Feb. 2001 Vol. 222 No. 2  International Politics

Jacques Sapir,  Contributing Editor

Russia’s Putin strives to build on good first year

Vladimir Putin’s first year as Russian president has been quite successful. Russia’s economic rebound (7% GDP growth) enabled him to tackle an oligarchical system that has weakened considerably. Under Putin, Russia has been more assertive of national interests outside its borders, without falling into imperial ambitions. From Beijing to Washington and in most European capitals, he is deemed a man to be reckoned with. Yet, one year after gaining power, Putin faces some difficult, but necessary choices.

By January 2000, Russia had entered the post-Boris Yeltsin era with great expectations that generated large popular support for the young, unknown Putin. Such support was never enjoyed by former President Yeltsin, much less any previous Soviet leaders (except maybe Josef Stalin at the end of World War II). Even his mishandling (in terms of public relations) of the Kursk submarine catastrophe last August did not erode this support. The new President did inherit a bright economy, which helps. To some extent, Putin bears no responsibility for this improvement, nor do oil and gas prices.

Russian President Vladimir Putin, left, listens to Azerbaijani President Geidar Aliev last month during a two-day visit to Baku that focused on the Caspian Sea region’s oil and gas resources. (AP Photo)

Actually, Russia’s economy rebounded mostly because of 1998’s devaluation, plus changes in domestic utility prices and greater federal discipline that improved the notoriously poor payment system. However, Putin should be credited for not reversing what former Primer Minister Yevgeny Primakov created. He understood at once what Yeltsin’s various administrators failed to grasp – a market economy needs a state that works. Rebuilding the state was the most important economic reform that Russia was waiting for.

Simultaneously and cautiously, he began to put his own imprint on Russia’s political arena. His first decisive move was to alter the balance of power between the federal government and regional regimes. New "super" regional administrators have been appointed. Also, a new organ of power, the State Council, emerged. If, for a transitional two-year period, regional leaders are able to keep part of their prerogatives, then feudalization of Russia will have been reversed.

Relations between the president and Parliament improved, too. With the Duma no longer a foe, the legislative process gained significant impetus. Oligarchs also began to have a tough time. Some clearly are losing ground, like media mogul Vladimir Gussinsky or notorious, self-exiled businessman, Boris Berezovsky. Others are falling in line, joining with Arkady Volsky’s Russian Union of Industrialists and Businessmen, like Interros Holding Co. President Vladimir Potanin and Yukos Chairman Mikhail Khodorkovsky. There are still too many oligarchs in Russia, but their ability to change or influence political decisions is reduced.

However, not everything is for the better in Russia’s world. First, the war in Chechnya still rages on – perhaps some kind of deal will be devised in early 2001. However, given a deteriorated Russian army (featuring badly paid, poorly controlled soldiers that rampage towns and settlements), any such pact will lack strength and stability. Putin did score a significant achievement in pressing for much-needed military reform, but he has been unable to put enough pressure on generals to restore discipline in the field.

More importantly, the economic rebound is losing strength. Without a true demand-sided policy backed by complete revamping of the financial / banking system, the import-substitution growth potential cannot be reached. If nothing is done, 2001 could become quite a disappointment, with growth not exceeding 3%. Behind this are Putin’s most troubling failures. In spite of a clearly expressed will, he still has been unable to shed himself completely of Yeltsin’s legacy. When decision time comes, he skirts an issue more frequently than not.

To be fair, Putin inherited a decaying administration, rife with entrenched private interests. The president’s so-called party, the Unity bloc, is not worth such a name. Actually, the only political organization working upward from grassroots level to the top is still the Communist Party, the KPRF. It no longer is a Soviet-style party – this group mixes some die-hard Brezhnevites with nationalists and social-democratic activists. But the very fact that it is still Russia’s only real political party is troublesome. Neither the centrists – around Moscow Mayor Yuri Luzhkov and Primakov in the Fatherland group – nor the liberals, who created the Union of Rightist Forces (SPS), have assembled anything comparable.

This may explain why Russia’s Council of National Security, which is quite different from the U.S. National Security Council, is gaining ground. The fact that security agencies (FSB and SVR) are more prominent also can be traced to both this administrative problem and the lack of organized political support that Putin faces. It is not easy in today’s Russia to find honest, competent administrators. Thus, it is understandable why Putin has had to move cautiously and rely on former KGB heirs. However, some decisions cannot be postponed for very long. Russia needs a growth-oriented economic strategy backed by a decision-making / implementation system not tainted by private interests. On both fronts, Putin will have to move soon, or he will lose the popular support that he has enjoyed up to now.