Deception

² The Pirate State

The story of Sergei Magnitsky should be a wake-up call to the outside world, revealing the true nature of the regime in Russia. But outsiders have systematically (and in some cases wilfully) misread events since 1999, when the chaotic but pluralist era of Boris Yeltsin gave way to the corrupt and authoritarian rule of the ex-KGB hard men – the Siloviki. Telling the real story of these men’s doings is hard and even dangerous. For Russia’s self-censoring mainstream media, no-go areas include Mr Putin’s private wealth, his sexual preferences, and the mysterious ‘terrorist’ bombings of autumn 1999 that stoked public anxiety, making the unknown stopgap prime minister a shoo-in for the presidency. It is often forgotten that Mr Putin arrived on the national stage as a political cipher: a quiet, grey, timid-looking man, blinking nervously in the unaccustomed limelight. He was the fifth prime minister in the space of twelve months: many at the time thought, wrongly, that his stint in office would be equally brief (as we will see later in the book, the outward appearance of mediocrity can be dangerously deceptive). Now the media admiringly portray Mr Putin and his colleagues as chaste, brave (and in his case virile) guardians of the national interest, not brutes or swindlers. Privately, few Russians believe these political arrangements are fair or efficient. But they see no way of changing them.

That reflects the contradiction at the heart of Russian public life. The twelve years of the ex-KGB regime has brought not the promised transformation to order and modernity, but only a sleazy stability. Corruption and incompetence mean that public services are still dire, despite the billions squandered on them. The result is demoralising and tiresome. Many of the brightest and best Russians yearn to live and work abroad. But at home, few see any alternative to Mr Putin and his colleagues. Whatever their shortcomings, in the view of many Russians, they are the least bad option – certainly better than the uncertainties and humiliations of the 1990s.

The harshest fate awaits those who try active opposition. Demonstrators for causes that displease the Kremlin risk arrest. A stark example of this is the protestors who gather on the 31st of the month (when it happens) to defend Article 31 of the Russian constitution, which guarantees freedom of assembly. Apparently oblivious to the irony, police haul them away: punishing those demonstrating for the right to demonstrate. The FSB and other organs of state power have closed down independent public life in Russia. They have intimidated journalists (and even bloggers); they bully trade unionists; they infiltrate and disrupt opposition parties. The threat of Soviet-style coercive psychiatric treatment is in the background (and sometimes even the foreground) during interrogations. All critics of the regime count as potential ‘extremists’, and ‘extremism’ is a criminal offence, punishable in some cases by the death penalty. In July 2010 the FSB gained new rights to issue warnings to individuals, organisations, and media outlets to stop activities it considers actually or potentially extremist.

A full account of the misrule that results would take a whole book, with full chapters, rather than just fleeting mentions, for subjects such as the mistreatment of the country’s millions of migrant workers.[17] Most of the worst abuses happen in the republics of the North Caucasus, such as Chechnya, Ingushetia and Dagestan, where the authorities are struggling to maintain control amid a growing insurgency from Islamist groups and others infuriated by their corrupt and incompetent rulers. But the noxious cocktail there poisons public life in Moscow too. A signal example of this came with the murder in January 2009 of Stanislav Markelov, a leading human rights lawyer who had represented many victims of abuse in Chechnya. The men who gunned him down in the middle of Moscow in broad daylight also killed a young journalist, Anastasia Baburova. So hardened is international public opinion to the regime’s habitual use of violence against its opponents that other cases barely attract attention. In March 2009 Lev Ponamarov, a leading human-rights activist, was severely beaten. This appears to have been a snub to a visiting European human-rights representative, Sabine Leutheusser-Schnarrenberger, whom he had just met. In July, Albert Pchelintsev, an anti-corruption activist, was shot with a stun gun, by attackers who told him that it was to ‘shut him up’. Natalya Estemirova, the leading campaigner and researcher in Chechnya for Memorial, the oldest and best-known Russian human-rights organisation, was abducted and murdered in July 2009. The Chechen president Ramzan Kadyrov said callously that he would not have bothered to murder a woman ‘devoid of honour, merit and conscience’. Oleg Orlov, chairman of Memorial, accused Mr Kadyrov of ‘political responsibility’ for the killing and was then prosecuted for criminal slander (he was acquitted in June 2011).¹ The investigative journalist Oleg Kashin received a crippling beating in November 2010.

These killings, assaults and other forms of intimidation often bear the FSB’s fingerprints. It makes no difference when other Russian authorities condemn the lawlessness. Mr Medvedev, for example, repeatedly denounced corruption and what he memorably termed ‘legal nihilism’. Yet for the most part, the Russian president was part of the problem, not of the solution. It was he, for example, who in August 2010 signed into law the FSB’s new powers to issue intimidatory warnings. Human Rights Watch states in its most recent report that the climate remains ‘deeply negative’, with only rhetorical commitments to human rights and the rule of law.²

Those who seek the secrets of the regime are at even greater danger. Russian journalists who turn over such stones risk violent attacks or death. Foreign journalistic inquiry too has become far harder over the past ten years as the regime and its business cronies have discovered England’s tough and far-reaching libel law. Finding source material is tricky. The paper trail often goes cold in places such as the British Virgin Islands, which blocks outsiders from finding the ultimate beneficial ownership of the companies registered there. But the greed and cynicism of supposedly more reputable countries in dealing with dubious but tempting customers is if anything worse.³

Even in America, Britain and Continental European countries that claim to shun crime and corruption, officials are unwilling to speak out publicly about the sea of dirty Russian money that swills through property markets, banking systems, financial exchanges and (increasingly) politics. In the course of an important investigation I appealed to a well-placed Western official to help me see some crucial documents. He responded: ‘We would love to help you, but however discreetly we do it, the Russians will find out. And they will take it as a declaration of war.’ A Finnish official, faced with a specific request that could have cast a damning light on a senior Russian figure’s behaviour, answered: ‘Good luck. But we can’t help you. That’s why we’re still here’. Such coyness stems only partly from prudence. Some officials have personal financial reasons for going easy on Russia: a lucrative directorship may be awaiting them when they leave government service. Others fear more generally that moral grandstanding will be bad for business; some feel that criticism of Russia is selective and even hypocritical, given the corruption and misrule in other countries, not least in the West.

These perceptions are changing, albeit slowly. Russia’s reputation as a promising emerging market looks increasingly hollow, as other competitors for foreign trade and investment do better. Russia’s place in the BRIC group – Brazil, Russia, India and China – is now largely nominal, as the other three countries forge ahead. Closer to home, the smaller but more advanced states of Central Europe have outstripped Russia in importance. The Czech Republic, with a population of only 10m people, buys more German exports than Russia with 140m people. Even including oil and gas, Poland is now a substantially bigger trading partner for Germany than Russia.⁴

Yet declining importance does not mean irrelevance, and few European leaders are willing to contemplate a real confrontation. They argue that many places are worse run than Russia, which does not look like a rogue state, or even a particularly threatening one. They also note that Russia, for its part, does not want a confrontation either. Having indulged in Soviet symbolism and nostalgia at the start of his time in power (when he described the USSR’s collapse as the ‘geopolitical catastrophe’ of the last century, and reinstated the tune of the Soviet national anthem) Mr Putin switched tack. Russia has mended fences with neighbours such as Poland, expressing sympathy for the victims of Soviet-era crimes such as the Hitler–Stalin Pact and the wartime Katyń massacre of captured Polish officers, and in some cases explicitly repudiating the lies surrounding those crimes, which had only lately been making a revolting comeback.

Russia has also in large part signed up to the rules of the international game (though it may not always obey them). It has negotiated with seeming sincerity to join outfits such as the Organisation for Economic Cooperation and Development (a rich-world think-tank in Paris) and the World Trade Organisation, which regulates global trade. Many leading members of Russia’s government, especially those dealing with financial and economic policy, look no worse and in some ways rather better than their counterparts in other ex-communist countries. As Daniel Treisman, an American academic, argues, Russia is no more messily ruled than other middle-income countries such as Mexico or Turkey.⁵ Rigged elections, manipulated media, high-level corruption and abuse of state power are unpleasant phenomena, but sadly not rare ones. Russia’s legal system sometimes works – especially in cases that, unlike Mr Magnitsky’s, do not involve the interests of the rich and powerful. Charities and pressure groups can function with only mild difficulties so long as they stay away from taboo areas such as Chechnya. Elections in the provinces sometimes yield surprising results that annoy the country’s leaders. It has a degree of media freedom (chiefly on the internet and in small-circulation publications). Emigration provides an important safety valve: unlike in the Soviet era, if you don’t like it, you can leave. The state expects little of its citizens, and vice versa.

Given that Russia emerged from communist dictatorship only twenty-one years ago, the right response, its advocates argue, is to be impressed that the country is so normal, rather than depressed that it is not better. Such special pleading makes it easy for foreigners to conclude that Russia, once you get used to it, is just another roughly hewn emerging market, more a source of opportunity than danger. In any case, Russia does not take much notice of outside strictures, so the best thing is to shut up. Critics of Russia’s domestic and foreign policy certainly need to be careful not to exaggerate their case. Some aspects of politics may be reminiscent of fascism, such as the personality cult of Mr Putin, the overlap between business and politics, and thuggish youth movements (as I note later, one of these now boasts Ms Chapman as a senior figure). But Russia is not a totalitarian country, or even a fully autocratic one. Vladislav Inozemtsev, an economics professor highly critical of the regime, concedes:

After an era where Russia resembled Weimar Germany in some respects, nothing like the Nazi Party or Hitlerian ideology is in sight.

The temptation among many Westerners, therefore, is to accept the superficial image of normality and cooperation, without digging too deeply into the violent, thieving and distorted mind-set and personalities behind it, or their pervasive incompetence and penchant for risky short cuts. A glimpse behind this veil of official timidity and self-interest came with the WikiLeaks revelations that started in November 2010. They exposed the almost panicky concern of American diplomats about the level of corruption in Russia, about the fusion between crime, business and government, and about its spillover into the West. America’s then Secretary of Defence Robert Gates observed in a secret cable that Russia was ‘an oligarchy run by the security services’.⁷ Britain’s Michael Davenport, a seasoned Russia-watcher in the Foreign Office, termed it a ‘corrupt autocracy’ when talking to his American colleagues.⁸ But that was mild by the standards of a more extensive analysis compiled in mid November 2009 by the American embassy in Moscow. Classified ‘secret’ (but now available at the click of a mouse on the WikiLeaks website), it was to prepare the director of the FBI, Robert Mueller, for a two-day visit to Moscow. It highlighted the real nature of his Siloviki interlocutors, the FSB director Aleksandr Bortnikov, the SVR director Mikhail Fradkov, and the Interior Minister Rashid Nurgaliyev. It described them as:

The diplomats went on to note that although the FSB and MVD[18] (as the Interior Ministry is known) nominally share the FBI’s responsibilities – criminal prosecution, organised crime, and counter-terrorism – they are also fully immersed in Russia’s political battles:

It also revealed the security services’ role in pushing back against perceived outside interference:

After linking Russian law-enforcement to organised crime, the cable concluded with a sharp indictment of the role played by the FSB in demoralising and persecuting American government employees in Russia:

This in itself is a kind of deception. American taxpayers foot the bill for these diplomats and analysts, for their allowances, salaries and expense accounts. But they do not get the truth. At the time that these telegrams were drafted, American officials were playing down the problems in relations with Russia, and trying to make a success of the so-called ‘reset’ in relations. Yet privately – as we can now read – they took a far more pessimistic (and realistic) view. Another leaked telegram painted a hair-raising picture of the corruption inside the Moscow city administration: it spoke of a ‘three-tiered structure in Moscow’s criminal world’ headed by Yuri Luzhkov (the then mayor, who denies any wrongdoing). ‘The FSB, MVD, and militia are at the second level. Finally, ordinary criminals and corrupt inspectors are at the lowest level,’ it claimed.¹⁰ The tone of such telegrams is far closer to the writings of outsiders such as Amy Knight, a top American analyst of the KGB’s lasting influence in modern Russia. She pointed out in 2011 that the FSB is not only an instrument of power; it determines who holds it.¹¹

Another deception was the earlier attempt to portray Russia in the 1990s as a democratic country, even though it was in that era that the current authoritarian system has its roots. As Mr Inozemtsev points out:

It is true that Yeltsin’s inner circle turned deplorably to election-rigging and the use of illicit money in politics as its popularity waned. They created the system, at least in embryo, that Mr Putin and his friends were later to develop and exploit. The continuity between the Yeltsin years and the Putin era that followed is no coincidence. It was a last desperate throw of the dice by Mr Yeltsin’s family in 1999, when impeachment (and possibly jail) was looming, to turn to the ex-KGB for help. But for all his own faults (and the much worse ones of his family members and hangers-on), Mr Yeltsin, Russia’s first democratically elected president, had strong principles. He was determined not to muzzle the media or lock up the opposition. He distrusted the intelligence and security services and encouraged competition between them. By contrast Mr Putin has given the FSB a near-monopoly.

Just after the collapse of the Soviet system, the Russian reformers’ plan was quite different. The FSB was intended to be a kind of beefed up FBI, responsible for fighting organised crime and for counter-terrorism, plus spy-catching as required (in that era many Russians saw Western countries, and their spy agencies, as friendly partners, not rivals). Those times are long gone. The FSB is now a sprawling empire, with capabilities ranging from electronic intelligence-gathering to controlling Russia’s borders and operations beyond them. Its instincts are xenophobic and authoritarian, with heavy doses of paranoia, ignorance, religiosity and nostalgia for the Soviet past. As a result, it now is like no other spy service in the developed world. The best analysis of its role comes from a hard-working (and brave) Moscow-based husband-and-wife team, Andrei Soldatov and Irina Borogan.¹² They liken the FSB to the Mukhabarat religious police of Saudi Arabia and other Muslim countries: impenetrable, ruthless and brutal. They argue: ‘The intelligence bureaucracy considers itself above criticism, impervious to the demands of democracy.’¹³ In their arbitrary power and incompetence, the officials of the FSB and its sister agencies epitomise the lawlessness and corruption that plague Russia and menace the outside world. But those inside the agency see themselves rather differently, as the ultimate guardians of Russia’s national security, thoroughly deserving of the rich rewards they reap. Nikolai Patrushev, who succeeded Mr Putin as the agency’s director in 2000, characterised his colleagues in startling terms:

That is true in one sense: the old nobility in Russia were mostly capricious, extravagant, incompetent and cruel. They set the scene for the Bolshevik revolution that brought them exile, death, destitution and imprisonment. But presumably Mr Patrushev did not have that in mind.

It would be wrong to term the FSB and its sister agencies simply as rebranded versions of the old KGB. Despite a narrower scope, they enjoy a far freer rein. The tactics are less brutal, certainly compared to the years of totalitarian terror under Stalin. They do not practise mass murder (and resort to assassination only on rare occasions). Russia is not a police state, in which the KGB, acting on behalf of (and tightly controlled by) the Communist Party, exercises rigid control over everything from foreign travel to people’s sex lives. Nor is Russia a closed society, in which every foreigner is suspect, and every trip abroad a potential security risk. The old KGB spent a lot of time worrying about currency speculation (the rouble’s official exchange rate was grotesquely overvalued). It vetted every application for foreign travel, and devoted vast resources to monitoring mail. The new regime is different, and not only because the Party is over. Instead of steaming open letters, the FSB uses powerful computers to scan emails. Instead of forcing all foreign visitors to stay in a handful of closely monitored hotels under the watchful eyes of Intourist guides, it focuses only on outsiders acting suspiciously.

To say that the regime in Moscow is suffused with the unpleasant ideology, values, habits, attitudes and behaviour of the Soviet era does not mean that it harbours communist or collectivist sympathies. Even its most diehard figures do not hanker after the planned economy or the one-party state, or for the costly and brittle apparatus of bureaucracy and control that went with them. They mourn the Soviet Union’s power, not its politics. They recall growing up in a great country – a superpower – defined by the size of its nuclear arsenal, its global reach, and its wartime sacrifice. In their lifetime, all that disappeared. The Soviet system became the butt of jokes – for the senility of its gerontocratic leadership, for the poor quality of its consumer goods and for the omnipresent shortages. What came next was worse: the humiliating retreat from the old empire, the acceptance of German reunification on the West’s terms, and playing second fiddle to America in global politics.

All of these things are associated in Russian minds with the 1990s. But what they disliked about that era was the weakness and chaos, not the capitalism. Many in Russia think, wrongly, that outsiders exploited the political disintegration to push through NATO expansion (of which more later) and to buy up Russia’s natural resources cheaply. Their driving concern now is to restore Russia’s standing in the world, and to prevent the West from ever again exploiting its weakness. The agenda is of stark competition for resources, status and power, against a background of perceived injustice and humiliation.

Opinions about the past are not monolithic. Few if any would defend Stalin outright. Some, particularly in the human-rights council set up by Mr Medvedev, actively argued for a radical break with the whole murderous and criminal system that the dictator inherited, developed and bequeathed.¹⁵ They want memorials to his victims, and to rename streets called after communist heroes, paving the way to reconciliation with the European Union and a strategic alliance against China. Such nuances are a welcome contrast to the early Putin years, when any criticism of Stalin or Soviet power brought a knee-jerk and allergic response. But it would be premature to say that any real shift is under way. Polls show that the majority of Russians do not want ‘de-Stalinisation’.¹⁶ Mr Putin, set for twelve years more as Russian president, dislikes the whole idea. Unknotting the threads of pride and shame will take many years. The regime remains ready to use the pomp of the Soviet past when it suits it, even if some privately find the associated jargon, ideology and priorities anachronistic and perhaps outright distasteful. What does define it unambiguously is an enthusiastic adoption of the crudest forms of private enterprise. Russia’s spookocrats like the new system not out of any close reading of Friedrich von Hayek or Adam Smith, but because it works for them. Whereas in the Soviet era the rewards of leadership were at best access to foreign goods and a luxurious dacha, the spoils of office now are colossal. No longer cloistered in the pretend austerity of Party discipline, they can enjoy the best the world has to offer, when, how and where they want it.

Greed is a defining characteristic of this new elite, but not the only one. Despite its good fortune (and great fortunes) the regime’s world view is harsh and pessimistic. The prison-yard mentality has spread to those who run the state: show weakness, and you suffer. What counts is intense loyalty to friends, ruthless rivalry with everyone else, and vengeance on those who betray you. Andrei Illarionov, a former top Kremlin aide in the early years of the Putin era, when the Russian leader was still championing economic reform, has now fallen out with the regime and criticises it in the harshest terms. He is now a fellow at the free-market Cato Institute in Washington, DC and has written a powerful denunciation of the twenty-two agencies that he estimates make up the ruling power structure.

He continues:

It is important not to glamorise the result. As Mr Inozemtsev points out, the prime characteristic of Russia’s rulers is ‘ignorance, intricately if poorly disguised beneath a veneer of scientific degrees’. But incompetent thuggishness is no more pleasant than the competent kind. And as the economist Mr Inozemtsev himself admits, the security and (mislabelled) ‘law enforcement’ organs have mushroomed:

The FSB in particular is under no kind of constitutional, legal or democratic oversight. It is a state within a state; a law unto itself. Its counterparts in Western countries make mistakes, exceed their power and on occasion misuse their privileges for self-enrichment or to serve domestic political ends. But they are ultimately under legal and political control. Some such agencies even have internal ombudsmen and offer protection for whistle-blowers. In Russia the parliamentary committees that are meant to supervise the spooks are ciphers. The FSB is responsible only to its director – a close ally of Mr Putin.

Mr Putin’s arrival in power in 1999, say Soldatov and Borogan, gave the secret services the right, for the first time in Russia’s history, to ‘define their own political agenda’.¹⁹ Top of that agenda is stability, drawing on both the KGB’s repression of dissidents and the Tsarist secret-police punishment of political extremism. Both the old and new secret police are based on the quasi-mystical regard for the interests of the state, coupled with a mixture of contempt and fear for its individual subjects. Both used, or use, a similar palette of tactics – ranging from crude intimidation to subtle deception. They were and are legalistic yet unconstrained by any concern for justice. In the FSB’s own eyes, their role is to ‘serve and protect’. But the idea of public service in this context is very different from the Western concept, where the voters’ wishes, channelled by politicians and constrained by the rule of law, provide the framework in which public officials operate. In Russia, ‘service’ is first and foremost self-service: helping oneself to the fruits of office, be they bureaucratic rents from corruption or the spoils of the country’s mineral wealth. Only after that comes public service. This is not service to the rules or processes of the state, but to a more abstract and transcendental idea of the national interest. Russia must be strong – in its use of military, financial and diplomatic power. If it cannot be strong it must be feared, or at least respected. The task of the public servant is to make that so.

A further component of the FSB mind-set is religiosity, in some cases with an admixture of mysticism. As Soldatov and Borogan note, the FSB has strengthened its ties with the Russian Orthodox Church – once the chief target of KGB persecution. In 2002 the then Patriarch of the Russian Orthodox Church, Aleksei II, blessed the reopening of the restored Cathedral of St Sophia of God’s Wisdom on Lubyanka Square, near the FSB headquarters. The then FSB chief Nikolai Patrushev attended the ceremony. This reflects the increasing search among Russia’s new leaders for old roots. Ideas of Russian uniqueness fit well with the rejection of foreign ideas such as political competition. They also chime with the notion – deeply held if bizarre to outsiders – that following the fall of ancient Rome and Constantinople, Moscow is the ‘Third Rome’, besieged by enemies who must be resisted at all costs. Indeed, the seemingly arcane subject of Byzantine history has become oddly popular among the FSB and in like-minded political circles. In January 2008 Russian state television broadcast a remarkable documentary called ‘The Fall of an Empire: The Lesson of Byzantium’.²⁰ Echoing the regime’s view of the 1990s, it blamed the end of the Byzantine empire on the intrigues of local ‘oligarchs’ and Western crusaders. The idea of a global conspiracy against Russia is central to the curriculum of the FSB Academy, which is fostering a new generation of Siloviki.

Unfortunately these ideas fall on fertile ground. Though Soviet-era education in the hard sciences was excellent, the tradition of study in the humanities was repressed and distorted. A real discussion of history and philosophy would have been corrosive for Marxism–Leninism. Only carefully vetted academics were allowed to teach and study such sensitive subjects. This legacy weakens Russia’s resistance to batty and paranoid theories. And the surviving cadres of Soviet-trained academics have in many cases found it easy to switch from the intricacies of dialectical materialism to exploring hidden international machinations against Russia. A truly startling example of the overlap between paranoia and mysticism is the theory of Mertvaya voda or ‘dead water’, a miraculous substance that (in Russian folklore) can revive the dead and heal wounds. To see it cropping up in the FSB academy syllabus and in the mainstream discussion of geopolitics is surprising: rather as if the FBI training camp at Quantico instructed its special agents in Hopi chanting or astral projection.²¹

Soviet-style fanaticism and ideology has for the most part given way to mere prejudice and paranoia. But the surplus nervous energy goes into personal self-interest. At least in their own eyes, the ‘Chekists’ were selfless public servants, devoted to the cause of communism and the greater glory of the state, and among them corruption was severely constrained and usually ruthlessly punished. Their successors’ capacity for self-enrichment is colossal. Soldatov and Borogan lift just one corner of the carpet. They highlight senior FSB officers’ abuse of power to build millionaires’ mansions on plots of land, gained at knock-down prices, in Moscow’s most desirable suburb, the area around the Rublevo-Uspenskoye highway to the west of the city.

That looks like petty corruption compared with the colossal sums that can be earned by diverting financial flows in energy and other businesses. Under the new system, the men who run Russia, by and large, also own it. The dividing line between public and private interests is hopelessly blurred. People who are government ministers or senior public officials in the morning are the chairmen or chief executive officers of commercial enterprises in the afternoon. Although these entities have products, managers, audited accounts, respectable bankers, shareholders and even listings on reputable foreign stock exchanges, they are not real companies in a Western sense: their managers’ aim is not to add value, raise profitability, reward shareholders and invest for the future. Instead their role is to siphon off money to insiders’ private schemes and to promote Russia’s foreign-policy agenda. The clearest example of this is in energy, where Gazprom and other natural resource companies trample on their shareholders’ interests as they pursue dubious and grandiose schemes. These companies have hugely inflated costs; they sell their oil and gas through murky intermediaries; they loot their subsidiaries (the treatment of the Gazprom pension fund is a particular scandal²²). A few brave campaigners such as Aleksei Navalny, a blogger, and the former government ministers Boris Nemtsov and Vladimir Milov, try to keep track of the looting and raise public concern against it.²³ But they face intimidating lawsuits and other threats; the public seems to accept that though its interests (both Rosneft and Gazprom are partly state-owned) are being abused by the country’s elite, nothing much can be done about it.

In some respects, this landscape of power does not differ greatly from that of other corrupt, autocratically run, resentful countries with big intelligence services such as China or Iran. But in these countries the spooks are the servants of the state. In Russia, they have for the past ten years largely run it. Mr Putin, the country’s undisputed leader, spent his formative years in the KGB. His right-hand man, Igor Sechin, a deputy prime minister and tycoon in the oil and shipbuilding industries, worked in military intelligence. Another ex-spook is the head of Russian railways, Vladimir Yakunin (who is also a string-puller in intrigues involving the Baltic states). So is the head of the Defence-Industrial Commission, which oversees Russia’s arms industry, Sergei Ivanov. So is Viktor Ivanov (no relation), who heads the powerful anti-drug agency. So are numerous others at the heights of political and economic life in Russia.

In numerical terms the Siloviki are a diminishing force. Olga Kryshtanovskaya, a sociologist who specialises in monitoring their role, reckons that they comprised nearly half the top 1,000 people in the country when Mr Medvedev came to power but fell to just under a quarter by late 2010.²⁴ Nor are they monolithic. Fights between Siloviki clans are formidable and sometimes public. In one instance a senior ex-KGB man, Viktor Cherkesov, publicly appealed in a newspaper article for a truce in a fight with a rival clan.²⁵ In another rumble in the same row, a financier called Oleg Shvartsman gave lurid details of the way in which his fund-management company handled the $3.2bn assets of senior officials in the SVR foreign-intelligence service and FSB.²⁶ He explained that this gave him political clout in enabling a kind of corporate raiding, in which owners could be persuaded to sell their firms for knock-down prices – these are also the tactics used to punish Mr Browder. Corruption hits the effectiveness of the security and intelligence agencies, as it does every other bit of Russian officialdom. Junior officers detest the fact that their bosses’ snouts are bigger, and deeper in the trough. Yet to focus on numbers, positions and squabbles misses the point. As Russia decays under the crushing weight of economic and social failure, the ideas the FSB stands for are becoming more powerful, not less.

From the outside, it is easy to conclude that this political arrangement cannot last. The infrastructure is crumbling, the demographic collapse accelerating and the economy is becoming obsolete. Russia is running out of people. The old cadre-factories of the Soviet Union are no longer forging the steely spooks of the Cold War. Even those minted in the later Soviet period, such as Mr Putin, are far less impressive, intellectually and operationally, than their predecessors. The great game of geopolitical competition with the West required idealism, brains and determination. Serving the Soviet Union in its declining years did not arouse the same loyalty or attract the same talents. The main motivator for those joining government service now is greed, mixed with resentment or a touch of Russian chauvinism. So it is tempting to imagine that the spookocracy will fade away with time, to the point that it will be dislodged by the growing Russian middle class, with its aspirations to live in a normal country. But the economist Mr Inozemtsev does not believe much will change. He argues:

He concludes that the Russian elite has ‘piratised’ one of the world’s richest countries, creating a neo-feudal system that is more stable than outsiders, plagued by wishful thinking, are willing to realise.

A big test of government is in the results it yields versus its costs. A benign autocracy may in some cases be better than a chaotic winner-takes-all political competition that leads to chaos and mob rule. It would be a mistake to dismiss the present Russian arrangement out of hand, especially at a time when political systems in Europe and America have signally failed to make the farsighted and sensible decisions that fans of parliamentary democracy believe it produces. It is easy to argue that Russia needs strong government in its transition from seven decades of totalitarianism. Western-style multiparty democracy may not suit all countries. Corruption, and an overlap with business and politics, is not confined to Russia (think of Italy under Silvio Berlusconi). As far as the role of the ex-spooks is concerned, the KGB employed some of the country’s brightest and most knowledgeable people. It would not necessarily be stupid or evil for Russia to draw on their talents now.

But in this case, such considerations do not affect the verdict: the experiment has been a spectacular failure. The regime has presided over an orgy of greed and waste, but with more than a trillion dollars of extra oil and gas revenues flooding into the country between 2000 and 2010, pitifully little has been built or repaired. The visitor may be impressed by the sleek black limousines that clog the Moscow streets, by the high-rise luxury apartments and by the glitzy shopping malls, but he will search in vain for a network of high-speed rail lines, for new world-class universities, or even for a proper arterial road linking Russia with its distant provinces on the Pacific coast. Outside Moscow and a handful of other big cities, Russia is rotting. Only the rise in bribes is impressive – by one estimate more than 164bn roubles ($6bn) is paid in kickbacks in Russia every year.²⁷ Others would see that as a wild under-estimate. A common unscientific assumption in Russia is that roughly half the 4 trillion roubles ($140bn) in public spending is purloined.

The power relations among the self-proclaimed new nobility in Russia are shrouded in mystery. Even the most expert insiders disagree about whether Mr Putin brought in his old colleagues in order to hold on to the power he so unexpectedly gained in 1999, or whether those colleagues put him there in the first place. He certainly cut a remarkably unimpressive figure in his early months as prime minister and then president, prompting ribald jokes about his inexperience and indecisiveness that seem bizarrely misplaced in retrospect. Perhaps his grey unprepossessing demeanour was part of his KGB training in covert operations: it certainly fitted the textbook instructions for infiltration, which are to respond to scrutiny by seeming unthreatening and inconspicuous. That disarmed critics and encouraged rivals to over-reach themselves (signal examples include oligarchs such as Mr Khodorkovsky of Yukos: in retrospect, he should have challenged the president a lot earlier, or not at all). Now Mr Putin is not only the unchallenged leader of Russia. He is also (according to estimates by the CIA) one of the richest men in the world. But he does not rule alone.

A detailed explanation of the ruling circles in Russia involves weighing the importance of figures that even sophisticated observers have barely heard of, such as Mr Putin’s cousin Igor, the brothers Yuri and Mikhail Kovalchuk, or the oil-trading magnate Gennady Timchenko. Some are members of Ozero (Lake), a cooperative that built dachas in a complex on the Komsomolskoye lake near St Petersburg. A prominent member of that group is Mr Yakunin, the railways chief. Another is Viktor Zubkov, now First Deputy Prime Minister. Mr Treisman, the American academic, who is a largely sympathetic observer of Russia under Mr Putin, gives in his book some tantalising hints of the Russian leader’s business past, including the troubling and unexplained question of his membership of the advisory board of the German-registered St Petersburg Real Estate Holding Company (known by its abbreviation SPAG). In 2003 German police raided offices and homes associated with the company in an investigation about the laundering of ‘tens of millions of euros’ for a St Petersburg crime syndicate involved in ‘numerous crimes, including vehicle smuggling, human trafficking, alcohol smuggling, extortion and confidence trickstering’.

No arrests were made and the investigation fizzled out. A banker who worked with SPAG said he had no knowledge of the company’s alleged links with organised crime and had agreed to take on the company as a client because of Mr Putin’s presence on its board. Mr Putin stepped down from SPAG’s board when he became president in 2000. He has consistently denied any wrongdoing. Another SPAG advisory board member, a Liechtenstein-based financier called Rudolf Ritter, was acquitted on charges of laundering more than $1m for the Colombian Cali drug cartel, but convicted on a charge of illegally trading the company’s shares. Reports in Newsweek²⁸ and Le Monde in 2001 and 2000 highlighted German official concerns about SPAG. Mr Putin had a close friendship with Vladimir Smirnov, head of SPAG’s St Petersburg affiliate, a company called Znamenskaya. He also was deeply involved in the lucrative municipal fuel business. Shortly after Mr Putin became president Mr Smirnov moved to Moscow, working first in the Kremlin property department, which administers the vast inheritance of the old Soviet Communist Party. He later moved to an agency that exports enriched uranium. The German journalist Jürgen Roth, in a book on this and related issues called Die Gangster aus dem Osten (The Gangsters from the East), alleges a systematic attempt to cover tracks and deter investigators.²⁹

The best explanation of how Russia really works that I have encountered is an unpublished one, compiled by the corporate intelligence service of a big Western company that has extensive dealings with Russia. These corporate spy services have many similarities to government agencies: they often employ retired spooks, are able to trade information and insights with those still inside the secret world, and are sometimes less constrained by the legal and bureaucratic restrictions that hamper public officials. This company’s analysts may have come closer than most (and certainly closer than some governments) to unravelling the truth.

According to their theory, Russia operates with two layers of governance. Mr Putin is chair of an ‘executive board’ comprising officials in public view such as Mr Sechin. But he is also a member of a shadowy ‘supervisory board’, a cabal of ex-spooks and other associates from St Petersburg days, probably only four in number. At least one of them (whose name for legal reasons I cannot mention in print) does not live in Russia. His nickname is ‘cashier’. Other members of the putative ‘four’ are even more obscure. They include a former colleague of Mr Putin from his days as a KGB officer in Dresden, and an antique dealer from St Petersburg with close ties to that city’s underworld. The four plus one are never seen in public together, though Western intelligence agencies have picked up some traces of coordination: Mr Putin and one of the four were in Sochi in 2007 just as the then Russian president fired his prime minister and appointed the unknown Mr Zubkov. Another foreign intelligence agency believes that Mr Putin made a seven-hour flight to Russia’s far east in the summer of 2008 with a member of his supervisory board on the presidential plane. An executive jet belonging to one member of the supervisory board appears to act as an air taxi for other members. In March 2008, for example, this aircraft flew to Prague to pick up Alina Kabayeva, a gymnast whose name has been linked to Mr Putin in the Russian tabloid press. It flew her to the holiday resort of Sochi in time to meet the Russian leader who arrived there on the same day.

Some theorise that the real story of Mr Putin’s rise to power is the fusion between wilier elements of organised crime in St Petersburg, such as the Tambov mafia, with the remains of the KGB in that city, and the transplantation of that formidable hybrid to power in Moscow. It is also tempting to see crime, business and intelligence as the three pillars of power in Russia. Yet such explanations are too elegant and too simple. Gangsterdom, spookdom and officialdom are intertwined, to the point that they are really just one pillar with three sides: a kind of unholy trinity.

Making sense of these swirling allegations and theories is tricky, not least because of the ever-present threats of violence and lawsuits.³⁰ But whether by accident or design, our view of Russia is clouded by misinformation and wishful thinking; in some cases clear evidence exists of intimidation and deception. Skewed perceptions are one reason why the West’s response has been so weak to the subject of the next chapter: the regime’s activities abroad.