Strongman, The

February 2004 Putin had lost his prime minister, Mikhail Kasyanov, who was sacked after a series of disagreements – the final straw being Putin’s decision to appoint his friend Igor Sechin to the chairmanship of the state oil giant Rosneft. Sechin was just one of Putin’s cronies (others included ex-KGB man Viktor Ivanov, ideology chief Vladislav Surkov and deputy chief of staff Dmitry Medvedev) who ended up running massive state companies, in addition to their administration jobs. Kasyanov saw this as proof that ‘Putin was drifting away from liberal approaches, towards a command economy’. 17 Out of government, Kasyanov went on to become a leading opposition figure, and one with much credibility, having worked side-by-side with Putin for three years – and having considered him initially a reformer.
    Next to go was Putin’s economics adviser, Andrei Illarionov – the man he had taken on despite his views on the futility and brutality of the Chechen campaign. Illarionov walked out in December 2005 after five years with Putin, delivering a devastating verdict on the country Russia had become. The country was no longer free and democratic, he said, but run by state corporations acting in their own interests. Until recently, he said, he could express his views freely, but now the political and economic system in Russia had changed, and he could no longer stay in post.
    In the year following the arrest of Mikhail Khodorkovsky, the siloviki moved to grab his assets for themselves, even before he was found guilty of anything. The sell-off of his oil company Yukos to the state was accomplished in a stunningly cynical way. Claiming that it was owed more than $27 billion by Yukos, the government arranged an auction on 19 December 2004 to sell off the company’s main production unit, Yuganskneftegaz, to cover the tax claim. The state gas monopoly Gazprom registered to participate in the auction through a new oil subsidiary, Gazprom Neft. So did a company called Baikal Finance Group, which had only been created on 6 December. Its registered office was at an address used by a vodka shop, a mobile phone operator and a travel agency in the city of Tver, north of Moscow. Who its owners were, no one knew. Nonetheless it secured a massive loan from the state-owned Sberbank in order to participate in the auction. On the day, Gazprom Neft declined to place a bid, leaving the obscure Baikal Finance Group to buy Russia’s largest oil company for $9.3 billion.
    Two days later, on a visit to Germany, Putin declared with a breathtaking pretence of innocence that the shareholders of Baikal Finance Group were ‘people who have been in the energy business for many years’, and that ‘as I have been informed, they intend to develop some sort of relationship with other energy companies in Russia, which are interested in this stock’. He didn’t know which companies they might be, of course, but ‘state companies have the same right as other players in the market’.
    At his annual press conference on 23 December, Putin couldn’t quite remember the name ‘Baikal Finance Group’ any more. That day it had been bought in its entirety by none other than Igor Sechin’s Rosneft. Sechin, it is thought, was the founder of the mysterious and short-lived Baikal Finance Group. ‘Today, the state, using absolutely legal, market mechanisms, is ensuring its interests,’ said Putin. ‘I consider this perfectly normal.’
    Meanwhile the trial continued of the man who had built Yukos into an oil giant in the first place. In May 2005 Mikhail Khodorkovsky was found guilty of fraud and sentenced to nine years in jail.
    The energy weapon
    Western governments – and Western investors – watched these events unfold with some trepidation. But there was worse to come. The repercussions of the Orange Revolution were far from over.
    The new Ukrainian president, Viktor Yushchenko, headed straight for Moscow on 24 January 2005, the day after his inauguration, and President Putin seemed to appreciate it. When the Ukrainian referred to Russia as a ‘permanent strategic partner’, Putin noted, with a hint of surprise, ‘What you just said about strategic partnership is a very good and very pleasant sign.’
    Nonetheless it was a meeting without smiles. Yushchenko felt misunderstood. He said in an interview: ‘My major concern was that all the steps we were taking, especially when it came to our democratic reforms, or the revival of our history,