The Anointed One Tracking the Rise of Putin's Crown Prince

Part 3: The Kremlin's New Factions: The 'Oil Party' vs. the 'Gas Party'

Medvedev was an expert advisor to Putin, who was 13 years his senior. According to contemporaries, Medvedev looked up to and was inspired by Putin. In an interview with SPIEGEL, Medvedev said that Putin's strengths were already apparent at the Smolny: "He was a good listener, was able to address the details and even dealt with calls about broken pipes."

One of the chief Moscow investigators at the time says derisively that Medvedev, the young lawyer, was merely a hanger-on. Medvedev himself calls it a romantic time. "We felt it," says Medvedev, "the 'wind of change.' Those years were important on our path to becoming a civil society."

Today, less than a decade later, the optimistic young market economists who once worked at the Smolny in St. Petersburg have arrived at the nerve centers of power in Moscow. They include Medvedev, who Putin brought into his government bureaucracy in 1999, appointed deputy head of the presidential administration after only a year and later as its head and, finally, made deputy prime minister in 2005. But battalions from the "Big House," the headquarters of the former Soviet intelligence service, the KGB, on St. Petersburg's Liteijny Prospekt, are now in Moscow. In addition to Putin, current Deputy Prime Minister Sergei Ivanov, Nikolai Patrushev, director of the domestic intelligence agency FSB, two graying Kremlin cardinals and the head of the country's drug enforcement agency began their careers at KGB headquarters in Leningrad.

During the past eight years in Moscow, Medvedev has had a ringside seat to the trench warfare he can expect when he becomes president, a struggle for power between "old" and "new" St. Petersburgers, between the former employees of the intelligence agencies, known as Siloviki, and liberals, and, more recently, between the "oil party" and the "gas party."

Despite the fact that all the independent parties have now been eliminated from the Russian parliament, the Duma, two factions have taken shape in the Kremlin. The "oil party," led by Putin's powerful deputy chief of staff, Igor Sechin, staunchly defends its sinecures surrounding Rosneft, the state-owned oil company. Meanwhile, the "gas party" is rapidly expanding its influence with the state-controlled natural gas monopoly Gazprom.

Medvedev, as chairman of the board of directors of Gazprom since 2000, is part of the gas party. The market value of the company has increased 50-fold since then, making it what is currently the world's fourth-largest company.

With Medvedev at the head of the board of directors and Alexei Miller as chairman of the management committee, Putin is in the process of reshaping the natural gas giant into a central tool of domestic and foreign policy.

Medvedev has made it clear that he believes that the state is "probably the worst of all possible owners," and he supports lowering the barriers for foreign investment. But he also complied with Putin's wish to increase the government's share in Gazprom to more than 50 percent.

In November 2003, shortly after taking office as the director of the Kremlin administration, Medvedev criticized the proceedings against jailed oil magnate Mikhail Khodorkovsky. But this didn't prevent him from bringing key pieces of the forcefully destroyed Yukos Group under Gazprom's control. Medvedev approved the incorporation of independent television station NTW into the Gazprom media empire, as well as the purchase and later resale of the former government newspaper, Isvestiya, to a banker friend of Putin's.

His recipe for success, both at Gazprom and at the Kremlin, has been simple: He is always in the picture, but never truly blameworthy -- neither for the destruction of the party landscape, which is attributed to his deputy in the Kremlin, nor for the only modest success of the "national projects" to improve the infrastructure, which Putin put under Medvedev's command in 2005. Three out of four Russians surveyed are convinced that funds distributed during Medvedev's tenure -- €7.6 billion last year alone -- were "squandered or stolen."

By working discreetly behind the scenes, Putin-favored Medvedev uses what one might call the Teflon principle: No matter what he touches, nothing sticks to him. "Medvedev was intricately involved in most of the major power struggles from 1999 to 2007, without being directly associated with them," writes the Russian daily Kommersant. The paper concludes that the St. Petersburg lawyer's influence may be overestimated, and that he is often only nominally responsible.

But the old networks with their hidden explosive material are still there -- both Medvedev's and Putin's. Konstantin Chuychenko, another former fellow student of Medvedev's who later became a KGB officer, is a prime example. He is the director of RosUkrEnergo, a notorious natural gas delivery company that earns billions from the resale of Central Asian gas, and has been at the center of disputes between Russia and Ukraine since 2004. At issue is the accusation that the company is siphoning off astronomical profits from the gas trade, with Gazprom's acquiescence.

When banker Oleg Zhukovsky was brutally murdered on Dec. 6, the name Medvedev quickly came up. A specialist for major customers in the wood and cellulose business, he was strangled and tied up in the pool of his villa outside Moscow -- a few months after Russian paper industry giant Ilim Pulp had sold shares it had reacquired, some of them from Zhukovsky's bank, at a handsome profit to a US investor for $650 million. After the incident, the Russian magazine SmartMoney wrote that the shares Dmitry Medvedev held in Ilim Pulp until 1999 were worth today's equivalent of "$300 million. Whether he sold his shares or transferred them to a foundation before moving to Moscow in 1999 is unknown."

Medvedev's former business partners deny that the presidential hopeful still holds shares, either directly or through them, as middlemen. At the Ilim Pulp headquarters in the town of Koryazhma in the northern Russian Taiga, where Europe's largest pulp and paper mill belches its clouds of chemicals over the surrounding forests, employees prefer to talk about Medvedev as a young lawyer, who began his career in business in an office on the third floor of the company's administration building, where he was director of the legal department. He left the company in 1999 when investigators from the public prosecutor's office began to explore the privatization of the paper mill.

According to the statement of assets he was required to submit before the presidential election, Medvedev, a former major shareholder in Ilim Pulp, has only €76,111 in assets today. His wife Svetlana is apparently even worse off. Her account shows a balance of only €10.55. A nine-year-old Volkswagen is rusting away in the couple's garage.

But it is precisely Svetlana, Medvedev's former fellow pupil, whom he has known since the first grade and to whom he has been married for 18 years, who appears to have been preparing herself for her role as Russia's first lady for some time. She lost weight, ordered more stylish outfits and began showing up in church more often -- in full view of the cameras. Insiders familiar with her behavior warn that she could be another Raissa Gorbachev. Former President Mikhail Gorbachev's wife's self-confident manner was a serious affront to many conservative Russians.

The Medvedev family lives in a 364-square-meter (3,918-square-foot) apartment, worth $6 million, on Minsk Street in Moscow. The condominium building, known as the "Golden Keys," is home to not only the Medvedevs and various multimillionaires from the oil and food industry, but also the patriarch of the Russian Orthodox church.


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