Russia - Putin, arbiter of a precarious equilibrium

Mar/Apr 2008

The following article has been translated from the monthly journal of our French comrades of Lutte Ouvrière (Lutte de Classe#110 - February 2008) . It was written before the presidential election took place. We are publishing it nevertheless, as it describes the context of this election and discusses the nature of Russia's political leadership today under Vladimir Putin.

It looks like the forthcoming Russian presidential election will be a mere rubber stamp exercise. Not only because, once again, the majority of those who could represent some sort of opposition - albeit a weak one - have been excluded from the competition or because, as usual, the media hype and the "administrative ways and means" will favour the present rulers of the country. In fact, the outcome of the March election appears to have been decided months ago.

In fact, the December 2007 general elections were organised in such a way that they could only lead to a personal political triumph for Putin. He led the campaign himself, as a one man's show, since he had no real opponents, and won two thirds of the vote. 315 out of the 450 deputies of the Duma (Parliament's lower chamber) were elected thanks to being his candidates rather than because they were standing under the banner of their party, United Russia. This large majority was further reinforced by 75 more deputies from two other parties that either declared their allegiance to Putin or supported him. So, today, Putin can boast of having the support of nine deputies out of ten and that he owes this to the people's support for his policy as well as for his person.

In a televised speech to Russian voters at the end of November last year, Putin asked them to remember how he had "pulled the country out of the ditch". Indeed, Russian people voted for Putin because they saw him as the man who had put some order into the economic, social and political chaos left behind by his predecessor, Yeltsin.

The ship of state sails again

People are well aware that the very wealthy parasites who plundered the country's economy under Yeltsin still do so today. But they are grateful to Putin for having ostentatiously cut down to size some of the smug nouveaux riches who lived a life of luxury that shocked most Russians who struggled against poverty. In the course of his two terms in office (2000-2004 and 2004-2008), the economy has recovered. For the eighth year in a row, the rate of growth of the Russian economy has been around 7 %, finally going back to its 1990 level - which, one should point out in passing, is really just an indication of the depth of the economic collapse caused by the end of the Soviet Union!

While there was some improvement, and it was not easy to achieve, its main beneficiaries remain, of course, the nouveaux riches, the wheelers and dealers, the high ranking functionaries and the ministers who run the big industrial and financial conglomerates. However, while the population is not the main beneficiary of the new situation, the fact is that wages and pensions are now more or less paid regularly. Official statistics, which say that net income has increased by 10% a year over the past years, are undoubtedly biased, due to the lumping together of the richest and the poorest, the most affluent regions (such as the Moscow area) with those in real poverty (like the Caucasus and the Far-East), despite the fact the vast difference in wealth between these extremes. Still, the fact is that, in many areas, wages have not only stopped losing their purchasing power, but they have gone up significantly over the past five or six years.

It should be said that this relative economic improvement coincided with a worldwide increase in the prices of raw materials, especially oil products, of which Russia is among the world's bigger exporting countries. This was something which was not Putin's own doing, but it is something for which he was nevertheless credited and all the more easily as, for more than a decade before his election in 2000, the population's way of life had been totally disrupted, while the standard of living of a vast majority collapsed.

At the end of his second term, Putin enjoyed relative popularity and appeared solidly installed at the helm of the Russian state. The Constitution did not allow him to run for a third consecutive term and, therefore, to stand in the 2nd March election. But for a long time Putin left people in doubt, not over the nature of his intentions - it was obvious that he had no plans to withdraw - but over the way in which he intended to remain in real control.

Having another president voted in while retaining the reins of power

For months, he seemed tempted to make a change in the Constitution that would have allowed him to run for a third time. The media regularly relayed appeals to do just that, issued by people close to the regime. However, this solution threatened to dent Putin's standing with the imperialist powers - those self-proclaimed guardians of democracy.

However, the Kremlin had other potential solutions in the making, so it was easy to avoid having to tinker with its own Constitution. Among these, was a possible merger between Russia and Belarus. This merger had been considered for years, without anything being done about it. It would have provided Putin with the opportunity of becoming the super-president of a new state. This would have had the advantage of allowing him to appear to the Russian nationalists, if not as the heir of the all-Russia czars, at least as the man who had re-unified Great Russia and White Russia (Belarus), at a time when Small Russia (the Ukraine) ignores them. However, this was a risky move since, despite the fact that they have set up a customs union, the relationship between Russia and Belarus, or rather between the bureaucratic cliques which run both countries, remains conflict-laden.

In the end, Putin chose to find someone to replace him, while retaining the Prime Minister's job. The last remaining step is to get his chosen candidate elected. If, as is likely, the Russian electorate remains in the same mood, this will pose no problem. The real question was to decide who could be Putin's man in the election and afterwards. It had to be someone who could be accepted by the factions that gravitate around the regime, someone who could not be suspected of wanting, or being able, to challenge their power nor favour one clique against another. And, most importantly, it had to be someone who did not have a clique of his own, which, once elected, he could have used as a lever - thereby leading at some point to a rivalry between the "standby" and the "star".

The rare bird which came out of Putin's conjurer's hat, was the then first Deputy Prime Minister, Dmitri Medvedev. Commentators presented him, rightly or wrongly, as having no ambition other than to serve Putin's interests, whose team he had joined after the collapse of the USSR, when Putin was at St. Petersburg's city hall.

The leading circles, their cliques and the ex-KGB

On the basis of the experience of the Soviet bureaucracy and the Russian bureaucracy ever since Stalin, anyone who is in power and wants to retain it has every reason to be suspicious of the rivalries between the leading circles' cliques.

For over two decades, Stalin was able to impose iron discipline on the state bureaucracy by playing its main sections off against each other and by regularly getting rid of those who led them. In fact, this "discipline" was vital for the survival of the bureaucracy itself. But when the dictator died, in March 1953, this discipline was put into question by the rivalry between half a dozen would-be successors. Khrushchev came out the winner, but the initial scrimmage, although confined to the top layer of the bureaucracy, led to his downfall within a few years. The cliques then struck a compromise which, under Brezhnev and his associates, protected the regime against destabilisation. But the price to pay for this, was the gradual slide into what Mikhail Gorbachev later called the regime's "stagnation". To get things going again, he tried to break up the bureaucratic fiefdoms, but still failed to consolidate his power. Instead, the top layers of the bureaucracy broke the back of the central power and, with it, the whole framework of the USSR collapsed. The crumbling down process spread and deepened during the eight years of Yeltsin's post-Soviet presidency. At every level of the state and of the economy, a host of bureaucratic cliques privatised their share of the economy, in order to loot all they could lay their hands on.

When Yeltsin resigned in favour of Putin, on New Year's Eve 2000, he left behind him a ruined economy that was being auctioned off, a broken and powerless state machinery which was penniless - in other words, a failed state in every sense of the word.

At the time, Putin, who was unknown to the Russian public, was described by commentators as having nothing to do with the deadly struggle being fought by the bureaucratic factions over Yeltsin's succession. This is doubtful. He was indeed a relatively unknown colonel of the ex-KGB. But the armed wing of the bureaucracy had fared better than other parts of the state machinery during the years of collapse. And being an ex-member of the KGB, Putin had a real advantage in the struggle for power.

There was also the fact that, just before becoming Prime Minister and then President, he had been at the head of the Federal Security Service (FSB), the KGB's main successor. Of course, the ex-KGB had taken part in the looting, in the days when the whole bureaucracy was fighting over everything that could generate an income, and every bureaucrat was prepared, at his own level, to break up a company or an institution, as long as he could make something out of it. But because, in general, the ex-KGB took part in this looting from the highest level of the central state, and because several of its recent chiefs-in-command (Andropov who was briefly head of the USSR after Brezhnev's death, Primakov, who was Yeltsin's Prime Minister) had appeared to be concerned with the preservation of the "power of the state", the FSB could seem to be, in many respects, the instrument most capable of preserving both the central state and, in a certain sense, the general interests of the bureaucracy. In the eyes of the "Family" - the first circle of Yeltsin's clique - this meant that Putin was offering significant guarantees, even before he was able to receive the support of the FSB machinery.

Putin had left St. Petersburg, where he was chief assistant of Mayor Sobchak, a political friend of Yeltsin's, for Moscow. The Family tested his loyalty during his stint in the president's Department of General Affairs. His job consisted, among other things, of putting up firewalls to protect Yeltsin and his clique from the corruption scandals that were catching up with them, in an atmosphere of fin de règne. Putin did such a good job that, after a short period at the head of the FSB, he was propelled to prime-ministership. Yeltsin had used up four Prime Ministers in less than 18 months, but Putin was able, against the backdrop of the war against Chechnya, to foster a kind of cross-party alliance, thereby enabling the ruling party to win the December 1999 general elections. Yeltsin was by then physically and politically burned out, but he was at least assured of being able to lead a quiet life if he resigned - which he did, leaving his post to Putin.

Restoring control over the state and the economy

At the outset, Putin was only interim president, but within three months, he got himself elected. He received the support of the Family, including the funding of the best-known "oligarchs" - those who stood in the shadows, behind the main bureaucratic cliques and who had made the most out of the looting of state assets with Yeltsin's complicity. Following his election, Putin issued a decree which provided the ex-president and his close relatives with legal and fiscal immunity. However, this immunity did not extend to all of Yeltsin's former proteges and favourites, as the oligarchs, Berezovsky and Guzinsky, were soon to find out.

As soon as the oligarchs who had helped him into office showed they wanted to have a say in the new regime, Putin turned against them. They were put on trial, jailed, or forced to seek shelter abroad. In the end they had no choice but to accept "golden exile" in exchange for the loss of the companies they had laid their hands on. Putin came out the winner of this first round. And other rounds would follow.

Upon his arrival at the head of the state, Putin said he intended to put state affairs back in order by consolidating what he called the "vertical line of power", in the name of the "dictatorship of the law". The population soon found out what he meant by this.

In late 1999, when he was still Prime Minister, Putin had launched a second war against the Chechen separatists. This war was expeditiously waged by an army that was eager for revenge after losing the first war under Yeltsin. It was a terrible war both for the Chechen people and for the Russian conscripts. The whole region was devastated. Putin wanted this war to be seen as a warning by all regional leaders of the bureaucracy and by the governors and presidents of the federated Republics, who had been given a free rein under Yeltsin and had transformed their fiefdoms into entities over which the Kremlin had no real control. Likewise, the brutal downfall of Berezovsky, Gusinsky and a few others was meant as a warning to all the nouveaux riches who might be tempted to forget that they owed their (very good) fortune to Russia's political leadership.

So, in 2003, Russia's richest man, Khodorkhovsky, ran into trouble when he chose to put up some kind of challenge against Putin. He was sentenced to eight years in jail and lost a large part of his wealth. The oil conglomerate he had grabbed for himself was broken up into parts which were ceded to other business cliques, whose leaders were either part of Putin's circle or had declared allegiance to him, and who presented themselves as guarantors of the interests of the Russian state.

At the same time, shortly after his first election, Putin divided the country up into nine federal districts - huge regions, each headed by a super-prefect, chosen by him from within the top circles of the KGB or the army. The task of these presidential representatives was to control the local executive bodies and to ensure that the territories under their control were subject to the Kremlin's rule. The second step in Putin's drive to re-centralise political power was taken in 2005, when he suppressed the right of the federal regions and Republics to have directly elected governors and presidents. From then onwards, a list of approved candidates was issued by the Kremlin, from which the regions and Republics were allowed to choose their governor or president, all duly endorsed by Putin.

Although Putin has a similar plan to nominate the mayors of the large cities from above, these cities are still allowed to elect their mayors. Or to be accurate, their "head of government", a designation inherited from the Yeltsin era, when all chief bureaucrats wished to be more or less independent from the Kremlin but, above all, wanted to be left alone by the central power while they quietly plundered their territory. Here again, in 2006, Putin started dealing with uncooperative officials. His method is well-tested - first the trial of the recalcitrant official, followed by his imprisonment and his destitution. The pretext is easily found: corruption. A year ago, the assistant public prosecutor of the Federation of Russia stated himself that corruption had been skyrocketing. The figures involved had gone up from $33.5 billion five years ago to $240 billion - that is, the equivalent of the Russian state's entire budget! So, under the cover of a campaign against corruption - an old tradition going back to Stalin's days, if not to the days of the czars - the mayors of a dozen big Russian cities have been brought to justice, over the past few months, and some of them sent to jail. Of course, this is all make-believe, since the whole state machinery is getting fat on corruption.

In keeping with his drive to reassert the control of central government over the administrative and political spheres, Putin went on reminding the officials in charge of Russia's economy exactly who was entitled to what and whom they had to thank for it. He hammered in what he meant by making a few striking examples (involving prison sentences, or even the confiscation of part of their assets, against Berezovsky, Gusinsky, Khodorkhovsky and, last summer, Gutseriyev, the head of Russia's eighth biggest oil firm, Rusneft). The aim was to get the leaders of the big conglomerates privatised under Yeltsin to understand that they could no longer make any important decisions without the Kremlin's approval. At the same time, the government recovered, forcibly if necessary, some of the jewels of the Russian economy.

Indeed, if it did not control these big conglomerates, the state would not have the means to carry out Putin's "policy of recovery for the country against its enemies who have left it in a humiliating position in today's world", as mentioned in the election manifesto of Putin's party, United Russia.

On a different level, in terms of the bureaucrats' private interests as individuals as opposed to the state's interests, the fact that the state regains control over these big conglomerates, both politically and financially, presents many advantages. It makes it possible to provide a relatively large number of top bureaucrats with jobs - and therefore to support them financially - as employees of these companies. It also makes it possible to offer them an income which is much more substantial than their official salaries since, thanks to their control on these exporting economic giants, which are big sources of foreign currencies, they can now plunder them from inside.

As part of this "re-centralisation" of economic responsibilities - and of the resulting privileges - the state regained control over one of the world's largest companies, the number one gas producer, Gazprom (in 2003, the state reestablished its role as majority shareholder). Once this giant had returned to the state's fold, it then forced the oligarch Abramovich to sell Sibneft, his oil company, while the Kremlin made it clear to this tycoon that he had better mind his own business in... London, where he lives, and forget about interfering with the businesses coveted by the Russian state. The return of the state to the head of Gazprom was also made great use of by the Kremlin's foreign affairs policy. It allowed Putin to regain control of economic sectors that were now outside Russia but within the boundaries of the ex-Soviet Union and also to apply some pressure on a number of East European countries, as well as ex-Soviet Republics, by using blackmail and threatening to put an end to Russian gas deliveries.

Raw materials (gas, oil, metal, wood, gems, etc.) being very profitable when they are exported, this sector has been a priority target of Putin's re-centralisation process. The manufacturing sector was also reined in, though not completely. But its most interesting showpieces (Avtovaz, Russia's giant car maker, OMZ and SV, two machine-tool companies) are now state-controlled.

On August 2007, Izvestia, the pro-Putin daily, ran an article titled "A Corporation Called the State". Addressing the issue of big corporations, it said:

"The state must own them because it needs them to solve the problems raised by certain aspects of the government's foreign policy. It must own them because it is not so easy to make a winning bid in an international call for tender, to maintain high oil prices, to develop one's competitiveness in high tech sectors. Today, in Russia, these tasks are successfully dealt with. Take the darlings of the Russian stock exchange, the oil companies: two thirds of their shares are controlled directly or indirectly by the state. The country's two biggest banks are state-owned. In telecommunications, 75 % of the shares are in the hands of the state."

Even if we leave aside the question of how this result was achieved by the state, the fact is that Russia's mammoth companies are often headed by high-level civil servants or government officials who add this job to their other responsibilities. Of course, they also considerably add to their income. The share of state-owned companies in the production of oil went from 7 % in 2003 to 40 % in 2007. The present head of Gazprom, Miller, is a member of the grouping around Putin, the so-called "clan of St. Petersburgers". He was also a member of Putin's presidential administration, a shadow government of sorts. Chief Deputy Prime Minister Sergei Ivanov, who was long considered as a possible Putin successor, runs the military-industrial complex and chairs OAK, an aeronautics consortium. Deputy Prime Minister Alexander Zhukov heads Russia's railroad company. Igor Sechin, deputy chief of the presidential administration, is at the helm of Rusneft, the now state-owned oil company. No less than eight members of Putin's "administration" have top-level posts in big financial or industrial conglomerates.

In a recent speech to the members of Moscow's Chamber of Commerce, Putin declared: "We are not setting up state capitalism". He did not explain what he meant exactly by "state capitalism", nor did he say what he actually wanted to do. But he did stress the fact that Russia's economy and society have a structure of their own, with a very strong interconnection between political and economic powers. Both powers claim their agreement with the market economy, but the market does not yet "set the tone" in Russia. Of course, Putin is partly responsible for the present situation. But, let us not forget that what gave birth to Russian society and its economy was a (more and more distant) revolution, followed by the strangling of the workers' state by a parasitic bureaucracy - whose present representatives still hold power and run the economy.

The "middle class" is annoyed

There are many examples of this. A recent issue of Dilovyie Lyoudi ("Businessmen"), a Russian economic monthly, tried to find out "What impairs the development of a Russian middle class?" Its main article said that a petit bourgeoisie and a middle class had indeed developed in the country and estimated that it numbered "25 to 30 million people, that is, almost 20 % of the population". These people "enjoy a monthly income of 300 to 400 dollars per adult member of the household", which ranked Russia "near India, but nowhere near the United States, Japan or Switzerland". In these countries, the average middle-class income is 10 to 20 times bigger than in Russia. Said the author of the article: "The members of our middle class, unlike their counterparts in Europe and the United States, are not entrepreneurs. [...] Fifty-four percent of them are government officials and not, as is the case in Europe, the United States and Japan, highly educated people, doctors, teachers, academics and professional people, who form a class which is one of the main supports of democracy". After noting that "in 2003, around 20 % of Russia's middle class were people who had their own business; in 2006, they were only 4 %" and that in the same period, "the share of the entrepreneurs' income inside the middle class had been cut in half", he went on to say that "the economic development between 1999 and 2006 enriched the civil servants and ruined the entrepreneurial middle class" before concluding: "The average member of our middle class is below average".

Undoubtedly, those who reinforced their privileges in Russia these last few years were the top and intermediate levels of the bureaucracy. They did so, first, under the protection of the state and, later on, from inside the state itself. They plundered a "recentralised" economy and state machinery according to rules set from above and enforced by the bureaucracy's hierarchy whose chain of command, after some consolidation and remodelling by the central power, maintained its exclusive control over the sources of wealth and privileges.

"Siloviki" and St Petersburgers

In order to rebuild the state's control, Putin sought the support of chosen sectors of the bureaucracy. First came the members of the power structures (the ministries of Defence, of Internal Affairs, the intelligence services and the political police) or "siloviki". They felt they had been defrauded by Yeltsin's favourites, who had engineered the big clearance sale that came with the privatisation process of the previous decade.

Putin found it relatively easy to come to terms with them. They were confronted with the same obstacles and Putin came from these circles, where he had a lot of contacts and supporters.

But Putin also looked for support in other sectors of the bureaucracy, for fear of appearing to be the siloviki's mouthpiece - and hostage. As early as the end of 1999 and beginning of 2000, at the time of his presidential oath of office, he received the support of the clan he had formed around himself when he was St Petersburg's number 2 leader. Medvedev, his official successor, and the Minister of the Economy, German Gref, are both prominent figures of Putin's clan of St Petersburgers. He also used an old Stalinist scheme, pitting the leading circles of "old" St Petersburg against "new" Moscow. St Petersburgers felt mistreated because in the previous decade, 80 % of the financial flow entering Russia passed through Moscow. He also almost systematically played siloviki against St Petersburgers for practically every post in the government, presidential administration and top levels of the state-owned economic sector. And finally, Putin found it relatively easy to set the army's high ranking officers against the FSB top brass, since these bureaucrats were already competing to tap the same sources of wealth and were permanently watching or neutralising each other.

The settling of accounts between these rival clans is perhaps less publicised than under Yeltsin, but has not stopped. Regularly, a new affair breaks out, army generals or ministers are sent to jail, high-ranking civil servants in the banking sector are assassinated...

This situation is not seen as in the least unfavourable for Putin, the man who proudly claims to have restored order in Russia, glossing over Chechnya's bloodbath. By playing on the existing rivalries between the bureaucratic clans, he has enjoyed more freedom than his predecessor. At the same time, he has been able to present himself to a certain extent as the upholder of the bureaucracy's collective interests, rather than as the champion of a small clique.

An unsteady balance

Taking advantage of very favourable global conditions (first of all, the high prices of raw materials), Russia's bureaucracy was able, under Putin, to ensure its political domination and economic plundering by leaning on an administration that appeared less debased than under Yeltsin.

Today, there are more and more Russians among the world's richest people and in the millionaires' hit parade of Forbes magazine. They are famous for their buying of English football clubs, luxury villas on the French Riviera and flamboyant yachts berthed at the ports of fiscal havens. They spend lavishly on holidays in the smartest ski resorts. According to the French newspaper Libération, this spending binge has meant "golden nuggets" for France's luxury industry. In the words of the spokesperson of the "Comité Colbert", a syndicate of some 70 luxury companies and institutions like Vuitton, Dior, Chanel, etc., "2007 was an exceptional year in Russia". As for the members of Russia's petty bourgeoisie, throngs of them now visit Egypt, Turkey and every imaginable tourist destination - as if they were in a hurry to spend part of the oil windfall.

These nouveaux riches and members of the middle class are not interested in investing inside Russia, except in marginal sectors (like luxury goods and real estate). They also seldom invest money in production, that is, in the renewal of productive machinery and infrastructure that is more than 20 years old, dating mostly from the time of the USSR. That is no surprise. After being a parasite of the planned and collectivized economy of the USSR, the bureaucracy was not transformed into something different with the collapse of the USSR. It remains socially nothing but a parasitic layer.

It is true that, in capitalist countries, the bourgeoisie is also reluctant to invest in production or only invests minimally. It does not trust its own economy and prefers the stock exchange where it can speculate on the price of oil and a whole array of financial or derivative products, despite the fact that speculation does not increase global wealth. Worse, it represents a genuine threat for the economy and society - as was shown by the recent financial crisis due to speculation on American real estate and subprime loans.

But there is a difference between the parasitic nature of Russia's nouveaux riches and the established bourgeoisie of the imperialist countries. The difference is precisely in the fact that the bourgeoisie is "established", that generation after generation, it built an establishment that is firmly rooted in the economy. In the prison cell where Putin sent him, Khodorkhovski may meditate on the difference that separates him, as the prototype of a parasitic social layer, from Rothschild, Ford, Rockefeller or even Bill Gates.

What has changed in Russia since the Yeltsin era? Putin has put some order into the scramble for the spoils that pitted the bureaucratic clans against each other and threatened to destroy the state apparatus itself. He is now the supreme arbiter of a whole hierarchy of chiefs and sub-chiefs who regulate the access of each individual bureaucrat to the sources of wealth. But that can hardly be sen as a something new. The bureaucracy did not operate differently in Stalin's time.

The fact is, that Putin often finds his inspiration in the old Stalinist and czarist recipe books. For instance, he has promoted Russian youth organizations called the Mishki (bear cubs) for the very young, and the Nashi (we Russians), for teenagers and university students. He permanently backs up the Orthodox Church and encourages it to be present in schools and public institutions as a supplier of moral indoctrination. He does not miss an opportunity to approve of nationalism and hails Russia's grandeur. He endlessly refers to the "threat from abroad" and describes his opponents as "traitors". The legislation allows him to ban any kind of organized opposition under the pretext that they are extremists - an accusation that is also levelled against strikers. And like Brezhnev, he has turned psychiatric wards into prisons for some of his opponents.

That should come as no surprise. Putin was able to consolidate the Russian state and to crystallize around himself a consensus - something which is relatively new in the leading circles. But the leaders of the bureaucracy know full well that, despite the considerable support it has won, their power is not forever insured against contestation and that the balance of power remains shaky. To a large extent, the present balance is at the mercy of factors which totally escape the control of the Russian state and its bureaucracy - like a sudden drop in the price of raw materials or an aggravation of the world financial crisis. But it could also be challenged by a Russian working class whose morale has improved with the slightly better economic conditions. It is indeed to be hoped that Russian workers, who recently revived the tradition of organised struggles and strikes, will eventually go a step further and challenge the power of the parasites who exploit them.