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Russia Report: March 26, 2003

26 March 2003, Volume 3, Number 13
This week marks the third anniversary of President Vladimir Putin's election. In terms of the international environment, much has changed since March 2000. Most notably, the Persian Gulf is engulfed in war, and the close relationship forged by Putin and U.S. President George W. Bush after the 11 September 2001 terrorist attacks in the United States seems to have been put on hold. At home, the landscape has been altered, but not radically transformed. Regional governors have lower public profiles at the national level, and the State Duma and Federation Council are quick to pass even the most controversial legislation. However, Putin has been unable to tame the bureaucracy he inherited from his predecessor, Boris Yeltsin. Without the cooperation of bureaucrats at all levels, some of the more sweeping reforms that Putin has managed to push through the legislature will continue to exist largely only on paper. This week, "RFE/RL Russian Political Weekly" asked three experts on Russian domestic politics about Putin's apparent failure to launch a reform of the bureaucracy: Lilia Shevtsova of the Carnegie Moscow Center, Dmitrii Furman of the Moscow-based Institute of Europe, and Peter Reddaway of George Washington University. Reddaway is currently spending his sabbatical at the London School of Economics. (Julie A. Corwin)

RFE/RL: Why hasn't President Putin undertaken significant reform of the state bureaucracy and tried to limit its role? He has promised to trim back the federal bureaucracy, but instead it has grown during his tenure.

SHEVTSOVA: On 3 April 2001, in his annual message to the Federal Assembly, Putin spoke for the first time of the need for administrative reform. He promised to reform the state apparatus and to put an end to influence peddling by bureaucrats, who solicit bribes to lobby for private interests. At that moment, the liberals such as members of the Union of Rightist Forces and Yabloko heaved a sign of relief. But a year has passed, and administrative reform is still being prepared. Why has it stalled?

Putin clearly understands that the Russian state apparatus is the major obstacle to all his reform efforts and attempts to pursue modernization. The problem is that the goal of any administrative reform is not simply to cut the number of apparatchiks -- in fact, Russia has only about 1.8 million people working at all levels of administration, which is not too high a figure compared to developed Western countries. The real challenge for any administrative reform in Russia is to end the close association between the state bureaucracy and private business, which is the wellspring of corruption and the degeneration of the state.

In order to achieve this goal, Putin would have to undertake a radical political revolution -- drafting new rules of the game for the functioning of the state, rearranging spheres of responsibility of the apparatus at all levels, and, in effect, changing the relationship between society and the state. It would mean a final break with the old, precommunist Russian system that is based on one-man rule and the fusion of power and property. The president apparently has come to the conclusion that such an overhaul is too dangerous for the country's stability and his own position. The current draft of the administrative reform includes rather modest aims, such as the establishment of an ethical code for Russian state officials.

Anyway, radical reform of the apparatus has been postponed until after the State Duma and presidential elections [in December and March, respectively]. After he is re-elected, will Putin risk undertaking such a reform? He might try, but he has to understand that this reform will mean the end of the current status quo in Russia. It will require reforming his base of support and rethinking his current strategy for ruling Russia. In any case, the core element of the reform will be -- as I've mentioned -- an end to collusion between the state apparatus and private business, which will require an increased role for the judicial system and transparent rules for economic activity. This will be the first step in changing the traditional role of the Russian bureaucracy and easing its grip on the economy and society.

FURMAN: In order to undertake a far-reaching reform of the state bureaucracy, one should first have some kind of incentive. Second, one should believe in the possibility -- if not the probability -- of success. The incentives should be great enough to outweigh the difficulties and risks connected with the undertaking. If the incentives are too small, then one will do nothing, even if the effort required is minimal. If, on the contrary, the incentives are huge, then he will be prepared to make a colossal effort and take enormous risks. For Putin, I think the incentives for undertaking such a reform are too small to outweigh the truly enormous and simply insurmountable difficulties that he would encounter.

Let's consider the president's motives and desires. Putin's natural desire is to serve his two terms -- clearly, there will be two -- and then either to transfer power to a person he selects from his circle or to change the constitution and remain president longer. A struggle with the bureaucracy cannot help Putin in any way with the goal of being re-elected. A too active struggle with the bureaucracy could give rise to some kind of plot among members of Russia's elite and that, in Russian conditions, would be dangerous. After all, it is difficult to imagine that the Family, when electing Putin, would have risked entrusting the government and its fate to a person whom it could not fully trust and completely control. [Former President Boris] Yeltsin and his Family did not elect Putin in the capacity of a successor without a means of guaranteeing his loyalty. They undoubtedly maintain some kind of control over him.

Therefore, a too active battle against bureaucratic corruption would affect the interests of the Family, and this means that it would be dangerous for the president. Such a struggle would give Putin nothing for the maintenance of his own power. On the contrary, the genesis of his power puts obvious limitations on the opportunities for such a struggle and makes it risky for him. Therefore, Putin's incentives for engaging in a battle with the bureaucracy cannot be very strong. Of course, that does not mean that there are none and cannot be any in the future.

Putin clearly wants greater control over the bureaucracy so that it carries out his orders. This is the normal aspiration of any bureaucratic head. But such an aspiration, by its very nature, does not lend itself to the conduct of any kind of thorough reform. The appointment of people devoted to him to important posts and various types of bureaucratic reorganizations are not part of an attempt to end the system of the supremacy of the bureaucracy. They are only representative of an effort to make the bureaucracy more obedient to him and more manageable.

Of course, Putin's motives could -- in part -- be purely "idealistic." Putin might believe, as do some of his advisers, such as economist Andrei Illarionov, that the dominance of the criminalized bureaucracy hinders the country's social and economic development and will lead to Russia falling further behind. There is little doubt that Putin is striving for the good of his own country. But because this good is not necessarily connected with the furthering of his own ambitions -- that is, to be re-elected in any situation -- such aspirations might be merely abstract. Putin would likely prefer that there be less corruption and that Russia were developing more successfully, but such desires could hardly be so strong as to encourage him to engage in such a difficult and risky proposition as reform of Russia's bureaucracy.

But let's assume -- for sake of argument -- that Putin's desire for a less corrupt, more robust Russia reaches a fever pitch, becoming a shining ideal for which he is willing to suffer great difficulties and incur substantial risks. What could he actually do? How can he roll back the bureaucracy?

The only real means of limiting the bureaucracy would be the development of democracy and the rule of law. However, the most basic obstacle on the path toward establishing the rule of law is the character of the system for selecting the country's highest authorities. They are formally elected in general elections, but they, in fact, face no real competition. As long as these officials face little possibility of being displaced at the ballot box, they cannot be held accountable by the public, and there can be no real limitation to their power. Under the existing system in Russia, elections are held without any real alternatives, and the task of re-electing Putin in 2004 can already be considered resolved. In this way, Putin himself personifies the main and not easily surmountable obstacle on the path to establishing the rule of law. Removing this obstacle would require altering the very nature of Putin's power. This cannot be his job. He cannot himself limit his own power and create his own competition. Such a task is simply a psychological impossibility.

Thus we come to the conclusion that the president has neither strong enough motivation nor the real opportunity of bringing an end to the modern Russian system of the supremacy of the criminalized bureaucracy. This is not his task. This is a task for Russian society itself, and it is not a separate one from effecting the transition to a system of a rotation of power and real competitive elections. Unfortunately, the Russian public is not yet ready to realize this goal.

REDDAWAY: Putin came into office trying to push market reforms, believing that the only radical way to deal with corruption would be to try to make the market function more efficiently. After three years or so, a lot has been done on paper with regard to tax reforms and streamlining of licensing procedures, etc, etc., but in practice not a lot has changed. According to some well-informed observers -- such as Igor Kamkin, the well-known political sociologist, and Aleksandr Budberg, columnist for "Moskovskii komsomolets" -- this is mostly because the bureaucracy has become so corrupt that it essentially offers its services on a free market to whomever is willing to buy them. These services are frequently and assiduously bought by various companies and oligarchs. In this way, the interests of private business have done well but at the expense of the national interest and at the expense of creating a level playing field for all businesses regardless of size.

Early in his term, in the summer of 2000, "Nezavisimaya gazeta" Editor in Chief Vitalii Tretyakov urged Putin to grab the bureaucracy by the scruff of the neck and show it from the beginning that he is its master. Otherwise, Tretyakov warned, the bureaucracy will get the upper hand very quickly. But the problem with Tretyakov's advice to Putin was that it presupposed that Putin was independent enough to take the bureaucracy by the scruff of the neck and that he would have powerful-enough allies who were prepared to help him. Apart from a few of his individual allies with security-service backgrounds, Putin didn't have these. He was a product of the Yeltsin administration, which chose him as Yeltsin's successor. And it appears that Putin has been bound by various obligations that he assumed when he was chosen, and perhaps those obligations were guaranteed by certain compromising materials that the so-called Family possesses. Putin is afraid that they will make these materials public, which could harm him politically and perhaps even cause him to be ousted.

So, in my opinion, Putin has never been a very independent political actor, and it was unrealistic of Tretyakov to put forward that advice in 2000. I think Tretyakov was right in principle that this was the only way that reform could be conducted, but certainly, Putin, for whatever reasons, was politically dependent on forces that were not in favor of reform. He was, therefore, unable to challenge the bureaucracy early on.

The fundamental reason that Putin can't reform the bureaucracy in the way that he wants to is that he lacks effective instruments for keeping the bureaucracy under his tight control. In his time, Stalin had the Communist Party and the secret police. Khrushchev had only the party, since he had emasculated the secret police. When he proceeded to alienate the party as well as the state institutions, then his reforms came to nothing. Gorbachev tried initially to use the party as his instrument to get the state bureaucracy moving again, but by autumn 1988 he had given up on that and instead tried to use popular forces as an instrument to control and push the bureaucracy in the direction of reform. But this had the effect of bringing down the Soviet Union.

Putin has no party to curb the bureaucracy, as Khrushchev and Gorbachev did. The Unified Russia party is an extremely weak reed, and he hasn't even tried to use it. The FSB [Federal Security Service] is too weak, is not structured for this sort of work, and has done virtually nothing with regard to reforming the bureaucracy. The presidential envoys to the seven federal districts also have very limited powers. They don't have budgets of their own, except to pay their staffs. They have achieved a few improvements from the point of view of taking back a bit of power from the regional governors, but they haven't made any real breakthroughs in controlling the bureaucracy in a very radical way.

Even if the suggestions of the commission [of deputy presidential administration head Dmitrii Kozak] for so-called federal administrative reforms are adopted as law -- as they probably will be before long -- the danger and likelihood is that they will remain mostly on paper rather than being translated into real change. The function of the bureaucracy as a modernizing force that helps the president and legislature to carry out real reform is simply not possible to envisage in the present Russian situation. The bureaucracy will tend to grow, because there is no political force with enough power to trim it back and control it and promote forward-looking bureaucrats.

The danger is that as time passes, big business and the oligarchs are likely to be able to dictate their terms more and more to ministers, deputy ministers, and senior civil servants. Private interests will increasingly dominate the national interest. The viability of the state as regards its basic functions is not improving, and is in certain ways declining. Ultimately, the only force that can change the situation or get a grip on the bureaucracy would be a president who has a popular mandate to carry out serious reform of the bureaucracy, which means carrying out a dynamic program of economic reforms, gradually weeding out corruption. At the moment, it is not possible in my mind to foresee the appearance of such a president. That might, one hopes, come in the future.

After three failed attempts and three hours of discussion, State Duma deputies on 21 March approved in its second reading a bill on the fundamentals of federal housing policy, Interfax and RosBalt reported. The vote was 227 in favor, just one more than required. Thirty-five deputies voted against the bill, according to RosBalt. The bill would establish the method and conditions for providing subsidies for housing and communal services for needy citizens. Under the bill, according to RosBalt, the majority of subsidies are preserved. However, the Federation of Independent Trade Unions called upon legislators to reject the bill, arguing that it would worsen the lives of a significant portion of the population. Yabloko, which led a campaign against the bill in 57 regions, argued that, if adopted, the legislation would lead to "an aggravation of the crisis in the housing sector and to a widening of the zone of social catastrophe in the regions." JAC

Also on 21 March, deputies approved the law on energy conservation, which had earlier been rejected by the Federation Council and was revised by a conciliation commission, RosBalt reported. The vote was 257 in favor, with 121 against and two abstentions. According to Interfax, the law now consists only of two lines: "Regional energy commissions are replaced by executive bodies of power of the Russian Federation constituent territories. The relevant amendments are made to the federal law on energy supply." JAC

Deputies on 21 March also passed a presidential bill that amends several laws regulating media coverage of elections, Russian media reported. The bill passed with 245 votes in favor and 160 against, "Kommersant-Daily" reported on 24 March. Central Election Commission Chairman Aleksandr Veshnyakov spoke in favor of the bill, which Yabloko, the Union of Rightist Forces, and the Communist factions opposed. The bill has been harshly criticized by media advocates and others who fear that the media will be afraid to offer even unbiased commentary on elections lest they be accused of covert campaigning (see "RFE/RL Newsline," 19 March 2003). JAC


Name of law______________Date approved___________No. of reading

On the fundamentals of_________21 March_________________2nd
federal housing policy

On energy conservation_________21 March________conciliation version

On the introduction of changes____21 March_________________1st
and amendments to several legislative acts
in connection with the adoption
of the federal law on basic guarantees of
election rights and the right to participate
in referendums

IN: Andrei Kokoshin was selected on 19 March to serve as chairman of the State Duma's Committee on CIS Affairs, replacing Boris Pastukhov, another member of the Fatherland-All Russia faction. Pastukhov was named first deputy chairman of the Russian Chamber of Commerce and Industry, Russian media reported. Kokoshin is a former deputy director of the USA-Canada Institute and former secretary of the Security Council.

IN: Igor Golikov was named head of the Tax Ministry's department for administering major taxpayers, "Politburo" reported on 27 January. Golikov previously served as deputy head of the administration of the Financial Monitoring Committee. He graduated from the alma mater of Finance Minister Aleksei Kudrin, the Leningrad Financial-Economic Institute, in 1991, according to "Profil," No. 5.

TRANSFERRED: President Putin has appointed Lieutenant General Sergei Verevkin-Rokhalskii as deputy interior minister and head of the new federal service for fighting economic and tax crime, ITAR-TASS reported on 25 March. Verevkin-Rokhalskii is a former deputy director of the Federal Tax Police Service. He is considered to be a member of the St. Petersburg "chekisty" clan (see "RFE/RL Russian Political Weekly," 19 November 2001).

QUESTIONED: Former Central Bank Chairman Sergei Dubinin; former chief of staff for President Boris Yeltsin, Yurii Petrov; and Petrov's son, Aleksandr Petrov, who is board chairman of Guta Bank, were called into the Prosecutor-General's Office on 24 March to answer questions relating to the alleged misappropriation from the state treasury of 300 tons of silver in 1996, "The Moscow Times" reported the next day. Yurii Petrov is currently head of the State Investment Company (Gosinkor).

STARTED: The Russian Union of Industrialists and Entrepreneurs, together with the Federal Securities Commission, has formed a National Council for Corporate Management, ORT reported on 25 March. Interros head Vladimir Potanin will serve as chairman of the council. According to TVS, the council will act as an arbitrator in conflicts between business entities so that businesses can avoid taking matters to court.

28 March: Supreme Court will hear an appeal by Moscow Mayor Yurii Luzhkov questioning a lower-court decision requiring that the city's vice mayor be elected separately from the mayor.

29 March: Unified Russia party will hold a congress

30 March: Legislative elections in Rostov Oblast

April: Financial Action Task Force (FATF) delegation to visit Russia, according to Financial Monitoring Committee Chairman Viktor Zubkov on 11 March

1 April: Date by which the State Duma would like the government to submit legislation amending the Budget and Tax codes in line with proposed legislation to reform local government, ITAR-TASS reported on 21 February

2 April: Tycoon Boris Berezovskii and business partner Yulii Dubov are scheduled to appear before a court in London regarding a Russian extradition request

2-4 April: Annual Russian Economic Forum to take place in London

7-10 April: Russian-Mongolian Forum on Economic Cooperation to be held in Ulan Bator

9-11 April: Defense Minister Sergei Ivanov to visit Japan

15 April: Court hearing in the trial of writer and National Bolshevik Party leader Eduard Limonov will reconvene

20 April: Mayoral elections will be held in Norilsk

22-25 April: The Sixth General Assembly of the Northern Forum will be held in St. Petersburg. Governors from 28 countries are expected to attend, and Prime Minister Mikhail Kasyanov will head the Russian delegation, ITAR-TASS reported

29 April: Deadline for completion of the first stage of Russia's chemical-weapons disarmament

30 April: Russian government will consider a financial plan for 2003-05, according to RosBalt on 12 March

May: St. Petersburg will celebrate its 300th anniversary

1 May: Deadline by which the government is expected to finish preparing a package of legislation establishing a mortgage system, ITAR-TASS reported on 26 February

11 May: Parliamentary elections will be held in North Ossetia

18 May: New law on railway transportation will come into force

25-27 May: Chinese President Hu Jintao will visit Russia

31 May: Russia-European Union summit will take place in St. Petersburg

15 June: Karachaevo-Cherkessia will hold presidential elections

16-22 June: A meeting of 25 Nobel Prize laureates on the topic of "Science and the Progress of Humanity" will be held in St. Petersburg

17-21 June: Seventh International Economic Forum will be held in St. Petersburg

27 June: Gazprom will hold annual shareholders meeting

July: Month by which a working group of European and Russian legislators wants to create a "road map" for implementation of the joint Russian-EU accord on Kaliningrad of 11 November 2002, ITAR-TASS reported on 3 March

14 September: Sverdlovsk Oblast Governor Eduard Rossel's second term officially expires

23 September: The first European-Pacific Ocean Conference will take place in Vladivostok devoted to improving dialogue among intellectuals in European countries and the Pacific region, reported on 6 March

October: Days of Bulgarian Culture will be held in Russia

29 October: 85th anniversary of the founding of the Komsomol.