The Polish Institute of International Affairs (PISM) is one of the most influential government affiliated research institutes worldwide. It promotes the flow of ideas that inform and enhance the foreign policy of Poland. PISM provides independent analysis and advice to all branches of government, contributes to KREMLIN KIDS: wider debates on international relations and houses one of the best specialist libraries in Central Europe. THE SECOND GENERATION POLSKI INSTYTUT SPRAW MIĘDZYNARODOWYCH THE POLISH INSTITUTE OF INTERNATIONAL AFFAIRS UL. WARECKA 1A, 00-950 WARSZAWA OF THE RUSSIAN ELITE TEL. (+48) 22 556 80 00 ISBN 978-83-66091-29-0 (PB) [email protected], WWW.PISM.PL ISBN 978-83-66091-30-6 (PDF) Bartosz Bieliszczuk | Agnieszka Legucka THE POLISH INSTITUTE OF INTERNATIONAL AFFAIRS Kremlin Kids: The Second Generation of the Russian Elite Authors: Bartosz Bieliszczuk Agnieszka Legucka Warsaw, November 2019 © Polski Instytut Spraw Międzynarodowych, 2019 Copy editor Brien Barnett Technical editor and cover designer Dorota Dołęgowska Graphics Jakub Pieńkowski 978-83-66091-29-0 (pb) 978-83-66091-30-6 (e-book) Polski Instytut Spraw Międzynarodowych ul. Warecka 1a, 00-950 Warszawa phone (+48) 22 556 80 00, fax (+48) 22 556 80 99 [email protected], www.pism.pl CONTENT Who are the “Kremlin Kids”. 5 Executive Summary . 7 Introduction. 9 Evolution of the Russian Power Elite. .11 The Second Generation’s Importance in the Russian Power Structure. 17 The Foreign Position of the Second-Generation Elite . 22 “Easternisation” of the West . .24 Conclusions. .32 Recommendations . 33 Index of persons. 34 Kremlin Kids: The Second Generation of the Russian Elite 5 WHO ARE THE “KREMLIN KIDS” “Kremlin kids” is a term describing the younger generation of the Russian elite’s close family and other relatives. Owing to their families’ influence, “Kremlin kids” enjoy a privileged position within Russia, running strategic state-owned companies, affording studies, acquiring property across the world and winning lucrative state contracts for their own companies. Not all children of the Russian elite are “Kremlin kids,” yet almost every member of the elite has a “Kremlin kid” in their family. Within Russia, the “Kremlin kids”—the elite’s most trustworthy associates—help their parents and families control strategic Russian companies (in oil, gas, energy, banking, etc.). Those who run their own businesses can count on a substantial flow of money from the state budget (less often, they personally work in the government). Such influence and experience make the “Kremlin kids” the most likely successors of the current ruling Russian elite. By holding such top positions, the “Kremlin kids” help achieve Russia’s foreign-policy goals because state-owned companies are often used by Russia as political tools. Even “Kremlin kids” who do not sit on the boards of state-owned enterprises promote Russian policy abroad, for example, in illegally annexed Crimea. More than that, though, the Russian elite avoid Western sanctions by passing their assets to their trusted family members. Therefore, the importance of the “Kremlin kids” grows also on the international level. The “Kremlin kids” should be perceived as a potential line of Russian penetration of the West. They are in positions to corrupt U.S. and EU officials with their illegally earned money and, therefore, to weaken the West’s ability to respond to Russia’s aggressive actions. Kremlin Kids: The Second Generation of the Russian Elite 7 EXECUTIVE SUMMARY 1. The second generation of Russia’s power elite, the so-called “Kremlin kids,” plays an important role in the system of politics and business inside and outside the country. Its members petrify that system’s pathological aspects—nepotism, corruption and money laundering—and they are likely to turn themselves into the power elite of the Russian Federation’s future. As for now, they are entrenched in key industries (energy, banking, investments), thus propping up their parents’ position in the Russian state system. 2. The privileged position held by the children and relatives of the Russian elite adds to arguments about the kleptocratic and clannish nature of Russian governance. It also mirrors a picture of social inequality, absence of the rule of law, and disrespect for ownership rights, where rich, well-connected Russians are equally at home with state and private property. 3. While not every relative of Russian top-elite follows a business or political path, almost every member of the top-elite has a descendant placed in a strategic entity. The top family clans include those led by the brothers Arkadiy and Boris Rotenberg, Sergey Chemezov, Yuriy Kovalchuk, Igor Sechin, Nikolay Patrushev, Yuriy Chayka, and Gennadiy Timchenko. Given their weight, it seems unlikely that the Russian power structure could be recast in step with a generational change of guard. Children and relatives act as proxies for their parents to strengthen their position in the system. 4. It’s been a mistake on the part of the U.S. and EU countries to believe that western values and principles (rule of law, transparency, etc.) can be transplanted to Russia just because the West is attractive to the younger elite generation of Russians. Education at western universities and personal business links, the argument ran, would bring about the westernisation of the Russian state system, or at least would predispose young people favourably towards the West. But the second generation of the power elite only very rarely embrace these values and they appear even less interested in transforming the system. Rich, influential Russians send their children to private schools and universities to give them a head start in life and as a hedge against situations in which they would be abruptly forced to stay outside Russia (e.g., if their parents lose power and influence). At the same time, though, members of the power elite are wary of admitting their children’s links to western educational systems because that would not square with their official anti-western line. 5. By ceding their assets to family members, Russian oligarchs have managed to evade some of the western restrictions imposed on Russian companies and properties. They are thus able to keep their possessions in western countries without having to revise the anti-western course of the Russian Federation’s foreign policy. But in a qualitatively new development—which the EU would do well to emulate—recent U.S. sanctions have begun to cover some of the “Kremlin kids” as well. Rich Russians benefit from certain forms of special treatment in European countries, such as the “golden visa” programmes (offering permanent residency and, sometimes, citizenship to foreign investors). This helps them to find a safe place for families and also to ensure that they can keep their income and assets (real property) outside the control of Russian authorities and courts, thus benefitting from the observance of the rule of law in western countries. The money invested abroad provides a safeguard against possible future risks, and children—familiar with foreign languages and social environments—can rest assured that they can cope outside the home country. 8 The Polish Institute of International Affairs 6. Russian investments involving money from questionable sources exert an adverse impact on the democratic systems and rule of law in the West. These investments are big enough to indirectly influence the decision-making processes by western leaders, who have for years been turning a blind eye to the provenance of the Russian capital they wanted to draw to their respective countries. Kremlin Kids: The Second Generation of the Russian Elite 9 INTRODUCTION One of today’s most affluent and influential Russians, Gennadiy Timchenko, told the Russian news agency TASS that “one should not leave too much to children, who should be brought up, provided with a good education and then asked to go it on their own.”1 In practice, though, none of the Russian oligarchs or key politicians has followed this advice. Following the break-up of the USSR, a new generation has emerged of Russia’s power elite, their children, often in their 30s and 40s. Russian leaders are – in general - reluctant to discuss the professional activity of their relatives because these family connections attest to the many corrupt features of the Russian system of politics and business and reveal social inequality, the unfair distribution of national income, and disrespect for law in Russia.2 The present report is an attempt to size up the “Kremlin kids”—this new generation of influential Russians—and lay out what role they play in Russia and abroad. The “Kremlin kids” appellation denotes the descendants of the present elite, those young people who are active in the country’s economy or politics, who carry weight for their parents’ position in the power system of the Russian Federation (as a result, strengthening its pathologies). They use their parent’s position as an advantage but also they work as a proxy for them in and/ or outside Russia. Their activities have a direct or indirect influence on the internal and external Russian politics. Among “Kremlin kids” are President Vladimir Putin’s daughters (Katerina and Maria) along with their husbands (Kirill Shamalov3 and Jorrit Faasen), the president’s cousin Igor Putin and his son Roman, and Mikhail Shelomov (son of Putin’s cousin Lyubov Shelomova).4 The group also includes the sons of influential state figures, such as Rosneft CEO Igor Sechin (son Ivan), Bank Rossiya CEO Yuriy Kovalchuk (son Boris), the Russian Federation’s Security Council Secretary Nikolay Patrushev (sons Dmitriy and Andrey), Russia’s Prosecutor General Yuriy Chayka (sons Artyom and Igor) and long-serving Russian State Railways CEO Vladimir Yakunin (son Andrey), and the children of Russian oligarchs, namely Arkadiy Rotenberg (son Igor), his brother Boris Rotenberg (son Roman), Gennadiy Timchenko (daughter Kseniya), Nikolay Shamalov (sons Yuriy and Kirill), and Sergey Chemezov (son Stanislav).