A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc

With EU sanctions starting to bite, Russia’s oligarchs are trying to put pressure on Vladimir Putin. But according to German intelligence, they are meeting resistance from Kremlin hardliners

German intelligence is reported to have obtained evidence of a power struggle under way in the Kremlin, with hardliners and oligarchs at loggerheads over Western sanctions. Some reportedly want to “put the brakes” on President Vladimir Putin to rescue their business interests.

Der Spiegel magazine reported on Sunday that the head of Germany’s intelligence service, Gerhard Schindler, had told the Berlin parliament’s foreign affairs committee that cracks were beginning to appear in the united front that President Putin’s government was seeking to present to the world.

Mr Schindler was said to have told the committee and subsequently Chancellor Angela Merkel in person that a struggle had broken out in the Kremlin, with hardliners and oligarchs seeking to exert their influence on Mr Putin.

“According to German intelligence it is quite possible that some of the oligarchs who are worried by European Union sanctions will soon start putting economic interests above political concerns and try to put the brakes on Putin,” Der Spiegel wrote.

 

Mr Schindler told MPs that unlike at the beginning of the Ukraine crisis, cracks were now beginning to appear in Mr Putin’s power bloc. He was said to have made his comments during a weekly intelligence report to parliament and the Berlin Chancellery.

Evidence of a Kremlin power struggle emerged after the EU this weekend expanded its list of Russians subject to sanctions to a total of 87 people and 20 organisations.

The EU is also drawing up a list of close Putin cronies who will also be targeted. Later this week it is due to decide on the first significant economic sanctions against Russia.

The measures are in response to the failure of Russian separatists in Ukraine to allow a full investigation into the downing of flight Malaysian airlines flight MH17, and Russia’s unwillingness to stop the flow of arms to the rebels.

 

Video: The latest from Ukraine

European officials have drawn up potentially damaging options for economic sanctions which include banning Russian banks with more than 50 per cent state ownership from raising capital on European markets.

Der Spiegel identified the chief Kremlin hardliner as Sergei Glasjev, 53, a Putin adviser who is responsible for Russia’s relations with Ukraine. It claimed that Mr Glasjev considered Europe “degenerate” and the United States to be Russia’s enemy. It said he wanted Russia to turn its back on the West and that he believed China should replace Europe as the country’s most important partner. Der Spiegel said Mr Glasjev welcomed the prospect of EU sanctions.

However, the magazine said Russia’s oligarchs were well aware that their country depended on Western machinery and know-how. Alexei Kudrin, a liberal former Russian finance minister, told Der Spiegel: “If sanctions are imposed against the entire Russian finance sector then our economy would collapse within six weeks.”

The German intelligence service’s assessment of the power play under way in the Kremlin is likely to have played an important role in deciding Berlin’s attitude to economic sanctions. Navy Day celebrations in Vladivostok Navy Day celebrations in Vladivostok

Ms Merkel’s coalition had until recently been wary of imposing sanctions for fear of damaging Germany’s wide-ranging business interests in Russia, which accounted for €36bn (£28bn) worth of exports last year. German industry heads had warned that if sanctions were imposed there would “only be losers”.

However last week Ms Merkel dropped her initial reservations and demanded that the EU rapirly impose sanctions including economic penalties against Russia. The move underlined Germany’s exasperation with Mr Putin’s failure to ensure a thorough investigation of flight MH17.

Eckhard Cordes, the head of German industry’s key Eastern committee, which oversees trade and business interests in Russia, also dropped his opposition to the idea. “For German industry politics must take first place. If economic sanctions are decided upon, then we will support them,” he said.

Germany’s Economics Minister, Sigmar Gabriel, appeared to endorse the intelligence service findings about a Kremlin power struggle. He told Der Spiegel that sanctions should specifically target wealthy Russian business leaders. “Above all we must hit the oligarchs. We have to do this, this coming week,” he said. “We must freeze their bank accounts in Europe’s capitals and cancel their travel permits.”

His remarks were echoed by the veteran Finance Minister Wolfgang Schäuble. In an interview with the Bild am Sonntag newspaper he said German business interests were “second” in importance when it came to foreign policy and Russia.

“Safeguarding stability and peace have top priority,” he told the newspaper. “Any threat to peace and stability would moreover be the biggest danger for economic development.”

Mr Schäuble said the existing sanctions were already beginning to take effect. “The rouble is losing value, Russia’s budget deficit is growing and its economic development is bad. Even the Russian president sees this,” he said.

According to German business reports, Russian companies are becoming increasingly reluctant to order machinery and other materials from Germany because of the uncertain political climate. German exports to Russia dropped by 15 per cent during the first four months of 2014 and declined “massively” in June.

Calling for Europe to present a united front against Russia, Mr Schäuble insisted: “Nobody in Moscow should start thinking that Russia can win with its approach.”

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