Vladimir Putin’s surprise firing of the Russian government on February 24 and his appointment of “technocratic” Prime Minister Mikhail Fradkov on March 1 had Western officials and observers buzzing about another round of “reform” and Russian cooperation with the West, while Western investors were optimistic that the new government would favor them.  Nevertheless, Washington should approach its relations with Moscow with a clear idea of what is likely happening behind the high Kremlin walls—and with no illusions about its present occupants.

Many Western observers saw Putin’s unexpected dismissal of the government, headed by Prime Minister Mikhail Kasya-nov, just 19 days before the March 14 presidential election, as a bold step intended to accelerate reforms that would favor foreign investment and improve Russia’s relations with the West.  The English-language Moscow Times, which serves Moscow’s expatriates, took a quick survey of resident Westerners and found they were “cheering” the “surprise nominee” who would supposedly “unquestioningly follow Putin’s orders to push forward reforms.”  Putin himself claimed Fradkov would advance restructuring of the government and fight corruption, while E.U. spokesman Reijo Kemppinen stated that the appointment of Russia’s current envoy to the European Union “is a positive signal of the importance that Russia attaches to its relations with the European Union.”  Meanwhile, William Browder, director of Hermitage Capital Management, which manages $1.3 billion in investments in Russian securities, praised the Russian president’s stated policy goals, seeing Fradkov as a Putin loyalist who would push hard for economic reforms.

But who is Fradkov, and why was he appointed?

Fradkov appears to be a political survivor with ties to several Kremlin “clans,” leading most Russian analysts to see him as a compromise figure—hardly a convincing corruption fighter.  Fradkov was likely a KGB recruit in the Soviet era when he worked for Soviet foreign-trade missions, which were commonly used as covers for intelligence operations.  In the “wild 90’s” under Boris Yeltsin, Fradkov served as deputy foreign-trade minister, “handing out lucrative export quotas and privatizing key export agencies in the crony free-for-all grab” that was then underway, as the Moscow Times (March 2) put it, and, as Russian sources have claimed, serving as a government placeman for the Alfa Group, a vast financial-industrial conglomerate reportedly linked to organized crime, including drug trafficking.  Fradkov was also involved in a scandal regarding misappropriation of budget funds—and reportedly built himself a Moscow residence with the cash.  Twice foreign-trade minister and a former deputy secretary of the Russian Security Council, Fradkov later headed the now-disbanded Tax Police before being named Russia’s envoy to the European Union last year.  Thus, Fradkov not only served the Yeltsin clan and developed a close relationship with Alfa “oligarch” Pyotr Aven but cultivated ties to the “St. Petersburg siloviky,” veterans of the KGB and the FSB (a KGB successor organization) with close personal ties to Putin.

The decision to fire the government so unexpectedly, the surprise appointment of Fradkov—who was not on any Kremlin-watcher’s short list of candidates for prime minister—and the nearly week-long pause before a new government head was announced suggest fierce infighting among the Kremlin clans—and, possibly, that the president is having difficulty containing the factional battle.  Moscow political analyst Lilia Shevtsova asserted that Putin’s appointment of Fradkov shows the Russian president is “losing his grip”: “This means that Kasya-nov’s dismissal wasn’t planned.  There was no plan at all.”  The chaotic events were, in Shevtsova’s view, “proof of disorientation, disintegration and compromise.”  “This confirms that there is some kind of serious conflict” in the Kremlin, according to Kremlinologist Andrey Piont-kovsky, with Fradkov, “tainted all over with corruption,” being an unlikely compromise figure.  Piontkovsky called the appointment a “totally irresponsible decision.”  Fradkov’s primary qualification may have been that the Kremlin had plenty of kompromat (“compromising material”) on the veteran bureaucrat, ensuring his loyalty: “There is no less dirt on him than . . . on Kasyanov,” reported Novaya Gazeta columnist Yuliya Latynina.

So what does the chaotic Kremlin situation mean for the West, especially the United States?  U.S. investors should be cautious in their dealings with Russia: Yes, the country is rich in natural resources, especially oil, and could be an alternative (to OPEC) source of “black gold” for America, but the risks are high, and any deals should be approached with a keen awareness of the nature of the “oligarchic” system and its workings.  The same rule can be applied to Washington’s relations with Moscow: Russia can be a strategic partner in, for example, the “War on Terror,” but President Bush should avoid any urge he might have to personalize relations with Putin or members of his entourage.  Any agreements with Moscow should be accompanied by adequate safeguards to prevent U.S. budget funds from entering the Swiss bank accounts of Russian bigwigs.  The White House can expect little in the way of cooperation in fighting international organized crime from the Kremlin; and the administration should be aware that Putin may not have as a firm a grip on power as most Western talking heads seem to think.  There are no guarantees he can follow through on any arrangements he makes with Washington.