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The reason is simple: the lack of credible property rights under Putin's system of crony capitalism, forces senior Russian officials and oligarchs to hold their money abroad, largely within the jurisdictions of the Western governments against which Putin rails.With the help of carefully selected loyalists, Putin has established three circles of power: the state, state-owned corporations, and loyalists' "private" companies.At the pinnacle of state power, the Security Council, he installed three KGB generals: Sergei Ivanov, Nikolai Patrushev, and Aleksandr Bortnikov.To strengthen the second circle of his power, Putin seized control over the state corporations one by one, beginning with Gazprom in May 2001, by appointing loyalists as chief executives and chairmen. The only relevant standard of corporate governance is loyalty to Putin.Then there is the third circle of power, comprising Putin's most powerful cronies – the top four appear to be Gennady Timchenko, Arkady Rotenberg, Yuri Kovalchuk, and Nikolai Shamalov – and their companies. The system Putin has created is strikingly similar to the czarist system that prevailed until the "Great Reforms" of the 1860s. This has naturally created a fourth circle of power, over which Putin has no control: the offshore tax havens themselves.
remarkable economic progress
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