The Race for Kremlin Spoils

Dmitry Medvedev's inauguration as Russia's president on May 7 promises to be a glittering affair. If Vladimir Putin's 2004 swearing-in is anything to go by, it will feature trumpeters, Kremlin guards in 18th-century Hussar uniforms and an assembly of Russia's most powerful men. The guest of honor: Putin himself, the only leader in Russian history to voluntarily relinquish the throne at the height of his powers. Soon he will begin his new job as Russia's prime minister, as his protégé, Medvedev, becomes his boss—on paper, at least.

The careers of most of the men and women present at the Inauguration will depend on their ability to position themselves in the right place between these two men. Putin has declared the prime minister's new job to be the nation's top "executive" position, and virtually every top bureaucrat in the country owes their job to him. Yet Russia's 1993 Constitution grants the new president sweeping powers to rule by decree, as well as to hire and fire governments at will, and Medvedev last month promised a housecleaning. "Public office should not be a source of income," Medvedev said, sending a shudder through the national elite. "We are entering into a period of high volatility in the upper echelons of power," says Dmitri Trenin of Moscow's Carnegie Center.

Medvedev's task is tricky. The White House, the seat of Russia's Council of Ministers, will become an alternative center of power with Putin at the helm and will undermine Medvedev's authority. And Putin still has the clout to dominate whatever realm of domestic policy he chooses. He has described his future role as Russia's "chief executive," possibly sidelining Medvedev to deal with issues like foreign policy. Medvedev's power will also be limited by the entrenched interests of bureaucrats who head politically powerful clans. Kremlin deputy chief of staff Igor Sechin, for instance, not only heads the state-owned oil giant Rosneft but informally leads a hawkish clan of former security-service veterans known as the siloviki, alongside Federal Security Service head Nikolai Patrushev.

How Medvedev deals with these clans will be a key bellwether of his power. "Bureaucrats who use their positions to channel money will be punished with the full force of the law," he warned last month. "We're going to have to perform some serious surgery to cut some of our greediest comrades down to size."

Yet for at least the last year Sechin has demonstrated that his clan is a separate power, independent even from Putin, says Kirill Kabanov, head of Russia's anticorruption committee. Kabanov estimates that "businessmen in epaulettes" associated with security services and the Kremlin control, directly and indirectly, businesses worth $300 billion. "The main risk Russia faces right now is that the siloviki will do everything to hold on to their power, their businesses," he warns.

Easing such siloviki out of power will be a dangerous job, and could trigger a civil war inside the security services. "Medvedev and Putin are now thinking how to avoid the worst-case scenario" of a feud between clans battling for survival, says Kremlin-connected Duma deputy Sergei Markov. "It is very important for them to agree between themselves how to balance the power of the siloviki—who are to a large extent independent, and control all of Russia's biggest businesses." Stanislav Belkovsky, of Moscow's National Strategy Institute, predicts Medvedev won't take revenge on siloviki who backed his rival, former Defense minister Sergei Ivanov, in the behind-the-scenes tussle for the presidency last year. Instead, they will be quietly eased into cushy jobs in state corporations. But Medvedev will make changes at a lower level, says Belkovsky, if only to give some substance to the public promises of an anticorruption drive.

Now many apparatchiks are trying to squeeze as much money from their positions as they can, in anticipation of Medvedev's spring anti-corruption campaign. "Almost all of my clients have reported a spike in shakedowns from bureaucrats and the police," says one top Moscow-based banker, who didn't want to be quoted discussing his clients. "Every bureaucrat in Moscow is trying to boost their retirement plan." So if Medvedev wants to wield any real power, he will have to take on the culture of bureaucratic graft that Putin created—while at the same time protecting Putin's closest friends from prosecution. At Medvedev's Inauguration, many of the guests will be wondering which group they fall into.