THE PRESIDENT’S FIRST ANNIVERSARY: IS PUTIN STILL AT THE CROSSROADS?

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It’s been a year since President Putin’s inauguration, and since the institution of presidential envoys was set up; this has given analysts a new pretext for summing up the results to date.

Semyon Novoprudsky, an observer with the Izvestia newspaper, considers that “something quite fictitious” is being claimed as one of the government’s achievements: namely, averting the threat of Russia’s disintegration. Novoprudsky believes that (apart from Chechnya) there has been no real threat of this happening “for at least the past six years”.

Apart from averting the disintegration threat, there is much talk of other “successes” – for example, “positive changes in the public mood”; in Novoprudsky’s opinion, this is also “fairly nebulous”. Meanwhile, there is a persistent silence on the topic of economic achievements – quite understandably, since there are none of them to speak of.

Last year’s 7.5% economic growth owed nothing to the government’s actions – it was the consequence of unusually favorable trade conditions. As for the rest, there’s nothing to brag about. The Cabinet isn’t having any luck in dealing with inflation. Restructuring the natural monpolies still appears to be “a combination of a talk-fest in public with secret coordination of concept papers”. As for the lingering wage backlogs for state-sector employees, together with “the suffering in some regions over the past winter” – the government prefers to avoid mentioning this at all.

The Ekonomika i Zhizn weekly reports the results of a poll done by the National Public Opinion Research Center (VTsIOM). One question was put as follows: “Which political goals are most in the interests of your family?” The highest response, 69%, was for “development of Russian industry”; and 47% of respondents chose “protection measures for domestic producers”. These are precisely the bottlenecks of current economic policy.

But Ekonomika i Zhizn considers the results of the question on confidence in social institutions to be even more interesting. The highest level of public distrust is for the police (44% of respondents), housing and communal services (32%), plus the judicial system and health care (28% each). These are the “pillars of the state” with which ordinary people come into contact most often. Clearly, says Ekonomika i Zhizn, there is still a “moat” between the state and the people; we’re just lucky it isn’t an “Iron Curtain”. However, according to the VTsIOM poll, 48% of respondents consider that they and their families have adapted to changed circumstances – even though only half of these people have managed to increase or maintain their previous level of family income. The other half have only adjusted to a lower standard of living.

The Novoe Vremya weekly reports the findings of various opinion polls, to the effect that 50-80% of voters are prepared to vote for Putin. Putin’s first year as president has been marked by the public’s trust and approval of his actions. Just before the anniversary of the inauguration, 60% of respondents expressed such approval. According to polls done by the Monitoring.ru group, 60% also consider that the president is doing all he can to keep his campaign promises.

Support for Putin is based on the hope that he will restore order in the nation. Around 70% of respondents consider that a “strong hand” is needed for this, and 42% of them think “all power should be concentrated in one person right now.” So no matter what measures are taken to strengthen the “state power hierarchy”, most people consider this will only be to Russia’s benefit.

But the media is fairly sceptical about Putin’s innovations – for example, the institution of presidential envoys, created precisely for the purpose of strenthening that state power hierarchy.

Nezavisimaya Gazeta says: “Over the past year, the institution of presidential envoys has remained grand and promising, but poorly understood and limited in its capacities.”

One real achievement of the presidential envoys is that regional laws are being brought into compliance with federal law. Almost all the envoys have reported that this task is 70-80% complete in their districts.

But Nezavisimaya Gazeta notes that it will be much more difficult to reach agreement on a distribution of power between federal and regional officials, “to make it absolutely clear who is responsible for what, from the top to the bottom”. However, the presidential envoys have managed to “intimidate, or at least confuse” the regional leaders – if only temporarily, says Nezavisimaya Gazeta.

Izvestia says that “the presidential envoys are undoubtedly a magnificent institution”. A year ago, Putin really needed a “transition period mechanism” – to ensure the passage of a new Tax Code, to organize a new budget process, to implement new procedures for membership of the Federation Council. And to “move against the clientele of two oligarchs: the media and intellectuals supported by Vladimir Gusinsky, and the regional and financial leaders supported by Boris Berezovsky”.

But the public was more indifferent about this than any of the president’s other initiatives. According to VTsIOM polls, 17% of respondents believe that regional governments have improved their performance as a result of moves to strengthen the “state power hierarchy”; 7% believe their performace has deteriorated. “Not many people have confidence in the presidential envoys,” Izvestia points out, “but even fewer distrust them – the public simply doesn’t know much about them.”

“The presidential envoys have spent their entire first year fighting,” says the Vremya Novostei paper. In the line of duty, they fought the regional leaders, “not only on legislation issues, but on politics in general”. In the Far East federal district, presidential envoy Konstantin Pulikovsky managed to remove Yevgeny Nazdratenko from the post of governor of Primorye. In the Trans-Volga federal district, Sergei Kirienko managed to defeat the “criminal regime” in the Republic of Marii El, created by Vyacheslav Kislitsyn. In the Central federal district, Georgii Poltavchenko succeeded in removing Governor Alexander Rutskoi of the Kursk region from power.

The presidential envoys have also battled the presidential administration, and even managed to eliminate its territorial affairs department. But it turned out to be a pyrrhic victory – they ended up reporting not to the president (as intended), but to Alexander Voloshin, head of the presidential administration.

The battle with the economic bloc of the Cabinet has continued all year – but the presidential envoys have still not been given control over money paid into regional coffers from the federal treasury.

Meanwhile, at the end of the first year, the president has given his envoys in the federal district “an entirely straightforward task”, according to Vremya Novostei: ensuring that living standards improve.

Putin stressed that the assessment of the year to come would depend on how much can be achieved in this area. “If living standards improve, it will mean we have achieved some results. If not, then everything has been meaningless,” said Putin.

As Kommersant-Dengi magazine reports, economic indicators continue to concern both the government and analysts who see signs of an approaching recession and the failure of the reforms.

Inflation for the first quarter was around 7% – twice the level predicted in the federal budget; according to the president, “it has begun to consume federal budget revenues and is threatening economic growth”.

In fact, says Kommersant-Dengi, inflation has become Russia’s number one problem – all Cabinets since 1991 have fought inflation. But inflation in itself usually facilitates economic growth – the volume of money in circulation exceeds the supply of goods, and producers start increasing output to meet demand.

However, it’s become clear that the opportunity for development in Russian industry after the crisis of 1998 has been lost.

Due to high world energy prices, too many dollars were entering Russia, and the Central Bank started printing more rubles to buy up the dollars. Hence the growth in inflation. Citizens have also followed the government’s example – they’re not putting their money into Russian-made goods (which still aren’t up to international quality standards); they’re buying dollars. For example, in the first quarter of 2001 Russian citizens bought four times as many dollars as they did in the first quarter of 2000 – 30% more than the total for 2000. Kommersant-Dengi explains: “People prefer to save money rather than spend it. They’re putting it into something that doesn’t yield much interest, but is secure.” The total sum across Russia isn’t large – about $400 million – but as they say, it’s the trend that counts.

Thus, Russia is experiencing its first over-production crisis. The government now faces a difficult problem: how money should be spent.

In order to neutralize “excess” money, the government proposes to have a “dual budget”: the basic budget figures will be based on the assumption that oil prices will be low, and in the event that extra revenues do materialize, they will be directed into a reserve fund for servicing foreign debt. However, says Kommersant-Dengi, by setting aside extra revenues the government will be reducing the level of consumption, which is already low (and is one of the reasons why Russia lacks a middle class – a pillar of political stability for any democratic government). Of course, it cannot be said that the government is doing nothing at all to return money to the economy; however, it’s only using one method for this – raising pensions and wages for state-sector employees, at a fairly rapid rate – every two months (pensions went up from February 1, and again from May 1). This money stimulates inflation and reduces income disparity among various social groups. However, as Kommersant-Dengi points out, if supply of goods exceeds demand, the normal result is for prices to fall – thus encouraging producers to compete for customers, improve efficiency, introduce new technology; i.e. to become more competitive. True, these processes are accompanied by rising unemployment and an economic slump: “essentially, such downturns are a foundation for subsequent growth, ensuring that natural selection operates in the economy”.

But the government will never sanction such a process, according to Kommersant-Dengi, since it would have political consequences – above all, it would have an impact on the president’s popularity rating: “It’s no coincidence that wages for state-sector employees are increased in the lead-up to elections.”

However, by supporting an inefficient economy in this way, the government is essentially returning Russia to the socialist path of development, which has already been tried once.

In order to escape from this obvious cul-de-sac, the government “ought to start behaving like a participant in the market economy – putting money into business, rather than spending it solely on creating various reserve funds and social welfare.”

The Argumenty i Fakty weekly attempts to predict which course of action the president will choose on economic reforms. There are three options: full speed ahead, full speed backwards, or running on the spot.

The first involves active reforms (pensions, taxation, labor laws, land ownership, utilities, etc.). The consequences for citizens will be further increases in the cost of living; the consequences for the government will be increased opposition and a decline in the president’s popularity.

“Of course,” says Argumenty i Fakty, “there is the hope that the fruits of these changes will be gathered in 20 or 30 years’ time by the grateful children of today’s voters. But this is small consolation for a president who faces an election three years from now.”

The second option entails a return to a command economy, state planning, an increased fiscal and regulatory role for the state. Hard currency revenue from oil exports would be commandeered for servicing foreign debt; rubles would be pumped into industry and the social sphere. There would once again be shortages of goods and queues in the stores. The social consequences: “Citizens who were recently hailing the arrival of a ‘strong hand’ would start quietly pining in their kitchens for Yeltsin and Gaidar.”

The third option is described by Argumenty i Fakty as “SFA – Simulation of Furious Activity”. While constantly talking about the inevitability of reforms, the government can approve various programs and make changes in the Cabinet without actually changing anything. “Television reports will show an energetic president, capably moving around via all forms of transport, productively expanding contacts with Cuba, Iran, Gabon, and other friendly nations, withstanding the aggressive plans of American imperialism, etc.”

If he chooses the third option, “as 2004 approaches” the president will undoubtedly dismiss yet another prime minister for economic failures, once again raise pensions and salaries for state-sector employees, and “with the help of God and PR consultants, succeed in being re-elected for a second term”.

Leading political commentator Leonid Radzikhovsky doubts that the president will settle on any one course of action: “Any drastic move will not only destroy the president’s popularity – it could even undermine his power. The power which was gained by a miracle, practically as a gift.”

Under these circumstances, Putin’s policies will depend on his goals: “If his aim is to strengthen his personal power, no matter what shape the nation is in, that’s one thing. If his aim is to avert possible crises, that’s different. Preserving power and preserving the nation are two different tasks.”

Argumenty i Fakty notes that in Putin’s book, “In the First Person”, Putin himself summed up his plans for the next four years: “The first year to be spent on formulating goals and putting together a team; the second year and part of the third will be devoted to gradual achievement of concrete results; the rest of the third year and the start of the fourth will involve presenting these results and moving into the next election campaign.” Clearly, the team has now been formed and the goals have been formulated: “so next on the list is ‘a mere trifle’ – achieving some concrete results”.

The Vek weekly takes up the question of whether rumors of an imminent social upheaval can be believed.

President Putin’s “Teflon approval rating” would seem to have made this question irrelevant, although it was often raised toward the end of Boris Yeltsin’s time in power. However, rumors of possible waves of protest do periodically arise – linked with the NTV affair, or the Duma’s final approval of the state of emergency laws, or the Communists’ May Day rally with its slogans calling for a Cabinet dismissal. So analysts are asking the question: “What if the president and Cabinet actually see an advantage in social unrest? Maybe in order to put the new state of emergency laws into practice right away, clamping down on all existing and potential opponents.”

Vek asked Vyacheslav Nikonov, head of the Politika Foundation, to comment on whether the government would like to see such an outcome. Nikonov considers that social unrest “is the last thing President Putin needs right now”. On the contrary, the government has an overriding interest in political and social stability. According to Nikonov, Putin has set out his priorities quite distinctly, “clearing the way for essential economic reforms, which haven’t been implemented since 1992”. The program planned by the president “is likely to be quite difficult and painful for a significant number of citizens”. However, it is essential to go ahead with it.

Igor Bubin, head of the Political Techniques Center, is sure that the impending reforms will not have a negative impact on the president’s approval rating: “The people are pinning all their political hopes on Putin, since there is no one else to focus on.” According to Bubin, social unrest is unlikely, judging by the movement of Putin’s rating, which declines a little after each disaster but inevitably returns to its previous level. “That is, if the president doesn’t make any catastrophic errors.”

But not everyone believes Russian voters have an unshakeable affection for President Putin. According to Boris Berezovsky – now the fiercest critic of the president’s policies, founder and sponsor of the Civil Liberties Foundation – the time has come to create a real liberal party in Russia.

Nezavisimaya Gazeta reports that Berezovsky is prepared to “take advantage of the mistakes of the government which has already done everything possible to form the social foundation of the future party: the ‘independent, liberal, new middle class'”.

Izvestia quotes Berezovsky himself: “Putin has basically destroyed everything we had created over the past decade… Now, after a year of Putin as president, we have everything we need to form a real opposition.”

But Berezovsky has no intention of supporting the Union of Right Forces or Yabloko – he considers them too closely linked with the Kremlin. The former oligarch is now betting on the human rights groups. His Civil Liberties Foundation has $25 million; of this, $3 million has been allocated to the Sakharov Museum in Moscow, a move which has aroused much debate.

(Izvestia notes that Elena Bonner has been criticized for accepting Berezovsky’s “tainted” money; her reply was: “Even if Berezovsky is just boosting his image, that’s his problem; I’m not going to refuse this money, since no other ‘clean’ money is being offered.”)

Now Berezovsky has allocated $10 million for a program to support human rights groups in Russia’s regions. A list of 165 groups has been released, each of which will receive $15,000.

Nezavisimaya Gazeta reports that the human rights activists “weren’t concealing their satisfaction as they revealed the terms of the grants”. Unlike Western foundations – which usually have some tough rules for grant applications – Berezovsky’s foundation simply asks applicants where they’re from and what they do. (True, noted human rights activist Sergei Grigoriants has expressed doubts over whether human rights groups have the right to take the oligarch’s money. However, most of them don’t share his doubts.)

“Berezovsky really doesn’t have any other channels of communication with the politically active part of Russian society, apart from human rights groups and the intelligentsia,” says Izvestia. “Over the past year, ever since he retreated from politics, he has been turning to them – using them as a cover, as a ‘human shield’ for himself and his activities.”

(The previous such episode was Berezovsky’s attept to set up a trust, made up of members of the intelligentsia, to manage his stake in the ORT network: “Berezovsky hid behind the trust agreement, like a smoke-screen, in order to quietly complete negotiations on a profitable transfer of his shares. As soon as the deal was done, he forgot all about the trust.”)

It’s long been known that Berezovsky is capable of unexpected tactical moves. His sudden change of attitude to Yevgeny Primakov may be viewed as the latest example of this. In an April interview, reminiscing about the choice between Putin and Primakov in the process of picking Yeltsin’s successor, Berezovsky insisted that the choice had been made on the basis of “the best available option”. He constantly asserted that the political situation in Russia would have been even more grim under Primakov.

But now, as Nezavisimaya Gazeta reports, Berezovsky is not only expressing a high opinion of Primakov (as opposed to his opinion of Putin), but even poetically describing these two politicians as a “scalpel” and a “cudgel” (the latter term is used for the president).

Izvestia quotes sources in the General Prosecutor’s Office as saying that Russia may demand Berezovsky’s extradition in the near future. It’s clear that Berezovsky’s recent actions have been aimed at forestalling such a move: “He can only count on the West’s goodwill if he presents himself as facing political persecution.” So there is every reason to believe that Berezovsky will continue “Operation Human Shield”.

Time will tell whether Berezovsky succeeds in putting together an opposition to the present regime. Meanwhile, the media is reporting some surprising shifts in the public mood in various Russian regions.

For example, Obshchaya Gazeta reports separatist sentiments in the Kaliningrad region, noting that – understandably enough – these are stimulated by material considerations: “It’s like emigrating to a richer country, taking along the entire territory and all your neighbors.”

However, Obshchaya Gazeta points out that Russians aren’t the most “materialistic” people in the world, and it’s actually quite difficult to determine the motives of Russian separatists.

Poverty is not the only issue, says Obshchaya Gazeta; there is also the sense of helplessness and the lack of hope: the era when the individual’s helplessness against the state was compensated by the greatness of that state has passed. (As “Obshchaya Gazeta” puts it, “this was like a servant taking pride in the wealth and power of the master”.)

Nowadays, after all the changes, after the collapse of the empire, the state still isn’t accountable to the people: “All the important events of the past decade – the collapse of the USSR, Russia’s transformation into ‘an independent nation’, privatization, the election of Putin – have transpired without any significant public participation.”

Therefore, according to Obshchaya Gazeta, all the popular speculations about Russia’s “special path” have a flip-side: “Saying that Russia is essentially unique could easily be read as saying that Russia is essentially a lost cause.” The new “Russian separatists” agree that Russia is a special country, with a unique path of development; and that’s precisely why they are working out how to detach themselves from Russia.

Obshchaya Gazeta says: “No centralization can stop the growth of such feelings. On the contrary, centralization will only accelerate it.”

This trend could only be halted by “real democratic changes (starting with federal elections), which would give Russian citizens the sense that their country really belongs to them”. However, there is little hope of this at present; so it would be premature to say that the threat of Russia’s disintegration has passed.

Of course, as Obshchaya Gazeta notes, from the viewpoint of world history it doesn’t matter how Russia is integrated into the rest of the world – as a whole, or part by part. “But so much effort has been invested in Russia over the centuries that it really would be a shame if it should fall apart.”

However, we should still bear in mind that for reasons of geography, such separatism is only possible for the Kaliningrad region – formerly East Prussia.

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