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Skip Navigation LinksHome :: Back Issues :: Vladimir Putin: Power – but for what ends?

September 2000

Vladimir Putin: Power – but for what ends?


In his first months as president Vladimir Putin has been gathering together the threads of power. Oligarchs have been curbed, regional governors put in their place and former KGB colleagues given influential positions. How Putin will use his authority remains uncertain. He seems intent on reforming the tax code and the customs administration and is committed to helping small and medium-size enterprises. But a start has barely been made on economic liberalization and the reduction of state intervention. Ben Aris reports




       
Putin: inherited a
Russia with a very
different political
landscape from
Yeltsin's era
"This is the end of the oligarchs in Russia," Boris Nemtsov, leader of the Union of Right Forces faction in the Duma, triumphantly declared to a room packed with journalists at the end of July. "The oligarchs are sick of being oligarchs. They want to be law-abiding taxpayers."

The meeting with 21 so-called oligarchs on Friday July 28 marked the end of the Wrst phase of new Russian president Vladimir Putin's campaign to make Russia great. His enemies have been subdued and his personal grip on power increased. He has largely accomplished what he set out to do - to destroy the Yeltsin system of government. But what will he do with all this power?

Yelena Bonner, widow of Soviet dissident and Nobel Peace prize winner Andrei Sakharov, believes Putin is setting up a modernized version of Stalinism. Presidential economics adviser Andrei Illarionov has talked about the need for a Pinochet-style model of reform. And others have praised Putin for introducing one of the most liberal economic reform packages since reforms began nine years ago.

It is hard to tell which interpretation is applicable, as Putin hasn't actually created much yet. What he has done is to consolidate his grip on power since his inauguration in May and reassert Moscow's control over the rest of the country. Beginning with the regions, he has extended his control into Russia's largest companies, and subdued the powerful business elite.

Crushing the regions
Putin inherited a Russia with a very diVerent political landscape from the one that Boris Yeltsin oversaw. Following the Duma elections at the end of last year, all the parties have moved towards the centre and the president enjoys unprecedented support in the legislature.

Using this support he attacked the remaining parliamentary opposition, the regional governors who have seats in the federation council, the upper house of parliament.

Under Yeltsin the governors had become increasingly powerful, trading their support of the Kremlin for increasing autonomy. Putin began by introducing seven okrugi (federal regions) that break up Russia's 89 regions into more manageable lumps. These okrugi are run by representatives who are directly appointed by the president and answerable only to him. Their job is not so much administration as to enforce the centre's will on the rowdy regions.

The okrugi are a mechanism to control the regions but the governors retained signiWcant power on their own patches, having long ago subverted the local branches of federal administration to their own ends.

The day before the oligarch meeting, the federation council ended a running battle between the governors and the Kremlin, signing oV a bill that ends the regional governors' automatic right to seats in the upper chamber.

Not only will the governors lose their cushy jobs, also the president now has powers to sack those that break the law - which under Russia's imperfect legal code means most of them.

Although the move smacks of a step back from democracy - the governors are appointed by popular election - Putin's victory was widely supported by Russian big business.

"Reorganization of the regional power was not anti-democratic," says Pytor Aven, an oligarch and the co-owner of the Alfa Group, one of Russia's largest Wnancial-industrial groups. "They were just local kings and were under no legal constraint." If Putin is serious about reform then he needed to reassert the Kremlin's control over the regions where these reforms would actually have to be implemented. Implementation is where Russia has always fallen down in the past.

"Crushing the governors is very good news," says Tom Adshead, a political analyst with Russian investment bank Troika Dialog. "Putin believes in the law and wants to make people obey it. He knows that the governors will dilute any policy initiative. Yeltsin let them get away with it. Putin accepts the conXict between the governors and the centre and is willing to confront it."

Crushing the oligarchs
The Wrst round went to Putin, but he is still in a delicate position. He has to balance the inXuence of three powerful lobbies: the various state organs, the economic strategy minister German Gref's team of liberal St Petersburg economists and the remnants of the "Family", a group of insiders that were close to Yeltsin with Boris Berezovsky at their head. The next group to come under attack - in what came to be called the war on business - was the oligarchs. The opening volley came with the arrest of media mogul and oligarch Vladimir Gusinsky on embezzlement charges.

       
Aven: "Reorganisation of regional power was not anti-democratic"
The Wrst high-level businessman to be locked up in the notorious 18th-century Butyrka prison, Gusinsky spent three days there at the start of June, a spell that marked the culmination of a rising campaign against him and his media organization, Media Most.

Gusinsky heads the country's most independent news organization and his arrest was seen as a crackdown on press freedoms. The company's Xagship news programme on NTV was one of the few Russian news media that had been openly critical of the war in Chechnya. Putin was reported to take personal exception to the lampooning he received every week on the Kukli show.

Gusinsky's arrest was soon followed by a string of investigations and raids on other oligarch groups including Mikhail Fridman's Alfa Group, Vladimir Potanin's Interros Group and Vagit Alekperov's LUKoil. It is not clear to what extent Putin was personally involved in the Gusinsky case, but the press claimed that a long-awaited crackdown on Russia's oligarchs - the men that grew rich in the mid-1990s through their close relations with the Kremlin - had begun.

"You have to start with someone - why with Gusinsky and not [Sibneft owner Roman] Abramovich or Berezovsky?" says Boris Fedorov, a former tax minister and now on the boards of United Energy Systems, Gazprom and Sberbank. "You have to start with somebody, you don't start with your own friends. You start with those you don't like." The Wrst initiative was almost certainly politically motivated and was also a blow against freedom of the press. But it was more an attack on Gusinsky himself than a general crackdown on the media.
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