Workers' Liberty #57


The continuing crisis in Russia

On 9 August Russia's President Boris Yeltsin sacked his Prime Minister - Sergei Stepashin - and his entire government. Former KGB operative Vladimir Putin was named by Yeltsin as Stepashin's successor.

Stepashin was the fourth Russian Prime Minister to be sacked in 17 months.

Viktor Chernomyrdin was sacked in March 1998. Five months later his successor, Sergei Kiryenko, was sacked. Yevgeny Primakov then lasted until May of this year. Stepashin survived just three months in the post.

By Stan Crooke.

On one level the latest sacking - and the preceding ones - could be seen as the idiosyncratic act of an ageing and ailing politician with a drink problem. There might be an element of truth in this. But on a more fundamental level the sacking of Stepashin and the appointment of Putin are rooted in nature of the political and economic structures which have emerged in Russia in the aftermath of the collapse of Stalinism.

SStalinism industrialised the Russian economy (and the economies of other Soviet republics). It did so at a tremendous price in human suffering, and in an irrational and wasteful manner. This industrialisation had nothing to do with building socialism. In fact, it was closer to primitive slavery than it was to socialism.

The collapse of Stalinism was followed by the proclamation of a "free market economy", to be achieved through a rapid process of privatisation. In practice, such privatisation was often simply an opportunity for Communist Party bureaucrats to transform themselves into capitalist entrepreneurs and financiers.

Factory directors bought up their factories on the cheap. They then set up their own daughter companies and joint ventures, to which they transferred their factories' equipment at an even lower price. Factory output was smuggled abroad in order to accumulate foreign currency, immediately invested in private Swiss bank accounts.

CP officials syphoned off vast amounts of CP funds and transferred them to the control of commercial trading houses and banks. Sections of the intelligence services invested millions from their budgets in new commercial structures and banks. Military commanders, especially in the Western Group of Forces, enriched themselves by embezzling money from the military budget and selling off military equipment.

Subsequent surveys underlined the overlap between the old nomenklatura and the new capitalists. According to Olga Kryshtanovskaya of the Moscow Institute of Applied Politics, 7% of the new Russian capitalists had been CP secretaries, and another 60% had had direct or indirect links with the old CP nomenklatura.

A 1996 report by the Harvard University Russian Research Centre came up with the same figure: 60% of the newly privatised enterprises were owned by former CP officials or factory managers (who would also have been CP members).

Closely intermeshed with the Communists-turned-capitalists was organised crime. Even before the collapse of Stalinism there had already developed an extensive criminal network in Russia, the Vorovskei Mir (Thieves Community). By 1991, when Russia declared its independence, the business dealings of Vorovskoi Mir were worth over a billion dollars a year, some 15% of the volume of goods and services in the country.

Privatisation of the economy was an unmissable opportunity for organised crime. The previously accumulated wealth of the Vorovskei Mir gave it the resources to buy into privatised industries and joint ventures. The new banking system was an opportunity for money-laundering. And the emergence of new enterprises allowed protection rackets to flourish.

According to the Economist, by 1994 some 40,000 businesses were owned or controlled by criminal organisations, including most of the country's 1,800 banks, and three-quarters of private enterprises paid up to 20% of their earnings as protection money.

A report published by the Moscow Academy of Sciences the following year concluded that 40% of all entrepreneurs and 66% of all commercial structures maintained criminal relations, and that organised crime had established control over 35,000 economic entities, including 400 banks, 47 currency exchanges, and 1,500 enterprises still in the state sector. The national and local government authorities also played a central role in the process of privatisation. It was, after all, they who had responsibility for carrying out the process of privatisation.

The "new" breed of "democratic" politician which supposedly emerged in Russia after the collapse of Stalinism was nothing of the sort. The "democrats" were very often just the old CP nomenklatura in a different guise: in the mid-'90s, 75% of the government, 60% of parliamentarians and 83% of regional governors had been linked in one way or another to the old nomenklatura.

Just as the individual factory director used privatisation as a way of buying out their factory on the cheap, so too local and national politicians recognised privatisation as an opportunity to enrich themselves from what had formerly been state property.

They bought out local enterprises themselves, or they entered into joint ventures to buy them out. They used their positions to award contracts to their own business associates. And they used their power and influence to ensure that their business partners and members of their own family were nominated to the boards of directors of privatised companies.

In return, businessmen and industrialists bankrolled the election campaigns of the politicians who had created such profitable openings for them. In the 1996 presidential elections, for example, estimates of the money paid by businessmen into Yeltsin's campaign varied from 100 to 500 million dollars. (The official limit on election expenditure was three million dollars.)

What has emerged in Russia over the last decade is not simply a form of "crony capitalism" in which a few corrupt politicians take backhanders from bent businessmen and outright crooks. What now exists is a set of political and economic structures in which there is simply no clear dividing line between businessmen, criminals and politicians. Business, crime and politics are not even a continuum. They are essentially one and the same activity, or at least different aspects of the same activity: making money. However, there is one difference between politicians, on the one hand, and businessmen and criminals on the other. The former stand for election, the latter don't.

Elections for the Russian parliament are due to be held in December of this year, and presidential elections have to be held by July of next year. Yeltsin himself will not be standing for re-election. Whatever his personal inclinations, he must be aware that the business "community", unlike in 1996, no longer sees him as a safe pair of hands.

But Yeltsin wants to stitch up the outcome of both elections. He and his "family" have grown wealthy from the process of privatisation and its inherently corrupt nature. (And "family" here does not mean the biological one. It includes his political allies, business friends, and overall retinue of hangers-on who have amassed personal fortunes in recent years.) Yeltsin's fear is that the election of a hostile Duma or the election of a hostile President could lead to the Yeltsin "family" being stripped of its power and wealth, and possibly even facing criminal charges.

This is not an irrational fear. Precisely because of the intermeshing of politics and business in Russia - "the business of government is business" - the loss of political office is tantamount to the loss of a personal business empire, with the attendant danger that whoever wins the take-over battle might start to enquire into corrupt practices.

Yeltsin dismissed Stepashin because he had lost confidence in his commitment to ensuring the "right" results in the parliamentary and presidential election. A week before his dismissal Stepashin had failed to prevent a swathe of regional governors from coming out in favour of Moscow mayor Yuri Luzhov as a candidate in next year's presidential election. And only three days before his dismissal Stepashin had declared himself to be neutral as regards the outcome of the Duma and presidential elections.

Stepashin may simply have been biding his time, waiting to see who emerged as the frontrunner so that he could then back the winner. Or he may have been preparing his own bid for election as President.

Whatever the exact circumstances, as far as Yeltsin was concerned Stepashin was no longer capable of doing his job properly, i.e., safeguarding the position of the Yeltsin "family". So Stepashin had to go.

His replacement, Vladimir Putin, worked for the KGB for 17 years. After spells as an advisor to Anatoly Sobchak and Anatoly Chubais - both of them former Yeltsin allies - Putin was appointed head of the KGB's successor organisation, the Federal Security Service (FSS), in July of last year. Putin, a member of the Yeltsin "family", owes his appointment not to his political experience of serving Sobchak and Chubais, but to his past in the KGB and his present in the FSS. This too says something about the nature of the Russian political system.

Even by the limited standards of bourgeois democracy, Russia can hardly be considered a "democratic" country, notwithstanding the existence of a multi-party electoral system. In the absence of the usual bourgeois-democratic checks and controls on public office holders, dirt becomes the means to undermine the position of those who have fallen out of favour with the dominant "family".

When Yeltsin's bodyguard Alexander Korzhakov was dismissed by his boss in 1996, for example, he was suddenly exposed for running a multi-million dollar racket in importing duty-free alcohol and cigarettes. The expose coincided with Korzhakov's attempt to win a Duma by-election in Tula.

Similarly, when the Russian prosecutor-general Yuri Skuratov rejected Yeltsin's demands last summer that he resign, national television showed footage of him in a sauna with three prostitutes. Yeltsin had demanded Skuratov's resignation to prevent him pressing ahead with an enquiry into money-laundering by Yeltsin's son-in-law.

The greatest digger of dirt in Russia is Putin's FSS. Putin's approach to winning back support from the regional governors and other powerbrokers who now back Luzhov will not be through the kind of political trade-offs practised in a bourgeois "democracy". His approach will be to threaten to dish the dirt on them.

The sacking of Stepashin and the appointment of Putin are a reflection of the undemocratic and corrupt nature of the social system which has evolved in Russia since the collapse of Stalinism. Stalinism proved to be an historical dead-end. The same will prove true of Russia's mafia-capitalism.

Back to the contents page for this issue of Workers' Liberty

Back to the Workers' Liberty magazine index

[ Home | Publications | Links ]