“The electorate has already taken shape,” says Gleb Pavlovsky, formerly the Kremlin’s top political consultant, now editor-in-chief of “Russkii Zhurnal” magazine. He was being interviewed by Rossiiskaia Gazeta about the results of the last political season and the short-term outlook. True, he was only referring to the left of Russia’s political spectrum.
Pavlovsky is convinced that although there has been much talk of a split among the left, this will not happen: “No matter what pictures of the situation on the left are proposed, the foundation will still be the same – the Communist Party.”
The Communist Party’s own confidence that its position is solid was confirmed to Rossiiskaia Gazeta by Valentin Kuptsov, deputy leader of the Communist faction in the Duma. Kuptsov described the past political year as “a year of great disillusionment”. In his view, the social laws passed over the past few months have noticeably lowered the living standards of voters.
Gleb Pavlovsky, citing the opinions of “most observers”, says the lawmaking process in parliament has been “active, and frequently very substantive”. What’s more, the president – as befits the head of state in a democracy – has been doing all he can to shape a favorable image of Russia abroad.
However, says Pavlovsky, “independent observers” have noted the appearance of “some discrepancies” between public politics and what is happening “in the depths of Russia”.
“The amount of political and social energy for which there is no demand” continues to grow. Being unable to find a normal outlet, this energy takes on “forms which are outside the system, and sometimes extremist”. This is why, according to Pavlovsky, the problem of extremism is now becoming a top priority.
Pavlovsky mentions the recent events in Krasnoarmeisk, emphasizing that both sides in the conflict “represented the actual interests of particular groups – the long-term residents, the new arrivals, and industry, which requires labor”. If such interests are continually ignored, this causes the kind of excesses which have become more frequent of late.
The Novaya Gazeta newspaper says that from Putin’s first days in power, he and his team have focused on “improving the image” of Russia, creating a positive impression of it. But this tactic is based on “the assumption that most of Russia’s problems don’t really exist – in effect, that they are the result of incorrect opinions about the state and the regime”.
This technique has been used primarily because the regime doesn’t know of any real ways of solving Russia’s problems. Even its good intentions usually turn out to be futile. For example, the widely-publicized higher salaries for state-sector workers have led to “the depletion of regional budgets”. As a result, Labor and Social Development Minister Alexander Pochinok has now started talking of cutting the number of state-sector workers by no less than 30%; and Economic Development Minister Herman Gref is talking of a 30% budget sequestration.
Meanwhile, as Novaya Gazeta emphasizes, democratic channels for expressing discontent are completely blocked. Even the Communists, who have become completely integrated into the system, find themselves under the close scrutiny of the regime.
And the endless battle against the Communists is misleading the public: “it reduces the problem of totalitarianism and dictatorship to the danger of a return to communism”, whereas what we ought to beware of is not the “red past”, but the “brown future”.
Moreover, the Communist Party, being “in reality a conservative party”, plays a stabilizing role to some extent, restraining nationalist-minded voters within certain limits – in the absence of which they would side with overt neo-fascists.
Novaya Gazeta stresses that from the very start of the present regime, “nationalist propaganda and war-fever have been consciously chosen as a tool for winning seats in parliament and winning the presidency”. Nothing has changed: “Nationalism and a nostalgic longing for an iron hand remain the sole – and officially approved – outlet for discontent.”
Therefore, all our present problems – social, economic, and military – are clear evidence that the regime ought to prepare for a “turbulent future”.
“The Economy is Sick.” That was the headline Nezavisimaya Gazeta used for its report about the appointment of Colonel-General Vladislav Putilin, formerly head of the main organization and mobilization directorate at the Defense Ministry and deputy chief of the General Staff, as a deputy to Economic Development and Trade Minister Herman Gref.
“It has to be acknowledged that the favorable four-year economic cycle which began after 1998 is now drawing to a close.” For the time being, there are no obvious signs of a crisis, as there were in 1998. However, “a range of threats are starting to emerge, and these may have unfortunate consequences.”
According to Nezavisimaya Gazeta, the major threat facing Russia next year is not the matter of servicing foreign debts, but the nation’s internal difficulties.
Over the four years since the crisis, the government has failed to take advantage of the opportunity to carry out essential structural reforms. The Russian economy still remains entirely dependent on oil prices, and is therefore completely unprepared for even the slightest deterioration in external economic circumstances.
The situation is so serious that an influx of military personnel into ministries concerned with the economy will not suffice to resolve it; neither will “attempts to implement a mobilization economy plan”.
The Vek weekly comments that it’s a poor government that doesn’t have a back-up plan ready in case of force majeure circumstances.
According to many observers, Vek notes, the political and social stability – and relative economic successes – of which the Kremlin is so proud “are unstable and transient, and are liable to sudden collapse”. The regime is well aware of this instability, as evidenced by the discussion of national economic security at the most recent Security Council meeting.
The regime’s anti-crisis strategy found expression in the recent “strengthening” of the Economic Development Ministry and the staff of Deputy Prime Minister Valentina Matvienko by personnel drawn from the General Staff, “who essentially play the role of the Kremlin’s commissars in the Cabinet”. Vek places the transfer of General Zdanovich to the All-Russian State Radio and Television Company in the same category, along with “the expansion of the practice of seconding intelligence officers to ministries and government agencies”.
According to Vek, “when the system is in crisis, state regulation and the mobilization option are not only acceptable, but inevitable”. But there are doubts about the quality, and hence the effectiveness, of this mobilization.
Vek questions the professional skills of the new appointees, and questions whether “a subject of mobilization” really exists – a professional and competent bureaucracy, or at least a broadly-distributed political party “of a new type”. Clearly, Russia has neither; “nor does it have any ideological backing for this possible mobilization strategy, which cannot be carried out without the support and participation of the citizenry”.
Moreover, says Vek, mobilization entails redistribution of national wealth in favor of strategically important sectors of industry, as well as in favor of “key spheres of human development” – education and health care. “In order for that to happen in Russia today, nothing short of a political revolution is required!”
The impossibility of actually implementing a “mobilization plan” in contemporary Russia leads Vek to the conclusion that all talk of it is no more than “political speculation and arguments in the battle for influence with the president”. In reality, it’s long been understood that anything goes in the battle for influence with the president.
The Novye Izvestia newspaper describes a brilliant idea which suddenly struck members of the Tula regional parliament. To mark the 622nd anniversary of the victory of Prince Dmitry Donskoi over Khan Mamai of the Golden Horde, this September, the Tula legislature has invited President Putin to meet with President Mintimer Shaimiyev of Tatarstan at the historic site itself – Kulikovo Field. This is supposed to symbolize the present unity between Russians and Tatars.
This proposal is somewhat tactless, to put it mildly. Last year, several citizens’ groups from Tatarstan appealed to President Putin to put an end to anniversary celebrations of the Kulikovo victory. The appeal had the support of President Shaimiyev. It also turns out that Russian and Tatar historians have diametrically opposed ideas about what exactly happened on that historic day in 1380.
As a result, the hope of drawing the president to the Tula region proved illusory, even though the invitation sent to Putin was signed by Governor Starodubtsev himself (according to the sources of Novye Izvestia, the governor didn’t condescend to sign Shaimiyev’s invitation personally).
Nevertheless, the people of the Tula region aren’t losing heart. They have a new idea: proposing that Tatarstan should build a mosque at the Kulikovo Field site, right next to the Orthodox church designed by the famous Shchusev, architect of Lenin’s Mausoleum. Surely President Shaimiyev can’t turn down a proposal like that. Therefore, hoping that Putin will visit the Tula region isn’t a lost cause; all it requires is a foundation in the form of a national idea.
In general, a pretext can be found; the main thing is that the visit should take place. “From that point, it’s a matter of technicalities. If Putin visits Kulikovo Field, he will also visit the city of Tula, meet the people, get a feel for the region’s problems. And maybe he will push the government into allocating some extra subsidies.” This, after all, is the whole point of this sudden outburst of Russian-Tatar friendship.
The Vremya MN newspaper has devoted a lengthy article to the economic background of another alliance – the Russia-Belarus Union.
As we know, there is currently a crisis in relations between Russia and Belarus; a sure sign of this are the statements coming from President Alexander Lukashenko since his “fateful” meeting with President Putin in St. Petersburg. The Belarussian president has proposed to re-examine relations with NATO, the World Trade Organization, and the West in general – as “a lesson for Russia”. Vremya MN notes that Lukashenko tends to do this kind of thing whenever there is a crack in “family relations” with Russia.
The entire six-year history of rapprochement between Russia and Belarus has been “a long string of alternating embraces and tiffs, kisses and huffs, avowals of true love and accusations of betrayal”. And it seems like this will continue forever.
However, according to Vremya MN, President Putin has deliberately tipped this drawn-out affair into crisis, with the goal of “either breaking up the family, or signing a legally watertight and mutually advantageous nuptial contract”. What should be included in such a contract? Belarus is predisposed in favor of union with Russia for a number of economic reasons. Firstly, Belarussian industry is oriented toward the Russian market; Belarus also depends on energy supplies from Russia. Belarussian entrepreneurs also have an interest in integration: in the hope of market reforms and democratic reforms, “at least to the level of Russia”.
For President Lukashenko, integration with Russia is clearly the policy cornerstone which secures popular support for him. At the same time, he has a great interest in Russia’s economic support, which is the only thing that keeps the unreformed Belarussian economy afloat. “And that is the most important thing,” says Vremya MN, since the start of real reforms in Belarus will mark the end of the political career of its current president.
For Russia, the benefits would include direct access to the borders of Europe, and in the near future to the borders of the European Union. And, of course, “optimizing the missile defense and air defense systems”, not to mention additional opportunities to “impose on the latently hostile Ukraine a model of relations which is convenient for Russia”.
The economic benefits for Russia are more problematic. Business conditions in Belarus are much worse than in most other post-Soviet states. Russian entrepreneurs don’t like that, of course; understandably enough, in order for them to participate in privatization in Belarus, a privatization process has to exist. Thus far, in all economic contacts, the final decisions on the Belarussian side are made by state officials and the president – completely ignoring the interests of Russian companies.
“What kind of mutually beneficial cooperation can we speak of, when gas subsidies to Belarus over the last five or six years have amounted to almost $2.5 billion – or when Russian companies are offered 10% stakes in privatization of financially shaky Belarussian enterprises (and even that is presented as an unprecedented favor)?”
Therefore, Russia’s argument is simple: either we discuss integration on principles similar to European integration (unification of economic and political systems, and setting up joint administration bodies “which take the real weight of participant nations into account”) – or we can discuss some kind of federative relationship, with Moscow having the decisive right to dictate its terms.
“Understandably, Lukashenko can’t see a future for himself under either of these models – hence his reaction.” However, Russia’s position is also understandable; obviously, the Russian economy simply can’t afford to continue “subsidies and preferences” to support the current regime in Belarus.
“Russia has failed to save for a rainy day.” That was the headline in the Vedomosti newspaper for an article about the Cabinet meeting at which Deputy Prime Minister and Finance Minister Alexei Kudrin reported that the famous financial reserve – created to accumulate funds for servicing foreign debts – has actually halved since the start of the year. At January 1, the financial reserve contained 89 billion rubles; and the plan was to add 105 billion rubles to this over the course of this year. However, according to Kudrin, as at July 1, the nation’s safeguard against the Year 2003 problem held only 40 billion rubles.
Vedomosti explains that the ruble stockpiles gradually melted away: 10 billion rubles went to companies and organizations as refunds on over-paid profit tax. The Taxes and Duties Ministry refunded another 40 billion rubles to enterprises when facilities they had constructed went into operation. Substantial subsidies and relief payments went to regions which ran into trouble after the wage rises for state-sector workers came into effect. Most importantly, the Taxes and Duties Ministry fell 38 billion rubles short of its tax revenue collection targets for the first half of the year. The reason is well known: oil prices only started rising in March. To make a bad situation worse, this summer the euro firmed to equal value with the dollar, which also had an inevitable effect on Russia’s finances.
The Kommersant newspaper considers that risks were involved in the very principles behind the financial reserve: “This is not a sum of money which is not to be touched, revenues from foreign trade with the global market situation turning out to be more favorable than pessimistic forecasts indicated; rather, this is whatever is left over in the treasury after all expenses have been paid out.” Besides, the global situation has not turned out to be very favorable. It’s worth recalling a statement by Yegor Gaidar, “the father of liberal economics in Russia”. When asked about the virtuoso skill shown by Russian tax-payers in tax evasion, Gaidar noted that in Russia, “a regular taxation system was first imposed by Mongol horsemen”. It was “a system of communal tax-paying, in place for centuries; then it was transformed into collective farms”. In historical terms, this system is what generated “a special attitude to taxation” in Russia; unlike attitudes in Europe, where the advent of taxation systems led to the advent of parliaments, i.e. democracy.
Kudrin assessed the financial losses resulting from all this year’s problems and misfortunes – from the appalling consequences of floods in southern Russia to increased salaries for military personnel – at $350-400 million. Next year, Russia will have to pay out $17.2 billion to service its foreign debts. This will require additional resources; Kommersant notes that “it’s time to stop looking down on foreign creditors and the International Monetary Fund”.
According to Kudrin, Russia will have to borrow $1-1.5 billion; and this will have to be done this autumn. If we wait until 2003, we will have to borrow $3-4.5 billion; Vedomosti comments that private investors will undoubtedly take advantage of this.
Many independent analysts, quoted by Vedomosti, consider that it makes sense to emphasize domestic borrowing – it may be more advantageous than any further foreign loans.
This is especially true since, as Finansovaya Rossiia recently reported, the amount of foreign currency being hoarded by Russian citizens has fluctuated between $20 billion and $50 billion over the past few years.
The amount of dollars in Russia has considerably exceeded the amount of rubles: by 94% in 2000, by 47% in 2001. Over the course of this year, dollars have exceeded rubles by 28-40%. Finansovaya Rossiia explains that this means the Russian economy is more dependent on the policies of the US Federal Reserve than on those of the Central Bank of Russia.
Mikhail Leontiev, who hosts the “Other Time” program on the ORT network, told the Argumenty i Fakty weekly that Russia is “tied to the dollar and the global financial system, like a small dog trotting at the heels of its large, fat master. If the master – that is, America and Europe – should happen to get stuck in a quagmire up to his knees, then the little dog will surely drown.” However, according to Leontiev, the Russian government is blind to this threat.
Argumenty i Fakty reports that proposed solutions are very diverse. They range from the above-mentioned “mobilization economy” (rumor has it that such a plan is already being developed, under the supervision of Sergei Pugachev, “banker and friend of the president”) to unconditional guarantees of property rights. The latter option for national economic security was proposed by Boris Berezovsky in a telephone interview with Argumenty i Fakty.
In general, everyone now acknowledges the relevance of the idea of saving Russia. Nezavisimoe Voennoe Obozrenie even proposes to make this the “national idea” – in order to do this, it must be “proclaimed from the very top, by the most authoritative person – the president”. Yes, of course – the most important thing is for the president to issue the call: “Save Russia!” It will be saved at once, naturally.
However, this is more likely to happen somewhat closer to the “politically hot” (or economically hot?) autumn.
Hence, for recreational and technical reasons, the next issue of “Political Forecasts” will come out on August 20.
Until then.
