From A Mouse To A Tsar

Both Putin and Medvedev were raised in St. Petersburg, but the similarities in their upbringing end there. Putin grew up in a working-class suburb in a prefabricated apartment block without hot water. In his 2000 autobiography, "First Person," Putin recalls leading gangs of kids to chase and kill rats in the stairwells, and dreaming of being a KGB agent after watching Soviet spy films. Medvedev was born into a very different world. His mother, Yulia, taught Russian and literature at the Herzen State Pedagogical University. His father, Anatoly, was a physics professor at the Leningrad State Polytechnical Institute. The young Medvedev dreamed of becoming a lawyer, a highly lucrative position even then. He came of age just as communism was beginning to unravel, and his early adult life was spent in the intellectual excitement of glasnost in Leningrad, the Soviet Union's most liberal city. It was a time when students would pack auditoriums to listen to lectures on Stalinism by historians finally free to challenge Soviet orthodoxy, and queue to buy the latest recordings of poetry written by once-banned authors. Gorbachev's glasnost was a revolution of the young—and the young, intelligent Medvedev was very much a part of it. While still in school, he took jobs as a construction worker and a street cleaner, saving his money to buy blue jeans and foreign records. He saved for months to buy Pink Floyd's "The Wall."

By 1989 Medvedev had become enchanted with Western ideas about free markets and democracy. That year, Anatoly Sobchak, his old law professor at Leningrad State University, decided to stand for the Soviet Parliament, which was quickly becoming a testing ground for Gorbachev's experiment in democracy. Sobchak picked Medvedev as one of a small team of protégés to run his campaign. It was a risky move for the young Medvedev, because Sobchak's heretical ideas about introducing free markets and ending the Communist Party's monopoly on power pushed perestroika to its limits, and well beyond. But when one set of campaign leaflets was designated too politically racy by the KGB and confiscated by the Leningrad City Council, Medvedev was among a group of activists who stayed up to print another set on an old mimeograph machine. "Dima [Medvedev] told me afterwards that he felt like Lenin after printing [the Communist underground newspaper] Iskra all night," recalls Sobchak's widow, Lyudmila Narusova. "Despite all the risks for their future career, these young people helped their professor with his campaign." Medvedev's gamble paid off. Sobchak was elected to the Supreme Soviet by a landslide, and soon became mayor of St. Petersburg.

While Medvedev's career took off, the man who would one day become his chief benefactor, Putin, toiled in relative obscurity as a mid-level KGB man in Dresden, East Germany, watching the inexorable collapse of communism. In 1990 he was laid off by the KGB, and given a sinecure as vice rector of Leningrad University. Soon after he was hired by Sobchak to "bridge the gap between the former dissidents who were now in office and their old persecutors [in the KGB]," according to a former senior Kremlin aide. Putin became particularly adept at selling off the city's property to all comers. Medvedev was his loyal executor, handling the nitty-gritty of the contract work behind the deals. But the line between bureaucrats and businessmen quickly blurred as former Party functionaries sold off chunks of state property. In the judicial vacuum of post-Soviet Leningrad, it was hard to say if these deals were legal. Sobchak was an academic lawyer who also happened to run the city, so "legal was more or less what Sobchak and his advisers said it was," says one St. Petersburg businessman who had dealings with the city council at the time.

Indeed the transition to democracy and the free market was proving to be rougher than any of the idealistic glasnost-era reformers had expected. Medvedev found that the Russian versions of both democracy and the free market were deeply imperfect. By 1994, in addition to advising Putin on legal affairs, he began working as a lawyer for Ilim Pulp, a Russian-Swedish paper processing company of which he was a part owner. He defended the company against a hostile takeover by recruiting former KGB and military intelligence officers to the cause, and roping in old classmates who were in government. It was a perfect lesson in capitalism, Russian style: property rights can only be defended by having friends in the government. During the same period, Medvedev taught civil law at Leningrad State University, and in academic papers argued for what law professor Yury Tolstoy describes as "a golden mean" between privatization and nationalization. "On one hand the owner does not forget to pay his dues to the State," recalls Tolstoy of Medvedev's ideas. "On the other hand the State has to provide the owner with security."

For his part, Putin's work in St. Petersburg led him to a position at the Kremlin's property-management department helping manage the Kremlin's property portfolio and private business interests—originally the wealth of the old Central Committee of the Soviet Communist Party. Putin become one of the few members of the tight-knit Yeltsin "family," party to the details of the Kremlin's murky, multimillion-dollar business empire. Under the patronage of key Yeltsin courtiers, Putin rose to become the director of the FSB, the successor agency to the KGB, and then, in 1999, to prime minister and heir apparent to the ailing Boris Yeltsin. Like Medvedev in his turn, Putin's chief qualification for the job was absolute loyalty to the outgoing president. Putin's people—many of them Leningrad Law grads—quickly became known as the St. Petersburg clan and were installed in the security services, Kremlin and government. Medvedev, as one of Putin's oldest and most trusted allies, landed the key post of deputy head of the presidential administration and head of Gazprom, the giant state gas company.

Over the next several years, Medvedev whipped the gas company into shape, and Putin turned it into one of the most potent arms of an aggressive new foreign policy. Medvedev eased out the old management and tightened the company's opaque and very leaky finances, regaining state control over various pieces of the company that the old regime had quietly sold off. Gazprom profits went from $670 million in 1998 to $25 billion in 2007, and the money flowed into the Kremlin's coffers. A resurgent power, both domestically and abroad, the company soon became a handy tool for pushing one of Putin's top priorities—to bring Russia's media under Kremlin control. Gazprom Media, a subsidiary of the company not directly controlled by Medvedev, gobbled up NTV television, one of Russia's most critical outlets. In 2006, Putin used Gazprom to punish former Soviet states like Ukraine and Georgia for defying Moscow's will. Gazprom jacked up its prices and when Ukraine couldn't pay, a brief gas cut-off reminded Kiev who was boss.