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  /  Investing Analysis   /  With shake-up at defense ministry, ‘Putin’s chef’ gets his wish from beyond the grave

With shake-up at defense ministry, ‘Putin’s chef’ gets his wish from beyond the grave

Removing a long-time defense minister from his post is nothing out of the ordinary. Arresting five of his senior staff, however, is clearly more than just a search for fresh blood — especially in Vladimir Putin’s Russia.

After the shock ouster, two weeks ago, of Sergei Shoigu as the minister for defense, a wave of arrests has gutted the defense ministry’s top brass under the guise of an anti-corruption campaign.

The timing is as intriguing as the arrests and reshuffle. After almost three years of failure on the battlefields in Ukraine, Russia has just gained the upper hand. It has, in recent weeks, launched a largely successful offensive in the north, toward Kharkiv, coupled with victories in the Donbas region in the east, too.

Ukraine’s crippling manpower shortage and dwindling ammunition supplies — exacerbated by months of stalling in the US Congress to approve a military support package — have also helped reverse Russia’s fortunes.

So the question then is, why shake up the ministry in charge of winning the war now?

Prigozhin message from the grave

Hanging over this shake-up is the ghost of Yevgeny Prigozhin, boss of the Wagner mercenary group, who was also formerly known as “Putin’s Chef.”

Before his death, he had expressed hatred for Shoigu and Russia’s top general, Valery Gerasimov, through profanity-laden tirades, accusing them and the ministry of corruption and incompetence.

Prigozhin led a mutiny on Moscow that was supposed to end with the overthrow of Shoigu and Gerasimov. Instead, he put the president in an awkward position and challenged his authority. Putin responded by describing Prigozhin as a traitor and stripped him of his assets, all before he died in a suspicious plane crash, alongside his most senior advisers.

Since then, Putin has kept the inefficiencies of the ministry’s weapons procurement, as well as its bungled invasion of Ukraine and corruption allegations, out of the public eye, keen to show he would not make any knee-jerk reactions following the mutiny. Doing so might question his authority and strength to the Russian people.

Putin was likely awaiting his reelection by the Russian people in March before making moving in on the defense ministry. The changes came shortly after Victory Day celebrations on May 9, which Putin and Shoigu attended, side by side, in a seemingly amicable appearance.

Despite his removal as defense minister, Shoigu will remain in Putin’s orbit after being moved sideways to a new role as secretary of the security council.

Putin’s interests: Ukraine

Putin’s interest is in keeping his house in order but, more pressingly, achieving victory in Ukraine. The defense ministry is central to how that war ends.

With Putin installing a civilian economist, Andrey Belousov, as the new defense minister, he has signaled he wants the ministry, with its vast budget, to procure weapons more quickly and economically.

Russia’s 2024 budget shows it is seeking to spend 6% of GDP on defense, the highest in modern Russian history, and will outpace social spending — a sign of the country’s transition to a wartime economy.

The corruption in question – Shamarin and Ivanov

Last Friday, Lieutenant General Vadim Shamarin, chief of the Main Communication Directorate of the Russian Armed Forces, was charged with “receiving a bribe on an especially large scale,” of 36 million rubles (around $393,000) from a factory that supplies the ministry with communications equipment. In exchange, he is alleged to have awarded the company lucrative government contracts.

Shamarin has pleaded not guilty, according to Russian state media.

Russian state media has also played a role in communicating the Kremlin’s crackdown on the ministry. Following Shamarin’s arrest in May, state-run Ria Novosti reported that his wife had purchased a Mercedez-Benz GLE in 2018 for 20 million rubles (about $218,000) at a time when his income was no higher than $34,000. A separate report found her income that year was 872,000 rubles ($9,740).

The highest profile of the five officials arrested was Timur Ivanov, the deputy defense minister. He was put under house arrest in late April, also on suspicion of taking bribes.

Ivanov had become a focus of the Anti-Corruption Foundation, founded by Alexey Navalny, who was killed in a Russian prison in February. He and his organization exposed the lavish lifestyle enjoyed by Ivanov’s partner — visiting invite-only jewelers, wearing couture clothing and owning a chalet in the chic ski resort of Courchevel in France. They questioned how she afforded such a lifestyle when her husband’s salary was officially $175,000 a year.

Russian state media reported that Ivanov maintains his innocence, citing its own source.

There can’t be overlap, but corruption will still remain

For Stanovaya, the reasons for replacing figures such as Ivanov and Shamarin are simple. “Part of Putin’s logic is that you can’t field someone in this position (as defense minister) where there are significant interests of the previous.”

To help clean up the ministry, Putin has appointed Oleg Savelyev, a former auditor at the Russia Accounts Chamber, as the deputy minister of defense. He will be “aware of the corruption that already exists in the defense sector,” Komin said.

Prigozhin’s final wish

Given the sweeping changes made by the president, rumors have swirled about the position of the Chief of Staff of the Armed Forces, Valery Gerasimov, the other target of Prigozhin’s rants.

Stanovaya said, “There are so many rumors now that he [Gerasimov] might be dismissed soon,” but the fact he has so far been spared gives Gerasimov “a window to start fighting for his own interests,” she added. “Gerasimov is fighting against his enemies, trying to secure his future,” Stanovaya said.

Komin agreed that Gerasimov may keep his position for now, as Putin has said he does not intend to make any other changes.

Crucially, Komin suggested that Gerasimov’s luck may be that there lacks a position, similar to Shoigu’s where he can publicly be moved aside without completely tarnishing his reputation, “it’s not a big deal to find the new guy. It’s more a big deal to find the place for the previous guy.”

In Putin’s Russia the president remains laser focused on winning in Ukraine, but recent overtures have shown that the supporting cast may change and the president is ready to be ruthless in his search of victory.

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