Russian President Vladimir Putins changing attitude toward two giant government-led high-tech projects sends a troubling message about his third term in office: Maintaining power is more important than modernizing the economy.

The projects, known as Rusnano and Skolkovo, were meant to propel Russias raw-material economy into the technology age. They involved multibillion-dollar government investments, the first in nanotechnology and the second in a new city that would become Russias answer to Silicon Valley. They were supposed to provide the infrastructure and stability required to attract large amounts of foreign investment.

Now, both have become targets in Putins campaign to demonstrate that hes being tough on corruption and mismanagement of government funds. As a result, their chances of succeeding are looking increasingly remote.

Putin himself ordered the establishment of Rusnano in 2007, endowing the state-owned company with $5 billion to invest in ventures that would put Russia at the forefront of the nanotechnology revolution. Headed by Anatoly Chubais, the architect of Russias early 1990s privatization, Rusnano initially had to place most of its money in bank deposits for lack of ready projects. Since then, it has managed to invest more than $3 billion.

Trouble came in April, when the Accounting Chamber, a body charged with auditing government spending, accused Rusnano of inefficient management in a report that received ample coverage on state-owned TV. It said that Rusnano had transferred about $40 million to shell companies and pointed out that a silicon factory in which Rusnano invested about $450 million was not functioning and was about to be declared insolvent. The report also highlighted the state companys 2012 losses of 2.5 billion rubles ($80 million) and the 24.4-billion-ruble (about $800 million) in reserves Rusnano had formed against potential losses from risky ventures.

In a recent televised call-in session, with questions carefully screened, Putin did little to support Rusnano and Chubais, who is still reviled by many for his role in the 1990s privatization program. I believe that he and a number of people who worked with him then made many mistakes, Putin said in response to a caller who asked when Chubais would finally go to jail. Putin then declared that CIA operatives had been among Chubaiss advisers.

Moving on to Rusnanos losses, Putin suggested that investing in alternative-energy projects such as solar batteries doesnt make sense in a hydrocarbon-rich country with long, dark winters. Its dark when you get up and dark when you go to bed, when would these batteries charge? he said. All he could say in Rusnanos support was that it has invested inefficiently, but this is not theft.

The company responded that its initial strategy was geared toward maximizing sales, not profit, and that it was far ahead of plan in that respect. But the objections did not get much airplay, and to a large extent the damage was done. Putins coldness and the widely publicized Accounting Chamber report offered a clear indication that the project is out of favor with the Kremlin. Thats not good for Chubaiss plan to have Rusnano fully privatized by 2020, with the first partial sell-off coming this year.

Skolkovo was a pet project of Dmitri Medvedev, the former president and now increasingly sidetracked prime minister. The plan, conceived in 2010, was to invest 85 billion rubles ($2.8 billion) in taxpayer money and offer other special incentives to attract Russian and foreign tech companies to a new city just outside Moscow. The Massachusetts Institute of Technology was enlisted to set up an educational partnership called Skoltech. Billionaire Viktor Vekselberg signed on as head of the Skolkovo Foundation, receiving and administering both government and private funding. On the governments side, Vladislav Surkov, then seen as the eminence grise of Russian politics, was appointed the projects curator.

At about the same time as the Accounting Chamber published its Rusnano report, Russias Investigative Committee charged Skolkovo vice president Alexei Beltyukov, a former McKinsey consultant, with illegally paying $750,000 to parliamentary deputy Ilya Ponomaryov, ostensibly for a series of lectures and research papers. Ponomaryov, a vocal Putin opponent, responded in a lengthy LiveJournal post that the money was for a major promotional campaign aimed at attracting foreign and domestic investors.

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