First Person

Tony Wood

  • ‘Sistema’, Power Networks and Informal Governance by Alena Ledeneva
    Cambridge, 327 pp, £19.99, February 2013, ISBN 978 0 521 12563 5
  • The Man without a Face: The Unlikely Rise of Vladimir Putin by Masha Gessen
    Granta, 314 pp, £9.99, January 2013, ISBN 978 1 84708 423 1
  • Putin’s Kleptocracy: Who Owns Russia? by Karen Dawisha
    Simon and Schuster, 464 pp, £11.50, September 2014, ISBN 978 1 4767 9519 5

Nearly five thousand people have been killed in eastern Ukraine since April 2014; according to Ukrainian government figures, 514,000 have been internally displaced by the fighting, with another 233,000 applying for refugee status in Russia (9000 have sought asylum in the EU). Peace talks over the fate of the Donetsk and Lugansk regions have so far been fruitless, and the ceasefire nominally agreed in September has been patchy at best.

The effects of the Ukraine crisis on Russia itself have been visible everywhere, from the thousands of refugees from Donetsk and Lugansk now resettling across Russia to the fresh graves quietly appearing in scattered villages, containing the remains of Russian conscripts killed in eastern Ukraine – casualties Moscow prefers not to acknowledge. (Some have even been retroactively discharged from the army, so that, for official purposes, they weren’t killed on active service.) Relations with the West have reached their lowest point in decades, and the combination of US-EU sanctions and plummeting oil prices has started to spread economic gloom. Between June and mid-December 2014 the ruble lost half its value – its downward path mirroring the slump in the price of oil, which went from $109 per barrel of Urals crude in June to $67 in December. All this has been exacerbated by the Kremlin’s self-destructive decisions. In August, Putin introduced retaliatory sanctions against countries that had mandated measures against Russia, the main effect of which has been drastically to reduce food imports and raise prices, helping to push inflation to an official level of 10 per cent, though some estimates put it at between 15 and 25 per cent. The country was already in recession when, in late December, the central bank forecast a further 5 per cent contraction of GDP in the course of this year. Some Russians have now taken to amending the patriotic slogan ‘Krym Nash’ – ‘Crimea is Ours’ – to ‘Krizis Nash’: ‘The Crisis is Ours.’

Yet so far Putin’s handling of the situation remains broadly popular in Russia. In fact one of the most striking things to emerge from the events of 2014 was the mismatch between the Putin government’s position domestically and internationally: surging neo-imperial popularity at home, virtual pariah status abroad. While the Western media is full of resurgent Cold War rhetoric, recent polls by the Levada Centre, one of the few independent research outfits remaining in Russia, show overwhelming support – 85 per cent – for the annexation of Crimea; they also show that in November 59 per cent thought the country was ‘moving in the right direction’, compared with 43 per cent last January. The solidity of this domestic consensus, however, is likely to be tested in the coming months by a combination of recession and rising prices, and the hostile international climate will narrow the regime’s options further. Putin’s presidential term runs until 2018, and the political landscape has been carefully swept clear of viable electoral alternatives, but his hold on power has begun to seem less unshakeable than it was a year ago. Any sense of how Putinism will fare – is it more likely to crack under external pressure than to erode from within, or will it do neither? – depends on the view one takes of the kind of regime it is.

Since the early 2000s, a number of terms have been applied to the system over which Putin has presided. The Kremlin’s own ideologues have at different times called it ‘sovereign democracy’ or ‘managed democracy’ (to which Russian wits responded by saying that either adjective was to democracy what ‘electric’ is to ‘chair’). Scholars and journalists, inside and outside Russia, have opted for other labels: ‘competitive authoritarianism’, ‘virtual’ or ‘imitation democracy’, ‘militocracy’, ‘mafia state’. Medvedev’s chair-warming cameo between 2008 and 2012 added a new term to the lexicon – ‘tandemocracy’ – and for a moment seemed to raise the possibility of liberalisation. But with Putin reinstalled a cold front settled over Russia in the wake of mass protests in the winter of 2011-12, and the autocratic features of the system became even more pronounced.

The various labels for Putinism put the stress on different aspects of the regime: its increasingly authoritarian bent, reflected in the suppression of dissent and the spread of security service personnel throughout the state apparatus; its hollow performance of democratic rituals such as elections, emptied of any actual democratic content; its artful manipulation of appearances through its grip on the media; its endemic corruption, and the related entanglement of officialdom with organised crime. Underpinning most Western analyses is the idea that all this represents a sharp break with what came before: as the standard story has it, the Yeltsin years saw the installation of a turbulent, flawed democracy; Putin has presided over an anti-democratic turn – even, for some, a regression towards state socialism. The tone was set early on by Putin’s frequent mentions of the ‘vertical of power’: in stark contrast to the apparent free-for-all of the 1990s, he established a clear chain of command, firmly subordinating Russia’s regional governors to Moscow and bringing the whole country’s administrative structure increasingly under the control of the United Russia party. This emphasis on central authority appeared to be echoed in the economy, as the state moved to regain its hold over strategic sectors such as oil and gas. By 2004, Putin appointees were in charge of seven companies which accounted for 40 per cent of GDP – a phenomenon referred to as ‘Kremlin Inc’, and seen as evidence of a turn away from free market capitalism towards a statist model. In The Man without a Face, Masha Gessen concluded that Putin’s goal was a steady and deliberate ‘transformation of Russia back into the USSR’, while in Putin’s Kleptocracy, Karen Dawisha insisted, in more excitable vein, that we need to understand his rule as the triumph of a nefarious KGB ‘cabal’ which had spent the 1990s preparing for a creeping revanchist takeover.

The figure of the president has always loomed large in discussions of the regime: in a country in which political power is not only highly concentrated but deeply personalised, the preferences and whims of the ‘First Person’ – the fawning title of a book of interviews with Putin published in 2000 – take on an outsize importance. Hence the attention devoted to Putin’s career, from his youth in 1950s and 1960s Leningrad to KGB spy work in East Germany in the 1980s; then a stint in the city government of his native St Petersburg from 1990 to 1996, followed by a move to Moscow and rapid promotion through the ranks of the Yeltsin administration, culminating in his surprise appointment as prime minister in 1999. The decade and a half of unrivalled dominance he has enjoyed since then have only increased the gravitational pull he exerts on Russia-watchers; he stands as both explanation and embodiment of the country’s defects. Since his return to the Kremlin, the already extensive literature on Putin and Putinism has had a growth spurt: in addition to Gessen’s and Dawisha’s books, in the last two years alone there have been journalistic accounts – Ben Judah’s Fragile Empire (2013), Marc Bennetts’s Kicking the Kremlin (2014), Anna Arutunyan’s The Putin Mystique (2014) – as well as analyses by academics and think-tankers: Alena Ledeneva’s Can Russia Modernise?, Fiona Hill and Clifford Gaddy’s Mr Putin: Operative in the Kremlin (2013) and Richard Sakwa’s Putin Redux (2014).

New Year’s Eve 1999 – when Yeltsin appeared on Russian TV screens to announce his resignation as president in favour of Putin – is often taken to mark a major turning point, from the ‘fevered 1990s’ to the stability of the ‘Zero Years’, as the 2000s are known, the moment when Yeltsin’s erratic improvisation gave way to the cold calculation personified in Putin. Economically, the prolonged post-Soviet collapse was followed by recovery after the 1998 ruble crash and then an oil-fuelled boom, while in the media a boisterous incoherent pluralism was replaced by deadening consensus. But there were deeper continuities in the system both men commanded.

Politically, the ‘managed democracy’ of the 2000s was not a perversion of Yeltsinism but its maturation. Faced with a fractious legislature – the Congress of People’s Deputies elected in 1990 – Yeltsin bombed it into submission in October 1993 and then rewrote the constitution along hyper-presidential lines, getting it approved by a rigged referendum that December. Even before that, he had sidestepped democratic accountability by implementing much of the key legislation that shaped the post-Soviet economy through a series of decrees – some of them, notably on privatisation, drafted by Western advisers. Thanks to the notorious ‘loans for shares’ deals of 1995-96, a handful of oligarchs obtained vast holdings in oil and metals companies in exchange for flooding the media outlets they owned with anti-Communist propaganda – a vital contribution to prolonging Yeltsin’s grip on power, though generous financial assistance from the West and electoral violations also played their part. In Chechnya, Yeltsin moved to crush local aspirations to sovereignty, unleashing total war against the civilian population in 1994, though the Russian army had been fought to a standstill by 1996.

On each of these fronts, Putin continued what Yeltsin began, starting in the North Caucasus in September 1999, when he launched a vicious counterinsurgency – officially labelled an ‘anti-terrorist operation’ – to destroy any idea of Chechen independence, eventually imposing a tyrant of his own choosing. Once installed as president, he made use of the autocratic set-up he inherited to reassert central authority, reining in regional elites by appointing plenipotentiaries to head seven new federal superdistricts, okruga; five of the first levy were former military men, underlining their disciplinary function (his first envoy to the Southern Federal District, Viktor Kazantsev, had commanded Russian forces in the North Caucasus). Fiscal reforms increased the federal centre’s tax take at the expense of the regions, with Moscow’s share rising from 50 per cent in 2001 to 70 per cent in 2008. In 2004 Putin further restricted their autonomy, abolishing elections for governors and mayors (though these were partially reintroduced in 2012). The national legislature had been put in its place by Yeltsin, though it showed signs of rebellion in 1998, in the wake of the ruble crisis; Putin brought it firmly to heel, streamlining the party system so that by 2007 there were only four to manage, two of them, United Russia and A Just Russia, the Kremlin’s own creations, while the Communist Party and LDPR (the Liberal Democratic Party of Russia) hardly constituted an opposition. In December 2003, Boris Gryzlov, the Duma chairman, summed up its negligible role by declaring that ‘parliament is no place for political battles.’

Bezalternativnost – ‘alternativelessness’ – was the triumphant achievement of Putinism, but the hyper-presidentialism, dodging of democratic accountability and use of force that made it possible were the creations of Yeltsinism. There may seem to be more obvious contrasts in the realm of economic policy between the 1990s and the 2000s: Yeltsin implemented a radical programme of market reforms and mass privatisation, seeking to dismantle for ever the state socialist system; Putin moved to expand the state’s role. But this picture, too, needs to be revised. Putinism has been driven from the outset by two parallel impulses, one rooted in neoliberal principles and the other in a strategic statism. From 2000 onwards, the government introduced a series of measures designed to extend the reach of private capital rather than curtail it: in 2001 a flat income tax set at 13 per cent; in 2002 an employer-friendly labour code; in 2002 and 2003 tax cuts for businesses; in 2005 reforms expanding the private sector’s role in education, health and housing, and so on. But it has also sought to ensure that the state retains control over key resources – primarily raw materials for export, especially oil and gas. The result has been what the political scientist Gerald Easter calls an ‘upstairs-downstairs’ economy: large strategic industries remain directly or indirectly subordinated to the state, while private enterprise takes care of the rest, from banking and construction to retail and petty trade. It’s important to bear in mind, though, that even the ‘statist’ component of Putin’s economic policies hasn’t always required state ownership: privately owned companies that work within the parameters the government has laid down, such as the Siberian oil giant Surgutneftegas, have been largely left alone; those that don’t – like Mikhail Khodorkovsky’s Yukos – have been attacked. Even state behemoths such as Rosneft and Gazprom are organised like private companies rather than Soviet-style ministerial enterprises, geared primarily to pay dividends to shareholders – of which the state is simply the largest.

Both aspects of Putinism’s economic policies – the liberalising thrust and its apparent statism – share a respect for private profit-making: a commitment to the capitalist model put in place during the 1990s. Despite vowing in 2000 that the oligarchs would ‘cease to exist as a class’, Putin presided over a massive expansion in their ranks: no Russians made the 2000 Forbes list of billionaires, 87 did in 2007, and 111 in 2014. Vast inequalities have been a constant feature under Putin, as the disparities in income and wealth that emerged in the 1990s were consolidated and deepened in the 2000s. But while the model remained the same, the personnel who benefited changed. The most powerful oligarchs of the Yeltsin era made their fortunes mainly in banking, finance and the media – Boris Berezovsky, Vladimir Gusinsky, Vladimir Potanin – but the ruble crisis of 1998 drastically reduced their influence, and rising commodities prices thereafter gave the advantage to those with assets in the raw materials sector; the typical tycoons of the 2000s were oil and metals magnates such as Vladimir Bogdanov of Surgutneftegas; Aleksei Mordashov, who owns the steelmaker Severstal; and Mikhail Prokhorov, co-owner of Norilsk Nickel. Then there were the ‘state oligarchs’, government functionaries who joined the ranks of the super-rich thanks to their chairmanships of state-owned enterprises, as well as the members of Putin’s entourage who, according to a November 2011 report in Novoe Vremia, controlled companies and assets worth between 10 and 15 per cent of GDP.

The Yeltsin-era oligarchs not only made off with state assets on the cheap but also effectively privatised large chunks of the government apparatus, in a phenomenon known as ‘state capture’. Under Putin, the boot seemed to be on the other foot, as state functionaries came to own swathes of private enterprise – ‘business capture’. But really both processes were shifts in the balance of power between different portions of the same elite. Since the start of the Yeltsin era, government and business had been closely intertwined, with private wealth coming from revenues that derived ultimately from the state: privatisation deals, banking privileges, government contracts, tax and trade concessions, arbitrage opportunities. The oligarchs who commanded the political landscape in the 1990s owed their fortunes to this kind of parasitism, rapidly acquiring enough wealth to purchase political power within a state apparatus permeated by private interests. In 1996 Berezovsky told one interviewer that ‘from my point of view, in general, power and capital are inseparable’ – adding, after a pause, that ‘if something is advantageous to capital, it goes without saying that it is advantageous to the nation.’

In the 2000s, the direction of influence between the spheres of government and business was reversed: on taking power, Putin laid down new rules that oligarchs had to abide by, and later appointed several key allies to the chairmanship of state companies. But the boundaries between the two realms remained fluid and the same goals were pursued in each. In 2008, Oleg Deripaska, CEO of Rusal, the world’s largest aluminium company, declared: ‘I do not separate myself from the state.’ This fusion of profit and power is the reason protestations about government assaults on private enterprise, such as those that erupted in the West after Khodorkovsky’s arrest in 2003, are wide of the mark: since the end of the USSR, the battles between government and business have been struggles over particular pieces of property rather than over the principle of gain. The system Yeltsin put in place was designed to enshrine this principle, and Putinism was built to defend it. The regime we see today is the fruit of their joint success.

*

In December 2010, word leaked out about a 74-hectare estate by the Black Sea reportedly built for Putin himself, complete with pseudo-neoclassical palace, amphitheatre, sports complex and three helipads. The news was scandalous but unsurprising: aerial shots of the enormous mansions belonging to government officials and well-connected biznesmeny had long been a staple of blogs and Twitter feeds: Aleksei Miller, CEO of Gazprom, is allegedly the owner of a thirty-hectare estate fifty miles outside Moscow popularly known as ‘Millerhof’. What was unusual about ‘Putin’s Palace’ was that a whistleblower from within the elite felt compelled to reveal its existence, not that a government official would have accumulated such colossal wealth.

For opponents of Putin such as Gessen, ‘the whole edifice’ of the regime rests ‘on this one man’, and his pathologies are writ large across the system. She claims Putin suffers from ‘pleonexia’, ‘the insatiable desire to have what rightfully belongs to others’; for Dawisha, Putin stands at the centre of a ‘kleptocratic tribute system’, through which he and those close to him have made vast illicit fortunes. There is no doubting the Russian elite’s endless appetite for self-enrichment, or its corrosive effects on the country as a whole. Corruption has metastasised, spreading to almost every sphere of life. State functionaries at all levels squeeze the populace for cash. The sums involved range from the small amounts demanded by traffic cops to the levies of $1000 a month ‘lifted’ from small businesses by government agencies (sanitary inspectors, fire safety inspectors, police and so on). As for high-end political corruption, in the mid-2000s, $200,000 would pay for amendments to existing legislation; $500,000 would get your own law custom-made; a false budget entry cost 4 per cent of the sum involved. The INDEM foundation, a Moscow-based think tank, calculated on the basis of surveys it carried out that the overall amount businesses paid in bribes rose ninefold between 2001 and 2005, from $34 billion to $318 billion, nearly a sixth of GDP.

Perhaps the most obvious symptom of corruption’s pervasiveness is the entry into everyday speech of its distinctive lexicon: most Russians will have no difficulty telling you the difference between raspil, otkat and zanos (raspil – ‘sawing off’ – refers to money made through fraudulent state contracts; otkat is a kickback; zanos is a regularised cash tribute, either a flat fee or a proportion of turnover). State officials who have their eye on particular sectors or kinds of business are known as smotriashchie, ‘watchers’, and their areas as poliany, ‘meadows’, a bucolic image that brings to mind the old tsarist institution of kormlenie, or ‘feeding’, in which officials supported themselves at the expense of the local population.

Corruption is so pervasive that it doesn’t make sense to focus so closely on Putin and his circle when seeking out its causes. Instead of blaming individual ‘kleptocrats’ we need to look at the elite as a whole, and the mechanisms that enable it to thrive. Ledeneva’s Can Russia Modernise?, an ethnography based on interviews with 42 apparatchiks and businessmen, provides crucial insights. Ledeneva’s informants all refer to contemporary Russia’s distinctive mode of government simply as sistema, ‘the system’.[*] The term encompasses almost all the things members of the elite are involved in, from petty compromises to grand larceny, from affairs of state to the exchange of favours. It covers what’s known as ‘manual control’, when the Kremlin overrides institutional hierarchies to secure a particular court verdict, say; or it can describe the elite’s wangling of privileges such as migalki – the blue sirens that enable apparatchiks to thread their way through the Moscow traffic. But what defines sistema is the combination of formal rules and informal practices through which it operates. One example of this is the way that members of the elite use official resources for unofficial purposes and vice versa. State functionaries, for example, depl0y entirely legal instruments – tax inspections, bankruptcy laws, property transfer documents – to seize hold of companies, banks, oil fields and so on. (The Russian elite is intensely legalistic in its felonies, in the spirit of a local proverb: ‘For our friends we have everything; for our enemies, the law.’) The capacity these people have to deploy formal and informal kinds of power at the same time has been one of the most powerful factors behind the growth of corruption: Ledeneva calls it ‘the core modus operandi of sistema’.

The blurring of the boundaries between formal and informal authority has its flesh-and-blood counterpart in the personalised networks that connect members of the elite to one another. The Russian elite is often described as an assortment of rival ‘clans’, grouped under descriptive labels such as ‘Petersburg lawyers’, ‘chekists’ (former KGB operatives), ‘siloviki’ (men from the ‘power ministries’) and so on. But the boundaries of these factions are fluid and subjective: the same people can turn up on different sides depending on whose analysis you’re reading and when. Other metaphors – ‘planets’ orbiting Putin at various distances, ‘Kremlin towers’ ringing the ‘tsar’ at the centre, a standing ‘politburo’ of close advisers – are evocative but too schematic. More helpful is Ledeneva’s suggestion that we see the Russian elite as a mass of several different kinds of network.

The strength and quality of the connections within these networks varies. Those closest to Putin are bound to him by strong personal ties: his inner circle includes former KGB colleagues and people he worked closely with in St Petersburg in the early 1990s, such as Igor Sechin, currently chairman of Rosneft; Sergei Ivanov, the presidential administration’s chief of staff; Viktor Ivanov, head of the Federal Narcotics Service; and Nikolai Patrushev, Putin’s successor as head of the FSB and current head of the Russian Security Council. With a second group Putin has weak but still personal connections. Ledeneva calls them ‘useful friends’ and they include members of the Ozero dacha co-operative, founded in 1996 by Putin and seven others, as well as his old judo partners: Gennady Timchenko, whose firm, Gunvor, rapidly grew from almost nothing to become fourth largest oil trader in the world; and the Rotenberg brothers, Boris and Arkady, billionaire bankers who among other things received lucrative contracts for construction projects related to the Sochi Olympics. (These individuals, and the companies linked with them, were among the first to be targeted by Western sanctions in 2014.)

Now imagine that each of the people connected to Putin stands at the centre of several networks of his own, spanning the realms of private and professional life, bringing in friends, associates, relatives and children. Here’s a brief sample of noteworthy family ties: Patrushev’s son Dmitry is chairman of the Russian Agricultural Bank; Putin’s cousin Igor was the vice president at Master Bank and now chairs the somewhat opaque Fund for the Support and Development of Industry in the Regions; the president’s nephew Mikhail is on the board of a gas company called Sogaz; the former education minister Andrei Fursenko, now a presidential adviser, is the brother of Sergei, another member of Putin’s dacha co-operative and director of a Gazprom subsidiary. Parts of this extensive web of nepotism have been mapped out by Russian journalists over the years: in Vlast’ semei (‘The Power of the Families’, 2012), for example, Marina Litvinovich focused on twenty of the top familial ‘clans’. The phenomenon extends all the way down to the local level: in April 2011 the newspaper Vedomosti ran a story about the wealth and power accumulated by the children of United Russia officials under the headline ‘They Were Just Very Lucky’. Rather than seeing the Russian elite as a set of clans or a single clique, in other words, we should think of it as a system of alliances and interest groups stretching across the country – a tangle of lines branching outwards in every direction from the ‘vertical of power’.

The concept of a kleptocracy or a ‘cabal’ centred on Putin, then, singles out particular individuals as being responsible for the rapaciousness of the regime. The logic behind the US and EU sanctions is that since power in Russia is both very centralised and highly personalised, punishing a select group of people at its apex is tantamount to disciplining the regime itself. This requires us to believe that Putin and his circle are uniquely crooked – as if the rest of the Russian elite weren’t driven by the same motives, or skilled in the use of the same techniques. More important, it asks us to shut out the wider realities of profit-making in Russia which are rooted in the capitalist system that was imposed in the 1990s, at such cost to Russians themselves but to much applause from abroad. That system is something the West has no interest in attacking.

*

There is a memorable scene in Andrei Zvyagintsev’s 2014 film Leviathan, set in a small town in the far northern Kola Peninsula, in which the town’s thuggish mayor pays a night-time visit to Nikolai, whom he has ordered to be evicted from his home. Red-faced and drunk, the mayor stumbles out of his chauffeur-driven car and says to Nikolai, ‘Vlast nado znat’ v litso’, meaning ‘You should be able to recognise power’ – though since the idiom contains the word for ‘face’ it implies recognition not just of power but of its physical embodiment.[†] Dmitry, the Muscovite lawyer whom Nikolai has invited to help him, tells the mayor he has no right to be on private property, to which the mayor responds by shouting at Nikolai: ‘You never had any rights, and never will!’

Leviathan has been called an unsparing portrait of Putin’s Russia, which it is: all the cynicism and arbitrariness of the ruling elite are on display. We see how the ‘vertical of power’ – a picture of Putin hangs on the wall of the mayor’s office – is in practice a licence for kingpins all the way down the chain to do what they like in pursuit of their own private goals. The film’s protagonists have their lives destroyed for daring to resist the whims of the local authority. But the bleakest aspects of the film are the mysteries it leaves unexplained. Why are Nikolai, Dmitry and the rest so defenceless in the face of this miniature tyrant, who seems almost too comical to be truly intimidating? Why is the system he represents so powerful, here and in the rest of Russia? What’s holding it in place?

Much writing on Russia seems to suggest that the answer is simply Putin himself, through some combination of authoritarian charisma, oil revenues, nationalist demagoguery, media manipulation and electoral fraud; or else it’s a criminal, semi-KGB elite that has managed to seize the machinery of state and convince the country to follow it down an anti-democratic path. But this is to mistake a symptom for a prime cause. Putinism isn’t a corrupt, dictatorial structure imposed on a helpless population; it’s embedded in the social, economic and political realities of modern Russia, shaped by them even as it shapes them in turn. One of the leviathans referred to by Zvyagintsev’s title is the state apparatus, but when isolated individuals like Nikolai try to oppose a crooked mayor, they are up against a far larger machinery – the form taken by capitalism in post-Soviet conditions. The fallout from the Ukraine crisis has greatly narrowed Putinism’s room for manoeuvre, but even in the unlikely event of his being swept from power, the system that currently bears his name could take on a different one and remain little altered in its substance. It is all the more formidable an adversary because it is both elusive and all-pervading, abstract and yet substantial: it is both versions of the biblical monster that haunt the screen at different moments in Leviathan – a black whale that surfaces forebodingly from the sea, and a bleached skeleton embedded in the sand.

23 January

[*] Peter Pomerantsev wrote about sistema in the LRB of 5 December 2013.

[†] Michael Wood reviewed Leviathan in the LRB of 8 January.