Blair Ruble

“Moscow at night glitters as never before. The Russian capital…is vibrantly alive, almost pulsating with energy…. Mayor Yuri Luzhkov has seen to it that virtually every building façade, every urban surface, is well-scrubbed or freshly painted – and brightly lit. Very brightly. Hundreds, perhaps thousands, of spotlights and streetlights have been installed by Luzhkov’s government to display the new Moscow to best effect. And the sight is indeed impressive. In its central districts, Moscow can be compared to the downtowns of the great cities of Europe – something that could never be said truthfully before, at least not since 1913.”

• “Moscow at night glitters as never before. The Russian capital…is vibrantly alive, almost pulsating with energy…. Mayor Yuri Luzhkov has seen to it that virtually every building façade, every urban surface, is well-scrubbed or freshly painted – and brightly lit. Very brightly. Hundreds, perhaps thousands, of spotlights and streetlights have been installed by Luzhkov’s government to display the new Moscow to best effect. And the sight is indeed impressive. In its central districts, Moscow can be compared to the downtowns of the great cities of Europe – something that could never be said truthfully before, at least not since 1913.”

• -Blair Ruble

• Mid-1990s

Westernized: Moscow-Siti

• Westernized: Moscow-Siti

• Desacralized symbolic Soviet spaces: skating rink near Lenin mausoleum;

• Russified: refurbished statues of Aleksandr II; Peter the Great

• Diversified: new lifestyles, housing, ethno-cultural diversity

Gross regional product: $340bln (24% of Russia’s GDP)

• Gross regional product: $340bln (24% of Russia’s GDP)

• 40% of Russia’s foreign investments

Sample figures:

• Sample figures:

• Social Benefits: 592 blnR

• Road construction: 38blnR

• Metro construction: 26blnR

Pervasive corruption

• Pervasive corruption

• High crime rate

• Pollution

• Deteriorating roads

• Traffic congestion

• Deteriorating public transport

• High cost of living (eg, utilities and housing)

Service and Responsiveness

• Service and Responsiveness

• Scale

• Accessibility

• Coherence and Accountability

• Regional cooperation

Moscow, the Economic Powerhouse

• Moscow, the Economic Powerhouse

• Moscow, Inc.

• Why Luzhkov Was Ousted?

• How is Sobyanin doing?

• Deluzhkovization
• Battling crime and corruption
• Redistribution of property
• Public satisfaction
• Transport
• Social payments
• Tolerance of public protest
• Challenges: Ethnic riots, Oppposition Demonstratios, Domodedovo bombing

• Prospects: the Meaning of Moscow

• Takeover of city’s Soviet-era assets

• Supermayoral system of governing

• Luzhkov’s charismatic leadership

• City Hall’s extensive involvement in business

• Massive inflow of resources from Russia’s regions and foreign investment

• Highly criminalized political and business climate

• Federal subsidies

• Luzhkov’s alliance with Yeltsin, then Putin

Money-power nexus

• Money-power nexus

• Relatively consolidated

• In Putin era, federal patrimonialism as in important ways come to resemble that in Moscow, rather than vice versa

The mayor and his proteges act as owners of the city as well as its political leaders:

• The mayor and his proteges act as owners of the city as well as its political leaders:

• Extensive participation of the city in business

• The involvement of Moscow businesses and financing city programs and the commercial use of Moscow city funds

• An opaque budget process marked by extensive use of off budget funds as well as federal subsidies.

• Russian Finance Minister Kudrin recently claimed that one quarter of Moscow’s government decrees were secret, including decrees allocating land in central Moscow.

356 State Unitary Enterprises

• 356 State Unitary Enterprises

• 337 blocs of shares in ventures and companies including:

• Agricultural holdings
• ZIL automotive metallurgy plants in Smolensk
• Building projects in:
• Abkhazia and South Ossetia
• Crimea, Ukraine
• Other foreign countries, from Mongolia to Venezuela

• As of 2008 Moscow received 0.15% of its budget revenue from these enterprises.

• During the economic crisis, this revenue shrank by 90%.

• The city poured 100 times that much money into supporting the enterprises

The AFK Sistema conglomerate, headed by Luzhkov crony Vladimir Yevtushenkov, embodied the fomer mayor’s blend of politics and business. Sistema operates consumer service businesses in telecommunications, microelectronics, insurance, home construction, oil, the media and banking. Sistema’s firms draw loans and business from the city government and generated funds for Luzhkov’s projects.

• The AFK Sistema conglomerate, headed by Luzhkov crony Vladimir Yevtushenkov, embodied the fomer mayor’s blend of politics and business. Sistema operates consumer service businesses in telecommunications, microelectronics, insurance, home construction, oil, the media and banking. Sistema’s firms draw loans and business from the city government and generated funds for Luzhkov’s projects.

Inteko, the firm owned by Luzhkov’s wife, Yelena Baturina – named by Fortune in 2010 as the world’s third richest woman – is one of the most power business empires in Moscow

• Inteko, the firm owned by Luzhkov’s wife, Yelena Baturina – named by Fortune in 2010 as the world’s third richest woman – is one of the most power business empires in Moscow

• Baturina’s brother, Viktor Baturin, sued Inteko for $120 million in 2007 alleging wrongful dismissal

Powerful elected mayor and apparatus

• Powerful elected mayor and apparatus

• Weak city Duma

• Tight Luzhkov team

• Neighborhood institutions (prefect, subprefect), largely act as transmission belts for City Hall orders

• Fawning local media

Yuriy Roslyak

• Yuriy Roslyak

• Valeriy Shantsev

• Vladimir Resin

• City Duma Speaker Vladimir Platonov

Kremlin has allowed Moscow significant autonomy, (exemption from federal privatization in exchange for Luzhkov’s loyalty and and mainenance of political stability

• Kremlin has allowed Moscow significant autonomy, (exemption from federal privatization in exchange for Luzhkov’s loyalty and and mainenance of political stability

• Bolstered by Luzhkov’s alliance with Yeltsin, then Putin; Luzhkov was a key Yeltsin ally in ‘91, ‘93, ’96 crises; relations with Putin were correct, but not close (Luzhkov made a presidential run in 1999)

• Moscow receives lucrative subsidies and privileges

• Moscow depends on revenue sharing from federal center

• Moscow is largest contributor to national budget

To ensure Moscow has sufficient fuel, food, and other supplies, Luzhkov has placed a high priority on cultivating good relations with other Russian regions and other countries

• To ensure Moscow has sufficient fuel, food, and other supplies, Luzhkov has placed a high priority on cultivating good relations with other Russian regions and other countries

• Economic cooperation agreements with most of Russia’s 88 units

• City loans to other regions

• Direct ties with Ukraine, Lithuania, other CIS countries, Latvia, and the separatist regions of Transdnestria, and Abkhazia

The courts, the Procuracy, the FSB, the MVD, are formally subordinated to the federal authorites

• The courts, the Procuracy, the FSB, the MVD, are formally subordinated to the federal authorites

• In practice, the city has say over their budget, personnel and operations

• Moscow subsidizes police officers salaries

• More than 100,000 federal armed troops are also are based near Moscow

• The city has provided material support to many of these troops,

Central to governing city. It has “…has stopped being a problem and become a system.” (Nemtsov)

• Central to governing city. It has “…has stopped being a problem and become a system.” (Nemtsov)

• Interlocking network of politicians, businesses, media holdings, law enforcement personnel, answerable to City Hall. Bribery, protection, graft is widespread

Figures from August 2010.

• Figures from August 2010.

• An officer of Mostotrest contracting company cites high costs from the “Kafkaesque paperwork associated with transfers of ownership to City Hall” and the need to move the underground “tangle of pipes, power lines and telephone lines, most of which have different owners …”

Favored construction companies—especially Baturina’s Inteko, Su-155 and others– received preferential treatment: permissions, municipal orders.

• Favored construction companies—especially Baturina’s Inteko, Su-155 and others– received preferential treatment: permissions, municipal orders.

• Kickbacks in the permissions process can reach 50-70 percent of housing costs

• Municipal orders accounted for almost half of the living space under construction in 2007 (yellow windows in the diagram).

Position

• Position

• Cost

• Police general in Moscow

• Approx. $1 million

• Police Major-General in Moscow Oblast

• $500,000

• Police chief of an administrative district in Moscow

• $100,000-$1 million or powerful business connections

• Chief of prosperous Tsaritsyno precinct in Moscow

• $500,000

• Precinct captain

• $50,000-$100,000 to be put at the head of the waiting list for the post

• Criminal police chief, precinct level, central or southern Moscow

• $25,000-$30,000

• Precinct criminal investigation chief in prosperous part of city

• $10,000-$15,000

• Chief of public order section, precinct level

• $15,000-$30,000

Organized crime is pervasive:

• Organized crime is pervasive:

• It plays a political role as lobbyist and partner in governing the city.

• City hall manages oc rather than fights it

• In recent years evolved from burglary, robbery and protection racket to acquisition of real estate, manufacturng firms and business

Criminal Map of Moscow

• Criminal Map of Moscow

• (Komsomolskaya pravda September 2009)

• Solntsevo Group

• Slavyanskiy Group (Usoyan)

• Tbilisi Crime Clan (Oniani)

• Izmaylovo Group

• Shushanashvili’s Georgian Gang

• Azerbaijani Gang

• Taganka-Chinese Gang

• Golyanov Group

• Solntsevo Group

• Territory of Mozhayskiy and Khoroshevskiy highways, Perovo, Shchukino, Ramenki, Dinamo, Cheremushki, area surrounding Southern and Prague subway stations, Balashikha, Odintsovo, and several large firms in downtown Moscow -- Solntsevo gang's sphere of influence.

• Approximate size: More than 1,000 soldiers, not counting brigade leaders and underlings.

• Specialization: real estate, protection of firms on "its own territory," and money laundering, including proceeds from drug trafficking. Sphere of interests -- hotel business and all waste disposal firms in the capital.

• Area surrounding Belarus subway station -- Tbilisi crime clan. Approximate size -- about 3,000 members.

• Leader -- "Thief-in-Law" Ded Khasan (Aslan Usoyan)

• Base -- in Sochi.

• Specialization: Interest in oil, hotel, trade, gambling business; banking, metal sales, travel industry, motor vehicle sales, and money laundering.

• Tbilisi clan

• Central District -- Tbilisi crime clan.

• Size -- over 3,000 members.

• Leader -- "Thief-in-Law" Tariel Oniani, aka Taro.

• Base -- in Spain.

• Specialization: gambling, banking, real estate, drugs, arms trade, and money laundering.

• Izmailovo

• Northern District -- Izmaylovo gang.

• Size -- over 1,000 members.

• Leader -- "Thief-in-Law" Aksen (Aksenov).

• Base -- in Moscow.

• Specialization -- protection of local businesses and some banks, trade, insurance, and extortion. Protection of jitney lines.

• Loyal to Ded Khasan (Aslan Usoyan) and Yaponchik (Vyacheslav Ivankov).

Iosif Kobzon, the Russian Frank Sinatra

• Iosif Kobzon, the Russian Frank Sinatra

Highway projects

• Highway projects

• Clinic

• Sports complexes

• “Worker and Peasant” statue museum

• Music school

• “Informational Intellect Center and Gimnazia”

Long rumored, causing widespread anxiety among Moscow elite

• Long rumored, causing widespread anxiety among Moscow elite

• Medvedev: “lost trust”

• The Kremlin wanted to further centralize political power,

• Part of a broader trend toward replacing entrenched regional heads (18 fired in 2010)

• Federal authorities wanted unfettered access to Moscow’s riches.

Dismissal preceded by ugly smear campaign on state tv which “revealed” massive corruption, traffic paralysis, and other problems obvious to anyone who has ever visited Moscow

• Dismissal preceded by ugly smear campaign on state tv which “revealed” massive corruption, traffic paralysis, and other problems obvious to anyone who has ever visited Moscow

• Luzhkov hit back: he wrote an open letter to Medvedevaccusing him of organizing a witch hunt and being “undemocratic”

• Sensing the end was near, many Luzhkov cronies embedded themselves in the Olympic construction mess, and were blamed by some for construction cost overruns and delays

Putin said it was Medvedev’s decision and he made it because he and Luzhkov did not get along}

• Putin said it was Medvedev’s decision and he made it because he and Luzhkov did not get along}

• Ultimately Putin’s decision, not Medvedev’s

Disproves speculation about growing political clout of Medvedev. He is a Putin man.

• Disproves speculation about growing political clout of Medvedev. He is a Putin man.

• Shows no indication he is anything but loyal to the federal center. Tight lipped bureaucrat rather than populist politician

• His career track is closely linked to oil and gas sector, especially to Lukoil and TNK-BP

Born 21 June 1958, Khanty-Mansi Autonomous Okrug

• Born 21 June 1958, Khanty-Mansi Autonomous Okrug

• 1980s Komsomol work in Chelyabinsk, local administration in Kogalym

• 1990s: Regional posts in Khanty-Mansi Autonomous Okrug

• 1996-2000: Federation Council member

• 2001-2005: Tyumen Oblast governor

• 2001-2003: Board chair of TNK fuel company

• 2004: The first governor to support Putin’s plan to end gubernatorial elections

• Dec. 2005: Head of Putin’s Presidential Administration

• 2006: Board chair of TVEL nuclear fuel company

• May 2008: Head of Putin’s government administration

• 2009-: Chair of Channel 1

• Oct 22 2010: Inaugurated Moscow Mayor

Sobyanin Soaring?

• Sobyanin Soaring?

Plans to remove a Peter the Great statue commissioned by Luzhkov and widely despised by Muscovites

• Plans to remove a Peter the Great statue commissioned by Luzhkov and widely despised by Muscovites

Peter the Great to Sobyanin: “What are we going to do with the statue?” (Yelkin, 10/30/10)

• Peter the Great to Sobyanin: “What are we going to do with the statue?” (Yelkin, 10/30/10)

Sobyanin has been systematically replacing officials in City Hall and neighborhoods

• Sobyanin has been systematically replacing officials in City Hall and neighborhoods

• Some holdovers remain, however, including Deputy Mayors Vladimir Resin and Ludmila Shvetsova.

• These may be those deemed “irreplaceable” or part of a deal between the Mayor’s office and the feds

• Unclear whether Resin and Shvetsova still retain real power

Cadres decide everything: Changes in Moscow city government as of October 26, 2010

• Cadres decide everything: Changes in Moscow city government as of October 26, 2010

• The caps show Luzhkov-era holdouts; the eagles show new cadres

More deputy mayors (11 versus 8).

• More deputy mayors (11 versus 8).

• Mayor’s office includes people from:

• Business (Golodets, Sharonov)

• Federal agencies (Lyamov, Rakova, Sergunina)

• Regions (Khusnullin—was in Tatarstan)

• Proportion of Luzhkov-era cadres has sunk to 40% (Shvetsova, Biryukov, Resin and Shukshin).

• More women (4 versus 2)

Vladimir Resin, chief of Metro construction commission

• Vladimir Resin, chief of Metro construction commission

1970s-1993: Komsomol and Supreme Soviet posts

• 1970s-1993: Komsomol and Supreme Soviet posts

• 1994-2000: Headed Moscow government's committee of public and interregional relations

• 2001: Moscow deputy mayor

• Was considered a top candidate to replace Luzhkov.

• Oversees departments of housing policy and housing stock, social protection, family and youth policy, culture, and public relations.

• Health and education reforms will now be handled by her new colleague Olga Golodets.

• Since 1970s: engineering and construction work in Moscow.

• Since 1980s: Moscow administration.

• First Deputy Premier of Moscow/ First Deputy Mayor since 1995.

• Was considered part of Luzhkov’s inner circle.

• Represents Moscow in the Federation Council (Senate) since Dec 22, 2010.

• This post provides immunity.

• Member of Senate Committee on Economic Policy, Entrepreneurship and Property.

Criminal bribery prosecution reopened against Deputy Mayor Ryabinin

• Criminal bribery prosecution reopened against Deputy Mayor Ryabinin

• Initial inquiries have been made into Luzhkov and Baturina business activities

• Federal auditors, working with Mayor Sobyanin, have reportedly come up with evidence of “systemic problems” in Moscow authorities actions regarding financial contracts and violations concerning more than $7 billion in investment in city transport in past three years.

• Interdistrict tax inspectorate deputy chief Tatiana Demenok was arrested for accepting a 90,000 R bribe

• Medvedev has directed Sobyanin to eradicate all administrative decisions that encourage corruption along with secret Luzhkov-era “personal decrees” that violate the law

Selling off the Bank of Moscow

• Selling off the Bank of Moscow

• Moscow City owns 47%

• City keeps $3.5bln in accounts there.

• Founder and Luzhkov friend Andrey Borodin is consolidating his assets—said to control 44% of the bank’s shares.

• The Audit Chamber started, then cut short, an investigation of the bank.

• Experts say it would be complex to remove city accounts from Bank Moskvy

• Who might buy shares—VTB? Alfa (Kremlin-friendly?)

Most casinos were closed July 1, 2009 under a 2006 decree

• Most casinos were closed July 1, 2009 under a 2006 decree

• January 15: Sobyanin visits a warehouse with confiscated gambling equipment, watches as it is sawed apart.

• Between 6 December 2010 and 13 January 2011, Moscow law enforcement closed:

• 239 “lottery clubs,”

• 8 illegal casinos and poker clubs

• 33 computer clubs hosting online gambling

• 7500 gambling apparatuses have been confiscated.

• There remain 111 “non-working lottery clubs to which law enforcement and district authorities have no access.”

Baturina’s brother reopened a lawsuit against Inteko

• Baturina’s brother reopened a lawsuit against Inteko

• Baturina discussed sale of assets to Vasily Anisimov of Coalco.

• Suleiman Kerimov reportedly also Inteko purchase

• Baturina has agreed to sell her stake in Moskva-Citi to Magnitogorsk Iron and Steel Works.

• Sold 98.12 % of Russky Zemelny Bank to six Cypress-registered companies (5.4 billion rubles)

The first zone in Russia to combine business activity, living space and entertainment in one single development

• The first zone in Russia to combine business activity, living space and entertainment in one single development

• First conceived by the Moscow government in 1992

• Will include a central City Hall and City Duma

Solving transportation problems

• Solving transportation problems

• Reducing corruption

• Retaining social benefits (pensions, Moscow supplements)

• Keeping city services running

• Managing public protest

Jan 18 2011: Sobyanin specifies that kiosks should sell goods that are really needed; that they should be connected to legitimate electric lines, not from trolleybus lines; that they be “esthetically attractive,” that they not hinder pedestrians, and that prefects should prepare maps of planned locations of kiosks by February and put them on the internet for public discussion.

• Jan 18 2011: Sobyanin specifies that kiosks should sell goods that are really needed; that they should be connected to legitimate electric lines, not from trolleybus lines; that they be “esthetically attractive,” that they not hinder pedestrians, and that prefects should prepare maps of planned locations of kiosks by February and put them on the internet for public discussion.

Moscow ethnic riots in December

• Moscow ethnic riots in December

• December 31 opposition demonstrations

• Domodedovo airport bombing

Moscow Police tried and failed to protect a cluster of young men from the Caucasus who were beaten by the crowd.

• Moscow Police tried and failed to protect a cluster of young men from the Caucasus who were beaten by the crowd.

• “Beat the Khach!” yelled voices from the crowd.

• “I didn’t think a person could look like that—like rubber. Blows flew about his body, his head, his face…”

“Legal demonstrations will be facilitated, but unsanctioned demonstrations will be strictly suppressed.”

• “Legal demonstrations will be facilitated, but unsanctioned demonstrations will be strictly suppressed.”

• (Sobyanin, announcing approval of 31 December protest led by human-rights activist Ludmila Alekseyeva for 1000 people at Triumfalnaya Square).

RIANovosti comparison of October 31 demonstration by human rights activists with the December 11 “youth demonstrations” by “leftist-radical youth”

• RIANovosti comparison of October 31 demonstration by human rights activists with the December 11 “youth demonstrations” by “leftist-radical youth”

• Harsher measures toward human rights activists:

• At the Oct 31 meeting, for which permission was received, 28 of 800 people were detained.
• At the unsanctioned Dec 11 demonstration, 65 of 5500 participants were reportedly detained at police stations, and about ten criminal cases were brought.

Airport not within city limits: Sobyanin not formally responsible

• Airport not within city limits: Sobyanin not formally responsible

• Nevertheless, he and Moscow Oblast governor Gromov competed to appear responsive.

• No apparent connection of Luzhkov or Sobyanin to East Line, the company that owned Domodedovo.However, close to Moscow Oblast authorities

Medvedev criticized the airport’s owners for lax security.

• Medvedev criticized the airport’s owners for lax security.

• Who owns Domodedovo?

• Domodedovo’s ups and downs:

• High-level competition over airport traffic, China trade (and contraband?) monopolies.
• Criminal investigations
• Battles with Russian Property Agency
• Powerful protectors

• Possible changes in ownership after bombing?

2000: Rosimushchestvo (Russian state property ministry) sued East Line, alleging improprieties in past rental agreements.

• 2000: Rosimushchestvo (Russian state property ministry) sued East Line, alleging improprieties in past rental agreements.

• 2005: President Putin recommended that East Line be left alone. Economics Minister Gref ordered Rosimushchestvo head Valeriy Nazarov to drop the lawsuit

• Rosimushchestvo ignored them, continued the suit.

• Did it have a powerful protector?

• September 30 2008: On instructions from new President Medvedev, the Supreme Arbitration Court quashes Rosimushchestvo lawsuits against East Line.

Hacienda Investments (Cyprus) >

• Hacienda Investments (Cyprus) >

• East Line Group (Ист-Лайн)>

• FML Ltd. (Isle of Man) >

• Nominal owners: Jane Peters and Sean Cairns

• Real majority owners thought to be Dmitriy Kamenshchik and Valeriy Kogan

• Others: FSB-linked arms exporter Rosoboroneksport was said to receive 25% in 2000.

Said to be the one who really controls the company.

• Said to be the one who really controls the company.

• Allegedly helped Kamenshchik settle disputes with Russian Property Agency in 2005.

• Said to have been seen skiing with Putin.

• Owns mansions in Caesaria, Israel and Greenwich, CT. His wife’s application to “build a replica of Orly Airport” at their Greenwich home was denied.

According to a 2002 Stringer investigation he:

• According to a 2002 Stringer investigation he:

• Worked with the UralMash organized crime group in the 1990s
• Hauled contraband (clothing and other goods from China), evading import tariffs.
• Turned over 25% of East Line shares to an FSB-linked company in 2000 in return for the FSB’s tapes and other evidence of his sexual and financial misconduct.

• Serves on Council on Entrepreneurship under the Russian Government, advisor to the State Duma chair, advisor to the Moscow Oblast administration.

East Line was planning an IPO. If Medvedev’s warning indicates trouble with the government, its share value will fall.

• East Line was planning an IPO. If Medvedev’s warning indicates trouble with the government, its share value will fall.

• Possible merger plan for the three Moscow-area airports has been developed by Troika Dialogue for a Putin-led government commission.

• Under one variant, Kamenshchik and Kogan would hold the largest number of shares, but the state would own the golden share.
• Kamenshchik and Kogan reportedly resisted this idea.
• Criticism following the airport tragedy could pressure them to agree to it, and could lower the value of their stake in the combined airport.

Sobyanin is now the federal mayor rather than Moscow’s mayor

• Sobyanin is now the federal mayor rather than Moscow’s mayor

• Moscow’s problems are now increasingly federal programs

• Although destabilizing unrest in the city is unlikley, it remains a possibility.

• If Sobyanin is judge successful, he could become a national figure (replacing Medevedev?)

Former mayor is exploring his options

• Former mayor is exploring his options

• Says he wants to stay in Russia

• But has also explored his options in Latvia and the UK