What Does Putin Want?
“Is Russia going Backward?” That was the question posed By the title of an article that I completed in late August 2004 and published in the October 2004 COMMENTARY. My qualified answer was no. Having supported Russia’s democratic, free-market revolution at every critical juncture during more than a decade of upheaval—from the election of Boris Yeltsin as president of what was still Soviet Russia in June 1991 and the rejection of the hard-line coup two months later, to the referendum in March 1993, Yeltsin’s re-election in 1996, and the toppling of the Communist-led plurality in the Duma in 1999—the Russian people, I argued, were not turning their backs on the reforms they had stoically sustained. They were simply ready at last for the new Russian state to be strong enough to help them.
The answer to their wishes was Vladimir Putin (as well as skyrocketing oil revenues). Putin, who became President of Russia in 2000, seemed to embody the hope of combining liberty and order, democracy and prosperity. Young, athletic, hardworking, intelligent, reportedly a teetotaler, he was the opposite in many respects of the by-then exhausted, very sick, and sometimes embarrassingly incoherent Yeltsin. With an astute politician’s sense for his country’s mood, Putin appeared to grasp the duality of its mandate to him. While deploring the things that most Russians detested about the 1990’s—the vulgarity and corruption of the newly enriched “oligarchs,” the arbitrariness of provincial governors, the erosion of law and order, and the delays in the payment of salaries and pensions to millions of current and retired state employees—he also recognized the achievements of the post-Soviet era. In his annual “state-of-Russia” addresses to the Duma and the nation, he extolled the virtues of democracy, the free market, and private initiative.
Nor did Putin just pay lip service to this core legacy of the revolution. As I wrote two years ago, his actions, by and large, had continued to affirm the national consensus: elections as the only legitimate way of choosing leaders, private property as the central fact of the economy, and a foreign policy based on Russia as a non-belligerent, non-imperial nation-state, something it had never been before. These were the factors that I weighed against the more troubling aspects of Putin’s presidency, particularly his campaign to reassert the power of the state and to extend its control over the media and society at large. In the end, the case I made was for vigilance but not full-scale alarm, for concern but not yet disappointment.
By now, however, it has become evident that Putin is taking Russia in a direction not only unmistakably different from the one pursued by Yeltsin but, in many regards, its opposite. For the United States no less than for the Russian people, this turn of events carries profoundly unsettling implications. Not only is the survival of Russian democracy at stake, but so too is Russia’s reliability as a key oil producer and as an actor in the world.
The ideology behind the Putin restoration rests in the first place on a distinct interpretation of recent Russian history. When Putin came into office, the fall of the Soviet Union and the reforms of the late 1980’s and 90’s were generally accepted as the consequences of a free, if imperfectly implemented, choice of the Russian people. Today, that crucial decade-and-a-half is seen in a very different light. Many key policies from that time are now viewed as shameful mistakes, deeply harmful to the country’s interests and committed by leaders who were at best naïve and weak, at worst venal and perfidious—if not, in fact, participants in a vast plot perpetrated by outsiders intent on weakening the Soviet (and then Russian) state. As Putin himself famously declared, the collapse of the Soviet Union was “the greatest geopolitical catastrophe of the 20th century.”
Key postulates of Russian national political culture—so magnificently and, many of us thought, permanently banished by Mikhail Gorbachev and Boris Yeltsin—have now returned in force. It is once again respectable to say that the glory of Russia is the state, that what is good for the state is necessarily good for the country, and that the strengthening of the state is society’s primary objective. Hence, the state functionary (naturally conceived as a model of enlightenment, probity, and public spirit) is today considered a far more effective agent of progress than a free press (so sensationalist and profit-seeking), the voter (so uneducated and fickle), the judge (a bribe-taker), or, heaven forbid, the private entrepreneur.
In a 2005 book, Will Democracy Take in Russia?, Yevgeny Yasin—one of the earliest and most influential theorists of the Russian economic revolution, the mentor of those who led it, and minister of the economy between 1994 and 1997—has described the difference between the 1990’s and today as a clash between two starkly alternative visions of progress. The strategy followed by Yeltsin, he observes, was “modernization from below.” Its engine was private initiative, with big business in the lead, and minimal limitations on civil liberties and political rights. Putin, by contrast, is dedicated to “modernization from above,” with the state as the most powerful actor, the agenda-setter in economic matters as well as in politics.
This has many precedents in Russian history, of course. Epitomized most clearly by Peter the Great and Stalin, “modernization from above” has been pursued, mutatis mutandis, by virtually all Russian leaders, the two most notable exceptions being Czar Alexander II (1855-1881) and Boris Yeltsin. Today, as during previous eras, the implementation of this policy has been accompanied by the loosening of restraints on the state so that it can better mold society to its ends. The executive once again dominates the legislature and the judiciary. Moscow’s control has been re-asserted over formerly self-governing provinces. The national mass media, especially television, also largely bow to the Kremlin. The police, the security services, and servile courts have become policy tools.
The gradual accumulation of executive power under Putin abruptly accelerated in September 2004 after Chechnya-based terrorists seized a school in the south Russian town of Beslan. In a botched operation, the school was stormed by Russian troops; more than 300 people, most of them children, were killed in the resulting carnage. Just days later, Putin announced political “reforms” ostensibly designed to help protect Russia against the dark forces behind the Chechen rebels.
The docile Duma quickly rubber-stamped Putin’s “proposals.” Under them, the election of provincial governors was replaced by “nomination”—in effect, appointment by the Kremlin. Where heretofore half of the deputies in the Duma had been elected by simple local majorities, now the entire Duma would be chosen from national party lists. At the same time, the threshold for parties seeking to enter the legislature was raised from 5 to 7 percent of the national vote; party blocs, which had helped smaller groups win office, were prohibited.
The effect of these “reforms” has been, as intended, to limit and control political competition. At the local and national level, running for office is now far more expensive and cumbersome than hitherto. More important, it is vulnerable as never before to interference from state and federal authorities, who can manufacture dozens of bureaucratic rationales for striking from the ballot virtually any political party or movement the Kremlin deems dangerous. Similar techniques are now being used to stifle the local activities of foreign nongovernmental organizations (NGO’s) like Human Rights Watch and the National Endowment for Democracy.
A similar reversal has occurred in the economic realm. Among the signal accomplishments of the 1990’s was the forging of market institutions from the detritus of the Soviet system. Private property was reintroduced after an absence of almost seven decades, and price controls on most items were eliminated. Russians had been used to spending hours each day in food lines; those now disappeared, along with the once ubiquitous shortages in basic material goods.
The key to these achievements, to cite Yasin again, was the “separation of [state] power and property”—that is, the wresting of most of the economy from the grip of the bureaucracy. For Russia, where political power had for centuries been virtually synonymous with control over (or outright possession of ) the economy under czars or the Communist party, this was a bold departure from the “patrimonial” system.
The Putin restoration has brought about a partial return to the national model. Yasin rightly calls it the “revenge of the bureaucracy.” Since 2002, the Kremlin has put a gradual freeze on liberalizing reforms while committing itself to a (similarly gradual) retaking of the “commanding heights” of the economy. This trend has been especially noteworthy in the oil and gas industry, the sector that matters most to the United States and to the rest of the developed world.
In the late USSR, oil production had beautifully embodied the point of the old Soviet joke that, after 70 years of socialism in Africa, the Sahara would have run out of sand. By the 1980’s, many experts were predicting that the Soviet Union, despite its enormous reserves, would become a net importer of oil. When new, private owners—many of them Kremlin-connected entrepreneurs who had won rigged auctions—took possession of the fields in the mid-1990’s, they found a sullen work force that had often gone unpaid for months, along with worn-out and antiquated equipment.
The economic revolutionaries in Moscow who presided over the privatization of the Russian oil industry had no illusions about these independent owners, but clearly preferred them to the bureaucratic nomenklatura, who, as it were, had nearly run the oil industry back into the ground. As the privatization “czar” Anatoly Chubais reportedly said of Russia’s new oil barons: “One does not steal from oneself.”
Few economic quips have been vindicated faster or more vividly. Despite “expert” warnings, parroted ad nauseam by American newspaper columnists, to the effect that the new owners would quickly strip their assets and flee abroad with the loot, between 1999 and 2004 the young tycoons (all of whom, to be sure, became fabulously rich) invested an estimated 88 percent of their profits, some $26 billion, in modern technology and new exploration. Gradually, the top oil firms also became more transparent, disclosing their asset and management structures and adopting Western accounting practices. Trillions of rubles were paid in taxes to the state and, for the first time in post-Soviet history, to shareholders. More important, during those six years, private oil production increased by 47 percent, as compared with 14 percent in the state-owned sector.
Then came the re-nationalization of the oil industry. It started with an assault on Yukos, Russia’s largest private company, through a series of blatantly manipulated trials that began in 2004. In one instance, a judge ruled for the prosecution after spending only three days “examining” several hundred volumes of tax materials. In another, Yukos was assessed for tax liabilities that exceeded its income for the period in question. In 2005, Mikhail Khodorkovsky—the company’s founder and, at the time, Russia’s richest man—ended two years of incarceration to begin a nine-year sentence in a prison camp in eastern Siberia, on the Chinese border, three thousand miles from Moscow.
Yukos was bankrupted. Its largest production unit was quickly sold to a front company that, in a matter of days, resold it to Rosneft, a stagnant, poorly managed state-owned firm controlled by Igor Sechin, a Putin confidant and deputy chief of staff, who had taken over as chairman of the board in 2004, the same year Yukos was put on trial. Today Rosneft is the second-largest oil company in Russia; yet even after robbing Yukos, it is weighed down by debts of over $11 billion.
Late in 2005, Sibneft, another leading private oil company, was bought by the state-controlled natural-gas monopoly Gazprom, which is chaired by another of Putin’s top aides, the former Kremlin chief of staff and today first deputy prime minister Dmitry Medvedev. Deeply in debt, and notoriously one of the country’s worst-managed companies, Gazprom has increased production by only 2 to 3 percent a year since 2000, despite booming natural-gas prices. It is widely assumed that one of the firm’s key functions is to serve as a piggy-bank for the Kremlin, which can take from it hundreds of millions of dollars for all manner of political and economic “projects” without a trace of accountability.
Putin’s statist ideology has also been felt by the main foreign investors in Russia’s oil sector. This past fall, the Kremlin halted or threatened to halt operations by Royal Dutch Shell, ExxonMobil, France’s Total, and the Russian-British TNK-BP. Notwithstanding official explanations for this move—from environmental violations to cost overruns to disappointing output—it is an open secret in Moscow that the government’s prime motive is to pressure the companies into either surrendering a share of production to the state or handing back their development licenses.
In its relentless extension of state ownership or control, the Kremlin has vetoed private funding for desperately needed new pipeline construction, despite the inability of Transneft, the state monopoly, to maintain the existing infrastructure, much less to lay new pipes. The administration also now appears to be examining its next target for nationalization. Lukoil, the country’s largest remaining private oil company, was recently charged with “improper utilization” of some two dozen licenses and threatened with cancellation of its development rights.
By shifting ownership so decisively to state-run companies, with their wastefulness and shabby yields, the Putin restoration has squandered the impressive gains achieved by privatization. It also now runs the serious risk of scaring off badly needed investment. With the most likely sources of innovation and productivity inside Russia expropriated or cowed, foreign oil “majors” have begun to think twice about putting billions of dollars into projects in the country’s far north and east, where most of its oil and gas are located. In jeopardy is Russia’s future as a dependable, long-term supplier to the world market.
In 2005, for the first time since 1999, Russian oil exports decreased in absolute terms. Thinking only of the short term, as most restorationist regimes have always done, the Kremlin has begun to poison the goose that lays the golden eggs.
Recent changes in Russian foreign policy have stemmed from the same change in ideology. In establishing a generally pro-Western profile, Gorbachev and Yeltsin had emphasized shared interests; they were inspired by the idea of finding “a path to the common European home” and a place for Russia in the “civilized world.” Such goals are dismissed now as the rhetoric of weakness, concessions brought about by the collapse of the Soviet Union. No longer is the integration of Russia into the family of Western capitalist democracies held to be a goal, even a distant one.
This is not to suggest that Putin has sought to re-create Soviet foreign policy outright. Despite the muscular rhetoric emanating from the Kremlin, Russia is not a “revisionist” power like the Soviet Union or present-day China. It is not intent on reshaping in its favor the regional or global balance of forces. In the geopolitical competition, Moscow may complain about the score, but it is unlikely to take the risks associated with changing the rules of the game.
Nor is Russia willing to commit the resources needed to sustain any such endeavor—unlike China, for instance, whose defense appropriations have grown annually by double-digit percentages over the past twenty years. Even in today’s Russia, flush with petrodollars, the share of the GDP devoted to defense—just 2.9 percent in 2005—is at least ten times smaller than during the days of the Soviet Union.
Nevertheless, although Russian foreign policy today is supremely pragmatic, it is conducted in a way that points to looming trouble. Putin has tried to win the greatest possible freedom of action for Russia by positioning the country above the international fray. To achieve this maneuverability, he has refused to bind himself to formerly important tenets like “democracy,” “human rights,” and “Western civilization,” rejecting alliances based on these precepts in favor of “working directly,” one on one, with a range of countries, many of them very unsavory. Without regard to the substantive merits of individual cases, Moscow is seeking to arrogate to itself a crucial role in today’s international process, collecting the attendant dividends as it goes along.
A chief element in this realpolitik has been the Kremlin’s readiness to leverage key Russian assets in the form of conventional arms, nuclear technology, and energy resources. Thus, Moscow saw its delivery of tactical air-defense missiles to Syria in 2005 as a means of restoring its influence in the Middle East. Similarly, earlier this year the Kremlin played host to the leaders of Hamas in an attempt at diplomatic arbitrage, hoping to obtain concessions (like the recognition of Israel’s right to exist) and to emerge thereby as an indispensable mediator between East and West.
The locus classicus of Putin’s new foreign strategy has been, of course, Moscow’s relations with Tehran. Russia has almost finished the Islamic Republic’s $1-billion nuclear power plant at Bushehr, and continues to oppose any effective sanctions aimed at forcing the regime to halt its march toward nuclear enrichment (a march that Moscow staunchly defends as the “peaceful development of nuclear energy”). Despite insistent requests by Washington, Russia has also resumed arms sales to Tehran, suspended by Yeltsin in 1995. The most recent deal, signed in December 2005, will provide mobile air-defense missile systems, MIG fighter jets, Su-24 bombers, T-72 tanks, and patrol boats.
With the country’s gold and currency reserves approaching $300 billion, Moscow’s motive in cultivating Iran is not primarily financial; the controversial agreements are worth just a few billion dollars. Nor is Putin driven by ideological opposition to American “imperialism” or to the American alliance with Israel. Indeed, last April a Russian rocket, launched from a cosmodrome in the Far East, carried into orbit an Israeli spy satellite that undoubtedly will be used to monitor Iran’s “peaceful” nuclear program.
Instead, for the Kremlin, Iran presents another opportunity for advancing the overarching objective of enhancing Russia’s role in the world. As one leading Russian expert has put it, the situation presents “a unique and historic chance to return to the world arena once again as a key player and as a reborn superpower.” The longer Moscow can postpone the moment when it will have to choose sides between Iran and the West, the higher it will be able to bid up the value of its diplomatic support.
A preview of things to come was on display in Russia’s handling of the U.S.-sponsored UN Security Council resolution in the wake of North Korea’s recent nuclear test. At the twelfth hour, Moscow’s representative managed both to dilute several key sanctions and, in a quid pro quo, to win American support for a resolution censuring Georgia, with which Russia is in an increasingly ugly spat.
At a different moment in world politics, Putin’s gamesmanship might not have caused serious complications in Russia’s relations with the United States. After all, Washington eventually accustomed itself to the cold-war diplomacy of France, which tried to compensate for the loss of its superpower status after World War II by practicing a similar policy of arbitrage in its dealings with the U.S. and the Soviet Union. But the times are different—and so too are the guiding principles of the White House under George W. Bush.
For the Bush administration, few things have been more crucial to determining a country’s place in U.S. foreign policy than the character of its internal politics. In the fall of 2001, as Washington assessed its situation after the attacks of 9/11, Russia still looked like a potential friend: a country with a range of personal and social freedoms, a genuine democratic opposition, and a steady stream of free-market reforms. The moment seemed right for a long-term strategic partnership, perhaps even an alliance.
Yet America’s current foreign policy, which sees the promotion of liberty and democracy as the key strategic means of ensuring U.S. security, cannot but be at odds with the Kremlin’s post-imperial restoration, the essence of which is political and economic re-centralization at home and an omnivorous realpolitik abroad. Even on the territory of the former Soviet Union, where under different circumstances the U.S. might have been more inclined to indulge Russian interests, Moscow has found itself at loggerheads with Washington.
Reformist governments in Georgia and Ukraine, which embodied the Bush administration’s push for democracy and liberalization, have been viewed by the Kremlin as inherently anti-Russian. (Profoundly cynical, as restorationist regimes usually are, the Kremlin appears incapable of imagining a mass popular protest that is not engineered and paid for “from outside.”) At the same time, Russia’s support for repressive regimes in Belarus and Uzbekistan has inevitably caused serious friction with the United States. Though a new cold war is hardly afoot, the tension is palpable and growing, and is unlikely to be relaxed any time soon.
Russians have not been the first people—nor will they be the last—to be tempted to exchange a measure of liberty for the promise of stability, prosperity, or national glory. (Recall Tocqueville’s lament over the “mistakes and misjudgments which led Frenchmen to abandon their original ideal and, turning their backs on freedom, to acquiesce in an equality of servitude under the master of all Europe,” Napoleon.) So when Putin declared that “order, stability, and the implementation of the economic policy must not become the price [paid for] democratic procedures,” millions of his countrymen agreed. Many have continued to support him in forging and maintaining “managed democracy,” as the Kremlin ideologists have labeled the restoration.
Yet in the end the price may prove too high. Even as salaries and inflation-adjusted incomes have continued to grow—thus forming the mainstays of Putin’s popularity—the Russian economy as a whole has failed even to keep up with the rising prices of oil and gas. From an average rate of growth of almost 7 percent between 2000 and 2004, the GDP expanded by just 5.5 percent in 2005. Yevgeny Yasin suggests that this downturn be studied as “a textbook case of how a state’s pressure can damage a national economy.”
The Kremlin’s intimidation of Russia’s wealthy elite has also translated into far less political accountability. Without substantial private capital, neither serious political competition nor free mass media can exist in today’s Russia. Opposition parties are forced to choose: either toe the Kremlin line (thus gaining a presence in the Duma) or find themselves in the political wilderness, excluded from the national debate.
One entirely predictable consequence of Russian society’s weakened control of government has been corruption so brazen, so pervasive, and involving sums so huge that it makes the graft of the 1990’s look like child’s play. In a recent World Bank survey, more Russian enterprises now report having to pay bribes to licensing authorities, tax services, militias, and courts than in 2002—a trend opposite to the one in virtually every other post-Communist nation.
At the same time, Russian politics has become more brittle. Without elected intermediaries at the local level, or a responsible national opposition, the center of political gravity has shifted to the very top. If popular dissatisfaction escalates—as the result, say, of a sharp drop in oil prices, a major terrorist act, or some spectacular public blunder—there will be no one to blame but the Kremlin. Having been devised to strengthen the Russian state, Putin’s post-imperial restoration runs the risk of dramatically destabilizing it.
Russia’s recent history is a reminder that modern capitalist democracy has two fundamental requirements. The first is that citizens be able to tolerate the perennial antagonisms and uncertainties inherent in free political contests and free-market competition. The second is that they trust themselves to manage and contain such unruly collisions. Even mature democracies occasionally strain to meet these demands. In younger and poorer republics, they are tested every day. Post-Soviet Russia has been tried in both respects and, with the help of Vladimir Putin, found wanting.
By the time the Soviet Union collapsed, seven decades of totalitarian rule had largely extirpated civil society in Russia. Local networks no longer existed for inculcating the habits of personal and civic responsibility. Professional and religious associations—the preparatory schools for democratic participation on the national level—did not exist. The result was a moral void. When the ancien régime fell, together with its state-enforced system of sanctions and rewards, the breakdown was complete.
Thus, contrary to many finger-wagging critics of post-Communist Russia, the real choice for Russians in the 1990’s was never between a “good,” “clean” liberal-democratic capitalism (which, these same critics alleged, Russians did not know how to build or had deliberately spurned) and the vulgar, corrupt kind that Marx called “primitive capitalism.” Rather, it was a choice between the latter and a return to state control of the economy and politics.
One might usefully see this as a choice between a jungle occupied by several large predators (a/k/a “oligarchs”) and one ruled by a single all-powerful beast. In the first case, the predators are mostly concerned with challenging one another, leaving space for smaller animals to develop and grow. In the second, the king of the jungle imposes a semblance of order while gradually destroying most of the rest of the fauna.
Throughout the 1990’s, Russians opted for economic and political liberty, no matter how unattractively incarnated. But once the threat of a Communist revival receded, so too did their tolerance for conflict, disorder, and inequality, along with their faith in the promise of self-rule. As Isaiah Berlin wrote years ago: “Liberty is liberty, not equality or fairness or justice or culture or human happiness or quiet conscience.” When liberty failed quickly to bring about sufficient quantities of those other desirable things, Russia was ready to give the beast a chance.
Russians have yet to accept what might be called the Magna Carta rule: that when barons, tycoons, moguls, and “oligarchs” are secure in their own liberty and property, they increase, almost despite themselves, the probability of liberty, property, and fairness for all. Democracy is full of such paradoxes. Learning to live with them requires wisdom, strength, and—above all—time. Unfortunately, there is no telling when Russians will again see that a measure of chaos is the price of freedom, and that no one will relieve them of the burden of responsibility for themselves and their country without exacting a cost they will bitterly rue having agreed to pay.