Publication: Monitor Volume: 6 Issue: 1

A number of Western editorialists have justly underscored the dichotomy between the vigorous, dynamic Yeltsin who faced down the hardline communist coup in August 1991 and the enfeebled and diminished leader who left office with a legacy of failed economic reform and a nation mired in corruption. Indeed, Yeltsin’s repeated promises over eight years to reduce Russia’s massive state apparatus–which would have de-bureaucratized the economy and thus reduced the main source of corruption–proved as empty as his numerous declarations of war on organized crime. In a gloomy April 1998 speech to the State Duma, then Prime Minister Sergei Kirienko noted that the state apparatus had added 1.2 million people to its ranks from 1992-1997, and that the cost of maintaining it had increased 62 percent in 1997 alone (Federal News Service, April 10, 1998). According to one estimate, the Presidential Security Service alone has 30,000 employees (Moskovskie novosti, January 4, 2000). Not surprisingly, the continued existence of the Soviet-era bureaucracy meant the persistence of old-style economic management. “We can keep saying that we destroyed the command-administrative system, but regrettably our management is still based on directives sent from above,” admitted Aleksandr Kotenkov, Yeltsin’s representative in the State Duma, in a 1998 interview (Ria-Novosti, Daily Review, March 11, 1998).

Yeltsin, however, did not simply fail to reform the Soviet-era state apparatus. He consciously moved to co-opt it. Perhaps the most significant move in this direction came early on in his reign, when he signed two decrees (dated November 15 and December 22, 1993) giving legal status to the Kremlin’s “property management” department, headed by his long-time crony, Pavel Borodin. These presidential decrees effectively legalized the Kremlin’s nationalization of the property which had belonged to the Soviet Communist Party. According to Borodin and others, this motherlode (which somehow escaped the attention of Russia’s energetic young privatizers) is worth at least US$600 billion, and includes three million square meters of office space in Moscow (including the Kremlin, the White House, the State Duma and the Federation Council buildings); regional government installations, dachas and rest homes, apartments, hotels, hospitals and medical centers throughout Russia; businesses of various kinds (in agriculture, construction, et cetera) and the government airline company Rossiya; and Russian property in seventy-eight countries. The Kremlin’s massive property empire, literally a state within a state, has been used to supply housing and other privileges to the 12,000 top state and government officials from all branches of government, and its influence over those officials cannot be overestimated (Profil, May 25, 1998; Moskovsky novosti, January 4, 2000). The decisive moment in the April 1998 parliamentary debate over whether to confirm Kirienko as prime minister, for example, was undoubtedly when Yeltsin told Duma deputies that he had ordered Borodin to take care of their “needs” if they showed “a constructive approach” to the confirmation vote. Many observers believe that this Kremlin “distribution system”–along with the “lobbying” efforts of large financial-industrial groups (most of them also closely linked to the state)–has played the key role in many, if not all, major parliamentary decisions. In any case, the Kremlin’s commercial relationship with one political group–Vladimir Zhirinovsky’s Liberal Democratic Party of Russia, which had one of the largest factions in the second Duma–became an open secret in recent years. As an anonymous top official told Kommersant Weekly during the October 1997 budget debate, the Kremlin’s dealings with the ultranationalist leader always came down to: “Okay, we’ll give you one more mansion” (Moscow Times, October 17, 1997). The Kremlin property department’s power to supply or not to supply may also help explain why Russia’s Supreme Court and Constitutional Court nearly always decided in Yeltsin’s favor.

The Kremlin’s control over the property which it inherited from the Soviet Communist Party resurrected something very closely resembling a nomenklatura, in the classic Soviet sense–a sad irony, given that Boris Yeltsin rode into the presidency of the Russian republic in 1991 as a crusader against the privileges of the Communist party elite. And while many observers now point to rigged privatization and oligarchical control of the media as among the biggest negatives in Yeltsin’s legacy, the Kremlin property department’s control over the basic living conditions of the country’s top government and state officials has played a major role in undermining the separation of powers, which was already weak thanks to the constitution adopted in 1993. It would be a final irony if the scandal involving alleged kickbacks to Borodin and other Russian VIPs into Swiss bank accounts led to Yeltsin’s undoing (see previous story.