Donald N. Jensen December 1998
I. The Importance of Political Culture
II. Crime Integral to System
III. Continuity of Elites
IV. Institutions of Government
V. Informal Politics
VI. The Politics of Policy Making
VII. Who Governs?
"Your sovereigns, born to the throne, may suffer twenty defeats and still keep returning to their capitals. I cannot. I am an upstart soldier. My rule will not survive the day on which I have ceased to be strong and feared."
- Napoleon to Metternich, 1813
This article attempts to answer the question, who governs Russia in 1998 and, moreover, what difference it makes who governs. These questions can be answered, I believe, only by linking the analysis of governmental institutions and political processes to an explanation of how and why major policy decisions are made as they are. Conclusions about a "demoracy", and "oligarchly", or a "criminalized state" are little more than conjecture if they are not based on a careful examination of how Yeltsin, the government, leading bankers, the Duma, the media, regional leaders and other major actors actually affect, or fail to affect, a wide range of policy questions. In this regard I believe today’s Russian government is not a new regime arising out of the old Soviet Union, but a successor to it. Russian politics, moreover, must be seen as an evolutionary process growing out of its political culture: the distinctive set of beliefs, behaviours and institutional arrangements about how governing ought to be carried out. For that reason these factors will almost certainly shape the country’s politics long into the future.
I. The Importance of Political Culture
There is much that is new in Russian politics. Public opinion polls show, for example, that people display more political tolerance and support for civil liberties than ever before. The Russian constitution borrows heavily from the West. However, continuities with Russia's political culture and the Soviet past are everywhere evident: in the stronger overall support for a strong leader than elsewhere, for example, and the more widespread preference for order. Three elements of that culture have special importance today because of their implications for the institutionalization of a democratic regime:An underdeveloped state. The state has traditionally been weak in Russia. The few institutions that did exist were cumbersome and inefficient. Their authority was poorly defined and they had trouble implementing their decisions. Laws guaranteeing property or power once obtained were nonexistent or poorly enforced. Instead, authority was personal and informal. The idea of civil society - the recognition by the state of the right of nonofficial social groups to legal status and a legitimate sphere of free action - was poorly developed. Indeed, the distinction between private and official action itself was often blurred.
Today's Russia's institutions also have vague, often overlapping authority - the boundaries between federal and regional authority, for example, are poorly defined, as is the separation of powers at the federal level. The boundary between "official" action and the private activity of its citizens is hazy. Laws are inconsistently enforced. Despite a large official bureaucracy, the government cannot implement many of its decisions, even "normal" functions such as tax collection. Thus, the state cannot easily act as a catalyst for social development by taking resources and devoting them to the "public interest" - if, indeed, the concept were widely shared and understood in the West.
Patrimonialism. Political authority was viewed by traditional Russian elites as closely related to property ownership. The czar - who identified the state with himself - "owned" the nation, its vast resources, and its citizens. He concentrated in his hands the most profitable branches of commerce and industry and granted favoured nobles economic privileges in exchange for their support. The civil service practised a byproduct of patrimonialism - "kormleniye," or feeding - which meant that it administered the czar's lands, collected taxes and kept a portion of what it collected for itself.
Today, patrimonial attitudes characterize many Russians, especially the elites. Especially influential entrepreneurs have become rich, with government support, by stripping Russia of oil, natural gas, and other resources and salting profits abroad rather than reinvesting it in the country's development. Corruption - the modern equivalent of kormleniye - is widespread. The government also holds large chunks of stock in key industries, often in natural resource extraction.
The culture of the imperial court. The culture of the Russian ruling elite traditionally centred on the "czar," who refereed and balanced the competition among princely clans for his favour as well as political, coercive, and economic advantage. Decision making was collective and reflected a workable consensus among members of an inner circle whose dynamics were controlled by tradition, a balance of interests, and the regulating "fiction" of the czar's unlimited power as a source and justification for the clans' authority.
Political competition today
centres on Yeltsin's "court." He avoids identifying with any single faction,
and instead balances ministers, business tycoons and security chiefs, who,
in the absence of rules of political competition, are in perpetual competition
with one another for his favour. Ties between members of the "court" and
society at large, as before 1917, are minimal. Yeltsin's divide and rule
strategy fosters oligarchic infighting and inconsistent policy, but enhances
II. Crime Integral to System
These trends have contributed to the criminalization of the political system. Today the normal business of the state, of law enforcement, and of the courts, cannot be conducted without reference to what in many Western democracies would be considered official illegality and corrupt and criminal interests.
Crime and illegality are not a threat to the system. They are a part of it:
The Audit Chamber, the nonpartisan, independent state auditor analogous to the U.S. General Accounting Office, has extensively chronicled the pervasiveness of the problem. The Chamber recently found that at least one-sixth of Russia's budget in 1997 was misspent due to mismanagement and corruption - a loss of more than $10 billion. The Chamber's head, Venyamin Sokolov, a Chamber member, surmised that the real amount may have been twice that sum. In 1995 and 1996, he added, "not a single article of the federal budget law was observed." In other recent reports the Audit Chamber determined in 1995-96, the government conducted $160 million in gold sales without the required approval by the legislature. Two government agencies illegally retained almost $100 million in commissions on foreign sale and one-third of the cash generated by unauthorized gold sales was spent on perquisites for high officials. In July 1997 the Audit Chamber found illegal the government's auction of Norilsk Nickel shares to ONEKSIMBANK, controlled by Vladimir Potanin, an ally of then First Deputy Prime Minister Chubays. Of $3 billion earmarked for reconstruction of the Chechne economy after the war ended, the Chamber found documentation for only $2 billion. Less than $150 actually reached Chechnya. Also in 1998 the Audit Chamber reported numerous financial irregularities in the management of the state owned Russian Television Network (RTR), largely from 1990-96. The State Property Committee, according to the Chamber, failed to monitor the finances of RTR, leading to the misappropriation of property, precious metals and funds.
Organized crime. It is the centrality of official crime and illegality to normal political activity, not organized crime, which is the major threat to democratic development, but Russian organized crime is nevertheless a major problem. The MVD estimates that in 1996 there were 8,000 criminal gangs in the former Soviet Union, 300 operating internationally. The Ministry of Internal Affairs (MVD) has estimated that 40 percent of private business, 60 percent of state-owned enterprises, and more than half of the country's banks are controlled by organized crime. Russian organized crime groups have in many ways supplanted the state in paying protection, employment, and social services, activities that the state can no longer provide. The majority of private enterprises are compelled, by force if necessary, to pay protection of up to 30 percent of their profits to organized crime.
The criminal groups built themselves up on the foundations laid in Soviet times - on the networks of "thieves in law," or "vory v zakone" who ran underground criminal networks from the penal system and specialized in activities such as robbery and prostitution. During the Brezhnev era, some of the thieves in law made common cause with members of the Communist Party, who grew rich through bribes, payoffs and underground barter economy, which provided the goodswhich the socialist system either banned or could not supply. Today organized crime includes these thieves in law, officials and entrepreneurs who got their start illegally during Soviet times, as well as groups sharing experiences (such as service in the Afghan war), membership in sports clubs, or loyalty to a particular leader. Ethnic groups composed of Chechens, Armenians, Azeris, Dagestanis, Georgians and Ingush join them.
The weakness of the state requires that businessmen have a krysha - protection - to be able to operate. Linking criminal and legal economies, this protection can come in the form of a criminal overlord protecting members of his organization or the protection a criminal group offers to a businessman in exchange for paying extortion money. Often the krysha provided by a crime group includes other services such as protection of property, debt collection, customs assistance, legal and business advice, and banking privileges at crime-controlled banks. A krysha also can include forms of corrupt government protection involving the militia, tax, police, military, customs, and border guards.
In a developed democracy,
these abuses would be mitigated by the workings of a democratic government
or protests from an aware and active civil society. In Russia, however,
the pervasiveness of crime has undermined Russia's already weak political
institutions and civil society, contributed to the fraying of the social
fabric. Crime is also the main reason why, seven years after President
Yeltsin launched economic reforms, the economy still shows only the faintest
signs of improvement. The standard of living, the health and the prospects
of the majority of citizens are deteriorating, while the wealth made by
its business elites is siphoned off abroad, often illegally. The fact that
crime is imbedded in Russia's system of governance does not necessarily
mean that it cannot be reduced through a combination of sound public policies
and effective leadership. Its deep roots, however, suggests that it cannot
be effectively combated without fundamentally changing the way the regime
III. Continuity of Elites
Within this cultural framework, the continuity of the current political establishment with the more dynamic and adaptable fragments of the old Soviet administrative elite - the nomenklatura - is the central fact of Russian politics. The Soviet system ended, not because of a revolution from below, but because portions of the nomenklatura decided to abandon the old ruling institutions, from the Communist Party to Gosplan and formally embrace a market democracy. Today this small oligarchy of political leaders, bankers, media tycoons, industrialists, and bureaucrats - often called the Party of Power - dominate the "commanding heights" of Russia's politics and economy - its key government positions, financial and industrial assets, mass media outlets and instruments of coercion.
In 1989-91 opposition groups with bases in the intelligentsia and favouring a democratic political system and civil liberties formed a loose, anti-Soviet coalition with ethnic nationalists and those parts of the Soviet managerial elite who were convinced that the old command-administrative system would no longer work. The alliance broke apart quickly after the August 1991 coup, when these managers resisted the efforts of the Gaydar government to implement radical economic and political reforms which, had they been successful, would have deprived the nomenklatura of influence and status. The managerial elite gradually drove the radical intellectuals from positions of influence and consolidated its hold on power.
Studies of the new Russia elite show that the majority of its members are drawn from the second rank of the Soviet-era nomenklatura. According to one study, 19% of the 1988 elite were in leading positions of private business in 1993; 48% of the 1988 group were still in the political elite in 1993. A large proportion of today's ruling class is a product of the same prestigious academic institutions that spawned the Soviet leadership or worked in the Communist Party's youth branch, the Komsomol, under whose sponsorship they were allowed to start businesses well before the "official" demise of communism and often in violation of the law. Still others - industrial managers, ministers, enterprise directors - came to power by "privatizing" their sectoral economic ministries during the waning Gorbachev years. Despite removing their enterprises from government control they continued to profit from their official contacts. This core group has been joined by new elements - entrepreneurs without government money and contacts and people with links to organized crime - comprising about one-third of the total, who did not occupy leadership roles in the Soviet system. Although there are some tensions between the old and new groups, there are also cross cutting rifts within each group.
While democratic institutions have taken root in Russia since 1991, to the extent that regular elections have been held and certain institutions have proven minimally effective, they are not strong enough to consolidate elite rule. This elite, formerly unified around Marxist-Leninism, is nevertheless divided over rival policies and how to divide the Soviet patrimony. It also lacks an ideology that legitimizes its rule. Moreover, the elite has failed to come up with a political formula to win over the masses. The government feels little accountability to the public for its actions. The public feels little responsibility for the actions of the government. Yeltsin's re-election in 1996 was secured with the financial support of the administrative elite, whose media outlets demonized his Communist opponent, Gennadiy Zyuganov. The key question, therefore, is whether in the transition away from Soviet communism, Russia's elites will succeed in creating a new set of values, a durable set of institutions and accepted rules of the political game.
The post-Soviet transition
has also generated a large numbers of "losers." There are perhaps 1-2 million
"New Russians," who earn more than $2000 a month; a middle class of 5-10
million people earning more than $500 a month; and some 80 million adults
who make lower than that amount and who spend more than half their money
on food. The ruling elite pays lip service to the plight of the majority,
but there are few effective ways for most Russians to influence elite decision-making.
"Opposition" often takes individual, non-political forms such as the refusal
to pay taxes, alcoholism, and suicide. The most influential opposition
force is the Communist Party of the Russian Federation, which claims half
a million members and draws 25-30% percent of the vote in the elections,
mainly from the elderly. Although the communists and their allies have
a majority of seats in the Duma, the lower chamber of parliament, its leaders
share many values with the elite, especially the perception that there
is a gulf between the elites and the masses. The party also has a strongly
statist orientation, inherited from its CPSU predecessor, which nclines
it toward pragmatic cooperation with the government.
IV. Institutions of Government
A "superpresidency" - a constitutional system providing for an extraordinarily strong chief executive, a weak national legislature, and partially developed judiciary - dominates Russian politics at the national level. Elected by popular vote for a four-year term, the president is in charge of foreign and defence policy and is commander-in-chief of the armed forces. The three "power" ministries - defence, interior and foreign affairs - report to him. The president can submit draft laws to the Federal Assembly and can veto legislation, subject to an override by two-thirds of both houses of parliament. He also has the power to legislate by decree.
The presidency was created in December 1993 when Boris Yeltsin's draft constitution won endorsement in a national referendum. Popular support stemmed from a desire to be rid of the stalemate between the president and parliament that had paralyzed the national government for much of the first two years after the end of the Soviet Union and which had culminated in the bloody insurrection in the streets of Moscow in October 1993. A strong executive, liberal politicians and intellectuals widely believed, would be the best guarantor of economic and social reforms. The approval also reflected Russia's cultural and historical preferences for a strong leader, as well as Yeltsin's understandable desire to maximize his political power.
The president also heads a sprawling, multilayered, multifaceted bureaucracy that many have compared to the old Central Committee bureaucracy of the Soviet Communist Party. This entourage includes policy experts, courtesans, and family members, and others not all of whom occupy official positions. (In perhaps no other industrialized country has a car salesman, as well as the president's daughter, body guard, and tennis coach, been trusted policy advisors). In April 1998 the executive branch consisted of a presidential administration, a system of presidential aides, and a presidential press service, all which reported directly to him. Also subordinated to the president were 22 federal ministries - some reporting to the president alone, others jointly to Yeltsin and the Prime Minister. The Administration of Affairs, under Pavel Borodin, provides logistical support for the executive branch. It employs more than 50,000 people and includes 200 firms employing tens of thousands of people, manages 2,000 dachas, uses 3 million square metres of office space and buildings in Moscow, and owns the Rossiya airline, a medical centre, a restaurant chain, five motor transport depots, several construction complexes, and a consumer service centre.
There is a large number of other agencies of executive power which nominally are subordinated to the Council of Ministers, but in which the president often takes an interest. This includes 11 state committees working on issues such as sports, film, antimonopoly policy, statistics and customs; two federal commissions (on securities and energy); 17 federal services covering such various issues as roads, migration and forests; 3 agencies (patents and trade, space, and government communications) and 2 oversight agencies. The number of officials whose appointment must be approved by the Kremlin number about 30,000.
The central organ of the executive branch, the Presidential Administration, comprises about 1,500 people and has been reorganized at least seven times in its six years of existence. Depending on Yeltsin's preferences and who has been at the helm - Sergey Filatov, Nikolay Yegorov, Yuri Petrov, or Anatoliy Chubays - it has been a bureaucracy only, an appendage of the president himself or the centre of power in the executive branch. Duplication of effort and competition within departments are widespread. With the appointments in 1997 of Yeltsin's friend Viktoria Mitina, Yeltsin's coauthor Valentin Yumashev and Yeltsin's daughter, Tatyana Dyachenko, to high positions in the presidential administration, the administration has since 1996 increasingly come to resemble an extended presidential family. Dyachenko is present at all important meetings, according to press reports, and accompanies her father on all important trips. Yeltsin reportedly relies on her to be an accurate channel of information. The influence of the Presidential Administration has largely eclipsed the government staff, with which it uneasily coexists and its authority overlaps. Important decisions by the Council of Ministers have generally been approved by the Presidential Administration before they enter into force.
During the five years under the new constitution Yeltsin has not exercised power so much as tried to hold on to it from all challengers, usually in order to prevent anyone else from doing so. His greatest periods of activity coincide with efforts to prevent any rival from emerging. In doing so he has, through his own strong personality and political skills, expanded his presidential powers even beyond those specified in the constitution.
Yeltsin has largely ruled by decree, of which he signs about 1500 per year. Most key government programs, such as privatization and the 1995 loans-for-shares auctions, in which leading oil companies were auctioned off at bargain prices to favoured banks, were carried out by presidential fiat. Yeltsin determines the strategic course of policy, though he clearly has not had the health or inclination to inject himself into the elaboration or micromanagement of policy once its general direction is set. While Yeltsin's advisors have often convinced him to change policy direction or have been the source of a particular initiative, it has been ultimately him whom they had to convince and it has been ultimately Yeltsin who made the decision to heed them. Conversely, Yeltsin is able to prevent general policy initiatives by the government or Duma that he opposes.
Yeltsin has constantly shuffled ministers and advisors and reorganized government structures. The number of government ministries has fluctuated wildly, as have the scores of largely ineffectual commissions and committees set up to address various policy questions. In response to failed policies - and sometimes for purely political reasons - he has fired a wide range of political friends and enemies. In March 1998, for example, he dismissed Prime Minister Viktor Chernomyrdin, who by all accounts was loyal to the president for more than five years, apparently for showing too much independence. At other times he brought in leaders with popular appeal - Aleksandr Rutskoy, Ruslan Khasbulatov and Aleksandr Lebed, only to discard them when they outlived their usefulness.
Behind such juggling has usually been Yeltsin's desire to maintain his hold on power. He has carefully balanced competing leaders, interest groups, and cliques. In the early 1990s, for example, he used Soviet-era holdovers such as Viktor Chernomyrdin and Oleg Soskovets, to balance "radical reformers Anatoliy Chubays and Yegor Gaydar. He has strengthened the police and Internal Ministry (MVD) troops to balance the regular army. He has steadfastly refused to identify with any political party or legislative faction.
Yeltsin has also used material incentives - money, apartments, and limousines - to coopt officials over whom he does not have the power of appointment. This has helped him gain the support of legislators (during the debate over the confirmation of Prime Minster Sergey Kiriyenko in April 1998, Yeltsin publicly asked long time aide Pavel Borodin to take care of the "needs" - a clear reference to these incentives). Yeltsin also has used compromising information to get legislators' backing.
Within the Yeltsin entourage, power is wielded by those closest to the president and who see him most often. Yeltsin is by most accounts open to a wide variety of advice before he makes a decision and - also by a wide variety of accounts - famous for agreeing with the last person in his office to have argued for a particular position. Yeltsin's immediate entourage falls into four categories: those responsible for providing services directly to the president (press, speechwriting, administrative support); policy advisors on matters such as foreign affairs and economics; his representatives to other bodies of power (the Constitutional Court, political parties, the Duma and the regions) and his immediate circle of friends and family. The State Legal Administration, under Ruslan Orekhov, performs the critical of role of gatekeeper, controlling the paper flow to the president.
The Council of Ministers is responsible for the formulation and implementation of economic and social policy, including credit and monetary policy, culture, science, education, health, social security, and ecology. The government also manages federal property and is charged with fighting crime. While the constitution in principle gives the government some responsibility over foreign affairs, defence and national security, in practice the president has by far the dominant role in these areas.
The president, subject to Duma confirmation appoints the Prime Minister, who heads the Council of Ministers. If the president dies or is incapacitated, the Prime Minister becomes acting president for a three-month period until new elections are held. If the Duma rejects three times the president's nominees for Prime Minister or votes no confidence in the government twice within three months on its own initiative (or once if the government itself requests the confidence vote), the president can dissolve the Duma, can appoint a new Prime Minister and can call for a new parliamentary elections. Unlike Western parliamentary democracies, where there is bargaining for ministerial portfolios during the formation of a new government - often managed by the party that has won the largest number of seats - the President or prime minister designate is under no obligation to hand out portfolios to the most influential parties. A large apparatus of more than 1,000 functionaries directly supports the government's work.
In practice, the Council of Ministers has failed to establish its full viability:
The State Duma consists of 450 seats and is elected through two types of mandates: a party-list vote, whereby 225 seats are divided among those parties that clear a 5 percent vote barrier. The other 225 seats are distributed through single-member constituencies on a first-past-the-post basis. Deputies serve 4-year terms and are not allowed to hold other types of employment, though many disregard this prohibition.
The Duma considers most federal laws, which usually require a majority to pass. The Federation Council has the option of voting on most bills passed by the Duma, but must do so within 14 days. While most laws submitted by the Lower House, the State Duma, do not require the approval of the Federation Council before being sent to the president, both houses must ratify some laws, including laws on the federal budget, taxes, foreign currency, credit, customs regulation and money emissions, the ratification of international treaties, the status and protection of the country's borders, and declarations of war and peace. If the Council rejects a law passed by the Duma, committees comprised of representatives of both houses may try to reconcile differences before sending it back to the full body for another vote. Alternatively, the Duma can pass a bill over the objections of the Federation Council if two-thirds of the deputies vote for it again in the same form. If the president vetoes a law, the Duma and Federation Council can override the veto by a two-thirds vote in both houses. The Duma's other powers include approving the president's choice of prime minister, and voting no confidence in the government. If the president's choice is rejected three times, the president can dissolve the Duma and call for new elections. That body also confirms the president's nomination for head of the Central Bank, declares amnesties and pardons, and brings impeachment proceedings against the president.
During its short history the Federal Assembly has largely been an appendage of the executive branch. The presidential veto and decree power has made the presidency and, to a lesser extent, the government, the primary sources of major laws and rules. Although the constitution also vests the power of legislative initiative in either chamber of parliament, as well as the president and the government, the Federal Assembly has considered far fewer bills than in many legislatures elsewhere. The executive branch has far more resources than the legislature to prepare bills. The parliament's committee system is weak and oversight of the executive branch feeble. Even with the threat of a no confidence vote and dismissal of the government, the Duma has been offset by the power of the president to dissolve the parliament and call new elections. Yeltsin, moreover, has often refused to obey the legislature's wishes, especially over the budget, by unilaterally withholding spending to advance his program. Despite its weakness, the Duma has sometimes been a useful public forum for debating national issues such as NATO expansion and the war in Chechnya, and has occasionally even overruled Yeltsin. In the wake of the 1993 and 1995 parliamentary elections, moreover, Yeltsin made changes in the cabinet to bring it more into line with the voters' apparent preferences.
After the opposition's triumph in the 1995 Duma elections, the Kremlin sought to block legislation it opposed by cultivating ties with the Federation Council, many of whose members owed their appointment as head of local administration to Yeltsin. As governors began to be directly elected in the following two years, however, the Federation Council began to distance itself from the executive. With independent political bases and constitutional protection against dissolution, Council members began to more aggressively lobby the federal government for favours. During the confirmation of Kiriyenko as prime minister, moreover, many members lobbied against his confirmation by the Duma, though they had no constitutional right to participate in the process.
The legislature's institutional weaknesses vis-a-vis the president have been exacerbated by the ineffectiveness and inexperience of the parliamentary leadership. Although opposition factions have dominated the Duma and have frequently denounced the president's policies, they have disagreed among themselves over strategy and tactics and often appeared more interested in maintaining their privileges than standing up to the president. The Duma has tried unsuccessfully on several occasions to impeach the president. It passed a preliminary vote of no confidence in Prime Minister Chernomyrdin's government in June 1995, but backed down a few days later. In its most assertive stance toward the president to date - its rejection of the candidacy of Prime Minister designate Kiriyenko in March-April 1998 - the Duma eventually buckled to pressure from the president.
Although the Duma has often denounced Yeltsin's policies and individual members of the government, relations have nevertheless sometimes been constructive. The Duma passed some elements of Yeltsin's economic program, such as the Civil Code, and reached a compromise with the president on a new electoral law. The federal ministries frequently lobby Duma deputies for approval of favourite bills. Yeltsin and the Prime Minister regularly meet the chairmen of the two chambers to discuss matters of common concern.
The Law on Government, signed by Yeltsin in December 1997 as the price for the Duma cancellation of a no confidence vote, may be a small step toward more equal relations between the branches. The bill for the first time gives the parliament some control over the Council of Ministers. It requires State Duma approval for all government ministers, except defence, foreign, and internal affairs and that the resignation of the Prime Minister be followed by the resignation of the government as a whole. Government ministers will also be obliged to appear before the Duma, at the latter's request. (Previously they could avoid appearing by citing the pretext of other pressing business.) Yeltsin largely obeyed the laws provisions during the government crisis of March-April 1998 that resulted in the confirmation of Sergey Kiriyenko as Prime Minister. His repeated unwillingness to compromise with legislative recalcitrance in the past, however, suggests that the true test of the Law on Government as a mechanism for regulating relations between the two branches has not yet come.
Russia's 89 regions include 52 oblasts (regions), 6 krays (territories), 21 republics, and 10 autonomous okrugs (districts). Each republic - nominally the "homelands" of a non-Russian minority such as the Tatars and Bashkirs - has the right to its own constitution and to elect its own president. Oblasts and krays are run by governors, most of whom were presidential appointees until elections became mandatory in 1996. Autonomous okrugs are ethnic subdivisions of oblasts or krays which have claimed special status either because they are very rich (for example, Yamal-Nenetsk in Tyumen, which has 53% of Russia's oil reserves), or because they are so poor they survive largely on federal financial support.
The regions display considerable political, economic, and social fragmentation. From the advent of the contested elections in the USSR in 1989 to the first Duma elections in December 1993, a clear regional pattern of voting has emerged. Northern and central areas of European Russia, the Urals, and parts of Siberia have tended to be more supportive of Yeltsin and reformist parties. Areas in an arc from the western border of Russia eastward through parts of the North Caucasus, the Volga region, and southern Siberia generally opposed Yeltsin. Urban areas, moreover, have voted strongly in favour of Yeltsin, while rural areas have tended to prefer the opposition Communist Party. Turnout has been especially high in areas that support the opposition. The large percentage of the economy that has become demonetized - perhaps as high as 75 percent, - according to one study - deters the formation of national markets. Similarly, housing shortages, the close link between the workplace and social services, and other constraints on labor mobility have tied most workers to their place of employment and impeded the development of regional and national labour markets.
The gap between the richest and poorest regions is vast and is increasing. The average Muscovite's salary is more than 17 times that of inhabitants of the North Caucasus republic of Ingushetia. In 1997 46% of all money in the state budget was contributed by the city of Moscow. Aside from Moscow, St. Petersburg and a few others, largely regions rich in resources, the vast majority of federation subjects are little differentiated by income.
Many governors have used popular election to rule with an iron hand. In a number of regions, fundamental questions about the distribution of economic and political power are not resolved. Executive and legislative branches are in frequent conflict. In several jurisdictions - Primorskiy Kray, Buryatia, and Udmurtia, the governor and the mayor of the region's capital city are in conflict. Moreover, the role of the presidential representative is not clearly defined. The representative in principle is supposed to participate in regional personnel questions, supervise the disbursement of aid sent from Moscow, and oversee the activity of federal bodies in the region. In practice, Yeltsin's representatives have encountered fierce resistance. In several regions there is a rivalry between several centres of power representing either sectoral (agricultural, military, fuel and energy), territorial or ethnic lobbies. In many instances, close ties between political and business elites allow elected officials to acquire needed budgetary funds.
The most contentious issue between the federal government and the regions is the division of power between federal and regional authorities, especially over tax and budgetary issues. More than forty republics, krays, oblasts, and autonomies have so far signed treaties delimiting authority between themselves and the federal center. While many treaties are strictly based on the Russian constitution, which vaguely provides for joint federal/regional control over many areas, some of these agreements, such as the treaties with Tatarstan, Bashkortostan, and Yakutia, are confederal, while others conform strictly to federal constitutional norms. Some subjects, moreover, have assumed jurisdiction over areas such as foreign policy, which are constitutionally federal concerns. In 19 of Russia's 21 republics, 29 of 49 oblasts, and 4 of 10 autonomous okrugs, constitutional laws have been passed that conflict with the Russian Federation constitution, and the Justice Ministry reported in 1997 that in the previous two years 16,000 laws examined by that ministry violated the federal constitution. The city of Moscow, Russia's most politically and economically powerful region, has struck a de facto understanding with the federal government that gives it substantial political and economic autonomy. It resolves problems with the federal authorities through direct negotiations.
Growing regional autonomy, which began well before the end of the Soviet Union and was a key reason for its demise, continues unchecked. Yeltsin's decrees are routinely ignored in the provinces. Numerous regions have adopted charters that blatantly violate the constitution and federal law. Nevertheless, the federal government needs the support of regional leaders to implement many policies. Although strong ethnic kinship, economic and cultural ties ensure that the Federation will likely hold together, federal efforts to slow the flow of power away from Moscow have been largely reactive and brought mixed results, from relative equilibrium between centre and periphery (Tatarstan, Moscow City) to disaster (the Chechen war).
Several events have spurred the decentralization of power:
The regions seek to maximize
their political and economic autonomy, press to keep as much local tax
money as possible at home and often try to take over some objects belonging
to the federal government. Many regions also lobby for additional federal
assistance - with as few strings attached as possible. The influence the
regions can bring to bear on the federal government is highly dependent
on their geographic position, economic significance, financial potential,
ethnic composition, and population size, as well as the clout of their
governors. Local governments also extensively borrow money at home or abroad
or engage in barter deals or the mutual offsetting of debt to garner additional
resources beyond the centre's control. The eight interregional associations,
with the one exception of the the Siberian Accord, have been slow to develop
because of vast differences among neighbouring regions. Tellingly - again
with the exception of Siberian Accord - these associations were formed
at Moscow's initiative, not the regions'.
V. Informal Politics
In Russia, as elsewhere, interest groups actively try to influence policy. Pressure group activity lobbying in Russia has several distinctive qualities:
Soviet lobbies at first supported Gorbachev's reforms. They hoped that his reforms would result in relaxed control of their activities by the state and party administrative bureaucracies - for example, that they would be free of the obligation to make deliveries to the state at artificially low prices, could find their own customers and charge them real market prices. Instead, perestroyka hastened the breakdown of the system in which they had long benefited, since the favoured lobbies now had to compete for resources and access with new a variety of others: entrepreneurs, former state employees, and criminal structures. These competitors - many operating illegally - were creating their own stock exchanges, banks and export companies and had their own access to state resources. The disintegration of the old lobbying system was further encouraged by the increasingly assertive Russian government, which sought to undermine the authority of the Union authorities by handing out privileges to a wide array of regions and enterprises, especially to those businesses loyal to them. By 1989-91 the old lobbying system, with its formal, hierarchical system of interest representation, had virtually collapsed.
The policies of the new Gaydar government in 1992 restored a measure of order in the system of lobbying, but forced interest groups to realign. Severe budget shortfalls demanded radical reductions in subsidies to sectors heavily dependent on state largesse during the Soviet period, especially agriculture, heavy industry and the military-industrial complex. Lobbying groups in the ascendance were largely those who could profit by selling abroad or in close association with the government - exporters of raw materials such as oil, natural gas, diamonds and gold as well as the financial sector, where a few large banks amassed huge profits because of inflation, the ruble's devaluation, and state budgetary transfers.
In 1991-93, a large number of associations based on shared economic interests also emerged. One group of industrialists, largely in charge of obsolete enterprises in heavy industry and who depended on state deliveries for raw materials, sought state subsidies to protect them from the effects of the market. Prominent associations included the Russian League of Industrialists and Entrepreneurs which was created in 1989 by the Communist Party and which represented heavy industry and the military industrial complex, as well as organizations claiming to speak for the new class of businessmen, such as the International Association of Enterprise Managers, the League of Cooperatives and Entrepreneurs, and the Association of Russian Banks. While most of these groups were not long lived, some met with success. The enterprise directors managed to squeeze continuing subsidies out of the government, secured the replacement of economic "radicals" Poltoranin, Burbulis, Aven, and eventually Gaydar himself by directors more sympathetic to their interests.
Since the Gaydar period most key lobbies have expanded and consolidated their positions. Today they include:
Financial-industrial groups (FIGs), the networks of politicians, banks, industrial firms, private security forces and media organs which constantly struggle with one another over policy and resources, are by far the most influential lobbies. In May 1998 there were more than 80 registered FIGs, including 1,000 industrial enterprises and 100 banks, and there were thousands more de facto FIGs, largely representing small or medium-size businesses and their in-house banks. The government needs the financial-industrial groups for revenue, personnel and expertise; the FIGs depend on the state for access to ownership of significant public assets, protection from attempts to challenge past illegal privatizations, and preferential state loans and tax concessions.
A few large FIGs are especially important, not because they are necessarily better run than their competitors, but because of their privileged origins in the Soviet nomenklatura and continued close relationship to the state. Unofficially, experts claimed in 1996 that Russia's eight largest FIGs controlled between 25 and 30 percent of GNP. Many top government officials have been recruited from the leading groups and return to the FIGs at the end of their tenure. Boris Yeltsin cannot rule without their support.
The financial-industrial group controlled by the natural gas monopoly Gazprom, for example, brings in about one fourth of the government's hard currency earnings, controls a quarter of the world's natural gas reserves, has a market capitalization estimated at about $50 billion, and controls pipelines linking Russia's neighbors that give it a major say in foreign policy. Former Prime Minister Chernomyrdin was once director of the firm and its interests are represented in the government by the Fuel and Energy Ministry. The payment of part of the firm's nearly 2 billion dollars in tax arrears in December 1997 enabled the state - which has a minority interest in the firm - to meet conditions laid down by the IMF for the release of $670 million of a $10.2 billion loan. For political reasons, Gazprom has tolerated a large number of unpaid bills, but also benefits from many legal or de facto privileges.
Of the ten most politically influential FIGs in 1998, five (Alfa, Inkombank, Rosprom-Yukos, SBS-Agro, Rossiskiy Kredit) got their start with the direct political and financial support of the Komsomol or Soviet Communist Party. Two others (Gazprom and Lukoil) are based on the "privatized" remnants of the old Soviet Oil and Gas Ministry. One (Most Group) was created during the final days of the Soviet Union and grew rich on its business dealings with the city of Moscow (The capital's new leaders, in turn, had taken over much of the wealth amassed by the old Moscow Communist party). The two remaining major FIGs, Logovaz and ONEKSIMBANK, were founded after 1991, but ONEKSIMBANK, established by former members of the Soviet nomenklatura, relied heavily on commercial relationships forged during the Soviet era.
After 1991, the large FIGs further prospered due to the immaturity of Russia's institutions, government "reform" policies, and Yeltsin's own governing style:
Yeltsin as Arbiter. Yeltsin has served as the umpire of this system, where constant competition by elites for power, resources, and the favour of the executive so strongly resembles the politics of the Czar's court. Although he has generally sided with the economic liberals in the government, Yeltsin has tried to avoid allying himself with any single FIG and has carefully balanced the FIGs to prevent any group from attaining too much power. He has brought representatives from competing FIGs into the government and has made sure that the sale of state property was widely distributed among competing groups and their foreign partners.
During his second term, however,
Yeltsin has been less effective. Public warfare among the oligarchs has
occurred more frequently. Although his faltering health has undoubtedly
played a role, Yeltsin's increasing reliance on family ties to govern has
apparently led him to make decisions with their financial welfare in mind.
Berezovskiy, moreover, has exploited his friendship with Yeltsin's daughter
to his financial and political benefit and often to upset the balance of
power. Former Prime Minister Chernomyrdin began to effectively step into
the breech for a time, but he was fired in March 1998, apparently because
Yeltsin saw Chernomyrdin's increasingly assertive and public performance
as arbiter as a political threat.
VI. The Politics of Policy Making
Now that we have seen how Yeltsin, the Federal Assembly, regional leaders, and interest groups and other political actors function, we should be able to explain how policies are made. Some observers argue that the system always operates more or less the same way - to serve the interests of the oligarchs, or Boris Yeltsin, or organized crime. In this part we shall see if these generalizations are correct.
One way to understand how an issue is shaped by and affects the distribution of political power is to examine what appear to be the costs and benefits of the proposed policy.
This approach can shed light on each of the following stages of policy making:
Majoritarian politics promise benefits to large numbers of persons at a cost that large numbers of persons will have to bear. Almost every Russian at some point in his life receives pension benefits. Everybody who works has to pay social security taxes. National defence and state-provided medical care offer the prospect of a distributed benefit that all pay for through taxes.
Such issues tend to be put on the agenda because they are visible or dramatic. Even in Russia, where public opinion is weak, they tend to be resolved in favour of the position that has a majority of citizens on its side. Policymakers are aware that public opinion exists even in Russia, that they ignore it only at their electoral peril. Although most Russians have little incentive to join interest groups or political parties, they nevertheless vote for or against politicians based on the stands they take on questions such as national defence, health care and education. In the 1996 presidential elections, Yeltsin skillfully cast the issue for the voters as an ideological choice between market and democratic reforms - which he represented - and communism, represented by his opponent Gennadiy Zyuganov. However, public opinion on an issue provides few details to policy makers. While most Russians oppose NATO expansion, they do not feel strongly about it and they disagree as to how expansion should be countered. In such instances, elites tend to formulate policies based on their ideology or worldview or their reaction to crises.
The fact that perceived costs and benefits of majoritarian politics are widely distributed means that few interest groups feel strong enough to organize and become involved. Thus, interest group activity is relatively low. Debate about putting these policies on the agenda and what to decide about them largely takes place within formal institutions such as the Duma, or the Federation Council. While President Yeltsin may care about a policy - for example, ratification of the START II Treaty - he usually does not perceive the costs or benefits as important enough to expend significant political capital on getting the outcome he wants.
The most notable recent example of interest group politics was the 1997 "Bank War," when Yeltsin, seeking to repay his election obligation to the oligarchs, infuriated them by announcing that the state-owned industries in the next round of privatization auctions would go to the highest bidder, instead of through an ordered division of spoils. The oligarchs saw this new policy as one that might impose concentrated costs on them and benefits on their business competitors. The result was an intense political and economic struggle among financiers, fought largely by mudslinging among the media, which was stopped only by Yeltsin's halting of the auctions in September.
Public opinion usually plays little role in interest group politics. The groups that are likely to be affected feel strongly enough about the issue as to organize themselves. Since many important interest groups have media organs under their control, the press also often plays a prominent role. President Yeltsin and the Prime Minister have actively mediated among interest groups, usually by ensuring that benefits were apportioned in a way that would maintain the status quo, but parts of the government also sometimes act as allies of those groups. Interest group politics, moreover, do not end with the passage of defeat of the initial proposal. The struggle continues during implementation - in the bureaucracy, the courts, the Accounting Chamber, or even with Yeltsin's further intervention.
The Stolichniy Bank (now SBS-Agro) purchase of Agromprombank in 1996 was an example of interest group politics involving rival parts of the government. In this instance one interest group, the FIG controlled by Stolichniy Bank, thought it would profit by the sale; Agroprombank, backed by the collective farm lobby, thought it would be harmed by the sale and opposed the takeover. The matter was settled when the government - acting as arbiter - forged a compromise: the sale was approved after Stolichniy agreed to maintain the bank's agricultural profile and turned over to the Agricultural Ministry, which often speaks for the interests of the collective farmers, enough shares of stock that it could block any drastic change. There was little involvement by the Duma or the courts.
The politics of the presidential court, a kind of interest group politics, result, not from policies that promise concentrated costs and benefits, but from the ability of members of the elite to help confer potential costs or benefits on other members of the elite. In 1997, for example, Anatoliy Chubays left the government - a cost to him - after reports published in media outlets controlled by his political and business rivals, lead by financier Boris Berezovskiy, that he had illegally received a large advance to write a book. To Berezovskiy, Chubays represented a potential political and economic threat. Court politics is usually marked by intra-elite competition for political and economic power, and status. As in other interest group politics, Yeltsin usually acts as the arbiter in these struggles. Since the opinion of Yeltsin and other elite members matters, kompromat is often used to discredit rivals.
Client politics promise benefits to an identifiable group, with costs distributed over a substantial portion of society. Because the group that is to benefit has a strong incentive to organize and lobby for it, but because costs affect everyone only slightly, those who must pay have little incentive to organize and may be indifferent to or ignorant of the proposal. Russian collective farms benefit substantially from agricultural subsidies; each consumer, however, pays only a small amount of these subsidies in the form of higher taxes. Royalties paid by European airlines to the Russian civil aviation industry for the right to fly through Russian air space give considerable financial benefits to Aeroflot and aviation officials who are not interested in using the fees for a distributed public good: modernization of air traffic control or air safety improvements. There is little incentive for citizens interested in air safey to modernize. Other examples of client politics are the use of "authorized" banks to manage government money, the granting of preferential export licences, and the dependence of many regional governments on money handed out by Moscow. In foreign policy, Lukoil and other firms with commercial interests in Iraq have pressured the government to work for the lifting of sanctions against Baghdad; the cost is widely distributed: the greater isolation of Russia in the international community and tensions in relations with the United States. The benefits are greater profits for the firm.
Client politics does not always involve material benefits. Certain groups, such as the Russian Orthodox Church and Soviet Army veterans, may have special legal protection from the government or have their values specially honoured. Several ethnic enclaves, for example - Tatarstan - have special constitutional protection. Client politics often take place away from the public eye. Neither the public at large nor the mass media have much interest in or knowledge of the policies involved. In order to protect their favoured relationship with the government, client groups must find strategically placed patrons in the government or the legislature. Often clients can exert influence in the cumbersome process by which the Presidential Administration makes policy decisions. The Duma's agriculture committee, for example, is a strong advocate of financial support for Russian agriculture. Because of the importance of a client having a sponsor, corruption tends to be far more widespread in client politics than in majoritarian politics. Implementation is likely, since it invloes a group accepting a benefit.
Entrepreneurial politics promise benefits for society as a whole or some large part of it, and a substantial cost on a some small identifiable part of it. This kind of politics includes many policies that are intended to restructure the legacy of the Soviet system: military reform - which promises improved national defence by contracting the army's size and moving to a voluntary force; contraction of the coal industry - which promises a more efficient, economically competitive coal industry if mines are shut down and state subsidies ended; and land reform, which proposes improved agricultural production through the reduction of low interest credits, subsidies, state purchase of agricultural products and direct investment. Compliance with international agreements limiting the spread of nuclear technology promises a benefit to Russian society: the avoidance of sanctions that would undermine Western financing of the Russian Space Agency. However, compliance imposes a high cost on Russian firms whose livelihood depends on sales to clients in Iraq, China, or Iran.
If the beneficiaries are the public at large and the public has little incentive to press for what it thinks are its interests, then one would expect that organized opponents of a policy would usually win. Moreover, since the Russian political system provides ample opportunity to block policies that threaten organized interests, it is remarkable that these policies are passed at all. The natural gas monopoly Gazprom, for example, has successfully lobbied in the Duma against bills it opposes. Since the public is not organized to act for itself, however, in order to put an issue on the agenda, a policy "entrepreneur" must act on its behalf - even if the entrepreneur may or may not actually represent the public's interests and even the entrepreneur acts partly for selfish reasons. Boris Yeltsin has often acted as a policy entrepreneur - when he has pushed privatization, the freeing of prices, and the elimination of the budget deficit, all policies that impose costs on specific interest groups. Boris Nemtsov, Anatoliy Chubays, and the United States government have frequently been policy entrepreneurs on issues which the Russian public either was indifferent toward or too unorganized to pursue for themselves. The IMF, a policy entrepreneur, has tried to break up monopolies such as Gazprom and the utility United Energy Systems into its components, even though there is little domestic support for doing so. The World Bank, another entrepreneur, has led the fight to restructure the coal industry.
Policy entrepreneurs often try to achieve through emotional or symbolic appeals what narrow public self-interest cannot. Thus, the rationale for a new policy is presented in dramatic terms - to advance "reform", "stop a return to communism", or "prevent the business oligarchs from gaining control of the country". Legislative and administrative action based on such appeals is often cast in equally bold terms with strict standards, stern penalties, short deadlines, threats by Yeltsin to dissolve the Duma or rule by decree, and, conversely, Duma calls to impeach the president. The mass media is of great importance in entrepreneurial politics, especially key journalists who decide to give exposure to the proponents of a policy. Interest groups often vigorously oppose entrepreneurial politics, but to the extent that media images and slogans are powerful, they nevertheless publicly give them lip service.
Even if a policy entrepreneur gets what he wants, however, interest groups can often undermine a policy by refusing to implement it or weakening the administration of that policy. This is especially the case when decisions may affect many layers of bureaucracy or negotiations among powerful actors. Although the government has gradually reduced budget subsidies to the agricultural sector in recent years, the agricultural lobby has sometimes found other funding sources in the Agriculture Ministry. Army commanders have resisted the federal government's attempts to reduce the size of the armed forces by forging alliances with regional governors, whose jurisdictions would be economically harmed by reductions in the size of the armed forces. In 1992 the management of major oil firms were sufficiently organized to resist the general privatization plans drawn up by the Gaydar government.
Despite his considerable formal authority, there are serious limitations on Yeltsin's ability to be a successful policy entrepreneur. Yeltsin does not have the time, interest, attention span or, in recent months, the political popularity to secure implementation by himself. Nuclear nonproliferation, a policy for which Yeltsin is an entrepreneur, ranks relatively low on the Russian foreign policy agenda, but implmentation is difficult because there is little economic incentive for Russian firms to obey multilateral export control restrictions. Moreover, implementation is dependent on the building of coalitions with groups affected by a particular decision and Yeltsin's vigorous use of his presidential powers has often made building such coalitions impossible. Yeltsin has delegated the task of overseeing implementation to deputies such as Anatoliy Chubays, Boris Nemtsov or Yevgeniy Primakov, but his inconsistent support for those individuals has undermined their efforts to see a policy is carried out policy.
Similarly, while Yeltsin
may be able to carry out specific policies and change the people who participate
in the policy process, it is doubtful that he can change the structure
of politics itself, redistribute the society's wealth, encroach on the
fundamental interests of the oligarchs, or eliminate corruption. The successful
efforts of interest groups in resisting the implementation of entrepreneurial
policies are a major reason why many of the government's "reform" policies
have been unsuccessful.
VII. Who Governs?
"Democracy" is a word used to describe at least three different political systems:
Since people elected to serve in representative institutions will probably be a small, unrepresentative elite the actual distribution of political power will depend on their composition and actions. There are at least four theories that purport to explain their behavior.
Marxist theory argues that the economic structure, in particular the pattern of ownership of the means of production shapes politics and determines political outcomes. We have seen that some aspects of foreign, defence, and economic policy in Russia support this view. However, we have also seen that public and elite opinions, not corporate ones, are sometimes the decisive factors. Political considerations account for major military and diplomatic initiatives, such as the question of whether to ratify START II. Economic policy can be of very different kinds depending on whether they are the product of interest group politics (loans for shares), entrepreneurs (Russia's relations with the IMF), or client politics (agricultural subsidies).
Elite theory asserts that it is always the same elite that makes policy - that, whatever the nature of the issue, the elite acts in concert or at least has a common economic, social, or political background and is only weakly influenced by public opinion. Many members of the elite also have shared values and experiences due to their origins in the Soviet system. Russia's weak public opinion and client politics, moreover, are partial confirmation of elite theory - certainly when FIG leaders, collective farmers or other groups obtain substantial influence over a broad policy area from which they benefit. However, these groups also have influence because they are the direct beneficiaries of some policy. However, elites, have disagreed among themselves over policies such as loans for shares, the Kiriyenko confirmation, NATO expansion and military reform.
Bureaucratic theory asserts that the number, size, and influence of governmental bureaucracies have become so great that elected officials and their key advisors are almost powerless to affect policy Ð whatever top officials propose the bureaucracy can subvert. Bureaucracy is most influential when officials have wide discretion - freedom to choose among alternative courses of action. Such broad discretion exists in areas such as tax collection, privatization policy, and many areas of foreign policy. However, bureaucrats have least power when their tasks are specified in exact language - pension laws tell an administrator how much money is to be sent to what classes of people and how often. Red tape, delays, or cumbersomeness also undermines the influence of bureaucracy in Russia. Moreover, the high personalization of authority ensures that, with the right connections, a citizen can circumvent a bureaucracy, no matter how large it may be or how great its discretion.
Pluralist theory asserts that policies are made by conflict and bargaining among organizations that represent affected groups. We have seen that this is an accurate description of interest group policies such as the loans for shares auctions. But the theory also overestimates the extent to which interest groups will form and be active. In client politics, the large number of persons who must bear the widely distributed costs of a program have no incentive to organize and must rely instead on policy entrepreneurs. In majoritarian politics, such as defence policy and many social welfare issues, decisions can be made directly as the result of presidential leadership or action by the Federal Assembly. Interest groups play only a minor role.
From the evidence summarized
in this article, no single description of the Russian political system
seems adequate, as different policies arise out of different processes,
with proponents and opponents trying to mobilize on their behalf different
personalities, processes and institutions in a fragmented government.
VII To What Ends?
The approaching end of the Yeltsin era dramatically increases the potential for major change in how Russia is ruled. The question has assumed greater urgency in recent months in the face of the central government’s acute fiscal problems, institutional degeneration, declining popular support for democratic principles and rapid movement toward a market economy, as well as growing doubts about Yeltsin’s fragile health and his mental capabilities.
Central to the issue of change – what will last and what will not – is the idea of stability: whether the system’s sometimes contradictory political, social and economic forces are in balance. Relatively stable systems both survive and are effective. They evolve in an orderly way. Unstable regimes’ change can be violent or marked by major political, social and economic discontinuities. Factors contributing to stability include governmental and constitutional change, effective decision making and strong economic performance.
In some respects the Russian political system has become stable. Some de facto rules of intra-elite competition have been established. The opening up of society has provided vast new opportunities for upward social mobility. Political and economic fragmentation has localized social unrest, while minimizing the consequences of the political struggles in Moscow for the country as a whole. However, the factors discussed here – especially the ineffectiveness of institutions, the inability of the regime to aggregate and arbitrate groups’ interests, and the divisions within the ruling elite – mean that the regime has not yet become stable enough that its survival has been ensured or the potential for dramatic change reduced.
Moreover, its citizens increasingly
view the regime as illegitimate. The Russian system has weathered shocks
of the 1993 unrest in Moscow, a bloody war in Chechnya, and massive industrial
decline. But as Yeltsin’s popularity has ebbed so has support for the system
he helped create. In a poll taken in early 1998 only 10% of Russians polled
said they believed democracy was the best way for the country to overcome
its current troubles. "Corrupt" and "criminal" were the qualities more
often used to describe the regime than any other. Unlike Soviet power,
which was often described as "close to the people", respondents often described
the current government as "alien" and "weak". Those polled were also almost
three times more likely to accept the legality of the Soviet system than
the current one. More significant, perhaps, than the general decline of
public support are the sign that the regime is losing the backing of the
elities. A legitimate regime can rule even when popular support for it
is low. Without it the sysyem will not be able to endure inevitable crisis:
scarcities, deprivations, and frustrated aspirations.
Postscript: Rumors Of Oligarchs’ Demise Greatly Exaggerated
Much has been written since Russia's August economic collapse about the demise of the business oligarchs - the small circle of influential entrepreneurs who grew rich in the past decade through close ties to the government, currency speculation, and - some say - criminal activity. Indeed, the business empires heavily dependent on the financial sector, such as Vladimir Gusinskii's Most Group and Vladimir Potanin's Oneksimbank, have been seriously damaged by the crash and two, Aleksandr Smolensky's SBS-Agro and Vladimir Vinogradov's Inkombank, are ruined. Though weakened, however, entrepreneurs with extensive interests in natural resources extraction - Vyakhirev of Gazprom, and Alekperov of Lukoil - or in industry - Khodorkovskiy of Menatep and Berezovskiy of LOGOVAZ - remain influential.
The oligarchs came to the notice of many people in the West in October 1996 when Berezovskiy boasted in an interview that he and six other tycoons had ensured Yeltsin's re-election by bankrolling his campaign. Moreover, he bragged that he and six cronies controlled much of the Russian economy. In fact, though the Big Seven, as the oligarchs came to be called, controlled a large chunk of the Russian economy and had the decisive say on some key issues, their influence was less than Berezovskiy suggested. There were many issues such as START ratification and military reform, where they played virtually no role at all. There were also many influential interest groups at the time that Berezovskiy did not mention: Lukoil, Gazprom, holdover Soviet lobbies such as the collective farmers and regional leaders such as Moscow Mayor Luzhkov.
Since the meltdown, Moscow's Alfa Bank, with longstanding ties to the Yeltsin administration and whose relatively small holdings in the now defunct short-term securities market enabled it to escape the worst of the downturn, has been able to gain competitive advantage over its more exposed rivals. In the absence of a strong treasury, Alfa has been "authorized" to service the St. Petersburg City budget, a task fraught with possibilities for corruption. The regional banks and banks that service oil, gas, and precious metals exporters also remain important.
Elsewhere in the regions, the economic collapse has also accelerated the formation of oligarchic structures. In Saint Petersburg and Yekaterinburg, local governments have taken over regional banks to ensure ready access to revenue streams. The Nizhniy Tagil Metallurgy Combine has given a 25 percent stake to the government of the Sverdlovsk region in exchange for a restructuring of its tax debts and the cancellation of the firm's wage arrears.
Still other oligarchs are regrouping. The strategic alliance recently announced by Lukoil and Gazprom may actually strengthen their economic and political clout. Gazprom already pays a quarter of all Russia's taxes, while Lukoil is also a major contributor to tax coffers. Even if they do not unite, the firms will almost certainly remain two of the few effective Russian foreign policy levers, especially toward Europe and Russia's neighbors.
Indeed, the Primakov government, far from trying to end crony capitalism, appears to be favouring cronies of its own. Favoured banks participated in several debt swaps orchestrated by the Central Bank in September and the Central Bank has sharply cut reserve requirements to increase banks' liquidity. Most of the "socially important" large banks the government intends to save have ties to the new government, Gerashchenko or the administration of Moscow Mayor Yury Luzhkov. SBS-Agro, for example, was one of the first banks to be bailed out. Depositors and creditors received little money. It went instead to pay off a loan SBS-Agro owed the International Moscow Bank, which Central Bank Chairman Gerashchenko headed until September. The authorities, meanwhile, have allowed Inkombank to fail, even though it had the second largest retail base in the country.
The government has also announced it intends to save, among others, Menatep and Most - Menatep has strong supporters in power, though few depositors and no regional network. Most's extensive media holdings make it invaluable as the legislative and presidential elections approach. Meanwhile, Oneksimbank, widely considered to have been close to ousted "reformers" Sergey Kirienko, Anatoliy Chubais, and Boris Nemtsov, has so far been left in the cold. In the non-banking sector, the government's highly publicized battle with Gazprom over the taxes it owes appears to be resolved in the firm's favour. Gazprom will provide food aid to needy Russians instead of paying money to the cash-starved federal government. A shakeup in the leadership of Rosvooruzheniye, the state arms export agency now under the control of a reported Primakov protege, suggests that the Russian arms industry may well experience a resurgence by more aggressively seeking clients for high tech weaponry abroad.
This is not to say that Russia's business interests win every battle. The government has warned six major oil companies that their access to highly profitable export pipelines will be cut off if they do not draft a plan to sell more crude on the domestic market. There are serious policy and economic interests dividing the oligarchs, such as over economic protectionism. Since these differences are often over who is to receive increasingly scarce government favours, however, they are unlikely to benefit the long-suffering Russian public and may well become fiercer as total default looms.
What has survived the August
collapse, however, are the rules by which Russian politics is played. Much
of politics is informal, authority personalized, institutions are weak,
the distinction between public and private is blurred, and money is the
currency of political power. That some people will financially profit by
these rules is certain; that the rules will advance economic reform and
democratic development is not. It was this absence of the rule of law underlying
economic reform that the 1998 EBRD Transition Report recently cited as
part of the explanation why Russia's transition has been so difficult.