New Russian National Guard created as Putin fears internal threats

WIthout any prior warning this week, President Vladimir Putin announced a massive overhaul of security, public order and law enforcement in Russia, creating a new domestic army - a new "National Guard". Additionally, Russia's entire police force is also being rebooted. These new developments require massive changes to existing legislation. Though Putin has stated that the National Guard’s main role will be to fight terrorists and organised crime, the force is too big and too heavily armed with new tanks and other heavy weapons for such a mission, say experts. The move is more likely because Putin believes the internal threat to his regime is rising rapidly; with the Russian economy in doldrums and mass poverty increasing, social unrest is very possible in the future. The sudden decision could also be a result of the publication of the "Panama Papers" revealing corrupt offshore financial schemes involving some of Putin's closest acquaintances, thereby exposing the Kremlin's hypocrisy, just as Russians are being told to tighten their belts; Putin says the leaking of the papers is an attempt to weaken Russia from the inside.

It’s been a big month for news about links between Kremlin insiders and the west.

First came the US announcement that Mikhail Lesin, architect of Russia Today, now RT, and former head of Gazprom Media, had died in Washington from blunt force injuries to the head.

Then came the Sunday Times’ revelation that Andrei Yakunin, son of anti-western ideologue and former Russian Railways head Vladimir, had access to another London mansion, far larger than the one we already knew about. While Vladimir Yakunin was instructing Russians to avoid contact with the west, his own son was reportedly taking British citizenship and his grandson was attending an elite British private school.

Finally, of course came the Panama Papers, with their revelations about the corporate structures controlled by Dmitry Peskov’s wife and, of course, the godfather of Vladimir Putin’s daughter, Sergei Roldugin.

While ordinary Russians were being instructed to tighten their belts in the ideological battle with the west, their rulers were employing Mossack Fonseca to infiltrate their money into enemy territory.

It is of course not a secret that Kremlin insiders run Russia for their own enrichment, but this barrage of revelations provides extraordinary levels of detail, and lays bare the nature of how Russia is governed in ways we have not seen before.

Unprecedented inequality is the effect of offshore bandits in action

In his final book Power And Prosperity, the American anthropologist Mancur Olson described “roving bandits” and “stationary bandits”. According to his theory, once upon a time, people simply stole from each other, and moved on. Then, some visionary realised there was more money to be made staying put and taxing people, thus creating the idea of government and, eventually, civilisation.

Stationary bandits become part of the communities they ruled. They enforced security, so as to maximise their earnings. That created the rule of law and, eventually, stopped them being bandits at all.

It is a neat and useful theory, but it falls down when confronted with the phenomenon of offshore finance. If bandits can take as much as they like, use tax havens to hide the origin of that money, then spend it somewhere else entirely, they are something new and unprecedented: “offshore bandits” perhaps.

Offshore bandits combine features from both of Olson’s categories – their money is “roving” while they themselves are “stationary” – without the side effects of either. They can continue taking money indefinitely, without feeling any need to improve the society they are living in. For a bandit, it’s the best of both worlds; but for a society, it’s the worst.

For a sign of what this means in practice, take a look at last year’s Credit Suisse Global Wealth report. According to the bank’s survey, in the 15 years of Putin’s tenure of Russia, the middle class (assessed as those owning $18,000-180,000, and making up 4.1% of the population) gained $137bn in assets.

That doesn’t seem too bad, until you notice that those above the middle class – just 0.5% of the population – gained an astonishing $687bn over the same period.

“The top decile of wealth-holders owns 87% of all household wealth in Russia. This is significantly higher than any other major economic power,” the report states.

Unprecedented inequality is the effect of offshore bandits in action. When people can enjoy all the benefits of power, without the responsibility that comes with it, it’s hardly surprising they take the opportunity to get really, really rich.

Of course, this also requires unprecedented degrees of hypocrisy, to obscure the realities of what is going on. That then leads to people like Lesin, who ran an anti-western propaganda machine while investing in Beverly Hills; or people like Yakunin, who cautioned against contact with the west for everyone but his own children.

It is customary at this point to state that there is nothing illegal in any of this. But offshore bandits are a very long way from the dictatorship of the law that Russia was promised a decade and a half ago. And pointing this out is not Putinophobia.

A version of this article first appeared on The Moscow Times