Ulyukayev trial suggests elite discord in Russia

Ulyukayev trial suggests elite discord in Russia

A Moscow court has sentenced former Russian economy minister Alexei Ulyukayev to eight years in prison for bribery charges. This verdict is widely perceived as a win for Rosneft CEO Igor Sechin, who was the key figure in the case against Ulyukayev and is an important figure in Russia’s government. However, the growth of Sechin’s influence is already causing a backlash among Russian political and business elites, which is a concern for Kremlin.

In November 2016, Russian Economy Minister Alexei Ulyukayev became the first federal minister in history of modern Russia to be convicted of crime and receive a prison term after complaints by Igor Sechin, CEO of Rosneft, Russia’s state oil company. The minister allegedly demanded a $2 million bribe for approving Rosneft’s purchase of a majority stake in a regional oil company Bashneft. This offical complaint led the Federal Security Service (FSB) to stage a transfer of marked U.S. dollar bills to Ulyukayev, led directly to his arrest.

An uncomfortably public trial

The personal role of Rosneft’s CEO in the Ulyukayev trial became a strong signal of Sechin’s growing political weight. However, it was not met with universal acceptance in Russia. While the eventful public trial did not conclusively reveal major discord within the Russian establishment, it unambiguously hinted at its presence.

One telling sign was the amount of public attention to the details of Ulyukayev’s bribe demand that Igor Sechin clearly did not anticipate. While Sechin attempted to minimize his own participation in the investigation process, his name was regularly mentioned in media leaks, some of which were very personal and rather embarrassing to Rosneft boss. For instance, one report indicated that Sechin gave the staged bribe to Ulyukayev along with a basket of assorted sausages, while another witness provided an account of Sechin (probably jokingly) betting on oil wells in a game of pool with the minister on an earlier occasion. Despite being summoned as a key witness, Sechin also consistently excused himself from appearing in court which was just as consistently reported in Russian state-run media.

Meanwhile, many members of establishment openly expressed doubt about Sechin’s account of the bribe incident and argued that Ulyukayev does not deserve a real prison term. Most notably, Margarita Simonyan – the editor-in-chief of the government owned news network RT – called the ex-minister’s last word in court “powerful” and called on judges to consider “other types of punishment” for him.

Finally, President Vladimir Putin himself appeared to be somewhat reluctant to shift the spotlight away from Sechin. When asked to comment on his absences in court during the annual press conference last week, Putin replied that the public hype prompted him to look into the issue. The president was convinced that Sechin did not break the law by not attending the trial, but added that  “[h]e could have come to the court, what’s the big deal?” This small remark suggests that Kremlin is not completely satisfied with Sechin’s behavior.

Vladimir Putin and Alexei Ulyukayev

Russian President Vladimir Putin and Alexei Ulyukayev in 2013

Sechin too powerful to deal with

Still, Putin’s ostensibly neutral stance does not reassure Igor Sechin’s rivals. There is no sign that Rosneft CEO will refrain from using his special relationship with the security forces (so called siloviki) to help resolve his numerous other corporate disputes. The ongoing litigation process between Rosneft and the financial group AFK System, which already resulted in the latter defaulting on its debt, is only one example of Sechin’s propensity for conflict.

However, more power will not necessarily help Sechin. As Andrei Kolesnikov, senior fellow of Carnegie Moscow Center, explained to news website RBC, the outcome of Ulyukayev trial only  “increased the level of hatred” towards the Rosneft boss in the business community. While this sentiment is unlikely to translate into a full-scale boycott, the atmosphere of tension is likely to spread.

This is a worrying trend for Kremlin because there is a risk that this distaste for Sechin will spill over abroad. If foreign investors were wondering who to avoid antagonizing in the Russian establishment before the Ulyukayev trial, they now have a definitive answer. This is problematic because Igor Sechin is an important figure in many external partnerships under the current sanctions regime, and so at some point Kremlin will have to decide whether it can allow someone so central to be a source of uncertainty.

Good tsar, bad boyars

Still, any action to diffuse the tension among the elites is unlikely to happen before the presidential election in March 2018. Moreover, President Putin – who recently declared his intention to run for his fourth term – will only benefit from the harsh verdict on Ulyukayev. For the voters, the trial over ex-minister was a powerful signal that Kremlin is serious about combating corruption, even if that involved sacrificing someone from the ruling faction. From this perspective, Ulyukayev – whose liberal bent made him quite unpopular – was a relatively convenient figure to spare.

The case of Alexei Ulyukayev, therefore confirmed that the anti-corruption campaign in Russia will follow the traditional “good tsar, bad boyars” logic, at least for the time being. This implies that the occasional high-ranking “bad boyars” will be accused of graft and thrown under the bus. The overall level of corruption in the country, however, is unlikely to change.

Categories: Europe, Politics

About Author

Yaroslav Makarov

Yaroslav Makarov has worked as a political and economics reporter for two leading Russian news agencies and spent five years as a foreign correspondent in Japan. Yaroslav is a candidate for a master's in international affairs at University of California, San Diego, and is a fellow at the Laboratory on International Law and Regulation.