Kupchan, an ex-State Department official now selling his advice commercially in New York. “If [Putin] he were starting to go after his insiders, that could well lead to panic and a true threat to the regime,” Kramer quotes Kupchan as claiming. “If it’s more of a pinpoint strike against an oligarch, a loyalist, who presides over a key sector that needs to perform better, that’s a more plausible explanation.” Kupchan and Kramer didn’t know. Noone who did would talk to them.
The version of the BBC’s Russian Service engaged Russian sources with names. One was reported as believing that Medvedev and Dvorkovich had triumphed over Putin’s friend, and that Igor Sechin, the chief executive of Rosneft, who is also on the US sanctions list, may be next. Another said Yakunin’s patriotism was hypocrisy. “As is well known, his son [Andrei] and granddaughter are in London. Maybe he decided that of their own accord they want to go into the shadows… to live in peace where they want.” A third and fourth told the BBC that Putin had become fed up with Yakunin’s expensive tastes. “In front of the president a huge queue has formed for [state budget] money, but there is less and less. To save money, it is necessary to thin out the place. Perhaps the example of Yakunin’s [exit] will make clear to other heads of large companies that their [money] requests should be modest.”
The Russian rail and transportation expert, Alexei Bezborodov (right), editor in chief of Infranews.ru, believes RZhD’s financials have presented ample reason for Putin’s disgruntlement. In the first quarter of this year RZhD reported a loss of Rb16 billion. Roughly double that loss is projected by year’s end. In 2014 the year-end loss for RZhD was Rb44 billion. But according to Bezborodov, the financial results and projections didn’t make the case for Yakunin’s dismissal, as Medvedev and Dvorkovich tried arguing. In Bezborodov’s view, Yakunin wasn’t pushed; he decided to jump.
The consensus among Russian sources appears in a lengthy report by Roman Shleinov and a team of journalists at Vedomosti on the Kremlin’s appointed successor for Yakunin at RZhD, Oleg Belozerov. “The resignation of Yakunin was unexpected,” they cite a high-level contractor for RZhD as saying. “The change of power in the monopoly was not prepared in advance. But you cannot say that it wasn’t ripe.” The preparation to advance Belozerov, according to the reporters’ sources and others contacted independently, has included Arkady Rotenberg, who stands to gain from RZhD spending on fresh infrastructure; Igor Levitin, the former Transport Minister and currently a presidential advisor; and the head of the Federal Security Service (FSB), Alexander Bortnikov (below, left). He and Belozerov (right) aren’t kin, but they are close, several sources claim. Levitin is not on any of the allied sanctions lists; Rotenberg is on most of them; Bortnikov is on the European Union list but not on the American one.
Far from a sign of Medvedev advancing or Putin’s cronies losing, several of Yakunin’s enemies claim his ouster demonstrates how he has helped galvanize the inner circle. “The regime is proving to be more resilient under pressure than Yakunin,” says one. What they all say about Belozerov – balanced in negotiations, financially prudent, meticuluous administrator – is everything that Yakunin ended up convincing Putin he is no longer.