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.[1]  But Putin was one of the more honest and decent people in the St. Petersburg government” (Wines “Putin Retains”).[2]  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”).[3]

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”)[4]

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.[5]

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.[6] 

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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[1] Note that you must always identify speakers.

[2] Sources of only one page do not require a page number.  Citations should be punctuated identically to the Works Cited list.

[3] If all of the information in a paragraph comes from the same source, the citation should only be placed at the end of the paragraph.

[4] Quotations of over four lines should be blocked.

[5] Sources do not need to be cited if the source (Jensen) is identified in the narrative.

[6] This program, pioneered by Senators Richard Lugar (R-IN) and Sam Nunn (D-GA), has deactivated over 6,000 nuclear warheads and almost 500 ballistic missiles since 1991.  The program has cost about $400 million a year.