28 October 2003 22:46
Democracy is not Putin`s priority
While western economies have been labouring through an economic slowdown, Russia has been enjoying vigorous growth.
Impressive stock and bond market performances have attracted upgrades from ratings agencies and enthusiasm from global
investors. Yet Russia's politics are in sorry shape - with conflict rumbling on in Chechnya, forthcoming elections
whose outcomes have been all but predetermined, and now the arrest and detention of Mikhail Khodorkovsky, the
country's most successful businessman.
Investors could be excused for feeling nervous. Back in 1998, Russia also seemed an investor's paradise, with
high returns and apparently low risk. Then that August, without warning, the government devalued the rouble and
announced that Russia would no longer meet its obligations to foreign bondholders. The Russian crisis was born. Could
history repeat itself?
Russia's democracy was then, as now, sickly. Boris Yeltsin, then president, had squandered opportunities to
build durable, accountable and representative political institutions. But it would be a mistake to attribute the crisis
to a lack of political reform. A far more important factor was a lack of central authority. In 1998, Mr Yeltsin was an
absentee president, while a small group of oligarchs battled for power in the shadows. Decision-making in Moscow,
whether on foreign policy, domestic politics or - critically - the Russian economy depended on who talked to whom on a
given day.
That is a mistake that President Vladimir Putin is unlikely to repeat. When, as a comparative unknown, he assumed
power, many analysts hoped that, in spite of his KGB background, he would prove a democrat in disguise. It was a forlorn
hope. As Russia's elections (parliamentary in December, presidential in March) approach, Mr Putin has acted
speedily to shut down anything that smacks of opposition. In particular, he has targeted those members of the business
elite who have involved themselves in politics.
Mr Khodorkovsky is just the latest and perhaps most spectacular example. Russia's wealthiest man, he heads
Yukos, the oil company that is arguably the country's most successful international concern. He has not hesitated
to criticise the president publicly, funding reformist opposition parties and calling for Mr Putin to move swiftly to a
more democratic system. He seems to have believed that his exceptional power and wealth would make the Kremlin think
twice before acting against him, despite a police investigation into Yukos in which two senior officials have already
been imprisoned. He was wrong. On Saturday, Mr Khodorkovsky was arrested and charged with offences including fraud and
tax evasion.
It is a tragedy that Mr Putin could find no way to coexist peacefully with one of his country's best and
brightest. But the arrest should not be mistaken for a broadside against business. Almost all of Russia's oligarchs
made a deal with the Kremlin when Mr Putin took office - they undertook to pay their taxes and stay out of politics, and
in return were allowed to get on with their businesses. That deal remains intact today, and so it will after elections -
and the Khodorkovsky affair - have faded from memory.
Nor is a political crisis on the cards. Russia's citizens hold little affection for those fortunate enough to be
in the right place at the right time during the privatisations of the Yeltsin years. With elections nearing, moving
against a high-profile oligarch will only bolster Mr Putin's popularity. In any case, Mr Putin has sufficient
control of the Russian political machinery to guarantee re-election. Both parliamentary and presidential elections will
surely be characterised as free, but unfair.
Once they are over, the focus will shift to Russia's economic performance. Thanks to oil, this looks likely to
remain strong. By comparison with the volatile Middle East and the ageing fields of the west, Russia, the world's
largest producer, looks benign. Mr Putin has implemented tax and legal reforms, and reforms of banking and electricity
are on the horizon. The country's healthy relations with the US - cemented by a common purpose in the war on
terrorism - can only help.
Meanwhile, democracy is on hold. Mr Putin knows that political restructuring, like economic reform, is risky. His
studies here go further back than 1998. Mikhail Gorbachev, Mr Yeltsin's predecessor, engaged in political and
economic reforms simultaneously and fatally weakened his capacity to punish and reward recalcitrant constituents.
In order to create representative political systems and robust institutions, and ultimately secure political
legitimacy, leaders have to expend scarce political capital. That invariably means their hold on power becomes less
secure - and that is a gamble Mr Putin is unwilling to make.
The writer is president of Eurasia Group and Senior Fellow at the World Policy Institute
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