VLADIMIR PUTIN COMPLETES HIS FIRST YEAR AS PRESIDENT

By Elena Chinyaeva

When Russia's first president, Boris Yeltsin, announced his resignation on December 31, 1999, it came as a shock. Few had expected him to part with power before the end of his term, though hardly anyone doubted that the man he named his "successor," Vladimir Putin, the former security service chief who had been appointed prime minister a half a year earlier, would win the presidential election in March 2000.

Given that Putin was the only candidate who did not bother to detail his program, it is hard to assess whether he has delivered on his pre-election promises. Nevertheless, one can say that during his first year in office, Putin, seeking balance and order in his country, has has set out to work toward this goal in various directions. The results have been mixed. Having excelled in mass psychology--his popularity ratings are as high as ever--Putin has arguably also raised Russia's international profile. Meanwhile, his internal political actions still leave observers bewildered as to his real intentions and allegiances, while the national economy appears to have developed almost irrespective of his government's policies. Such imbalances might have a simple explanation: Putin is consistent and tough in implementing his own decisions and ideas, but when he has to rely on his advisers, determination gives way to ambivalence and hesitation.

GIVING A POSITIVE MESSAGE

For the most of the last decade, Russian society was racked not so much by fundamental political and economic changes as by psychological imbalance. The phenomenon of total nihilism, with its enormous destructive power, deeply affected every aspect of the country's life. Russia stopped either loving or respecting itself. Against this background, a full-scale national hysteria was easy to provoke.

Amid the nationalist euphoria which accompanied the Soviet Union's break-up, ethnic Russians were often regarded as responsible for the politics of the previous regime--not just in the newly independent ex-Soviet republics, but also in national republics within the Russian Federation itself. For ordinary Russians, the accusations that they were "occupiers" and "exploiters" contrasted starkly with their own self-perception as a long-suffering, hard-working people. (Sixty-one percent of respondents in a 1995 sociological survey chose "readiness to endure difficulties and hardships" as a distinctly Russian feature). In the New Russia, where ethnic Russians amounted to 80 percent of the population--in contrast to just over 50 percent in the Soviet Union--a dangerous wave of Russian nationalism was manifested in the victory of Vladimir Zhirinovsky's ultra-nationalist Liberal-Democratic Party in the December 1993 parliamentary elections. Fortunately, it did not go any further than Zhirinovsky's belligerent rhetoric.

By the mid-1990s, it was clear that the public desire for change had been fully satisfied by the years of Gorbachev's perestroika and Yeltsin's reforms. People now wanted order and respect. A poll conducted by the Independent Institute of Social and Nationalities Problems and published by Mir Rossii in February 1996 found that 74 percent of the respondents saw Russia as a "common home" for all nationalities. The poll also showed that all groups of the Russian population longed for a strong state headed by a strong leader. The respondents viewed the dissolution of the Soviet Union negatively (59 percent of respondents with an Orthodox background and 70 percent of Muslim respondents regretted the Soviet Union's break-up) and nearly 82 percent of respondents said Russia was a great power which "should command respect." Not surprisingly, 41 percent of the respondents said they supported the idea of uniting all the peoples of Russia in a common effort to revive its status.

Amid the legal anarchy and corruption, the desire for a strong leader translated into the hope for a national leader who would once and for all establish "rules of the game," thus creating the conditions for Russia to regain its strength. What prevailed was not a desire to have a strong state but a popular expectation that "order" should be introduced from above. Neither Yeltsin nor his prime ministers were up to the task. Yegor Gaidar and other reformers were busy destroying the old system, Viktor Chernomyrdin and Yevgeny Primakov scrambled to maintain a fragile balance without moving forward, Sergei Kirienko did not have enough time and Sergei Stepashin was too concerned about politics. Vladimir Putin was the only one who gave people a positive message.

By the time Putin was appointed prime minister, Russia, having lived through the economic disaster of August 1998, an attempt to impeach Yeltsin and continuous economic and political chaos, was totally mired in self-disgust and a feeling of guilt that was carefully cultivated by some of its Western well-wishers. When Russia was poised to enter a new conflict in the Caucasus, Putin firmly said that Russia had been attacked and thus had to shed these guilt feelings and defend itself. He went into the second Chechen war, not as a shrewd politician fishing for popularity, but as a kamikadze ready to risk his head. He gave the people a feeling that someone was responsible, a feeling of protection. Putin has promised to return people their dignity and they have given him their trust. His ratings remained high throughout a turbulent year, even despite the tragedy of the submarine Kursk. All that was left was to use such extraordinary popularity wisely--not an easy task, as it turned out.

RUSSIA'S NEW PRAGMATIC FOREIGN POLICY

Putin appears to believe that balance and order are easier to apply to Russia's foreign policy. Some critics charge that he is seeking to reestablish Russia as the main rival of the United States by befriending states the Americans call "rogues" and regrouping former allies whose debts to the Soviet Union are now owed to Russia. These critics say he ought to be strengthening ties with the West.

In fact he is trying to do both. Seemingly emotionless and cold, Putin has been building up his international policy in the same vein, affectionless and pragmatic. He moves methodically through his vast and chaotic inheritance trying to figure out who owes what to whom and how stalled relations might be reinvigorated to Russia's benefit. Starting with Britain's Tony Blair, he met with most of his fellow G-7 leaders. He also paid particular attention to renewing Russia's ties with former Soviet satellites, visiting North Korea, Mongolia and Cuba, as well as India, the Soviet Union's favourite partner outside the former Soviet bloc.

Putin has also continued, slowly but steadily, to press Russian interests in the Commonwealth of Independent States. During past few years, it has split into two groups of states which could roughly be described as pro-Russian--Belarus, Kazakhstan, Kyrgyzstan and Tajikistan, which entered into the Eurasian Economic Union last autumn, as well as Armenia--and the states which formed the GUUAM bloc (Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldova) which are increasingly pro-Western. Having demonstrated his readiness for an open confrontation, if needed--cutting gas supplies, threatening and even introducing a visa regime for Georgia--Putin has prevented the split of the post-Soviet space into opposing blocs of Russian and anti-Russian orientation. Russian policy towards the former Soviet Republics has continued to be based on bilateral ties. The first priority remains the formation of a union with Belarus, whose strategic position is worth the cost of reforming its Soviet-style economy. In late December, an agreement was finally signed with Ukraine about settling its enormous debts to Russia for gas supplies.

Because Russia's relations with the United States, Germany and France have worsened as a result of the Russian default in August 1998, the NATO military operation in the Balkans in 1999 and the new Chechen war in 1999, Putin began to look for a new strategic partner in the West. He found one in British Prime Minister Tony Blair. Having met with him five times over less than a year, Putin used these opportunities to legitimatize himself and his policies, including in Chechnya, with the international establishment. This helped to overcome other difficulties--allowing, for instance, an improvement in relations with France. A similarly careful but self-assured line was maintained towards the United States. Putin delivered Edmond Pope, whom Moscow had accused of spying, to George Bush on the day of his election victory. Putin also enlisted Canada, America's closest ally, in U.S. national antimissile program.

Putin was the first among the world leaders to visit North Korea, the most notorious of the so-called "pariah states" and did so just weeks before Western capitals started opening their diplomatic missions in Pyongyang. With the process of reunifying the two Koreas, however long and treacherous, on its way, Putin's was a no-lose step for Russia, which once dominated North Korea's international trade and economy.

In India, now world-famous for its computer engineers and fast-growing business community, Putin was sensitive enough not to dwell on the two countries' former affections, but stressed the need for cooperation in high technology. Refusing to forgive debts of former allies--Cuba alone owes Russia about US$20 billion, roughly the size of the current Russian state budget--Putin has undertaken to ensure that debts are returned in the form of economic preferences for Russian business. Wisely so, because Mongolia and Cuba have large reserves of copper and nickel, respectively.

While critics say that the tiny size of Russia's state budget hampers its efforts to play a leading role on the world stage, they conveniently forget that international business is driven not by state budgets, but by private companies with large turnover. Russian companies, such as the Gazprom natural gas monopoly, the UGMK metallurgy holding, or the rare metals producer Norilsk Nickel, are big enough to have considerable foreign interests. In late December, a large contract was signed with India for supplying sixteen new SU-30 fighters, one of the world's finest planes of this class, giving a new boost to both the Russian aviation industry and bilateral relations.

Markets abandoned by the Soviet Union are being actively penetrated by other foreign businesses. For example, Canada's Miramar Mining Corporation and Sherritt International, as well as Australia's QNI, are active in Cuba's mining industry. In this context, Putin's visits to the Soviet Union's former allies look like a last-minute attempt to get a foot in the door. This is certainly wiser than shooting oneself in that foot, as the Americans have done with their trade embargo. The absence of American competition is just another stimulus to get back to old markets while it is still possible.

TRYING TO CALM TURBULENT DOMESTIC POLITICS

In domestic politics, the president's drive for balance and order has led to a new parliamentary configuration and an administrative reform. The former aims at building a new political system, in which only two or three major parties compete in the elections. The second is aimed at strengthening central power by establishing the Federal Constitution's priority over the local legislation in Russia's often separatism-prone regions.

The year started with the pro-presidential Unity party, created for last December's parliamentary elections, becoming the second biggest parliamentary faction, after the Communists. This ended the six-year confrontation between the legislative and executive branches. Legislation introduced into the State Duma in late December would impose strict regulations on process of forming parties, allowing only major national parties to participate in elections. In May, Russia was divided into seven federal districts, while the reorganization of the Federation Council--with governors being replaced over time in the upper house of parliament by their representatives--stripped regional leaders of some of their prerogatives. To heal their wounded pride, a new advisory body--the State Council--was established, which includes governors.

The idea of ending Russia's political chaos was at first supported by many. Strengthening the power at the center, however, was not accompanied by a thorough judicial reform and thus often produced unintended consequences. The law enforcement agencies, especially in the provinces, tend to interpret the center's initiatives as a call to "push and press," thus delivering a major blow to the strata Putin had pledged defend above all--small and medium-sized businesses. While big companies, also attacked by the tax police and the Prosecutor General's Office, have more means to defend themselves, the heads of small and medium-sized businesses, especially in the regions, found themselves caught between the police and local racketeers. The talk about making the courts truly independent has not yet been transformed into action and nothing has been done about changing the status of the Prosecutor General's Office, which at present is virtually accountable to no one.

Parliamentary reforms, including the legislation on party building and the reorganization of the Federation Council, have been well intentioned. But in its current form, this legislation might negatively influence the right of citizens to associate freely. It is also hard to say whether the new institutions of the federal districts and the State Council--neither of which have constitutional status--were worth the fuss. Yet they have take on a life of their own, demanding more powers, more staff and more influence.

OIL-PUMPED ECONOMY

Putin's understanding of balance and order in economy appears to be the least certain. The president has declared that all individuals and companies should have equal economic rights and freedoms, but has left it to his eam to elaborate both the concept and a detailed economic reform program. The liberal strategic goals Prime Minister Mikhail Kasyanov's government have declared--low inflation, stimulation of private initiative, openness to investment--are most welcome. Yet the government's day-to-day policy has often been controversial.

According to official figures, the gross national product last year rose 7.6 percent while industrial production rose 9 percent. Agriculture was in the black for the first time in many years, growing 3 percent, while wages rose approximately 20 percent. Investment in the real sector grew by 17.6 percent, while inflation was slightly over 20 percent and unemployment was 10.4 percent. The country's gold and hard currency reserves reached US$27 billion. The highest economic growth rate--13 percent--was recorded in the North-Western federal district, while the lowest--6 percent--was registered in the Far Eastern district.

Yet it is hard to gauge the extent to which the success was due to the government's efforts. Economic growth has been led by export-oriented businesses, above all gas, oil and metals producers. Their rapid development has given a powerful impetus to the modernization of the domestic machine-building industry, in turn stimulating other related sectors. Record high oil prices allowed Russia to finish the year with a large trade surplus, impressive hard currency reserves, and even a budget surplus.

Government policy, however, was inconsistent. A new 13-percent flat income tax rate was introduced at the beginning of this year, but in order to cover holes in the budget the government spiked an intended 50 percent tax cut on profits earmarked for investment--a step unlikely to stimulate an investment boom. The taxes employers have to pay on the wages of their employees remained relatively high, especially for small companies. Local taxes have also been raised, putting small and medium-sized businesses at a disadvantage.

The restructuring of Russia's banking system has also been stalled while the government has focused on strengthening state banks. Despite economic growth, the Russian stock exchange experienced several deep plunges last year, finishing the year low. Contrary to expectations, it has not become instrumental in attracting investment.

For the second time, the State Duma approved the 2001 state budget on time, but the budget predicts a rather modest 4-percent economic growth rate. The explanation is simple: Structural reforms have not been completed--which, in the context of falling oil prices makes Russia vulnerable. The economy may even show negative growth.

The year 2000 was a year of great expectations and mixed results for Russia. This was best manifested in the new Russian state symbols that the president suggested and the parliament adopted. If there were hopes for state symbols which would unify society, the mixture of the Tsarist coat-of-arms, pre-revolutionary Russian navy flag and Soviet hymn will hardly serve the purpose. Yet Putin clearly wanted to meet the New Year and with new state insignia and went about realizing this with his usual enviable determination. What would be better for the year 2001 would be if Russia's president had more clear ideas about supporting economic and political freedoms. Then his popularity and the country's international prestige would be guaranteed.

Elena Chinyaeva, who holds a doctorate in modern history from Oxford University, is a writer with the leading Russian political weekly Kommersant-Vlast.

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