Russia: Putin's Place in the New World Order

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Upheavals in the former Soviet Empire have added to Vladimir Putin's headaches.

Vladimir Putin has many things to be grateful for but the situation along Russia's southern borders is not one of them. The so called 'rose revolution' in Georgia in November 2003, the 'orange revolution' in the Ukraine in 2004 and now the 'tulip revolution' in poverty-stricken Kyrgyzstan in 2005 have all complicated his life. When the USSR disintegrated into 15 parts in 1991 the new states around Russia's borders became known in Russia as its 'near abroad'. They were formally independent but the hope was that they would have leaderships sympathetic to Moscow and be inside its sphere of influence. When Putin came to power in December 1999 some saw his 'top priority' to be restoring Russia's prestige and influence in the Commonwealth of Independent States which grouped together most of the former Soviet republics. He has not succeeded.

Rash of protests

Russia has had to tolerate enlargement of Nato in the west and the spread of American influence in many of the former Soviet republics to the south of Russia. Now in some of them divisions at the top, combined with protests from below, have created regimes which, if not openly hostile, are cautious in their relations with Moscow and more open to the west, the European Union and Washington.

Do Georgia, the Ukraine and Kyrgyzstan form part of a pattern? Some American policymakers would like to think so but each case is different and not least the last one - Kyrgyzstan. Even if the US tried to hurry events along in Georgia and the Ukraine its influence should not be exaggerated. What moved people to protest were real problems. The difficulty was that they put their faith in another faction at the top instead of themselves. Even so, some in Moscow are still worried that the sight of large numbers on the streets on Russia's borders might give some Russians 'the wrong idea' about how to deal with their problems. This seems to have happened and there is great anger among people at Putin's attempt to reduce the already small benefits, and housing and other subsidies that people have. This change threatens the precarious standard of living of some of Russia's poorest groups including large numbers of pensioners. The result has been a rash of protests in Moscow, St Petersburg and the provinces, the size of which has surprised many observers.

The crisis in Russia since the early 1990s has been so severe that most people have been shell-shocked. Protests took place but with one or two exceptions their wider impact was limited and they were often conditioned by despair. Now the Russian economy has had several years of strong growth. Many, perhaps the mass of the population, have seen little benefit from this but it is a commonplace that people feel more confident about making themselves heard when they feel that things no longer need to be as bad as they are. There seems to be an element of this in what is happening.

So why has the Russian economy grown so strongly? In the summer of 1998 the economy hit rock bottom as it was caught up in the global financial crisis. The rouble crashed and with it part of the banking system. Savings were lost, debts left unpaid, and companies went bankrupt. Since then growth has been around 6 to 7 percent a year, which is still a long way from bringing back the levels of output of a decade and a half ago, but still impressive.

There are three explanations for this growth. One is that it is a natural rebound from the crisis. Sooner or later the rouble had to move up again and, assisted by devaluation after the 1998 crisis, we have now seen something of a recovery. The second explanation is that the rapid growth has been driven by the windfall of rising oil prices. For this Putin can largely thank George W Bush and the invasion of Iraq as well as western oil speculators. The third explanation is that the reforms are finally beginning to work and Russia can sustain a rapid expansion, so the leadership claims, into the indefinite future. Organisations like the OECD claim this is happening, but the evidence is weak. The real explanation looks more like a combination of the first two accounts.

Russia has always had huge natural resources. Today it is estimated to have the world's largest natural gas reserves, the second largest coal reserves and the eighth largest oil reserves. Oil and gas alone account perhaps for 20 to 25 percent of output by value. They dominate exports. Russia is the world's largest natural gas producer and the second largest oil exporter after Saudi Arabia. A $1 change in the price of a barrel of oil results in a $1.4 billion change in revenues in Russia. This is an enormous windfall. Putin's government has set up a stabilisation fund to ensure that when the oil price drops it will have some additional resources available. In the meantime oil profits are not only spent by the rich in Russia but also put in safe havens abroad, including what some call 'Moscow on the Thames' and others Chelsea Football Club. But a sustained recovery independent of oil, or even with it, is questionable. The spread of the new wealth is quite narrow. Most importantly, wider investment is still lagging and very uneven, which points to long term difficulties not being resolved.

This is one of the reasons why Putin and his supporters still think that they have some way to go in changing the economy and why they continue to want to put pressure on many ordinary Russians. But does Putin have a wider master plan? Recent biographies by Andrew Jack, Inside Putin's Russia, and Peter Truscott, Putin's Progress, suggest not. Putin wants to move forward, not back to the old regime, but he is feeling his way.

Power and patronage

Putin has had to build a base in Russia. This involved three things. One was to get a compliant Duma with a majority to support him. This was the easiest to achieve. Political parties are weak and lack roots. Individuals who want to succeed gravitate to 'the party of power' which enjoys the patronage of the president. Because of this if Putin tries to change the constitution to be able to serve a third term he will get plenty of support from the big political group in the Duma now dependent on him.

The second task has been to reintroduce some kind of order into the Russian state. This had become so fragmented and corrupted under Yeltsin that it pulled in different directions and only limited resources flowed to the centre. Russians call this re-establishing the 'verticals' - the command structure. Some associate it with a return to the past but it is necessary for any modern state. Yet it has proved easier to make token gestures than produce the kind of unity that Putin might want despite his rhetoric of strong control from the centre. 'You pretend to lead and we'll pretend to follow,' some have said of his efforts.

The incompetence and disarray of the Russia state were nowhere more horribly revealed than in the chaotic and bloody end to the September 2004 school siege at Beslan in which several hundred died. Indiscriminate firing broke out on all sides despite the presence of some of the best Russian army units and Putin's own special representatives. However much the centre and the government tried to suppress discussion, blame inevitably pointed towards it and the incompetence of the authorities.

The Beslan tragedy and the more or less regular 'terrorist' attacks in Moscow and elsewhere arise directly from the ongoing war in Chechnya, which Putin boasted he could control but has failed to do. The attacks continue despite the huge amount of death and destruction visited on the local population. Putin is happy to play the 'terror' and 'Islamic' threat at home and abroad, and even though the west has looked askance at other aspects of his regime, criticism towards the Russian government here has been muted.

Putin's third political task has been to stabilise the informal distribution of power that had emerged out of the Yeltsin chaos. Putin was put into power by 'the family' - a clique around Yeltsin. They were, said Yevgeny Primakov who had lost his job as one of Yeltsin's prime ministers because he challenged them, 'a specific group of people with clear objectives' - protecting the continuity of their wealth and power. While the Russian economy was collapsing it was helped on its way down by the way that sections of the ruling class grabbed large parts of it at bargain prices. The IMF estimated that Russia's oil assets were sold for less than 10 percent of their real value. Some of the most successful winners came to be known as the oligarchs - a handful of big names. Some of these oligarchs developed especially close relations with Yeltsin and his cronies. But behind both 'the family' and the wider group of oligarchs was a narrow but no less important layer of those who did the real job of managing Russian capitalism on a day to day basis and wanted security too.

Putin has generally delivered what this broader layer wanted even as he has detached himself from some of the figureheads and 'the family' cronies. In July 2000 he offered a deal to the oligarchs to the effect that if they stayed out of politics they could keep their wealth. Some didn't get the message and they have lost. Vladimir Gusinsky and Boris Berezovsky both mixed wealth, influence and media control and fled Russia when they fell out with Putin. Thanks to Jack Straw Berezovsky has political asylum in Britain, from where he argues that Putin is undermining the chances of a democratic Russian capitalism. Mikhail Khodorkovsky, the head of what was once the Yukos oil giant, languishes in jail, having gone further and threatened an open political challenge to Putin. The system is so corrupt that legitimate charges could be made against most of Russia's rich. But not all oligarchs have been picked off. The billionaire Roman Abramovich saw the way in which the wind was blowing and tried to build a good relationship with Putin as well as a positive image abroad for insurance against retribution for his dubious past.

Names like 'liberal authoritarianism' and 'managed democracy' have been given to the system that Putin is trying to create. Elections have been fixed, though probably no more than under Yeltsin when the west turned a blind eye to what happened. More serious is the authoritarianism which has been used not only against certain oligarchs with whom we or people in Russia have little sympathy but also against more genuine opponents of the regime including campaigning journalists. But if we should have no illusions about Putin it is equally important to realise his difficulties. Putin, said one western journalist in the Guardian (23 September 2004), 'is trying to build a police state without a functioning police force'.

So where does Putin's Russia stand in the world today? The Russian economy is still very weak but as a permanent member of the UN Security Council and with thousands of aging nuclear weapons Putin can try internationally to punch above his weight. He is trying to do so against a more nationalist background. Today the Russian establishment looks back on the foreign policies of the early 1990s as an embarrassment. Then it was naively believed that the west meant what it said about a new world order. But there is an equally strong view that Russia has to be more involved in the world economy. It needs to integrate, it needs foreign investment and it needs access to markets. The Russian leadership has therefore to try to recover some of the ground lost, but to do so pragmatically, recognising that it will take time.

In the west a more assertive Russia is seen as a more difficult Russia, which is one of the reasons that Putin comes in for more criticism than Yeltsin. This, rather than principle, underpins recent diplomatic attacks on the Russian leadership. This is why, as in Georgia, the Ukraine and Kyrgyzstan, it is foolish for those who really oppose the regimes to imagine that genuine change can come through musical chairs at the top and the hope of support from afar. The importance is to begin to build an alternative from the bottom up, although unfortunately there are still too few in Russia who understand the need to do this.

But radicalisation can be sudden, as the events in Georgia, Ukraine and Kyrgystan have shown. And when people protest in such great numbers it can inspire others and have a generalising effect throughout the whole region. If it occurs at the centre of power it can be more seismic. Predicting if and when this will occur is hardly sensible but it is perhaps time for a little more cautious optimism that despite Putin's best efforts he might not achieve the control that he wants. And a space below might begin to be created that can be used more positively than in the past.

Putin's Progress by Peter Truscott, Pocket Books, 2005

Inside Putin's Russia by Andrew Jack, Granta Books, 2005

See also Dave Crouch's analysis of the March revolt in Kyrgyzstan.