Publication: Prism Volume: 7 Issue: 3

By Aleksandr Tsipko

Putin is becoming increasingly bogged down in the mire of Russian political life. Over the last two months, Russia’s political analysts have been saying with increasing frequency that his political will and desire for change are ebbing away. They mainly associate his dampening enthusiasm for decisive action with the failures of his administrative reforms. He has put the breaks on centrifugal tendencies, and reduced the threat of the break-up of the Russian Federation, but Moscow’s control over the regions and general ability to govern the country has not actually improved. The institution of the presidential envoys Putin set up is going nowhere. As a link between the Kremlin and the governors, they have not found their niche in the hierarchy of power. This is because Putin has not vested his representatives in the seven federal okrugs with real powers. They have been awaiting a decree granting them the right to regulate the activities of the governors and extending their current powers. Instead, Putin has begun making curious speeches about how the federal okrugs are not themselves subjects of the federation, and that full responsibility for the state of affairs in the regions actually lies with the governors. The envoys themselves say in interviews that they do not have the power to regulate the activities of the governors, and that their main job is to help the regional bosses, particularly in emergencies. Many experts now believe that the envoys are only hampering the establishment of good working relations between Moscow and the regions. The public do not know who the envoys are, and do not understand what they do or why Putin initiated this administrative reform in the first place. The governors still reign supreme in their territories, and the real life of ordinary people in the regions depends on their decisions and actions.

The system of sanctions, which, by virtue of amendments to the constitution, the president is now entitled to apply against governors who have transgressed, has also misfired. The recent situation in Primorsky Krai is indicative of this: Putin decided not to risk setting in motion the constitutional procedure for dismissing an incompetent governor. Instead he resorted to “telephone law”, and asked Yevgeny Nazdratenko to resign of his own accord, rewarding him with the ministry of fisheries.

The ironic thing about this is that while he was governor of Primorsky Krai, Nazdratenko actively campaigned against reform of the country’s fishing industry, and specifically against holding open auctions for control of the most valuable biological resources. But now these reforms are going to be carried out by someone who once actively opposed them.

The Nazdratenko case is further confirmation of the highly limited achievements of the administrative reform carried out last year. Even in its current weakened state, the Federation Council is not fully under the Kremlin’s control. The administration has decided against bringing criminal charges against Nazdratenko, realizing that out of solidarity the governors will never vote to strip him of his parliamentary immunity: Any one of them could be next. The Primorye affair sheds clear light on another weak spot in the administrative reforms initiated by the president. Despite the best efforts of the Kremlin and the heads of the federal okrugs, who represent its interests, the governors remain in complete control of their regions. Even after his resignation, Nazdratenko continued to run the show in Primorye through his deputies, and had every chance of returning to the post of governor by winning the elections set for May. As a result, the public dressing down of a negligent governor – which was supposed to be an example to others–turned into its complete opposite: An illustration of the Kremlin’s helplessness in the face of increasing truculence on the part of the regional barons.

There is therefore every reason to suppose that the reforms of Putin’s power hierarchy, so widely publicized in the press, are sinking into the sand, and that the achievements of these reforms are as yet minimal. It is now clear that the regional elite, bottle-fed by Yeltsin, has now developed great resistance. The latest gubernatorial elections are striking proof of this. Almost two thirds of the old “Yeltsin vintage” governors remain in their posts. Regardless of the thoughts, desires and plans of Moscow–the so-called “Federal Center”–for the most part things in the regions remain just as they were. Putin’s presidency began with an unsuccessful attempt to remove St. Petersburg governor Yakovlev. Then Putin’s attempt to remove Samara governor Titov also ended in failure. And just recently, everything was in place to prevent Mintimer Shaimiev from triumphing in the forthcoming presidential elections in Tatarstan. In theory, everything that could have been done had been done to finally remove him from the political scene. Two opponents–relatively influential politicians–had secretly set up their election headquarters in Tatarstan. But once again Putin’s starting gun misfired, and everything remained as it was.

The picture is similar in the struggle with another powerful force in Russia’s political elite: The oligarchs. An initial intensive attack was succeeded by a period of calm, and an attempt at reconciliation with the enemy; then there was a climb down from a number of principle positions. Last year, the Kremlin gave the business community quite a scare by casting doubt on a number of privatization deals, such as the pledge auction of Norilsk Nickel. However, things are now moving in completely the opposite direction. In order to implement an agreement with the RSPP (Russian Union of Industrialists and Entrepreneurs), which in its current incarnation resembles nothing so much as an oligarchs’ trade union, the Unity party has proposed an initiative to reduce the limitation on privatization-related crimes from ten to three years. At the same time, the attempts of the power structures to put pressure on big businesses, with a view to tapping them for extra budget contributions, came to nothing. On the contrary, the growing tendency is for movement in the opposite direction. Under pressure from the business community, and contrary to their original plans, the Kremlin and the government are granting more and more tax concessions which might have an extremely damaging effect on budget revenue. Attempts by the ministry of finance to abolish tax relief on profits used for reinvestment, for example, were a complete failure. At the same time, in line with agreements with the RSPP, the ministry of economic development has drafted a proposal to reduce customs tariffs on imported production equipment. The ministry of finance also lost out in its battle with the oil companies over export duties on oil. Late last year, using the excuse of high oil prices and a fall in value of the euro, the government imposed a sharp increase in export duties to 48 euros per ton. With the subsequent reduction in world oil prices in December and January, and a strengthening euro, the oil companies called for the government to bring these duties into line with the official tariff scale. In the end, Prime Minister Mikhail Kasyanov took the unilateral decision to remove this problem from the purview of his stubborn Finance Minister Aleksei Kudrin, and asked German Gref to draft a resolution reducing the duty to 22 euros per ton. The price of this decision is the loss of 4 billion rubles of revenue for the federal budget each month. Russia’s leaders have decided that honoring their agreements with big business is more important than mobilizing budgetary resources to pay the Paris Club. Expected concessions in hard currency regulations for Russian exporters may also complicate the search for a solution to the country’s debt problems.

Thus, instead of smashing the regional rebels and the oligarchs, Putin has prompted them to unite, and in so doing has created a serious political enemy for himself. The architects of Putin’s administrative reform program did not anticipate that the oligarchs might unite with the regional elite; the unforeseen has now become political reality.

Most of today’s governors were not chosen by the people; they are placemen, protégés or simply people hired by particular financial groups. The oligarchs and the big businesses behind them, feeling insecure on a federal level, have begun consolidating their positions in the regions and engineering the election of their own people as governors. There are numerous examples of this. Neelov, governor of Yamalo-Nenets Okrug, is a Gazprom man. Sobyanin, who recently triumphed in gubernatorial elections in Tyumen, is a Lukoil man. Abramovich, an oligarch who owns large oil companies, is simultaneously governor of Chukotka.

Big businesses are shifting their attention from the federal to the regional level, insuring their political and economic interests against unexpected changes of course by Putin. The oligarchs’ transition to a regional profile allows them to play an active role in the new redistribution of property that has begun, and it is evident that this has nothing to do with Putin. Those oligarchs close to the Kremlin, particularly Abramovich, Mamut and Deripaska, are buying up large enterprises one after the other, and gaining control of whole regions of Russia.

Irrespective of Putin’s intentions and his strategy to strengthen the power hierarchy, there are new processes underway in the regions, related to a change in the strategy for survival adopted by large financial groups. Previously they followed the colonial model of behavior, focusing mainly on exporting profit out of the area, and showing no interest in the fate of the “natives” or the social and ecological situation in the regions. Now, big business and the oligarchs as a whole have decided to involve themselves in the regions, and are starting to play a role in everyday life and buff up their image in the regions. And the federal bureaucracy, including officials from Putin’s office, are beginning to adapt themselves to this new order. It is striking that during the recent gubernatorial elections in the regions, Putin’s team did not have a universal policy for its candidates. Each group of federal officials worked for their own candidate–not entirely selflessly, of course, and in open competition with each other. Different officials from different offices pursued their own regional policy, without worrying about the opinion of Putin himself. This is indicative of the fact that we do not yet have a state.

All of this attests to the fact that Putin is failing to subordinate the interests of his officials to a common national policy, and is failing to deal with the impenetrable political environment in Russia. Many experts think that, sensing the resistance of this environment, Putin will soon lose his appetite for change, and will focus his efforts on survival–as Yeltsin did. We will then be following the Yeltsin path, albeit without Yeltsin himself. And then a new period of stagnation will set in, a new status quo. The limitations of the instruments of power, and the limitations of our economic and social resources, may bring about just such a scenario. This unwelcome prospect is also compounded by the foreign debt, the lack of a united team, impending technological disasters and the absence of a well thought-out program of change.

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