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THE SENIOR MOSCOW banker was blunt the night president Vladimir Putin was swept into a second term of office. “But is the lack of democracy good for Russia?” he pondered.
It is not the sort of question that foreign investors normally ask of political events in Russia but they are very nervous about what the future holds.
Ironically, no-one believes that Putin’s overwhelming victory will be bad for the economy. A new cabinet was appointed a week before the vote to save time, and prime minister Mikhail Kasyanov, a Yeltsin-era politician, was replaced by Mikhail Fradkov, who will be the technocratic enforcer running a slimmed-down government.
It is not these changes but rather Putin’s hold on all the political levers and the near complete lack of checks and balances that are making bankers jittery.
What will happen when Putin steps down in 2008? For one thing the democrats are unlikely to improve their position greatly. Irina Khakamada, the only liberal to stand against Putin, claimed her 4% of the vote was a “victory”. In any other country it would have been regarded as a crushing defeat.
“The fact that, according to the preliminary results, nearly 5 million voters have cast their ballots for me indicated that voters have given me carte blanche to build a new democratic party,” Khakamada told journalists gathered at the swanky Moscow restaurant Santa Fe where liberals had gathered to drink a final toast to the death of democracy.
Liberal fragmentation Putin may have control over state media, but the liberal rightists remain their own worst enemies.
Khakamada’s new party will further fragment an already shattered opposition, despite one-time liberal star Anatoly Chubais’ best efforts to get them to lay aside their differences in the battle with the Kremlin. Khakamada’s own party, the Union of Right Forces, wouldn’t even back its leader’s presidential campaign.
Nikolai Petrov, a political analyst with the Carnegie Endowment for International Peace, says that there is no reason why authoritarian rule and fast economic growth should not go hand in hand. Putin’s second term will be similar to the first: increasing state control over everything and the continuation of liberal reforms.
“It is possible to combine the two, and many economists argue that the fastest way to bring about strong economic growth is through a semi-authoritarian political regime,” says Petrov. “But this contains a contradiction that will inevitably end in confrontation.”
The contradiction comes from the diverging goals of the rulers and the ruled. According to Olga Kryshtanovskaya, who has been following power politics in the Kremlin for the past decade, the proportion of former security service personnel in government has grown to a quarter, three times the communist-era level of about 7%.
The mentality of these Chekisti (the Russian nickname for the KGB ? the Cheka was Soviet Russia’s secret police’s first incarnation) is already permeating through the mentality of the government apparatus, which Putin has made even more vertical. The number of ministries has been cut from 30 to 17 but several state committees and agencies have been set up so the number of bureaucrats remains about the same.
“The problem with simplifying the structure of government is that you introduce room for more mistakes,” says Petrov. “Lots of Chekisti have been appointed and they like big paramilitary structures. They are not eager to discuss their decisions and prefer direct subordination to checks and balances. There is a critical mass of security people in government and they are changing the mechanisms everywhere.”
Hardliners Some have argued that Putin is independent of all the Kremlin fractions and plays the role of referee, balancing the interests of the liberal reformers on one side and the Siloviki (hardliners) on the other.
However, Petrov says that the recent reshuffle suggests a simpler explanation: the Siloviki are in charge, they see the need for reforms and the likes of economic supremo German Gref and finance minister Alexei Kudrin have been brought in as managers who have no political power.
Since the present president took over in May 2000 analysts have been asking “Who is Putin?” The question took a lower profile during the period of rapid economic growth between 2001 and 2003 but since the arrest of Yukos oil boss Mikhail Khodorkovsky in October and then the heavy-handed presidential election campaign in March, it has resurfaced. Answers continue to confuse. Putin seems to have two faces ? he is a liberal economic reformer and a political dictator.
Maybe an easier way to understand him is to assume that he is trying to maintain as much of the Soviet structure as possible but concedes that economic central planning does not work and must give way to the free market.
Certainly he has taken on some of the style and promises the Soviets made.
Putin nailed his colours to the mast by promising if not a “workers’ paradise” then at least material improvement manifested in a doubling of GDP by the end of the
decade. And after the elections he set Gref a new target of cutting the proportion of Russians living in poverty from 20% to 10% within three years in a rather bizarre exchange during the first televised meeting of the new cabinet.
“It is desirable for [the reduction of poverty] to happen in three to four years,” Gref told Putin.
The president, however, insisted on a stronger pledge. “Don’t be shy, say it: in three years this level will be achieved,” he said.
“We will do our best,” Gref replied.
Gref is in charge of building a working economy based on free-market principles but Putin has held to another communist tenet: the state, not the people, should be in charge of running things.
Almost as soon as Putin took over, he set up a system of seven super-regional administrative districts, the okrugi, each of which received a presidential envoy. The okrugi have no standing in the constitution and all but one of the presidential representatives are former KGB top brass.
The Duma, the Russian federation’s legislature, has been under the Kremlin’s thumb since the December elections and it rubber stamps laws drawn up by the executive, which has become a parallel government with no real standing in the constitution.
As part of the ministerial reorganization, a new rule has been proposed that only ministers, and not Duma deputies, can propose draft legislation to the lower house.
A parallel and less well observed process is going on in the regions. The presidential representatives in the seven okrugi have set up a system of “public reception rooms”, which are nominally offices where the public can complain about officials abusing their positions or instances of corruption. In practice the 3,000 offices, located in nearly every large town, have become the Kremlin’s branch network.
With the power to hold local officials accountable to the accusations of abuse of office made “by the people” these offices have become very powerful. Attached to each is a federal inspector, who has taken to “recommending” which investment project should be undertaken by local businessmen.
“The process is completely opaque,” says Petrov. “No-one is watching how the money is spent and in many cases the regional authorities have been co-opted by the ?rooms’ which are subordinate to the president. Local business too, as entrepreneurs fish for political influence.”
Checks and balances Russia was slipping from the federal government’s control during the Yeltsin years and taking local government in hand is necessary, but what the political analysts are worried about is the lack of checks and balances, a complaint echoed by the World Bank.
“The new structure of government is very similar to what we recommended years ago,” says Christof Ruhl, the chief Russian economist at the World Bank in Moscow. “But where are the regulatory agencies? Where is the energy commission? There is an anti-monopoly commission, but there are no real anti-trust laws.”
Civil society has always been weak in Russia and what few horizontal checks there were on the Kremlin were destroyed when Yeltsin forced through a new constitution in 1993, handing almost unlimited power to the executive.
However, Yeltsin’s power was partly contained by his feud with the regional governors, whose support he needed to win two elections.
On taking office in 2000, the first thing Putin did was to reduce the regional governors’ power by removing them from the federation council, the upper house of the Duma.
“Whatever checks and balances were created under Yeltsin have been destroyed by Putin,” says Yevgeny Volk, the head of the Heritage Foundation’s Moscow office. “You can be reasonably confident that with Putin things will go relatively well, but there are no safeguards to ensure his successor will be so guarded.”
