Publication: Monitor Volume: 7 Issue: 78

President Vladimir Putin’s support for his cabinet’s measures aimed at debureaucratizing the economy have earned him applause both at home and abroad, even from some of those observers who fear that in other areas, such as press freedom, he is heading in an authoritarian direction. The thinking here is that Putin and his ministers may have opted for something resembling the Pinochet model–an authoritarian political system coupled with liberal economic reforms. The bureaucratic resistance that the law on licensing is meeting, however, suggests that even if Putin and his cabinet sincerely intend to carry out a liberal revolution in the economy, they may be unable to do so.

Meanwhile, there are other signs that various corrupt practices which became endemic to the Russian economy in the 1990s will be difficult or impossible to eradicate. Last week, for example, Agence France Presse quoted Aleksandr Shokhin, chairman of the State Duma’s committee on foreign credits and finances, as saying that the government was poised to resume the practice of letting a select group of private banks handle state funds. This system of “authorized banks,” which began early on during Boris Yeltsin’s tenure as president, helped enrich a small group of banks headed by the so-called “oligarchs.” These tycoons–once referred to by Pyotr Aven, head of Alfa Bank and former foreign trade minister, as “appointed millionaires” (Aven himself, it should be noted, was one of them)–then used money made off or skimmed from the federal budget to, among other things, buy up key industrial enterprises at bargain-basement prices. Shokhin claimed that, during an April 19 cabinet meeting, Prime Minister Mikhail Kasyanov’s government all but took the decision to allow private banks to hold money earmarked for the state’s pension fund (Moscow Tribune, April 21).

It is worth noting here that Putin’s predecessor, Boris Yeltsin, also vowed on a number of occasions to debureaucratize the economy and to end the corrupt relationship between officialdom and the business sector. Yeltsin, in fact, in his State of the Nation address to parliament in March 1997, attacked corruption and the bureaucracy in even more absolute terms than Putin did in his speech last month. Yeltsin and other top officials–including Anatoly Chubais, then a deputy prime minister–pledged in 1997, among other things, to end the system of authorized banks and replace it with a federal treasury system. Yet the practice of placing federal money in private banks persisted. Indeed, it is difficult to know whether the system of authorized banks was ever officially ended, or simply temporarily ceased to function due to the collapse of Russia’s banking system in August 1998. If it turns out to be true that the system is now being revived, it would be yet another sign that the corrupt symbiosis between business and bureaucracy which emerged in the 1990s will persist into the new millennium, however sincere Yeltsin’s successor is about establishing a “dictatorship of the law” and a level playing field between all economic actors.

Along these same lines, it is less than encouraging to note that on April 20 a senior official in the Prosecutor General’s Office, Deputy Prosecutor General Sabir Kekhlerov, reiterated that his office is categorically opposed to legal reforms which would, among other things, require prosecutors to get court approval for arrests and search warrants. Kekhlerov said his office’s opposition to the reforms was shared by both the Kremlin administration, headed by Aleksandr Voloshin, and the head of Russia’s Supreme Court (Moscow Times, April 23). In January of this year, the Kremlin withdrew legislation it had submitted to the State Duma just days earlier requiring prosecutors to get court approval for arrests and search warrants. The bill, which was reportedly drafted by Dmitry Kozak, the head of the presidential administration’s legal department and backed by Duma liberals, was reportedly withdrawn under strong pressure from, among others, the Prosecutor General’s Office, the Interior Ministry and the Federal Security Service (see the Monitor, January 30).

Likewise, it is difficult to square Putin’s promises to cut bureaucracy with other measures, such as the creation last year of seven new federal districts–each with their own authorized presidential representative and new bureaucratic structure–or his reported plans to set up a new State Investigative Committee–which would be given the powers of investigation currently enjoyed by the Prosecutor General’s Office, FSB, Interior Ministry and tax police–and a new military police force (Moscow Times, April 3).