Strongman, The

tax-evasion. 7 Putin came to power vowing to sort things out, and appointed two St Petersburg cronies – Dmitry Medvedev and Alexei Miller – as new chairman of the board and CEO respectively. Miller knew next to nothing about the gas industry: according to Kasyanov, he spent his entire first year in the job learning. But that was only half the trouble. For the Gref team, the main problem was that Gazprom was a Soviet-era behemoth whose grip on the entire process of exploration, extraction, distribution and sales stifled competition. The oil industry, by contrast, had been broken up into a large number of competing companies in the 1990s.
    Vladimir Milov was the young deputy energy minister who was tasked with reforming the gas sector. The idea, Milov said in an interview, was to ‘break up the monopoly, separating distribution companies from production companies, turning them into smaller businesses, which were supposed to be privatised and compete with each other.’ 8 Putin supported similar plans for the de-monopolisation of the electricity industry, despite protests from his own adviser, Illarionov. But Gazprom was different.
    In the autumn of 2002 Milov drafted a plan for the reform of Gazprom. It won Gref’s approval, and Kasyanov’s. ‘It used to seem to a lot of people,’ says Kasyanov, ‘that splitting up the production and transport of gas could lead to the disintegration of the whole sector, which was such an important part of the country’s life-support system. They still try to frighten people, saying that without Gazprom in its existing form, the whole of Russia would collapse. That was just scare-mongering. In fact, all competent economists and industrialists knew that you could carry out a gas reform safely and painlessly. Everything was ready for that.’
    According to Milov, the plan was sent to Gazprom’s CEO, Alexei Miller, who at once raised it directly with Putin: ‘He wrote Putin a furious memo, saying it would be disastrous and we were threatening national security. Putin then wrote on the letter, “I basically agree with Mr Miller. Mr Kasyanov please take that into account.” ’
    Milov says he expected nothing else. ‘Putin had shown a very specific interest in Gazprom since his early days. It was quite clear that he thinks of this company as one of the ultimate attributes and sources of power.’
    Kasyanov tried to present the plan three times to his cabinet, but Putin insisted that it needed more work and the prime minister should discuss it further with Miller. ‘Listen to Miller, listen to him personally,’ he told Kasyanov. ‘Don’t listen to these people who’re egging you on.’
    Finally, in 2003, Putin simply ordered Kasyanov to drop the subject. ‘Literally five minutes before the start of the cabinet meeting he called me and told me to remove the item from the agenda.’ Gazprom, as we will see in later chapters, would become one of Putin’s most effective levers of power – in the media, economy and foreign policy.
    The good life
    Putin’s first term as president, largely thanks to the economic reform package, saw the first signs of growing foreign investor confidence. On the consumer side, giant multinationals, such as the French supermarket chain Auchan and the Swedish furniture outlet IKEA, pioneered huge retail parks in the Moscow suburbs. Each new IKEA store cost $50 million to open – but they hoped to recoup the investment quickly because, astonishingly, Muscovites seemed to have the cash to spend in them. The only thing that held back even greater investment was the vast amount of red tape and corruption that all entrepreneurs still faced in Russia – and few foreigners had the stamina or knowhow to overcome. (Chapter 12 will look at the crushing effect of corruption in Russia.) Still, IKEA’s huge blue and yellow furniture stores were like flags of modern life, fluttering all around the Moscow suburbs – and soon in other cities too.
    In terms of Russian psychology – to the extent that this can be gauged – the shock of the 1990s seemed to be wearing off. I had the feeling (totally subjective, I admit) that people felt less patronised by the West than they had in the Yeltsin era. The foreign advisers were gone, and much of the new growth had a home-grown feel to it. Supermarkets filled up with Russian produce – but not the substandard Russian produce that used to be sold, packaged in identical brown bags; now it came in shiny packaging to