Boris yeltsin’s passing from the world scene demonstrates once again how one man can change history. If not for Yeltsin, Russia today might still be ruled by the Soviet Communist Party, either in reformist or Stalinist incarnation. But Yeltsin only started the long and still unfinished business of reforming Russia. He has left much of the job to his hand-picked successor, Vladimir Putin, the steely-eyed former intelligence officer and ex-head of the Russian secret police who only a year ago was a complete unknown. It is now up to Putin to tackle the future of Russia and its centuries-old problem of integration into the West.

As the Soviet Union collapsed, the Russian reform-oriented elites led by Yeltsin attempted a political modernization that included the wholesale import of Western-style political machinery. The trappings of democracy installed in Russia included participatory elections, the creation of an office of the president, and the adoption of a constitution influenced by pre-revolutionary Russian political practice, the French Fifth Republic, and the United States. But as has been true since the time of Peter the Great, when Western practices are planted in Russian soil, they acquire uniquely Russian characteristics. Putin’s presidency will inevitably be evaluated in the light of the successes (or failures) of the political and economic reforms started under Yeltsin and Gorbachev.

Putin’s March 26, 2000 presidential bid wasn’t quite a formally uncontested election of the kind that was a hallmark of the Soviet era, but it still presents a peculiarly Russian phenomenon — the election of a monarch. The wildly popular political novice Putin ran without a strong opponent, and at this writing looked to face no serious obstacles on his way to the presidency. After a "dirty tricks" campaign aimed against them, former Prime Minister Yevgeny Primakov and Moscow’s Mayor Yurii Luzhkov, both of whom appeared formidable only a year ago, opted not to enter the contest. The consensus in Moscow is that the young, ambitious, and focused Putin will be very much a hands-on leader, inheriting the legacy of the impetuous and autocratic Yeltsin.

Sorting out Yeltsin’s past role and Putin’s future rule is an important challenge for Western policy experts and politicians. It is also important to understand how Russia is really ruled, and not to be misled by those familiar Western terms: elections, parliament, president. We must see Russia for what it is — a huge country that has been stuck in what the Russians call "catch-up modernization" for the past 300 years, but does not really consider itself to be entirely a part of the West. As in the past, Russia today is ruled by elites who are willing to acquire Western goods and concepts, but do not fully identify with the West and often are envious of it. The world’s ability to live with and next to Russia now hangs in the hands of Putin.


Yeltsin’s ambiguous place in history

Like many russian rulers before him, Yeltsin started out a reformer and wound up a retrograde. While he earlier defied the communist putschists, liberated prices, and launched a massive privatization, he later ended up presiding over the economic crash of August 1998 and the destruction of Chechnya. His resignation on the eve of New Year’s 2000 concluded an era in Russian politics that began with Mikhail Gorbachev’s ascent to power in 1985.

This was the era of dismantling communism, the centrally planned economy, and the Soviet multinational empire. By the time Yeltsin assumed office, Gorbachev had pulled most Soviet forces out of the external empire and had refrained from interfering when democrats toppled the communist governments in Eastern and Central Europe. In fact, Gorbachev reportedly encouraged the removal of the hard-line leadership of East Germany, led by Erich Honecker, and he had no kind words for the Romanian dictator Nicolae Ceauçescu upon his demise.

In the Soviet Union itself, the Communist Party was utterly discredited. Graves containing the remains of hundreds of thousands of Stalin’s victims were exhumed across 11 time zones, from Belarus to Eastern Siberia. Russians were disoriented and demoralized as the old order fell, but at the same time full of hope for a better future.

The Soviet Union itself was about to be transformed into a confederation when the August 1991 coup struck. The fiction of the "Soviet people — a new historic entity," as it was called under Brezhnev, had fallen apart. Ethnic conflicts raged between Armenia and Azerbaijan in the Southern Caucasus. To save the internal Soviet empire, Gorbachev authorized the use of force against independence-minded leaders of the Baltic states and anti-communist nationalists in Georgia and Azerbaijan, but to no avail. War was about to erupt between the communist-leaning Slavs and Romanian-speaking nationalists in the Trans-Dniester part of Moldova.

Yeltsin accelerated Gorbachev’s reforms, bringing about the dissolution of the Soviet Union and administering the coup de grâce to the iron rule of the Communist Party. He should also be credited for ushering in a working democratic political process, albeit in a rather inelegant fashion. After a few years, a new elite crystallized. It combined more advanced members of the communist-era nomenklatura and security apparatus with some representatives of the emerging entrepreneurial class. This elite effectively privatized most of Russian industry: the lucrative oil and gas sector, the largest aluminum, nickel, platinum, and palladium plants in the world, and that giant but creaky Soviet flagship airline, Aeroflot. A stock market appeared, then soared to become the best-performing financial market in the world (1996-97) before crashing in 1998.

The new business oligarchy attempted to create a rough-and-tumble universe of the new Russian commercial banking (which collapsed in August 1998, leaving billions of dollars of debt behind). Fortunes were made, but many lives were lost (or destroyed) in the process. At one point in the mid-1990s, Moscow had more Mercedes 600 cars than the rest of Europe combined.

Prostitution and drug use, both very hush-hush in the Soviet era, became open and rampant. Russian society may have lost some of the warped values of the communist era, but it failed to gain any others instead. The Orthodox Church, heavily penetrated by the Soviet secret police, hardly provided a substitute for the spiritual vacuum of the late communist and post-communist era. Instead, it was busy begging for tariff breaks for its vast alcohol and tobacco importing operations. A spiritual leader of the liberal reformers of the Church, Father Alexander Men, was brutally murdered. Other reformers and dissidents in the Church, such as Father Gleb Yakunin and Father Georgi Edelstein, were defrocked or exiled to far-away parishes.

The new oligarchy seized control of the Soviet TV channels while building new media outlets. As the corpses of bank presidents multiplied, so did the horror stories in the Western media connecting the oligarchs with corruption at the highest level in the Kremlin.

Yeltsin, like many a revolutionary before him, came from the ruling class of the previous regime, from the apex of the communist nomenklatura. He was a nonvoting member of Mikhail Gorbachev’s Politburo and first secretary of the Moscow city party organization before he officially broke with the communists and launched his own bid for power. Yeltsin’s star turn on the global stage came as leader of the opposition to the hard-line communist coup in August 1991. Russia’s history ¾ and that of the world ¾ would have been very different if the gray apparatchik conspirators, who included Gorbachev’s own vice president, the Soviet defense minister, the interior minister, and the head of the kgb, had succeeded in restoring a Brezhnevite Soviet Union and eliminating Gorbachev and Yeltsin.

Yeltsin’s personal style was authoritarian. In October 1993, he sent troops to shell the White House, then the seat of a rebellious Russian Supreme Soviet dominated by communists and other hard-liners. He did not allow other politicians to build their own power bases, changing his prime ministers as often as Nicholas II. However, unlike the last czar, his political instincts were somewhat more democratic. He refused to rule as an autocrat after defeating the Supreme Soviet. He did not dispute the decision of the pro-communist courts to pardon the 1991 coup plotters or the 1993 Duma pardon of the hard-line opposition. Yeltsin permitted parliamentary elections and accepted their bitter results both in 1993 (which gave a victory to the clownish nationalist Vladimir Zhirinovsky) and in 1995 (a communist last hurrah). While he had the authority to dissolve the Duma and call for new elections, he never made use of it. Once he had pushed through a constitution, he adhered to it, refusing his confidante and chief bodyguard Alexander Korzhakov’s advice to cancel the 1996 presidential elections.

Yeltsin’s weaknesses and drawbacks were as significant as his achievements. While he operated well during crises, he quickly lost interest in the daily affairs of state. Perhaps due to his lack of understanding of economics and the law, he allowed the privatization of the vast and obsolete Russian industrial base to be abused and corrupted by insiders. He never understood the necessity of building a functioning legal system, including a framework for the enforcement of contracts, or of maintaining an adequate law enforcement apparatus. Disintegration of the legal system became so advanced that in some towns judges were placed on retainer by larger law offices. In other cities, lawyers paid for judges’ office supplies.

Having surrounded himself with corrupt cronies and financiers, Yeltsin paid only lip service to fighting crime and corruption. He presided over an unprecedented deterioration in Russia’s internal security and law enforcement. The population became disgruntled as bandits ruled the streets and businesses, while businesspeople, foreign and domestic, balked at investing. Taken together, the failures of the post-communist transformation and the inability to construct even a minimal social safety net lowered the already meager standard of living of tens of millions of Russians and helped make Boris Yeltsin as unpopular at the end of his term as Mikhail Gorbachev was at the end of his.

Chechnya is another black spot on Yeltsin’s legacy. He launched an unsuccessful military campaign in 1994, hoping to boost his flagging popularity. The Russian generals, still smarting from the defeat in Afghanistan, learned that while the Soviet Army, with its mass of ill-trained conscripts, might have been prepared to fight on the Northern European plain, it was not ready to fight in mountains populated by Muslim guerillas. The Kremlin planners and generals did not anticipate fierce resistance by the Chechen nationalists led by the late Soviet Air Force Gen. Djohar Dudaev. Yeltsin’s democratic instincts failed him when it came to non-Russian, dark-skinned mountain dwellers: He refused to meet with Dudaev or to make any concessions to his successor, the ex-Soviet Army Col. Aslan Maskhadov.

The first war, unconstitutional and ill-conceived, brought great humiliation to the Russian military and allowed Chechnya to effect a de facto secession. One of the reasons Russian forces performed so abysmally in 1994-96 was that Yeltsin failed either to reform the Russian military and security services or to keep them outside the grip of the pervasive corruption that marred his presidency. The war served as a cover for the generals to make millions of dollars profiteering: The generals sold artillery shells, cannon and light weapons by the trainload, claiming that all the hardware had been lost in battle. Moreover, they sold some of the weapons to the Chechen militants they were supposed to be fighting. No wonder Yeltsin had to sue for peace before the 1996 presidential election, following debacle after debacle in the battlefield.

That did not close the subject, however. Yeltsin authorized preparations for a new invasion of Chechnya in spring 1999. In August that year, Chechen militants Shamil Basaev and Khattab (the nom de guerre of a Jordanian-born Chechen) invaded Dagestan with several hundred militant Islamic fighters. The two claimed that they had embarked on a jihad against Russia and intended to establish an Islamic state in the Northern Caucasus from the Black Sea to the Caspian Sea. Russian oil interests in the Caspian were endangered, and the territorial integrity of the Russian Federation was put in question. The "field commanders" were repelled in August, but four mysterious explosions blasted through apartment buildings in Moscow and the south of Russia.

These heinous acts were immediately pinned on the Chechens, and in September 1999, Yeltsin authorized a full-scale invasion of Chechnya to erase the defeat of the 1994-96 war and to assist the election of his chosen successor, Putin. The second Chechen war resulted in over 10,000 killed and 250,000 refugees. The city of Grozny was effectively erased from the face of the earth, the worst urban destruction in Europe since World War II.

Finally, there was the ignominy of the presidential pardon Putin granted Yeltsin. The ex-ruler of Russia and his family were connected in published accounts to a massive bribery scandal originating with the Mabetex company based in Lugano, Switzerland. There were also charges in Moscow that Yeltsin’s family members received villas as presents from influential Russian business tycoons. When Russia’s left-leaning former prosecutor general, Yuri Skuratov, attempted to investigate these allegations, a tape surfaced showing him cavorting with two prostitutes whose services were reportedly paid for by a banker he was also investigating. Yeltsin fired Skuratov in the wake of the rather conveniently timed scandal.

On his first day in office, acting Russian President Putin pardoned Yeltsin for any possible misdeeds and granted him total immunity from prosecution (or even from being searched and questioned) for any and all actions committed while in office. Yeltsin also received a life pension and a state dacha. An orderly transition of power? Perhaps. A demonstration that you can get away with a lot while in public office? Certainly.


Putin’s debut

Vladimir Putin is a tough (some say ruthless), competent, non-ideological ruler. Moscow pundits agree that he is more focused than his predecessor. Igor Malashenko, a well-known Russian commentator, recently stated that Yeltsin presided over a "disorganized autocracy," while he anticipates that Putin’s will be an orderly one. A prominent Russian businessman termed the whole of Putin’s generation "ruthless and unprincipled." Secretary of State Madeleine Albright, in a view shared by at least one Russian reformist politician, thinks that Putin is a moderate nationalist. There is little doubt that Putin is a statist who surrounds himself with "securocrats" — long-tested collaborators primarily from the intelligence services.

Putin’s speeches and interviews demonstrate beyond doubt that he is acutely aware of Russia’s weaknesses and deficiencies. He understands that Russia’s over-dependence on energy exports, with their market volatility, bodes ill for a country of 150 million people. Putin became aware of Russia’s industrial decline during the 1980s, while he was stationed in Dresden, East Germany, as a kgb intelligence officer. During his stint in the GDR, he was reportedly involved in some "technological acquisitions" (industrial espionage) for Moscow and was a kgb liaison to the East German secret police, the Stasi. Putin is said to have realized that the Soviet Union did not possess the manufacturing base necessary for the early post-industrial age. It could not even manufacture adequate personal computers and mainframes. Given his position at the time, he must have been aware of the inadequacies of the Soviet Union’s late start in the information age. The highly centralized, incompetently run economy was losing to the West.

Putin’s eventual involvement in reformist politics and his current preoccupation with economic growth rates as well as Russia’s technology base do not contradict his security background. His treatise on Russia’s place in the twenty-first century (published on the Russian government’s website) claims that by growing 8 percent to 10 percent a year, Russia can catch up with Western Europe’s current levels of production within 15 to 20 years. Unfortunately, Russia grew only 2 percent during the very favorable economic climate of 1999.

Thus far, Putin’s political and public relations instincts have been astute. He was filmed giving out hunting knives to Russian officers and troops in the trenches of Chechnya the morning of New Year’s Day, when most Russians were sound asleep after having spent the night toasting the new millennium. He sent Yeltsin’s daughter, Tatyana Diachenko, packing on his first day on the job. The notorious Diachenko not only was her father’s Kremlin advisor, but is also alleged to have spearheaded many of the corrupt financial dealings attributed to the Yeltsin family. He fired Yeltsin’s presidential property manager, Pavel Pavlovich Borodin, who is now being sought by police in Switzerland. He demoted Nikolai Aksenenko, first deputy prime minister in charge of the economic portfolio, to preside over the railways, while elevating a tough debt negotiator, former Finance Minister Mikhail Kasyanov, to the No. 1 economic position. Watching their dynamic new acting president, many Russians quoted their proverb, "a new broom, which sweeps clean."

The first political crisis of the "new broom" occurred when the newly elected Duma met. The much-anticipated "coalition for reform," including the Union of Right Forces, the liberal-left Yabloko, the Fatherland-All Russia Party led by Primakov and Luzhkov, and Putin’s party, the Unity Party (a.k.a. the Bear) failed to materialize. Instead, Putin struck a compromise with the communists. Gennady Seleznev, a fellow Peterbourgeois and a rather docile former Duma speaker, was reelected. The Duma communist faction received the largest number of committee chairmanships, nine, while the opposition coalition got only three committees.

While the liberal factions cried foul, the coalition with the communists made sense for Putin from a number of angles. To begin with, it denied Primakov the important perch of chairmanship of the Duma, from which he could have challenged the acting president. Second, it made the communists appear not to be in implacable opposition to the Kremlin prior to the presidential elections. In addition, the move provided Putin with a manageable chairman within the legislature. And finally, it struck a blow to the cocky Union of Right Forces and its de facto leader, Anatoly Chubais, who had boasted that Putin was in his pocket.

But Putin’s "pact with the devil" dealt a blow to hopes for a reformist agenda. While the communists may well give Putin parliamentary votes, the Union of Right Forces could have provided him not only loyal Duma members but also a relatively competent (by Russian standards) pool of yuppie policy analysts and managers. These experts would have been independent of Boris Berezovsky and his group. In addition, the coalition with the communists served to discredit Putin among the Russian elites and anti-communist voters and did nothing to boost his image in the West. While the deal might be sensible tactically, in the long run it undermines the same reforms that Putin claims he is so anxious to promote. The communist faction in the Duma will not support the private ownership of land, a new bankruptcy law, and tax reform, all of which are at the top of the reformist legislative agenda. Putin will need the voices of the democrats, namely Yabloko, and some of the Fatherland deputies, in order to legislate Russia forward.

Even more worrisome is Putin’s reliance on the St. Petersburg "mafia" of ex-kgb officers to staff his administration. These advisors make the Russian intellectuals nervous. They cite potentially repressive steps, from Internet controls to outright censorship and a crackdown on Russia’s relatively free media. Two cases in point of the tendency toward greater intervention in the media came to light recently. In January 2000, Vladimir Babitsky, Radio Liberty’s correspondent in Chechnya, was arrested by the Russian military and then disappeared. When he finally resurfaced, he was immediately rearrested. The Russian prosecutor’s office is threatening to charge him with treason. In another incident, also in January, Alexander Khinshtein, a Muscovite investigative reporter, was threatened with incarceration in a psychiatric prison for digging into the background and business practices of the controversial tycoon Berezovsky and Interior Minister Vladimir Rushailo. This was the first time since the Soviet era that authorities attempted to use psychiatric prisons for intimidation.


Yeltsin and Putin: Is the jury still out?

Yeltsin took over when russia was in a declining trajectory. He and his advisors borrowed such concepts from the West as price liberalization and privatization, as well as political architecture, in an attempt to bring the country’s political and economic systems into compliance with contemporary Western models. Expectations were high. The Russian leaders led the public to believe that this "borrowing" would effect a palpable improvement in the standard of living almost immediately. They were naive. It is clear that with all the political and economic innovation of the 1980s and 1990s, Russia failed to bring about the kind of free market and democratic reforms that would facilitate the country’s inclusion into the Western family of nations. Russia has not even achieved the level of integration and growth reached by such Central European countries as Poland, the Czech Republic, Hungary, and the three Baltic states.

The historic experience of Russian reforms since the time of Peter the Great demonstrates that when elements of Western technology and social mechanisms are introduced from the top, this is usually an attempt by the ruling elite to close technological and military gaps between Russia and its perceived adversaries. By introducing glasnost and perestroika, Gorbachev hoped to revitalize socialism to allow for easier absorption of Western technological innovation. Usually, the democratization of political life, greater participation in governance, and economic liberalization have either been granted from above (Alexander II, 1860-81) or have been forced by the elites (Nicholas II, 1905-17; Gorbachev, 1989-90; Yeltsin, 1992-99). Under the most aggressive reformers, Peter I and Stalin, the price for reforms has been paid by the populace, who were taxed without pity and sent to work like serfs.

What about the incomplete reforms of the post-Soviet period? What benchmarks can we establish according to which we will be able to judge Russia’s progress this time around?


Nurturing civil society and participatory democracy on Russian soil, including the support of free media. Under communism, all volunteer and professional organizations, as well as commercial and business activities, were run by the state. Since Gorbachev, thousands of private businesses and nonprofit organizations have sprung up, unleashing a pent-up energy for civic and business activity. When Vladimir Putin talks about strengthening the role of the state and improving government efficiency, many Russian commentators and democratic activists are worried. Is Putin talking about a paternalistic state, such as Germany or Sweden, or something more sinister? Putin brought many of his KGB buddies into positions of power in the Kremlin. And his business allies’ control over most important outlets of the mass media, especially the two national TV channels, ORT and RTR, as well as attempts to regulate the Internet, may seriously endanger the future of free media in Russia.


Maintaining the federal nature of the Russian state, preventing both its disintegration and the reemergence of a centralized unitary state or an empire. Under Yeltsin, the election of regional governors was introduced for the first time in Russian history. Power partially shifted from the center in Moscow to the 89 regional capitals of Russia (roughly equivalent in size and population to U.S. states, and in many cases much vaster). Ethnically based constituent republics of the Russian Federation were particularly vociferous in asserting their unique "state rights," often contradicting federal legislation by promulgating their own rules. Putin has floated some trial balloons about abolition of gubernatorial elections and wants to revert to the czarist and Soviet practice of regional governors nominated from the center. Such a radical move, which cannot be accomplished without a fundamental constitutional change, would be a move toward authoritarianism.


Resolving ethnic and religious conflicts through peaceful means and preventing a surge of xenophobia and racism. Russia is a multi-ethnic state that still grapples with the question of who is a Russian, with the rights of "Russian-speakers" in the neighboring countries, and with the status of its own Muslim citizens (Chechens, Ingush, Dagestani, and others). Registration of ethnicity in internal passports and governmental documents is mandatory (though a person has a right to refuse to answer such a question). In the early 1990s, Yeltsin challenged regional leaders to take all the sovereignty they could. He was exaggerating: Moscow insists on ruling the regions from the center, having a say in the distribution of wealth and major economic decisions of the provinces.

In the large non-Russian republics, such as Tatarstan and Bashkortostan, the "titular" national elite, which often consists of the Soviet-era nomenklatura, is anxious to preserve its hold on power. Often, the fight over the control of the vast natural resources is depicted as ethnically motivated: Tatars or Yakuts against Russians. In reality, it is also a fight over the control of wealth. For example, Tatarstan and Bashkortostan are rich in oil, while the Komi republic (Hanty-Mansi and Yamal-Nenets districts) is virtually one giant natural gas field. The Republic of Yakutia-Sakha in Eastern Siberia is one of the largest diamond producing areas in the world. How the pie is going to be divided among Moscow and the regions is a serious challenge for the next Russian president.

Since the war in Chechnya, attacks on dark-skinned citizens of Russia and the former Soviet Union are on the rise. So are the number and relative strength of ultranationalist and xenophobic organizations, such as the neo-Nazi Russian National Unity (RNU), led by Vladimir Barkashov. This movement attacks Christianity as a "Jewish ruse"; its supporters wear black uniforms and use a Nazi salute; and it utilizes a modified swastika as its symbol. Members of RNU were charged in a number of murders believed to be initiation tests for would-be members of the movement. While RNU claims 100,000 members and supporters, including some in the armed services and the police, the real number is lower, possibly around 10,000. They were disqualified from running in the 1999 Duma and 2000 presidential elections. Other organizations, such as Pamiat, attempt to break up political meetings of democratic organizations; they have also attacked synagogues. The Communist Party of the Russian Federation is another bulwark of racism. Extremist nationalists do not seem too dangerous at the ballot box, but may influence the youth and some in the security services, police, and the military. The test is whether they will continue to be marginalized or permitted to bid for mainstream acceptance.


Building the accountable, functioning, and transparent institutions of a market economy. Russian reformists in the economic policy area naively posited that deregulation of prices and privatization of industrial enterprises would quickly allow for a market economy to build itself spontaneously. They were too optimistic. Modern markets are extremely complex systems, dependent upon the proper function of numerous highly sophisticated elements, from commercial banks to futures markets to banking supervisory structures. Such market institutions require a competent legislature and a clean bureaucracy. While privatization and price deregulation have been largely achieved (with the exception of land, oil and gas pipelines, and railroad privatization), the banking system, the capital markets, and the entire system of government regulation of the economy, including the Central Bank of Russia and Ministry of Finance, leave much to be desired by Western standards. Since the August 1998 financial collapse, economic reforms have all but stopped. Monopolists’ vested interests, centralizing approaches of the Soviet era, a dearth of qualified personnel, as well as the pervasive corruption are slowing down the reform process.


Achieving sustainable economic growth; making Russia attractive for foreign investment and hospitable to domestic entrepreneurship. Russia has become a net exporter of capital on an unprecedented scale: From 1987 on, between $20 billion and $24 billion in capital has departed Russia on a yearly basis. The overall amount of exported Russian capital is a staggering $300 billion. This is much more than the combined Western portfolio and direct investment, as well as bilateral (country to country) and multilateral assistance (from such organizations as the International Monetary Fund and the World Bank). The reasons for capital flight include inhospitable tax and macroeconomic environments, pervasive corruption, and bureaucratic red tape.

The examples of several Latin American countries, such as Brazil and Argentina, have demonstrated that once significant economic reforms are implemented, expatriated capital returns. However, the Putin administration may attempt to tackle the problem by police regulation, not via macroeconomic adjustment and liberalization.


Legislating the most necessary elements of the much-anticipated economic package (including private property on land, revamped bankruptcy laws, and tax reform). Russia is a naturally endowed cornucopia of tremendous wealth. In order to turn it into a rapidly developing economy, the government needs to create economic conditions that would make Russia a level playing field for domestic and foreign investors. This includes the introduction of private property on land, including for mining, agricultural activities, and construction; a significant decrease of tax rates, which currently may take away over 100 percent of a business entity’s profit; simplification of the tax code; and optimization of asset distribution through transparent and equitable bankruptcy procedures. Instead of embracing these reforms, Putin’s first deputy prime minister (de facto prime minister) and chief economic advisor Mikhail Kasyanov voiced resistance to free market principles of economic management, criticizing calls for tax reduction and private land holdings. Putin did not support the Union of Right Forces’ idea of conducting a national referendum to push through land privatization. Without it, ordinary Russians may continue languishing in poverty while a thin layer of the super-rich oligarchs and ex-communist nomenklatura capitalize on their political connections.


Improving the legal system, including the enforcement of court rulings, and enacting effective mechanisms for dispute resolution. Russian courts and contract enforcement are probably the most crucial missing link in the puzzle of economic reform. While some vital areas, such as private real property, have gone unlegislated, other laws are not adequately implemented. Contracts are more often enforced by the mob than by courts and police. Judges often take bribes and tweak their rulings accordingly. The failure is aggravated by scarcity of contract enforcement personnel (court bailiffs were introduced only a couple of years ago). Lawyers are few, and those who are available were often trained in the socialist, politicized, and criminal law-based system of the Soviet era, or the second-rate post-Soviet colleges that pass for law schools.


Building a small and efficient state, instead of the current bloated and ineffective one. Today, Russia boasts twice as many bureaucrats as there were in the Soviet Union in 1989. The government pays its workers little but gives them vast powers to regulate business and economic activity. Thus, the big eyes and hungry mouths of the bureaucracy cause companies to spend up to 8 percent of gross income on bribes, in one estimate. In some cities, organized crime, which often exists symbiotically with the government and law enforcement, takes bribes amounting to as much as 25 percent to 30 percent of company’s gross income.


A comprehensive government reform is in order, one that will cut by at least half the state apparatus, including the large military forces (currently belonging to the Ministry of Defense, Ministry of Interior, the Border Guards, the railroad troops, Emergency Ministry troops, etc.). Economic regulators, who are notorious for taking bribes, have to be under strict orders not to interfere with business activity, especially by vulnerable small and medium-sized businesses. The biggest challenge will be curbing unnecessary regulation while keeping the much-abused environment intact and observing at least minimal health standards.


Cracking down on organized crime and corruption. Today, the police and security services are part of the problem, not part of the solution. The police collect protection money from businesses while granting cover (krysha in Russian, or "roof") to shady businessmen, drug dealers, prostitutes, and smugglers. The highest "authorities" in organized crime have bought seats on the Duma lists of several political parties and are often seen as guests of honor at social events in Moscow. If Putin is serious about his much-hailed platform of law and order, this has to change. Not only do well-known criminal leaders need to go to jail, but high ranking government officials and oligarchs who broke the law should also be prosecuted. Only then will Russians have reason to believe that democracy and the machinery of the state serve them.


Reforming the military and security apparatus, including democratization of these services and effective civilian, budgetary, and legislative control. The Russian military is on the verge of escaping civilian control. Its indiscriminate use of force in Chechnya against Russian civilians is a prime example. The generals who commanded the field operations threatened the Yeltsin government with "resignations, or worse" if the Kremlin entered into negotiations with the Chechen leadership. In addition, the military still has not accounted for billions of dollars of equipment and ammunition that disappeared as the Soviet Army withdrew from Eastern Europe and fought the wars in Chechnya, Moldova, Tajikistan, and elsewhere.

At the same time, the military loudly demands and gets increased budgets, including a 50 percent hike in overall appropriations for fiscal 2000, a 57 percent increase in new system acquisitions, and an 80 percent increase in research and development funds. Russia officially is spending just over 3 percent of its GDP on the military; unofficial figures are as high as 10 percent (when the Interior Ministry and other quasi-militarized budgets are taken into account). With an official per capita annual GDP of $1,500 to $2,000 (the figure could be as high $4,000 per capita once all informal economic activities are taken into account), the Russians cannot afford to feed and equip so many uniformed "protectors of the Motherland." The heirs of Tchaikovsky and Tolstoy deserve a better lot.


The temptations of history

Vladimir Putin will be strongly tempted to revert to the traditional paths of autocracy and statism. As a former intelligence officer and head of the secret police, he has the right profile to emerge as a centralizing, strong leader in the tradition of Peter the Great, or even worse, Nicholas I, the preeminent monarch-policeman of the first part of the nineteenth century. Putin’s entry into the political scene is inescapably connected to the war in Chechnya, which, the critics say, was engineered to launch the "Putin for President" campaign. He may see both the fate of Russia and his rule through the traditional prism of military prowess and conquest.

Like many Russian rulers before him, Putin may be interested in maintaining a dialogue and exchange with the West in order to attract the technology and investment needed to build military power. The Chinese leadership starting with Deng Xiaoping has pursued this strategy quite successfully. Or Putin may realize that Russia, despite the preachings of the Slavophiles and Eurasianists (those who see Russia’s greatness as lying between East and West), does not really have a "third way" that can permanently and viably separate it from the West; and so instead it must continue to absorb Western values and economic and government mechanisms. In the decentralized, entrepreneurial, and globalizing environment of the twenty-first century, the traditional preoccupation of Russia’s elites with a strong, paternalistic, and sometimes aggressive state could prove too taxing, and in the end, self-defeating. Such a form of government, based on bureaucratic regulation, may further breed the corruption that is already choking Western investment and causing unprecedented capital flight from Russia.

If indeed Russia becomes more bureaucratic and authoritarian, will it also become more dangerous for the West? Not necessarily: It will still be a slow-growing economy with a GDP of about $250 billion to $300 billion a year and a military budget a fraction of that of the United States. It may become more dangerous for its immediate neighbors, especially those against whom influential circles in Moscow bear a grudge — Georgian President Eduard Shevardnadze, for example, or oil-rich Azerbaijan, or countries with large Russian-speaking minorities, such as Latvia, Estonia, Ukraine, or Kazakhstan. The challenge for the West would then be how to respond to a Russian threat against these countries, if and when it materializes.

Russia, as many times before, has approached a fork in its road to modernization. For the first time in the past 10 years, it will be making a decision on its direction without Boris Yeltsin. Whether he will be remembered for bringing down communism and the Soviet Union and presiding over the transition to a market economy — or for institutionalizing corruption, failing to reform the security apparatus and the military, and embroiling Russia in a prolonged war in the Caucasus — will largely depend on where Russia goes from here. Thus Yeltsin’s place in history is to a large degree in the hands of his chosen successor, Vladimir Putin. The Yeltsin chapter in the Russian quest for identity and its place in the world is over. The Putin chapter has begun.


Ariel Cohen is research fellow in Russian and Eurasian studies at The Heritage Foundation.

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