Two important tendencies have marked Russian political life during the past few months. The first is the Kremlin’s attempt to control officials’ and lawmakers’ foreign accounts and real estate holdings. The second is the growing activity of independent bloggers and civic activists in investigating unaccounted foreign assets of regime figures. Both the government and the opposition seem to be pursuing the same objective of exposing suspicious property owners. However, as political analyst Tatiana Stanovaya points out, the government’s interests and society’s interests do not overlap.
Last summer, shortly after Vladimir Putin took office as president, the Kremlin became interested in those lawmakers and officials who have accounts and mansions abroad. Anonymous sources told the media at the time that a new law would be adopted that banned officials and deputies from owning property and opening bank accounts abroad. This measure would supposedly help to ensure their patriotism. Trips “to Courchevel and its likes” cause irritation in society, an anonymous source explained. This explanation was probably only a pretext: the Kremlin has in fact started pondering whether the bureaucracy living “between two countries” can really be loyal.
As a result, two bills emerged in the State Duma. The first one suggested that information about the real estate holdings and foreign accounts of individuals in four categories (Federal Assembly members, governors, regional deputies, and certain political officeholders) be published on specific websites. The bill also established criminal penalties for falsifying information or failing to submit a declaration. Dmitri Medvedev’s government was ready to support this “mild version.” The second bill imposed a direct ban both on owning property abroad, except for those properties designated for official use, and opening bank accounts abroad, except for those accounts intended for medical treatment or educational purposes. The ban applied to state employees’ spouses and minor children as well. Violators could be fined 5 to 10 million rubles ($164,000 to $328,000) or receive up to five years in prison, with suspension of the right to hold office for three years. This was not “a two-move problem, when a tougher bill is introduced in order to successfully pass a milder one,” a source in the presidential administration explained to Kommersant, adding that the Kremlin did not expect all officials to like the bill. “Even some United Russia members, who do not see which way the wind is blowing, have tried to object.” However, if the law were to come into force, this source predicted, “[Gennady] Gudkov and his likes won’t be able to say that they are being persecuted for political motives because the law will apply to everybody.”
The Kremlin wanted to push the second version of the bill through the Duma, which caused a split within the government. Prime Minister Dmitri Medvedev, Deputy Prime Minister Vladislav Surkov, and Federation Council Speaker Valentina Matviyenko opposed the bill. In late October, State Duma Speaker Sergei Naryshkin joined them, saying that a ban on state employees’ ability to own property and accounts abroad “has nothing to do with combating corruption.” Finally, last December, the Russian Association of Lawyers (an organization close to Medvedev) and the Supreme Court joined this coalition. “Criminalizing an act is only appropriate when it poses a danger to society and other response measures have proved ineffective,” Supreme Court Deputy Chairman Anatoly Tolkachenko wrote in his reply to the Duma. It seemed that the Kremlin would not dare to go against the current under such circumstances.
With deteriorating relations between Western countries and Russia, officials with mansions in Miami and the Cote d'Azur might be more likely to “betray the Motherland’s interests” in a case of political destabilization.
However, in February, the president sent the Duma his version of the bill, which could be called a compromise with the elites. Since the bill’s initial introduction, the Kremlin’s motives have become more complicated. Their first motive was to encourage the loyalty of lawmakers and officials. In their view, with deteriorating relations between Western countries and Russia, and particularly between Russia and the United States, officials with mansions in Miami and the Cote d'Azur might be more likely to “betray the Motherland’s interests” in a case of political destabilization. The Kremlin’s second motive was to protect itself from possible external pressure. The adoption of the Magnitsky Act in the United States has become a landmark in US–Russia relations. The Russian elite has found itself in a vulnerable situation, in which sanctions can be imposed on officials’ accounts and other assets in response to their violations of human rights. It is no coincidence that Vladimir Putin spoke about imposing a ban on foreign accounts and real estate while discussing the Magnitsky Act during his December press conference. “This is undoubtedly an unfriendly act towards the Russian Federation,” Putin said. “What is at issue here is not just officials who are not allowed to open bank accounts or own real estate. I mentioned this in my address to the Federal Assembly recently. We also believe that Russian state officials, especially high-ranking politicians, should keep their money in Russian banks. Incidentally, there are many banks in Russia with 100 percent foreign capital, and there can be no doubt as to their efficiency and reliability. If such a bank has an office in Russia or in Vienna, or in some other capital, makes no difference; what is important is that it is an international financial institution. Hold it here, please. As for real estate, I have also spoken about this. If our colleagues abroad can help us identify those who violate laws, we will be grateful to them and can even give them a prize for their efforts. However, the issue here has nothing to do with officials. It’s a matter of one anti-Soviet, anti-Russian law being replaced with another. They can’t seem to do without it. They keep trying to stay in the past. This is very bad and has a negative impact on our relations.”
The Kremlin’s third motive was to take over the initiative from civil society, which, represented by popular bloggers, had started making scandalous discoveries of officials owning luxury real estate in prestigious corners of the world. First, Dmitri and Gennady Gudkovs published information about so-called “golden pretzels”—State Duma deputies owning businesses abroad (in defiance of Russian laws). Later, evidence of United Russia members owning houses, condos, and mansions outside of Russia began to emerge. The most notorious scandal broke out in mid-February. Popular opposition blogger Alexei Navalny published information that had been “dug up” by an anonymous blogger known as doc_z that revealed that United Russia lawmaker Vladimir Pekhtin and his son Alexei owned properties in Miami Beach, Florida. In this blog entry, Navalny posted links to open US property records showing that two condos owned by Pekhtin and his son Alexei had been purchased for $540,900 and $1,275,000, respectively, and that they owned an additional plot of land with a house and a pool in Florida that was worth more than $400,000. Together, the total value of the Pekhtin properties amounted to more than $2 million. Based on these facts, Navalny sent requests demanding Pekhtin’s resignation to Prosecutor-General Yuri Chaika, Duma Speaker Sergei Naryshkin, Prime Minister Dmitri Medvedev, the Presidium of the General Council of United Russia, and the United Russia parliamentary caucus leader.
Vladimir Pekhtin came to the State Duma as the same time that Vladimir Putin came to the Kremlin. The United Russia lawmaker's political career was cut short by the revelations of independent bloggers.
Pekhtin denied Navalny’s allegations that he owned real estate in Miami. “I do not know what he has found there and what he writes, and I have no other comments. My son did study there [in the United States], he has appropriate papers,” Pehktin said to the pro-Kremlin Izvestia newspaper. Answering the question of whether he has any property abroad at all, he stated that he owned "practically no foreign real estate.” This answer only added to the negative public response. Shortly afterwards, Pekhtin had to step down as head of Parliament’s ethics committee and finally gave up his Duma seat altogether. Pekhtin was probably “pulled up” by the Kremlin because the discrediting of a prominent United Russia member threatens the discrediting of the whole “Putin vertical.” Pekhtin’s departure set a precedent—he was not just another rich party member, but one of the most influential and politically active figures in United Russia. Prior to this incident, he could have easily been seen as one of those whom the Kremlin would never betray. However, now even these people are being “asked to leave.” This incident will probably not be exceptional: on the heels of Pekhtin’s departure, billionaire lawmaker Anatoly Lomakin submitted his resignation, apparently also at the Kremlin’s “request.” The regime has started a campaign of self-purging.
Outwardly, the Kremlin’s actions appear schizophrenic. With one hand, the regime is trying to purge its bureaucracy and lawmaker corps of corrupt individuals, and with the other, it is initiating criminal cases against those who expose the same corrupt officials within the government. It seems that the government’s interests and society’s interests should meet: ineffective bureaucracy and corruption bother the government, because such problems make it harder for it to fulfill its functions; Putin, whose poll standings are suffering; and society, which has to pay twice for the appetites of corrupt officials.
It is here, however, that an intriguing point emerges: Putin and the Kremlin do not need any allies in the fight against corruption. The regime does not allow any partners in its war, which it is prosecuting on three fronts. The first front is represented by corrupt officials themselves. Here, the Kremlin tries to act quietly and “without ceremony,” giving the elite all the opportunities available to “come back to the Motherland.” For instance, Putin’s version of the bill banning foreign accounts does not include a prohibition on foreign real estate holdings. What is more, the bill does not say anything about criminal responsibility for violating the law. The maximum punishment that the violator may face is dismissal. Such compromise and mitigation are easily explainable: the main characteristic of the Kremlin’s “manual control” is that the full extent of the law applies only to those who are not protected by a special “untouchable” status. An overly strict law could pose a serious threat to the “Putin cadres” who support his regime. These people are allowed to have dual citizenship, move their families abroad, maintain foreign accounts, and own mansions on the Cote d’Azur. It is already clear that this new law will function on a selective basis.
The Kremlin sees the bloggers’ activity not as an aid in exposing dishonest officials, but as a major political threat.
The second front that Putin and the Kremlin are attacking is the nonsystemic opposition, which is far ahead of the government in exposing potentially corrupt officials. On their wages alone, Russian deputies and officials cannot afford to buy luxurious condos or pay for their children’s education at the best Western universities. The Kremlin sees the bloggers’ activity not as an aid in exposing dishonest officials, but as a major political threat to the regime’s stability that “loosens” its foundation. It is not surprising that the number of criminal cases against Navalny is growing, and that all liberal opposition bloggers have been intensively investigated by the special services. The campaign accusing them of cooperating with “foreign intelligence agencies” is bound to continue. Putin’s speech during an expanded session of the Federal Security Service, in which his spy mania was revealed in its fullest extent, proves this point. Other drastic initiatives have begun to emerge: these include the suggestion that any publications about a person’s private life or property be prohibited without the consent of the object of “attack.” A bill to this effect has already been sent to the State Duma for consideration.
The third front of Putin’s attack is the West. Today, there are almost no optimists left who still believe in the possibility of rekindling the “spirit of the reset.” Preventing affairs from going worse has become the “best” scenario of US–Russia relations. “Having been unable to come to terms with the US and their allies, who keep on increasing their criticism of Russia after Vladimir Putin’s return to the Kremlin, Moscow has launched a counteroffensive,” wrote Sergei Strokan in Kommersant. “The demonstration of ‘gentle force’ has been its response—the propaganda of the Russian model of development is supposed to show its superiority over that of the Western world. Not an arms race, but a battle of values and ideologies represents a distinctive characteristic of a new cold war.” From this perspective, the US State Department will continue to be painted as the “general staff” of the “war against Russia,” and the Russian opposition will be labeled its “agents.”
This war on three fronts leads to three mutually complementary strategies: the regime will try to combine a counteroffensive on the West with the suppression of the opposition and a targeted purging of the elite. However, this strategy has a serious systemic drawback: even with the Kremlin’s growing authoritarianism, there are still a few “democracy islets” left in Russia. The Internet is certainly one. Russian bloggers’ activity is becoming an important factor of domestic politics, and it cannot be totally controlled by the government. Throwing one person in prison will not stop new exposures of “golden pretzels.” And that means that the Kremlin is critically vulnerable in this area, which may sooner or later become fatal for the regime.
