WSJ on the Russian Oligarchy’s Survival

The Wall Street Journal this morning profiles an aluminum tycoon on what he reveals about the Russian oligarchy’s symbiotic relationship with Vladimir Putin during the credit crisis. It’s a well-done story that’s reminiscent of WSJ page-one stories of yore.

For instance, this is really good detail:

Mr. Putin made a “surprise” visit in early June. TV coverage showed Mr. Deripaska looking like a penitent schoolboy as the prime minister ordered him to sign a contract restarting the plant, and then demanded the oligarch return his pen.

Insisting the plants be reopened, Mr. Putin told him and the other tycoons, “If you can’t agree among yourselves, then we’ll do it without you.” Press commentators started talking of the looming end of Mr. Deripaska’s career.

What TV didn’t show was that even as Mr. Deripaska played the scapegoat in Mr. Putin’s populist set piece, the tycoon was being well-rewarded. That same week, the Kremlin agreed in principle to extend its $4.5 billion loan for a year. And soon, authorities approved $600 million in subsidies to help GAZ restructure.

Nicely done.

It struck me reading this paragraph that we may have more in common with the Russians than we’d like to admit:

The waves of bankruptcies and nationalizations many here expected were judged too destabilizing to risk, according to government advisers. Keeping loyal oligarchs afloat has checked the political impact of the financial crisis by limiting layoffs. The tycoons, in turn, have obliged by sometimes playing the role of whipping boy on state television. Mr. Putin “needs there to be a multiplicity of oligarchs for him to keep power,” said one person close to Rusal.

Sounds about right except for the whole “limiting layoffs” part. But I kid (mostly): the Russians are much more ham-fisted about the whole thing. Emphasis is mine:

Swamped with debt, Oleg Deripaska seemed the most likely of Russia’s tycoons to fall victim to the financial crisis a year ago. Today he is on his way to preserving most of his sprawling empire, thanks to bailouts from the Kremlin and breaks from foreign lenders.

A month ago, Mr. Deripaska closed a deal to delay repayment of $7.4 billion in foreign loans. This week, he kicks off marketing for an initial public offering of UC Rusal, the aluminum giant that is the core of his holdings.

One key party has already committed to buying shares: a state bank whose chairman is Vladimir Putin.

It’s also the right move that the Journal just dispenses with the whole show that President Dmitry Medvedev has any real clout.

The piece is better on how Putin is helping the oligarchs than on how the oligarchs are helping him. For instance, t writes this on the symbiotic relationship:

It also helps explain how the oil-fired Putin regime has survived a financial and economic crisis that once appeared to threaten its foundation.

It seems to this non-Kreminologist that what once threatened its foundation was the price of oil cratering into the thirty-five-dollar-a-barrel range and that its renewed fortunes have been bolstered more by its return to the eighties.

But this is a worthy story.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.