Putin’s People. Catherine Belton

two men sigh. Everything has changed – apart from their ability to idealise their own roles. ‘What was great about the nineties was that there were no lies,’ Yumashev continues.

      ‘Absolutely,’ says Pugachev. ‘For me, my whole life, the truth was equivalent to freedom. I earned money not for riches, but for freedom. How much can you spend? As long as you have enough to buy two pairs of jeans, that’s fine. But a certain independence gave me one thing: I don’t need to lie.’

      It seemed to the two men that the president had become surrounded by yes-men, all of whom proffered lengthy toasts to Putin, telling him he had been sent by God to save the country, while they served at his pleasure. Yet it seemed to Pugachev that these yes-men understood the deep hypocrisy of the system, the sham democracy represented by the Kremlin’s ruling party, United Russia, and how deeply corrupt it had become.

      ‘Look at the people around VV [Putin], who say Vladimir Vladimirovich, you’re a genius!’ Pugachev continues. ‘I look at them – and they don’t believe in anything. They understand it’s all crap. That United Russia is crap, the elections are crap, the president is crap. But they understand all this, and then they go on stage and say how great everything is. And all the toasts they make, which are total lies. They can sit and tell … rubbish about how they have always been together, ever since they were sitting on the school bench. But at the same time the guys sitting in the office next door are saying, “As soon as he comes out, let’s finish him off.” There is such cynicism. I don’t think they feel comfortable. The ones who have power … I am sorry for them. They’re stealing from all sides, and then they come out and speak about how Putin is fighting against corruption. I look at them and think, this is the end. I’m sorry for them … VV was always asking, “What is that word beginning with s? Sovest – conscience.” They don’t have receptors for this. They don’t understand it. They forgot the word and what it means. They’ve gotten totally messed up.’

      All the achievements of the Putin era so far – the economic growth, the increase in incomes, the riches of the billionaires that had turned Moscow into a gleaming metropolis where sleek foreign cars filled the streets and cosy cafés opened on street corners – boiled down to the sharp increase in the oil price during the Putin years, they agree. ‘In 2000 the oil price was $17 and we were happy,’ says Yumashev. ‘When you and I were in power it was $10, $6. The best time for me was when it hit $16 for two to three weeks. Now it’s $150, and the only thing they’re doing is building awful houses for themselves.’

      ‘The state is doing nothing with the money. They could have transformed the country’s infrastructure. But he thinks everything will be stolen if we build roads … Time is passing so quickly,’ says Pugachev.

      ‘Eight years have gone. In 2000 we gave the boss such a smoothly oiled machine. Everything worked. And what did we get?’ asks Yumashev.

      ‘We didn’t understand that he wasn’t going to drive things forward. I thought he was liberal, young,’ Pugachev replies.

      ‘For me it was principally important that he was young,’ says Yumashev.

      ‘You understand it turned out he was from a different species.’

      ‘Yes. They are different people,’ Yumashev agrees.

      ‘They are different, special people. This was something we didn’t understand. The person who understood this very well was Ustinov [the prosecutor general],’ says Pugachev. ‘He told me, “You understand, the guys from the security services, they are different. Even if you were to suck all their blood out and then put on a different head, they would still be different. They live in their own system. You will never be one of them. It is an absolutely different system.”’

      The recording offers a unique window into the unguarded views of two men who had brought Putin to power, and their horror at the system they’d help create. This book is the story of that system – the rise to power of Putin’s KGB cohort, and how they mutated to enrich themselves in the new capitalism. It is the story of the hurried handover of power between Yeltsin and Putin, and of how it enabled the rise of a ‘deep state’ of KGB security men that had always lurked in the background during the Yeltsin years, but now emerged to monopolise power for at least twenty years – and eventually to endanger the West.

      This book began as an effort to trace the takeover of the Russian economy by Putin’s former KGB associates. But it became an investigation into something more pernicious than that. First research – and then events – showed that the kleptocracy of the Putin era was aimed at something more than just filling the pockets of the president’s friends. What emerged as a result of the KGB takeover of the economy – and the country’s political and legal system – was a regime in which the billions of dollars at Putin’s cronies’ disposal were to be actively used to undermine and corrupt the institutions and democracies of the West. The KGB playbook of the Cold War era, when the Soviet Union deployed ‘active measures’ to sow division and discord in the West, to fund allied political parties and undermine its ‘imperial’ foe, has now been fully reactivated. What’s different now is that these tactics are funded by a much deeper well of cash, by a Kremlin that has become adept in the ways of the markets and has sunk its tentacles deep into the institutions of the West. Parts of the KGB, Putin among them, have embraced capitalism as a tool for getting even with the West. It was a process that began long before, in the years before the Soviet collapse.

      Putin’s takeover of strategic cash flows was always about more than taking control of the country’s economy. For the Putin regime, wealth was less about the well-being of Russia’s citizens than about the projection of power, about reasserting the country’s position on the world stage. The system Putin’s men created was a hybrid KGB capitalism that sought to accumulate cash to buy off and corrupt officials in the West, whose politicians, complacent after the end of the Cold War, had long forgotten about the Soviet tactics of the not too distant past. Western markets embraced the new wealth coming from Russia, and paid little heed to the criminal and KGB forces behind it. The KGB had forged an alliance with Russian organised crime long ago, on the eve of the Soviet collapse, when billions of dollars’ worth of precious metals, oil and other commodities was transferred from the state to firms linked to the KGB. From the start, foreign-intelligence operatives of the KGB sought to accumulate black cash to maintain and preserve influence networks long thought demolished by the Soviet collapse. For a time under Yeltsin the forces of the KGB stayed hidden in the background. But when Putin rose to power, the alliance between the KGB and organised crime emerged and bared its teeth. To understand this process, we must go back to the beginning of it all, to the time of the Soviet collapse.

      For the men who helped bring Putin to power, the revanche has also brought a reckoning. Pugachev and Yumashev had begun the transfer of power in desperate hurry, as Yeltsin’s health failed, in an attempt to secure the future of the country – and their own safety – against what they believed to be a Communist threat. But they too had forgotten the not too distant Soviet past.

      The security men they brought to power were to stop at nothing to prolong their rule beyond the bounds of anything they’d thought possible.

      ‘We should have spoken to him more,’ sighed Yumashev.

      ‘Of course,’ said Pugachev. ‘But there wasn’t any time.’

PART ONE

       1

       ‘Operation Luch’

      ST PETERSBURG – It’s early February 1992, and an official car from the city administration is slowly driving down the main street of the city. A grey slush has been partially swept from the pavements, and people are trudging through the cold in thick anonymous coats, laden with bags and hunched against the wind. Behind the fading façades of the once grand houses on Nevsky Prospekt, shops stand almost empty, their shelves practically bare in the