Putin''s People

How do networks born in a secret police bureaucracy come to rule a country and project power worldwide? This book argues that modern Russia is the product of a long fusion between the Soviet intelligence apparatus and post-Soviet capitalism. Vladimir Putin's ascent—from mid-level KGB officer in Dresden to President—is not a personal odyssey so much as the visible culmination of a system engineered by the siloviki: the men of the security services who preserved the KGB’s networks, financing, and clandestine habits through the regime changes of the 1990s.

You start with the late Soviet period, where “friendly firms,” covert trade and the Communist Party’s invisible economy quietly stocked hard currency abroad. These parallel channels—Seabeco, Nordex, FIMACO—let the USSR finance influence even after collapse. When the Party disintegrated, the operators behind these structures, often foreign-intelligence veterans, converted them into private assets. In Dresden, Putin and colleagues linked with Stasi and KoKo smuggling firms under Operation Luch, learning techniques for clandestine finance—front companies, “operative firms,” and black cash channels—skills that reappeared later in St. Petersburg's oil-for-food system.

Building the Post-Soviet Power Base

Back in the decaying Soviet north, Putin’s office in Sobchak’s city administration became an incubator for the new hybrid power network. The St. Petersburg model blended bureaucratic control, organized crime (the Tambov group), and financial intermediaries (Bank Rossiya). Business figures such as Ilya Traber, Yury Kovalchuk, and Gennady Timchenko served as early conduits for money and muscle. The Ozero dacha cooperative gave these men a social and economic fortress—trust-based membership among future ministers and executives. What you see in miniature here is the prototype for how the state and criminal networks merge: capture of strategic assets, opaque ownership structures, and enforcement through loyalty or fear.

Translating Covert to Public Power

Putin’s rise to head of the FSB and then Prime Minister reflects a careful continuity of the old guard. The same siloviki—Patrushev, Sechin, Ivanov, Timchenko—move in unison to restore the apparatus of coercion. Their project culminates in what insiders call “Operation Successor”: the orchestration of kompromat and media control to remove legal and political threats (Skuratov, Primakov, Luzhkov) and secure Putin as the presidency’s safe candidate. In December 1999, the transition from Yeltsin’s family rule to siloviki dominance completes with one handshake—the Kremlin becomes a fortress run by intelligence men.

The State Within the State

Once in power, the siloviki rebuild the state in their own image. Institutions—courts, tax police, media regulators—become instruments of discipline. The Yukos case and Khodorkovsky’s arrest signal the end of independent wealth. Rosneft, Gazprombank, and Bank Rossiya absorb the economy’s commanding heights. Legal verdicts and auctions are “managed”—the term ruchnoye upravleniye, or manual control, defines the era. Property now exists by political permission.

Power Projection and Global Reach

The obschak—the black cash engine—funds loyalty and foreign leverage. Through Bank Rossiya, Gazfond, and offshore proxies like Sergei Roldugin, capital exits through mirror trades and shell companies, returning as influence in London, continental Europe, and even American politics. Soft-power arms—Orthodox foundations, conservative coalitions, cultural NGOs—wrap ideological camouflage around these financial flows. Abroad, hybrid war completes the toolkit: Crimea, Donbass, and cyber measures join economic and cultural operations to form a synchronized mode of empire.

Central Argument

The book’s core argument is that Russia’s resurgence is not spontaneous nor ideological—it is systemic, predicated on the rebirth of the KGB’s networks within capitalism. The siloviki converted black cash into governance, bureaucracy into coercion, and soft power into cover for ambition. Understanding this machinery means reading power itself as an enduring intelligence operation that survived regime change and adapted to the open world.

By following these threads—from Dresden to St. Petersburg to the Kremlin—you see how clandestine continuity shapes global politics. The system’s strength lies in its opacity; the reader’s strength lies in tracing its patterns. The ultimate insight: Russia’s reemergence is the story of a deep state reborn as a global actor, balancing black cash, ideology, and hybrid warfare in the style of its own secret heritage.

To understand how the siloviki built enduring power, you must first grasp the invisible economy that survived the collapse of the Soviet Union. In the late 1980s, the Communist Party engaged in systematic concealment of hard-currency resources abroad using trade ministries and 'friendly firms.' When the state fell, the money stayed hidden—but the hands that controlled it did not disappear.

Party Gold and Hidden Banks

Documents recovered after the 1991 coup reveal how Party treasurers like Nikolai Kruchina and Leonid Veselovsky transferred vast sums to Western accounts. Swiss and Liechtenstein entities became vaults for 'trusted custodians'—doverenniye litsa—often drawn from foreign-intelligence cadres. Banks such as Banco del Gottardo and Jersey’s FIMACO shielded reserves. Names like Seabeco and Nordex served as instruments to transform Soviet commodities into private Western holdings.

Operation Luch: Clandestine Continuity

Simultaneously, the KGB ran Operation Luch in Dresden—Putin’s station. The plan prepared for regime collapse by building front companies and securing 'black cash' abroad. Through Stasi cooperation with Kommerzielle Koordinierung (KoKo), embargoed technology and state money traveled through firms like Robotron and Schlaff’s networks, with funds stored in Liechtenstein and Switzerland. The KGB learned to preserve influence via economic instruments rather than ideological doctrine.

How These Mechanisms Persisted

Putin and colleagues imported Luch’s methods into St. Petersburg in the 1990s. The barter-based oil-for-food schemes and shadow banks were modernized versions of Cold War covert finance. (Note: scholars such as Catherine Belton call this the 'economic DNA of the KGB'—bridging the Soviet underground with open-market capitalism.) Friendly firms reappeared as city-linked exporters; black cash became a stabilizing fund for both political loyalty and personal profit.

The Lesson

Operation Luch shows that when a system collapses, networks survive. The operators learned to use Western finance as a hiding place rather than an opponent. You see the roots of later schemes—the Panama Papers, mirror trades, and offshore holdings—inside this blueprint of pragmatic espionage.

In short, the invisible economy carried Soviet intelligence through the end of communism into capitalism. For you, following those financial seams explains how power today still rests on private networks birthed from secret accounts and clandestine trade routes decades ago.

When the Soviet state disintegrated, St. Petersburg became the prototype of the new Russian order. Under Deputy Mayor Vladimir Putin, the city’s foreign-relations committee turned crisis into opportunity—creating barter deals and port monopolies that blended bureaucratic power, organized crime, and covert finance. This environment forged the methods that later scaled to national domination.

Oil-for-Food Barter and Early Slush Funds

Facing food shortages, Putin’s office arranged swaps of oil and metals for imported food. Critics like Marina Salye found irregularities: phantom imports, inflated commissions, obscure intermediaries. Felipe Turover, a KGB-linked banker, explained that the deals were designed to create funding pools—operative instruments for future operations. These schemes replicated the KGB’s Luch-era trade routes, now under civic cover.

Ports, Tambov and Enforced Control

The city’s port privatization brought in muscle. Ilya Traber’s partnership with the Tambov gang secured control of terminals and fuel monopolies, blending business with coercion. Violence and raids marked ownership shifts, while foreign foundations masked shares. The outcome was a working model of the obschak—a cash engine combining legal and illegal flows under loyal oversight.

Bank Rossiya and Ozero

Bank Rossiya, taken over by KGB-connected scientists like Yury Kovalchuk, became the financial hub of this ecosystem. It fused the economic elite with Putin’s personal circle, later evolving into the central node of national financial power. Alongside it, the Ozero cooperative, a lakeside community of insiders (Yakunin, Kovalchuk, Timchenko), created the trust bonds underpinning the siloviki economy.

Core Pattern

St. Petersburg illustrates how the fusion of state, crime and commerce normalized informal power. Capture a chokepoint, redirect flows through loyal banks, offer protection and access, and condense oversight around a small trusted group. That template later repeated in Moscow, Gazprom, and Rosneft.

What began as survival tactics amid chaos became a governance model. Once the siloviki ascended to the Kremlin, they replicated the St. Petersburg system nationwide: monopoly control fused with security supervision, ensuring that loyalty—not legality—defined ownership.

Transition from Yeltsin to Putin was not accidental or merely generational. It was an engineered operation designed to protect the ruling family and institutionalize siloviki dominance. The Mabetex and Skuratov scandals reveal the mechanics of this transfer—how kompromat, legal pressure and manipulative media were used to resolve succession.

The Mabetex Affair

Swiss authorities uncovered evidence that Kremlin officials took kickbacks for renovation contracts via Behdjet Pacolli’s Mabetex. Witness Felipe Turover traced links to Yeltsin’s family. As prosecutors in Moscow probed deeper, the regime responded with deflection and silence, activating security channels to suppress inquiry.

Kompromat: Weaponised Scandal

The book details how Sergei Pugachev and associates circulated videotapes compromising Prosecutor General Yury Skuratov. The manipulated scandal neutralized investigations threatening the presidency. Within weeks, Skuratov was suspended, closing the window for a legal reckoning. It demonstrated that Moscow’s elite did not fear transparency—they controlled it.

Primakov and Luzhkov: The Blocked Alternative

The rival coalition of Yevgeny Primakov and Yury Luzhkov offered a potential reformist counterweight. The Family’s response was strategic: install a loyal security official—Putin—as successor (Plan B). With Yumashev’s assistance and kompromat distribution, the transition became self-preservation for the inner circle.

Insight

Operation Successor shows how intelligence culture converted into statecraft: leverage secrets, destroy opponents legally and morally, and install controlled leadership. What began as crisis management evolved into permanent technique.

Integrated into this handover was the consolidation of the coercive toolkit that later defined Putinism: kompromat, legal raids, media control and discipline through fear. The operation proved that post-Soviet political transition could be choreographed entirely through the art of surveillance and scandal.

The Yukos saga reveals how the Kremlin redefined property rights as instruments of obedience. Mikhail Khodorkovsky’s oil giant represented transparency and independence; its destruction exemplified the 'manual regime'—personalized control over courts, prosecutors and corporate takeovers.

From Rivalry to Arrest

After Khodorkovsky publicly challenged state corruption in 2003, tax raids and legal cases multiplied. His October 25 arrest marked a symbolic turning point—every major executive recognized the cost of defiance. Prosecutors flooded Yukos with retroactive tax bills exceeding $20 billion, forcing bankrupt auction sales. Baikal Finance Group appeared as a phantom bidder, transferring Yuganskneftegaz to Rosneft under Igor Sechin’s oversight.

Courts as Instruments

The eleven-month trial illustrated the regime’s new apparatus. Judges were secluded and supervised; verdicts were dictated from above. Putin’s comment—'this was a matter of state'—exposed the guiding principle of selective justice. Olga Yegorova’s Moscow City Court managed appeals under pressure, ensuring immediate sentences.

Consequences and Lessons

Business leaders learned ownership in Russia was conditional. Prosecutors, police and courts became rent-seeking powers in their own right, extracting wealth and enforcing loyalty. The siloviki’s grip extended to contracts, banks and media—forming a vertically integrated system where economic activity served political ends.

The Takeaway

The Yukos affair institutionalized fear. Law became flexible; punishment became political. It marked Russia’s leap from chaotic capitalism to controlled authoritarian capitalism—where compliance sustains survival.

For you, Yukos symbolizes the system’s DNA: justice as leverage, courts as switchboards, and oil as the medium of state re-domination. It demonstrates how governance can become a choreographed struggle for economic obedience.

After consolidating control, Putin’s network built a parallel budget—the obschak—that financed domestic patronage and global reach. This slush fund absorbed wealth from state contracts, Gazprom subsidiaries and pension funds, redistributing it through Bank Rossiya, Sogaz, and offshore fronts.

Constructing the Fund

The acquisition of Sogaz and Gazfond’s subsequent control of Gazprombank transferred billions into opaque management under Yury Kovalchuk. Sergei Kolesnikov’s whistleblowing exposed charitable donations from oligarchs routed offshore—Rollins International, Santal Trading—then re-emerging to finance elite projects like the Black Sea palace. These transactions created the Presidential obschak, merging state proceeds with personal patronage.

Offshore Architecture

Parallel schemes—the Panama Papers and Roldugin’s offshore entities—exposed how billions circulated among cultural fronts and nominee owners. Mirror trades via Deutsche Bank shifted funds abroad under legitimate covers. Shell networks in Moldova and Cyprus transformed stolen capital into sanitized investments, enabling influence operations through Western institutions.

Exporting Power through Money

Through Londongrad and property acquisitions, Russian elites converted illicit flows into prestige and immunity. From Chelsea to Mayfair, wealth bought stability, and Western finance normalized Kremlin-linked capital. Bank Rossiya’s reach financed both domestic propaganda and external influence—charities, parties, and media across Europe.

Underlying Truth

The obschak is not merely theft. It’s a system of financing authority, a hidden budget for loyalty and foreign operations that runs beneath the visible state. Money itself becomes an instrument of hybrid warfare and image management.

In following these monetary channels, you grasp how Russian influence transcends borders not through ideology but liquidity. The obschak turns capital into weaponry—soft, slow, and devastatingly effective.

Once economic and institutional control was achieved, the Kremlin developed two outward instruments—soft power and hybrid warfare—to extend its reach, while internal tensions revealed cracks within its elite system. Ideology and coercion merged to sustain imperial ambition.

Orthodoxy and Ideological Framing

The revival of Orthodox values, financed by businessmen like Konstantin Malofeyev and Vladimir Yakunin, gave Moscow a moral narrative. Foundations such as the St. Vasily the Great and Russky Mir sponsored conservative causes, linking religion with nationalism. Across Europe, these networks supported far-right and traditionalist movements, influencing policy debates and weakening EU consensus.

Hybrid War and Global Reach

In Georgia (2008) and Ukraine (2014), Russia tested its modern toolkit—deniable troops, propaganda, cyberwarfare, and financial logistics. The strategy blended covert funding from the obschak with cultural justification from Orthodox narratives. Crimea’s annexation epitomized this blend of ideology and military ambiguity.

The West's Complicity and Londongrad

Western institutions—financial centers, law firms, property markets—accepted this wealth, enabling infiltration. Rosneft IPOs, football clubs and real estate acquisitions in London converted black cash into legitimacy. When sanctions finally arrived post-2014, the system absorbed shocks through domestic reserves and Chinese partnerships, revealing how economic autarky was prepared long before confrontation.

Internal Fractures

But within, power consolidation bred fragility. Whistleblowers like Alexander Shestun exposed systemic coercion. Elite arrests—Ulyukaev, Calvey, Magomedov—illustrated rivalry among siloviki factions. As resources shrank under sanctions, internal violence rose. Putin's constitutional maneuvers sought longevity amid declining legitimacy, making repression his main stability instrument.

Final Reflection

Hybrid power sustains empire abroad but erodes trust inside. The state’s stability depends on secrecy and fear—creating resilience that is brittle by design. The siloviki built continuity, but never safety.

In sum, this chapter closes the arc: a system born of clandestine finance graduates into global aggression but carries internal decay. Soft power and hybrid war showcase its ambition; black cash and paranoia reveal its limits.