Putin Takes On the Oligarchs
It had not escaped the Kremlin’s attention that NTV was owned by Vladimir Gusinskiy, so such threats were not just attacks against press freedom; they also signaled the beginning of the war against oligarchic independence from the Kremlin. The strategy unfolded against the backdrop of the deepening of the regime’s commitment to continuing along the path toward a neoliberal authoritarian state.
Journalists immediately began to probe what was the “real” Putin agenda. In answering the question “Why Putin?,” Obshchaya gazeta’s Dmitriy Furman focused not on Putin’s own ambitions but on the obligations he had entered into with his backers and his circle. One of the major tasks Furman pointed to in a February 2000 article was to “achieve a general agreement on the results of privatization.” This meant not giving in to the threats of Luzhkov and Primakov to undo the results of the “loans for shares” privatization of the 1990s.XVII But in addition, and more important, Putin decided to rein in the “predatory impulses” (khishchnicheskikh impul’sov) of the oligarchs, to dampen down and control their internal conflicts, which were seen as a threat to stability, and to focus on the creation not of a law-based state but a “strong” one, one that could force the oligarchs to submit to the new rules of the game and avoid a bloody settling of accounts (krovavym razborkam).107
Other media outlets focused on rumors that Putin intended to increase state ownership in these entities as a means of bringing them under Kremlin control. On March 2 Rossiyskaya gazeta astutely observed that the Kremlin was now using “black PR” techniques in which compromising articles were planted in friendly outlets (zakazukhi). The newspaper lamented that this was turning people into Homo zapiens, without the ability to use the mass media to stay informed and instead becoming Pelevin-likeXVIII zombies who fall victim to manipulative technologies that “zap” them with false information.108 The purpose of this strategy was “the establishment of an economy based on corporate entities . . . to replace the present economy based on individual entities.”109
Indeed the monopolistic trend of Russian business continued at this time with Sibneft (owned by Berezovskiy and Abramovich) and Siberian Aluminum (owned by Deripaska) cooperating to establish Rusal, a company that would control over 80 percent of Russia’s aluminum production and 7 percent of global production. This merger took place against the backdrop of the struggle between criminal and oligarchic interests, clans, and gangs in the southern city of Krasnoyarsk. These “aluminum wars” were indication of the inherent dangers of letting violence settle disputes. At one point the largest smelter in the former Soviet Union was being run by an alleged criminal enterprise that had won a pitched battle against the combined forces put together by the region’s governor General Aleksandr Lebed, Oleg Deripaska, United Energy Systems chief Anatoliy Chubays, and the Alpha Group security forces. In early 2000 they had finally succeeded in arresting the leader of the gang, Anatoliy Bykov, and taking him to be tried in Moscow. Bykov sold his shares to Abramovich; then, on March 14, 2000, in London’s Dorchester Hotel, Abramovich, Berezovskiy, and Badri Patarkatsishvili signed an agreement to the merger with Deripaska. At this time all four were on good terms with the Kremlin, so the arrangement, by suppressing local criminality and insubordination, received the center’s blessing.110, XIX
Meanwhile in Moscow, Putin’s economic policy was being shaped by a specially formed committee. Clearly it was the liberal economists, working to put a growth-based economic strategy in place in the months before Putin’s inauguration, that led many in the West to be optimistic about the chance for a deepening of the transition to both free-market capitalism and democracy. Under the leadership of the director of the Center for Strategic Research, German Gref, this group included First Deputy Finance Minister Aleksey Kudrin, presidential advisor Andrey Illarionov, the director of the Russian Government’s Working Center for Economic Reforms Vladimir Mau, and former prime minister Yegor Gaidar. But the working group also included members who represented the interests of the oligarchs, including presidential chief of staff Aleksandr Voloshin and First Deputy Prime Minister Mikhayl Kas’yanov. This group was working on an economic plan for Putin that would overhaul the tax system, increase government revenue, provide a growth-based economic strategy, and reassure foreign investors that a law-based system would guarantee their investments. NTV reported in early April that a struggle for policy outcomes and posts had broken out between the oligarchs and representatives of the “St. Petersburg liberals,” including members of this group and United Energy Systems chief Anatoliy Chubays.112
On April 25 it was announced that they had completed their first draft, just ahead of the inauguration. Clearly conflict was already breaking out about the future nature of economic policy, the division of economic spoils, and the coming appointments to key economic positions. Seeing that those with interests in big business were being outmaneuvered, Berezovskiy heaped scorn on what was called the Gref Plan as “unprofessional” and “naïve.”113 Boris Nemtsov, once one of the Kremlin’s young reformers and a leader of the newly formed Union of Right Forces, criticized the draft report for not settling the divisions over economic policy: “There is a struggle going on over the strategy for Russia. Either it will be crony capitalism with tycoons, corruption, underground deals and social polarization, or it will be a Western-style economy.”114 Obviously Gref’s preference to break up oligarchic control over the natural resources monopolies was going to be mightily resisted by the oligarchs, who wanted to continue the cozy relationship they had had with the Kremlin in the past. The Kremlin sided neither with the liberal economists nor with the oligarchs. Instead it exercised a third option: to strictly subordinate business interests to Kremlin needs, putting monopolistic trends second to the Kremlin’s political interests, the economic needs of the Russian state, and the personal interests of the new elite coming to power. Central to this plan was the alliance between the Kremlin and those liberal economists, headed by Chubays, who understood from the “loans for shares” deal that oligarchs needed the Kremlin to protect their gains, and the Kremlin needed oligarchic money to win elections and oligarchic restraint to keep the budget afloat and the population satisfied. After the election, however, it began to dawn on the oligarchs that the Kremlin’s interest in capturing revenues from these companies and in reasserting a strong state might diminish their own independence.
* * *
I. Soyuz Pravykh Sil, or Union of Right Forces, included the Common Cause (headed by Irina Khakamada); Democratic Choice of Russia (headed by Yegor Gaidar); New Force (headed by Sergey Kiriyenko); Party of Economic Freedom (headed by Konstantin Borovoy); Republican Party (headed by Vladimir Lysenko); Russia’s Voice (headed by Konstantin Titov); United Democrats (a group of social democratic parties headed by Aleksandr Yakovlev); Young Russia (headed by Boris Nemtsov); and some smaller groups.
II. Wanting to be encouraging, the report issued by the Parliamentary Assembly of the Council of Europe in the immediate aftermath of the elections concluded meekly, and over the objection of rival Russian party leaders, “The Russians have been given the political freedom to elect their representatives and they have shown their determination to use it. This shows that Russia maintains its democratic course.”17
III. See the many public opinion polls of the New Russia Barometer, conducted jointly by a team led by Richard Rose at the University of Aberdeen and the Levada Center since 1992, available at http://www.cspp.strath.ac.uk/catalog1_0.html.
IV. Stalin famously justified strengthening the state in a June 1930 address to the Sixteenth Party Congress when he called for “the highest development of state power with the object of preparing the conditions for the withering away of the state power—such is the Marxist formula. Is this ‘contradictory’? Yes, . . . but this contradiction is bound up with life, and it fully reflects Marxist dialectics.”20
V. Article 6 of the Soviet Constitution, passed under Brezhnev, assigned to the Communist Party of the S
oviet Union the role of “the leading and guiding force of Soviet society.”
VI. The Russian Constitution stipulates in Article 92.2 that “presidential elections shall be held before the expiration of three months from the date of the early termination of presidential office.” Article 72.4 of the December 1999 federal election law on the election of the president that Yel’tsin signed before he resigned also contains the provision that if fewer than half of all registered voters on the official lists take part in the ballot, the election will be declared not to have taken place and will be rescheduled for no more than four months later or three months after the day on which the election was declared not to have taken place.30 Additionally the law mandates that the winner must garner a majority of votes actually cast, so that if there is no majority victor in round one, there is a possibility of a second-round runoff.
VII. In his extensive discussion of this episode, Boris Volodarsky states that he was told by Alexander Litvinenko that the taping was ordered by Yevhen Marchuk (a Ukrainian KGB general, former prime minister, secretary of the National Security and Defense Council from 1999 to 2003, and himself a presidential contender) and carried out by Major Mykola Mel’nichenko, one of Kuchma’s bodyguards, who subsequently received asylum in the United States.34 The recordings convinced the U.S. government to cut off aid to Ukraine after the tapes revealed that Kuchma had authorized the sale of the advanced radar system Kolchuha to Saddam Hussein’s Iraq.
VIII. ITERA is a politically connected gas company established by Igor Makarov, registered in Jacksonville, Florida, which emerged as Russia’s number-two gas company primarily by taking gas cheaply from Gazprom and selling it abroad for profit. Gazprom’s loss of these profits became the subject of William Browder’s own investigations when he sat as an independent director of Gazprom representing the interests of American investors through Hermitage Capital. Putin had promised to clean up this relationship when Gazprom’s head Rem Vyakhirev was ousted in favor of Aleksey Miller, but the process of stripping Gazprom of assets via intermediate companies with close links to the Kremlin obviously continued and has been well documented.37
IX. See Myagkov et al. (2009). Using the same methodology, the authors conclude that fraud was present throughout the Putin period, beginning in 1999–2000, and in Ukraine in the first round of the 2004 presidential election. Also see Myagkov et al. (2008); and Hale (2003).
X. Maksimov (1999) is a handbook for campaign workers on how to organize campaigns and how to distinguish between “clean” and “dirty” technologies. However, it is written in the language of battle, with descriptions of “frontal attacks,” “partisan attacks,” “security measures,” “mass actions,” and “operational groups.”
XI. Given the sensitivity and importance of this document, and the persistent purging of the Internet of anti-Putin content, I have created a PDF of it, and provided an English translation, available at http://www.miamioh.edu/havighurstcenter/putins-russia. I have confirmed the authenticity of the document from multiple Russian sources.
XII. Of the seven books, only books 1 and 2 remained on the Internet in 2012, and of book 2, only 2.1, on the creation of a new Political Council (what would be the State Council, Gosudarstvennyy Soviet), was included. The portion that remained consisted of approximately fourteen thousand words, or about forty-seven pages. The total size of the collected seven books, with their many classified appendixes, referred to but not published, must have been many times larger.
XIII. The Federal Agency of Government Communications and Information (Federal’noye Agentstvo Pravitel’stvennoy Svyazi i Informatsii, FAPSI) was responsible for electronic surveillance. It was the rough equivalent to the National Security Agency in the United States. It was reorganized in 2003 and largely absorbed into the FSB.
XIV. Aleksandr M. Yakovlev was a staunch Communist, a legal specialist, and a member of the Supreme Soviet. In 1994 Yel’tsin created the position of president’s plenipotentiary representative in the Federal Assembly (polnomochnyy predstavitel’ prezidenta v Federal’nom Sobranii) and named Yakovlev to the post.94
XV. The transcript of this program is presented as an appendix in Satter (2003). The NTV program was the centerpiece of a subsequent documentary, Blowing Up Russia, that presents all the evidence, including circumstantial, in support of this theory.98
XVI. An alternative legend of Putin’s early childhood can be found at many Internet sites critical of him. The argument is set out most clearly in Felshtinskiy and Pribylovskiy (2008).
XVII. The “loans for shares” scheme was hatched when the Kremlin, in desperate need of cash to pump into the economy prior to the 1996 elections, provided shares at below-market rates in the state’s largest industrial and extractive enterprises in exchange for cash. Understanding that this scheme had a disputable legal basis, those oligarchs who benefited from it entered the Putin era with grave concerns that their financial gains could be overturned.
XVIII. Viktor Pelevin was a writer of novels such as Generation P and Empire V that provided thinly veiled critiques of the transition from Communism and the descent into authoritarianism.
XIX. Bykov was ultimately arrested for the death of a subordinate who ended up not being dead. Nevertheless he was sentenced to six and a half years in prison, a sentence that was suspended. Bykov then appealed to the European Court for Human Rights on the basis of wrongful imprisonment. For more on this episode see Hass (2011).111
Chapter Six
The Founding of the Putin System
His First Hundred Days and Their Consequences, May–August 2000
Putin’s Inauguration: The Embodiment of a Strong State
During the campaign Putin had declined to debate his opponents or to conduct meetings or rallies with voters. He was unwilling to submit to the kind of popular scrutiny normal in a democratic campaign. When prompted by an interviewer to address the belief that he would “change dramatically right after the elections,” Putin had replied, “This is not something I will answer.”1 Now, during the inauguration on May 7, 2000, he made a virtue of his apparently unique right not to have to diminish his stature by indicating his plans for the next four years. Thus from the beginning of his tenure he built a metanarrative of being above politics, of framing politics as something dirty and beneath him, of creating an image of stability as solid and unassailable as the Kremlin walls themselves.
His inaugural ceremony as the second president of the Russian Federation was designed to underscore his main theme: the centrality for Russian history of a strong state located inside the Kremlin. He placed himself not among the Russian people, not in the vast open spaces of Russia, not in the democratic corridors of the newly revived federal assemblies. Putin deftly created a symbiosis between the Kremlin and his own power as president: “For today’s solemn event we are gathered here, in the Kremlin, a place which is sacred for our people. The Kremlin is the heart of our national memory. Our country’s history has been shaped here, inside the Kremlin walls, over centuries. And we do not have the right to be heedless of our past. We must not forget anything. We must know our history, know it as it really is, draw lessons from it and always remember those who created the Russian state, championed its dignity and made it a great, powerful and mighty state.”2
Identifying himself with the Kremlin and its past leaders allowed him to emerge as if out of a chrysalis from the position of deputy mayor of St. Petersburg, in ill-fitting suits and in Sobchak’s shadow, to the presidency in less than four years. Putin’s charisma was created over the course of his six months as acting president by PR specialists like Gleb Pavlovskiy and Vladislav Surkov for the purpose of embodying the power of the Kremlin walls in Putin himself.
The inauguration ceremony was carefully stage-managed as the founding event of the Putin presidency. Television cameras followed the arrival of his motorcade inside the Kremlin, the salute from the Kremlin’s regimental commander, his long confident walk alone through the Kre
mlin’s red-carpeted corridors into the halls where the Russian elite had been continuously shown standing and waiting for him behind cordons that would separate them from him. Foreign dignitaries and the diplomatic corps were excluded since this was, as the press secretary asserted, a “Russian internal event,” signaling that the new president would not be beholden to any foreign pressure. The doddering Yel’tsin, whose painfully wobbly steps were followed fully and unnecessarily by television cameras, ascended the dais for the swearing-in and then descended the long Red Staircase to the Kremlin courtyard below, his bodyguard there to avert a possible fall. These shots of Putin and Yel’tsin underlined the contrast in the physical robustness of the two men, signifying that Russia’s future was now in firmer hands.
Whereas the camera shots of all the speakers prior to Putin, including Yel’tsin, showed them against the backdrop of the dais’s blue curtain, Putin, and Putin alone, was captured against the background of the gilded side doors, emerging godlike against a sky-blue background, interspersed with shots of a rapt audience straining to see him, to hear his every word; of the Russian Orthodox patriarch looking on approvingly; of the presidential standard being raised over the Kremlin; of the Kremlin clock marking the beginning of a new era. The camera shots looked up to him and down to the audience. This was not a “meet and greet” event, a celebration of a transition or of democracy; this was an occasion designed to herald the emergence of a single and indisputable leader of a renewed state.3 Entering the Kremlin he had been pictured alone, but after the ceremony he walked out followed closely by the chief of his new presidential guard, Viktor Zolotov. As they left, again cordoned off from all onlookers, there was an artillery salute, the Kremlin bells started pealing, and Glinka’s “Glory” from the opera A Life for the Tsar rang throughout the hall and via television throughout the land. It was intended to be and was undoubtedly quite a spectacle, and indeed marked the beginning of a presidency in which an actual relationship between the state and society, between the Kremlin and the country would constantly be mediated by images of Putin as the incarnation of Russia’s aspirations, values, and history.I
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