Rebuilding the USSR, Retaking the Commanding Heights

The stuff of Putin's fondest dreams

With the 2014 Winter Olympic Games kicking off in Sochi, Russia, the world's attention has naturally focused on that country. The story of Boris Yeltsin handing over large swathes of Soviet-era industry to so-called "oligarchs" who purchased these interests at fire sales prices is well-known.  Pressured to privatize state-owned firms by the West, Russian authorities unloaded energy and raw material concerns quickly and irrationally.

In Russian President Vladimir Putin's second term beginning in 2012, earlier nostalgia for Soviet strength from Yeltsin's handpicked successor has turned into a redoubled effort to reconsolidate state control over the aforesaid industries. In particular, the efforts of Igor Sechin, one of Putin's leading operatives, is intriguing in terms of reconstructing the "commanding heights" of state-controlled industry in the 21st century:

When Igor Sechin was working as President Vladimir Putin’s deputy chief of staff a decade ago, visitors to his Kremlin office noticed an unusual collection on the bookshelves: row after row of bound volumes containing minutes of Communist Party congresses. The record stretched across the history of the party and its socialist predecessor -- from the first meeting in March 1898 to the last one in July 1990, a year and a half before the Soviet Union collapsed...

Sechin regularly perused the documents and took notes, says Dmitry Skarga, who at the time was chief executive officer of Russia’s largest shipping company, OAO Sovcomflot. “He was drinking from this fountain of sacred knowledge so that Russia could restore its superpower status and take its rightful place in the world,” Skarga says.

Sechin’s back-to-the-future fascination with his country’s communist past is something he shares with Putin, who, soon after coming to power in 1999, restored the music (though not the lyrics) of the Soviet-era national anthem and later described the collapse of the USSR as the greatest geopolitical catastrophe of the 20th century. 

Economic efficiency? Bah! Competition serving the consumer interest? Getouttahere! Enough Western nonsense; it's back to the "golden age" of Uncle Joe:

Sechin is the leading exponent of Putin’s stated determination to restore the state’s role in the Russian economy. Putin used Rosneft, through its acquisitions, to return Russian oil to state control. The company, 69.5 percent government owned, controls about 40 percent of Russia’s crude output. In a similar vein, Putin re-established majority state control of natural gas-exporting behemoth OAO Gazprom. The company had been privatized in the mid-1990s under his predecessor, Boris Yeltsin, cutting the government’s stake to 41 percent.

To develop high-technology industries such as armaments and pharmaceuticals, Putin created Rostec, a state corporation that encompasses 663 companies employing 900,000 people, or 1.2 percent of the entire Russian workforce. He expanded state-run banks OAO Sberbank and VTB Group, whose dominance in retail banking has edged out foreign rivals such as HSBC Holdings Plc and Barclays Plc.

Sechin declined requests to be interviewed or to answer written questions. In a telephone interview on Jan. 20, Putin spokesman Dmitry Peskov said of Sechin: “Sechin is a believer in the role of the state in his economic philosophy while at the same time not excluding a free-market approach. And he is firm in pursuing his viewpoint.”

Putin and Sechin see themselves as being in the, ahem, vanguard of rolling back admittedly rigged experiments in free market economics post-Soviet Union. While the West looks on with no small measure of dusgust and horror, you do have to wonder whether the era of oligarchs--coinciding with liberalization, deregulation, and privatization--did Russia any favors. By botching the former Soviet Union's transition to modern-day Russia, Westerners probably sowed the seeds of doubt which have reached their fullest expression in today's Putinism.

As the saying goes, you reap what you sow.

UPDATE: Dig the gulag-standard digs for Sochi visitors.