The Guardian June 7, 2000

Russia's new president:
More of the same, but worse

by Mati English

The inauguration of Russia's new president, Vladimir Putin, on May 7th was 
a well choreographed and pompous affair. It was promoted as a "modest" one-
hour long spectacle which was to show the energetic Mr Putin walking the 
long red carpet along the halls adorned with what looked like toy soldier-
dressed guards. Impressive, almost Hollywood. The new president swore to 
uphold the interests of Russia while the old president, Boris Yeltsin, 
looked on.

Mr Putin stressed in his speech that "the transfer of power is always a 
test of the constitutional system, a test of its strength. We have passed 
this test with dignity. We have proved that Russia is becoming a truly 
modern democratic state. The peaceful succession of power is the crucial 
element of the political stability of which we have dreamed".

There were a number of critical commentaries in the Russian press on the 
succession. Some noted that Mr Putin had been appointed by Mr Yeltsin as 
his "heir" and the election campaign was just a sham to rubber stamp and 
legitimise the "chosen one".

Be that as it may, Mr Putin is the new Russian president. One of the 
frustrating features of the whole period, from Mr Yeltsin's resignation on 
New Year's eve to the March 26 presidential elections and beyond, was Mr 
Putin's failure to put forward any political, economic or social policies 
during the election campaign. 

His election campaign was tightly stage-managed by a special group of PR 
people which included Yeltsin's daughter. Marketed as an "action man", Mr 
Putin promised to strengthen the Russian state and make Russians proud of 

One of the first tangible policy moves was to reassert direct presidential 
control over the 89 regions which make up the Russian Federation. Each 
region has an elected governor most of whom were eager to support Putin 
during his election campaign. They also constitute the Federation Council, 
the Upper House of Parliament.

Mr Putin ordered the division of Russia into seven administrative zones 
under specially appointed administrators directly responsible to him. They 
are not elected and are supposed to see to it that the laws and 
constitution of the Russian Federation are adhered to.

When Yeltsin was dismantling the Soviet Union 10 years ago he told the 
regions and the local authorities to "take as much sovereignty as you can 
swallow". Sovereignty in the regions degenerated into feudal fiefdoms of 
corrupt officials, corrupt police and a corrupt system of governance. 

Many of the Moscow political elite tolerated these developments because 
they gave corrupt and greedy officials the opportunity to enrich themselves 
through economic and financial deals, exploit the nation's rich resources 
and live-it-up at the expense of the impoverished workers as Russia became 
dominated by corrupt and gangster capitalism.

Mr Putin's decree on the establishment of the seven administrative zones 
received a mixed reaction. Local administrators fear a restriction of their 
powers and privileges. While there is nothing wrong with bringing some 
semblance of normal governance in the country where at least laws and 
regulations are the same across the same country, subsequent events do not 
point in this direction.

The new administrative divisions corresponds exactly with Russia's present 
military zones and five of the seven newly appointed administrators have 
either a military or a security background. They are to come to Moscow and 
have meetings with Putin once a month. All of them have been appointed to 
the Russian Security Council. 

Commenting on this decision Mr Zuganov, leader of the Communist Party of 
the Russian Federation (CPRF) said that before embarking on these state 
administrative changes a detailed plan of how the country is supposed to be 
governed should have been made and discussed. For too long ordinary people 
have been denied the right to participate meaningfully, have a say, and 
have their concerns addressed.

Suspicion and uneasiness regarding such an administrative system goes back 
to the "young reformers"  people like Chubais and Gaidar  who spoke 
appreciatively of the "Chilean model". They argued that the iron-fisted 
rule of Pinochet had created an economic miracle to be admired and follow. 
This idea was expressed at the beginning of Yeltsin's rule and surfaces 
from time to time.

While Mr Putin did not bother to announce any economic plans or policies 
during the election campaign Putin's men were working on them behind the 

German Gref has emerged as one of Putin's advisers and has now presented 
his program of social and economic development of Russia for discussion.

Who is German Gref? He heads one of the "think-tank" outfits that have 
proliferated in St Petersburg (Mr Putin's hometown) and has been appointed 
by Putin as his minister of economic development and trade.

Mr Gref's connection with Mr Putin goes back to the time when both of them 
lived in St Petersburg. As the French newspaper Le Monde records, 
both Putin and Gref worked as "consultants" for a Frankfurt-based property 
company called Spag. Spag was set up in 1992 on the initiative of the St 
Petersburg city council which had a stake in the company. At the time the 
Mayor of St Petersburg was Mr Sobchak who died recently. He was Mr Putin's 
professor and mentor. Mr Putin was head of the St Petersburg foreign 
relations committee from 1992-96. 

Spag is now being investigated by German and Austrian police. Rudolf 
Ritter, one of the founders and directors of Spag was described in a report 
by the Germany's secret police (BND) as an agent of the Ochoa brothers' 
Colombian drug cartel and of Russian organised crime. Rudolf Ritter is also 
the brother of Liechtenstein's financial minister. It is common knowledge 
that Liechtenstein is one of the world centres for money laundering. The 
BND claimed in its report that Ritter had set up a network of money-
laundering companies which transferred money to buy properties in Russia. 
Ritter was arrested on May 13 in Liechtenstein and is being held on remand. 
He is being charged with money-laundering and links with organised crime.

Only on May 23 did Spag's Internet site indicate that Putin had given up 
his job there  weeks after his election as Russia's president. The 
Russian president's press office claimed that Putin had never worked for 
Spag as an adviser and had never been paid any salary.

This statement contradicted one made by Spag's director  that Putin had 
worked for the company for several years (until March 2000) along with 
German Gref but "it was an unpaid job, a kind of sponsorship".

Mr Putin is now president and Mr Gref has been given the responsibility to 
work out an economic plan for the whole of Russia! 

Ten disastrous years

The Russian economy remains in a chronic state. The ten years of so-called 
reforms has devastated the economy more than the destruction caused during 

More than half the industrial enterprises are idle; $300 billion dollars 
have been siphoned off overseas; the people have lost their savings 3 
times; 30 per cent of families live below the poverty line. "Market 
reforms" brought forth a criminalised economy; poverty and stagnation.

Mr Gref's key economic policy calls for deregulation of the economy and the 
complete removal of state control or involvement. The state should be 
concerned with the effective implementation of its basic functions  
security and the protection of the rights and freedoms of its citizens. The 
state should guarantee "fair play" and adherence to law by everybody and 
should gradually remove itself from interfering into business, according to 
Mr Gref's economic vision.

To those familiar with the aims of the economic rationalists, the IMF and 
the World Bank will find this very familiar.

The combination of neo-liberal economic doctrines with the commercial 
interests of influential groupings which use state regulation in their 
private interests have already reached high levels in Russia. To proceed 
along the same path will lead to an unprecedented corruption of state power 
as a whole. 

Social issues are being addressed from the same ideological point of view -
- the state should not be responsible for education, medical care and the 
provision of welfare. To cover it up, Mr Gref's plan envisages shifting 
responsibilities from the central to local governments. In reality it would 
mean that lots of people will be deprived of even the paltry amount of 
welfare payments they are receiving now.

The comment of the Communist Party of the Russian Federation on the 
proposed economic program is very much to the point: the authors of the 
program are trying to make the state serve the interests of big business 
which has been created as a result of privatising former state property. It 
is for this purpose that they need a weak state and "freedom" for big 

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