The arrest of one of Russia’s wealthiest tycoons, Ziyavudin Magomedov, and his brother Magomed, is one of the biggest scandals to hit Russia’s business community. Not only does this case provide another example of Russian power plays, used to secure political power and control over resource distribution, but it is also likely to affect the dynamics within one of Russia’s most lucrative sectors – infrastructure construction.
Oleg Deripaska and Viktor Vekselberg are the main victims of the new round of U.S. sanctions imposed last month. The two long-time commercial rivals and known Kremlin’s loyalists have found themselves in the same boat; relying on their ties to elite networks for the survival of their business empires. Shadow Governance Intel analyses what political and societal networks Deripaska and Vekselberg can look to, to stay afloat amid the new round of U.S. sanctions, explaining why their stories are important to monitor.
Last month Naftogaz celebrated a big victory in a lawsuit against Gazprom. However, its domestic battles have been far less victorious. One major stumbling point is the system of gas supplies dominated by oligarch Dmitry Firtash. Despite international pressure, and the obvious economic benefits of unbundling the system of gas supply and distribution, the government has been reluctant to challenge Firtash’s monopoly. Shadow Governance Intel analyses the standoff between Naftogaz and the Firtash-controlled regional gas suppliers, and explains why the government continues to resist change.
The scandal around Cambridge Analytica (more specifically, its dealings with LUKOIL) has demonstrated that it is not only state-owned companies that the Kremlin uses for political purposes. Large private companies in Russia face an interesting conundrum: although they need well-connected shareholders to ensure stability and compensate for institutional weakness, these very shareholders often present commercial, investment and reputational risks.
Despite the progress made by Ukraine towards the liberalisation of the gas market, its reform efforts have been marred by the political headwinds and interference of powerful elite networks. Overcoming this inertia will determine Ukraine’s future financial prosperity; however, the window of opportunity is closing. The break-up of Naftogaz is a very undesirable thing from the perspective of key stakeholders, in the sense that it would create significant competition in the marketplace – a market they have controlled both in terms of production and marketing.
China's recently published Arctic policy places great emphasis on the development of the Polar Silk Road, which will require further expansion of its cooperation with Russia. Shadow Governance looks beyond the geopolitical layer of the China-Russia partnership in the Arctic, and analyses its commercial implications and its impact on Russian elite dynamics.
In 2018, Putin is expected to be re-elected for his 4th presidential term. He will do so against the background of eroding institutions and underhand elite infighting. The transition of power in 2018 and the changes in the ruling elite will happen in the context of slowing economic growth and depleting financial reserves, weak institutions, negative foreign policy inertia, and a risk of social tensions.
Increased affiliation to the Russian Orthodox Church has proved to be a trend among Russia’s elite groups during Putin’s third presidential term. Both the church and elite groups benefit from their mutual allegiance. While power players finance Church operations, the Church provides ideological backing to the Kremlin and a positive public image for business elite.
VTB’s involvement in the Mozambique debt scandal attracted attention to the bank’s operations in Africa and other foreign countries. The bank is closely connected to Russia’s most powerful elite groups who frequently use it to solve politically-sensitive problems. VTB’s foreign activity should be closely monitored vis-à-vis the Kremlin’s attempts to use it to informally promote its foreign policy goals.
Russia’s banking sector is undergoing the largest reshuffle in decades. The result is that over 50% of banking assets are controlled by a handful of large state- and private-owned entities, through which informal networks leverage their influence. Details of the power dynamics and influence power players wield over Russia’s banks are provided in the Report Store.
Over the past few years, children of Russia’s elite groups have – with increasing frequency - been appointed to high-profile positions in state-owned corporations and ministries, or have taken over their parents’ business. Shadow Governance examines how blood relations, combined with strong societal networks, are used to exert influence and engage in resource distribution.
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Russia’s introduction of new tax breaks is yet another example of the Kremlin’s influence over the law-making process. The new fiscal amendment, approved by Parliament and signed by the President, is set to benefit sanctioned friends of the regime.
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