- The creation of an economic and political system in Russia based on the merger of state and property as a result of the reforms of the 1990s;
- Russia’s refusal to conduct a public, state and legal assessment of the period of Stalinism, Bolshevism and the communist dictatorship.
Presidential Address to the Federal Assembly. 2015
“State power-property” system
A state coup (this is something that today the regime loves talking about, but it is referring to the events in Kyiv in 2014) actually happened in Moscow in 1993 – when tanks fired on Russia’s White House (parliament building) in 1993 and the state authorities refused to subsequently conduct an all-encompassing investigation of these events whose victims numbered hundreds of people. It is vital to understand here that the actual confrontation between President Yeltsin and parliament in October 1993 and the barbaric non-political methods used to resolve this political crisis were a direct consequence of the failures of the reforms which had been commenced.
Subsequently, privatization was needed. However, how do you conduct mass privatization in a poverty-stricken post-Soviet country, moreover, at a time of hyperinflation? In spring 1995 President Yeltsin’s government started implementing a “loans-for-shares scheme”. Based on the government’s design, the leadership of the country was to transfer under a fraudulent scheme ownership of immense assets of the most effective state enterprises (including global enterprises, for example, the nickel, palladium mining and smelting company Nornickel) virtually for free to individuals with close ties to the state – “personal friends”. And this is how vast corruption practices were created, underpinning a system based on the organic integration of property interests and state power and accordingly, the entire merger of the state at all business levels.
The outcome of Russia’s presidential elections in 1996 can be attributed directly to the emergence of the criminal oligarchy. After wiping out the savings of the Russian population and excluding the people from participation in actual privatization, Yeltsin’s so-called “reformers” were fully aware that they would no longer be able to count on popular support. Moreover, the majority of Russia’s citizens started posing a threat to anyone who had appropriated a significant slice of state property with the help of the regime and the so-called new “power-property” class (the direct result of the merger of state power and property). And this is when they concocted the “horror story” about “revenge communism” which would allegedly rear its ugly head if the population did not vote for Yeltsin in the elections, a tactic to intimidate the population who had only just been liberated from Soviet power. However, this had nothing to do with the communists and the threat that they might win the elections. Society’s rejection of “reformers” and the regime (on the eve of the elections President Yeltsin’s rating had sunk to a new low of several per cent) was by no means a rejection of democracy and the idea as such of real liberal reforms.
It is true that compared to the absurdity of Yeltsin’s reforms the communists actually looked stronger and more convincing, but they would have found themselves facing a completely different balance of forces if they had been participating in fair and honest elections against a real democratic alternative which was in the making at the time. However, from the perspective of the crony groups to have emerged from the criminal privatization of property, such an outcome in the elections was undesirable, as this might have ended in a re-examination of the results of this privatization. As the emerging class of oligarchs were preoccupied with retaining their illegal oligarchical crony system, Yeltsin who was extremely unpopular at the time and seriously ill was presented as the only alternative to the communists. The Western establishment, in particular, the US, went all out in its ardent backing of such a scenario.
The success of an unpopular president could only be guaranteed by eviscerating the free press and mobilizing all the resources controlled by the merged state and property resources. To achieve the “necessary” result, the regime used General Lebed, whose candidacy was expected to “draw off” some of the electorate opposed to Yeltsin. To promote Lebed, the ruling elite played the cards of great power status, militarism and imperialism, concepts which are so dangerous for Russia. In this way, exploiting pre-election manipulation techniques and the widespread falsification of the results during the actual voting, Yeltsin was re-elected President.
The outcome of the 1996 elections helped to preserve and entrench the criminal-oligarchic economic and political state machinery. It is at this point that the period of market and democratic post-Soviet reforms which continued for four years in total ended ignominiously. Russia started to be transformed into a totalitarian monster. To shield the fake owners, in other words, the oligarchs, from any legal focus and prevent investigations by the judiciary, parliament, the press and the political opposition, a corrupt oligarchic corporate state was created. Such a state does not permit any separation of powers. In such a state established judiciary is entirely dependent on the ruling regime, the falsification of parliamentary and presidential elections becomes the norm, the absence of independent financing renders the press utterly dependent on the state and severely weakens political opposition, while the criminal consolidation of the powers-that-be and the property owning class rules out the possible emergence of any effective political alternative.
The goal of the post-Soviet Russian state by the end of the 1990s was not to protect individual rights and support vital institutions for the country, including the right of private property, but instead to protect the interests of the power groups serving the head of state and the group of the beneficiaries of criminal privatization, forcibly dedicated to him indefinitely.
In these circumstances, a system of peripheral authoritarianism with political nostalgia for the Soviet past had been established and taken hold by the mid 2000s in Russia. In this system power was concentrated in the hands of an absolute minority subservient to one individual. This regime looks down with disdain on the general population in the country, utterly disregards their fundamental interests and consequently seeks in every possible way to render the people totally apolitical.
The objective of creating in the country the political and economic institutions required to create a new economy and modern state was put on the backburner – it was not even assigned second priority, but more likely third or fourth priority. The privatization vouchers and fraudulent loans-for-shares auctions of the 1990s did not create a legitimate institution of private property. The attainment of this objective and the emergence of a middle class would have been contingent on wholesale privatization, something that never happened. No legal businesses emerged in Russia that enjoyed even a modicum of independence from the state. Meanwhile, in the absence of businesses that are independent of the state, the independent financing of political parties, trade unions, civil institutions is impossible. As a result, free and fair elections in the country are simply not on the table and actual regime change at elections has been ruled out. And so we come to the inauspicious outcome: it must be admitted that a post-Soviet Russian society was never formed.
All this taken together has resulted in the creation and establishment of an authoritarian political system in Russia with potential for the inevitable transition to a totalitarian regime. This system is built on a colossal gulf between society and the state, while it executes the overriding function of disparaging human dignity and spreading terror. And this is all a direct consequence of the economic reforms of the 1990s.
And what about the role of the West?
The West, first and foremost the US Government, supported proactively and unconditionally all these key stages of the reforms which resulted in the establishment of a Russian authoritarian nationalist system. To some extent, this was due to their inability to understand what was happening. At the same time, however, Western politicians did not strive that hard to understand. They focused their attention on personalities, on the persona of President Yeltsin, and not on the dangerous system and not on the people who were on the receiving end of this system. Western international institutes – the IMF and the World Bank with the support of the US Government – contributed significantly to the creation, design, financing and consolidation of this very system. It goes without saying that Russia’s leadership, the political elite and the Russian people must take full responsibility. However, it must also be acknowledged that the system would not have appeared without the West’s support.
It is worth noting here that ever since 1992 the West had shifted its focus from supporting Russia democracy and modernization to personal support for Yeltsin considered friendly to the West, as if modernization had already happened or was guaranteed by the retention of an individual viewed by the West as their ally.
Naturally, the West’s errors about post-Soviet modernization did not concern only Russia. In 2019-2020 a book was published “The Light That Failed: A Reckoning” by Ivan Krastev and Stephen Holmes, considering in detail and assessing the influence of the West on reforms in Eastern Europe1Ivan Krastev and Stephen Holmes “The Light that Failed: A Reckoning”, New York: Penguin Books, 2020, 256 pp.. However, now we are talking about Russia.
Meanwhile by the end of the 1990s one could observe the creation of a political and economic system in Russia which has nothing in common with modern democracy and capitalism based on the institution of private property. It was already clear back then: the reforms had been conducted in such a way that Russia would become a criminal, oligarchic and corporate state – which is very dangerous both for its people and its neighbors. Some of the first results of the decade of post-Soviet reforms were summarized in my article entitled “Russia’s Phony Capitalism”, published in Foreign Affairs almost 25 years ago in May 1998. The article started with a warning which is today unfortunately comprehensible to everybody, something that was not the case when the article was published: “Russia faces a watershed decision. The vital question for Russia is whether it will become a quasi-democratic oligarchy with corporatist, criminal characteristics or take the more difficult, painful road to becoming a normal, Western-style democracy with a market economy… Russians will make this fateful choice and be its principal victims or beneficiaries. But its consequences to Americans, Europeans, and others who share this shrinking globe should not be underestimated”.
This was their last chance. They did not use it. A few months later, in August 1998, the Russian economy collapsed, and Vladimir Putin appeared within a year.
Creation and support of Putin
The appearance of such an individual as Putin at the summit of the Russian regime was no accident or error. This was an inevitable choice predetermined by the logic and the requirements of the political and economic system created in Russia in the 1990s. Organically, this system was looking for someone who would defend unconditionally the results of the criminal privatization, its participants and beneficiaries (oligarchs and criminal billionaires), and as a whole the order of things that had been established in the country. It was only natural that a former officer of the KGB Vladimir Putin would be selected for this role. That is it in a nutshell. It should come as no surprise that Putin promised Yeltsin that he would preserve the system that had been created and would keep his promise.
They selected, incidentally, an individual capable of demonstrating his readiness to go to war. In September 1999, after Putin became Russia’s Prime Minister, a so-called counter-terrorism operation was declared, in other words, the second Chechen war was unleashed. The war was triggered with the assistance of terrorist incidents that remain inexplicable even today: they consisted of nocturnal explosions of residential blocks of flats with sleeping residents in Russian cities and the escalation of a state of panic. This is how the regime substantiated the need to launch once more large-scale military operations in the Caucasus. It was on the basis of this war that the distillation of Putin’s popularity was built on the “meme” invented specially for Putin: “wipe them out in the outhouse”. By the time Yeltsin had appointed Putin as his successor, the bloody war in Chechnya under the direct leadership of Prime Minister Putin had already been going on for several months. So there is no need to talk about some error of judgment or mistaken choice. In the presidential elections held shortly afterwards in March 2000, Putin was fervently supported by people referred to as reformers, individuals in whom the West had invested its brightest hopes – Yegor Gaidar, Anatoly Chubais, Garry Kasparov and others (incidentally, today Kasparov has once again become in the West the personification of a “new democratic Russia”, but now the former world chess champion is a vociferous opponent of Putin). At the time all these “liberals” and “democrats” went on and on about the “rebirth of the Russian army in Chechnya”, while calls to stop the war were called a “stab in the back of the Russian army”. Incidentally, at the time the peace-loving West had no scruples about such developments. In this way Russia continued on its journey to today’s war.
Meanwhile, two objectives were being resolved in Russia’s oligarchic-corporate state political system – how to create the absolute power of one individual and how to secure the immutability of this regime. Ever since 1996 it had been crystal clear that there were no fair and honest and transparent elections in Russia. The West saw and understood everything, that there was virtually no free press in Russia, that everything would be falsified and everything would be misrepresented. However, this elicited virtually no reaction either from Europe or the USA. It is highly likely that the West welcomed the immutability of the regime in Russia: they believed that it would be more peaceful and reliable. Step by step the Russian criminal oligarchic system took hold and was recognized internationally – from 2000 to 2014 Putin as the head of this system was a fully-fledged member of the G8. After the annexation of Crimea in 2014, Russia’s participation in G8 summits was suspended. However, in 2020 the US President Donald Trump advocated the resumption of the G8 format and was backed by the President of France Emmanuel Macron.
The West proactively supported Putin for many years at a personal level as Yeltsin’s heir: Tony Blair came to Russia to offer his support in the 2000 presidential elections, George Bush Junior confessed after meeting Putin in 2001: “I looked the man in the eye. I found him to be very straightforward and trustworthy… I was able to get a sense of his soul.” Putin has been praised by Berlusconi, Prodi, Sarcozy, Fillon, Kurz, Tsipras, Macron … Moreover, the G8 summit was held in Saint Petersburg in 2006.
It would be naïve to assume that during all these years western partners had failed to work out “who is Mr. Putin”. This was not hard to do: after the 2000 elections and the mass bombing of the civilian population in Chechnya, processes which had been consolidating the authoritarian system developed by leaps and bounds: the return of the Soviet hymn, the shutdown of the biggest independent TV channel NTV, Mikhail Khodorkovsky’s arrest and the de facto asset stripping of one of the biggest Russian oil companies YUKOS by the law enforcement, security and defense forces. However, Putin continued to be perceived in the West almost as an ally.
In the final analysis, however, it is namely the preservation of the state power-property system built in the 1990s in Russia and the retention by the regime of individuals considered by the West to be their partners which led to the confrontation between Russia and the West and to a radical review of foreign policy. Putin has been transformed from a close partner to one of the major opponents of the western world.
New terms and old approaches
The deterioration in relations between Russia and the West over the past 15 years is attributable not so much to NATO’s expansion in the East and promises to admit Ukraine and Georgia, mentioned both pertinently and inappropriately, even though this subject is fully understood and for that reason widely used. In my opinion, the key problem revolved around the lack of any serious interaction at a profound institutional level. To all intents and purposes, all the cooperation and partnership was limited to handshakes, backslapping and “eye-to-eye contact”.
Ever since the start of the 1990s the West has been effusive about “the end of history” and has done nothing to create a new collective security system in line with the times. “The greatest failing of the West’s strategic choice after the end of the Cold War is, of course, the exclusion of Russia from the European security system, its isolation, and hostility of contemporary Russia”, William Hill, former US Ambassador in Moscow in the 1990s, wrote in 20182William H. Hill, No Place for Russia: European Security Institutions Since 1989. Columbia University Press, 2018.
Were any attempts made to come to a mutual understanding? Yes. However, these attempts were not backed by any conviction or persistence either from the part of Russia’s leadership or from the part of its Western partners. For example, I am referring here to Putin’s proposal on the development and creation of a joint anti-missile defense system for Europe Russia, the EU and US). At the start of 2001 Putin discussed this issue in Moscow at negotiations with then Secretary General of NATO George Robertson, but no further progress was made. Or take another example – A Joint Declaration on New Strategic Relations between Russia and the United States was signed in Moscow in 2002, but subsequently not a single practical step was taken to implement it.
The absence of any initiatives on Russian-European integration in security is attributable, first and foremost, to the lack of understanding of the significance of this process. When the European Union was created, its key strategy was to prevent a new war in Europe. However, as the years have passed, the European Union has been transformed into a bureaucratic structure which has delineated its borders and started focusing on internal problems. In actual fact the strategy of a Greater Europe and Russia’s European integration was not even discussed seriously.
Incidentally, the same could be said about the European integration of Ukraine. If there had been any understanding in the European Union and a real desire to see Ukraine in Europe, if it had drafted a corresponding strategy, then it would have been possible over a quarter of a century – from 1991 to 2014 – to create reliable guarantees to prevent a return to the Soviet past.
Would it have been pertinent to expect the oligarchic criminal state system in Russia to come up with a reasonable domestic and foreign policy concept in line with the requirements of the 21st century? In particular if one considers how Putin’s timid attempts to discuss the creation of a joint anti-missile system with NATO or organize strategic cooperation with the USA were inconclusive. Instead of working on the strategically important rapprochement of Russia and Europe, the Kremlin started concocting an anti-western political agenda.
In the absence of a strategy built on the realities of the 21st century and the part of Russian history and culture which is objectively an integral component of European civilization, a post-modernist nationalist trend was created artificially, underpinned by resentment, revenge, the restoration of “former glory”, etc. Furthermore, system-wise the goal remained the same – the immutability of the regime, the prevention of any political alternative, authoritarian rule, the absolute dependence of business on the state. It is common knowledge that the key element required to preserve and maintain the viability of such a system is its expansion. And this is exactly what Putin declared in 2007 in Munich3Vladimir Putin’s speech at the Munich Security Conference on 11 February 2007. against the backdrop of sky-high oil prices. This is when the Russian President effectively announced a new cold war which had the goal of dividing the world into spheres of influence: let’s split up the world between Russia, China and the USA, and create in our part oligarchic corporate states, and we don’t need democratic principles, such as alternation in power and the separation of powers, regular fair and honest elections, a free press, etc. And this was the “deliberate choice” of the Russian regime that Putin has often talked about for different reasons.
The creation of tension on the post-Soviet space, the events in 2013-2014 in Ukraine, the annexation of Crimea and the bloodletting in the Donbass – this was all a direct consequence of the politics of the Russian power-property system. And today, 16 years later, we can acknowledge that Russia’s place in the world declared by Putin has not been achieved – it failed to become either the leader in opposition to the “unipolar world”, or to attract to its side European politicians and citizens. Putin’s “deliberate choice” boxed the regime into a corner, while a reluctance to acknowledge his own errors and accept defeat in the new Cold War led to the step taken on 24 February 2022. However, it is important to understand that the Russian political system at the very beginning had set its sights on this goal, and that is why Putin succeeded in this aim.
What the Western mass media now call a “failed policy of conciliation” applied to Putin (the inadequate response of the West to the war with Georgia in 2008, the events of 2014 in Crimea and the Donbass), in actual fact constitutes the distinctive traits of modern geopolitics – pragmatism and inertia. The post-Soviet space was not perceived as a danger and consequently this area was not prioritized. Moreover, the threat from Russian criminal-oligarchic system was deemed immaterial, while Europe’s high dependence on Russian energy resources fostered continuing communication and cooperation.
When it comes to Russian domestic politics, the West has changed its attitude to Putin, but not its approach to Russia. Western politicians, aware of the hostility of their recent protégés in the Kremlin, have already found new favorites among the Russian opposition. Reluctant to take a close look at developments in Russia and failing to make any attempt to analyze the nature of various political phenomena in the country, western politicians and mass media have indicated their backing for the national imperialist wing of Russia’s opposition (the participation of the key figure attracting this support Alexey Navalny in nationalist marches, his imperial declarations on the “Russians as the most divided nation in Europe”, aggressive support for the war against Georgia, his contacts with neo-Nazis, xenophobic and chauvinist statements were never kept secret). The fight against corruption was the only and key preoccupation of this wing of the Russian criminal oligarchic system. However, it should be understood here that against the backdrop of the Russian political and economic system, this is just a component of skirmishes within the ruling elite in their fight for power within the same system.
This is another vivid manifestation of global political ingenuousness and misunderstanding of Russian realities in the West, fraught as it is with the risk of future painful repercussions.
Owing to such misunderstanding and a reluctance to figure out what is really going on, even after the annexation of Crimea and the start of the war in the Donbass in 2014, nobody in the West embarked on the development of a “Marshall Plan” for Ukraine – no real steps were taken to commence Ukraine’s integration into the European Union. The tragedy of 2022 was required for the West to start to consider seriously the issue of Ukraine’s membership of the European Union.
The impact of economic sanctions imposed on a country with a corporate, criminal-oligarchic structure is counterbalanced by its unique features. And one of them is the fact that immutable authoritarian leaders of corporate states are completely indifferent to the lives of the populations of their countries. Such regimes seek to implement their own hegemonic version of the world order. No sanctions will prevent Putin or Xi Jinping from implementing their projects either in the case of Ukraine or in relations with Taiwan. The reason is simple: their power does not derive from economic success, but instead from imperialist ideology and the promotion of totalitarian expansion. That is why in this case the threat of paying a high economic price for choosing war is not an effective argument for coercing them to choose peace.
End of the war and guarantees for the future
Is there any way out from the tragic situation which has unfolded? Yes, there is. However strange it may seem, the answer can be found in the words of the First Chancellor of the German Empire Otto von Bismarck: “A statesman… must wait until he hears the steps of God sounding through events; then leap up and grasp the hem of his garment”4A. J. P. Taylor. Bismarck. 1955. I am referring here to the need to engage in politics in accordance with the objective requirements of the time and period in world history. By virtue of its specifics, Russia is without a doubt a part of European civilization, in terms of culture, mentality and history. And the only possible positive future for Russia is European. Putin’s attempts through the corporate criminal system to send Russia in some other direction, for example, Eurasian, and create a separate civilization out of the country is fraught with the catastrophe of the loss of any future. Right now we are on the verge of such a catastrophe.
That is why there is only one reliable way out of this seemingly endless war – a conscious movement together by Russia, Ukraine, Belarus, Moldova and possibly Georgia and Armenia towards a life corresponding to the 21st century, the life lived today by the European Union – transparent borders between countries, identical rights for the citizens of all member countries, a single currency and general legislation on key issues, coordinating supranational governing bodies.
The key issue here is that the European choice is the choice which rejects war, not because war is economically disadvantageous or could be lost, but instead because war in essence contravenes the principles of the state system and the values of individuals entitled to make their own choice.
Europe’s history in the 20th century shows that, regardless of developments, a peaceful future on the continent is only possible within a new European architecture – political, economic and military, which includes both Russia and Ukraine. And that is why there is one step that the Russian people will have to take – build a fundamentally different political and economic system based on freedom, the real separation of powers, creativity, the inviolability of private property and fair competition in all areas of life. That is why sooner or later people will once again refer to Europe as running from Lisbon to Vladivostok.
However, if Russia with its multi-million people is perceived as a barrier blocking the path to the goal, and not as a goal, then we will end up going round and round in a vicious circle endlessly.
In addition, we cannot focus all the time on Putin alone and his time in power. The problem is far broader than one person. Even without Putin the system that led Russia to today’s tragedy is alive and kicking. In addition, the relentless focus on his persona has become one of the premises of the war: the fight personally against Putin, specific individuals in his entourage and even corruption in this milieu, but not a fight against the system, has shifted the emphasis and turned the attention of Russian society to the key problem – the contempt for moral standards in politics, has engendered the loyalty of Russia’s liberal intelligentsia to nationalism, populism on the left and to national Bolshevism.
There is no alternative to the European path for peace. Germany and France fought for one hundred and fifty years over Alsace and Lorraine, for control of the city of Strasburg. And it was only the establishment of the European Union that brought an end to the war. Naturally, it would be very strange and naïve in the current situation to expect the current Russian leadership to understand that this is the only path for Russia in the 21st century. It goes without saying that today nobody is ready to discuss the idea of the rapprochement of Russia, Ukraine and other post-Soviet countries with the European Union as a way out of the war that risks going on for years. Neither in Russia, nor in the West. And that is completely understandable. However, this will not always be the case. History, time and the inevitable return to reality will force both Russia, Ukraine, Europe and other participating countries to come back to this idea.
The key here is that the scale of the crisis facing western democracies attributable to the new technological era, economic or environmental challenges does not mean that there is some real global alternative to the values of modern European civilization. Totalitarian China is not an alternative. Meanwhile, what has been called the “Global South” (Latin American, African and Asian countries) is based to a certain extent on European values and models. “Multipolarity” in the modern global world is a dangerous unrealizable pipe dream and any attempts to move this way would prove extremely costly.
At the same time, the value-based crisis, which became one of the reasons for the war in Ukraine, does not mean that European values should be replaced by some other values. The objective is to raise European values and the institutes implementing them to a new qualitative level in line with the global world of the 21st century.
