by Anders Aslund, Peterson Institute for International Economics
Op-ed in the Moscow Times
May 21, 2008
© Moscow Times
Most journalists have unquestioningly embraced the notion that Prime Minister Vladimir Putin formed the new government. A typical headline after the Cabinet shakeup read: "Putin Reinforces Power Base by Giving Top Jobs to Kremlin Aides" (Financial Times).
But is that true? Many Russian insiders disagree, as has been reflected in this newspaper. They fall into two categories. One group says Putin is the real ruler and will remain so until 2020. The other group, which includes many leading Russian businessmen, suggests that Putin might fade away within a year because presidential powers are so great, Putin is tired and too Soviet, and many economic and social problems are piling up.
When Putin assumed the presidency in 2000, he initially did little to change the government left by Yeltsin, even keeping Yeltsin's chief of staff, Alexander Voloshin, for four years. In later years, the Putin regime became increasingly dominated by a close circle of St. Petersburg KGB cronies, known for being as repressive as corrupt. Their only merit was their close links with Putin. For eight years, he did not demote a single crony.
Amazingly, when forming his new government and presidential administration, Dmitry Medvedev demoted no less than six of Putin's chief KGB cronies: Kremlin officials Igor Sechin and Viktor Ivanov, FSB director Nikolai Patrushev, Federal Drug Control Agency chief Viktor Cherkesov, First Deputy Prime Minister Sergei Ivanov, and IT and Communications Minister Leonid Reiman. Since Putin had never done anything like that, Medvedev looks remarkably strong.
The scourge of the Putin administration was the Sechin group, which spearheaded the confiscation of Yukos and reinforced repression. It seemed invincible, but now its four top members have been demoted: Sechin, Viktor Ivanov, Patrushev, and Justice Minister Vladimir Ustinov. Apparently, their only support was Putin's presidency.
The worry was that the competing St. Petersburg KGB clan headed by Cherkesov would come to the fore, but Cherkesov has also lost standing. Medvedev has delivered a remarkable double blow.
Although Russia's economy is continuing to boom, problems are increasing. Inflation has surged to 14 percent, and oil and gas production is stagnating. Economic overheating is overwhelming, with a shortage of qualified labor and desperate underinvestment in public infrastructure. Worst of all is the corruption that Putin promoted.
At long last, the blatant conflicts of interest have been somewhat reduced. Reiman, who has been mired in one corruption scandal after the next, has been demoted to presidential adviser. Sechin, the chairman of Rosneft, has been weakened, as has Viktor Ivanov, the chairman of Almaz-Antei and Aeroflot. Viktor Khristenko, the chairman of Transneft, no longer has energy in his portfolio as minister. The head of the newly created Energy Ministry, Sergei Shmatko, is independent of oil and gas interests.
All bona fide reformers remain in the government, and they have been reinforced by new appointments. Among the deputy prime ministers, a majority—Igor Shuvalov, Alexei Kudrin, Alexander Zhukov, and Sergei Sobyanin—can be considered market economic reformers.
Admittedly, they are balanced by Putin's neanderthals, Viktor Zubkov, Sechin, and Sergei Ivanov, but as economic reality imposes itself on Russia, renewed reforms will be badly needed. Sechin has hardly ever appeared in public and is considered unsuitable as a public politician, so he might be up for a fall. How many news conferences can he survive?
In Russia, no ruler is safe unless he controls the security services. It took Putin more than a year until he was allowed to undertake any change. With stunning speed, Medvedev sacked Patrushev, Putin's long-serving and odious friend, as head of the FSB and appointed Alexander Bortnikov, who is probably closer to Medevedev.
Medvedev has emphasized the need to fight Russia's "legal nihilism" and corruption with legal reforms, and he has appointed his own justice minister, his old friend Alexander Konovalov. On Monday, he announced the creation of a new state body to fight corruption.
In recent speeches, Medvedev has complained about renationalization and increased state domination in the economy.
Among Putin's presidential staff, Medvedev needed two people, Vladislav Surkov, who commands the United Russia faction in the State Duma, and Alexei Gromov, who has masterminded Putin's media manipulation. Both are staying with the presidential administration, which probably means that they will transfer their loyalty to Medvedev.
One of Putin's most spectacular failures has been to win membership for Russia in the World Trade Organization. Sensibly, Medvedev has raised this issue to a first deputy prime minister—Shuvalov—with a strong operative track record. The same is true of Khristenko, who has been given the WTO mandate at the ministerial level. Apparently, Medvedev is more serious about Russia joining the WTO than Putin ever was.
Putin has also alienated other former Soviet republics through arrogance, verbal aggression, cyberwar, and military provocations. Medvedev has at least established a government agency to promote Russia's cooperation with these countries.
One of the most repugnant features of Putin's regime was his support of the hooligan movement Nashi. He even organized a state agency to nurture them and let their head, Vasily Yakimenko, become the agency's chairman. Medvedev lost no time in sacking Yakimenko and abolishing his agency.
Is this a Medvedev rout? It is too early to say. One dissonance stands out. Sergei Naryshkin, a Putin loyalist from the St. Petersburg KGB, has become Medvedev's chief of staff. But Medvedev has already advanced his cause more than Putin did during his first three years as president. Rather than talking about Putin's reinforced hold on power, we could speculate that Putin is actually preparing to leave.
None of these changes proves that Medvedev is good, but they arouse hope. Interestingly, both former Prime Minister Mikhail Kasyanov and Novaya Gazeta editor Dmitry Muratov have argued that we should give Medvedev half a year to prove himself. There are many litmus tests. Will Medvedev give amnesty to Russia's political prisoners, including Mikhail Khodorkovsky? Will he reintroduce freedom of expression, media, and assembly? All these laws already exist, so he can just start implementing them again.
Medvedev's successful start suggests that we should expect many and substantial reforms soon, and they are badly needed. Corruption cannot continue like this if the Russian state is to stay manageable. Long-prepared reforms for education, health care, and pensions are urgent. The country's infrastructure must be extended and renewed. The government can no longer afford not to reform as it did for the past five years. There is new hope for Russia.
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