Publication: Monitor Volume: 7 Issue: 235

The news coming out of Russia and attitudes toward President Vladimir Putin both at home and abroad have been so positive of late that a rare negative prognosis about Russia’s future stands out sharply. This is all the more so when such a prognosis is put forward by a member of the Russian president’s own team. Andrei Illarionov, Putin’s maverick economic adviser, came out with a surprisingly bleak forecast yesterday during a roundtable organized by the Civic Debates club, a Moscow discussion group that includes leading Russian politicians and experts. Addressing the roundtable’s topic, “The political scene in the middle of Putin’s term: at the halfway point from chaos to order,” Illarionov did not limit his remarks to economic issues. He said that the intensity of the power struggle between various factions in the country’s political leadership, including the ongoing “information war”–meaning the use of media to attack political rivals–and the level of corruption were no less today than they were under Putin’s predecessor, Boris Yeltsin. “We’ve ended up in the same rut we were in for the previous ten years,” Illarionov said. “And the dynamic and dimensions of corruption are even greater than they were before: Earlier it was done in a kind of amateur way, but now corruption is becoming institutionalized.”

In addition, the president’s economic adviser suggested that Putin’s two years in power had been in vain in terms of economic policy. “If during these two years the economic policy that was carried out in 1999 had been continued, we would now have not 5 percent growth [per year], but 15 percent, at a minimum. But we are living exclusively on petrodollars. An extraordinarily lucky situation for us on the world oil market, and not a change of the team in power, was the only reason for the relative stability in the country during 2000-2001.” Illarionov said that the past year had seen the “shattering of illusions.”

Illarionov concluded that the roots of these problems were political and mainly the fault of Russia’s superpresidential system, which has shown itself to be less effective than a parliamentary system. The presidential adviser wound up his remarks predicting that if there were no serious structural changes in Russia’s system and the battle between Kremlin and other elite factions were to continue, Russia would break apart, “because any society that does not have within it a sufficient basis for commonality sooner or later breaks into pieces, as the example of the Soviet Union showed” (Kommersant, Nezavisimaya Gazeta, December 21).

Interestingly, Illarionov’s remarks occurred against the backdrop of Argentina’s financial meltdown and ensuing political crisis. Several observers compared the South American country’s situation today to Russia’s during its August 1998 financial crisis and afterwards, but drew different conclusions. One newspaper today praised the Russian government of two years ago (which was headed by then Prime Minister Yevgeny Primakov) for ignoring the advice from Argentina’s economics minister, Domingo Cavallo, and his ideological soulmate, former Russian Finance Minister Boris Federov, that Russia follow Argentina’s example and peg its currency to the dollar. The paper described Cavallo, who resigned his post yesterday, and the International Monetary Fund as being the “architects” of Argentina’s impending default on its US$132 billion external debt (Vremya Novostei, December 21). Nezavisimaya Gazeta likewise noted Cavallo’s resignation with some satisfaction, describing him as “the beloved hero of Russian liberals circa 1998,” but warned that Russia’s current leadership should not “sleep soundly.” Echoing Andrei Illarionov, the paper wrote that while the risk of Russia defaulting on its US$140 billion external debt had lessened significantly since August 1998, the country had still not managed to break out of its dependence on natural resources or “to create financial instruments that would allow the stabilization of the economic situation.” The paper added, however, that regardless of the “economic upheavals” that might be in Russia’s future, its current political stability was a “serious guarantee” against the kind of “social cataclysms” Argentina was currently experiencing (Nezavisimaya Gazeta, December 21).

It should be noted that Illarionov, who accurately predicted weeks prior to the August 1998 financial meltdown that Russia would have to devalue its currency–a prediction that earned him the wrath of top Russian officials like then Central Bank Chairman Sergei Dubinin and Anatoly Chubais, who was then Russia’s representative to international lending institutions–has repeatedly warned that Russia is over reliant on both oil and foreign loans (see the Monitor, February 23; October 26, 2000).