Medvedev Steps Out from Putin's Shadow
This morning, Russia’s President Dmitry Medvedev signed a decree relieving Yuri Luzhkov of his duties as Moscow Mayor. Contrary to Russian practice, this decree states in no uncertain terms that “the President has lost confidence in the Mayor.” Legally, the mayor of Moscow is one of many regional governors, who are appointed by the President and serve at his pleasure.
This is the most important political event in Russia since then-President Vladimir Putin had Mikhail Khodorkovsky arrested in 2003 and had his oil company Yukos confiscated.
Luzhkov has been one of Russia’s most powerful men since 1992, when he became mayor. For the last few weeks, the Kremlin (that is, Medvedev) has been pursuing a vicious media campaign against Luzhkov, attacking him for outrageous corruption. Three Russian state television channels broadcast long attack films on Luzhkov, whose Moscow channel prepared a response but was not allowed to show it. Last week, Kremlin sources rumored that Luzhkov would resign this week. Yesterday, a combative Luzhkov returned to Moscow publicly stating that he was not going to resign.
Luzhkov is widely seen as the second most corrupt person in Russia after Putin. Forbes assesses that his wife Yelena Baturina has a net value of $3 billion, but her real assets are likely to be much larger. She owns a big construction company, Inteko, which has received numerous advantageous insider deals without competition. She has felt the political wind, and she has sold off many assets and transferred much of the wealth to a private holding company in Austria, where she now spends much of her time.
Medvedev’s sacking of Luzhkov has many significant consequences.
First, through this act, Medvedev has made clear that he has substantial real power. Until today, most Russia-watchers erroneously claimed that Luzhkov was more powerful than Medvedev, although Medvedev has already ousted some 25 regional governors, including heavyweights such as the long-time presidents of Tatarstan and Bashkortostan or the governor of the Sverdlovsk region.
Second, the Moscow city administration has long been seen as a kingpin of corruption in Russia. By taking on Luzhkov, Medvedev for the first time launched a serious attack on corruption. The prior standard was that if a governor goes voluntarily, his corruption would be forgiven and not investigated. If he would be obstinate, as Luzhkov has been, vicious investigation and prosecution follows. Three recently ousted governors are going through those ardors right now.
Third, Medvedev’s attack on Luzhkov represents a proxy attack on Putin. Putin has not engaged in any criticism of Luzhkov, while Medvedev and Luzhkov attacked one another publicly. A few days ago, Russian media reported that Putin had congratulated Luzhkov on his birthday, but Medvedev did not. Ever since Medvedev became a candidate for president in December 2007, he has distinguished himself by attacking corruption, state corporations and lawlessness, while Putin has done nothing of the sort but spoken like the chairman of Gazprom. Incredibly, many observers have swallowed the official Moscow claim that there was no difference between them or that Medvedev was a mere puppet, although he got much more television coverage than Putin. Now, the struggle between Medvedev and Putin is open and on. Nobody can deny it or their differences any longer.
Fourth, the Luzhkov group of friendly businesses has been an important part of the Russian business world. Undoubtedly, Inteko will be investigated and cut down to size. One friend of Mrs. Luzhkov is Suleiman Kerimov, whose Moskva Nafta holding company has just taken over large stakes in the dominant Russian potash company Uralkali and the dominant gold company Polyus Gold, with the open support of Putin. But the other day, a United Russian parliamentarian, Ashot Yegizaryan, managed to have $6 billion of Kerimov’s assets frozen by a Cyprus court in a battle over the Hotel Moskva complex just beside the Kremlin, clearly as a part of the struggle against Luzhkov. The biggest businessman in the Luzhkov sphere is Vladimir Yevtushenkov of Sistema and MTS. He might be sufficiently strong in his own right, but the ouster of Luzhkov has in all likelihood undermined his standing.
Medvedev has not given us any indication yet as to whom he will appoint as the next mayor of Moscow. So far, he has just made Luzhkov’s loyal first deputy acting mayor. Several candidates have been mentioned from top government posts, but my bet is that Medvedev will try to promote his old mentor Alexander Voloshin, who was chief of staff to both Yeltsin and Putin.
With this act, Medvedev has thrown down the gauntlet and exposed himself to political retaliation from nobody less than Putin. It is far too early to say now how this drama will evolve, but you can be sure that it will be a great drama with two major actors.