Publication: Prism Volume: 7 Issue: 4

By Aleksandr Tsipko

President Vladimir Putin’s specific answer to the question is no. In concluding his most recent State of the Nation address, he declared that the latest Russian revolution was over, and promised that “there will be neither revolution nor counterrevolution: It is high time we learnt to live by normal human logic.”

The recent reshuffle in the government’s power bloc and the program of liberal reforms announced in the address, however, attest to the opposite: That we are still developing in fits and starts, following the logic of confrontation, demolition and rejection of the past. Even now, since Putin’s election, discontinuity is clearly stronger than continuity. The idea of breaking with the Yeltsin era dominates everything Putin does. Nowhere does he say anything about continuity with the era of the first president of Russia. Not only do we lack a full democratic process for the succession of power, we also lack an established mechanism for job rotation which is essential for normal life.

The first sign that we are still in the grip of the revolution which began in August 1991 is the ongoing phenomenon of “meteoric” political careers. The fact of Putin’s elevation from a lieutenant colonel in the KGB to the leader of a huge state indicates that our revolution is ongoing. Political affiliations are still much more important than professional and business qualities, a factor which is highly typical of revolutionary periods.

The appointment of the unknown and not particularly distinctive engineer Boris Gryzlov, first to the leadership of the pro-presidential Unity party in the Duma and then to the job of minister of internal affairs, is further testimony to the fact that the revolution still goes on. Doubtless Gryzlov will have predominantly ideological, commissar-style functions in the Interior Ministry. His brief is to clear his department of the corrupt placemen of the old regime and to replace them with new ones who are unquestionably loyal to the new president. It is obvious–and everyone knows it–that the appointment of the complete amateur Gryzlov has provoked a murmur of discontent not only among top ministry officials, but also among rank-and-file policemen. It is perceived as a sign of mistrust and disrespect for those who have devoted their entire lives to serving the organs of the Interior Ministry. Such appointments are typical of revolutionary periods, when the victors begin purging the state apparatus of the “servants” of the old regime. In this instance, of course, the deal was to replace a professional–Rushailo, a career general who is close to the Family and to Boris Berezovsky–with the civilian Gryzlov, who boasts just one undeniable advantage over his predecessor: He is a Putin loyalist from St. Petersburg.

These new appointments in the power bloc undoubtedly signify an attempt by Putin to sever the umbilical cord which still ties him to Yeltsin’s Family. Defense Minister Sergeev was replaced not only because he reached retirement age, but also because he was a key power player in the Family, and maintained very warm and friendly relations with Yeltsin even after the latter’s retirement.

However, clearest confirmation of the revolutionary nature of Putin’s intentions is provided by the declared program of liberal reforms. Instead of reestablishing state control of key positions in the economy, as predicted by many analysts, Putin has put his money on the full and final liberalization of the Russian economy. If everything the president mentioned in his address is implemented, then we will truly be witnesses to and participants in the third liberal revolution since the collapse of the Soviet Union. This not only concerns the choice of direction for the economy. First and foremost, of course, it concerns the choice of the political and social base for the regime. Putin is probably banking on big business. Within Putin’s own team, it may be said that the liberal reformers have gained the upper hand over the siloviki; today Putin has far more time for the views of Gref, Kudrin and Chubais than for those of his KGB friends, Sergei Ivanov, Patrushev and Cherkesov.

Over the last two months, Putin has clearly changed his mind about the best way to revive the economy and replenish Russia’s meager budget. Immediately after his election to the presidency last spring, Putin said bluntly in speech after speech that the oligarchs were “fishing in the murky waters of privatization,” and that in the vast majority of cases the auctions to sell off state property involved violations of the law. These statements of Putin’s were nicely in tune with the proconfiscation sentiments of the vast majority of Russians, who still view the oligarch’s wealth as stolen property. Incidentally, such sentiments were also characteristic of most siloviki, above all serving army officers, who got nothing out of privatization. Many expected that Putin would therefore exploit the mood of the majority to try to take reestablish state ownership at least of the natural resources.

But now Putin has spoken out, clearly and unambiguously, against a review of the results of privatization, and against any attempt to nationalize privatized property. With regard to the results of privatization, Putin has decisively distanced himself not only from the communists but also from the centrists as personified by Luzhkov and Primakov. As long ago as 1999 the centrists–first and foremost Fatherland–proposed the idea of cataloging and carrying out a juridical assessment of all the results of the transformation of state property into private property.

Yet on this issue Putin has aligned himself with the Right–one could even say the radical Right. He is effectively supporting the idea of clearing the decks, proposing to reject once and for all the idea of a moral and legal review of the redistribution of property. Not only has he spoken out against nationalization or further redistribution of property; he has also declared his intention to see privatization through to a triumphant end. Addressing his comments directly to the opponents of further privatization, Putin said: “We must expedite the adoption of a new law on privatization. A law which will establish precise and transparent rules for the sale and purchase of state property and which will enable us to put and end to political speculation about a sell-off of Russia. Unfortunately, talk of this kind is still going on. Now and again there are calls to impound this or confiscate that, and so on and so forth. The time has been and gone when the state owned everything, absolutely everything. We all know where that got us!”

Tellingly, Putin even moved away from his own previous position on retaining state control over the military industrial complex. In his address he advocated supporting the emerging practice of “involving private enterprise in defense research and production.”

The address revealed the president’s liberal romanticism and his belief that shaking off the fetters of state regulation of the economy will in itself ensure economic growth and prosperity for Russia. Putin was sharply critical of the bureaucratic obstacles in the way of legalizing private business. Typical of this is Putin’s desire to get rid of what he dubbed “nonfunctional restrictions in the hard currency sector.” Everything Putin said in his address about continuing the liberal reforms in Russia was revolutionary not just in essence but also in its consequences, bearing in mind the traditional Russian suspicion of anything to do with the movement of capital. “I believe,” said Putin, “that the current restrictions on operations involving capital and real estate discriminate against Russians as compared with other nationals, curtail their freedom and undermine the competitiveness of Russian business.”

Putin’s determination to get rid of the remaining Soviet communist social guarantees as soon as possible is also revolutionary in essence and in its political consequences. He plans to move away from old Soviet legislation. Putin also advocated shifting from the old system of free healthcare towards paying for medical insurance. He also said that the time has come to legalize payment for education, which in many cases is already the norm anyway.

Unlike other political analysts, I personally do not see the program of reforms proposed in the address as pure propaganda aimed at the western political elite. There are grounds to suppose that Putin, despite his background in the “power” structures, is leaning towards liberal market mechanisms for modernizing the economy. If this were not the case, he would hardly have entrusted the economic bloc to such overt liberals as Gref and Kudrin. Nor is it likely that Gaidar would have drafted the government’s economic program. And he would hardly have retained Andrei Illarionov as the Kremlin’s chief economic adviser.

Putin probably sees radicalizing the economic reforms as the best way of resolving the worsening economic problems. The parlous state of the systems providing vital municipal services, which was exposed during this year’s cold winter, has thrown into sharp focus the question of implementing housing and utilities reforms and restructuring the energy monopolies. In his address to the Federal Assembly Putin openly supported, for the first time, the idea of restructuring both Gazprom and United Energy Systems. Again, instead of renationalizing the natural monopolies and the natural rent, Putin proposes commercializing them, placing them on a market footing.

It is important to stress again that Putin is not only choosing ways of transforming Russia’s postcommunist economy; he is also selecting a political buttress for his regime.

The deals struck between the Kremlin and big business, which at first seemed to be on an unsystematic case-by-case basis, have gradually developed into a clear-cut and conscious strategy. In pursuing liberal reforms, the president has decided to rely on this section of the Russian elite. There is some logic to this. In Russia, as in any country with a market economy, there are universal laws, which were even formulated by Marxist and Leninist scholars. A nonconservative economic policy designed to emancipate entrepreneurial initiative and cut back the economic functions of the state will be of interest first and foremost to big business. Liberalization of the economy will be accompanied by unpopular measures to reduce state expenditure in the social sphere, which will inevitably bring Putin’s popularity rating down. After that, it will only be possible to continue down this economic path with the active support of the business community.

This hypothesis is also supported by the fact that Putin has effectively abolished the power base of the siloviki–the Security Council is no longer a parallel body to the government and the administration, involved in all decision-making affecting the fate of the country. Until the recent reshuffle, the Security Council, as the main center coordinating the power structures and the foreign ministry, offered almost limitless powers to the ex-KGB and army people who staffed it. Now that the Security Council has lost its many coordinating and controlling functions, the role of military men in the life of the state has decreased.

While Ivanov was in charge of the Security Council, he was effectively number two in the state hierarchy, because no decision was taken either in the Foreign Ministry or in the power structures without his knowledge. Now that Ivanov has been appointed defense minister and Rushailo has moved across to the Security Council, that body is only responsible for coordinating military action in Chechnya. This all suggests that Putin is backing the demilitarization which has recently been taking place in the system of government in Russia. It is possible that Putin saw Ivanov’s strong and all-powerful Security Council as a threat to his power base. This may be why Putin has now placed the liberals above the siloviki in the hierarchy of state power. Sergei Ivanov now has considerably less opportunity to directly influence decisions which do not come under the strict purview of the ministry of defense. It is now difficult to imagine Ivanov visiting major world powers as Putin’s personal envoy and influencing decisions on Russia’s strategic development. On the contrary, Ivanov’s military reforms will be incorporated into the general program of liberal reforms drawn up by German Gref. The president has not merely destroyed the Security Council as a parallel government and administration. He has eliminated the possibility of management of the economy being transferred to the siloviki.

There is no doubt that all these changes–above all banking on liberal reforms and big business as the buttress of power–will lead to a change in the alignment of political forces in Russia. Instead of the expected consolidation, we will probably get a new standoff between rich and poor, between the people and the authorities. Clearly a third liberal revolution and attempts to remove the vestiges of Soviet social guarantees will cause discontent among the public. As soon as the “majority” that Putin now relies on realizes that their president is not with them but with the “rich”–the oligarchs–they will naturally turn away from him. Under such circumstances, there can be no talk of the country consolidating around Putin. Many analysts even believe that in using the language of his liberal advisers–the language of Gref and Illarionov–Putin has given a great boost to the communist opposition, which now once again has reason to rail against the “antipopular” policies of the government.

In backing a new liberal revolution, Putin will inevitably run up against serious internal political problems. The danger lies not so much in the KPRF, which still has little prospect of coming to power, but in the fact that Putin has decided to rely on the liberal elite, which is extremely unpopular in Russia and which enjoys no social support. The danger in radicalizing the reforms, if they do not bring a rapid and tangible increase in prosperity, is that they may undermine the current political stability, which is still fragile. And this at a time when Putin’s reshuffle has managed to offend both the military and officials at the Ministry of the Interior.

He must also reckon with the fact that the governors and the regional elite as a whole are not happy with the declared radicalization of the liberal reforms either. In recent years, the regional elite has openly feuded with Moscow’s liberal elite. This is related to the fact that the governors and the regional elite, where patriarchal sentiments are strong, feel cut off by liberal ideology. But the main bone of contention is that the new liberal revolution goes against the fundamental economic interests of the regional elite. If steps are taken to debureaucratize the economy, the regional budgets will suffer greatly, because their income depends on what is called “shopkeepers’ capital,” that is, proceeds from small and medium-sized businesses.

All of this gives grounds to suppose that Putin will probably at least partially correct his course towards a radicalization of the liberal reforms. After all, revolutions in Russia are dangerous things. It would be reckless to undertake unpopular measures without the support of either the siloviki, or the regional elite, or the people.

Aleksandr Tsipko is senior associate at the Russian Academy of Sciences’ Institute for International Economic and Political Research and a columnist for Literaturnaya gazeta.