THE BATTLE BETWEEN ENFORCERS AND OLIGARCHS CONTINUES: THE COMMUNISTS GAIN POINTS

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Russia ususally gets somewhat tense as it goes into the fateful month of August. Then again, in recent years months that might be described as calm have been rare. Terrorist attacks, bombings, political scandals at the top, one after another – these things are undoubtedly incomparable for ordinary citizens, in terms of how they affect their lives. But they are also undoubtedly connected, if only in the sense that they contribute to the overall political climate which, in one way or another, will make itself known on the critical days for the whole political elite: the day of the parliamentary elections, and the day of the presidential election. Despite the usual voter apathy, the Kremlin is still concerned about things that might go wrong, and is trying to safeguard itself against any unexpected developments.

The presidential election is looking much clearer than the parliamentary elections; there hasn’t been any dispute about who the winning candidate will be. Nevertheless, the actual content of that winner’s policy program for the next four years will greatly depend on the outcome of the parliamentary elections – on which of the competing Kremlin factions can gain the upper hand in those elections.

A great deal is now being done to secure that interim victory. For example, most observers link the ongoing YUKOS scandal to those election goals. The Vremya MN newspaper says it isn’t surprising that the Prosecutor General’s Office is playing the role of “The Terminator” in relation to the financial markets. For example, as soon as the first rumors of more criminal cases arose – against Sibneft this time – the share price of Sibneft fell by 10%.

Thus, according to Vremya MN, a conclusive answer was found to the question of whether the attack on YUKOS is a one-off event or whether it signals a new trend, a dangerous trend for business in Russia. Now, with threats against Sibneft, all doubts have been dispelled; after all, this strike was aimed at the second participant in the merger deal that aims to create an oil company which will be the largest in Russia and the fourth-largest in the world.

Yevgeny Gavrilenkov, chief economist for Troika-Dialog, told Vremya MN that the situation really does resemble “a Russian version of a Terminator script: any company could become the next Sarah O’Connor, nobody is safe from becoming the next number in the phone book.”

Overall, the YUKOS conflict is being viewed by the business community as a kind of preliminary outcome of Vladimir Putin’s first term.

Writing in Vedomosti, Kirill Rogov says this conflict demonstrates that business in Russia “can survive and even prosper, while remaining illegal or quasi-legal.” And a company’s size makes no difference. Vedomosti also notes: “The position of medium-sized companies in relation to regional governments, and small business in relation to local governments, essentially repeats the same pattern: a company’s legal legitimacy can always be called into question, and this is a fundamental factor in the entire system of business and governance.”

What’s more, says Kirill Rogov, it is widely believed in the business community that maintaining the status quo would be the best possible option for Putin’s second term: preserving the existing balance between two competing clans – the oligarchs and the security and law enforcement agencies (enforcers). For obvious reasons, the business community fears the recent shift of the balance in favor of the enforcers.

However, Vedomosti is pessimistic about the possibility of returning to the usual zero-sum variant: as they say, you can’t cross the same river twice.

In Putin’s first term, Vedomosti explains, the main aim of the enforcers was to “demonstrate to the public that their presence is essential, as guarantors of law and order in various areas of society.” The oligarchs’ strategy was to make every effort to deny the enforcers direct access to managing the economy and natural resources.

Apart from anything else, according to Vedomosti, the power-struggle showed that both sides are viewed by the public as only “partially legitimate.”

According to a poll done by the National Public Opinion Research Center (VTsIOM), some respondents (18%) are sure the attack on YUKOS is a campaign stunt by the Kremlin in order to gain “cheap popularity” (another 18%). Other respondents consider it a lawful action by the justice system (15%) or a move “against the oligarchy” and “non-Russian capital” (15%).

Thus, the proportion of the public that recognizes the actions of the enforcers as legitimate (36%) is very close to the proportion of supporters (30%). Vedomosti comments that citizens support the enforcers because their actions are viewed as having the goal of “exposing the corrupt and fraudulent nature of big business.” At the same time, citizens are clearly not prepared to give the attacking side a monopoly on control over politics and the economy.

According to Kirill Rogov, no decisive victory is possible for either side in this situation. However, although the confrontation will inevitably lead to further crises in the Russian economy and Russian politics, it’s unlikely that the two sides can achieve a lasting compromise. That’s primarily because “a conspiracy of elites can produce a temporary redistribution of resources, but it cannot legitimize property” in the eyes of the people.

And that, according to Vedomosti, is the perennial hot-spot in Russia’s societal situation.

In an interview with the Argumenty i Fakty weekly, Auditing Commission chairman Sergei Stepashin put the issue somewhat differently. In his view, Russia’s main problem is that “we still haven’t succeeded in producing a normal middle class, which should have become the foundation of the national economy.” And the foundation of politics, of course – but what’s the point of talking about things that don’t exist?

Meanwhile, the current “mood of the electorate” is such that campaign points are being gained by those who act decisively and directly, undoubtedly taking advantage of the fact that the overwhelming majority of voters are dissatisfied with the way they live now. Hence the “war on oligarchs” that dominates the pages of a diverse range of newspapers, and the “Operation Werewolves in Uniform” police corruption case, and the many echoes of these actions across the Russian provinces… Observers warn that the public will not benefit, in the end, from these publicity stunts by players on the political stage; but that doesn’t concern anyone, since the public good has never been the goal – and the actual goals have obviously been achieved.

On August 1, Nezavisimaya Gazeta published its latest monthly ranking of the most influential Russian political figures. The results were entirely predictable.

Nezavisimaya Gazeta comments: “In political phenology, July is a month of falling ratings. But that doesn’t apply to this particular July.” What we’re seeing is the reverse.

The upper half of the ranking, full of “the most substantial gentlemen”, doesn’t usually see leaps of 15-20 places. However, it has been radically revised. In particular, Interior Minister Boris Gryzlov zoomed up 20 places in the ranking. Prosecutor General Vladimir Ustinov; he also managed an “excellent jump.”

A clear trend can be seen for Ustinov: each criminal case instigated against YUKOS executives has facilitated a steady rise in his approval rating, and the ratings of other “comrades who represent a more significant corporation than the Prosecutor General’s Office.”

Boris Gryzlov’s rating is understandable as well; for him, “Operation Werewolves in Uniform” was a real “shining hour”, as Profil magazine puts it. Political experts agreed, and so did ordinary citizens: an Public Opinion Foundation poll indicates that Gryzlov’s approval rating among voters has risen 8% recently.

However, says Profil, despite all the PR successes of Gryzlov and the party he leads, success at the elections is by no means assured for United Russia.

According to Profil, the Kremlin is well aware of this. And that is the reason for the heavy promotion of a second pro-Kremlin party: the People’s Party, led by Gennadi Raikov.

The papers have said a lot about the rise of a competitor for United Russia, another claimant to the Kremlin administration’s attention, being linked to pre-election rivalry between two deputy heads of the presidential administration: Vladislav Surkov and Viktor Ivanov (the latter, together with Igor Sechin, leads the “security and law enforcement wing” among the factions in Putin’s team). However, it would also be true to say that if United Russia – a creation of the “Yeltsin’s Family” faction – had been obviously heading for triumph at the polls, it’s unlikely that a second pro-Kremlin party could have arisen.

Having judged that the chances of United Russia defeating its main rival (the Communist Party) are not looking good, the Kremlin has decided to use Gennadi Raikov’s party to split the pro-presidential vote (including leftist voters), “hoping to expand it by doing so.”

According to Profil, this decision has several advantages: the People’s Party, unlike United Russia, has strong support in the regions, since most of its leaders are Duma members from single-mandate districts.

Until now, the Kremlin has demanded unconditional support for United Russia from the governors; but now they will have a choice, which is very important for maintaining a good relationship with proud regional leaders.

There is also a hope for “certain strata” of the electorate that may be attracted by some eccentric slogans of the People’s Party. For instance, this is the notorious fight against “virtual homosexuals”, for which the people’s Party has been blamed along with other possible and impossible sins by former member of the party Dmitry Rogozin.

In any case, if earlier the two pro-presidential parties made attempts to agree for all their rivalry, now they have started open opposition. As has been already said, in the Kremlin’s opinion, this tactics may be quite successful as an attempt to takeover part of the pro-presidential electorate from the left.

The government is worried about the obvious leftist turn in people’s spirits. In this connection it is worthwhile to pay attention to the comment of Novye Izvestia on the information published by the RIA Novosti news agency referring to “a high-ranking anonymous Kremlin official”. The news agency states that Putin’s “proposals on formation of the government on the basis of the parliamentary majority does not imply transition to the parliamentary republic”.

In the view of the paper, this announcement arranged as a “political consultants’ ‘information leakage’ sanctioned from above” is “radically changing the entire disposition of political forces in the country not only for a short prospect but also for a long range prospect”.

In other words, the Kremlin that has been hoping for formation of the pro-presidential majority faction in the Duma, has factually put up with the prospect of the inevitable failure of its party.

The newspaper concludes, “The to-be-on-the-safe-side campaign in case of the Communists’ victory has been started, since in case of a triumph of the left, retention of even a hypothetical possibility of formation of the government on the basis of the parliamentary majority would be equal to suicide for the government. Novye Izvestia states, “The printed pace of Bolsheviks can already be heard on the Borovitsky Hill.”

Answering the newspaper’s question about today’s layout of forces, political experts come to the conclusion that United Russia will not be a failure in the election. Furthermore, in the view of Mark Urnov, Chairman of the Expertiza analytical program foundation, the United Russia faction is likely to be the largest in the future Duma, because it will have more single-mandate deputies than the Communists. But this is not the victory the Kremlin has been dreaming about: there will not be a symbolic victory, i.e. a victory by lists.

In the view of Boris Makarenko, Deputy Director of the Political Techniques Center, United Russia as it is now “simply does not correspond to the Kremlin’s idea of a government party.” Therefore, the support the Kremlin provided to United Russia with has been withdrawn.

Novye Izvestia says, “It used to be thought that United Russia as a party would satisfy everyone.” However, as the elections got closer and when the time of formation of party lists and distribution of party money came, it turned out that United Russia was still in the hands of “the family”. And the role of Boris Gryzlov and some other St. Petersburgers is rather formal and cannot radically change the situation. Thus, Voloshin and Surkov have overplayed Sechin and Ivanov. Therefore, it was decided to set up one more government party.

Part of the new “St. Petersburg elite” decided to financially support Raikov in order to get their own detachment in the new Duma. The St. Petersburgers have long been collecting money using force methods. These methods were used in the case of YUKOS.

The force detachment of the St. Petersburgers consists of two links: the Prosecutor General’s Office (Deputy Prosecutor General Biryukov is responsible for this link) and the federal Security Service (FSB) handled by Zaostrovtsev. The newspaper says, “This detachment is rushing about the country with one and he same plan of actions: first comes an announcement of the State Auditing Commission or the Ministry for Taxes and Duties, then FSB is involved, next a hostage is taken, and finally political negotiations about the fate of the enterprise or its monetary flows takes place.”

Soon it will be clear what the opposition between the old and new “hosts of life” will result in. however, as the newspaper says, the Russian parliament will still include “those who wish to divide everything (the Communist Party), to cheat everyone (the Liberal Democratic Party), to defend everyone (Yabloko), to re-educate everyone (the Union of Right Forces), and to manipulate everyone (United Russia and People’s Party).

It is necessary to keep in mind that the two latter represent the forces “hating one another much stronger than the left and the right”. The subject of their argument is “money and real power”, while others are arguing about “ideologies and the hypothetical power in the future”. Therefore, the closer the election is, the tenser will be the friction between the two government parties.

Meanwhile, the left are accumulating new points, including points in the business community. It came as a surprise for many observers that Communist party leader Gennadi Zyuganov has made a rather harsh announcement regarding the government in connection with the case of YUKOS.

The chief Communist does not view the situation surrounding YUKOS as the state’s fighting oligarchic capital or economic crime. In his opinion, it is just a new episode of the permanent “inter-clan fight”. At his news conference, Zyuganov said, “We expected there to be a crackdown on some company or other, but we never imagined it would take such barbarous forms.” In the view of the CPRF leader, “as soon as YUKOS declared its political interests, the blow fell.”

Unlike many of his supporters, Zyuganov did not say a single negative word about Khodorkovsky’s company. He said, “This isn’t a matter of YUKOS – it’s a matter of the national economy. These activities may paralyze the state’s financial system… I fear lest this should lead to a new default.”

This position of Zyuganov gave Izvestia a reason to note: “For the first time, the nation’s chief Communist has come forward as a defender of the interests of major capitalists.” The newspaper says that the Communist party hopes that some representatives of Russian big business will support the Communists in the upcoming Duma election. Zyuganov added in the end, “Not a single entrepreneur wishes to live in a police state, so this time they will support a broad alliance between us.”

According to Izvestia, the most surprising aspect was not the announcements themselves, but the fact that they were made too late. It has been rumored for a long time in political circles that the YUKOS chief executive has “diversified” his support for political structures, and the Communists are rumored to be among them. The other structures are Yabloko and the Union of Right Forces (URF). However, their leaders made corresponding announcements right at the start of the scandal surrounding YUKOS and the Prosecutor General’s Office. Zyuganov kept silent: first he had a rest in the Caucasus, and then he was busy with his account to voters. According to our sources, the business community had asked the authorities of the Communist Party of the Russian federation to make such an announcement earlier.

However, the Communists need not make haste. Argumenty I Fakty quotes Co-Chairman of the People’s Patriotic Union and Editor-in-Chief of the newspaper Zavtra Alexander Prokhanov: “Imagine the terrible situation: the Communist Party is subsidized by three or four oligarchic structures. How would it behave in this case? Where would it lead the oligarchic campaign?”

Prokhanov agrees with Zyuganov that the Kremlin’s fighting tycoons is “a fight between the left and right hands, i.e. a fight within the government”. However, he asserts that the left benefit from this fight, since it “distracts the government from a front strike on the Communists”, which, according to sources of Zavtra, is scheduled for September-October.

However, Argumenty i Fakty experts are convinced that “no compromising links with tycoons” will prevent the left from conducting an election campaign under such slogans as “Down with the oligarchs!” “Loot the Loot!” and so on, with some “Jewish tinge” (traces of anti-Semitism – translator’s note).

Meanwhile, Alfred Kokh, campaign manager for the URF, has imparted his own curious conjectures about left-wing election plans to Argumenty i Fakty. He said: “Do you rule out the possibility that the business elite is funding the Communists on the condition that they should pretend to have nothing to do with business, and gain points by opposing business – only to vote for bills favorable to big business once they are elected to the Duma?”

However, if there really is such an agreement with the Communists, it is not clear why a right-wing party would be necessary at all.

URF leader Boris Nemtsov has practically answered this question. He has published a kind of right-wing manifesto in Nezavisimaya Gazeta, proposing methods of escaping from the cul-de-sac into which the government’s conflict with business has led the nation. In his proposals, Nemtsov focuses on the need to transform Russian capitalism (he describes it as “a second-rate form of capitalism, capitalism according to the Latin American model, characterized by an economy that is dependent on raw materials exports, and the constant threat of social upheaval”).

To reform this unattractive state regime into European capitalism “with its strong middle class and respect for human rights and private property”, Nemtsov proposes a curious instrument: “increasing the natural resources rent for raw materials companies, while simultaneously cutting taxes for those sectors of the economy that do not deal with raw materials.”

Not long ago, it was hard to imagine that URF leaders would raise this topic of their own accord, since it is very sensitive for the Russian oil sector. It is well known that “natural resources rent” is the favorite issue of left-wing economist Sergei Glaziev. So it must be true that the upcoming elections are working miracles with political leaders.

In his manifesto, Nemtsov also develops his idea, calling it “the right-wing option for resolving a dead-end situation”.

“Rather than using the leftist formula of ‘expropriate the expropriators’ and ‘death to the oligarchs’, we propose a right-wing formula: higher natural resources taxes, combined with tax cuts for small business and medium-sized business – in exchange for an amnesty and restrictions on business participation in the political process.”

The URF leader believes that everyone will benefit from this decision: “Millions of pensioners, military personnel, health workers, and teachers would get an extra increase in their pensions and wages. Secondary industry would benefit from tax cuts, leading to less poverty, less unemployment, and the growth of the middle class across Russia, not only in Moscow. Meanwhile, the large natural resources corporations would get guarantees of security – for companies as well as individuals.”

Besides, the increase of the natural resources rent would moderate the political activity of large corporations, which currently have substantial amounts of money to direct into politics.

In short, this is almost a Solomon’s decision, with obvious social-democratic overtones.

However, the government is certain to have its own plans, which may be no less effective, in a way – and are sure to be more colorful.

Soon we will find out about them.

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