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In the period which has elapsed since those dramatic events, other confident predictions have exploded, though not I think any of mine. Some economic liberals were, for example, led astray by too much confidence in the prescriptions of their own ‘dismal science’. It was not actually, as I shall explain, that the prescriptions were wrong. Rather, they took insufficient account of non-economic factors. The liberal economists assumed that with the Communist Party shattered and Western-style ‘reformers’ in the Kremlin it would be quite easy to instal the institutions of a free economy with rapid benefits for the Russian population. There appeared to be encouraging parallels with Poland, another former communist state where precisely such a crash programme of economic reform, masterminded by Leszek Balcerowicz in the early 1990s, had brought positive results within two or three years. But Russia was not Poland.
On the other hand, the gloomiest predictions about Russia have also been largely – though it is premature to say permanently – disproved. Some foresaw a new Russian imperialism set on achieving by force the recreation of a Russian-centred Soviet Union. So far, at least, this has not happened. Tensions remain between Russia and her neighbours. But there have been no large wars, no use of weapons of mass destruction, no return of communism, no turn towards fascism. It is right that among the many criticisms which can be made of Western policy such important if negative achievements should also be acknowledged.
In truth, the story of Russia over the last decade is not one of progression or even regression along a clear path, rather it is a tale of twists and turns, accelerations and occasional derailments, of integration countered by disintegration, of reform and reaction, all alternately or even simultaneously in play. We have to try to understand what has happened and why, because only by doing so can we predict, let alone influence or steer, what happens in the future.
And that is important. Russia cannot and must not be written off. Personally, I feel this with a conviction bordering on passion. The Russian people suffered so much in the twentieth century – and they were so frequently left to their unhappy lot by those Westerners who lied and collaborated with their oppressors – that we must be indignant at the state in which they remain. In the Cold War the West’s greatest allies were always the ordinary Russian people. They now deserve better.
But taking Russia seriously today is also a matter of calculation. When ex-President Yeltsin went to Beijing in December 1999 and reminded us undiplomatically that Russia still had a formidable nuclear arsenal, he was only telling the truth. Whether weak or powerful, an opportunity or a headache, Russia matters.
THE BURDEN OF HISTORY
The best analyses of the Soviet Union were by and large those of historians rather than Sovietologists, because the historians had the benefit of perspective, while the Sovietologists had to glean most of their material from the turgid and mendacious statements of one or other Soviet authority. With Russia’s recent return to an older shape and identity, history is even more important as a basis for our assessments.* (#litres_trial_promo)
It has been well-said that ‘of all the burdens Russia has had to bear, heaviest and most relentless of all has been the weight of her past’.† (#litres_trial_promo) Russia might have developed differently. The course of history is not inevitable. But it is unarguably irreversible. One would have to go far back through the centuries to find a glimmer of any indigenous Russian tradition that might have spawned liberalism of the kind that has flourished in the West. From the late Middle Ages the tsars ruled their vast expanding domains in a fashion which explains much about modern Russia.
First, they recognised no property rights except their own, because they treated all their realm as if they owned it, and they regarded all secular lords as their tenants in chief. With no private property – above all, no private land – there could be no law, other than the tsar’s autocratic decrees. With no law, there could be no flourishing middle class, because there was lacking the security required for the accumulation of wealth, for the continuation of commerce and for the development of enterprise. Russian towns remained accordingly few, backward and small.
Secondly, the tsars admitted no institutional or even theoretical checks upon their power. They did not need to seek the consent of their subjects in order to raise revenues. Late-nineteenth- and early-twentieth-century Russian representative institutions thus had little resonance with most of the populace and were treated with scant respect by the tsar.
Thirdly, the tsars established an odd symbiotic relationship with the Russian Orthodox Church. On the one hand, the tsar exercised total control over it: the traditions of Orthodoxy – inherited from practice in Byzantium – were highly conducive to this, recognising no clear division between the ecclesiastical and political spheres. On the other hand, Russian Orthodoxy, claiming Moscow as ‘the third Rome’, deeply infused the whole Russian state with attitudes which were viscerally anti-Western.
These three elements combined uniquely with a fourth – the way in which Russia’s development as a state more or less coincided with its acquisition of an empire. Both were intricately connected for, to quote one leading authority, ‘since the seventeenth century, when Russia was already the world’s largest state, the immensity of their domain has served Russians as psychological compensation for their relative backwardness and poverty’.* (#litres_trial_promo)
Westerners who visited tsarist Russia immediately knew that they had to deal with something utterly alien and un-European. More open-minded than those intellectuals who a century later made their pseudo-pilgrimages to the Soviet Union was the Marquis de Custine, who wrote his recollection of a visit to Russia in 1838. He went there as a sympathetic admirer of Russia; he returned an outraged critic:
The political state of Russia may be defined in one sentence: it is a country in which the government says what it pleases, because it alone has the right to speak. In Russia fear replaces, that is paralyses, thought … Nor in this country is historical truth any better respected than the sanctity of oaths … even the dead are exposed to the fantasies of him who rules the living.† (#litres_trial_promo)
If this reads like a description of the Soviet communist dictatorship, that is more than coincidence; for it was grafted onto a Russian police-state tradition that was already well-established.
Custine’s picture of backwardness and repression is not, though, the whole story. The depredations which communism later made upon Russia – and even from its political coffin still makes – went far beyond anything devised by the tsars. Furthermore, economically at least, things had begun to change well before the Bolshevik Revolution. Russia’s belated but dynamic industrial revolution took off with a vengeance from the last decade of the nineteenth century. Indeed, as Norman Stone points out:
By [the eve of the First World War], Russia had become the fourth industrial power in the world, having overtaken France in indices of heavy industry – coal, iron, steel. Her population grew from just over sixty millions in the middle of the nineteenth century to a hundred millions in 1900 and almost 140 million by 1914; and that was counting only the European part, i.e. west of the Urals. Towns, which contained only ten million people in 1880, contained thirty million by 1914.* (#litres_trial_promo)
Russia lacked the social and political institutions to cope with the strains of such rapid economic change. Moreover, the empire was about to enter a terrible war which exposed its weaknesses, and which led first to anarchy, then revolution, and finally to the imposition by the Bolsheviks of the most total dictatorship that the world has known.
THE LEGACY OF COMMUNISM
The system was as much the work of Lenin as of Marx. The wordy, flawed analyses of the German were applied with ruthless violence by the Russian, who already lived and breathed the repressive atmosphere of the tsars.
The Soviets took the traditional tsarist hostility towards alternative sources of authority, towards freedom of thought, towards private property and towards a rule of law much further. While the tsar had demanded that he be treated as God’s representative, the Party actually usurped the place of God Himself. Communism’s war against religion – even one so politically amenable as Russian Orthodoxy – was pursued with the same aim as that against the richer peasants and against all the habits and ties of private life: the state must seize, possess, and ultimately absorb all.
For seventy years this system was imposed on the Russian people. Of course, like all that is human, it had its less bad moments. In time, the frenzied campaign against religion abated, to be replaced under Stalin by an uneasy modus vivendi between Church and state, because the latter found the former’s influence useful. Similarly, after Stalin’s purges a certain stability descended on the Soviet system, which became more bureaucratic, stratified and corrupt – this was the period of the emergence of what Milovan Djilas called the ‘new class’.* (#litres_trial_promo) The monster of communism mellowed a little as sclerosis set in. Under Khrushchev, the errors of Stalin were admitted. Under Gorbachev, the conduct of Lenin was eventually debatable. In the last few years of the Soviet Union the pressure for free speech and free elections grew and – to his credit – Mr Gorbachev responded.
There was also talk of economic reform. But it never came to anything. This was essentially because, for communists – from Lenin to Gorbachev – ‘reform’ simply meant making the Marxist-Leninist system more efficient, not adopting a different system. Perhaps the last moment at which such an approach could have yielded positive results was under the intelligent Yuri Andropov (1983–84), who at least understood the economic abyss before which the Soviet Union tottered. But he was too sick – and his successor Konstantin Chernenko (1984–85) was both too sick and too dull – to make any impact. By the time that Mikhail Gorbachev took over in 1985 any attempt to reform the system was bound to fail and likely to result sooner or later in its dissolution.
And this, of course, is what happened. Mr Gorbachev’s programmes of glasnost (openness) and perestroika (restructuring) were intended to be complementary, but that is not how they worked out. Openness about the failures of the system and of the people, past and present, who were responsible, was immensely liberating for the Soviet citizenry who had for so long been denied the chance to debate the truth. But restructuring the ramshackle institutions of the state, let alone replacing the mediocrities who battened on them, was really out of the question. In any case, the basis of the Soviet Union was still the Communist Party (which also controlled the military-industrial complex and the security apparatus), and the Party would not meekly yield up the one thing it valued above all – power.
This fact also explains the personal tragedy of Mikhail Gorbachev, who was feted by the West – and justly so – but who was rejected and reviled by his own fellow-countrymen. For all his talk of the need for ‘new thinking’, in the end he just could not practise it. Faced in 1991 with a choice between continuing along the path of fundamental change on the one hand and a return to repressive communism on the other, he dithered. I do not believe, though this has sometimes been said, that he secretly supported those hard-line communists who temporarily seized power in July 1991. But he had himself appointed them to their positions. And even when he returned to Moscow he proclaimed himself a communist. So for all my admiration for his achievements, my sympathy for his predicament, indeed my liking for him as a man, I am sure that his replacement by Boris Yeltsin was right for Russia.
The deep hostility between these two men who between them have done more for their country’s freedom than any other Russians was doubtless partly to be explained simply by political rivalry. But it also, I am convinced, represented something deeper. Mr Yeltsin knew in his heart that the system in which he had risen and then fallen, only to rise again, was fundamentally wrong – and not just because it failed to give people a reasonable standard of living, but also because it was based upon a structure of lies and wickedness. This, I think, is why Mr Yeltsin looked so large as he stood on that tank in central Moscow when he led the heroic battle for Russian democracy. And it is why Mr Gorbachev looked so diminished as he returned three days later from his Black Sea coast retreat in the Crimea. Cameras often lie, but this time they told the truth: not just a tale of two Russians, but also a tale of two Russias.
The collapse of the August 1991 coup provided the opportunity for a triumphant Boris Yeltsin to order the banning of the Communist Party and to oversee the orderly dissolution of the Soviet Union. In recent years it has become the fashion to scorn Mr Yeltsin’s weaknesses, which were doubtless real enough. But they were more than matched by astonishing courage and large reserves of political wiliness. And had bravery and cunning not also been accompanied by a typically Russian ruthless streak he could never have scored victory after victory against the communists who wanted to drag Russia back to its Soviet past.
Boris Yeltsin’s shoulders were broad. But history’s burden was still too heavy for them. The habits, instincts and attitudes developed by Soviet communism made the transformation of Russia into a ‘normal’ country immensely difficult. This has been glaringly apparent in the growth of lawlessness.
Long before the end of the Soviet era, Russians had come to regard the state itself as their enemy. For those who chose to proclaim their individuality it was an oppressor. But for many more the state was essentially a thief.
There was, of course, no law in a Western sense in communist society. Indeed, though there were rules and regulations at every turn there was no concept of equity, according to which a single set of obligations based on what each was due as a human being was applied to all equally. As the writer and dissident Alexandr Zinoviev strikingly put it: ‘In Communist society a system of values prevails which is founded on the principle that there should be no general principles of evaluation.’* (#litres_trial_promo)
In fact, the only dominant principle was that of predatory egotism. Such habits die hard, or not at all. It is important to stress that although the scale and violence of Russian crime have snowballed since the end of the USSR, its psychological and systemic roots were planted under communism. In the last years of Leonid Brezhnev’s presidency corruption in high places became notorious. But from the mid-1980s, crime became fully institutionalised, not least through the activities of the KGB which, according to a senior CIA source,
sold cheaply acquired Soviet commodities abroad at world prices, putting the proceeds into disguised foreign accounts and front companies … [Its] lines of business came to include money laundering, arms and drug trafficking and other plainly criminal activities.* (#litres_trial_promo)
There was, understandably, little confidence that this disordered state of affairs would change under the new dispensation: most Russians had grown so accustomed to it that criminality appeared the ordinary way in which things were done. How could it be otherwise when so many of the same people who had held high positions under communism re-emerged under capitalism as the new masters?
Russia has accordingly become a notoriously criminal society. It is thought that between three thousand and four thousand criminal gangs operate there. The Russian Ministry of Internal Affairs says that organised crime controls 40 per cent of the turnover of goods and services; some estimates are higher. Half of Russia’s banks are thought to be controlled by criminal syndicates. Not surprisingly, the European Bank for Reconstruction and Development (EBRD) considers Russia the most corrupt major economy in the world. Public opinion polls have suggested that Russians despair of honest effort as the means to advance. Instead, 88 per cent listed ‘connections’ and 76 per cent dishonesty as the best ways to get ahead.† (#litres_trial_promo)
Estimates of the size of the black economy – always difficult to gauge – put it at between a quarter and a half of Russia’s national income. Much of this is, of course, a matter of unpaid or badly paid Russian workers trying to earn a decent income; much of the rest reflects the chaotic circumstances in which all enterprises have to operate. But it is still a recipe for extortion and gangsterism.
In such circumstances violence has become a tempting method of settling scores, instilling fear, and deterring both competition and criticism. Russia’s murder rate is now probably the highest in the world. Those who speak out against abuses in high places must expect to be targeted.
Such, for example, was the fate of that brave and principled lady, Galina Starovoitova. I first met her in London during the 1991 attempted coup, when she and I discussed how to help rally support for Boris Yeltsin. Mrs Starovoitova was a leading figure in the biggest political party at that time, ‘Democratic Russia’. She became a personal adviser to President Yeltsin on inter-ethnic issues – a position she relinquished because of her opposition to the Chechen War. She was later elected as a member of the Duma representing St Petersburg, where she denounced the anti-Semitism and corruption which had become unpleasant facets of the life of that great city. She also proposed a draft Law of Lustration intended to prevent high-level former Communist Party and KGB members from occupying high state positions. This, though, was rejected by the communist majority in the Duma.
Galina Starovoitova was murdered on the night of 20 November 1998 as she climbed the stairs to her apartment. It was a well-prepared assassination with what her family later told me had all the marks of the old KGB style. I was horrified by this and wrote to President Yeltsin. But her murderers have never been brought to trial. She is a martyr to the ideal of the Russia most Russians long to see. It is impossible to have much confidence in the Russian authorities’ promises to stamp out crime while her, probably well-connected, murderers remain at large.
ECONOMIC REFORM AND THE IMF
Lawlessness in all its forms has impinged on attempts to reform the Russian economy. And this should be remembered as a background to the agonised debates which have taken place since the crash of August 1998 on the theme of ‘Who lost Russia?’ In fact, the question is badly put for three rather obvious reasons: first, Russia is not necessarily lost; second, it was certainly not the West’s to lose; and third, the loss for which the International Monetary Fund (IMF), senior politicians and advisers should be required to answer is that of billions of dollars by Western taxpayers in futile bail-outs.
Elsewhere, I consider more fully what might constitute a proper role for the IMF.* (#litres_trial_promo) But it is worth rehearsing the arguments for and against its deep and costly involvement in Russia. The main argument for relying on an international organisation rather than, say, the Group of Seven (G7) major economic powers to help Russia out of the mess it inherited from communism, was that the IMF allegedly had the expertise to undertake the task and the neutrality to avoid outraging Russian sensitivities about the country’s sovereignty.
In fact, things have not worked out that way. The IMF’s decisions were increasingly politically motivated, clearly intended to keep President Yeltsin in and the communists out of power; and it found itself increasingly pilloried by Russians as an agent of malign Western intervention. Of course, the prior question is: did such massive programmes of assistance make sense in the first place?
The argument against the provision of loans and other aid to insolvent sovereign borrowers is well-known: it mirrors in many respects the problem involved in lending to insolvent individuals. Quite apart from whether the money will be repaid – which may not be the first consideration – such action creates what is called ‘moral hazard’. This means that it is assumed by the recipient of the aid – or by others who benefit from it indirectly, or may wish to benefit in the future – that irresponsibility will not be penalised. And that, of course, increases the likelihood of its recurring.† (#litres_trial_promo)
Taken to its extreme, this argument would suggest a policy of rigid international non-intervention in Russia’s economic affairs. It should be said at once that this argument has its merits. Insofar as the West’s billions of dollars have helped shore up a structurally unreformed economy and a corrupt plutocracy they have done harm not good. But the fact remains that Russia is too great a potential danger to her neighbours and the world to be allowed to fail entirely. In these circumstances, the needs of politics will always tend to override the requirements of economics. The practical challenge is to ensure that intervention is correctly timed, targeted, monitored – and known to be limited. Unfortunately, with Russia this has not been the case.
Looking back, there was only a very narrow window of opportunity for the West and the IMF to act decisively. The Soviet Union was in discussions with the IMF as early as 1988. Two years later the Fund produced its recommendations for fundamental economic reform. President Gorbachev was presented with a number of possible reform programmes, but he had little understanding of economics and his preoccupations were mainly with his own and the Soviet Union’s survival. From the beginning of 1991 the Soviet administration actually moved away from political and economic reform, a course which culminated in the August 1991 putsch.
Perhaps more could have been done in this initial period. I was very keen to see Mikhail Gorbachev rewarded and encouraged. That is why I wanted to see the Soviet Union/Russia associated with the G7 economic powers, in spite of its difficulties.* (#litres_trial_promo) I was not keen to see open-ended credits supplied, which would just build up more debt. Instead, I believed that Sir Alan Walters (my old friend and economic adviser in government) had been right to argue for the setting up of a currency board to stabilise the rouble by backing it with dollars. I also thought that Western companies might be invited to use their expertise to reform a whole sector of the collapsing Soviet system – ideally, food distribution.
Conditions changed fundamentally for the better with the accession to power of Boris Yeltsin, who immediately declared his intention to liberalise the Russian economy and brought in committed expert reformers as ministers and advisers to help him do so. The following January, price controls were removed, internal trade was freed, the rouble was floated and measures were taken to slash the huge budget deficit. But the consequences for the Russian people of this necessary programme were severe. Once the first enthusiasm for change passed it was inevitable that political pressures on the President and his team would mount. The communist-dominated parliament became the centre of resistance.
This was the point at which the West should have been generous. But it was not. Western politicians and bankers seriously misread the situation, imagining that the small print of an economic programme was more important than the political reality. By the summer of 1992 President Yeltsin had felt compelled to drop the reformist Prime Minister, Yegor Gaidar, and instal the representative of the industrial cartels, Viktor Chernomyrdin, in his place. At the same time the former chief of the Soviet Central Bank was appointed to the post of chairman of the Russian Central Bank, where he immediately set the printing presses rolling. The IMF only now agreed its first big loan to Russia – seven months after the reform programme was launched, and after the true reformers had been ousted.
For a variety of reasons, that missed opportunity never recurred. Even during the periods when economic progress seemed to be made, the underlying conditions were actually deteriorating. Politics was largely at the root of this. The struggle between the President and the parliament was waged with increasing ferocity, largely over economic policy, with Mr Yeltsin’s opponents (who had control over the Central Bank) trying to secure as strong a dose of inflationary socialism as possible. Western hopes rose, after the defeat of the parliamentary rebellion in October 1993, that the President would now be able to impose a full-blooded reform programme. To some extent, this was what happened. But the success of the communists and nationalist extremists in the parliamentary elections of December demonstrated how deep was popular disillusionment with the course proposed by the IMF. During 1994 the Chernomyrdin government pursued a policy which pushed up spending, borrowing and inflation, resulting in a collapse of the rouble in October.
Both the IMF and the Russian government now made greater efforts to agree a detailed programme of economic reform sustained by IMF financial support. The largest loan yet given to Russia – $6.8 billion – was announced on 11 April 1995. This was more than a matter of economics: it represented an investment in President Yeltsin, who faced an election in April 1996.
Mr Yeltsin won, but at what turned out to be a huge cost to himself, to Russia and to the West. First of all, he destroyed his health and could never recover his former energy and authority. Second, in order to win he made a large number of promises for extra spending which could not be afforded. Third, he had to rely on the support of Russian plutocrats whose interests lay rather in securing control over cartels in a corporatist economy than in creating a properly functioning free-market system.
For these reasons, Mr Yeltsin’s second term was a serious economic disappointment. The appointment of Anatoly Chubais and Boris Nemtsov as First Deputy Prime Ministers seemed to signal an attack on the vested interests which stood in the way of change. But it was all too late. The rouble came under pressure as a result of fall-out from the East Asian financial crisis. In March 1998, in a move intended to signal a renewed drive for reform, Yeltsin appointed a new young Prime Minister, Sergei Kiriyenko, in place of Chernomyrdin. The concentration now was on measures to increase dwindling tax revenues and defend the rouble. The international market pressure on Russia continued to intensify and the IMF together with the World Bank and Japan provided $17.1 billion of new loans.
But the market would not be bucked. In August, after $4.8 billion of the loan had disappeared across the exchanges, the rouble was devalued and then floated. It lost over half its value against the dollar in just two weeks. The Russian stock market fell by 80 per cent. Some experts estimated the rate of capital flight as at least $17 billion per year.* (#litres_trial_promo) Money poured out of Russia, doubtless much of it ours. Russians lost, perhaps permanently, faith in their own currency.
The political consequences were not slow in coming. Mr Yeltsin’s authority was fatally weakened. Prime Minister Kiriyenko was dismissed and, after a delay in which Chernomyrdin’s reappointment was rejected by the parliament, Yevgeny Primakov, backed by the Communists, took his place. He was joined by other throwbacks to the Soviet era.
The Primakov period, which lasted until his surprise dismissal in favour of Sergei Stepashin in May 1999 – and then Vladimir Putin in August – was a time of stagnation. Economic reform in any meaningful sense was suspended. In Russia it was a time for political manoeuvring. In the West it was time for recrimination.* (#litres_trial_promo)
WHY ECONOMIC REFORM HAS FAILED SO FAR
What is clear from this sketch of the tangled events of the period between the proclamation of reform at the start of Yeltsin’s presidency and its effective abandonment some time before the end is that the IMF lacked the knowledge and the means to effect the major changes required to bring free-market capitalism to Russia. All they could be expected to do – and what they should have tried to do – was to support positive moves from within Russia and refrain from supporting negative ones. Having lost the only real opportunity to achieve transformation of the Russian economy by those who believed in the project, Westerners consistently overrated the prospects of half-baked reform at the hands of halfhearted reformers. The idea that a government run by Viktor Chernomyrdin, let alone by Yevgeny Primakov, could be relied upon to pursue the same objectives as Western economic liberals was laughable. Yet the rhetoric was always the same: ‘reform’ could only be achieved by more Western money and still greater Western forbearance.
The errors of wishful thinking were compounded by a failure to understand that the Russian economy depended upon Russian power structures. If the power structures remained inimical to reform, reform would simply not occur.
Without a proper rule of law, honest administration, sound banks and secure private property, it is not possible to create a free-market economy. President Yeltsin is often criticised for giving in to political pressures and slowing down or sidestepping the necessary appointments and measures. Perhaps someone with a less mercurial personality would indeed have made a difference. But politicians have to find backing if they are to make changes. If Yeltsin could not gain the support he needed among an increasingly disillusioned electorate he had to find it from the powerful figures that have come to be known as the ‘oligarchs’. With no previous experience of patience being rewarded, the Russian people became increasingly unwilling to go on making sacrifices.
The conditions in which most Russians live are hard indeed. They deserve better. But some of the statistics bandied about are somewhat misleading. When we hear (as we sometimes do) that the country’s economic output is about half the level of a decade ago or that real incomes have fallen sharply, it is worth recalling that economic statistics under the Soviet Union were hardly more reliable than any other official statements. Moreover, a country that produces what no one wants to buy, and whose workers receive wages that they cannot use to buy goods they want, is hardly in the best of economic health. Comparisons between living standards in the last years of the Soviet system and living standards now suggest that measured by the most important criterion – what people are actually able to spend – there has been some improvement. * (#litres_trial_promo)
Yet it has been very uneven, and there have been terrible moments. The harshest pressures, as public expenditure controls were imposed, were upon people dependent on the state for their living. There were large arrears in payments of wages and pensions and sharp falls in their value, as inflation soared. Probably the worst blow has been against savings. Nothing does more to undermine a society than when savers are impoverished, as the history of Germany’s Weimar Republic shows.
But perhaps the most telling indices of misery are not economic but social – for Russia is sick, and at present it is really no exaggeration to say that it is dying. As one expert has remarked: ‘No industrialised country has ever before suffered such a severe and prolonged deterioration [of public health] during peacetime.’† (#litres_trial_promo) Death rates in Russia are nearly 30 per cent higher than at the end of the Soviet Union – and public health was already bad in Soviet times. Deaths are now exceeding births by well over half, some seven hundred thousand a year. Life expectancy for Russian men today is about sixty-one – worse than Egypt, Indonesia or Paraguay. The main causes are extraordinarily high rates of heart disease and injuries, in which the common factor is apparently alcohol abuse. Life is simply so bad that the bottle offers the only refuge.
What makes so many ordinary Russians this depressed is, one suspects, not just frustration at their own prospects, but also anger at the way in which a minority flaunts huge wealth acquired from successful speculations, insider trading, cartels and gangsterism. The root of the trouble was that in Russia in the early 1990s, when reform was under way, there was no middle class in the European sense. Tsarist Russia never developed a substantial middle class anyway, but what there was fled or were impoverished or killed by the Bolsheviks.
Under communism no such class could emerge and ‘bourgeois’ values were, naturally, deplored. There were ‘managers’ of course. But these were just political bureaucrats, not entrepreneurs and owners. Consequently, those who found themselves with the knowledge, means and position to flourish in the early years of reform were the class of apparatchiks.
The prospering of this elite renders in the eyes of many Russians the mere notion of ‘reform’ suspect and its proponents odious. And though they are wrong, who can blame them?
Beneath the formalities of memoranda, declarations of intent, statistical projections and neatly typed balance sheets, a series of struggles for power have been conducted. Among the most important players have been: the bureaucracy; the armed forces, whose frustration at their penury has on occasion threatened the security of the state; the magnates, in control (directly or indirectly) of Russia’s vast natural resources, particularly oil, which they bought cheaply and then obtained licences to sell at much higher international prices; and banks, which performed none of the functions of normal Western banks, but rather bought up in rigged auctions the shares of privatised companies.
In fact, a kind of economic theatre of the absurd was functioning well before the 1998 crash. Industries, which because of their inefficiency were incapable of making a profit, were kept afloat because their bosses used influence and connections to escape paying taxes to the government, gave worthless promissory notes to their creditors and often remunerated their workers in barter. The absurdities of the Soviet system were being recreated. As the joke ran in those times (referring to the fact that both industrial products and industrial wages were effectively worthless): ‘We pretend to work – they pretend to pay us.’ But now, as often as not, no one was paid. Such are the circumstances in which – in spite of the fact that 70 per cent of industry is notionally in private hands, that consumer prices have been deregulated and that a return to socialism is probably impossible – we have to conclude that economic reform has so far largely failed.
One of the most crushing verdicts on what has occurred is that of the economist and current adviser to President Putin, Andrei Ilarionov:
… [S]ince the summer of 1992, with few exceptions, the political struggle has not been over whether the government should implement more liberal or more interventionist economic policy. The real struggle has been over a different issue: who or whose team (group, gang, family) would control the state institutions and instruments that control the distribution and redistribution of economic resources … The only distinction among the groups participating in the Russian transformation was their ability to camouflage their deeds to make them suitable for public consumption in Russia and abroad.* (#litres_trial_promo)
The West cannot behave as if this were not the case. We have to learn from our mistakes. We have to face up to their consequences. And we have to do better.
Developments since the crash of 1998 have provided Russia and the West with a breathing space. As one would expect after a dramatic fall in the currency, Russian goods are now cheaper and exports have soared. The economy has been growing again (by 5.4 per cent in 1999 and 8.3 per cent in 2000). The trebling of oil prices has also benefited Russia, one of the world’s major oil producers, and the government is now raising US$5.5 billion annually from the energy sector.
These favourable conditions offer a new opportunity to tackle the fundamental obstacles to prosperity. As a basis for future action to shift Russia back on course towards becoming a ‘normal country’ I suggest the following:
There must be no more self-deception. If the people and policies dominant in Russia at any time are opposed to real reform there should be no financial cushion provided by the West or the IMF. Such aid is worse than useless – it’s doubly damaging, because it associates the cause of reform with failure
We must keep the long-term goal in view, which is to create a real free-enterprise economy based on sound money, low taxes, limited government and above all a rule of law. Barely a start has been made on achieving these things. And while the foundations are rotten, so will be the economic edifice
While connections, corruption, crime and cartels form the basis of the Russian system there can be no true freedom and no genuine democracy. The West must speak the truth about this openly to the Russian people
We have to stop regarding the only people who matter as being the political and bureaucratic elite in Moscow. Russia is naturally extremely rich – with major deposits of coal, oil, gas, timber and strategic minerals. But its greatest potential wealth lies in the millions of young would-be Russian entrepreneurs. They must be helped to understand what capitalism is about – and what it is not about. Above all, perhaps, we have to be patient. Today’s Russians face the Herculean task of undoing the harm done, not just by seventy years of Soviet communism but by previous centuries of autocracy. And ultimately only the Russians themselves can perform that task.
RUSSIA AS A MILITARY POWER
If almost a decade down the track from the end of Soviet communism we were now dealing in Russia with a ‘normal country’, that is a stable democracy with a functioning market economy, the West could afford to take a relaxed view of Russian military power, strategic interests and political intentions. Of course, even in those happy circumstances, the operation of the balance of power in Europe and possibly Asia would mean rivalries and tensions between Russia and the United States and its allies. But such problems would be more manageable and the reactions of Russia more predictable.
The worst error, as always in dealing with Russia, is naïveté. The Clinton administration initially sought to treat Russia as a ‘strategic partner’. But, however important Russia remained in its own backyard, the Russians had neither the will nor the means to enter into any global partnership with the United States. Moreover, Russian Cold War rhetoric between 1995 and 1997, when it tried and failed to block NATO’s expansion to take in Poland, Hungary and the Czech Republic, revealed the emptiness of any such project. This, it will be recalled, was when President Yeltsin warned: ‘NATO will get as good as it gives. We have sufficient deterrent forces, including nuclear forces.’* (#litres_trial_promo)
For as long as they could afford to do so, the Russians also frustrated Western aims in the countries of the former Yugoslavia. If Russia was supposed to be the West’s partner there no one seems to have told the Kremlin. As a result of NATO’s Kosovo air campaign against the Serbs in March–June 1999 Russia suspended all military contacts with NATO. But most revealing of the emotional temperature among Russia’s military and political elite was the threatening language they again used. The chief of the General Staff pointed out that he supported ‘the use of nuclear weapons to protect Russia’s territorial integrity’. The chairman of the Defence Committee of the Duma helpfully suggested that the state’s strategic concept should be amended to include the option ‘to deliver pre-emptive nuclear strikes’. Another retired general demanded Russia’s withdrawal from the Intermediate Range Nuclear Forces (INF) Treaty.
The fact that the Russians acquiesced in Kosovo and eventually seem to have helped bring President Slobodan Milošević to the negotiating table reflected their weakness rather than their good will. Above all, it reflected their economic weakness, for the IMF was about to release a further tranche of $4.5 billion over eighteen months when the campaign began. Even then, the Russian generals (with or without the knowledge of President Yeltsin) sent Russian troops to seize Pristina airport, for the sake of swagger, so risking with no apparent concern a major international confrontation.
Russia has for centuries grown used to compensating for its economic underdevelopment by means of its military strength. For the Soviet Union, particularly in the last decades of its existence, such an approach was the only means of remaining a superpower. Today’s Russian leaders appear to have inherited something of that outlook.
But only something – for although it has over a million military personnel, and its defence spending still probably runs at over 5 per cent of GDP, the state of Russia’s armed forces as a whole is pitiful.* (#litres_trial_promo) Non-payment of wages or payment in kind has left soldiers and sailors in some areas forced to grow cabbages or to engage in black-marketeering to avoid starvation. Morale and discipline are generally bad.
This has made some Russian generals and politicians keen to maximise the effectiveness of their most sophisticated weaponry. Both President Yeltsin and President Putin have emphasised the central importance of Russia’s nuclear defence. In November 1993 Russia’s new military doctrine both ended the previous Soviet pledge of ‘no first use’ of nuclear weapons and outlined more flexible options for their use. In April 1999 President Yeltsin responded to the opening of NATO’s bombing campaign against Serbia by holding a special meeting of his Security Council on the subject which he opened by stating that ‘nuclear forces were and remain the key element in the national security strategy and Russia’s military might’. Mr Putin chose to make one of his first visits as President to a centre for nuclear weapons research at which he told his audience: ‘We will retain and strengthen Russia’s nuclear weapons and its nuclear complex.’ The symbolism and the message were clear.
Russia has been concentrating on the development of a new generation of missiles and warheads, while seeking to extend the life of existing weapons systems. The most important new programme is that of the SS-27 Topol-M Inter-Continental Ballistic Missile (ICBM). Russia’s problem is that the cost of maintaining any kind of nuclear parity with the United States is likely to be prohibitive, given the rate at which Russia’s existing arsenal is becoming obsolete.
President Putin was widely praised in the West for having secured the Russian Duma’s endorsement of the START II treaty. He has more recently called for further substantial reductions to America’s and Russia’s nuclear arsenals. The driving force for these proposals is penury rather than mere goodwill. But they may well make sense all the same. For as long as Russia continues to hold a nuclear arsenal which it cannot afford properly to maintain, the rest of the world will be at risk of such weapons falling into the wrong hands or of an accidental launch. Furthermore, Russian scientists and advanced technology must if at all possible be kept in Russia to be productively redirected, not put up for sale to the highest international bidder.
Another potential worry for the West is posed by the former Soviet Union’s chemical and biological weapons capability. Such weapons are notoriously difficult to detect by ordinary verification techniques. They can be easily hidden, as we know from Saddam Hussein’s activities in Iraq. They can also be developed alongside or under cover of ordinary commercial, civilian processes. Three Russian officials have been reported as saying that Russia has twenty-four poison gas factories, six of which it plans to destroy and eighteen of which it has either converted or will convert to non-military uses.* (#litres_trial_promo) Unfortunately for us, the Soviet Union’s biological weapons programme was very closely integrated into ostensibly civil programmes of research. There are worries about how far the necessary disentanglement has gone. Above all, however, it is the possibility of such weapons developed covertly in a Russian laboratory falling into the hands of rogue states or terrorists that is the main worry.
In the end, it is probably upon the massed if uneven ranks of the Russian army that any credible projection of Russian power depends. At present Russia’s armed forces are demoralised and their resources depleted. But it would not be wise to assume that this will always be so. The Russians are traditionally a martial nation. While it is most unlikely that Russia will ever again be a global superpower, it will remain a great power – too big to rest content within its own borders, too weak to impose itself far beyond them. All of which makes for troubling instability.
But the West has to cope. How?
We must never forget that Russia has a huge arsenal of weapons of mass destruction. So some of the most important Western aid programmes are those, like the Nunn—Lugar programme aimed at ensuring proper oversight of Russia’s nuclear weapons, which satisfy our own security needs. Indeed, in all our dealings with Russia, the right approach is to put our security interests always and everywhere first
We must try to persuade Russia that its willingness to sell military technology to rogue states may well rebound against Russians – both for reasons of basic geography and in view of Russia’s problems in its relations with much of the Muslim world
Finally, we dare not take Russia for granted: the seeds of danger are often planted in the soil of disorder, as the world has learned to its cost before.
NATIONALITY PROBLEMS AND THE ‘NEAR ABROAD’
Russia is a huge country that covers eleven time zones. Its border – thirteen thousand miles of it – is the longest in the world, running from Europe to Eastern Asia. This gives Russia a unique opportunity to interfere in other countries’ affairs – particularly because so many of its neighbours were for so long subject to Moscow’s domination.
The fact that Russia’s nation-building and its territorial expansion were in tsarist times so closely interlinked means that Russia has traditionally regarded its frontiers as fluid not fixed. The Cold War stasis lent an appearance of permanence to the Soviet Union’s external perimeter. But with the disintegration of the USSR into Russia and fourteen other independent states that situation ended.
Russia itself felt vulnerable, and this vulnerability explains some – though not all – of the subsequent aggressive rhetoric and manoeuvring. Some twenty-five million ethnic Russians remained living outside the frontiers of the new Russian Federation after the winding up of the Soviet Union. For Russians this diaspora’s existence is both a reason and an excuse to claim the potential right to intervene in other former Soviet republics. On the other hand, the population of the Russian Federation is far from homogeneous: almost 20 per cent of the Federation’s inhabitants are non-Russian. The loyalties and aspirations of these non-Russian nationalities are among Russia’s least soluble problems.
In facing up to such problems, today’s Russian Federation and its neighbours find themselves once more living in the sinister shadow of the old Soviet Union. Stalin’s policy towards the peoples of the USSR was a mixture of calculation and spite. Altogether he uprooted some two million non-Russians, about a third of whom died directly or indirectly as a result, and deported them to Central Asia and Siberia. There was also a planned movement of Russians in the other direction, out of the Russian heartlands, to take up industrial and other jobs in far-flung but important parts of the Soviet Union. These Russian minorities enjoyed a (relatively) privileged existence. Indeed, a policy of promoting Russian interests against those of other nationalities, while trying to avoid any upsurge of ‘bourgeois’ Russian nationalism, was an important part of Moscow’s policy towards the Soviet Empire.
Of course, it failed, and long before the end anyone outside the Kremlin knew it. Surely one of the most memorably stupid pronouncements of any Soviet leader was Leonid Brezhnev’s of 1972 on the fiftieth anniversary of the formation of the USSR: ‘The national question, as it came down to us from the past,’ affirmed Brezhnev, ‘has been settled completely, finally, and for good.’* (#litres_trial_promo) Within twenty years nationalism would have helped abolish the Soviet Union ‘completely, finally, and for good’. It remains to be seen whether it will do the same for the Russian Federation.
Against such a background, it is not surprising that ethnic and national suspicions are easily generated. In the years after the end of the Soviet Union a series of crises erupted in the territories of the Russian Federation and its neighbours. The common factors were threefold: Russia’s concern for the Russian minorities in what it called, in a phrase with alarming overtones, the ‘Near Abroad’; Russia’s attempts to use the Commonwealth of Independent States (CIS) as a means of re-integrating the former Soviet republics into a Russian-led confederation; and Russia’s struggle to control its own nationalities and their subordinate republics and regions.
Each region has had its own distinctive features. In some areas stability has returned. In others the outlook is uncertain. And in some of the latter the implications for the West are important.
