Putin’s options: an oligarch speaks out

0:00This intelligence podcast is sponsored by Backmarket, the leading global marketplace for refurbished tech. When the kids need phones, laptops or tablets for school, buying refurbished tech makes sense for families trying to save money without sacrificing quality. At Backmarket, tech costs up to 50 percent less compared to new. All devices have been professionally refurbished and come with a one year warranty and 30 day return policy. Start saving money. Visit Backmarket.com or the Backmarket app to shop now.

0:39Rosie Blau:Hello and welcome to The Intelligence from The Economist. I'm Rosie Bloor.

0:49Rosie Blau:Today on the show, life in Kyiv as attacks intensify, and our week-long journey down Route 66 reaches its destination.

1:04Rosie Blau:But first...

1:12Rosie Blau:Four years of war have vastly changed Russia. As the fighting has come closer to home, the conflict has become everyone's problem. Russia is facing a growing fuel shortage as Ukraine expands drone strikes on Russian energy sites, including the country's largest... ...strikes on Kyiv. The Russian leader is now facing trouble at home. Now a sense of nervousness is palpable in Moscow. And discontent is becoming more audible. Russia's elite feel that the country has reached a dead end. One of them, a billionaire industrialist called Andrei Melnichenko, has been thinking about a way to change that.

1:53Rosie Blau:For the past few months, he's spent over 60 hours speaking to our Russia editor, Arkady Ostrovsky. Today, I'm joined by Arkady and our deputy editor, Ed Carr, to discuss the future of Russia and Melnichenko's vision for it.

2:12Rosie Blau:Hi, Ed. Hi, Arkady. Hi, Rosie. Hi, Rosie. Ed, let's deal with the nuts and bolts first. Who is Melnichenko and why are we featuring him so prominently in The Economist this week? Well, he is an oligarch. He is one of, I would say, along with Abramovich, Russia's two most important oligarchs. He's different from many of them in that he didn't acquire his riches and wealth in assets in the 1990s during the chaos. He rather built it up as an industrialist. He's the fertilizer king. He's big in coal, big in steel. But he's also a guy who was forced back to Russia because of personal sanctions and having played by the normal rules of oligarchs, ignoring politics, make as much money as you like.

2:58He's now back in Russia. Politics matters to him. Russia matters to him. And he sees Russia heading in a bad direction.

3:06Rosie Blau:And Arkady, tell us about the time you've spent with him. What's striking about what he says? and why should we be listening to him? Yes, as you say, I spent about 60 hours over the past three months. And it started with one meeting in Istanbul. It was not supposed to be part of an interview. And he said something to me which made me sit up. He said, for the first time in my life, I feel Russia is my country. I've come back. To him, it's now the only country he's going to have. This is the guy, as Ed said, who's lived this global life. I don't think it's just sanctions. I think the whole kind of order of his life has fallen apart.

3:46His factories are getting attacked by Ukrainian drones. He's also facing attacks not just from Western sanctions, but from some rapacious Russian security services who want to take parts of it. And the fact that this guy is starting to speak is actually the most striking part of it, not just what he is saying. He's not an anti-Putin figure. He's not an opposition figure. He's not an anti-war figure. He's plants of supply, pneumonia that's gone into explosives for the war. He's not a rebel. That's the wrong way to think of this. This is a man who was able to forget about his homeland. He was a global citizen.

4:20He's now back in Russia and what happens in Russia affects him directly. And so he feels he's got to do something about it.

4:27Rosie Blau:We all know how dangerous it is to speak out if you're inside Russia. So something big has changed here. What's changed within Russia? Well, my view is that what's changed is that the Ukrainian deep campaign has started to affect mass feeling in Russia. For most of the war, Russians have just kind of shut it out of their minds. They haven't wanted to think about the war. Well, the deep strikes are affecting ordinary life, most directly through fuel shortages, big queues. We've seen videos of bust-ups and fistfights at petrol stations. At the same time, Crimea, a big success for Putin when he annexed it in 2014, is now isolated again.

5:11Bloggers have started to speak out. There's just a feeling that the stalemate is becoming a real problem. The war seems futile and unending, and that is producing discontent. Now, Putin has to respond to that, and I think Milachenko is worried that he responds to it by escalating and repressing, and that's something he's desperate to avoid. Yeah, I think there is a sense that the war has come home. For somebody like Milnichenko, whose factories do get hit, I think they all feel that it cannot carry on as it is. Because whatever Putin is doing is not working. So he sees two scenarios. One is Putin increases the cost of it, which means escalation, repression, all that stuff, the security services locking down.

5:58or he scales back and makes the country more inclusive to avoid this cliff. But the sense of it's become everybody's problem and therefore if it's everybody's problem and these are the guys with resources, they want to play a part in it. It's very existential. It's not some theoretical scenarios. To these people is the question of life and death and their future. And it's not as if Russia is about to rise up. It isn't a popular revolution or something. That's not what's happening. What's happening here is an understanding of futility, an understanding that Putin's got to respond and that if he responds in the wrong way, people like Melnichenko and other oligarchs fear this could go very, very badly for them.

6:43Rosie Blau:And do you buy that? We've always thought right from the beginning of this war, if there was a stalemate in the front, the war would be decided in Moscow. And I haven't been able to see the mechanism. I don't know this is going to result in something, but this is exactly the kind of scenario in which you see gathering forces in Russia demanding a voice. And Putin faces a very, very difficult choice. Melchizedek is too careful to challenge him directly, but he is presenting Putin with a dilemma. You either cling onto your power and things get worse, or you can give up power and there might be something better.

7:15That's a choice that he's trying to force on Putin before Putin's committed to escalation. I do buy it. I think if you look at Russian history, the big changes actually always start happening at the top. The people then respond to them, but they don't lead necessarily the revolution. It can only happen, however, if there is a discontent around. If he is starting to lose the war, that is what strips somebody of legitimacy. Whether you're called the Tsar or the General Secretary of the Communist Party, it doesn't matter. This is why I think this is all starting to happen. It's the combination of the sense of the elite that it cannot carry on.

7:56It's a dead end. It's the discontent building from below. And it's coming at the time when the war is achieving absolutely nothing. So that's the background. I think these are the elements from which something might happen. A lot depends on Ukraine. A lot depends on the West. But my sense of something is happening.

8:14Rosie Blau:I have to ask this, even with the generalized discontent, even with the state of the war. Melnichenko, how much of what he says is self-serving is about him. Could he be using us? Of course it's self-serving. Yes. I mean, he's not doing this because he's high-minded. He's not doing this because he's anti-war. He's doing it because he thinks this is the route to survival. And you have to remember, people like Melnichenko have taken risks and bets throughout their lives. You don't end up as the most powerful industrialist in Russia unless you have a big appetite for risk. So it is self-serving. But the question is whether his analysis is right about the structural forces that are shaping Russia now.

8:54The most interesting things in history happen when the self-interest of the people who have resources start coinciding with the forces of history and the interests of the country. That's what happened at the end of the Soviet Union ultimately was the self-interest of the elites that wanted to retain their status. That's what led the transition from the Soviet Union to Russia.

9:16Rosie Blau:We're talking about the forces of history. Where does this leave Russia's future, Putin's future? It shows that the war he had started, as I thought from the beginning, will change Russia. Russia will not, I don't think in the longer term, continue to be what it was. I think what we're seeing with this intervention is that there is a force entering the scene. It will be the question of whether Russia can transition into a different entity with genuine parliament, with genuine participation. Minnichenko takes a very long view. This is the guy who invests for 35, 40, 50 years. By the time it happens, he won't be around.

9:56He understands that you can't do this by violence. and he sees Russia only has a future if it's attractive to people inside and predictable to the world outside. I think, though, it's important to remember that he doesn't cast himself as a democrat. His idea of sovereignty is much more inclusive. It's much more about the Kremlin serving the people, but he doesn't propose a democracy. I can quite easily see Russia being, by our standards, authoritarian, but just much more effective.

10:28Rosie Blau:Ed, Arkady, thank you so much for talking to me. Thanks, Razzie. Thank you.

10:46It was a new one, even for me. We were at the key of Central Station, at a midnight train, preparing for a 27-hour journey back to the UK.

10:57Rosie Blau:Oliver Carroll, our Ukraine correspondent, has just arrived in London. The train coming in from Kharkiv was late anyway. These things happen in Ukraine. Not so much leaves on the line as exploding ordnance around the train. But as it arrived, we hear these ballistic missiles going off all around the station. You see drones. You see lasers tracking them. When we eventually get the go-ahead to leave, this is about an hour later, the train is already two hours late. We were actually very lucky. It was the last train which was allowed to leave the station. But I think that sort of story tells you a little bit about the kind of air war this has become for people living in Ukraine, and especially the capital, Kyiv.

11:49Rosie Blau:Oli we've just been talking to Arkady about the war finally coming home to ordinary Russians but of course for the people of Ukraine and for you who've been there for four and a half years the war has been at home all of that time you say this is a new escalation just explain how bad the attacks have been yeah I think it's it's useful perhaps to think of the attacks on Russia as sort of a political messaging because in the main, these Ukrainian drones, they're far less powerful than the combined Russian ballistic cruise drone attacks. There are exceptions when interceptions and electronic warfare mean they go into buildings, but generally speaking, they're not really affecting civilian buildings that much.

12:36It's a political message. In Ukraine, what you're seeing is, first of all, less of these attacks, but more intense when they happen. So the Russians are stockpiling their missiles. They're sending all they can in a quick series of strikes. So, for example, one year ago, 200 or 300 drones coming into Kiev would be considered an excessive night. Now 700 is pretty ordinary. And when you're combining this with the huge power that you have with Russian ballistic missiles, new hypersonic quasi-ballistic missiles, anti-ship missiles, that they're increasing the amount they can launch in a night and they're perfecting this opera.

13:20This is becoming very hard to defend against and it's all increasingly concentrated on the capital. July the 2nd was the biggest aerial attack since the war began and all 29 ballistic missiles and anti-ship missiles which were launched landed. There were no interceptions and they killed 31 people.

13:41Rosie Blau:So what are you really seeing on the streets of Kyiv? How does this come home? You know, it really depends which part of Kyiv you're talking about because there are relatively safe and relatively less safe parts.

13:55But for example, Sunday night, Monday morning, the attacks effectively levelled eight streets in a suburb called Vishnobel. What had happened there was a Russian missile had essentially targeted an ammunition dump. You saw first responders trying to pull survivors out for hours after. It was a very grim scene. After the attacks in the morning, you often wake up to this sunrise. You can barely see smoke covering the horizon of this black fog.

14:31Rosie Blau:Oli, you've just arrived in London but obviously you've been sitting there for four and a half years watching all of this. The people of Kiev have been sitting there for four and a half years watching all of this. How is the mood there now and how does it feel to suddenly leave? You know when you're in one particular gig for like essentially four and a half years you're obviously not a local. You're able to rotate out every two or three months but you still feel the same kind of most Ukrainians are feeling. And this new uptick in the aerial attacks, you've seen people essentially, when they wouldn't be paying that much attention to them, they're now really taking serious attention.

15:13So they're sleeping in the metro, they're fleeing cities again. And despite the more positive news you're seeing from the front lines, and certainly there's a story which we can talk about there. There is a real sense of anxiety and tiredness and frankly exhaustion. And you see it most especially, for example, in young military-age males. The mobilization at the moment is becoming increasingly aggressive. So for them, it's a very difficult picture. So every two or three months, I'm sort of teleported to Europe or America, if that's what you could call 27 hours on the road. And it's really strange where you see these different worlds where a major worry for people is getting the restaurant booking for the evening.

16:03Rosie Blau:There's a military logic to all of this. I can see that. Tell me how it's going down politically. Right. So at the beginning of July, you saw Zelensky announce this 40-day intensification of drone operations. Basically, 40 days in Russia is the period after death when basically the Seoul departs. So it was essentially saying that Putin was already dead and this was a matter of him reckoning with that. Obviously, quite cheeky. The attacks on Russia are serious, but it's really the mid-range drone operation, which is between sort of 20 and 200 kilometers. That's really the defining trend of this summer.

16:41And basically, the drones are coming online now in numbers, in types, and using this Starlink satellite technology, technology, which Russia basically can't use anymore after Elon Musk removed their right to use it in the occupied territories. And that's given Ukraine a huge advantage in precision weapons. And it's been able to use that to create these, maybe chokeholds is too strong a word, but pressure on the supply lines coming into Crimea. And that's an issue for Putin. That's the new story of this summer. But at the same time, there is still fierce fighting going on along the front line in the Donbass Fortress Belt.

17:19And the mix match between that 40 days rhetoric and the more nuanced picture on the front lines, that's political theatre.

17:27Rosie Blau:There seems another mismatch though, the abundance of drones, and yet the cities are virtually defenceless with the lack of interceptors. So yes, drone interceptors, the Ukrainians are doing much better on. They intercept roughly 95 % of the drones come in, which is an amazing statistic. The real problem you're sort of referring to is the anti-ballistic interceptors. And the problem here is there is a huge mix match between the global production of anti-ballistic missiles and the production of Russian missiles. Even if all the global production of Patriot interceptors went to Ukraine, it wouldn't be enough.

18:11And then you add on top of that the Middle East war, which essentially ate into a huge number of the global pool of Patrick missiles. And this is not a new story. Ukraine has been screaming out about this for many years. On Wednesday, President Trump offered a kind of solution. So one of the things we're going to be talking about is we're going to give a license to you to make patriots.

18:36Rosie Blau:That's pretty cool, right? This way you can't complain that we're not giving them enough. and say, make them yourself. We haven't informed the company of that yet, but that'll work out all right. Sure, they'll be thrilled. Problem is none of that is going to come online soon. The thing that got people through this last very difficult winter was the inevitability of nature. However dark Putin's spell might be, the sun will still follow the frost. And right now, people are trying to extract every bit of life, however difficult. but the pendulum will swing back and if there isn't a ceasefire deal by the winter which I think is the default assumption you have to be fairly apprehensive about what might ensue Oli thank you very much thank you Rosie

19:45Elvis Presley in 1963 came, he spent the night in Shamrock and they ate breakfast in here

19:53Rosie Blau:about 4.30 in the morning. Ma-mama was the one that was the cook back there. So she cooked the breakfast. But when my sister and I, when we got here after school, about 4, that's all we heard. Elvis Presley was here and I love Elvis Presley. My oldest brothers thought he was Elvis Presley, from playing the guitar, driving convertibles, ducktails. That was Alita Stone, who volunteers as a guide at the U Drop Inn in Shamrock, Texas. Every day this week, we've brought you a travelogue from John Fasman, our senior culture correspondent, as he journeys down America's famous Route 66. The U Drop Inn is a restored gas station and diner.

20:35It's a beautifully proportioned, low brick building with some Art Deco touches. And it might look familiar to fans of Pixar films. It was the model for Ramon's house of body art in the film Cars, which had a huge impact on Route 66.