What we had
June 1994. Prime Minister Viktor Chernomyrdin bitterly criticised the MMM Company and the financial pyramid collapsed several days later.
October 1994. Russia lived through a “black Tuesday” as the US dollar exchange rate skyrocketed in one day triggering a collapse of various financial pyramids with the Chara Bank at the head. On the ruins of private pyramids Chernomyrdin began to build a superpyramid of State Treasury Notes (GKO). By that time a group of people close to authorities privatized practically for nothing the best pieces of state property and developed into oligarchs.
November 1994. Head of the Federal Security Service (FSB) Sergey Stepashin helped the Chechen opposition in an attempt to oust separatist President Dzhokhar Dudayev, but failed. In December federal troops entered the rebel republic and stormed the capital of Grozny.
June 1995. Chechen resistance was practically routed. However warlord Shamil Basayev stormed a hospital in the city of Budennovsk taking hundreds of hostages. President Yeltsin was inactive and the prime minister had to interfere into the hostage drama. “Speak louder, Shamil Basayev, I cannot hear you well”, Chernomyrdin shouted into the telephone and fulfilled all the demands of the terrorists allowing them to safely escape back to Chechnya.
January 1996. A new group of terrorists attacked the Dagestani city of Kizlyar with a population of 40,000. The Russians learned the name of warlord Salman Raduyev, who followed the example of Basayev by shooting people in the streets and taking hostages in a hospital and a maternity home. The operation to free the hostages was so badly organized that it left major casualties, while most terrorists escaped to Chechnya.
August 1996. General Alexander Lebed and oligarch Boris Berezovsky accepted the Russian defeat in the Chechen war and signed a peace agreement in the city of Khasavyurt thus opening a way to the collapse of the Federation. Terrorist from Saudi Arabia Khattab became the main sponsor of “independent Ichkeria” and supplied Arab mercenaries to it, like Osama bin Laden did a decade before in rebel Afghanistan.
July 1996. Ailing President Yeltsin won a difficult victory at the presidential election due to the support of the oligarchs by defeating Communist leader Gennady Zyuganov. The authority, which ruined the habitual way of life of the Russians, offered nothing in exchange and most people got nostalgic about the Soviet past.
The autumn of 1996. Yeltsin underwent a heart bypass surgery. The government and mass media served the interests of “state-appointed billionaires”. Regional laws contradicted federal legislation, in Kalmykia and other national republics ethnic Russians were ousted from the bodies of power. Millions of people were not paid wages, pensions, and allowances. Khattab, who now settled in Chechnya, married a girl from the Dagestani village of Karamakhi inhabited by Wahhabites.
In 1997 world oil prices fell and the pro-Communist majority in the State Duma urged to impeach Yeltsin. State debts to the people were growing, protest rallies and marches, as well as hunger strikes swept the country. The elders of Dagestani settlements of Karamakhi and Chabanmakhi refused to obey official secular authorities. While local officials urged the elders to change their mind, Khattab attacked a military base in Buinaksk causing casualties among the servicemen.
Early 1998. Signs were mounted at approaches to several Dagestani villages which warned: “Attention! The Shariah law is acting on this territory”. Yeltsin fired Cherno-myrdin and appointed young reformist Sergey Kiriyenko as the head of government. Kiriyenko hoped a barrel of oil (159 liters) would cost at least US$12 (as in 1973 when the dollar was 25% higher), but the oil price refused to exceed US$8.
August 1998. Many billion dollars of foreign credits were withdrawn from the country and disappeared without trace. Russia was unable to timely repay its financial obligations. In one day the ruble fell four-fold against the dollar — to 24 rubles per greenback. Prices skyrocketed. People rushed to withdraw money from bank accounts, but the banks had only the GKO, but no cash.
Autumn of 1998. The collapsed state financial pyramid buried numerous banks and companies, dozens of thousands of people remained jobless. New Prime Minister Yevgeny Primakov worked to improve the situation, but his leftist outlooks, independen-ce and a good relationship with the opposition State Duma irritated President Yeltsin.
Early 1999. Sergey Stepashin became the prime minister. Spring brought green leaves to Chechen forests allowing militants to hide there, and recruits from Khattab camps launched weekly attacks at border posts that Russia built to separate Chechnya. Authorities were inactive, while ordinary citizens were ashamed of the impotency of the country which used to be a superpower.
July 1999. Khattab sent 200 militants to Dagestan to attack police posts and patrols. On August 2 another bandit unit seized the Tsumandin district of the republic. On August 6, 400 militants, most of who were Arab mercenaries, crossed the border of the Botlikh district under the command of Khattab and Basayev. They disarmed policemen, erected firing positions, including for armor. On August 8, reinforcements with artillery arrived from Chechnya.
On the night of August 9 authorities sent trucks to evacuate women and children. In the morning the militants seized another two villages in Dagestan. President Yeltsin appointed Vladimir Putin acting prime minister.
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What we have
In domestic policy Putin faced seven basic tasks: (1) elimination of the threat to the Russian territorial integrity, (2) enhanced control over the regions, (3) elimination of poverty through economic growth, (4) redistribution of the wealth of the oligarchs for the benefit of the whole people, (5) creation of the middle class due to the development of small and medium-sized businesses, (6) the fight against corruption, (7) reviving national dignity in the people.
The interests of the new prime minister, who seven months later was elected president, radically contradicted the interests of many regional leaders. Some of them established despotic regimes, while others embezzled budget funds and were engaged in shady and selfish deals. The oligarchs were also in no hurry to share the wealth with the robbed citizens. Economy demanded modernization. Bribery was actually legalized. And it was impossible to dream of a true love of the people to the Motherland without eliminating poverty.
Putin had to begin with North Caucasus. Russian army generals no longer sent untrained draftees to fight experienced militants, and used artillery and air force to destroy enemy positions. Men in Dagestan joined the home guard and assisted the army. As a result, combat activities quickly retreated back to Chechnya. On the night of January 29, 2000 terrorists had to flee from Grozny by running across a minefield. Many of them were killed and wounded. Basayev lost a foot. In the following years Khattab, Yandarbiyev, Arbi Barayev were killed, numerous field commanders and their subordinates were liquidated or nabbed. War demon Basayev is most likely dead from the spring of 2002. All that made it possible to hold a referendum in Chechnya in 2003 and then a presidential election, which Akhmad Kadyrov won.
Having returned Chechnya back to Russia, Putin switched to regional governors. They were ousted from the Federation Council. Instead the governors began to appoint their representatives to the parliament upper house, however the same right was granted to regional legislatures as well. As the appointees of the governor and the legislature were sometimes at odds with each other, the regional lobby was considerably weakened. The division of the country into seven federal districts headed by presidential envoys also enhanced authority. And finally Putin gave himself the right to dismiss regional governors.
Surprisingly, the governors did not even protest the loss of some of their powers, which went to the federal center. Most likely, they were scared by the merciless fight against terrorism and the KGB descent of Putin (his promise to “kill terrorists even in the outhouse” was not only a popular slogan. Putin, a former FSB head, was well aware that some terrorists were really killed in toilets where they tried to hide from an anti-terrorist operation). The oligarchs did not feel the changes under Putin and hoped to manipulate the president like they did will ailing, heavily drinking and lazy Yeltsin. And they failed.
Very soon Boris Berezovsky and Vladimir Gusinsky had to flee the country. Berezovsky failed to realize that the time of all-round liberalism had gone forever and attempted to oppose the president by creating the Liberal Russia Party from his London self-exile. However its leaders bitterly quarreled with each other and one of them, State Duma deputy Sergey Yushenkov was even killed. However, the billionaires who remained in the country did not make a proper conclusion from this instructive story. They thought it was suffice for them to stay away from politics (only Chukotka Governor and oligarch Roman Abramovich followed Berezovsky and resettled to Great Britain — an unprecedented event in the world practice of regional governance).
Putin, in his turn, clearly realized it was impossible to eliminate poverty without the money of the oligarchs. Stubborn unwilling-ness to share billions, not millions of dollars resulted in the arrest of Mikhail Khodorkovsky. Other business tycoons hastily declared their new socially-oriented position.
However, the stand-off between authorities and big business did not allow to considerably develop the long-suffering small and medium-sized businesses. A vivid example is the situation with private shuttle minibuses. Mayors of some cities are frantically fighting to reduce the number of the popular and necessary urban transport means in order to save loss-making Soviet-era municipal public transport. Those officials should instead hurry to fulfil their direct duties and have their regional budgets approved. Such major cities as Ulyanovsk and Kostroma have not yet adopted their local budgets for the current year.
Nevertheless, the contribution of small and medium-sized businesses to the national economy is not that insignificant. Last year we had six small and medium-sized companies per a thousand of population which employed 15% of the manpower and jointly produced 10% of the Gross Domestic Product (GDP). In Byelorussia, which is geographically, economically, politically and mentally close to Russia, there are three small and medium-sized businesses per a thousand of population which employ 9% of the total manpower and produce 6% of the Byelorussian GDP.
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What we’ll have
Although the catastrophic feeling that Russia is falling into a black hole ceased to exist under Putin, in reality nothing much has changed. Even the fight against corruption was launched only in the end of 2003 and has been going on selectively by targeting those on top. However rank-and-file corruption has not suffered. Suffice it to look at the banned shops and kiosks at railway stations which flourish under the cover and protection of corrupt police officers.
So what are the reasons for Putin’s landslide victory at the March 2004 election, besides his personal charisma? In the summer of 2000 oil prices skyrocketed in the world. OPEC oil-exporting countries attempted to trigger a new energy crisis in the world. The price of a barrel jumped to US$35—37. Sergey Kiriyenko could not even dream about that. Oil remained expensive in the range of US$20—35 per barrel, which is a reason for the growth of the Russian GDP, for the federal budget surplus, and for an easy repayment of foreign and home debts. It is also a reason for a patriotic upsurge, which is often both naive and grotesque like in the popular song: “There is a GRAD missile system in the battlefield, there are Putin and Stalingrad behind us.”
In the meantime, the prospects of oil prices are not very inspiring. Let us remember the greatest energy crisis in the history of mankind that was triggered by OPEC leadership decision to raise the oil price four-fold in late 1973. Other prices followed suit in the West. Enterprises and factories came to a standstill, unemployment sharply increased, while most private cars had to be parked for quite a time. Soviet newspapers published numerous caricatures about Americans with candles in hands and about the Dutch, who moved from cars to bicycles.
However the crisis forced western companies to design new oil refining technologies, which allowed to produce from a ton of crude over 800 kilograms of light fractions for motor fuel and chemical industry compared to some 500 kilograms before. On the other hand, the omnipotence of OPEC turned out to be a bluff. Crude and oil products comprised from 90 to 100 percent of exports of the richest members of the organization. If the emirs, sultans and sheikhs stop selling oil, they will go totally broke together with their citizens.
In the 21st century the dependence of a country on exports of natural resources is a sign of backwardness. The dependence of industrialized nations on crude oil is gradually decreasing. In 1973 a half of the world economy depended on oil shipments, but a quarter of a century later the figure reduced to 25%. Therefore there was no crisis in 2000. In France drivers blocked for several days major highways and approaches to refineries. In Poland drivers protested in another way: their trucks moved at a turtle’s speed impeding other motorists. In Great Britain drivers held several rallies. In other countries protests were even less evident.
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To fully free themselves from OPEC dictate industrialized nations are looking for energy carriers outside the Arab world. Thus, the United States puts a serious stake on Canadian oil-bearing sands and on seemingly inexhaustible reserves of bitumen. So far it is expensive to refine such a raw material. However, calculations show crude oil prices will considerably fall in the coming decade also due to the seizure by the US-British coalition of Iraqi oil fields.
In which situation will Russia encounter the upcoming oil price fall? The beheaded Chechen resistance stages terrorist acts in downtown Moscow. The army remains unprofessional and is therefore sick with stealing and hazing. Instead of really assisting the population the oligarchs are buying indulgence by returning Tzarist toys back to the country. The government reform aimed to end corruption so far only gave birth to new departments and raised wages to officials. Most governors succeeded to get on with presidential envoys and continue to do what they want — sometimes for the benefit and sometimes for the detriment of the population. No numerous middle class, which is the pillar of any state, has emerged. The use of high technologies in the national economy is an exception from the rule, while Soviet-era equipment has been worn-out completely and can produce nothing good (just look at the hopeless products of domestic car makers).
The level of exactingness was clearly demonstrated during Putin’s inauguration on May 7, when Constitutional Chief Justice Valery Zorkin spoke into a switched-off microphone in a TV broadcast to the whole world. No wonder oil dollars remain the only Russian instrument to eliminate poverty.
In other words, our state has not become socially-oriented, like the head of state is urging. Everyone can see that Vladimir Putin sincerely and whole-heartedly works to drag the country out of the marshland. Despite all endless changes the country is successfully resisting his effort. And nobody knows whether the president will succeed to break the vicious circle.
Nobody knows. Even Vladimir Putin himself.
By Alexander CHERNITSKY
