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Russia Report: August 27, 2004

27 August 2004, Volume 4, Number 33
By Victor Yasmann

Earlier this month, the influential National Strategy Council (SNS) published suggested political guidelines for President Vladimir Putin's second term titled "A National Agenda And A National Strategy," RosBalt reported on 5 August.

The council was founded in 2002 by the controversial and enigmatic political consultant Stanislav Belkovskii (see "RFE/RL Russian Political Weekly," 7 April 2004) and made its name during the summer of 2003 when it published a report alleging the existence of an "oligarchs' coup" plot. That report was widely seen as the first volley in the Kremlin's campaign against oil giant Yukos and its former CEO, Mikhail Khodorkovskii, and the first indication of a transition in domestic policy from so-called managed democracy toward bureaucratic authoritarianism. Belkovskii, who is the president of the council, was a co-author of that report.

In January 2004, Belkovskii, who holds more radical views than do most of the roughly 40 other SNS members, announced his resignation. He went on to found the National Strategy Institute, which has been frequently confused with the SNS ever since. Also in January, Agency of Applied and Regional Policy Director Valerii Khomyakov was named the new director general of the SNS.

Speaking to journalists in Saratov on 4 August, Khomyakov said that the report entitled "A National Agenda And A National Strategy" was prepared by a working group headed by SNS co-Chairman and economist Iosif Diskin, RosBalt reported. Khomyakov also said that President Putin has read the report, the objective of which is to stimulate public discussion and the consolidation of a national political agenda.

The 'Nomenklatura-Pragmatic' Program

The report opens with a summary of Putin's first term, which it characterizes as a struggle between two competing political programs -- the "liberal" project and the "nomenklatura-pragmatic" program. The liberal project included a radical demolition of the old politico-economic system, a reduction of the role of the state, and the creation of the foundations of a market economy. This "liberal" program, however, paved the way for "oligarchic capitalism" and transformed the country's democratic institutions into a mere facade behind which the oligarchs made sweetheart deals with the bureaucracy.

The "nomenklatura-pragmatic" program proposed reforms aimed at using the state as the main instrument of modernization. It does not, however, envision the reform of the state itself. The main result of Putin's first term was the ascendancy of this project and the virtually total defeat of the liberal model that emerged during the period of managed democracy.

The basic tool of managed democracy is the institution of a super-presidency, under which all political and economic actors are dependent on presidential decisions, the report argues. During Putin's first term, the Kremlin established the complete dominance of the mass media and substantially restricted the activity of both the right and left flanks of the political spectrum. It transformed the pro-Kremlin Unified Russia party into the Duma-majority party, mutating it "from a representative of the electorate's interest into a tool of control over society," the SNS report states.

Managed democracy also largely removed regional elites from national decision-making, which has taken on an increasingly Moscow-centric nature. In the last couple of years, this bias has been complemented by a fairly strong St. Petersburg element as well. The SNS report emphasizes the instinctive antidemocratic nature of the government and its desire to orchestrate national political life and to manipulate the public consciousness.

This antidemocratic nature creates a profound crisis of public confidence in all institutions of power, including the government, the Duma, the Federation Council, the justice system and law enforcement organs, and the armed forces. Polls show that public confidence in such state institutions is not more than 6-8 percent.

"Just like a decade ago, the liberal Russian intelligentsia is in opposition to the government, accusing it of perfidious plans and a striving toward dictatorship, but it is making no efforts of its own to conceptualize the current situation in Russia," the report states.

Decaying Military

One of the most interesting sections of the SNS report is the one devoted to defense and law enforcement. The report argues that the lack of real military reform -- combined with corruption and mismanagement -- have led to the accelerating deterioration of the material status of the military and the erosion of its morale.

"As a result of the fight for their survival, a considerable part of the officer corps of the Russian Federation has already crossed the line of irreversible moral decay," the report claims. "Corruption, embezzlement, and commercial activity at the expense of the service has become the norm for many officers."

"A negative balance exists between the army and the state," the report continues. "The state is no longer in a position to maintain and control the armed forces. Therefore, it closes its eyes to corruption and plunder. In turn, the military remains loyal to the state insofar as it is allowed to steal and accept bribes."

The situation is no better among the law enforcement organs. They cannot cope with crime and corruption in Russia, problems that are so severe they jeopardize the country's further modernization. Moreover, corruption is so pervasive within these agencies that they themselves pose a danger to the state. According to some experts, about $20 billion in bribes passes through Russia's law enforcement organs each year, the SNS report says. Such corruption also threatens the public. Almost one-half of Russians see these agencies as a threat and one-fourth claim to have personally experienced some infringement of their rights at the hands of law enforcement officials, the report states.

Despite this pessimistic analysis, the report has few suggestions for improving the situation. It proposes the creation of a unified system of strategic military planning, the formation of a military force structure based on real "target-threats," the creation of two or three model units in each branch of the military, the purging of corrupt and disqualified personnel, the establishment of civilian control over the military, and the creation of a civilian army affairs commissioner within the presidential administration.

As far as the law enforcement community is concerned, the report proposed giving the National Security Council a leading role in coordinating the law enforcement agencies. It also urges the continued reform of the Interior Ministry, programs to increase public intolerance of corruption, and state support to journalists conducting investigative reports.

At the same time, the SNS report is sympathetic to the efforts of the so-called siloviki to review the results of the privatization of state property during the 1990s. "The much-discussed amnesty on privatization entails the acceptance of a selective approach to the enforcement of law, to the absurd contention that the laws of the 1990s are 'unstable,' contradictory, and that only privatization laws should be rigorously enforced," the report states. "Such an amnesty is a direct insult to those who acted honestly or who didn't enter business at all because they doubted that it could be done legally. Granting an amnesty would close off for a long time any possibility of legalizing the genuinely legitimate large fortunes in Russia."

The report adds, however, that it might be desirable to offer selective amnesties and leniency to those "who made significant contributions to the development of the country," specifically mentioning anyone who received a state order after 2000. "Judges should take into consideration a convict's real contribution to the development of the economy when sentencing," the report states. "When it is determined that a significant contribution was made, the judge must choose a punishment that is not connected with imprisonment but with the obligatory restitution of any harm caused."

"The National Strategy Council proposes this formula for a 'national compromise': it is more important to force the rich to work for the good of the country than to switch them around," the report states.

By Jeremy Bransten

Defense appropriations emerged as the top priority in the 2005 draft budget approved on 23 August by the Russian cabinet.

Military spending is due to rise to $528 billion rubles ($18 billion) in 2005, up 28 percent from last year's 411 billion rubles ($14 billion).

Overall, spending is due to rise across most state-funded sectors, as the Russian economy enjoys sustained growth, thanks to increased revenues from oil exports. But the steep hike in defense has caught the media's attention. It follows Russian Defense Minister Sergei Ivanov's recent assertion that military reforms have been successfully completed and that the Kremlin now intends to modernize Russia's armed forces.

In reality, Moscow-based military analyst Pavel Felgenhauer told RFE/RL that there is less to the matter than meets the eye. First, Felgenhauer notes that years of neglect and under-funding have left the Russian forces in desperate need of extra funds. In essence, the 2005 budget continues to compensate for these lean times. And even with the increase, Russia's defense budget will remain 20 times smaller than U.S. military expenditures.

Secondly, inflation should be taken into account -- meaning the actual rise in defense spending is smaller than it appears. "The increase appears very large, but these numbers -- over 25 percent -- do not take inflation into account," he said. "Inflation up to now in Russia has been considerable. They say that next year, they'll be able to lower it below 10 percent annually, but it's not clear if they will be successful. So in reality, the increase in defense spending is around 15 percent."

Despite Ivanov's recent statement about successful reforms, Felgenhauer said the Russian military establishment remains hugely bloated and without a focused strategy. Defense spending, he notes, has to sustain more than 2 million Defense Ministry employees, plus another 2 million employees of the various security agencies and the Interior Ministry.

"We have an oversized military machine. If we look at colonels alone, who are on active duty, we have more than 100,000 of them! I'm not talking just about the Defense Ministry, but across the board. The president, last December, said we have 4 million military personnel and personnel of equivalent status. When you have so many colonels and so many servicemen, even if you give them all a salary increase of just $50 a month, it adds up to an enormous sum," Felgenhauer said.

According to military officials, much of the increase in the 2005 defense budget will go to modernize Russia's aging weapons systems, air force, and navy. But Felgenhauer notes that officials made the same promise last year, when extra money for purchases was also set aside. To this day, it is unclear how the money was actually spent.

"We have a scandalous situation, where last year 118 billion rubles [$4 billion] was set aside [for purchases], this year they were supposed to spend 146 billion rubles [$5 billion] and the end result is that two tanks or four tanks, two helicopters and one airplane are bought per year. We are talking about very large amounts of money that are disappearing -- no one knows where."

No one knows either how much of Russia's defense budget is going to fund the continuing war in Chechnya. The problem, Felgenhauer said, is that whatever figures the Kremlin periodically presents are highly selective and impossible to verify -- making oversight of Russia's defense spending practically impossible.

"The problem is that everything is secret, including the military budget. We know the overall sum and this is divided into several sections, which reveal next to nothing. We do not know how much weapons development projects cost, we do not know how much money is being spent on each individual project. We do not know how much the weapons that the army buys cost. We do not know the exact number of people in the military. Officially, this is secret information. Periodically, certain numbers are mentioned, but they differ from each other. There is a mass of departments and ministries and everything is secret. There is no civilian oversight. There can be no civilian oversight when practically everything concerning the Defense Ministry is a secret," Felgenhauer said.

In this context, analysis of Russia's defense needs and capabilities remains a very inexact science. Russia's State Duma is set to consider the draft budget in the first of four readings on 26 September. With pro-Kremlin deputies having a two-thirds majority in the chamber, Duma Speaker Boris Gryzlov says he expects the bill to pass easily.

By Julie A. Corwin

Last week was a bad one for Ulyanovsk Governor Vladimir Shamanov: an estimated 2,000 striking workers at a local defense plant blocked off traffic to the center of Ulyanovsk and the latest in a long series of federal agencies appealed to the federal government to introduce external rule.

Unfortunately for Shamanov, who is seeking reelection in December, last week was not a unique experience. His last four years have been roiled by one crisis after another, and Moscow-based newspapers have frequently characterized his administration as proof that success in the battlefield does not necessarily translate to success in managing local government. "Novoe vremya" noted recently that Ulyanovsk has found itself in an even worse crisis than it experienced when longtime Communist Governor Yurii Goryachev was in power.

Lieutenant General Shamanov, a former commander of federal forces in Chechnya, easily defeated Goryachev in December 2000 with the financial backing of local business interests. Four years later, one of these entrepreneurs, Opora construction firm head Khamza Yambaev, has accused people working for Vladimir Shamanov of beating him and causing serious injuries. Their alleged attack, according to Yambaev, was prompted by a letter he sent to Shamanov suggesting that he should not seek re-election. Yambaev is known in the oblast as the head of an association of entrepreneurs and was an active member of the local branch of the Union of Rightist Forces before it fell apart. Following Yambaev's accusations, the leaders of a range of political parties and public organizations in the oblast, including the Communist Party and Yabloko, sent an appeal to President Putin asking him to introduce direct presidential rule in the oblast, VolgaInform reported on 17 August. They claimed that it has simply become too risky for anyone to challenge Shamanov following the recent alleged attack on Yambaev.

Whether or not it's because of fear, few challengers in the December gubernatorial election have so far come forward, despite polls showing that Shamanov cannot win re-election in the first round. The names of local businessmen Sergei Gerasimov and Aleksandr Polyakov have been floated, but neither are considered serious threats since they have failed to do particularly well in past elections. Polyakov, a member of the board of directors of Aviastar, received less than 2 percent of the vote in a single mandate district during the December 2003 State Duma campaign. Entrepreneur Gerasimov has twice ran for State Duma deputy and got only 7 percent of the vote. The respected local newspaper "Simbirskii kurer" no. 123-124, reported that the possible candidacy of Dmitrovgrad Mayor Sergei Morozov is also being discussed. Local and national media have also speculated about the possible candidacies of better known national figures, such as Liberal Democratic Party leader Vladimir Zhirinovskii, State Duma deputy and former presidential candidate Sergei Glazev, and Union of Belarus and Russia Secretary Pavel Borodin.

But local analysts so far believe that the greatest threat to Shamanov is the option "against all," according to RosBalt on 12 August. Two attempts to elect a State Duma deputy from a single mandate district in the city of Ulyanovsk -- once in December 2003 and another in March 2004 -- have failed because "none of the above" was the most popular choice. The region's electorate, according to analysts, trusts neither oblast nor local authorities.

Shamanov and President Putin blame Shamanov's predecessor for the energy crises that have plagued the region during Shamanov's first term. During a visit to Ulyanovsk in July 2003, Putin noted that electricity rates and the number of people working on problems with public utilities have soared in the region, but effectiveness has declined. "It is the result of the neglect of the oblast leadership in past years," he declared. In an interview with Ren-TV the following month, Shamanov sounded a similar note, saying that problems "have been piling up for the previous 10 years" and the federal center neglected to provide "systemic aid" to the region.

However, the interviewer, well-known commentator Yuliya Latynina, asked Shamanov to explain some of his more questionable decisions. She asked him why, when statistics showed that area under crops had declined by 21 percent, he imposed a ban on the private sale of land and why as a member of the board of director of the UAZ car factory, he interfered in marketing policy. "Being an army general, do you think you are good at economics?" she asked. Shamanov replied that he will not be a "puppet" in the governor's chair. "I have a good name," he replied. "Shamanov is the head of the Ulyanovsk Oblast administration. The administration will control everything that is going on in the region at present." However, if Yambaev's example is any illustration, the transregional business groups that backed Shamanov during his first term -- and the local electorate -- may believe that its time to cut the strings.

IN: Presidential administration deputy head Vladislav Surkov was appointed on 20 August to the board of directors of the state-owned Transprodukt oil-transportation company, Interfax reported on 24 August. Surkov replaces administration economics adviser Aleksandr Krasnov as the Kremlin's representative on the nine-member board.

OUT: Prime Minister Mikhail Fradkov dismissed Sergei Sai as director of the Federal Land Cadastre Service in connection with the restructuring of the state apparatus, reported on 23 August.

SHIFTED: Igor Yusufov, who served as energy minister from June 2001 to March 2004, has been named the Foreign Ministry's special envoy for Caspian issues, Interfax reported on 20 August, citing Ambassador at Large Andrei Urnov. Yusufov replaces Viktor Kalyuzhnyi, who has been named Russian ambassador to Latvia (see "RFE/RL Newsline," 14 July 2004).

OUT: Prime Minister Mikhail Fradkov has dismissed First Deputy Transportation Minister Anatolii Nasanov, "Kommersant-Daily" reported on 18 August. According to the daily, this is the first major dismissal that has been made since the new government was formed. Fradkov also fired Deputy Natural Resources Minister Valerii Pavlov, who has taken another job, ITAR-TASS reported on 17 August.

26 August: Deadline for the government to submit its draft 2005 budget to the State Duma

27-31 August: Swiss parliamentarian Andreas Gross and German Bundestag deputy Rudolf Bindig, two of the three rapporteurs for the Parliamentary Assembly of the Council of Europe on Chechnya, will visit Moscow

27-29 August: First ever Russian "Olympic" games for incarcerated persons to be held in Petrozavodsk

28 August: Walter Kasper, representative from the Vatican's Pontifical Council, will present the icon of Mother of God of Kazan (Our Lady of Kazan) to the Russian Orthodox Church

29 August: Presidential elections will be held in Chechnya

September: St. Petersburg's State Hermitage Museum plans to open the Hermitage Center, which will exhibit works from the Hermitage's collection, in the city of Kazan

September: OPEC President and Indonesian Energy Minister Purnomo Yusgiantoro will visit Moscow, according to Interfax

September: President Putin to visit Dushanbe

2 September: Moscow Arbitration Court will hear Yukos's appeal of the seizure of Samaraneftegaz

2 September: Jordan King Abdallah II will visit Russia

2-3 September: Defense Minister Sergei Ivanov and President Putin will visit Ankara, Turkey, Interfax reported

5 September: Mayoral elections in Orenburg

5 September: Law restricting advertisements of beer comes into force

7 September: Moscow Arbitration Court will hold hearing on Yukos's appeal challenging Tax Ministry's claim for taxes from 2000

8 September: Palestinian Prime Minister Ahmad Qurei will visit Russia

14 September: British Prince Edward, Earl of Wessex, will visit Petrozavodsk

15-18 September: The third International Conference of Mayors of World Cities will be held in Moscow

15 September: Supreme Court will render a final decision on when to hold gubernatorial elections in Samara Oblast

20 September: The State Duma's fall session will begin

26 September: State Duma will consider draft 2005 budget in its first reading

October: President Putin will visit China

October: International forum of the Organization of the Islamic Conference will be held in Moscow

1 October: Date by which the government will decide whether to sell a controlling stake in Aeroflot, according to Economic Development and Trade Minister German Gref

7 October: President Putin's birthday

10 October: Mayoral elections scheduled for Magadan

23-26 October: Second anniversary of the Moscow theater hostage crisis

25 October: First anniversary of former Yukos head Mikhail Khodorkovskii's arrest at an airport in Novosibirsk

31 October: Presidential election in Ukraine

November: Gubernatorial election in Pskov and Kurgan oblasts

20 November: Sixth anniversary of the killing of State Duma Deputy Galina Starovoitova

22 November: President Putin to visit Brazil

December: A draft law on toll roads will be submitted to the government, according to the Federal Highways Agency's Construction Department on 6 April

December: Gubernatorial elections in Astrakhan, Vladimir, Bryansk, Kamchatka, Ulyanovsk, and Volgograd oblasts, Khabarovsk Krai, and Ust-Ordynskii Autonomous Okrug

December: Presidential elections in Marii-El and Khakasia republics

5 December: By elections for State Duma seats will be held in two single mandate districts in Ulyanovsk and Moscow

29 December: State Duma's fall session will come to a close

1 February 2005: Former President Boris Yeltsin's 74th birthday

March 2005: Gubernatorial election in Saratov Oblast