Week 8 Response Paper - Chapters 16 and 17

Nolan Dorics
The ideas discussed in chapter 16 are well encapsulated in the chapter’s title, Kremlin
Inc.; Putin, in his effort to expand the state’s control over vital Russian industries, especially oil
and natural gas, seemed to increasingly treat his office and the Kremlin as a corporate entity
throughout the mid-2000s. Chapter 17 is concerned with Russia’s international image, which
during this time was shaken by highly public assassinations and increasing tensions with the
United States.
Following the controversial arrest of Mikhail Khodorkovsky, Putin’s motivations behind
the legal attack were becoming more obvious. Not only was there concern over certain oligarchs
like Khodorkovsky posing a political threat to Putin’s administration, but Putin and his people at
the Kremlin seemed increasingly fixated on regaining a greater amount of state control over the
crucial oil and natural gas industry, evidenced by the fact that the process of dismantling Yukos
and auctioning off its assets had begun before Khodorkovsky’s trial had even reached a verdict.
In line with this goal, Putin was concerned with gaining a majority control over Gazprom, so he
negotiated a plan to merge Gazprom with Rosneft, an oil company owned by the state. It was
also part of his plan for the merged Gazprom-Rosneft to acquire from auction Yukos’s greatest
asset, Yuganskneftegaz, thus creating a humongous Russian oil giant owned in majority by the
state. This, however, did not go according to plan. Through a lengthy process of international
financing and some sort of banking mishap that I can’t really decipher, it was Rosneft alone that
acquired Yuganskneftegaz! Although it wasn’t exactly according to Putin’s plan, the process was
still largely successful. An important detail here is that although the arrest of Khodorkovsky and
dismantling of Yukos didn’t signal the total renationalization of the industries which had been
auctioned off in the 90s like many analysts and investors feared, it was still indicative of the
Kremlin’s overall strategy through the mid-2000s to increase state control of those industries by
creating state corporations which would consolidate and influence the private sectors from the
top down. Along these lines, Putin’s approach to his presidency seemed more and more business
oriented. “Despite disavowing any business acumen, Putin reveled in the details of the country’s
biggest deals, negotiating himself and mediating disputes” (Myers 293). Another detail that
showcases just how fixated Putin was on the business side of running a country was his
micromanaging of the corporations lead by his Kremlin friends. For example, “…Putin pulled
the reins at Gazprom, involving himself in the minutiae of the company’s budgets, pricing,
pipeline routes, and even personnel” (Myers 292). Another important example of Putin’s fixation
on business was his arrangement of the Gazprom Nord-Stream pipeline deal, which provided
him leverage for negotiating prices with Ukraine. Ultimately, Putin “negotiated” another deal
with Ukraine that involved shutting off much of the country’s natural gas in the middle of winter,
like all good negotiators know how to do. The result was increased prices for Ukraine and other
European countries as well as the inclusion of the company RosUkrEnergo as a middleman.
RosUkrEnergo itself had been created, in part, by Putin to help mediate the oil and natural gas
activities of Ukraine in Russia’s favor.
 An important conclusion I can draw from these readings is that once Putin secured such a
strong position of power for himself, once he succeeded in surrounding himself with only his
most loyal friends and consolidating the Russian political process beneath him, he was free to do
as he pleased within the Russian borders and even slightly outside them such as in Ukraine.
Putin’s political strategies during and following the Yukos affair were bold, to put it nicely. He
strongarmed his way through business deals and bureaucratic processes with disregard for
democracy and the greater good. The author of the book put it succinctly that after witnessing the
ludicrous ascension of an oligarch class via Yeltsin’s political reforms of the 90s, Putin seemed
to want to secure a similar form of profit for himself and his friends in the Kremlin. What I think
is funny or maybe disturbing about these readings is that Putin’s first job in the government
involved negotiating contracts in St. Petersburg. Now that he was president, he seemed to
approach his job in the same exact way, as if he was just another shady businessman.