Thursday, November 29, 2007

Oprichniks vs Boyars 2.0

prichniks were Russian paramilitary forces
established in 1564 under the rule of Tsar Ivan the Terrible to operate outside, in parallel and partly as a substitute to the Russian Tsardom civil, military and court apparatus. As a rule Oprichniks, including many of their highest leaders, were raised from low classes to serve the Tsar directly. Supposedly the Tsar needed them to crush powerful Russian nobles, mainly the Princes (Knyazes) and the Boyars, as well as traders grown too independent in the liberal northern cities such as Pskov and Novgorod. Because Oprichniks came from the low layers of society (Boris Godunov served as archer in the army before becoming one of the leaders of the Oprichnina and later himself ascending to the throne) and had no political support other than the Tsar himself they were fanatically loyal and hated nobles whom they saw as unjustly rich, powerful and corrupted. They believed in the Tsar as the only legitimate power in Russia. Because Ivan the Terrible was always suspicious of his entourage he created and entrusted this militant organization to defend him against the enemies. Oprichniks were supposed to be "pure" people, caring not for their personal well-being but for the Tsar and Russia.

Oprichniks had to be strong so they could stand own ground against a rebellion by the nobles and their private armies. This never happened. But the main activity Oprichniks were engaged in was neither military nor security related. They became infamous for massive prosecutions and property confiscations.

n interview in Russian business daily Kommersant reveals the following shocking information: today a 600 000 strong army of modern-day Oprichniks operate in Russia. This force, formally separate from the state is drawn from the former basic and middle level state enforcers: retired police, special services and so on. The force in question is jointly managed by Siloviki and pro-Kremlin businessmen.

The background? The sensational interview was given by a Russian businessman, Oleg Shvartsman (ОЛЕГ ШВАРЦМАН), CEO of a "finance-industrial conglomerate" group Finansgrupp (Finansgroup), which is organization worth 3,2-billion dollars. In the interview he acknowledges that his activities are directly subordinate to certain high-ranking officials in the administration of president Vladimir Putin, including the almighty head of presidential office himself, Igor Sechin. The activities of Finantsgrupp CEO and his affiliates, acting under the cover of several other private and non-government organizations are allegedly approved by the president.

The goal? In the interview Mr Shvartsman claims that the network's goal is "re privatization" of any and all large lucrative private property, which is not yet under control of the figures from the presidential administration. Subject to this plan of "re privatization" are undertakings, which in the opinion of Oprichniks do not earn sufficient sums for Russia's State budget. Too small tax revenue, explains interviewee, is bad for the country's economically deprived regions and therefore undertaking have to be given to somebody else, namely to his Kremlin associates.

The means? Today's Oprichniks achieve their goals in several stages: first, using their operatives across the country they select companies sufficiently attractive for takeover. For this task they employ the net of former state security services operatives numbering some 600 000. These operatives act under protection of power-related state ministries such as the ministry of internal affairs, FSB and so on. Formally these retired officers act under umbrella of several non-governmental societies, the most powerful of them being "Social Justice Union of Russia" (Союз социальной справедливости России). Their tasks include analysis of potential acquisitions and contacting minority shareholders with the purpose of "convincing" them to sell. And further planning. No one is being beaten, claims Mr Shvartsman. "People get paid money".

After initial situational assessment measures are undertaken to bring down the firm's market value by the means of applying administrative pressure. Mr Shvartsman gives an example: a company in Orenburg region, which produces Chrome (metal substance) has market value of 800 million dollars and is considered one of the best, most profitable Russian producers of this rare element. After the company is approved for takeover administrative measures are applied until firm's market price drops. In particular case the company can be obtained for just 300 million dollars, two and half times cheaper than its real value. Ms Shvartsman does not specify in the interview the form in which this kind of pressure is manifested, but judged from past experience it could be as simple as "accidental" and "irreparable" breakdown of a government monopoly operated pipeline or power line. Or tax fraud investigation. The buyers are firms controlled by Siloviki. As interviewee explains Siloviki do not hold shares directly in the companies, it is done under the cover of organizations such as Finantsgrupp itself and different offshore schemes.

The results? Putin's control over the acquired assets is ensured by the means of giving majority shares to Cyprus-registered firms, which, in turn, belong to spouses and family members of "the people loyal to Russia". These people are the members of the current presidential administration, most of whom, in turn, are head of state's personal friends. After the takeover the market value of the undertakings grows back quickly.

"Oprichnik", painting by Apollinary Vasnetsov (C) Wikipedia

he demise of Oprichniks came as fast as was their rise, but not before they lost control over situation engulfed in indiscriminate robbing and slaughtering of people, enriching themselves instead of strengthening the state power. Feared as they were, they proved to be little actual force faced with determined opposition. When the Crimean Khan besieged Moscow in 1571 Oprichniks, corrupted by the enormous riches they had collected in Tsar's name, failed miserably. The city was captured and burnt down (with the exception of the powerful fortress of Kremlin). Soon Oprichniks were dissolved, but it was too late to save the kingdom. Several years after this event the Tsar died and with his death the ancient Rurik's dynasty declined. With the nobles destroyed the country was struggling in military competition with foreign powers and soon descended into Smuta period, the darkest in the Russian medieval history.

While some historians argue that the harsh acts of Oprichniks could be seen as a tool to destroy the power of the Princes, nobody agrees with their actual actions. In the end they not only asserted Russia's image as barbaric, but hardly brought the intendent benefits.

Could history be repeating itself?

See also: Eurasia Daily Monitor. FINANSGROUP: HOW RUSSIA’S SILOVIKI DO BUSINESS. By Jonas Bernstein. Friday, November 30, 2007.

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