The fourth part of our ‘Russia’s Human Resources’ series looks at the government and state-owned companies.

We have analysed the biographies of 31 members of the top brass of Russia’s federal government and 19 leaders of major state-owned companies (companies with a critical stake held by the government). As we are not able to analyse all state-owned companies, we limited ourselves only to the leaders of the largest state-owned companies. These people appear in the ‘Kremlin list’ of the U.S. Treasury Department as ‘Other high-ranking political leaders.’ We received all the information from media reports and public biographies of the officials concerned.

Interestingly, a quarter of federal officials received their first degree in applied sciences. 40% received a degree in either law or economics (finance). 10% hold military education. Another 10% have a degree in history (including international relations). The head of the Ministry of Health, Veronika Skvortsova, graduated from a medical university. The Minister of Agriculture, Dmitry Patrushev, who is the son of Nikolai Patrushev (Security Council), holds a diploma in management. The Minister of Industry and Trade graduated from the Social Sciences Department at the Moscow State University. The Minister of Education Vasilyeva holds a degree from a conducting and choral department. The Minister of Sports Kolobkov has a diploma in physical education. He once took part in the ‘Ice Age’ project with Anna Semenovich.

We used data on the officials’ first degrees for several reasons. Firstly, we believe that their education was most likely obtained full time. Many diplomas in public administration and law were usually obtained from distance learning programmes (as we showed earlier). Second, most of those sampled began their careers after their first degree. Their next diplomas came as part of ‘lifelong learning’.

Friends From Back in the Day

The government displays clear traces of personal ties with Dmitry Medvedev or Vladimir Putin. For instance, the chief of staff Chuichenko was a fellow student of Medvedev. The Minister of Emergency Situations accompanied Putin during his working trips in the 1990s. Minister of Justice Konovalov has known Medvedev since their university years. The head of the Ministry of Construction, Yakushev, was personally appointed by Putin as governor of the Tyumen region in 2010. Deputy Prime Minister of Russia Golikova is married to Viktor Khristenko, the former Minister of Industry and Trade and the Deputy Prime Minister. Anton Siluanov is probably the most technocratic minister: his parents, brother and himself have dealt with financial issues since the Soviet times.

Education in uniformed services was received by Deputy Chairman Borisov, as well as the head of the Ministry of Internal Affairs Kolokoltsev and the Minister for North Caucasus Affairs Chebotaryov. In the government, Yury Borisov handles the development of the defence industry, especially in the sphere of radio electronics, where he established a career in the late 1990s. Minister Chebotaryov is a kind of ‘governor-general’ of the Caucasus, where he served as an officer of the border troops.

Executives of state-owned companies generally hold diplomas in exact sciences as well as economics and finance (37% and 32%, respectively). A total of 21% hold a law degree. It is likely that Alexey Miller, who graduated from the Economic Department at the former State University of Economics and Finance in Leningrad and has known Putin since the 1990s, is the most professional leader of all state-owned corporations. In 2010, Harvard Business Review ranked Miller among the Top 3 most effective managers in the world. Pavel Livinsky, the General Director of Rossety, devoted his entire life to working with the power grids. The Chairman of the Board of Gazprombank worked at the Vneshtorgbank of the USSR since 1974. The Chairman of the Board of Tatneft has also been working in the oil sector since the 1970s. On the other hand, the president of Alrosa is the son of Sergey Ivanov and a graduate of the Economics Department of the Moscow State Institute of International Relations, is merely 38 years old.

The siloviki control almost a quarter of all major state-owned companies. The leaders of Rosneft, Rostech, Transneft and Bashneft had experience of serving in law enforcement agencies before joining civilian structures. The oil sector and military technology are the priorities when it comes to the control exercised by the Russian regime.

The federal government and state-owned companies have different personnel. The leaders of state-owned enterprises are technocrats for the most part. But government officials can be better characterised by their close ties with the president as well as a more traditional background in law and economics.

What Role Do These Figures Play?

According to the Constitution, the government ‘exercises executive power in Russia.’ In the event of a hypothetical disaster, Prime Minister Dmitry Medvedev will act as President. His top deputies and ministers will formally manage the main government bodies. Moreover, as Margarita Zavadskaya notes, Russian voters believe it is the government and the Duma that are responsible for the state of affairs in the country. President Putin is a symbolic figure in this reckoning, responsible for foreign policy. It seems logical to assume that the central government should be interested in being effective. Otherwise their career prospects would be in jeopardy.

However, this is not the case. Tatyana Stanovaya believes that the government is a lame horse in Putin’s Russia. The prime minister is guarding his chair in case of a crisis. Members of the government cannot take a single meaningful decision. According to Stanovaya, the government consists of faceless executors of decisions made at the top. One can partly agree with this opinion, especially remembering the criminal case of the former Minister of Economic Development Alexei Ulyukayev. He had spoken out against the deal between Rosneft and Bashneft.

This claim simplifies the wider picture too much. The state policy cannot exist without procedural and bureaucratic decisions that can either ‘bury’ even the most important presidential decision or enable its implementation. For example, there is still talk about how Roskomnadzor (reporting to the Ministry of Digital Development) has failed to block Telegram. Another example is the Unified State Examination. At first this exam attracted criticism. But then it became the standard after several crises like leaked answers a few days before the exam. In the end it brought serious positive results. Namely, the social mobility of school graduates; reduced corruption in the university admissions process; standardised assessment of graduates’ knowledge. With the lack of a ban on Telegram and the new exam, the results were not possible without the central government and ordinary officials..

In fact, the Russian regime is well aware of this. As noted by Fabian Burckhardt, Sergei Kiriyenko’s ‘Leaders of Russia’ competition is a way to enhance vertical mobility. It is an attempt at a meritocratic approach to government personnel. So far, the ‘mentors’ of that scheme have been winning. Through it, they still maintain their posts and their lifestyle. By doing so, they stifle any sense of dynamic change. Even the average age of members of the new government has increased by 4 years, to 51.27 years.

The State Run Economy Is Here To Stay

According to various estimates, the share of the government in the Russian economy varies from 50% to 70%. For example, in 2016 the U.S. Treasury Department announced that 70% of GDP and a third of jobs in Russia came from companies at least 25% state funded.

The nationalisation of Russia’s economy bears the signature of Vladimir Putin’s inner circle. They control key infrastructure and energy companies. Poor investment conditions, high interest rates and over-regulation of various industries have been pushing private companies out of the market for years.

Even without taking the corruptive rent-seeking into account, it is beneficial for government agencies to place orders with state-owned companies. It is easier for them to get loans, to establish the necessary contacts with other government agencies. Another plus for government agencies is that knowledge that such prestige projects will always escape bankruptcy.

An unstable foreign policy and sanctions have also helped end foreign participation in key sectors of the Russian economy, including access to lending markets. For example, the ‘privatisation’ of Rosneft proceeded in much the same way as a special operation, partly involving money from state-owned VTB bank.

Large state business, as a downside, destroys the formal system of relations between the centre and the regions. That curbs regional development. The environmental protests taking place in 2018 are a vivid example of how Russians become victims of the interests of a narrow group of business elites linked to the central government.

Yet, one should not expect to see the de‑nationalisation of the Russian economy. At least not without any preliminary political shocks. Privatisation entails a loss of both political control and economic benefits. These were obtained not through efficient business, but due to the neo-patrimonial nature of relations between state-owned companies and the state. Besides, state-owned companies are convenient. It is easier to ‘ask’ them to take part in a project where private organisations fear to tread. So Putin has no personal incentives to destroy the existing system of relations between state-owned business and the government.

In other words, state-owned companies and the Russian government are like two sides of the same rusty coin. The one is stuck to the other.