Putin Begins Crackdown on Russia’s Oligarchs
2350 GMT, 000511

Russian tax police raided oligarch Vladimir Gusinsky’s Media-MOST offices in Moscow on the morning of May 11. The Russian press is playing up the incident as a violation of democracy and free speech. More important, it is President Vladimir Putin’s first official offensive against the corrupt upper tier of Russian businessmen. To prove his impartiality, however, Putin will next need to launch an equally strict operation against Gusinsky’s rival, Boris Berezovsky.

Armed with submachine guns and axes, tax police, Interior Ministry troops and investigators from the prosecutor general’s office evacuated and searched the Media-MOST office. Media-MOST is a holding company founded by Gusinsky that operates the NTV independent television station, the Echo of Moscow radio and the Segodnya newspaper. The Prosecutor General’s office released a statement that said prosecutors had discovered information on Media-MOST employees while investigating the embezzlement of government money. Last November, Media-MOST was also confronted by the Yeltsin administration for failing to pay a $42 million debt.

On the surface, it appears that Putin is resorting to tactics most Western observers had hoped he would resist: using the Federal Security Services (FSB) to rough up his political opposition. Russian media immediately accused the Kremlin of Stalin-style intimidation and censorship. There are several factors that support this argument. Gusinsky’s media outlets oppose Putin and his administration. NTV and Segodnya often publish features critical of the government, the war in Chechnya and Putin’s rise to power.

Also, Gusinsky does not primarily own commodities, which are the profitable industries that must be pulled out of the oligarchs’ reach. Putin’s goal is to separate the oligarchs from industries where they can steal enough money to damage the entire economy. In light of this goal, Gusinsky does not seem to fit the profile.

But, through Media-MOST’s connection to Gazprom, Gusinsky and his companies do have the power to pass on a significant financial burden, the effects of which will seep back to the national economy. In 1996 Gazprom bought 30 percent of the shares in Media-MOST. Since then, Media-MOST has accrued approximately $1 billion worth of foreign debt, for which Gazprom is liable. Should Media-MOST default, or should Gusinsky reallocate some funds to his personal accounts, Gazprom – in which the state has the largest stake – will have to pick up the debt. And the federal government, which relies on Gazprom’s profit to cover more than 25 percent of government revenues, is not willing to sacrifice a billion dollars for Gusinsky.

Finally, as a result of a rift among the powerful oligarchs who used to surround former president Boris Yeltsin, Gusinsky is Berezovsky’s rival. Observers who believe Putin is in some way allied with or indebted to Berezovsky have already hinted that Putin is doing Berezovsky both a personal and professional favor, as Berezovsky owns several competing media companies. In order to prove he is prepared to systematically remove all of the oligarchs from powerful positions, Putin will next have to confront Berezovsky. Thus, in light of Putin’s plan to use the secret services and tax police to wipe out the oligarchs, it becomes apparent that the raid on Gusinsky’s companies was more than just a Kremlin attack on its political opponents.