Weekly 28 March 2022

Chubais Out

Hello! This week the newsletter is about presidential adviser and 1990s reformer Anatoly Chubais who has left Russia in protest against the ‘special military operation’ in Ukraine — the most senior Russian official to publicly break with the regime. While a divisive figure for most Russians, Chubais played a key role in elevating Putin to the presidency, and has held senior government positions for over 30 years. His exit from Russia is a historic moment.

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Queueing for cash in Istanbul

The departure of climate envoy Chubais was first reported Wednesday by news agency Bloomberg, and later confirmed by President Vladimir Putin’s press secretary, Dmitry Peskov. Chubais himself has not actually said that he is abroad, but newspaper Kommersant published a photo taken Tuesday that showed the architect of Russia’s 1990s privatization program withdrawing cash from an ATM in Istanbul.

The Kremlin is obviously reluctant to discuss Chubais’ resignation. “To be honest, I don’t understand why we spend so much time on this. Every day someone leaves the [presidential] administration, every day someone new arrives,” Peskov told reporters Thursday.

Chubais decided to leave because of his unhappiness with the ‘special military operation’ in Ukraine, according to Bloomberg’s sources. But Peskov told journalists that nobody in the Kremlin knew anything about the former official’s thinking – and that’s quite plausible. Many members of the Russian elite have told The Bell that it’s pointless to discuss the ‘special operation’ with Putin, let alone express criticism of it (billionaire Mikhail Fridman even said that attempts to intervene with Putin were “suicide attempts”).

However, Chubais gave a clue about his feelings in a recent Facebook post dedicated to what would have been the 66th birthday of fellow reformer Yegor Gaidar. “In our arguments about the future of Russia, I didn’t always agree with him. But it seems that Gaidar understood the strategic risks better than me, and I was wrong.” The hint was clear: after Putin came to power, Chubais remained in government and, in the 2000s, backed the idea of Russia becoming a “liberal empire”. Gaidar, who died in 2009, was a critic of Putin’s regime, and warned of the dangers of trying to “rebuild the Russian empire”.

Why does it matter?

For the 22 years of Putin’s rule, Chubais was the figurehead of an influential group of so-called ‘systemic liberals’ — West-leaning, liberal economists and officials who worked closely with the regime. At the same time, Chubais was always seen as an important representative of Russia in the West, and his departure suggests serious negotiations with Europe and the U.S. are an unlikely prospect in the years to come.

Chubais received his economics PhD in 1983 and became a leading figure in a group of progressive economists who were discussing reforms of the Soviet system. In 1991, he was appointed to a government position along with Gaidar and other reformers. Chubais took responsibility for a key 1990s reform: the privatization of the Soviet economy. This is still an intensely controversial subject because Soviet industry was sold off for a dime to bankers who became fabulously wealthy. Chubais defended privatization to the last, saying that it led to the creation of private property. However, with Russia’s billionaires now crippled by Western sanctions and unable to influence the Kremlin, Chubais’ defense seems more and more flimsy.

For many businessmen and liberals, Chubais was the personification of the new, West-facing Russia. But he was widely hated by Russians who were impoverished in the 1990s, and the phrase “it’s all Chubais’ fault” has been a common saying ever since. The then-President Boris Yeltsin saw Chubais as an irreplaceable political and economic advisor — under Yeltsin, Chubais was, at various times, deputy prime minister, finance minister, and presidential chief of staff. Chubais helped rescue Yeltsin’s calamitous presidential election campaign in 1996 and repeatedly secured cash for Russia from the International Monetary Fund, earning a reputation as Russia’s leading interlocutor with the West.

As presidential chief of staff, Chubais made a decision that would have far-reaching consequences: in 1997, he invited a little-known bureaucrat from St. Petersburg to join his team. That man was Putin. When Yeltsin was choosing a successor in 1999, Chubais did not, in fact, back Putin — instead favoring then-prime minister Sergei Stepashin. But when Yeltsin finally named Putin as his successor, Chubais publicly supported him.

Chubais has held senior positions throughout the 22 years of Putin’s rule. Until 2008, he was in charge of reforming the electricity sector, then he took charge of Rusnano, a state-owned corporation that was created specially for him and designed to invest in technology development. Chubais returned to Putin’s staff in 2020, this time as presidential climate change envoy — a role that was, once again, created specially for him. At the time, experts noted that this position could offer many opportunities for informal discussions with the West (if he was granted such authority by Putin).

Chubais has always had influential opponents, especially among officials. Several criminal cases have been opened against him and his allies. While Chubais has not wielded serious political influence since the early 2000s, he remained untouchable, partly due to his role in facilitating Putin’s rise to the presidency and partly because he was always publicly loyal.

One of the talking points of last fall was a frank interview with Chubais’ wife, Avdotya Smirnova, in which she laid out the political philosophy of the so-called ‘systemic liberals’. In particular, she was critical of Sergei Kiryenko, once considered a ‘systemic liberal’ who currently manages domestic politics for the Kremlin. “He sacrificed his liberal reputation to do what he sees fit. He doesn’t bend, he maneuvers,” she said.

Will others follow Chubais?

The two other pillars of ‘systemic liberalism’ in Russia are widely considered to be former finance minister Alexei Kudrin (the current head of the Audit Chamber), and Central Bank chief Elvira Nabiullina. Both currently remain in position.

Nabiullina’s long-term future has been under discussion since the first days of the ‘special military operation. As one Central Bank source put it to Bloomberg, the fighting and Western sanctions “undid a lot of what Nabiullina managed to achieve in her nine years in office.”

Nabiullina recorded an ambiguous video statement to her colleagues early this month from which it was difficult to draw conclusions. “We all wish that this had not happened. But we did everything to ensure that our financial system and Central Bank could cope with any shock. And now we can do it. Let’s not get bogged down in political disputes at home, at work or on social media: it just wastes the energy we need to do our jobs,” she said.

At the same time, there have been rumors that Nabiullina might resign and that her deputy, Vladimir Chistyukhin, would take her place. Chistyukhin is an unremarkable official who has worked at the bank since 1995. But these rumors were squashed when Putin endorsed Nabiullina for another five-year stint at the Central Bank earlier this month.

Nabiullina wanted to quit but Putin would not permit her to leave, Bloomberg reported Wednesday, citing several sources at the Central Bank. The day before, a source told The Bell a slightly different story: even before the ‘special military operation’, Nabiullina wanted to leave her post and was even looking for a new job at an international financial institution. However, events in Ukraine made her departure impossible.

Even less is known about Kudrin. One of Putin’s closest associates, Kudrin left government in 2012 to found a liberal think tank and support one of Russia’s leading universities, the European University in St. Petersburg. In 2018, he returned to government, taking charge of the apolitical but potentially influential Audit Chamber. However, Kudrin’s biggest asset — his access to Putin — was never dependent on his official role. It is not known whether he attempted to discourage Putin from radical steps in Ukraine.

Since the start of the crisis, Kudrin has made just one public statement — and it was even more cautious than Chubais or Nabiullina. Earlier this month, he posted on Telegram: “In the past week, the world in which we live has changed dramatically. These changes are likely to be with us for a long time. This poses new challenges… I emphasize that the Accounts Chamber is a non-political state body. This means that, regardless of personal ideological preferences, professionalism and auditing ethics come first and foremost … The word ‘audit’ comes from the Latin verb ‘to listen’. By definition, an auditor is one who listens first.”

Why the world should care

While Chubais exercised little real power, his departure is deeply symbolic. His colleagues in government, the so-called ‘systemic liberals’, have been treading an increasingly narrow path in recent years amid growing repression and state capitalism. Whether or not there are more defections, their days as a political force in modern Russia are ending.