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3 August, 2011

Before the Tsunami

Russia in anticipation of changes

It is sometimes easier to sense the changes in a country's politics andatmosphere after an absence of a few years. Returning to Moscow for thefirst time since 2007, I found a country both frantic and frustrated:frantic to enjoy the new materialism that was so visible and so brash in thecapital, and frustrated because of the lack of opportunities for the youngergeneration and the political paralysis while all the country waits to findout whether President Medvedev will stand again for president in March orwhether Vladimir Putin, his predecessor, will reclaim his old job.

The new materialism is everywhere. Moscow is booming - at least on thesurface. New office blocks and shopping centres are going up apace.Restaurants are full, people are enjoying the assurance of consumer choiceand, despite very high prices in the city centre, and the new moneyed class isdetermined to splash out on consumer luxuries.

Moscowis a far cry from the drab communist capital of 30 years ago oreven the transitional post-communist chaos of the early Yeltsin years. Intypical manner, the Russians have swung from enforced egalitarianism to thewildest excesses of untrammelled capitalism - with consumption being theoverriding goal of those who remember the shortages and the lack of choice.

Indeed, the desire for the best of the West has led to a glut: there are toomany shopping centres, filled with Western brand-name retails outlets thatare half empty. There are too many thrusting skyscrapers built by corrupt orspectulative interests as new business centres. And much of this building,destroying much of the historic heart of the city, is rumoured to be a wayfor oligarchs to hide their money or for monopoly interests to launderprofits and escape tax.

But in the lazy months of summer, a younger generation of Russians isenjoying the new affluence. The old conformity has gone: whereas in the 1970Russians, looked, walked, dressed and behaved in regimented ways, verydifferent from Westerners, today's young people - relaxed, plugged-in totheir Facebook sites, mobile phones and internet connections - behave asthough they had never known the controls, the political restrictions and thefear of surveillance that persisted even until the end of communism.

Appearances can be deceptive, however. There is a frustration and resentment at the growing social divide, at the differences between rich and poor and at the astonishing growth of corruption. Almost every Russian complains of having to pay bribes, often just to get officials to do what they are supposed to do. Many, especially the young, complain bitterly of the clique holding top jobs who, they say, are enriching themselves illegally and have no fear of official reprimand or dismissal. Corruption, according to government figures, has increased by at least a third in the past two years, with the astronomical figure quoted of $300 billion paid in bribes to business interests.

At the same time, the country's economic dependence on its energy exports means that much of Russian industry is lagging far behind, and that efficiency reforms have barely begun in many areas. This has dampened the job prospects for a new generation of well educated Russians. Surveys have found considerable frustration over the lack of opportunity and the difficulties that monopoly interests create for anyone trying to do business on their own. A high proportion of young people would like to move abroad to find work (if there is any prospect of getting a work permit).

The Kremlin is well aware of the frustrations. And barely a week goes by, in the run-up to the parliamentary elections in December, without a promise to address this issue and respond to the rising call for government accountability. Here, however, politics intervene. Dmitry Medvedev has made the anti-corruption campaign a hallmark of his presidency, coupled with a modernisation of Russia's infrastructure, the opening up of the country to outside investment, a reform of the court system, more privatisation and a retreat by the State from direct involvement in the economy. He outlined this in detail to thousands of foreign businessmen at the annual St. Petersburg International Economic Forum last month.

It sounded like a recipe for courageous economic reform and liberalisation. But many Russians were cynical. Mr Medvedev has made such promises before - with little result. And unless there are high-level prosecutions of senior figures in the Kremlin entourage who are known to be corrupt, few believe that anything will be done to curb the power of the "siloviki" - the power ministries associated with Prime Minister Putin. Mr Medvedev, in almost four years in office, has not dismissed a single minister.

His speech, however, was seen by many as a signal that he is trying to distance himself from Mr Putin, associated with the renationalisation of Russia's energy assets, a strong Kremlin role in the economy and an authoritarian form of government that tolerates little dissent either in politics or the economy. And this has led to another round of speculation about the political relations between the two men.

For months all Russia has been analysing every Kremlin prouncement to try to guess the political intentions of both Putin and Medvedev. Every commentator has a different theory. Some say that Medvedev will withdraw to let Putin stand, almost unopposed, for the presidency. Others say that the present "tandem" will continue, as it suits both men to have a "good cop, bad cop" duopoly, both committed in fact to the same end. Others suggest there may be a phoney contest, with Mr Putin winning and Medvedev, the losing candidate, being offered the job of Prime Minister - reversing the present arrangement.

In truth, no one knows. But the speculation is having a debilitating effect. For until it is clear who controls the real levers of power, no official wants to take decisions that might land him on the wrong side of power. Russia's problem is the long-standing conflict between a State based on high-sounding constitutional principles and one run in reality as a Byzantine court, where intrigue, character assassination and the fawning determination of senior officials to do the tsar's bidding lead to transparent attempts to manipulation regulations to achieve political aims.

Little has changed since communist, or even tsarist, times. For this reason, there is a determined attempt to give the appearance of democracy and pluralism but a constant effort to prevent the emergence of any real political opposition. It is, in Putin's famous description, a "managed democracy". This has become very evident over the past two months.

Last month, four opposition politicians attempted to register a new party, the Party of People's Freedom, to contest the parliamentary elections in December. It was to be led by Boris Nemtsov, a former deputy Prime Minister, Vladimir Ryzhkov, a former Duma deputy, Mikhail Kasyanov, a former Prime Minister, and Vladimir Milov, a former deputy energy minister. The Justice Ministry, however, refused to register it on the grounds that it did not provide for a rotation of its leaders and had collected signatures from people who were either dead, under age or not legal residents of the regions where they signed. Mr Nemtsov has since been banned from travelling abroad.

No such quibbles held up the registration of the new pro-Kremlin Right Cause party, however, which is to be headed by Mikhail Prokhorov, Russia's third richest man who has no previous political experience. This party, which insists it is not an "opposition, will offer a nominal alternative to the ruling United Russia party, together with the marginal communists and the Liberal Democratic Party of the maverick Vladimir Zhirinovsky. But none of them are in a position to oppose either Mr Putin or Mr Medvedev.

These manoeuvrings point to the central political dilemma in Russia today. How can the Kremlin modernise an economy, desperately in need of outside investment and diversification, while retaining the kind of central control that Moscow has always exercised and which Putin believes essential in a country so ethnically diverse and geographically vast? To modernise the economy, Medvedev needs to reassure potential Western investors, who are worried not only about corruption but also about the lack of transparency, the gangster culture in much Russian business and the subservience of the law to political authority. Words are not enough to reassure them. They were worried by the arrest and jailing of Mikhail Khodorkovsky (although there are rumours he may be paroled before the December elections). Another clear lesson was sent only weeks ago by the sudden dismissal, without reason, of the British chief executive and all foreign managers from the successful airline Avianova, orchestrated by the leading oligarch shareholder Mikhail Fridman.

Independent courts, successful challenges to such arbitrariness and the prosecution of Kremlin insiders would, however, threaten the Putin conception of a strong presidency. Russia has always seen power as a zero-sum game. For this reason, it is now bitterly opposed to the online campaign against corruption being waged by Alexei Navalny, a blogger who has exposed the failure to prosecute some of the highest placed officials suspected of corruption.

Putin, as well as Medvedev, knows that he needs to modernise the economy if it is not to be a hostage to the price of oil. But to do so at the price of freedom is difficult: young Russians no longer have any fear. The internet - which, unlike China, is not censored - makes full state control of politics impossible, and the younger generation of Russians is very internet-savy, giving this medium a power and influence much greater than in the West. Russia is increasingly interlocked with Western partners and neighbours, and the internet reinforces those links every day.

Despite his KGB background, Putin is, at heart, a pragmatist. Most Russians believe that he still commands the real power in the Kremlin. For all his attempts to create his own power base and woo the middle classes, Medvedev is unlikely to supplant his political patron. Will Putin be able to retain political control, keep up living standards and satisfy a population that now takes its post-communist freedoms for grated? Already Putin's popularity ratings, though high, are slipping. Despite the Georgia war and the continued opposition to Nato, both Putin and Medvedev have shown a more friendly face to the West in the past two years. They need the expertise of the West as well as its investment. The dilemma, as always in Russia, is how much democracy and Western influence to admit without losing control of a country that still has not built up the checks and balances or the institutions of civil society. It was the dilemma facing Gorbachev - and in Russian terms, he lost control.

The lazy summer days in Moscow may be only the prelude to a much fiercer political struggle this coming autumn - but one played out behind the scenes in the Kremlin, and not in front of the cameras of state television.


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