The Penguin History of Modern Russia

the voting in July 1996, after the other candidates had been knocked out, gave a thumping victory to Yeltsin. Money, patronage and a brilliant media campaign had done the trick for him.

Despite his good performance in the presidential polls, though, Yeltsin lacked a stable, loyal majority for his policies in the State Duma.⁷ He did not attend its proceedings or negotiate with its leaders, leaving it to his prime ministers to manage some kind of accommodation. Chernomyrdin worked behind the scenes offering attractive deals to groups of deputies. Party politics lost much importance as various leading figures were bought off. Vladimir Zhirinovski and the Liberal-Democratic Party noisily criticized the government but did not always vote against it. Duma debates commanded little public respect or attention. Press and TV were concentrated upon the President and ministers except when something scandalous was happening in the chamber. Zhirinovski increased his notoriety in 1996 by physically assaulting a female Duma deputy; but his party’s fortunes did not benefit in subsequent elections. The situation was staider in the Council of the Federation but hardly more helpful in easing the passage of Chernomyrdin’s legislation unless he gave in to their demands for special concessions to region after region. This was pork-barrel politics par excellence.⁸

Of all the republics in the Russian Federation it was Chechnya which caused the greatest trouble for Moscow. Having declared unilateral independence in 1991, its leader Dzhokar Dudaev had continually cocked a snook at Yeltsin. He had presided over the thorough criminalization of economic activity in Chechnya and given haven to Chechen protection racketeers operating in Russia’s cities. He permitted the application of Sharia law. He declined to pre-empt Islamist terrorist raids from inside Chechnya upon nearby Russian areas. While Dudaev was right that Chechnya had remained with Russia solely because of the superior military power of tsars and commissars, he was not the simon-pure democrat and liberator depicted in his propaganda.⁹

In December 1994 Yeltsin’s Minister of Defence Pavel Grachev had persuaded him that the Russian Army would quickly crush the Chechen rebellion. The motives for the invasion were murky. Grachev wished to divert attention from his corrupt management of the armed forces’ finance and equipment. Powerful members of Moscow’s business elite also aimed to secure tighter control over their oil assets in the Chechen capital Grozny. Yet Grachev had misled everybody about the readiness of his troops to take on the Chechens. After Grozny fell to artillery assault by land and air, Dudaev and his commanders organized resistance in the mountains. Terrorist actions were intensified in Russian cities. Moscow TV stations and newspapers had reporters in Chechnya who told of the Russian army’s incompetence and of the atrocities carried out by its troops. Such was the confidence of the Chechen fighters that even after Dudaev was killed, having been traced through his satellite-connected mobile phone, the armed struggle continued. But the cost in human lives mounted, and a truce was arranged for the duration of the presidential campaign; and Lebed soon succeeded in producing a peace agreement which left both sides with their honour intact. Military hostilities would cease; the Chechens would in practice govern Chechnya without interference and the independence question would simply be deferred.

No one really thought that the threshold had been crossed to a solution. Already the implications were dire for Russia’s self-liberation from the authoritarian past. Leading liberals Grigori Yavlinski and Yegor Gaidar were among the few politicians to censure the invasion. Yeltsin recognized his blunder over Chechnya too late and was a shadow of his former self. Practically the entire political establishment had casually accepted the use of massive and at times indiscriminate violence in pursuit of the state’s ends. There was scant appreciation of the damage done to the prospects for a healthy civil society to emerge.

The usually critical leaders of the Western powers did little more than go through the motions of upbraiding the Russian government. The perception was that Yeltsin, warts and all, was the best President available and that his economic and diplomatic achievements earned him the right to prolonged support. It was noted too that Chernomyrdin, while abandoning the laisser-faire zeal of Gaidar, continued to strengthen the roots of capitalism in Russia. Even Gaidar had avoided genuine ‘shock therapy’ for the ailing economy for fear that a drop in people’s living conditions might provoke civil disturbances. Chernomyrdin maintained the policy of enormous state subsidies for fuel, lighting, telephones and transport, and he ensured that tenants should receive the deeds to their apartments without charge. He also devoted resources to keep the prices of farm produce low. Moreover, fiscal regulations gave incentives to firms to eschew sacking employees; the incidence of unemployment stayed low.¹⁰ At the same time Chernomyrdin and his successors pressed ahead with economic measures which brought little benefit to anyone outside the tiny circles of the wealthy. By 1995 sixty-five per cent of industrial enterprises had been privatized. The market economy had been installed.

Markets in Russia, however, were of a very distorted kind. Competition was cramped by the dominance of a few ‘oligarchs’ over the banks and the media as well as the energy and rare metals sectors. Criminal gangs and corrupt administrative clienteles compounded the difficulty. The rule of law was seldom enforced. The economic environment was so unpredictable and indeed downright dangerous that the most successful entrepreneurs stashed away their profits in Swiss bank accounts. Fraud was rampant. About half the funds loaned to Russia by the IMF were illegally expropriated by powerful individuals and diverted abroad.

Not all the economic data were gloomy. Although gross domestic output continued to diminish after 1993, the rate of diminution was slowing. In comparison with most states of the CIS, indeed, Russia had an economy that seemed very vibrant. Tajikestan and Georgia were in desperate straits and even Ukraine could not afford to pay its debts to Russia for gas and petrol. The Ministry of Economics in Moscow in 1995 predicted that the Russian economy would at last start to expand again in the following year. The prognosis was proved wrong. Among the problems was the justified reluctance of foreign enterprises to set up branches in Russia while contracts were hardly worth the paper they were printed on. The government’s financial management also left much to be desired. In 1997 it issued state bonds to balance the budget. The terms were hopelessly disadvantageous to the government if ever the rouble fell under severe pressure. Global financial markets were febrile at the time and the dreaded run on the rouble duly occurred in August 1998. Russia unilaterally defaulted on its international loan repayments and Sergei Kirienko, despite not having been Prime Minister when the state bonds had been issued, stepped down.¹¹

Yeltsin’s reputation was in tatters, but the Russian financial collapse quickly turned out to be a blessing in disguise. The devaluation of the rouble increased the costs of imported goods and inadvertently provided a stimulus to domestic manufacturing and agriculture. Shops and kiosks bought up and sold Russia’s own products. By 1999 the beginnings of economic recovery were unmistakable and gross domestic output was rising; and these small steps forward were rightly treated as success.

Nevertheless the economic crisis was not simply an accidental result of the vagaries of financial markets at home and abroad; for the government’s incompetent policies had made a bad situation a lot worse. Such strength as the Russian Federation retained in the world economy anyway rested on the export of its natural resources. Oil and gas were in the lead. Not far behind came gold, diamonds and nickel. Wood pulp too was sold abroad — the result was a shortage in the supply of paper for Russian newspapers! The only finished industrial goods to be sold in any amount across Russian borders were armaments, and even in this sector there was the difficulty that the government was constrained by the Western powers to stop selling weaponry to traditional customers such as Iraq and Iran. Such an economic strategy had been followed by governments from Gaidar’s onwards. Indeed the structure of Soviet foreign trade had similarly been built on the export of natural resources. What was new after the collapse of the USSR, as Zyuganov pointed out, was the process of de-industrialization. Russian factories no longer produced as much output as in 1990 (which was a poor year for the Soviet economy). The Communist Party of the Russian Federation urged the need for tariff walls for the restoration of industrial production.

Communists were brisker in supplying criticism than practical policies. Indeed they appeared reconciled to permanent opposition, and their willingness to abandon tenets of Marxism-Leninism was remarkable. Zyuganov declared himself a Christian believer; his prolific pamphleteering was inspired more by anti-communists like Nikolai Berdyaev, Arnold Toynbee and Oswald Spengler than by Lenin.¹² One prominent communist even owned a casino.

Such a party had become ever more incapable of reversing the changes made since 1991. Its most telling criticisms in the State Duma were aimed at the government’s foreign policy. Yeltsin had planned with Foreign Minister Andrei Kozyrev to sustain Russia as a power in alliance with the most influential Western countries: both believed in the need for a warm partnership with the USA and Yeltsin spoke confidently about his ‘friend Bill’ when reporting on his summit meetings with President Clinton. Yet the partnership was never remotely near to being an equal one. Russian economic distress disabled the government from competing with American technological advance, military power and global diplomacy. The only residue of old glory lay in Russia’s possession of ageing nuclear weapons: this was the sole reason why Clinton bothered to hold summit meetings. The Russian financial