Russian elites and KGB have found common ground on one issue, restoring Russia as a great power, as long as the energy giants and the financial-industrial magnates are able to persuade Putin that they are the best instruments to reach this goal…
Speech delivered by Dr Françoise Thom (*) at the International Conference on « Challenges to Western civilization and the future of NATO » hold at the Emausy Monastery in Prague, Czech Republic, April 26, 2002.
Table of Contents
One of the Kremlin’s spin doctors’ top priorities has been to improve Russia’s disastrous image in the world media. After two years one can say that this task is largely accomplished. Russia is now seen as an emerging tiger, and the press presents a glowing picture of the Russian economy. With a simplified tax system (a flat income tax of 13 percent, lowered turnover and custom duties, and a 24 percent profit tax) reducing the tax burden and broadening the tax base; new laws on business registration, licensing, and inspections; a new Land Code establishing the general principle of land ownership for urban land; a new Labor Code liberalizing the hiring and firing of workers and clarifying employees’ rights, output has grown by 5.2 percent last year. Russia’s stock market index increased dramatically. The federal budget has registered a large surplus. Inflation is on the wane. The outflow of capital from Russia continues to ebb.
Shadows in the picture
True, even the Russian media admit, there are shadows in the picture. After peaking at 9.0 percent in 2000, GDP growth ground to a halt by the end of last year, – though for the year as a whole growth came in at 5.0 percent and it did start to pick up again early this year. The economy is still dependent on the world markets for raw materials and is still affected by seasonal changes: when oil prices tumbled in September last year, growth in Russia stopped.
The inflow of hard currency to the country nearly halved in 2001 because of declining prices on commodity markets. The inflow of direct foreign investments remains insignificant: 2.5bn dollars – even less than in 2000 – were invested in Russian companies in the whole of 2001. When Putin decreed an 89% increase in state-sector wages, it soon became clear that certain regions couldn’t afford to meet their financial commitments, and that’s when arrears began to rise. The federal authorities repeatedly have had to dip into their coffers to help the country’s regions, territories and republics pay off wage arrears. For the last six months, the GDP has faltered. Reports from the regions have been growing increasingly alarming. Back in the summer of 2001, Putin forced the regions to transfer most of the locally collected taxes to the federal center. While a heavy burden of budget commitments is placed on the regions, regional funds are now running dry. Wage arrears are piling up again, – and not just in a dozen regions, as the cabinet claims, but in almost 70. Two years ago, 17 out of 89 regions of the Russian Federation were capable of contributing to the center’s coffers to support the rest. Now, only nine such regions are left. Those who are tempted to believe in the Russian tiger should remember how long it has been taking West Germany to make the East Germany economy moving. And the problems existing in Russia are much worse than those of East Germany.
First there is the rapid depreciation of fixed assets and equipment in industry, transport, power and communications. Enormous investments are needed for retooling the economy and for overhauling the entire infrastructure.
Secondly there is the unprecedented demographic recession (i.e. a sharp birth-rate decline and a decline in the number of young people, who are supposed to replace retiring workers) with the additional removal of large able-bodied population categories, – drug addicts, AIDS victims, alcoholics, mentally disturbed persons, crime victims and people with congenital defects – from the production and consumption sphere.
Thirdly there is a criminalized public mentality, the cult of violence, eroding moral values, as well as a decline in society’s overall culture and education standards.
Fourthly the traditional plagues of Russia, bureaucracy and corruption, have not decreased. As for court rulings, they are still bought and sold. This situation seriously undermines the position of the Russian market in the eyes of potential domestic and foreign investors.
The political picture
The Russian media have also trumpeted the success of the Putin administration on the political field. At least stability has been attained, they claim. Of course freedom of the media is not perfect, but the erosion of the Russian state has been stopped. Yet, the Soviet regime was also very stable, till it collapsed. True stability rests on the smooth functioning of democratic institutions, on a self-governing decentralized society.
This is not what Putin’s regime has brought to Russia. His stability is a Soviet-type stability, it is reached through the destruction of actual, virtual or imaginary alternatives centers of power or adversaries.
The philosophy of the « vertical of power », which seems to be one of Putin’s rare convictions, is absolutely Soviet: implementation of orders given from the top must be controlled at every stage and level. Institutions are reduced to a series of parallel transmission belts.
Step one of Putin’s strategy was to appoint seven non-constitutional presidential representatives who largely usurped the powers of regional governors elected according to the constitution.
Step two, was to banish governors from the Federation Council (equivalent to the Russian Senate) and effectively to convert that chamber into a collection of nobodies acting on instructions from the Kremlin.
Now, step number three is to deprive the opposition in the lower chamber (Duma) of active participation in the legislative process: Russia’s parliament, whose majority largely backs President Putin, has overhauled its key committees – throwing Communists out of most of their top jobs.
When the speaker of the Duma appealed to the President on this matter, Putin said that this was the Duma’s internal affair. This was typically hypocritical, as everybody in Russia knows that the maneuver against the communist fraction was organized by the Presidential administration. The reasons of this operation are interesting.
The Kremlin already had a fair degree of control over the Duma. All bills proposed by the president were adopted by the Duma and even the most problematic bills — such as the labor code and the land code — were, in the end, accepted. The problem lay elsewhere.
The popularity rating of the Communist Party (unlike that of the party at power, United Russia) has been growing steadily over the past few months (from 32% in favor in January, to 34% of supporters in March 2002). This against a background of record low ratings for the President’s United Russia party, which in late March had only 21 percent approval compared with 34 percent for the Communists.
Most of this new trend is due to falling real incomes, inflation and deferred wage payments, particularly in the provinces. United Russia was supposed to be the pro-government party. However, over the four months of its existence, this party has not promoted a single significant initiative that could make an impact on the public.
Vladislav Surkov, the Kremlin official who supervises the creation and development of United Russia (and others parties), has admitted that « intellectual life in the party equals zero« . The Kremlin sought to prevent an alliance between Communist voters and disgruntled local authorities. This prophylactic strategy against an exaggerated risk, reveals the Kremlin’s feeling of insecurity. This in its turn can be explained only by the fact that the situation in the country is far from the glowing one depicted in the media and in official propaganda. For governors are no longer the formidable force they were under Yeltsin. The Kremlin can bring pressure to bear on them by a variety of methods.
Governors and chairmen of regional legislatures were expelled from the Federation Council (immunity was stripped from them as well) and sent them to the State Council, a « consultative » body with vague status and annual rotation. The governors were offered a deal: they lost all influence on the federal level, but they were compensated by acquiring full control in their regions. Governors are harassed by constant appeals to the Supreme and Constitutional Courts and by protests from the prosecutor’s office against the laws adopted by regional parliaments. Budget contributions to the center were drastically increased the year before last. The Kremlin uses Transneft (the oil pipeline network) and Russian Joint Energy Systems (the electricity grid) to remind the regional barons who actually controls the pipes (oil dollars) and the switches (electricity bills). The issue of eventual merging of regions gives now further psychological leverage against local governors. The Russian Constitutional Court has confirmed the right of the country’s President to dismiss leaders of constituent parts of the Russian Federation, and has also confirmed the right of federal legislators to dismiss regional parliaments. However, the Constitutional Court did make this right conditional by adding a number of substantial restrictions, requiring decisions at least three levels of jurisdiction, including a decision from the Constitutional Court itself.
In the Kremlin’s eyes, party-building amounts to the creation of new transmission belts: « In the West, the party that wins an election forms the government. But in Russia the victorious administration forms its own party. The presidential administration graciously receives anyone with aspirations to be a party boss and advises on what direction his or her new party should take« .
The actual « party of power » (now called United Russia) is essentially a further instrument of control on the provinces. The appointment of regional party leaders must be approved by the political council of the federal party; and there have been cases (for example, in Altai, Khabarovsk, Oryol and Birobidzhan) when the membership of entire groups of United Russia was terminated for showing excessive independence in selecting regional leaders. Only in this way is it possible to prevent governors from seizing control of the regional branches of United Russia and turning them into their own regional « party of power. » It is still premature for United Russia to pursue positions in regional executives, as these remain controlled by well-entrenched governors. However, posts in the legislative branch, where United Russia has already formed factions in regional assemblies, are far more accessible. In some regions, United Russia factions have proven sufficiently strong to seize control of the regional assembly speakerships.
As a result of the measures taken since 1993, the Kremlin is now almost the only player in the political-party field. Does this mean stability and coherent leadership ? We know now that under its monolithic façade the Soviet elite was splintered between various warring factions; and that this hidden internecine conflict helped to bring down the totalitarian state. Conflicts between persons or interests that cannot be brought into the open and formulated in conceptual terms are deeply destructive. Clannish mentality means indifference to the public good. Each protagonist prefers a setback for the country to a success for his rival. Several factions are fighting at the top of the « vertical of power » – and each group is willing to use all its resources to promote its own projects. The Central Bank was fighting a guerrilla battle against the ministry of Finance; the FSB is in conflict with the Customs administration; the general staff with the Minister of Defense; the Presidential administration with the Ministry of Transport; the head of government with the Audit Chamber… Putin has to arbitrate between the various fragments of the bureaucracy, and to make sure that no group becomes dominant to the point of threatening his own power.
This indifference to the public good, inherited from the Soviet bureaucratic system, is increased by a recent post-communist trend: the pace of formation of vertically integrated groups of companies is accelerating. These financial-industrial groups consist of various enterprises and banks. Financial-industrial conglomerates have a tendency to put their interests before those of the wider public; they need fiscal incentives to develop particular sectors and may lobby the authorities to restrict competition from foreign companies.
The need to arbitrate between warring factions leads to inconsistencies in Putin’s behavior: this year, in conversation with the Chairman of the Union of Industrialists and Entrepreneurs, Arkady Volsky, Putin unexpectedly raised the subject of who Russia’s natural income actually belongs to. At the same time, a question was raised in the State Council about the granting of licenses for the extraction of precious minerals. Yet the matter got no further than the discussion stage. Putin can permit his prosecutor general Vladimir Ustinov to launch an investigation into the president’s chief of staff Aleksandr Voloshin, while leaving Voloshin in charge at the Kremlin, free to take retaliatory measures and to defend the interests of the Yeltsin Family.
As a result of the factors outlined above, one can conclude that the Russian regime built by Putin is not a stable one. As soon as his personal power will come into question (either because of organized oligarchic resistance, because of an unexpected crisis or because of the end of his mandate), the « vertical of power » will disintegrate and the political crisis at the top will become a crisis of the Russian state as it happened in the Soviet Union in 1991. The destruction of the communist faction will remove the incentive (fear of renationalizations and arrests) which led the oligarchs to unite twice to save the central power, in 1996 and in 1999. So the crisis may be protracted with unpredictable outcome.
Putin’s foreign policy
Putin’s foreign policy tries to reconcile the traditional objectives of Soviet/Russian diplomacy with an acute perception of Russia’s weakness. The Russian President declared recently: « I am conducting this [pro-Western] policy solely because I think that it fully suits Russia’s national interests and not in the least to be nice to anyone.«  As commentator Andronik Migranyan puts it: « It is clear that the demographic and economic situation are such that Russia will not be able to control its vast territory and resources for more than a few decades. » The West is Russia’s only realistic geopolitical and geo-economic ally. However, that does not mean that Russia has accepted her diminished status. Like a good judo expert, Putin tries to turn America’s strength to his own advantage and to use maximally the one remaining strength of Russia: her increasing weight as a major oil producer. For this reason the Putin Administration has created the Eurasian Economic Union (EEU) and the Eurasian Energy Community (EEC), in order to reinforce or to restore Moscow’s control on oil and natural gas exports from Russia, Kazakhstan, Azerbaijan and Turkmenistan.
Russia has an overwhelming interest in the flare-up of the Middle Eastern crisis, for two reasons. First, it boosts oil prices and will encourage the West to invest in Russia’s oilfields; Russia wants to replace Saudi Arabia as the main provider of energy to the West. Secondly, the Middle East crisis is destroying the transatlantic link and isolating the US from its allies. Thirdly it will imperil American domination: « The current lone superpower is intervening in such a number of diverse conflicts and is dissipating its energies so much that the aggregate pressure on it in these regions will be entirely symmetrical. […] It seems to me that the United States has made a cardinal decision on the Near East instead of building up complex relationships with Arab regimes. It may have decided to marshal these regimes to fit a ‘correct’ US template. That is why it needs action in Iraq. It is a very ambitious goal during the achievement of which it could greatly overstretch itself…. »
This has radically changed Russia’s attitude toward NATO. If NATO becomes a political organization (as the Russians, since Gorbachev, have always demanded) and if the US loses interest in it because of disgust with its European allies, Russia can hope to step into America’s shoes. The co-chairing of NATO with the US, combined with a dominant position as Europe’s main oil and gas provider, will give Russia an hegemonic position in Europe. Here is how general Leonid Ivashov, a well-known hard-liner, sees it: « I think that as soon as the United States reduces its role in NATO or NATO expands to forty states, Europe will have a normal collective security system with Russia making a decisive contribution to it. »
This many-sided strategy is now being implemented. Instead of supporting the radical Arabs as in the Soviet past, Russia is now supporting the extreme right-wing in Israel, with the same aim as in the Soviet times but much more prospect of success in rending the Israel-Arab conflict intractable. This does not exclude continued support to Russia’s traditional allies in the Islamic world: only last year, Iran bought another US$7-billion worth of arms and military equipment from Russia. This new Putin diplomacy of fostering international conflicts has been excellently described by Dmitri Glinski-Vassiliev: « Hence the otherwise seemingly illogical diplomacy of subtly encouraging the hard-line and war-prone groups within Western governments » (that are partially overlapping with those who have positioned themselves as the winners of the Cold War).
The starkest evidence to date of such an encouragement was Putin’s ‘impromptu’ statement in Brussels that virtually absolved the countries of the anti-terrorist coalition from responsibility for whatever civilian casualties may occur in the course of their operations. Later, he restated the same point differently, by saying that the desire to avoid civilian casualties actually caused some of the U.S. problems in the Afghan operation… Systematic analysis of Putin and his proxies’ actions and statements reveals a pattern of encouragement for the more bellicose forces, both in the West and among its rivals, at the expense of forces of moderation and tolerance. Consider, for example, Putin’s comments to Germany’s Bild, in which he softly reproached Germany for being content with its « modest position in the world » rather than playing a more active military and security role globally, and spoke condescendingly of those ‘intellectuals’ who keep reminding everyone about Hitler to justify restraint. On another occasion, Putin specially emphasized that the German armed forces’ participation in a military action outside of the German territory will « cause no concern at all on his part. »
At the same time, Putin is trying to convince the US that a Russian alliance will be much more useful for them than the one with their difficult European allies, and that it could be a substitute for NATO: « I think that Russia and the USA can be more active than the European Union in solving the [Israel-Palestine] problem. » This does not stop Putin from having with the Europeans a radically different discourse . Speaking at the Bundestag on September 25, last year, Putin declared: « Nobody doubts the great value of Europe’s relations with the US. However, I simply think that, certainly in the long term, Europe will better consolidate its reputation as a powerful and really independent center of international politics if it combines its own possibilities with Russia’s human, territorial and natural resources, and with Russia’s economic, cultural and defense potential. »
The Russian elites hope that the September 2001 attack will convince the US to abandon its traditional liberal values, allowing a convergence with Putin’s ‘dictatorship of law’ and causing further estrangement from the Europeans. Europeans and Americans alike will be encouraged to forget what cements the transatlantic link: the community of values and civilization. As Alexander Tsypko puts it, « The fact that [the West] now needs to strike a balance between freedom and the need for safety has prompted it to draw closer to our country; now at last the Americans will begin to understand that the problems of human life cannot be reduced to the rights of sexual minorities or the right to participate in presidential elections. »
Declarations by Russian leaders and articles by Russian experts show that Putin’s Russia is aiming at a revolution in the organization of European security. This would leave Russia as the dominant power in Europe and thus as an interlocutor the US would have to take seriously once again. « Russia should become an equal partner of NATO in the creation of a new system of European security. And it must be a full-fledged partner with the right to vote….Ideally, we would like the bloc to be not a military but a political organization with which we would collaborate with due consideration for changes in the world and new realities.«  … « We should not forget that in the new world this Cold War era organization is doomed; it will fade away, since it is no longer needed. It’s vital for us to get along with the United States, to cooperate with it – but if we crawl to it, or do the opposite and try to create the impression that Russia is equal in strength, it would mean we are losing sight of the main strategic goal. That goal entails participating in setting up a new global balance, to replace the exhausted model of two superpowers and assorted Third World countries. The new balance ought to be a guarantee against any slant toward US dominance … Russia shouldn’t just create a window to Europe – it ought to fling its doors wide open to cooperation with Europe. »
Russia is already making clear to the Europeans that Moscow wants to translate its energy clout into political influence. During his recent meeting with Chancellor Schroeder in Weimar, President Putin reminded the Europeans of their energy dependence on Russia, and warned them that Russia could create obstacles if Moscow were not treated as an equal partner in future agreements. « If Europe sees Russia as an alien type, then of course we could create obstacles on the path of expansion of these relations… If Russia is, however, treated as an equal partner in long-term agreements, the country will guarantee the long-term delivery of energy supplies.«
Russia’s strategy in the Western former Soviet republics reveals no less Moscow’s imperial designs. In Ukraine, Moldova and Belarus (and probably in Central Europe as well) the Putin administration supports and fosters anti-Western, communist or nationalist forces, in order to create a maximum estrangement between those countries and the West. It is clear that, in cutting her neighbors from the UE, Russia wants to « integrate » Europe as an empire, from a position of force.
This strategy is far from unrealistic. At a recent NATO meeting in Ditchley Park, the mounting discord between the United States and its allies was obvious. It was suggested that if NATO fails to support the United States on Iraq, it might find itself out of business. According to Polish Defense Minister Jerzy Szmajdzinski, the main difference between the new committee  and the existing Russia-NATO Council is that, up until now, Russia has dealt with an already approved common NATO position, whereas in future discussions will begin from scratch. This will make it possible for Russia to widen the gap between the US and the Europeans, playing on their disagreements.
In his April address, Putin hardly mentioned the American-Russian relations. Instead, he laid heavy the emphasis on Russia’s integration into Europe. Yet, the paradox is that the more Putin insists on Russia’s European destiny, the more the domestic evolution of Russia is widening the gap with European civilization and values. Russian media are now openly propagandizing in favor of state violence, whilst showing contempt for « European politcorrectness », human rights.
A new TV serial, Spetsnaz, started in April on Russia’s main channel. It features non-stop violence, has a stirring rock music soundtrack, and celebrates the tough guy New Patriotism of Putin’s Russia. The same mood is evident at the cinema in the new box office smash, War, by Aleksei Balabanov, whose previous Brat-2 movie showed Russian hit men outwitting and gunning down Americans in Chicago.
Russians are constantly being indoctrinated by their media that fundamental freedoms are dangerous for them. At a recent press conference, Primakov, appointed by the Kremlin as a watchdog for the new TV6 channel, said he hoped that the agreement he planned to sign with Kiselev and his team of journalists would provide for « a certain degree of censorship. » Reminded by Kiselev that Russian law prohibits censorship, Primakov said the censorship he had in mind « must be internal« , not « imposed from outside. »… « Call it self-censorship, if you like, » Primakov said. « There is nothing dangerous about that, on the contrary, self-censorship is a guarantee against any danger ». Chairman of the State Duma’s International Affairs Committee Dmitri Rogozin recently declared that Russia’s joining the Council of Europe was a mistake.
One gets the feeling that the regime plays a dangerous game of brinkmanship, whipping up ultra-nationalist passions inside Russia, whilst trying to show Putin posing on the international scene as the only moderate element in Russia.
During the recent Winter Olympics, all the media and TV channels ran a loud, almost hysterical, patriotic campaign. The President himself joined in. He was sharply critical of the judging of the ice-hockey match between Russia and the Czech Republic.
Yet, just a few days later, the Russian authorities took fright at the anti-American sentiment they had stirred up and began to present the situation in a completely different light. Now it seems that the real issue was not the judging at all, but the dire state of Russia’s sporting infrastructure, which prevented their sportsmen from preparing adequately for the Olympics. Moscow’s reaction to the presence of American military instructors in Georgia has been exactly the same: Hysteria in the Kremlin-manipulated media and cold-blooded pragmatism on the part of the President. A similarly clamorous media campaign was organized in favour of reintroducing the death penalty, with the sole aim of showing virtuous President Putin as the « only European in Russia »: « The idea of the recommencement of capital punishment is supported by the majority of the population. Opinion polls testify to the fact. It is a wrong position. As long as I am authorized to influence the situation, no capital punishment will be recommenced in Russia. »
The same approach has been adopted toward the Vatican, Putin declaring that he has nothing against the pope’s visit in Russia, on the background of an hysterical anti-Catholic propaganda in the media and of restrictive measures taken against catholic bishops and priests.
Energy majors and the « natural monopolies » main instrument for projecting power outside Russia
Commentators agree that in order to launch the structural reforms necessary for the real improvement of the Russian economy, Putin will have to face deeply entrenched interests and to run political risks. But it is unlikely he will take those steps, not only because of the political risks, but because he sees the emerging giant financial-industrial groups – especially the energy majors and the « natural monopolies », – as the main instrument for projecting power outside Russia. Those groups have replaced the Soviet military-industrial complex. If the Russian elites were really preoccupied with the prosperity of the average Russian, they would reach a consensus on reforms running contrary to the interests of those groups. But as the Russian elites and the KGB have found common ground on one issue, – restoring Russia as a great power, – as long as the energy giants and the financial-industrial magnates are able to persuade Putin that they are the best instruments to reach this goal, their future is quite assured and they do not have to fear perilous changes. It is no accident that the Russian Union of Industrialists and Entrepreneurs is headed by two men with very little knowledge of a modern economy but with strong intelligence links, A. Volsky and E. Primakov. The latter is known for his communist sympathies and his strong advocacy of great power ambitions for Russia. This shows were the Putin regime real priorities are.
(*) Dr. Françoise Thom teaches History of International Relations and Cold War at the Sorbonne University in Paris. Famous Sovietologist, writer and lecturer, she first published « Communism: Newspeak » in French « La langue de bois » in 1987 (Julliard); « Le moment Gorbatchev » (Hachette) in 1991 and « Les fins du Communisme » in 1994 (Criterion) among other books.
 Though the official in charge of Kremlin propaganda, Sergei Yastrzhembsky, doesn’t think so. In his view, Russophobia has not yet been extirpated from the Western media. But the situation is now promising : « Today, for the first time we have a real opportunity to implement image-making projects for Russia. […] The Russian political and business elite is consolidating. […] The time of ignoring the problem of creating a realistic image of Russia is over. We must undertake systematic, consistent and focused work on this front. » See Sergei Yastrzhembsky, « Russophobia Still Rampant », Moscow Times, April 24, 2002.
 From 84.4 percent in 1998 to 36.5 percent in 1999 and 20.2 percent in 2000–in 2001 it was 18.6 percentinstead of the 12 to 14 percent envisaged in the 2001 budget. Overall, it is still considerably higher than the 11 percent in pre-crisis 1997.
 The Communists, the largest single group in the State Duma lower house, were removed from seven of nine parliamentary committee chairmanships and promptly stepped down from the two remaining. The deal between centrists of the pro-Putin « United Russia » faction (the Duma’s second largest) and liberal groups amounted to a reversal of a pact struck in January 2000 immediately after general elections. Vladimir Putin, coming to power, forced through a disproportional package deal that effectively punished the Fatherland-All-Russia (i.e. Primakov-Luzhkov) group for daring to compete with his own Unity party in the 1999 elections. This deal was an effective block consisting of Unity with the Communists, in which both sides got more chairmanships than they were entitled to.
 The Russian elite is very aware of this: « If, God forbid, something happens in the country as a result of which Putin’s rating will begin to swing, the entire political structure will shake, » Chubais said in an interview with Rossiyskaya Gazeta on April 30.
 Dmitri Glinski-Vassiliev: « The Putin-Bush Alliance and the Cultural Threat to Western Democracy » Ponars Policy Memo No. 226, prepared for the Ponars Policy Conference, Washington D.C., January 25, 2002
 « We should look at a new military alliance that would include the United States, Russia, Turkey maybe, India maybe, for Central Asia, » Mikhail Margelov, the chairman of the Russian Duma’s foreign affairs committee and a Putin ally, told Jim Hoagland. See Washington Post, April 28, 2002
 « The Putin-Bush Alliance and the Cultural Threat to Western Democracy », quoted by Dmitri Glinski-Vassiliev inPonars Policy Memo No. 226, prepared for the Ponars Policy Conference, Washington D.C., January 25, 2002
 Established on Dec. 7, 2001, when NATO members met Russian Foreign Minister Ivan Ivanov and concluded an agreement that will strengthen Russia’s decision-making role in the NATO-Russian Permanent Joint Council.