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1998 In Review: Russia's Year Of Political Instability

Moscow, 18 December 1998 (RFE/RL) -- More than a year ago, Russian reformist politicians and leading business tycoons were already engaged in what some termed a "war of mutual assured destruction."

The fight continued fiercely in 1998, coupled with Russia's deepest economic crisis in the post-Soviet period. During the year, the power struggle eventually swept liberal politicians and their model of reform from power. President Boris Yeltsin was sidelined and the already dire conditions of millions of Russia's citizens worsened.

As 1998 draws to an end, most analysts say Russia's political instability indicates things may get worse before they get better.

Sergei Markov, director of the Moscow Institute of Political Studies, told RFE/RL recently that by year-end, Yeltsin was physically and politically depleted and no longer knows how to react to Russia's ever-growing challenges.

Let's look at the year as it happened.

At the start of the year, after briefly re-enforcing the position of conservative Prime Minister Viktor Chernomyrdin, Yeltsin appeared to switch his preferences to economic reformers. One of them was then-Deputy Prime Minister Anatoly Chubais - seen as the architect of Russia's early economic reforms. In lengthy interviews published by Russian newspapers, he condemned what is known as "crony capitalism," marked by close ties between financial and business interests and government officials. He warned it was putting the country at risk of an Asian-style economic crisis.

In a prescient statement to the daily "Kommersant," Chubais noted: "I read the analysis about (the causes of economic collapse in) Indonesia, Thailand and South Korea and close my eyes --it is all so similar to us."

Chubais, along with fellow Deputy Prime Minister Boris Nemtsov, stepped up criticism of Russia's leading businessmen, the so-called "oligarchs." They directed most of their fire against Boris Berezovsky, a businessman-turned-politician. They saw Berezovsky as the main advocate of oligarchic capitalism.

In turn, a Berezovsky-led group of industrial, financial and media magnates accused Chubais and Nemtsov of hypocrisy. Berezovsky charged that their calls for fair and open competition between business groups masked their own close ties to one of the oligarchs - Vladimir Potanin, the head of Uneximbank, then a growing financial empire.

Political analyst Markov says Chubais and Nemtsov tried to strengthen the role of the state against the oligarchs, but that their efforts came too late.

"Russian liberals are traditionally afraid of the state. Their background is generally the Soviet-era half dissident intelligentsia that has always regarded the state as the indisputable enemy. (For them) the demolition of the state, its weakening, was always an unquestionably positive goal. If this was the right approach toward the communist (Soviet) state, it was absolutely incorrect in the new (post-Soviet) conditions...The state in Russia in the last few years has not been strong, on the contrary, it is far too weak. Only recently, liberals tried to overcome their mistake...but they did not obtain results."

By March, powerful financial and media circles seemed to be consolidating their support around Prime Minister Chernomyrdin, who earlier served as a top executive in Russia's gas giant Gazprom.

But on March 23, Yeltsin came back from one of his frequent illnesses to abruptly fire Chernomyrdin and replace him with a young and untested technocrat linked to Nemtsov, Sergei Kiriyenko. The unexpected decision triggered a major political crisis that lasted for more than a month.

Most media outlets controlled by the oligarchs took a very critical view of Yeltsin's selection of Kiriyenko.

Markov says that the new government also inherited weak support from the Russian public, which reformers in previous years had failed to cultivate.

"The first thing that undermined our reformers, and I think it is the most important factor, is that they did not become patriots. They never learned to say 'our country' and continued to call Russia 'this country.'... People feel they're second class citizens and have the impression a radical experiment of which they know nothing was carried out on them."

Despite widespread opposition, Kiriyenko's government took bold steps in an attempt to steer the country out of its growing economic crisis. The effort won praise from the West. U.S. administration officials and the International Monetary Fund endorsed the attempt made during the summer to strengthen fiscal discipline and push long-awaited economic legislation through parliament.

But the results were far from positive. Kiriyenko's efforts to help stabilize the country's finances, in part by getting powerful business interests to pay their taxes, floundered. The effort stalled partly because Kiriyenko lacked a power base and partly because of the diminished role of Yeltsin - again weakened by illness.

On August 17, recognizing defeat, the Russian government gave up its defense of the ruble and defaulted on an estimated 281,000 million rubles of treasury bills and bonds (about $40 billion at the time). Simultaneously, it also devalued the ruble and introduced a 90-day moratorium on foreign debt payments.

As the ruble's exchange rate started tumbling and the banking system was paralyzed, the condition and prospects of the long-suffering Russian people dramatically worsened.

Looking to stabilize a dangerous political situation, Yeltsin, for the second time in less than six months, sacked his prime minister and the entire government on August 24.

After the State Duma rejected Yeltsin's initial efforts to bring Chernomyrdin back as prime minister, the President agreed to name Foreign Affairs Minister Yevgeny Primakov to the post. With his background as a Soviet-era official and former spy-master, Primakov had no trouble obtaining confirmation in the Duma in September.

Andrey Piontkovsky, director of Russia's Institute for Strategic Studies, told RFE/RL following the August events that "in just a matter of days and without any changes in the Constitution, Russia de facto changed from a presidential to a parliamentary republic." In Piontkovsky's words, "politically, Yeltsin had...ceased to exist."

Primakov formed a government of "national consensus," bringing in other Soviet-era veterans like Communist Yuri Maslyukov as first deputy prime minister and Viktor Gerashchenko as head of the Central Bank.

By promising that the government would immediately pay in full back pensions and wages, Primakov was able to avoid social confrontation in nationwide protests in October.

Since Primakov's appointment, Yeltsin has been increasingly sidelined, his health has significantly worsened and the day-to-day running of the economy at year-end is firmly in Primakov's hands.

However, the fight for power is far from being settled and after the initial post-August shock, politicians are again weighing the possibilities and new alliances are being considered.

After a brief flirt with the Communists, Moscow Mayor Yuri Luzhkov created a political movement, "Otechestvo" (Fatherland), that he says will hold centrist positions.

The new movement will take part in parliamentary elections, scheduled for December 1999 but, according to most observers, it is designed mainly to support Luzhkov's presidential ambitions. Yeltsin's term runs until 2000, but his health and political problems have increased speculation that the vote might come earlier.

Luzhkov is seeking the endorsement of powerful regional bosses to enhance his presidential chances. But he is being cautious in weighing possible alliances with weakened political groups that have been trying to join his movement in a bid to improve their own political future.

Meanwhile, liberal reformers are only just starting to form a center-right coalition to try to make a comeback and to oppose future Communist domination of parliament. In the 1995 parliamentary elections, divisions and personal rivalries among liberal leaders split the pro-reform vote among a host of parties. Only the "Yabloko" faction, led by economist Grigory Yavlinsky, surpassed the five percent threshold needed to gain seats in the Duma.

Meanwhile, anxious Kremlin aides, fearing that growing calls for Yeltsin's resignation could gain momentum, have said Primakov has the constitutional duty to step in should the president have to resign.

But, as fresh injections of foreign loans have failed to materialize, Primakov's position appears increasingly difficult.

And some Russian analysts say that despite his current political marginalization and frequent ill health, Yeltsin cannot be ruled out completely as a political force in Russia's future.

(Second part of two articles reviewing Russia in 1998)