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How 'Putin's Kleptocracy' Made His Friends Rich

ARUN RATH, HOST:

Karen Dawisha, professor of political science at Miami University in Oxford, Ohio, spent the last five years investigating how Russia's president, Vladimir Putin, came to control so much of that country's wealth. Her new book is "Putin's Kleptocracy: Who Owns Russia?" Karen Dawisha, welcome to the program.

KAREN DAWISHA: Thanks for having me.

RATH: So when you call Russia a kleptocracy, can you explain what you mean?

DAWISHA: Sure, so what I mean is that Putin has created a system where he nationalizes the risk and privatizes the reward. So when we think about the Sochi Olympics, for example, it's well-known that they cost about $50 billion and most of those contracts were awarded as no-bid contracts to people close to him. And billions were made by them. Another example would be the collaboration of Putin's closest circle in the establishment and funding of Bank Rossyia, a bank that has emerged as one of Russia's top 10 banks that receives a lot of government state budgeting, but it's a private bank. So here you have a case where the money to fund comes from the state and the profit goes to friends of the current president.

RATH: And the roots of Putin's rise, as you describe, they go all the way back to the last days of the Soviet Union. Can you talk about what was happening then with the KGB and with Putin?

DAWISHA: Right, so what happened was the KGB and conservatives in the Communist Party got quite worried that Gorbachev, who was a reformist, might install a multi-partied system, as had emerged in Eastern Europe. And that would mean that they wouldn't get access to state funds, so they decided preemptively just to take them. And then having done that and put the money - you know, buried the money deep, there was a coup attempt against Gorbachev, and he and Yeltsin banned the Communist Party. So the KGB suddenly knew the bank accounts for all of this money, but there was no oversight. So they just did what comes naturally.

RATH: And what you write about seems like it involves KGB - the former KGB - and Russian criminal activity. Is - are they all connected?

DAWISHA: Right, they are connected. What we might expect in a Western country is that the ruling authorities would suppress the mafia, but it doesn't happen, even in the United States. So there have been periods - even in the United States - where certain cities come under the influence more than others of mafia activity.

But in Russia, what happened was that the central state came under the influence - significant influence - of mafia activity. And sometimes some groups were favored who were willing to enforce contracts, run off-books operations and take money out of the country. And so, you know, money was flooding out of Russia, both mafia money and KGB money.

RATH: So it seemed like this process - in a way the status quo - was working very well for Vladimir Putin and his friends. But since what's happened in the Ukraine, Russia's actions in Ukraine, the sanctions that have been imposed on Russia, doesn't that complicate the status quo? How do you see what's happening - these latest aggressions - fitting in with Putin's overall economic strategy?

DAWISHA: I don't think that there's any way that he could have predicted that there there would be sanctions of the type that have been imposed. You know, it was a military exercise that he engaged in. He probably expected a military response. That hasn't happened, so when these sanctions came down, he was extremely surprised and has encouraged the people who've been sanctioned around him to take the case to court and to fight back in the legal arena. So we'll see if they do pursue that. I think they certainly will in Europe.

RATH: And speaking of court - before I let you go I need to ask you - this book - your book was originally going to be published by Cambridge University Press in Britain. And I understand they dropped it because they were concerned - I know Britain has different libel laws than we have here in the U.S.

DAWISHA: Right, so what happened in Britain is that their libel laws are such that only if it's proven in a British court as being true can you say that a charge is true. So the fact that, you know, I've written a very academic book with thousands of footnotes, fulfilling more than the necessary academic standards in Britain, the book could be challenged in court. And friends of Putin have shown themselves willing to defend the regime by taking on lots of people in British courts.

RATH: And not to put too fine a point on it, but these are the people with fairly deep pockets.

DAWISHA: Yeah, yeah. Infinitely deep pockets, one imagines (laughter).

RATH: Karen Dawisha's new book is "Putin's Kleptocracy: Who Owns Russia?" Karen, thank you.

DAWISHA: Yeah, my pleasure, Arun. Transcript provided by NPR, Copyright NPR.