How Wealthy Are Putin’s Friends?

This article originally appeared at Bloomberg View

Russian President Vladimir Putin has an optics problem: Even as he asks people to be patient with the economic turmoil brought on in part by his response to Western sanctions, new income and propertydeclarations are demonstrating that he and his top staffers aren’t sharing the pain.

During today’s four-hour call-in session with ordinary Russians, Putin spoke about his ban on food imports from Western countries, imposed last year as a response to financial sanctions against state-owned companies:

“Yes, this has negative consequences in terms of a contribution to food inflation, that’s true. And indeed, here it will be necessary to put up with it for a while.”

On paper, Putin isn’t a rich man: His official earnings amounted to 7.6 million rubles ($151,600) last year, and his assets included a third of an acre of land, a modest, 828 square foot apartment and a garage, where he keeps two vintage Soviet cars and a cheap, Russian-made Niva off-roader. That said, he’s doing much better than most Russians. His income is almost 23 times the national average, and it more than doubled from 2013 to 2014 thanks to a big salary increase he gave himself in April — a raise that most Russians could only dream of  at a time when unemployment is growing and companies are cutting costs.

I have written before that I don’t believe in multi-billion-dollar estimates of Putin’s personal fortune. A man who wields near-absolute power in a country as vast as Russia doesn’t need money or property — though if he ever retires, he will probably be able to turn part of his political capital into cash. Much of his wealth potential comes from the opportunities he creates for friends and underlings. Even the official declarations, which are probably woefully incomplete and do not include investments or bank balances, show that such opportunities are considerable.

Putin’s chief of staff, Sergei Ivanov, a career government official, declared an income of 16.2 million rubles in 2014. He owns a big house on five acres of land and a palatial, 2,768-square-foot apartment. His wife drives a Porsche Cayenne. Nikolai Patrushev, secretary of Putin’s security council and a former domestic intelligence boss, declared a combined annual income with his wife of 40 million rubles and, among other real estate, a house in Moscow’s exclusive Serebryany Bor area which anti-corruption activist Alexei Navalny recently estimated was worth 1 billion rubles. Across the river from the palatial mansion sits an uneven row of ugly high-rise blocks. “The river is like a literal poverty line,” Navalny wrote.

The list of Putin administration officials with expensive cars, boats and lots of real estate goes on and on. Alexei Gromov, a deputy chief of staff whom Moscow editors fear for his stringent insistence on the Putin party line, owns a 10,344-square-foot house near Moscow, worth millions of dollars, though he has not worked a day in the private sector. His declared income is 9.2 million rubles, higher than Putin’s. The presidential press secretary, Dmitri Peskov, whose artful denials of this or that are in the news every day, made as much as Gromov and owns a Mercedes G500

Since Russia has few independent media outlets, none with the resources and access to investigate the origins of top bureaucrats’ money and property, it’s perfectly safe for officials to declare the visible part of their wealth. Putin said as much when asked why the heads of state companies such as the oil giant Rosneft and Russian Railroads do not publicly disclose their incomes and assets. (Rosneft chief Igor Sechin successfully sued journalists who alleged that he made $50 million a year, and Russian Railroads President Vladimir Yakunin threatened to resign if required to report his income.) 

Putin explained that, since the management of state-owned Russian companies included foreigners who could not be required to publish their incomes, it was unfair to require their Russian colleagues to do so. Yet, Putin added, “in most Western economies” managers revealed their incomes voluntarily. “I would strongly recommend that ours follow suit,” he said. “There’s nothing dangerous about it.”

Indeed, Russians’ reaction to politically-induced economic problems has so far been lethargic, and Putin’s support has remained stable. So it seems that the officials he made powerful and rich — in that order — need not worry about the people they’re asking to “put up with it for a while.”

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