Jeffrey
Stroebel
Humanities 8
Mr. Stroebel
8 December 2003
A
New Russia
A
popular Russian comedian has joked: “Much has changed, but nothing has
happened. Or is it that much has
happened, and nothing has changed?” (Yergin and Gustafson 147). In truth, a great deal has changed in Russia since the fall of the Soviet Union a dozen years ago.
While serious questions about the status of true electoral democracy and
freedom of the press still exist, the chaos and uncertainty of the Yeltsin
years is being replaced by an improving economy and a feeling of stability that
contrasts sharply with the “Wild West” atmosphere of the dismantling of the
Soviet state. Russia is also re-emerging in a new form as an important
world power under President Vladimir Putin.
Together, Presidents Bush and Putin have wiped away the last vestiges of
the Cold War, as the two countries have become important allies in the war on
terrorism, and the vast potential of Russia to supply vital sources of energy to the United States in the future can only encourage continued strong
relations. Although vestiges of
Soviet-era thinking still remain, the Russia of today bears little resemblance to the chaotic post-Soviet
state of a decade ago.
Overview:
A.
In what ways has Russia shown progress since the Soviet era?
B.
Why are there significant concerns about democracy in Russia?
C.
What are the strengths and weaknesses of the current Russian economy?
D.
Why is Putin so popular?
Specific Questions:
1.
Describe
Vladimir Putin’s life and career before he became president.
2.
Why
did Yeltsin choose Putin as prime minister?
3.
Why
was Putin’s election as president in 2000 criticized as anti-democratic?
4.
Why
did the Kursk tragedy remind many of the Soviet-era?
5.
Describe
Putin’s relationship with the oligarchs.
6.
What
actions were taken against Berezovsky, Gusinsky, and Khodorkovsky?
7.
Describe
the structural reforms that have been passed by the Duma since 1999.
8.
What
factors contribute to Russia’s demographic crisis?
9.
What
is the current situation in Chechnya?
10. How did Putin respond to the September
11 attacks? In what ways has Russia
assisted the U.S. in the war on terrorism?
11. What issues still remain contentious
between Russia and the U.S.? Why?
President Putin
When
Boris Yeltsin appointed Vladimir Putin prime minister in August 1999, Putin was
virtually unknown, both to ordinary Russians and the outside world. Born in St. Petersburg (then Leningrad), he was the only son of two decorated World War II
veterans. Although his father was a
factory foreman, like most Leningraders, Putin spent his youth in a communal
flat, sharing a carved-up apartment with two other families. In 1975, he graduated from Leningrad State University and accepted a position in the foreign intelligence
branch of the KGB. From 1984-1990, Putin
was stationed in East Germany where he recruited spies to send to the West and
monitored East Germans who favored economic reform similar to Mikhail Gorbachev’s
in the USSR. After the
collapse of East
Germany,
Putin returned to St.
Petersburg where
he became reacquainted with one of his former professors, Anatoly Sobchak, a
strong supporter of Gorbachev who was elected St. Petersburg’s first
post-communist mayor in 1991. Putin
resigned from the KGB and became a top aide to Sobchak, remaining out of the
spotlight but earning a reputation for honesty and efficiency in his main job
of recruiting foreign companies and promoting business. Nina Odling, a senior analyst at the Leontieff Center for Social and Economic Research in St. Petersburg, said: “Everyone in government in Russia has skeletons in his closet. But Putin was one of the more honest and
decent people in the St.
Petersburg
government” (Wines “Putin Retains”). Putin left St. Petersburg after Sobchak was defeated for re-election in 1996
and went to Moscow, accepting the invitation of Anatoly Chubais to join
the Yeltsin government. In May 1998,
Yeltsin named him deputy chief of staff and just two months later appointed him
to head the Federal Security Service (FSB), the successor to the
KGB. After little more than a year as
head of the FSB, Yeltsin appointed Putin prime minister.
At
the time of his appointment, Putin was viewed as a tough, efficient politician
who could use his contacts in Russia’s security services to protect Yeltsin and
his associates, known in Russia as “The Family,” from criminal corruption
charges once Yeltsin left the presidency.
Although many initially viewed him as little more than a puppet of “The
Family,” events soon enhanced his popularity and established Putin as an
independent political force. The
resumption of the war in Chechnya, after a series of terrorist bombings in Russian
cities, and Putin’s strong rhetoric against the rebels immediately enhanced his
stature. The media, controlled by the
government and “Family” insiders such as oligarch Boris Berezovsky,
constantly reinforced a positive image of the new leader. As one reporter noted: “His calm
decisiveness, apolitical manner and comparative youth contrasted favorably with
the bombast, Kremlin maneuvering and indecision of the final years of an
increasingly infirm Mr. Yeltsin.” When
the Putin-endorsed Unity Party surprisingly emerged from the December 1999 Duma
election as a strong force, Yeltsin felt confident enough to resign the
presidency, making Putin acting president.
In Putin’s first presidential order, Yeltsin and his immediate relatives
were issued immunity from any future prosecution. Putin also named Mikhail Kasianov, a close
Yeltsin associate, prime minister and retained Aleksandr Voloshin, another “Family”
insider, as his chief of staff. With
Russia’s media and power structure behind him, Putin easily won March 2000
presidential election, defeating the Communist Party leader Gennadi
Zyuganov by a margin of 52% to 29%.
Putin’s huge victory seemed to end the Communist Party’s role as a major
factor in Russian politics. In the 1996
campaign against Yeltsin, Zyuganov won a majority in about half of Russia’s 89
regions, but in 2000 he won a majority in only 4 (Wines “Putin Narrowly”).
Putin’s
sudden rise, KGB background, and virtually uncontested triumph in the
presidential election was seen by many as proof that the dream of establishing
a democracy in Russia had ended. Business Week correspondent Paul Starobin referred to the election
as a “farce.” Russian journalist
Yevgenia Albats agreed. “We have buried
the idea of liberal democracy in Russia,” she said after the election (Wines “Putin Narrowly”). Others, however, saw Putin as the
manifestation of traditional Russian desires, predating the country’s tumultuous
twentieth century. Former dissident
writer Vladimir Voinovich believes that Putin captured many people’s hopes for
the emergence of a strong figure to lead them out of Russia’s misery. “People always expect that a kind and clever
czar will come along,” he said. “Most of
the people simply want to live well, and they hope that a Putin or someone else
will come along—a strong man, he will bring order, subdue Chechnya, put all
thieves and corruptionists in jail, confiscate the money of the oligarchs—and
all will be well” (Hoffman “Russians Rallying”). Another former dissident, Gleb Pavlovsky,
views Putin as a comforting figure after years of turmoil during the Gorbachev
and Yeltsin eras. “Putin arrived as the
man to stop the revolution…. After twenty
years of revolution and surprises, people are tired. They’re exhausted by the notion of thinking
about an entirely new world, a new state, a new form of economy and
thinking—new everything!” (Remnick 81). For
his part, Putin promised to restore Russia’s former status as a “great power,”
and endorsed the concept of strong, central authority: “For Russians, a strong
state is not an anomaly. Quite the
contrary, [Russians] see it as a source and guarantor of order” (Starobin,
Fairlamb, and Crock).
The Kursk Tragedy
While
Putin’s presidency was viewed as a new era in Russian history, an August 2000
submarine disaster, however, indicated to many how Russia still clung to Soviet-era behavior. On August 12, 2000 the nuclear submarine Kursk, one of Russia’s newest submarines, sank in the Barents Sea. All 118 men aboard
perished. The disaster evoked memories
of the 1986 Chernobyl nuclear power plant disaster, which had symbolized the
crumbling decline and accompanying denial present in the last years of the Soviet
Union.
Just
as in the case of Chernobyl, the government reacted slowly and attempted to obscure
the truth. The navy waited more than a
day and a half to announce the sinking, and the first accounts said that the
crew was alive and that oxygen and electrical power were being provided from
surface ships. Russian officials refused
offers of help from other countries, speculating that a U.S. or British submarine had rammed the Kursk. For days
Russian rescuers tried vainly to reach the submarine, hampered by outdated
rescue equipment. Three days after the
sinking, the deputy prime minister in charge of the investigation said that Russia would not need to ask for foreign rescue
assistance. Three days later, Putin said
naval officials had been in touch with foreign counterparts immediately after
the disaster to work out ways to get help.
On August 16, the navy reported that coded messages from inside the Kursk were still being heard, an indication that crew
members were still alive. Shortly afterward,
a government spokesperson said no sound had been heard since the 15th. As time went on, a critical media exposed
more and more of the government’s inept lies (Williams “Soviet-Style”).
Eventually,
after a week of futile rescue attempts, Norway and Great Britain were asked to send sophisticated rescue
equipment. It took the Norwegians only
48 hours to enter the ship (which the Russians had failed to do in a week) and
determine that all crew members had died shortly after the initial
explosions. “Nothing was left of the
people inside—minced meat,” said a Russian navy spokesperson concluded,
dismissing claims that swifter action could have saved some of the crew. In late October, however, a note was
recovered from the body of a sailor proving that at least 23 of the men had
survived the initial explosions. Further
evidence also showed that the sailors may have survived for as long as four
days before succumbing to a lack of oxygen.
Clearly, the government’s delay in obtaining international help in the
rescue efforts may have been responsible for their deaths. Later, it was revealed that the ship had been
refitted in 1998 with controversial new torpedo engines fueled with a volatile
mixture of hydrogen peroxide and kerosene because the new torpedoes were much
cheaper. Despite their cost savings, the
new torpedoes were judged to be “very difficult to store and dangerous to use.” After the sinking, several specialists
maintained that the first blast involved a misfiring torpedo engine, which
touched off a fire and the catastrophic detonation of the non-nuclear warheads
on board. When the remains of the
submarine were brought to the surface a year later, the damage was consistent
with the theory of an internal explosion.
Condemnation of the government’s handling of the affair from within Russia was vehement and a huge embarrassment (Hoffman “Did
Cost-Cutting”).
Putin and the Oligarchs
In addition to the
submarine disaster, Putin’s first year in office was characterized by an effort
to combat several major problems that had weakened the central control of the
government during the Yeltsin era. These
actions led to allegations that the president was attempting to become a “New
Tsar.” Specifically, Putin sought to
regain control of Russia’s various regions, which under the leadership of
regional governors had greatly increased their autonomy from Moscow during the last years of Yeltsin’s rule, as well as
curb the powers of the oligarchs. Putin
stripped the governors of their automatic positions in the Federation Council,
the upper house of the Russian legislature, and created 7 “super-governors” to
exercise oversight over the 89 elected regional governors. These “super-governors,” sometimes referred
to as the “eyes of the Tsar,” report directly to Putin and four of the seven
had previously served with him in the Federal Security Service.
Putin also instigated a
series of investigations to examine tax avoidance by Russia’s leading
businessmen. His purpose clearly seemed
to have been to frighten these oligarchs rather than collect taxes. With Russia’s high rate of taxation, few if
any businesses could demonstrate that they had totally complied with the
law. In July 2000, 21 business leaders
met with Putin and heard him strongly warn them to pay their taxes and not
interfere in politics. At least
publicly, most of the oligarchs appeared willing to accept this new role. Vladimir Potanin, the head of the country’s
largest nickel producer, commented: “We should say to
people: ‘You think we were bad. But we
want to be normal and socially acceptable.’
Many oligarchs are tired of the lack of well-defined rules and are
waiting for the Kremlin to define the guidelines” (Ignatius “Putin”). Business leaders
would also like to see Russia adopt more stringent anti-corruption laws, which are
necessary before the country can be admitted to key international economic
groups such as the World Trade Organization (WTO). By cleaning up their practices and opening
their books to public scrutiny, large Russian companies not only have a better
chance of attracting foreign investment but also can develop into profitable
multi-national corporations.
Given
the manner in which privatization was conducted in the 1990s, everyone who
benefited has something to hide.
Prosecution by the government, however, has been highly selective. Businessmen who are supportive of the
government (such as Potanin) are apparently safe; those who criticize it are
not. An excellent example of this can be
found in the story of two of Russia’s leading Yeltsin era oligarchs—Boris
Berezovsky and Vladimir Gusinsky.
Both were subjects of intensive government investigations, which have
forced them into exile. Because these
two men also owned two of the country’s three leading television stations (the
other was wholly government-controlled), it was difficult to discern whether
their conflict with the government was an effort by the government to eliminate
corrupt business practices or to crush press freedom.
Berezovsky,
a strong Yeltsin and Putin supporter who controlled
ORT, one of Russia’s three major television networks, broke with Putin
in August of 2000, resigned his seat in the Duma, and accused the president of
favoring authoritarian methods of rule. Berezovsky then became a target for
government investigation when, a month later, he
was accused of embezzling millions of dollars of funds from Aeroflot, the
national airline, which he controlled. Late in 2000, he fled the country and
surrendered his control of ORT to avoid prosecution.
Gusinsky, the owner of NTV,
the only Russian television station frequently critical of the government, was
under constant pressure throughout 2000 to also surrender his holdings to the
government. Short on cash, Gusinsky had
turned to the government-controlled natural gas monopoly Gazprom for a series
of loans beginning in 1996. Unable to
pay off his loans, Gusinsky claimed that the Putin government frustrated his
attempts to finance a payoff. In June,
he was jailed for three nights on fraud charges, which were later dropped. A month later, he was told he would be arrested
again if he did not agree to sell his media empire. Under pressure, Gusinsky agreed:
I knew two days in
advance that I would have to sign it. I
had two options. They said it more than
once; there were constant threats, threatening to put me in cells with TB
patients, with AIDS people—everything that can be promised was promised to
me. I was indeed a hostage, and
everybody understood it this way. Let us put it this way: I consciously signed
this deal…. I thought it was dishonest;
I had no choice. When you have a gun to
your head, you have two options: to receive the conditions of the bandits or
get a bullet in your head. I did not want to have a bullet in my head. (Hoffman
“Media Baron”)
Fearing for his life, Gusinsky fled the country and
recanted his July agreement, claiming that his signature was invalid because it
had been obtained under duress. A legal
battle ensued over the control of NTV, which finally ended in the summer of
2001 when Gazprom seized control of the station and installed a new management
team. Gusinsky’s
newspaper Segodnya and the magazine Itogi also suffered hostile
takeovers. Donald Jensen,
associate director of broadcasting at Radio Free Europe/Radio Liberty, believes
that the campaign against Berezovsky and Gusinsky had little to do with
fighting corruption but was simply a matter of enforcing political loyalty:
Putin has targeted Vladimir Gusinsky and Boris Berezovsky, the most
independent, but economically vulnerable barons, whose media holdings are
especially useful to him as he tries to consolidate his rule. Virtually untouched have been oligarchs
Mikhail Khodorkovsky, Vladimir Potanin, Pyotr Aven and Mikhail Friedman. In fact, one reason for the relentlessness of
Putin’s attacks on Gusinsky and Berezovsky is that they are business
competitors of oligarchs who back the Kremlin….
Thus, Putin has settled for a social contract with the moguls under
which he allows them to do business so long as they back him politically and sometimes
serve the state.
However,
Paul Klebnikov, a senior editor at Forbes
and author of Godfather of the Kremlin:
Boris Berezovsky and the Looting of Russia, applauded Putin’s actions in
going after crony capitalists like Berezovsky and Gusinsky:
By indicating that he
wants to apply the law to some of Russia’s most powerful tycoons, Putin has
made a step in the right direction. If
anything, Putin has been too hesitant and haphazard in going after his country’s
biggest malefactors…. For most of the Yeltsin
years, they were allowed to dictate government policy, loot state property at
will and siphon off their earnings abroad.
The result was a ruined economy, a bankrupt government and an
impoverished population. In any just
society, these kinds of operators would end up behind bars.
Following the takeover of NTV, opposition figures seldom
appear on television directly criticizing the president.
The
stifling of an independent press is perhaps the most significant
anti-democratic development in Russia since 1991.
Reporters without Borders, an independent news monitoring service,
ranked Russia 121st out of 139 countries in its 2003
freedom of the press index (McFaul). The
controversy over NTV seems to further reinforce the widely held view that
attacks on businesses are highly selective and designed far more to instill
political loyalty than end corrupt practices.
The Khodorkovsky Case
On
October 25, 2003, masked Russian security police stormed aboard the private jet
of Mikhail Khodorkovsky and arrested Russia’s richest oligarch, charging
him with tax evasion, fraud, forgery, and embezzlement. The most serious of the charges is that
Khodorkovsky’s oil company, Yukos, failed to pay $5 billion in taxes dating
back to 1998. The 40-year-old
Khodorkovsky is estimated to have amassed an $8 billion fortune since he
obtained control of the company for $309 million in the infamous “Loans for
Shares” transactions of 1995. Today, the
company is the world’s seventh largest oil producer with a market value of $45
billion (Meier). Khodorkovsky had been a
symbol of the reformed oligarchs of the post-Yeltsin era. Unlike any other major Russian company, Yukos
openly declared its income, allowed its books to be examined by outside
auditors, issued quarterly reports, paid its taxes, and became the first
Russian oil company to pay dividends to its stockholders.. In addition, the company gave $45 million to
charity in 2002 (Aron). Khodorkovsky
himself became a media star, often traveling to the United States where he courted
a merger with U.S. oil companies Exxon Mobile and Chevron Texaco, contributed
$100,000 to first lady Laura Bush’s favorite charity (The National Book
Festival), and had his photograph taken with the president and first lady at
the White House (Meier).
Why
was Khodorkovsky arrested? The former
communist youth organization executive who used his connections within the
party to propel himself to wealth after the fall of communism has acknowledged
that this process was not totally above board.
Speaking to an American reporter before his arrest, he admitted: “You
could get away with not breaking any laws because there weren’t really any
laws. People, even in the West, tried to
say I broke the law, but they were never able to prove it. Not everything was ethical. This is not something for me to be proud of”
(Remnick 85). Russian scholar and Boris
Yeltsin biographer Leon Aron comments:
“[I]t is
likely that in the 1990’s he broke some laws. But in the chaotic Russian
economy of the time, when the state was privatizing its assets on a grand
scale, no large business in Russia was ‘clean’—and the larger the company, the
greater the chance it committed violations.
For example, full payment of corporate taxes amounted to well more than
100 percent of most businesses’ profits.
Tax evasion was the only strategy that allowed an entrepreneur to pay
salaries and invest in his business.”
The real reason for the arrest may be that
Khodorkovsky angered President Putin by becoming a media darling and openly
contributing to opposition political parties that criticized the president as
dictatorial and anti-democratic. A
source who refused to be identified has told the Washington Post, “Putin
hates Khodorkovsky” (Baker and Glasser “Oil Tycoon”). His arrest may also be a sign of a power
struggle within Putin’s inner circle which has divided between pro-business
advisors, such as former Yeltsin chief of staff Alexander Voloshin (who
resigned in protest after the arrest), and the circle of former KGB officials
close to the president, who are known as the siloviki (men of power) and
deeply resent the wealth and power of the oligarchs. Aron explains:
After three-quarters of a
century of limitless power, many in the largely Soviet-era Russian senior
bureaucracy are incapable of accepting an economic system in which property and
wealth are not directly conferred, withdrawn or at least controlled by the
state. “If we don’t like you, how can
you be rich?” That is the message that
the state bureaucracy intends to send with Mr. Khodorkovsky’s arrest. Other oligarchs, as well as hundreds of
thousands of owners of smaller businesses, must take heed…. Thus the Yukos affair is not simply a law
enforcement matter, as President Vladimir Putin has insisted. It is a major battle between two economic
cultures…
The
reaction to Khodorkovsky’s arrest was predictable. Human rights activists such as Yelena Bonner,
the widow of famous dissident Andrei Sakharov, called it “a glaringly lawless
action” (Baker and Glasser “Billionaire’s Arrest”). The day after the arrest, the Russian stock
market suffered its largest loss since the economic meltdown of 1998 as
businessmen predicted that the fear generated by Khodorkovsky’s arrest could
jeopardize the economic success that has occurred during Putin’s
presidency. Charles Ryan, chairman of a
Moscow brokerage commented: “the largest contributor to … growth in recent
years has been stability and the confidence that has led to investment. So by bringing these guys to book, he could
undermine the very stability that has been the underpinning of his
success. Putin maintains that the case
is isolated purely to Khodorkovsky and is not a first step in re-examining the
privatizations of the 1990s (Baker and Glasser “Russian Stocks”). Not a single oligarch issued a statement
condemning the arrest either. Olga V.
Kryshtanovskaya, a sociologist, argues that “The business elite is panicked.” They are not coming together. They are not confronting power. They think it’s dangerous to ruin relations
with power, and think they will be able to make their own agreements.” Most Russians simply shrugged their shoulders
in indifference or approved of the arrest.
A poll taken a month after the arrest indicated that 42% approved and
only 18% opposed it (Baker and Glasser “Russia Alleges”). “It is not an exaggeration to say that a bit
more than half of society hates the rich,” said Leonid A. Sedov, an analyst for
the Russian Center for Public Opinion Research, an independent polling
company. “They feel the rich did not get
their money in an honest way. And in part, that is actually true.” “I’m on my feet working 12 hours a day,” said
Galina Novosytsova, 45, a cashier at a sausage shop in a local food market. “I
have no savings, no car, no mobile phone. They got factories just like that.” (Tavernise “Russia is Mostly Unmoved”).
Putin’s
crushing of the independent media, the Khodorkovsky arrest, and other actions
have raised serious questions as to his desire to abandon past Soviet-era
practices. He invited former KGB head
Vladimir Kryuchkov, one of the key plotters in the 1991 coup attempt, to his
2000 inauguration and supported restoring the old Stalin-era Soviet national
anthem. In announcing his support for
the restoration, Putin said:
If we agree that the symbols of the preceding epochs, including the
Soviet epoch, must not be used at all, we will have to admit that our mothers’
and fathers’ lives were useless and meaningless, that their lives were in
vain. Neither my head nor my heart can
agree with this. Is there nothing good
to remember about the Soviet period of our country? Was there nothing but Stalin’s prison camps
and repression? What about the
achievements of Soviet science, of the spectacular space flight of Cosmonaut
Yuri Gagarin, of the art and music of cultural heroes like composer Dimitri
Shostakovich? (Tyler “Putin Pushes”)
Putin is also fond of saying: “Anyone who does not
regret the collapse of the Soviet Union has no heart, but anyone who wants it
restored has no brain” (Remnick 82). To
some, efforts to restore the glories of the Soviet past were simply part of Putin’s
desire to wipe out all effective opposition and rule as an autocrat. By appealing to communist-era nostalgia,
Putin has picked up support from those who have voted for the communists in
previous elections. Increasingly, all of
Russia’s major parties in the Duma profess support for the president. Igor Bunin, the head of a Moscow think tank, believes that Putin has effectively
created a stranglehold on all political power: “The system of checks and
balances which existed in the Yeltsin years has completely disappeared. All the formal structures of power remain—the
Duma, the Federation Council, the media, the businessmen—but their substance, their
content have been eliminated” (Wines “Putin Grows”).
The
lack of any strong political opposition has allowed the government to attack
many of the problems that have plagued Russia since 1991.
The Duma has passed a number of structural reforms that had been
strongly opposed by previous Communist-dominated legislatures. In August 2000, Putin signed a new law that
greatly simplified the tax process, leveling a flat 13% tax on incomes and
removing many payroll and pension fund taxes.
Almost instantly, income tax revenues rose by over 50%, and today Russia collects a third of its GDP in taxes, a rate slightly
higher than the United States (Aslund 22).
In 2002, corporate taxes dropped to a flat rate of 24%. Bank deposits are now insured. A new labor code has been approved, replacing
Soviet era legislation that did not even recognize private employment. The new code provides for a minimum wage,
overtime pay, penalizes companies for withholding wages, and specifies the
means by which workers can be fired.
Similarly, a judicial code has been enacted that will fight corruption
by raising the pay of judges and stripping them of their immunity from
prosecution. The code will also
guarantee the right to trial by jury for all crimes that carry a penalty of at least
ten years and strengthen the requirements for search warrants. Many reformers who continue to worry about
Putin’s authoritarian tendencies admit that, at times, he has utilized his
enormous popularity to force through changes that have only been talked about before. “I would even say it is the biggest step
[toward reform] since ‘92 or ‘93,” said Yevgeny Yasin, economics minister
during the presidency of Boris Yeltsin. “I
believe they’re working better than we did….
They’re doing what we thought up at that time. They’re continuing the chosen course and they’ve
learned to avoid our mistakes” (Baker and Glasser “Putin”). Putin is currently so popular (a recent poll
indicates that 82% of Russians approve of his presidency) that one of the most
popular songs in Russia features three female singers crooning “I Want a Guy like Putin.” Lyrics include lines “I want someone like
Putin, full of strength, Someone like Putin who doesn’t drink.” and “I want
someone like Putin who won’t hurt me, someone like Putin who won’t abandon me”
(“Putin’s Popularity”). Although the
song may be more a commentary on the deficiencies of Russian men in general,
Putin is generally admired and presents a stark contrast from the way Russians
viewed his predecessor, Boris Yeltsin.
The fourth
Duma elections, held in December 2003, indicated the lack of any effective
political opposition to Putin. The
United Russia Party, which offered little in the way of a political program
beyond absolute support for the president, won a smashing victory, capturing over
35% of the vote for party list seats and over half of the single-district
seats. Support for the Communist Party
continued to drop, down to 13% from their 24% total in 1999. The two main liberal, pro-market parties
failed to reach the five percent threshold to capture any party list seats
(Baker and Glasser “Putin Allies”).
Throughout the election campaign, United Russia availed itself of
unprecedented assistance from the government as all three of the government
owned television statements spoke glowingly of United Russia, savagely attacked
the Communists, and ignored the other parties.
The Organization for Security and Cooperation in Europe (OSCE) sharply
criticized the “unequal campaign opportunities” and “clear bias” in the media
on behalf of United Russia. News was so
tilted that 56 percent of all news coverage on one state network in November
was about Putin or United Russia, the OSCE found. In some schools, children were made to write
essays extolling United Russia—or, if they preferred, the virtues of the local
United Russia candidate. A popular
supermarket chain, signed an agreement with United Russia requiring all clerks
to wear party baseball caps and buttons, regardless of their political views. On Moscow’s billboards and the state-run
Metro, United Russia ads dominated and other parties charged that police
frequently removed their posters from public areas (Glasser “Russia’s Party for
One”). With the results of the election
a foregone conclusion, many citizens showed little interest in the
elections. Turnout fell below fifty
percent, significantly lower than the three previous Duma elections. The election represented both the resurgence
of “great Russia nationalism” and “the failure of the liberals” who pushed market
and democratic reforms, said Vladimir Ryzhkov, an independent Duma deputy. “Now the future of Russia is in the hands of
one man—that’s Putin” “The question is
whether he will allow for a new onslaught of totalitarianism, nationalism, a
new imperial policy, or will he be reasonable enough to prevent this kind of
development” (Baker and Glasser, “Putin
Allies”).
The Economy
Questions
regarding political pluralism and a free, independent press have often taken a
backseat to economic and foreign policy issues since 2000. Russia’s economy is still well behind that of
the more developed countries of Western Europe.
With an annual gross domestic product of $346 billion, Russia’s economy
is smaller than that of the Netherlands, despite a population advantage of 146
to 16 million. It is also overwhelmingly
dependent on its export of natural resources, as oil, natural gas, and metals
account for 75% of the country’s exports (Lannin). As the world’s second leading oil exporter (Saudi Arabia is first), oil exports and their taxes currently
account for 40% of all government revenue (Wines and Tavernise). Manufacturing still remains handicapped by
outdated equipment and, despite a growing grain surplus, the country imports
40% of its food (Brooke).
In
most former European communist countries, the development of small businesses
has led the way to a healthier economy.
In Russia, there are fewer small businesses today than existed
in 1994. Less than 30% of Russians are
employed by small and medium-sized businesses, in comparison with over 60% in Poland, Hungary, and the Czech Republic, a condition that President Putin has referred to as
a major concern (Wines “At Last’).
Economic power is extremely concentrated. Eight major business groups, led by powerful
oligarchs, control 85% of the income from Russia’s 64 biggest private companies
(Tavernise “Handful”). “Our hope that
small business would become the engine of reform and would take its proper
place in the economy has not yet come to pass,” Putin commented in December
2001. He laid the blame squarely on
government corruption, especially on permit-givers, inspectors and regulators “who
feed off small business at every stage of its development” and who limit the
growth of businesses by “constant extortions.”
Bureaucracy is also to blame.
More than 500 steps are legally required to obtain a business license in
Russia, and hundreds more agencies then regulate almost
every aspect of business life. Each step
in the bureaucratic chain presents an opportunity to extract a fee, a
consideration or an outright bribe from a businessman or woman whose existence
depends on government approval. While
large businesses often have the political connections to cut through such
obstacles, small businesses are usually at the mercy of government bureaucrats
who seek bribes to supplement their meager official salaries. Alexander Ioffe of the Russian
Entrepreneurial Organization’s Union, a small-business lobby group, maintains that most
small and medium-size businesses pay bribes in one form or another. “There is essentially a state racket at work,”
said Ioffe. In 2002, the Duma passed
legislation that eliminates bureaucratic licenses for half of Russia’s small
businesses. “The president has sent a
signal that the attitude of the government is changing, but what lies ahead
will be very difficult, very painstaking work because it will mean depriving
officials who are financially doing pretty well” (LaFraniere “Cleaning Up”).
Despite
the dangers of a lack of diversification, Russia has benefited greatly from high world oil
prices, which have remained in the $30 per barrel range during Putin’s term in
office. As a result of the increased
revenue, many of the most serious economic problems that plagued Russia from 1991-1998 have improved
significantly. Unlike any other developed
country, Russia’s Gross Domestic Product (GDP) has shown positive growth for five
consecutive years (an estimated 6.2 % in 2003, 4.3% in 2002, 5.5% in 2001, 8.3%
in 2000 and 1.8% in 1999 when oil prices were below $20 per barrel). The currency also has remained relatively
stable, hovering between 27-32 rubles per dollar over the past four years. Inflation, which often exceeded 50% during
the Yeltsin years, was only 16% in 2002 and has declined further to 13% in
2003. State salaries and pensions are
being paid on time. The 2003 budget included
a 33% increase in social spending, with much of the money going toward raising
the pay of doctors, teachers, and soldiers as well as other improvements in
education, healthcare, and welfare payments (Aris). In the past two years, the country has
maintained a budget surplus, alleviating the need to seek additional foreign
loans. In November 2001, Russia totally repaid the $1 billion five-year
Eurobond that it had borrowed in 1996.
This marked the first full Russian bond payoff since Tsarist times. As a result, Russia’s credit rating, which
had been an immense casualty of the 1998 economic crash, recovered to a point
that JP Morgan declared Russian debt as less risky than emerging market debt in
general (“Three Years”). Although foreign investment has not recovered
from 1998, there are signs that domestic investment is increasing, reversing a
ten-year trend of capital flight as profits made in Russia were usually deposited overseas rather than
reinvested in the Russian economy.
Roland Nash, chief economist at Renaissance Capital, a Moscow investment bank, has noted the difference: “Russian money
is going into Russian assets—that’s new.
It’s different from the stealing and rape we saw during the 1990’s” (Tavernise
“Not”).
Although much of the economic improvement
is undoubtedly the result of higher oil prices, several other encouraging signs
are present. Due to increased investment
in new technologies, oil exports have risen significantly in the past two years
after a decade of decline. Grain
production, a chronic problem during the late Soviet years, has also risen to
the point where Russia is becoming a factor in world grain exporting markets. Russia was one of the world’s leading grain exporters at the
beginning of the twentieth century, but increasingly imported grain over the
last three decades of communism. Exports in the 2002-03 agricultural year reached 10 million
tons, eclipsing the 8 million-ton record set in pre-revolutionary Russia back in 1913. Most of Russia’s grain exports go to Italy, Greece, Spain, and Northern
Africa, but with labor and farming costs less than half of Canada’s, Russia is
well-placed to win new markets. Priced
at $85 to $95 per ton, Russian wheat is $50 below U.S. wheat of the same quality, and $20 below
that of the European Union. Problems
still remain. Russian grain exports, however, are far
from having the weight they had in czarist days, when it supplied one-third of
global markets. Outmoded farm equipment, a lack of fertilizer, and
high transportation costs, which often account for over 50% of the total cost
of production, still plague farm productivity.
Russia must construct new port terminals and
improve its railroad system to ship its surplus grain cheaply (Belton). If
these problems can be solved, food production analysts believe that Russia, which has 13 times the farmland of France, could export tens of millions of tons of surplus
grain within a few years (Koriukin).
Despite
the general economic improvement, many Russians, especially those living
outside of Moscow (where incomes are triple the national average), have
seen little progress. The average
Russian is only starting to approach the level of real income enjoyed by
citizens before 1991 (Wines “At Last).
The average monthly wage is $115 and about a third of Russians have
incomes below the poverty line of $40 per month (Starobin, Belton, and Crock
70). The middle class, defined as those
families earning $1,000 per month in Moscow and as little as $200 per month in other areas, is
still very small. Sociologists estimate
that 20-25% meet this qualification in Moscow and as little as 10% of the rest of the country
(Montaigne 18). In comparison, 64% of
the U.S. population falls within the middle class income range
of $15,000 to $75,000. With massive tax
avoidance, however, Russian income figures are always open to question. There are greater signs of improvement in
terms of consumption. One research study
observed “that a majority of respondents spent 1 ½ to 2 times more than what
they said they earned” (Raff). In
addition, extremely low housing and food costs mean that Russians have a large
amount of spendable income. Private
automobiles, for example, have increased from 79 per 1,000 people in 1991 to 224
per 1,000 ten years later (Starobin, Belton, and Crock 72). When Ikea, a major European home supply
store, opened in Moscow in 2000, company executives were shocked to find that
sales were as high as in their Western European outlets (Aris). In 1997, Moscow had no shopping centers;
today it has 15 (Wines “Russia’s Economy”).
Regardless
of encouraging economic statistics, few can argue that many Russians still remain
profoundly disappointed in their country’s post-communist performance. As one Russian commented to a reporter: “Everything
Marx told us about communism was false.
But it turns out that everything he told us about capitalism was true”
(Freeland 17). One-fifth of those Russians
identified as middle class indicate that they eventually hope to emigrate from Russia (Raff).
Teachers, army officers, health care workers, and most other government
employees currently earn monthly salaries of only $50-100 per month (Montaigne
21). This is no doubt a major reason why
a 2001 poll showed that 79% of the population regrets the demise of the Soviet
Union, up from 69% in 1992 (Seward).
Russia also faces an enormous demographic crisis. Recently, the Economic Development Ministry
prepared a forecast of Russia’s population in 50 years that indicated a dramatic
decline to 94 million people, 52 million fewer than today (“Demographic”). Life expectancy in Russia is 58.9 years for men and 72.4 years for women (in
comparison, life expectancy in the U.S. is 74.2 for men and 79.9 for women). In addition, Russia may have as many as a million people infected with
the AIDS virus, and this figure could reach 5-8 million by 2010, 8-10% of the
population (“Intelligence Study”). Most
of this is due to intravenous drug use, but increasing levels of prostitution
have contributed to rapidly rising HIV and venereal disease rates as well
(Karash). Alcoholism also remains an
immense social problem. Thirty thousand
Russians die each year of alcohol poisoning.
A recent study indicates that half of all Russian men who die, regardless
of cause, are drunk. Alcohol plays a
major role in road accidents, homicides, suicides, domestic violence,
industrial accidents, birth defects, and violent crime. Orphanages are full of children abandoned by
their alcoholic parents (“Vodka”).
Chechnya and Foreign
Relations
Similarly
frustrating is the ongoing struggle in Chechnya. According to
government statistics that human rights workers argue are too low, Russia’s
army has suffered over 4,000 deaths since the fighting resumed in August 1999. Chechen rebels claim that 80,000 civilians
and 1,500 rebels have also died (Baker “For Putin”). Russia has repeatedly faced criticism by world organizations
for human rights abuses. “People are
being killed through summary executions.
Detainees are being taken to temporary camps, where they are badly
beaten and tortured. Some of the
detainees simply disappear,” says Russian Human Rights activist Oleg Orlov who
visited Chechnya in February 2002 and videotaped Russian soldiers
looting and burning Chechen homes (“After Two Years”). Although the main forces of Chechen
resistance have been blasted away and some economic restoration has begun, the
area is far from pacified. “They are
everywhere,” commented one Russian soldier, referring to the rebels. “This is their home. We are just like cosmonauts. If we step too far from our ship, we are
lost…. You know, here children start
firing guns when they are 12 years old, so every Chechen is a danger. The only
way to end this is to kill them all” (Williams “For Russians”). The October 2002 incident in which over 100
people died in a Moscow theatre after Chechen rebels took the audience and
cast of a popular play hostage for three days underscored that Chechnya is a problem that refuses to go away. “They don’t know what to do in Chechnya. They don’t
have a plan. It is an endless conflict,”
says Alexei Malashenko, a Chechnya expert with the Carnegie Endowment for International Peace Moscow Center (LaFraniere “Grozny”). Putin, nonetheless, has vowed to stay the
course despite a November 2002 poll which indicates that 73% of the public
believes that the government’s policy has been a failure. Although critical of government policy, the
Russian people are undecided as to the appropriate course of action, with 48%
favoring negotiations with the rebels and 43% arguing for a more vigorous
prosecution of the war (Zolotov “Polls”).
Putin meanwhile, has attempted to deflect international criticism of
human rights violations by linking Chechnya with the international war on terrorism. The war, he says, is a battle to stop
international Islamic terrorism from invading Russia, and “we won’t allow it” (Glasser “Putin’s War”).
The
terrorist attacks of September 11, 2001 dramatically altered the path of
U.S.-Russian relations. Immediately
following President Bush’s orders to place U.S. forces on high alert—a move that previously would
have prompted a similar response from the Russians—Putin called Bush and
informed him that Russian troops had been instead ordered to stand down. The significance of this symbolic action was
not lost on President Bush: “It was a moment where it clearly said to me that
he understands the Cold War is over” (Sipress).
Less than two weeks later, Putin announced that Russia would give almost
unlimited support to U.S. actions against Osama bin Laden’s al Qaeda network in Afghanistan,
promising to share intelligence, provide airspace for relief efforts,
participate in search and rescue missions, and increase its supply of arms to
anti-Taliban forces. More importantly,
just days after Defense Minister Sergei Ivanov had expressed opposition to the U.S. using any of the former Central Asian republics of
the Soviet Union as bases for attacks on Afghanistan, Putin overruled him and the Russian military, saying
that Russia would not object to the presence of U.S. forces in Kyrgyzstan, Kazakhstan, Tajikistan, Turkmenistan, or Uzbekistan. “He’s with
us,” a senior U.S. official at the U.S. embassy in Moscow commented. “And
he is all by himself” (Starobin, Belton, and Crock 67).
While
Putin’s strong support for the United States was guaranteed to anger hard-liners at home, it
totally revamped U.S.-Russian relations and may prove to pay lasting dividends
for Russia in the future.
Faced with a growing Islamic threat on its southern border, which the
war in Chechnya indicates Russia is ill equipped to fight, Putin now
has a strong ally in the United States (Starobin, Belton, and Crock 72). Almost immediately after September 11,
Russian officials tried to link bin Laden with Chechen rebels. Sergei Yastrzhembsky, the Kremlin
spokesperson on Chechnya, quickly claimed that although bin Laden was not the
only foreign backer of the rebels, “he is a real sponsor, that is a fact.” Although evidence of direct ties to al Qaeda are difficult to substantiate,
Russian intelligence officials claim that bin Laden’s organization has provided
money, training, and anti-aircraft missiles to the rebels (LaFraniere “Moscow”). A bin Laden associative, Abu Daud, stated in
a 2000 interview that 400 Arab volunteers, trained by al Qaeda, had been sent to fight in Chechnya. “Putin wants
us (the U.S.) to legitimize what he’s doing in Chechnya, to equate it with the war on terrorism,” comments
Russian expert Michael McFaul. “He wants
Bush to come to Moscow and say, ‘We’re in this war together’” (Carney).
With
this new relationship, a number of long-standing contentious issues between the
U.S. and Russia seemed to disappear in the wake of September 11. Putin hardly objected after President Bush
unilaterally withdrew from a 1972 treaty that would have limited the U.S.’s
ability to test missile defense systems.
In May 2002, Bush and Putin signed an agreement that will drastically
cut the number of both counties’ nuclear missiles. The U.S. promises to cut its nuclear arsenal to approximately
2,000 warheads from its current 6,000.
Putin had previously announced plans to cut the Russian arsenal as low
as 1,500 warheads, avoiding the cost of replacing many Soviet-era warheads that
would reach the end of their service over the next decade. Some American conservatives immediately
labeled this deal as “Bush’s Surrender,” implying that Putin had no alternative
but to reduce Russian warheads regardless of any U.S. action (Safire).
In further cost-cutting moves, Putin closed former Russian military
bases in Cuba and Vietnam. The U.S. also agreed to continue to spend approximately
$500,000 a year in the Nunn-Lugar Cooperative Threat Program to assist Russia in dismantling nuclear, chemical, and biological
weapons.
A
more significant sign of cooperation was the admission into NATO of the former Soviet Republics of Lithuania, Latvia, and Estonia in November 2002, a move the Russians had previously
strongly opposed. Following the NATO
meeting, Bush traveled to Russia where he met cordially with Putin. It is not inconceivable that Russia might someday be admitted to NATO, the Cold War
alliance formed to oppose Soviet expansion.
Currently, the NATO countries have agreed to consult with Russia, but maintain their right to act without Russian
approval or support. Putin has
repeatedly emphasized that the Cold War hostility between the U.S. and Russia should be treated as merely an outdated relic of
history. In his 2002 state of the nation
address, he commented: “No one is planning to be our enemy in the modern
world—nobody wants it and nobody needs it” (Zolotov “Putin”). Others in Russia disagree. Some,
especially military leaders, grumble that Putin has been “Gorbachevized,”
implying that he has sacrificed his own country’s interests in order to please
the United States, receiving nothing in return (Carney). They point out that the U.S. Congress has
refused to repeal a Cold War era law designed to punish communist governments
for their violations of human rights, which requires Russia to get annual
approval in order to receive normal trading rights with the U.S. Even China, a far more repressive state, is
not required to do this. A May 2002 poll
revealed that less than 50% of Russians have a positive view of the U.S., down from 70% in October 2001 (Gessen). Dimitri Trenin, of the Carnegie Moscow Center, believes that Putin must soon realize some tangible
gain for his cooperation with the U.S.: “Many would still say he’s selling Russia for a song; that he’s giving and giving and not
receiving anything in return” (Wines “Tying Russia”). Clearly, Putin has been willing to sacrifice
long-held positions that are still popular with his own people in favor of a
close relationship with the U.S., which he believes is crucial for Russia’s
economic development. “Economic policy
is dictating all the other aspects of international relations, says retired
Russian General Vasily Lata. “Putin sees
the future of Russia a bit further. He sees that
without positive economic development, Russia has no future” (Baker “Putin’s Concessions”). Although Russia’s strategic realignment has
yet to produce many tangible benefits, clearly, in Putin’s eyes, it is better
to be viewed as a significant partner of the U.S. than merely as a defanged former enemy. The Washington
Post has noted: “In just a few years, Russia has moved from being an economic basket case to Bush’s
key ally” (Ignatius “Russia Wins the War”).
In
addition to providing Russia with some tangible reward for her support in the war
on terrorism, two other major obstacles remain in U.S.-Russian relations. Russia has close ties to two of the countries that President
Bush labeled “the axis of evil.” Russia is currently under contract to complete a nuclear
power plant in Iran and to build five additional plants in the future. The U.S. charges that the Iranians will then be able to
utilize this technology to develop nuclear weapons and has urged Russia to stop all assistance to Iran. Russia, desperately needing the $5 billion that these
contracts will provide, insists that the reactors will only be used for
peaceful purposes and will submit to regular inspections by the International
Atomic Energy Commission (Myers and Tavernise).
A far more serious disagreement is in regard to Iraq. Along with
France and Germany, Russia opposed President Bush’s policies in Iraq. After the 1991 Gulf War, Russia emerged as Iraq’s leading trade partner. Since 1996, U.N. figures show that Russia sold Iraq $4.18 billion in food, medicine and oil-industry
supplies. In addition to recent sales, Iraq still owes Russia for large amounts of arms sales during the Soviet
era. Estimates place Iraq’s current debt
to Russia at between $7-15 billion (Baker “Russian-Iraqi”). Prior to the U.S. invasion, thousands of
Russians worked in Iraq, mainly as technical advisors in the oil industry, and
several Russian oil companies had also signed long-term deals with the Iraqi
government to further develop vast oilfields.
The total value of these deals is estimated to have exceeded $40 billion
over the next ten years (Baker “Russia Defends”). Clearly, Russia fears that a U.S. supported Iraqi government would repudiate past debts
and that U.S. and British oil companies will replace the Russians
as developers of Iraq’s vast oil-producing capabilities. Following President Bush’s visit to Russia in November 2002, officials in Moscow said that they had reached an agreement with the U.S. to protect Russia’s economic interests regardless of
any action against Iraq (DeYoung); however, Russia clearly has much to lose
as a result of the U.S. occupation of Iraq.
In
addition to the strategic realignment following September 11, continued
conflict in the Middle East has increased the importance of Russian oil. Already the world’s second leading oil
producer, a study by the Petroleum Finance Co. (a Washington consulting firm)
notes that when Russia’s proven oil and gas reserves are combined, it is by far
the world’s leading energy nation, with about 15% more proven reserves than
Saudi Arabia. Russia is actively expanding its ability to export its own
oil, and its dominant geographical position, as well as its relationship with Iran, Iraq, and the former Soviet republics of Central Asia, could easily give it a degree of control over about
16 million barrels per day within the next 5 years, roughly double the current
production of Saudi Arabia. Although Russia would like to sell oil to the U.S., almost all of its exports go to Europe. Russia is greatly hampered by the lack of sufficient export
ports capable of handling large tankers and a poor internal transportation
system. So far, western countries have
been reluctant to invest in further developing Russia’s oil producing and
exporting capabilities. Since 1993, the
West has invested only $5 billion in the Russian oil industry in comparison to
$13 billion in neighboring Kazakhstan. The lack of
stable tax laws, a court system that cannot be trusted to enforce foreign
investment rights, and the fear of Russian oil companies losing control to
foreigners has hindered attempts to modernize its facilities and tap difficult
to reach resources. Russian investment,
however, has increased dramatically, to $10 billion in 2001, up from $1.5
billion in 1999, a dramatic turn from the days when Russian owners were mainly
interested in making a quick profit and moving their money overseas. “The Russians have realized you can make more
money by real capitalism than by stealing,” comments the head of Petroleum
Finance. (Ignatius “Russia Wins”). The
importance of Russian oil will only increase.
2002 production reached almost 8 million barrels per day (of which over 5
million were exported), up from 6 million in 1996, and estimates are that Russia could hit 10.2 million by 2010. Just as Saudi Arabia, with current exports of 6.7 million barrels per day,
has been able to enhance its status and influence based upon its energy production,
Russia will be increasingly important to the economies of
the West (Banerjee and Tavernise).
Putin’s
response to the events of September 11, 2001, and the resulting strategic
alliance with the United States, is the most apparent indication of a “New Russia.” This, however, is only the most visible sign
of a country undergoing vast changes after a decade of turmoil. The Russian economy, bolstered by significant
legal changes long-needed to permit a market economy to develop, is finally
showing progress. It is an economy still
vastly overly dependent on oil, but Russia’s continued emergence as a significant
energy provider can only further enhance her international stature. There are still significant questions in
regard to Putin’s method of rule; has he has used his power more to push
through much needed reforms or to resurrect an authoritarian state? The continued high level of approval he
elicits from the Russian people may be a result of his success in quashing
negative media coverage, but it is also likely to reflect a genuine feeling
that Russia is finally on the right course.
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