That's the assessment of five officials close to President Vladimir Putin, who say that a struggle at the heart of his inner circle is slowing decision making as sanctions squeeze the economy. With Putin focused on foreign policy, rival factions are battling for influence, said the people, who declined to be identified discussing internal issues, Censor.NET reports, citing Bloomberg.
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One group, centered on Prime Minister Dmitry Medvedev, is concerned about Russia's increasing alienation from the global financial system, said the officials. The other, which includes heads of state companies such as Igor Sechin of OAO Rosneft (ROSN) and veterans of the security services, favors greater state control over the economy, they said.
Russia's ruling elite is convulsing as the economy careens toward recession, the ruble hovers near a record low and the conflict in Ukraine pushes the country deeper into a standoff with the U.S and its allies. With oil, Russia's largest export, at a 27-month low and banks increasingly turning to the state for funding, there's less money to go around.
"The long-running conflict between rival pro-Putin camps has elevated to war," said Stanislav Belkovsky, a Kremlin adviser during Putin's first term who heads Moscow's Institute for National Strategy. "The elite are fighting for a shrinking pool of assets."
Heightening the feud between the rival groups is the arrest of billionaire Vladimir Evtushenkov and the legal campaign by prosecutors to nationalize his oil company, OAO Bashneft (BANE), according to the officials.
Evtushenkov, confined to his Moscow mansion since Sept. 16 on allegations of money laundering, is closely aligned with Medvedev and his allies, according to the people. They are at odds with the "siloviki," a group of powerful policymakers that includes men like Putin's chief of staff, Sergei Ivanov, who share a security service background and have worked with the president for decades.
Evtushenkov's legal troubles show how damaging the conflict within the power structure can be for the losing side, said Olga Kryshtanovskaya, a sociologist studying the country's elite at the Russian Academy of Sciences. His fortune has tumbled more than 70 percent since the start of the year to $2.9 billion, according to the Bloomberg Billionaires Index.
"State corporations are on the offensive against private business," Kryshtanovskaya said. "There is a deficit of resources. They need resources and Putin needs loyalty and controllability."
Officials, already divided over Ukraine, are now keeping their heads down, waiting to see how the case against Evtushenkov plays out and who might be next, the people said.