Wednesday, October 28, 2015

‘A War between Russia’s Regional Elites and Moscow has Begun’

Paul Goble

            Staunton, October 28 – The battle over Transaero is “only an occasion and indicator of what is taking place: a war between regional elites and the center,” Andrey Shepilov says. And on is outcome rather than on what is happening in Ukraine and Syria hinges the survival of the Russian Federation in its current borders.

            The line of this “front,” the Russian analyst says, runs not through other countries but along the Urals, and it is becoming ever more threatening given that the Kremlin is running out of resources and the regional elites have concluded that they must act because for them it is a “now or never” situation (

            This war which could end with the disintegration of the Russian Federation isn’t receiving the kind of media attention that the fighting in Ukraine and Syria has, but, Shepilov argues, “the resources which are being used in this battle exceed those of Syria and the Donbas taken together.”

            Still more ominous, he suggests, is that “all the resources have been thrown into battle by the Kremlin and it most likely doesn’t have any reserves left.”

            All this can be seen if one carefully follows the Transaero case.  “The first news [about it] was strange: the government of Russian suddenly decided that those who owned shares in the private aviation company Transaero must sell them to the state aviation company Aeroflot for … one ruble.”

            This is totally without precedent or legal justification: “Even under the autocracy, the tsar couldn’t order his subject to sell his property for nothing however much he might want to.”

            Then, the general director of Transaero was removed and a representative of Aeroflot appointed, with the management of the first being subordinate to the management of the latter. “This might be called a raider seizure but [under those] the raiders formally imitate the laws governing their actions.”

            The next step in this drama came when the Aeroflot representative now in charge of Transaero didn’t try to save the company but rather to drive it into bankruptcy, even though Transaero was meeting all its debt obligations – at least until the change of control. But then the new managers ordered the company not to pay and thus set the stage for bankruptcy.

            Following that, Transaero began to cancel flights. Aeroflot agreed to carry the passengers but at a far higher price that was then charged to Transaero than the original tickets cost. That only exacerbated the situation at Transaero which then cancelled more flights for which Aeroflot then received more money.

            The Kremlin apparently expected that everyone involved would simply go along convinced that they had no choice. But that didn’t happen: Transaero’s employees filed suit and also launched a petition drive on In the very first days, that collected “more than 120,000 signatures.”

                “And then happened what should have happened.” Those who held Transaero shares refused to sell them to Aeroflot. That eliminated whatever cloak of normal order had been cast over this and showed that Moscow wanted to destroy Transaero and would not be constrained by law or anything else, Shepilov says.

            The government then declared Transaero bankrupt, something it does not have the legal power to do: Even in Russia, “only a court” can take that step.  And that showed just how far the Kremlin was prepared to cross a line that it had not crossed earlier as in the case of the destruction of Yukos where the formalities were observed even if rights were not.
            This was a clear signal to business and the elites: “’You are nothing … you are our property to do with as we like. Neither law nor society will defend you. From now on, only one law will operate in the country: the whims of the first persons of the state.’” The elites herd and realized that if they did not act now, they might never have another chance.
            Others are pointing to the threats to the territorial integrity of the Russian Federation that the collapse in oil prices and the ruble and the rapid drawing down of the reserve fund pose. Konstantin Borovoy among others says that Russia “will not be preserved in its current borders” (
            The reasons for that conclusion are two-fold. On the one hand, the Kremlin’s retrenchment is hitting the regions furthest from Russia the hardest, with those east of the Urals and Kaliningrad especially hurt by Moscow’s actions. (For a map of how the breakup may occur, see
            And on the other, regional elites recognize that as the economic situation worsens, Moscow will only cut back further leaving them at an ever greater disadvantage. If they don’t act now, as Shepilov says, they may never again have as many resources as they do at present to defend not only their regions but even their personal power.

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