Russia as a Network State: What Works in Russia When State Institutions Do Not?

Russia as a Network State

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Russia as a Network State What Works in Russia When State Institutions Do Not? Edited by

Vadim Kononenko Research Fellow, Finnish Institute of International Affairs, Helsinki, Finland

and

Arkady Moshes Programme Director, Finnish Institute for International Affairs, Helsinki, Finland

Introduction and conclusion © Vadim Kononenko 2011 Editorial matter and selection © Vadim Kononenko and Arkady Moshes 2011 All remaining chapters © respective authors 2011 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2011 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN 978–0–230–24964–6 hardback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Russia as a network state : what works in Russia when state institutions do not? / edited by Vadim Kononenko, Arkady Moshes. p. cm. Includes index. ISBN 978–0–230–24964–6 (hardback) 1. Public administration—Russia (Federation) 2. Central-local government relations—Russia (Federation) 3. Local government—Russia (Federation) 4. Political culture—Russia (Federation) 5. Russia (Federation)—Politics and government. I. Kononenko, Vadim. II. Moshes, Arkadii. III. Title. JN6695.R863 2011 302.30947—dc22 2011001648 10 20

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Contents List of Tables

vi

Acknowledgements

vii

Notes on Contributors

viii

Introduction Vadim Kononenko

1

1

The Formation of Russia’s Network Directorate Olga Kryshtanovskaya and Stephen White

2

Can Medvedev Change Sistema? Informal Networks and Public Administration in Russia Alena Ledeneva

39

Crooked Hierarchy and Reshuffled Networks: Reforming Russia’s Dysfunctional Military Machine Pavel Baev

62

3

4

Who is Running Russia’s Regions? Nikolay Petrov

5

Networks, Cronies and Business Plans: Business–State Relations in Russia Philip Hanson

19

81

113

6

The Russian Network State as a Great Power Stefanie Ortmann

139

7

Conclusions Vadim Kononenko

164

Select Bibliography

172

Index

182

v

List of Tables 1.1

List A Companies (in which key decisions are agreed with the Russian government)

29

1.2

Sectoral distribution of key state companies

30

1.3

Officials on the boards of major state companies, c. 2010

31

1.4

Elite groups on the boards of key state companies

32

1.5

Share of elite groups on the boards of state companies

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4.1

Governors’ appointments in 2005–10 by years

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Acknowledgements The first stage in the compilation of this book was funded by the Friedrich Ebert Stiftung, which made it possible to conduct an expert round-table seminar on Russia’s network governance, an occasion which also gave the authors the opportunity to discuss the contents of the book, in Helsinki in October 2008. The editors are grateful for the ‘seed money’, which was well received. Our gratitude is due to all the participants of the seminar: Prof. Stephen White, Prof. Alena Ledeneva, Dr Nikolay Petrov, Prof. Marie Mendras, Dr Susan Stewart, Dr Pavel Baev, Prof. Riitta Kosonen and Dr Uwe Optenhögel for their active personal involvement and interest in the subject of the book. The comments and criticism we received during the round-table seminar were immensely helpful in exploring the concept of the ‘network state’ and Russia. We are grateful to the authors who agreed to contribute chapters to this volume and who were enthusiastic enough to incorporate the new idea of the Russian network state into their scholarship and expertise. The book was prepared in the Finnish Institute of International Affairs (FIIA), where both editors had been working for several years before embarking on this project. The editors are grateful to FIIA directors Prof. Raimo Väyrynen and Dr Teija Tiilikainen for their support, understanding and continuous encouragement for the project. Particular thanks are due to the administrative staff of the FIIA for their efficiency in taking care of all the administrative matters, and especially to research assistants Maija Hyypiä and Minna-Mari Salminen. Lynn Nikkanen deserves special thanks for painstakingly correcting the English language of the manuscript. Our greatest thanks go to our families and friends who are undoubtedly the best and most endearing network that each of us would ever wish to engage with. We would like to extend our gratitude to Liz Blackmore and Shankar Narayanan for professional handling of editorial matters at Palgrave Macmillan.

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Notes on Contributors Pavel Baev is Senior Researcher in the International Peace Research Institute, Oslo (PRIO). He is also Head of Working Group on International Dimensions of Civil Wars at the Centre for the Study of Civil War (CSCW) at PRIO. He graduated from Moscow State University (MA in Political Geography, 1979) and worked in a research institute in the USSR Ministry of Defence. After receiving a PhD in International Relations from the Institute of USA and Canada, Moscow in 1988, he worked in the Institute of Europe, Moscow until October 1992, when he joined PRIO. In 1995–2001 he was a co-editor of Security Dialogue, a quarterly policy-oriented journal produced at PRIO, and in 2000–4 he was Head of the Foreign and Security Policies program. He held a NATO Democratic Institutions Fellowship in 1994–6. Philip Hanson is the author of The Rise and Fall of the Soviet Economy (2003) and co-editor of Regional Economic Change in Russia, Alexander Zinoviev as Writer and Thinker and Transformation From Below. He is a consultant on the Russian and Baltic economies for the Economist Intelligence Unit and Oxford Analytica, and an Associate Fellow of the Royal Institute of International Affairs Russia and Eurasia Programme. Vadim Kononenko is Research Fellow at the FIIA. He was educated at St Petersburg State University and London School of Economics. His research interests include Russia’s foreign policy and relations with the EU. He is a member of St Antony’s College of the University of Oxford where he is conducting research on the role of public/ private networks in the making of Russia’s energy policy. Olga Kryshtanovskaya is Director of the Institute for Applied Political Science and the Head of the Department for the Study of Hierarchical Elites, which is a part of the Sociology Institute of the Russian Academy of Sciences. She holds an honorary professorship at the University of Glasgow. She has conducted research at universities in New York, Salzburg, and under contract to the French Ministry viii

Notes on Contributors ix

of Defence. She has been a ‘spin doctor’ for such politicians as Gorbachev, Chernomyrdin, Nemtsov and Lebed. She has likewise worked on the President’s staff and for the Duma. In addition to numerous academic publications in international journals, she has also written political commentaries for such influential Russian newspapers as Moscow News, Argumenty i fakty, Izvestiya and Vedomosti. Kryshtanovskaya came to international prominence with the publication of her essay ‘The Russian Financial Oligarchy’ in 1994. Alena Ledeneva is Reader in Russian Politics and Society at the School of Slavonic and East European Studies, University College London. Her expertise is in post-Soviet Russian affairs: Russia in the global order, the Russian state and the rise of organized crime, barter economy, social networks and patron-client relationships. Prof. Ledeneva studied Economics at the Novosibirsk State University (1986) and Social and Political Theory at the University of Cambridge (MPhil 1992; PhD 1996). Until 1999, she was Research Fellow at New Hall, Cambridge. Arkady Moshes is Programme Director of the Russia in the Regional and Global Context Programme of the FIIA. He has authored numerous academic articles and policy advice-oriented reports on Russia–EU relations, as well as specifically on Ukraine, Russia and Belarus. Stefanie Ortmann is currently Lecturer in International Relations at the University of Sussex. Previously she was a lecturer at Royal Holloway, University of London and a visiting lecturer in the American University of Central Asia, Bishkek. She was awarded her PhD at the London School of Economics. Her research interests include the concept of identity in IR and the state in constructivist and critical IR theory. She explores these through analyses of Russian foreign policy, the international dimension of Russian state-building and ‘normative competition’ between Russia and the West. Nikolay Petrov is Scholar-in-Residence at Carnegie Moscow Centre. He has served as chief organizer of the Analysis and Forecast Division in the Supreme Soviet (1991–2), advisor and analyst for the Russian Presidential Administration (1994–5), and scholar at the Kennan Institute for Advanced Russian Studies (1993–4) and the International Foundation for Electoral Systems (1994). He has been working at the Carnegie Moscow Center since 1996 with a break in 2000–2 when he lectured at Macalester College in the United States.

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Petrov earned his PhD from Moscow State University. His research interests include Russian domestic politics, regional development, civil society and elections. Stephen White is James Bryce Professor of Politics and Senior Research Associate of the University of Glasgow’s School of Central and East European Studies. He graduated from Trinity College Dublin in history and political science, and then completed a PhD in Soviet studies at Glasgow – including an exchange year at Moscow State University – and a DPhil in politics at Wolfson College Oxford. His research interests focus on Soviet and post-Soviet politics, with special emphasis on elections, voting and nonvoting, parties, political elites, public opinion and the media. He also works on the current politics and foreign policy of Belarus and Ukraine, on Russian foreign policy and political graphics. He was elected a Fellow of the British Academy in 2010.

Introduction Vadim Kononenko

This book is about the Russian state and the ways in which it functions. From the outset, it begs a general and perhaps not so obvious question: what happens when the ubiquitous elements of the state – institutions, laws, cohorts of civil servants of various rank and position, strategies and policies – do not work adequately, or function according to differing, multiple and seemingly contradictory logics? As such, this question is about Russia as well as about any other state. It is also a question about theory and how the concept of state and the problematic relationship between institutions and individuals, public and private, formal and informal have been approached in political science and the studies of Russia. By looking at the post-Soviet Russian experience, this book raises questions about the scholarly assumptions and views that underlie these approaches. In doing so, this book also attempts to give a strong empirical analysis while being reflexive of established views and assumptions about the issues of state and governance in contemporary Russia. The notion of ‘network state’ which is central to this book may seem to many a reader a contradiction in terms. Indeed, in much of political science tradition the state has been approached with the classical Weberian understanding in mind, the vision of the state as the governing authority that reinforces order within its borders.1 Apart from the prerequisite of clearly demarcated unproblematic territorial and political borders, this vision also implies that the art of governing – of and by the state – should be practised by formal legal and rational institutions. In this way, a state is defined by its attributes, that is, formal institutions of government, because without them a state 1

2

Introduction

can hardly be recognized as such. This focus on institutions, whether weak or strong, has conditioned much of the mainstream empirical research on states, in particular in the post-Soviet region. It is also reflected in the idea that modern Western democracies are the closest embodiment of the Weberian ideal of the legal-rational bureocratic state that should serve as a point of reference when analysing other polities, including Russia and other Soviet successor states. That the post-Soviet realities are a far cry from the institutionalized legal-rational authority has been accounted in the literature by relying on another Weberian point of reference (and an ideal type): the patrimonial state, a form of ‘traditional rule’ in which authority is concentrated in the hands of a leader or a ruling group and is accompanied by the fusion of private and public sectors (Sakwa 2008a).2 The abundance of informal practices, the weakness and inefficiency of state instutions, the persistent existence of various groups of interest and influence in Russia’s politics obviously justifies a more critical assessment than the institution-centred approaches and narratives presuppose. However, even this, arguably more nuanced and perceptive to reality on the ground, understanding of Russia as a neo-patrimonial state is problematic because of the inherent complexity of Russia’s development as a state after communism. To claim that the post-Soviet Russian state is neo-patrimonial would be to overlook the actual emergence of institutions and state bodies that have been taking place from 1991 and onward, as well as the obvious centrality of the state in political and public discourse in Russia. So complex is this development and so tight is the actual overlap between institutions and ruling groups that neither of the models can give a full account of what kind of state is in place in Russia. Furthermore, any assumption of how these theoretical templates can be arranged with regard to the two last decades of of Russia’s history should be taken with care. It is not obvious that the collapse of the Soviet Union and the subsequent policies of the Yeltsin leadership had set Russia on the course towards a legal-rational bureocratic form of governance. Neither is it certain that Russia under Putin has ‘regressed’ back to a patrimonial, neo-medieval, Tsarist-like regime. It may simply be that the Russian experience has proven to be more complex than any of these narratives would imply. This book attempts to step outside these binary theoretically informed story-lines by developing a conceptualization of the Russian

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‘network state’ based on the assertion that institutions and networks should be seen in a dialectical rather than a mutually exclusive relationship within the contemporary Russian state. The empirical analysis in this volume posits that this dialectical relationship within the state, which in the widest sense can be characterized as a relationship between state institutions and ‘statespeople’ (individuals and interpersonal networks who claim the right to represent the state) is inherently ambiguous (Navaro-Yashin 2002). The term ‘network state’ that is used in this book is thus a working tool to conjure up this inherent ambiguity empirically and simultaneously draw attention to the problematic nature of the concept of the state when applied to studies of post-Soviet politics.

The ambiguities of the Russian state Despite the Weberian focus on the state as the overarching framework for maintaining legal and institutional order, any student of Russia would be struck by the perpetual presence of disorder in Russia’s current state-formation. Disorder in this sense does not refer to total administrative chaos nor to the complete collapse of governance and state failure. Neither does it imply that the current Russian state is somehow prone to a territorial collapse or social turmoil. ‘Disorder’ is used here, perhaps for want of a better word, to describe a reality that does not correspond with the standard view of the state as ‘a set of administrative, policing and military organizations headed and more or less well coordinated by an executive authority’.3 The Russian reality is arguably better characterized by declared intents and attempts at coordination, in which the ‘executive authority’ finds itself a hostage to administrative structures that fail to work according to plan.4 Indeed, the Russian state is full of internal contradictions. Most of the formal attributes of the state and key institutions such as the constitution, federal structure, bureaucracy, the army, and the judicial system are deeply problematic. Richard Sakwa defines this basic contradiction as the duality between the stated goals of the political regime in Russia and its practices, which permanently subverted the principles it claimed to uphold (Sakwa 2008b: 5–7). For example, as Sakwa notes, the reform of the party system conducted during the early years of Putin’s first term as president

4

Introduction

was presented as a means to develop democracy in Russia towards stronger parties and parliamentarianism. However, the underlying goal of the reform was to ensure that the sphere of party politics was manageable and that no threats to the regime could emerge from that arena (Sakwa 2008b: 5–7). Lilia Shevtsova discerns such contradictory features of Russia’s political order as those visible in adherence to mutually exclusive principles of the market and bureaucratic control, authoritarianism and democracy, paternalism and social Darwinism, and anti-western and pro-western trends in foreign policy and rhetoric (Shevtsova 2007b). In the broadest sense, the whole process of state-building, or gosudarstvennoye stroitel’stvo after 1991, which has indeed been the overarching goal of every Russian leader, can be seen as an illustration of the contradiction between rhetoric and practical policies. In their rhetoric, Russian leaders have repeatedly fallen back on the idea of a ‘strong state’, a consolidated, efficient and resourceful polity, yet the consequences and outcomes of decisions and policies almost always cast doubt on any such strengthening of the state. For example, this is only one book among many that attest to the fact that the level of corruption has been on the rise throughout much of the 2000s.5 There has also been a steady increase in the criminalization of various branches of the state, particularly in the realm of the law-enforcement agencies (Hignett 2008). At the same time, during the two decades since the Soviet collapse, the Russian state has proved itself viable enough to withstand two protracted internal conflicts in Chechnya in 1994 and 1999, a severe constitutional crisis involving an assault on the parliament building in 1993 by the Russian president, two major economic recessions in 1998 and 2008, as well as a series of technological catastrophes, terrorist acts and other accidents with a shockingly high number of casualties and appallingly low performance on the part of the state institutions. How can the Russian political (dis)order sustain such turmoil, while simultaneously maintaining its legitimacy and safeguarding its continuation? One way to look for possible answers ventured by the authors of this volume is to focus on the particularities of the disorder. Not every decision gets stalled in the labyrinths of bureaucracy, not every policy is a failed attempt. Things do get done in Russia, for the Russian people by the state, but the question is, how? As stated

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at the beginning of this chapter, in order to examine what works in Russia when the state institutions do not, one needs to look beyond the classical assumptions of the state as an autonomous and rationally structured system and analytically embrace the specifics of the Russian disorder. Various interest groups and networks populate the corpus of the state at all levels, declaring the state to be strong and autonomous, yet all the while maintaining full control over key decisions. It is important therefore to shift the focus from state as government, that is, institutions, to state as governance, that is, a set of specific practices and processes that regulate and preserve the status quo within the state, but which cannot be analytically understood by focusing only on the elements of government (institutions, formal procedures, political parties and so forth). This new focus on governance is informed by the observation, strongly put forward in this book, that a sort of symbiosis between informal groups and formal institutions of the state has emerged in the past decades in Russia in which the elite groups foster their own special interests by infiltrating institutions, in effect merging with the state, while at the same time maintaining their own position as unaccountable to these institutions. The state is thus chronically weak and subordinate to the networks, yet it is kept afloat as a sort of institutional carcass that the networks need. This form of dualism of institutions and elite networks within the state is described in this book as the ‘network state’. It is argued that during the years of its post-Soviet existence and particularly during the leadership of Vladimir Putin (2000–8), Russia has evolved into a type of state where governance is encapsulated within the symbiosis between networks and institutions. Examining Russia as a specific case of a network state and focusing on its processes and functions may help provide answers to why some key decisions are never implemented while others duly are, and to why the Russian state continues to exist despite the systemic inefficiency of its institutions. Furthermore, the notion of the network state is derived in this book from the empirical ambiguities of how the Russian state currently operates. Indeed, as a notion which is grounded in the reality under consideration, it reflects its diffuse nature. It is therefore important to consider the limitations of this notion as well as its potential advantages, which is done in the sections that follow.

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Introduction

The Russian network state What is the Russian network state? Its defining feature is the role played by elite networks in politics. Networks are understood here as a means of social interaction which is less formal than those between and within state institutions (Steen 2003: 141). As such networks can be found both outside the state institutions but also incorporated within and passing though institutional divisions such as ministries and administrative hierarchies. In this regard, networks are always personal and link up individuals or groups that share similar interests, allegiances and identification. In the Russian case, there is a clear tendency for the elite networks to identify themselves with the state, which makes it very difficult to distinguish between the two. As is shown in the contributions to this volume the elite networks do not operate from the outside exerting influence on the state. Rather, as the members of networks almost always hold a highranking position within the state sector, the Russian elite networks are an integral element of the state. That again explains why the notion of the network state is not entirely a contradiction in terms and can be applied to the Russian case. In fact it may well reflect the contradictory nature of Russia’s network-driven politics. The formation of such state networks can best be located along the state/business nexus, illustrating the well-known principle of Russian politics about running and simultaneously owning the state in Russia. But this is not the whole story. As this book shows, the networks permeate virtually all areas of policy-making, including the military and defence, relations between the regions and the federal centre, and foreign policy. Importantly, networks transcend different administrative divisions between ministries and agencies. Interest-based, commercial, or personal allegiances cut across bureaucratic structures. The networks should therefore not be taken as a problematic part of the state, nor be equated with the problem of corruption. For the most part, the network-based governance defines what the current Russian state is, in effect, all about. The presence of networks can be discerned in the way in which the interests and decisions emerge in such a system. For instance, the manner in which the key decisions were made and implemented in the latter years of Putin’s presidency (2005–8) took the form of

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a ‘state-private partnership’ – an intricate mix of state ownership and private management, proliferating in the most lucrative industries and branches of the economy such as energy, transport and infrastructure, as well as space technologies. Inasmuch as Russia’s internal politics is realized through establishing the ‘state-private partnership’ ventures and state corporations, one could envisage a kind of ‘network’ policy-making emerging in Russia in parallel with the formal institutions. Such policy-making advances the interests of domestic power groups and networks, both at home and abroad, while adhering to the rhetoric of ‘national interest’ and a ‘strong state’. In reality, the ‘national interest’ behind policy initiatives and goals becomes infused with the various ‘special interests’ of the stateprivate actors. One example among many is the United Aircraft Corporation (OAK), a state-controlled company consolidating aircraft construction companies and state assets engaged in the manufacture, design and sale of military and non-military aircraft. It was particularly noteworthy that in his address to the Munich Security Conference in February 2008, Russia’s first deputy Prime Minister Sergei Ivanov (also the president of the board of directors of the OAK) mentioned this project and pointed to fruitful cooperation between the OAK and Boeing. Another example is the activity of Gazprom in Europe. Among its various purchases abroad, Gazprom bought Serbia’s state-owned oil refining monopoly, Naftna Industrija Srbije (NIS), in February 2008. The Russian energy giant proposed a package agreement stipulating the involvement of Serbia in the ambitious South Stream project. The majority of the Western media interpreted the deal as a political backing of Serbia against Kosovo, although the reverse may well have been the case. Gazprom may have effectively used the political situation to advance its strategy of acquiring the energy infrastructure in Europe. In this regard, one could argue that perhaps what remains of foreign policy (in its traditional sense as an activity of the state to define the country’s place in the world) is, in fact, a rhetorical, diplomatic cover to further the interests of domestic power groups.

The persistent importance of the state The evidence for the continuous and profound degradation of state institutions in Russia and the proliferation of networks does not

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Introduction

mean that the state, in its classical interpretation as coordinating authority with a legitimate mandate for order and violence, has lost its significance. The state is alive and kicking, or rather it is being kept alive, yet it is doing different things and in a different way compared to twenty years ago when it was the Soviet state, or even ten years ago in its early post-Soviet incarnation.6 Given that, it is important to point out what is meant by the state in this volume.7 The state in the context of Russia’s network politics can be considered to perform three functions: • It is an organizing reference point for the Russian elites and, paradoxically, the networks themselves. Indeed, the weaker and more de-institutionalized the state has become over the years, the louder the calls for a ‘strong state’. Particularly in the Russian context, the concept of ‘velikaya derzhava’ or ‘Great Power’ has been the overwhelmingly dominant reference point for the majority of the Russian people, including the ruling elites and intellectuals. In fact, the same groups and individuals who presided over the emergence of the ‘network state’ throughout the 2000s continuously fall back on the idea of a strong state and also issue repeated warnings about Russia’s possible disintegration. The figure of Vladimir Putin and his role in transforming the state is particularly important for our analysis. Having ascended to power after Boris Yeltsin’s resignation on 31 December 1999, and with his personal endorsement, Putin made the goal of strengthening the state the centrepiece of his presidency. Indeed, the plethora of problems confronting the state at the time of his installation in the Kremlin was worrisome to say the very least. For example, throughout the 1990s the Russian state was constrained when it came to delivering salaries and pensions on time to the population, as well as overseeing the collection of taxes. Russia’s federalism has remained assymetrical throughout the 1990s with a clear shift of control away from the centre, a process that was sometimes compared to the devolutionary ‘parade of sovereignty’, or (parad suverenitetov) – the flight from sovereignty of the Soviet republics that led to the disintegration of the Soviet Union in 1991. In particular, separatism in Chechnya and the threat of terrorism associated with it were considered among the

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most serious challenges to Russia’s statehood. The ‘strong state’ was then the point of reference that would be shared by representatives across the political spectrum, including the Communists. It is instructive that one of the first and arguably most effective political networking projects of Putin’s early years in power was the aptly named ‘United Russia’, or Edinaya Rossiya, a pro-Putin party holding the majority in the Parliament and the regions. • The state, or rather the statist discourse, is utilized as a factor in mobilizing the population and securing legitimacy for the ruling networks. This goes some way towards explaining why the statist rhetoric that was used in Russia throughout Putin’s years was adopted by his successor, Dmitri Medvedev.8 In one of his first programmatic statements, titled ‘Russia Forward’, Medvedev talked about the efficient state, citing corruption as the major stumbling block to Russia’s development.9 Statist sentiments are also shared by the Russian people. There is a deep-seated paradox here, however: even though the opinion polls indicate zero trust in the government and state institutions, they nevertheless confirm widespread support for the notion of a strong unified state. • The state is the legitimate framework in which sovereignty and control is fully employed, while governance is only partially so. The state comes into view, as in all other countries, of course, every time the ‘public order’, namely the status quo, is at stake in the event of a public protest or, say, gas deliveries to Europe, or regional elections in the Russian Caucasus. Yet, while the state is the accepted source of authority for everyone, be it the CEO of Gazprom or the leader of Chechnya, it says little about how the governance is organized. The same tendency, only in a more pronounced form, can be observed when it comes to Russia’s foreign policy, on two fronts in particular: relations with the West and with the CIS. In both cases, Russia positions itself as a Great Power and a solid strategic actor. The practice suggests that Russia is relying on existing business networks, or is building new ones (Baev 2008; Pannier 2009). In this regard, thinking of Russia as a network state should not lead us to the conclusion that the state is obsolete in Russia, nor that it has lost all of its commanding authority. In reality, a more complex phenomenon has taken place. While under Putin’s leadership, the

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Introduction

state has been re-centralized and granted more sovereign power than ever before since the collapse of the Soviet regime; for example in some sectors of the economy or in terms of federal relations, the actual qualities of the governmentality of the state, its logic and rationality, have merged with the elite networks. In this context, the very term ‘network state’ resonates with its uses in the literature on transnational networks or new post-modern models of governance in which the power of the state is decentralized and dispersed within civil society (Castells 2000). The situation is again paradoxical. On the one hand, the Russian state may seem like a very modern polity with all its traditional armoury of vast presidential prerogatives, conscription-based all-round defence forces and foreign policy based on the idea of power dominance and strategic competition. At the same time, despite the visibility of ‘stateness’, it would be misleading to assess the Russian state only in terms of sovereignty and control. It is precisely the process of governing the country that reveals the role of the networks. In this regard, as this volume shows, elite networks and networking extend the instutions and compensate for their inefficiency. That is of course not to say that elite networks and their representatives in power are not responsible for the chronic deficiency of state institutions. Still, because of their horizontal character, personal allegiance and trust, and not least shared identity, policy networks offer a sort of alternative means of governance. In the political parlance of Putin’s time, this phenomenon was often referred as ‘manual control’ (ruchnoje upravlenije). In mainstream policy analysis this term is interpreted as a sign of the paternalist authoritarian tendencies of the Putin presidency.10 At the same time it can be read as an implicit reference to network governance: individuals in power connected into a ruling network. The section that follows discusses the network state as a category of analysis employed throughout the thematic chapters of this book.

The network state as an analytical category The unifying aim of this book is to explore the Russian state and its many controversies through the analytical lens of the ‘network state’. In this way we would also like to offer some conceptual insights whereby the debate on Russia, both theoretical and policy advicefocused, could proceed. In the academic discussion, the question of

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what kind of state has emerged in Russia after communism has long been connected to the debate on the prospects for democracy in Russia. Such a debate has had several ups and downs as well as different phases in which various scenarios of Russia’s development have been contested. The initial literature on Russia’s post-Soviet statehood is dominated by the assumptions of transition to democracy after the ‘end of history’ and the collapse of the Soviet Union, when Russia was seen as headed to join the West. Among other factors, this assumption was conditioned by the widespread ideal of the legal-rational state with clear-cut separation of private and public and effective institutionalized and autonomous government. Like other societies largely outside the West (for example India, or the post-colonial African states), Russia has been conceived along the weak/strong state (or transition state/ neo-patrimonial state) dichotomy with the Western liberal democratic state being the model case and the major yardstick. As early as the mid-1990s, it became obvious that despite Russia’s self-proclamation of being a ‘democracy’, it was more rightly a ‘democracy with adjectives’ – hybrid, quasi, and so on. Collier and Levitsky (1997), for instance, counted several hundreds of these qualifiers. It has to be pointed out that although major assumptions of the transitology paradigm were seriously questioned, the normative centrality of the Western democracy stayed on. That is reflected in the profusion of ‘democracy with adjectives’ models: in all these conceptualizations, Russia’s development was measured according to how far it diverged from the rational-legal ideal of the Western state. Indeed, while conceptualizing Russia as a state in transition became less common again after Putin’s accession in 2000, the literature notes Russia’s transition not to, but away from democracy. Added to that was the Russian official discourse, which seemed to confirm these scholarly assumptions. Putin made it clear from the outset of his presidency that Russia would not be a ‘second edition’ of the UK or the US, as it had its own history, geography, traditions and therefore its own political system. This was accompanied by the rejection of those who had led Russia in that direction in the 1990s, viewing them as misguided, if not actually recruited by Western powers and their intelligence agencies. By and large, Putin’s centralization project was understood in terms of building a strong state with an active endorsement of such a project by the majority of society at

12

Introduction

large. In the literature this period was labelled as a form of ‘third world patrimonialism with Bonapartist tendencies’ (Markwick 1996), ‘feudalism’ (Shlapentokh 1996, 2007) or even ‘competitive authoritarianism’. What was common to scholary assessments was the sense that there should be an ‘end to the transition paradigm’ (Carothers 2002). The analytical perspective of the network state both challenges and provides ‘added value’ to this literature on Russia’s ‘post-transition’. It challenges the view that a centralized state with a vertical mode of governance emerged under Putin’s leadership. But it also provides a way to assess the controversies and peculiarities of Putin’s legacy and the way in which the state is related to the networks that govern it. As such, the ‘network state’ perspective is of particular help in understanding the three following aspects of the Russian state-formation in its current setting. First, it brings into focus the practices and processes of governance outside the conventional understanding of power only in terms of control by a vertical chain of command, and sovereignty. It critically assesses the ways in which power is employed in the name of the state by the governing networks, and it also re-assesses power as shared within elite networks. Key to this is the distinction between power and domination, or sovereignty which can be found in Michel Foucault’s works on governance, rationality and power (Burchell, Gordon and Miller 1991). Foucault insists that ‘we must distinguish the relationships of power as strategic games between liberties – strategic games that result in the fact that some people try to determine the conduct of others – and the states of domination, which are what we ordinarily call power. And, between the two, between the games of power and the states of domination, you have governmental technologies’ (Foucault 1988: 19, quoted in Lemke 2004). This is an important conceptual point which often goes unnoticed in studies of Russia’s politics that are traditionally focused on power of the state as means of domination over society. A Foucault-inspired research on the network state would focus on micro-practices of power, on ‘techniques’ of power as opposed to portraying power as a will to domination. As Leira puts it, ‘The ideal is to get to the micro-practices of power, to study it where it works in detail, on and through specific subjects, both through immaterial and material processes’ (Leira 2009: 4).

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In this regard, the ‘network state’ can be described as a way of organizing governance in Russia. Indeed, in Russia the art of govering, or ‘governmentality’ to use Foucault’s term, is conditioned, as we argue, by the profusion of elite networks and the blurred line between the state and society. It resonates well with Foucault’s critique of the view of the modern state as having a universal, autonomous essence and being totally distinguishable from the society at large (Foucault 1982 quoted in Lemke 2004). Governmentality in Foucauldian terms can be summed up as ‘a set of practices and strategies, governmental projects and modes of calculation, that operate on the something called the state’ (Jessop 2007: 7). The attempt here is to identify these sets of practices and modes of thinking that underlie the role of networks in governing the Russian state. This is done not only for the purpose of describing the hidden power of networks in Russia’s politics but also with the aim of revealing the underpinning rationality of network-driven governance in Russia. Secondly, the network state perspective is helpful in discussing the role and place of institutions. What is considered in the literature as a problem – the weakness of institutions, corruption and state capture – is looked at as the basis of the system and one of its founding principles. The institutions and networks are analysed in conjunction with each other, not in opposition as is the case in the conventional studies on institutions in Russia. Political power operates by networks and through institutions, whereas governing is performed by institutions and through networks as, for example, in the case of state corporations. Finally, the network state perspective explains some of the tendencies of the present regime that are often unaccounted for by other approaches, or referred to as simply controversies. For example, the persistent falling back of the leadership on the idea of centralizing and modernizing the state and the practical failure of such projects under Putin and during the early years of Medvedev’s presidency. That said, network state as an analytical category faces clear measurement problems. First, it cannot be quantified: estimates rely on qualitative judgments of complex and often contradictory political dynamics. To measure the impact of networks, empirically rich case studies are necessary. In this book, individual chapters provide extensive documentation of the linkages between elite

14

Introduction

networks and political processes across a wide range of thematic contexts. A second difficulty results from the complex nature of network state as a category of analysis. Just as it would be exceptionally difficult to find a ‘network state’ that describes the ideal type, so too would it be rare to encounter a situation when all components of policy process share the same trajectory. In this book a number of policy networks relevant for understanding Russia’s politics will be identified. Most of them contain a large number of interests and they might overlap and not be clear-cut. It is the aim of the empirical chapters to illustrate what networks were more integrated into the body of the state and which ones were excluded from the policy-making process during the period of leadership of Russia’s three post-Soviet presidents. These measurement difficulties complicate the applicability of conclusions that may be drawn about links between networks and institutions. This considerably limits the generalizability of the network state analytical framework. Therefore any cross-national comparisons, albeit outside the scope of this book, must be considered preliminary until the validity of the comparison can be established through rigorous empirical testing.

Preview of chapters The seven chapters that constitute this book analyse different aspects of the Russian ‘network state’. In Olga Krystanovskaya’s and Stephen White joint chapter, ‘The Formation of Russia’s Network Directorate’, the writers examine the emergence and evolution of elite networks under Putin and their further transformation during the time of Putin’s successor, Dmitry Medvedev. The Russian elite has been renewed to a large extent during the Putin period. Two stages in its reorganization can be identified: the first stage, from 2000 to 2003, when an active renewal of the establishment was taking place, was accompanied by the massive ascension to power of representatives of the business and security services, as well as the formation of a St Petersburg network. The second stage, from 2004 to 2007, saw a stabilization in the composition of the elite, with a movement from renewal/upward mobility to rotation. New people attain higher state positions not in large numbers, but individually, while the rules of the game are clarified

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further and a tonkaya nastroika, or fine tuning, of the administrative system takes place. In ‘Can Medvedev Change Sistema? Informal Networks and Public Administration in Russia’ Alena Ledeneva focuses on patterns of interaction that emerge at the point of contact between state officials in public administration and their counterparts – both patrons and clients – in politics and business, law enforcement, the judiciary and the legislative system. Analysing the process of interaction within networks in Russia, Ledeneva narrows down the notion of informality. Informality is not a feature of personal relationships or simply a personal aspect of the hierarchy characterizing interactions between officials who happen to know each other. Informality is a feature of formality, of relationships that emerge within formal structures, due to both formal constraints (demanded by formal structures) and informal constraints (pressures of social norms, tradition and custom). The specifics of informal pressures in Russia, essential for understanding informality, include a blurred boundary between friendship and the use of friendship, and helping a friend at the expense of public/corporate resources. The chapter introduces a bottom-up perspective on the analysis of the informal workings of the networks or, as Ledeneva prefers to call it, sistema. Medvedev’s presidency is an interesting test for the workings of sistema. His initiatives (the exposure of telephone justice, blat appointments and anti-corruption legislation) pose challenges to sistema and need to be monitored as indicators of change. Nikolay Petrov looks into the specifics of the region-based networks in ‘Who is running Russia’s regions?’ Key to this is an understanding of the evolution of the regional management, both in terms of process and cadres. In Petrov’s analysis, the central elements of the new system of management resemble a ‘managerial network with overdeveloped radial and underdeveloped concentric ties’. In ‘Networks, Cronies and Business Plans: Business-State Relations in Russia’ Philip Hanson sets out to characterize more precisely the relations between the central state and big business in Russia. Earlier work has established several features of Russian business-state relations after 2000. There is evidence of state capture by business at the regional level, affecting regional legislation. There is also evidence that at least from 2003 onwards the central Russian state exerted control over big business to a degree not observed in two other states with close links

16

Introduction

between business and politics: post-World War Two Italy and Japan. Hanson addresses the question of whether the central Russian state is indeed a unitary actor in its dealings with business, or whether the notion of rival ‘clans’ or factions is closer to the mark. Have people in the state apparatus been seeking to place more assets in state ownership in general or to ensure that trusted magnates will control assets in the interests of particular groups of politicians, or is there some mix of these objectives across sectors and across factions? To shed light on these questions, the liberal ideal of ‘anonymous’ dealings between the state and particular firms is described, and its practical impossibility in any state is noted. A number of Russian case histories are subsequently reviewed. They include the failure of the Gazprom-Rosneft’ merger plan, the removal of Russneft from Mikhail Gutseriev, the rise of Rostekhnologii, the Mechel fuss and lobbying by the Russian Union of Industrialists and Entrepreneurs. The conclusions that emerge are plausible inferences drawn from what is routinely disparaged as ‘anecdotal evidence’. They therefore carry an academic health warning. Pavel Baev in ‘Crooked Hierarchy and Reshuffled Networks: Reforming Russia’s Dysfunctional Military Machine’ argues that the many contradictions and inconsistencies in Russia’s security policy cannot be attributed solely to the sloppiness of the ‘decider’, and an important part of the explanation can be found in the interplay between competing networks inside the military hierarchy. This chapter takes the decision-making on waging war with Georgia as its point of departure, examining the strategic posture, and looking into the prospects for modernization. In the strictly centralized system of power that Vladimir Putin saw as the only way to exert presidential control, and which is still seen by the ruling elite as the most ‘organic’ for Russia despite President Dmitri Medvedev’s penchant for liberal rhetoric, the military organization could appear to be a perfect model. Indeed, the Commander-in-Chief should be able not only to order the launch of any number of strategic missiles by opening the legendary ‘black suitcase’, but also to direct any operation in every potential theatre. In actual fact, however, an order from the top might not arrive at the combat units concerned at all, and not because the means of communication are unreliable but because the twisted chain of command has too many weak links.

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Stefanie Ortmann in ‘The Russian Network State as a Great Power’ points out that ‘Great Power’ and democracy have both been consensual, foundational representations of the Russian state since 1991, adhered to by all sides of the political spectrum – although in the early 1990s, in particular, there was a real political struggle over what this actually meant in practice. At present, despite the ideological differences between siloviki and liberals, the identity of Russia as a Great Power, and the ‘hyper-Westphalian’ interpretation of what this means, is consensual (though interpretations of what it means for foreign policy-making vary). In fact, it could be surmised that this is a discourse that needs to be adhered to because it underpins an individual’s claim to be in the in-group – to be a member of the state elite. The pursuit of Great Power status, and the obsession with it among the current Russian leadership, is understood by Ortmann in terms of identity. In fact, this ‘state identity’ should be seen as separate from the classic identity question of being part of Europe and the West, though these identity discourses do overlap. Ortmann argues that this is a process with a domestic focus first and foremost; nevertheless the identification of the new Russian state as a ‘Great Power’ has been central here. In fact, it could be said that since the inception of the new Russian state in 1991 this identity narrative has focussed on a semantic field of ‘Great Power’ on the one hand and ‘democracy’ on the other. Both semantic fields have undergone considerable shifts in meaning since 1991 (from Yeltsin’s ‘normal Great Power’ to Putin’s ‘democratic Great Power’). In the concluding chapter, Vadim Kononenko sums up this volume by looking into the challenges Russia’s network state faces. How is the ‘network governance’ is going to evolve in the light of the dual leadership of Vladimir Putin and Dmitry Medvedev? Is the state in Russia stable and sustainable given the incongruities confronting the state instutions, including the possible rifts between networks? Finally, how unique is Russia’s experience, given the ambivalence of the modern state at large?

Notes 1. M. Weber (1918). ‘Politics as a Vocation’. In D. Owen and T. Strong (eds) (2004). Max Weber. Vocation Lectures. London: Hackett. 2. R. Sakwa (2008a). ‘Liberalism and Neo-Patrimonialism in Post-Communist Russia’, Law in Eastern Europe, 59, pp. 181–200. For the application

18

3. 4.

5.

6.

7.

8.

9. 10.

Introduction

of neo-patrimonialist models in the post-Soviet context, see also H. Zon (2001). ‘Neo-Patrimonialism as an Impediment to Economic Development: The Case of Ukraine’, The Journal of Communist Studies and Transition Politics, vol. 17, no. 3, p. 71. T. Skocpol (1979). States and Social Revolutions: A Comparative Analysis of France, Russia, and China. New York: Cambridge University Press, p. 29. A more appropriate term for disorder in the context of the book might be the Russian besporyadok. The Russian order can be described as a state of perpetual besporyadok. L. Holmes (2009), ‘Crime, Organised Crime and Corruption in PostCommunist Europe and the CIS’, Communist and Post-Communist Studies, 42 (2): 265–87. These changes are well documented in seminal volumes that trace the transformation of Russia’s political system, such as that by Shevtsova (2003, 2007b). These studies, however, stay within the borders of the institutionalist tradition, comparing Russia to Western models as a deviant case, but not providing analytical tools for an understanding of why Russia is what it is. A caveat needs to be put in place because, as with other concepts used in this book including ‘network state’, the contributors did not work with a unified definition of these concepts in mind. Each of the authors comes from a different theoretical and methodological standpoint. In this regard, our understanding of networks and institutions with the state in Russia is best approached with the idea of plurality and interdesciplinarity of contemporary research on states. The statist rethoric was indeed a constant feature since the inception of the post-Soviet Russian state, as argued by Ortmann in her contribution to this volume. The speech can be found at www.kremlin.ru/speeches. Accessed on 10 December 2010. P. Sidibe (2008). ‘Vladmir Putin hochet perejti ot ruchnogo upravlenija runkom k sistemnomu’ [Vladimir Putin Wants a Change from the Manual Management of the Market to Systemic One], Rossijaskaya Gazeta, http:// www.rg.ru/2008/08/20/putin-konkurencia.html; R. Coalson (2007). ‘Russia: Moscow Shifts from “Managed Democracy” to “Manual Control”‘. Radio Free Liberty http://www.rferl.org/content/article/1079227.html. Accessed on 10 December 2010.

1 The Formation of Russia’s Network Directorate Olga Kryshtanovskaya and Stephen White

1.1 Introduction The Soviet system was nominally a socialist democracy in which authority was exercised by a government that was formed by popular elections held at constitutionally prescribed intervals. In practice it was dominated by the network that was represented by its ‘leading and guiding force’, the Communist Party of the Soviet Union, and within the party by a ruling group that monopolized all positions of authority. Party members as a whole made up about 10 per cent of the adult population; however, all of them were obliged by the party rules to accept and implement the decisions of higher party bodies, and to refrain from any attempt to organize with other members (which was known as ‘fractionalism’). In practice, there were considerable differences within the ruling group that directed the entire network. Some of these stemmed from the competition for further advancement; others owed more to loyalties of a sectoral or regional kind that were supposed to unite groups such as the ‘steel eaters’ and place them at odds with the representatives of consumer goods industries. But in the last resort, their loyalty to the network as a whole was greater than their loyalty to any part of it; and if it was not, there were various party and extra-party sanctions that could be applied in order to secure obedience. Arguably, it was the collapse of this network that brought about the end of the Soviet system itself. Up to the 1980s, a complex of institutional mechanisms had ensured that it continued to recruit the new members it needed, but avoided the kind of degeneration that often 19

20 The Formation of Russia’s Network Directorate

results from political monopoly. It was, argued T. H. Rigby in a classic study, a ‘self-stabilizing oligarchy’, one that seemed to have avoided the tendency of all oligarchies to ‘dissolve into a pattern either of individual dominance or of a far more diffuse distribution of power’ (1970: 167). What appeared to have developed, in Rigby’s analysis, was a ‘battery of internal checks and balances’ (Ibid.: 188) that allowed a single dominant figure to emerge, but did not allow that position to be abused in a manner that threatened the network as a whole. Some kind of ‘implicit contract’ appeared to have been elaborated for this purpose, whose main elements were: keeping the two most important positions, those of party leader and prime minister, in different hands; reducing opportunities for patronage; distributing seats in leading bodies among different members of the leadership so as to avoid ‘dangerous patterns of overlap’; and maintaining a countervailing balance between the topmost leaders (Ibid.: 175). All of this, Rigby argued, had ‘hedged around the power and authority of individual leaders with a number of quite formidable controls, with the object of preventing history from again repeating itself, of obstructing a new drift to one-man rule’; any new leader was likely to ‘make use of and build on the experience acquired since 1964 in structuring stabilizing factors into the oligarchy’ (Ibid.: 187, 191). There were other, more broadly conceived mechanisms that helped to prevent the network as a whole from breaking down. One of the most important was the informal convention that prevented (or at least limited) self-recruitment and nepotism. Under its provisions, the children of higher-level officials never inherited positions with the same levels of seniority as their fathers. Instead, ‘elite children’ had a series of professional niches, often connected with work in foreign countries, to which their entry was facilitated by a special system of education at elite institutions, especially those that trained economists, diplomats and journalists with a specialization in international affairs. But those who directed the power network made sure that leading positions were also accessible to the more talented members of other sections of society, including the intelligentsia, working class and collective-farm peasantry in whose interests the entire network was supposed to operate. This relative openness began to diminish during the Brezhnev years, and was openly reversed when Brezhnev’s own son, Yuri, and his son-in-law, Yuri Churbanov, moved into ministerial positions and became members of the Central Committee

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in 1981; but they both lost their positions at the following congress, in 1986, and two years later Churbanov ended up in prison and the entire Brezhnev family was disgraced. The network, in addition, required of its leading members and particularly of those who were likely to obtain career advancement that they serve in different parts of the country. The traditional path towards one of its leading positions began with study in Moscow and then moved on to the soviet, Komsomol, economic or party apparatus at district level, followed by recall to Moscow for a oneor two-year stint in the CC headquarters and then a return to the provinces to take up a higher-level post (often a regional first secretaryship). Apart from geographical mobility, another characteristic was a change in career specialization. Over the Brezhnev period a number of typical elite career patterns developed, all of them part of the wider network of political power: party–economic, Komsomol–party, soviet–party and party–diplomatic. The most typical was a career that moved upwards from Komsomol to party work, or from party to soviet work and back, or from economic to party work and back. There were also ‘pure’ career progressions, most often on the part of economic administrators. In such cases, the people concerned moved upwards at the same factory to the level of director, then into the relevant ministry and eventually to the rank of minister (Kryshtanovskaya and White 1996: 714–15). The changes that took place under Gorbachev made it impossible to continue these self-stabilizing mechanisms, or indeed maintain the network as a whole. As ‘democratization’ proceeded, positions within the network became dependent on the support of ordinary citizens at elections that had become at least largely competitive, or (if they were for party positions) dependent on the support of party members in a secret and competitive ballot. It was no longer enough to rely on the continued support of an influential patron, who in turn depended on the loyalty of his subordinates within a network that assured material benefits and lifetime security for all of them. The extent to which these forms of network maintenance had broken down was very apparent when a new Central Committee came to be elected at the 27th Party Congress in 1990. In the past, the Central Committee had always included the holders of a series of key positions in government and society as well as the directors of the party network as a whole. This time, Gorbachev had decided that it should

22 The Formation of Russia’s Network Directorate

comprise a smaller group of officials who would work on a full-time basis, rather than a collection of notables selected ex officio, and their names would no longer be drawn up as a single list prepared by the leadership that was approved in its entirety. The result was that the level of turnover was greater than at the time of Stalin’s purges, with no fewer than 88 per cent of the 412 members entirely new to party office (Mawdsley and White 2000: 202–4). At the same time, economic changes were taking place that began to allow de facto private ownership (under the cooperatives law of 1987) and then fully private ownership of productive resources: first of all, of individual forms of enterprise that did not involve the employment of others, and then of much more substantial forms of economic activity. This fully private wealth was becoming available at the same time as positions in the network were becoming exposed to the unpredictability that was an unavoidable consequence of electoral choice. Not surprisingly, those who directed the network and now found their positions insecure appropriated as much of this new wealth for their own purposes as they could while they were still able to do so. Trotsky, writing in exile, had long before argued that the Soviet ruling group – the bureaucracy, as he called it – would find their privileged position unsatisfactory as it depended on their control of political office, which was necessarily temporary. Far better, from the bureaucracy’s point of view, to protect their advantages from the uncertainties of the political process and make them inheritable across the generations in the same way that ruling groups in other societies had been able to do: by private ownership. ‘Privileges’, as Trotsky had already pointed out in 1936, ‘have only half their value if they cannot be transmitted to one’s children’, and for this reason the bureaucracy would ‘inevitably’ seek to consolidate their position through property relations. The victory of the elite in this decisive sphere would mean its ‘conversion into a new possessing class’ (Trotsky 1991: 210).

1.2 From a Communist to a post-Communist network With the coming to power of Yeltsin, a new network directorate began to consolidate itself. Yeltsin, as a rule, used officials who had been appointed by Gorbachev, or whom he had known himself in the Sverdlovsk party committee. And although the flow of new

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people into high-ranking positions continued, it was nonetheless clear that the revolutionary period of the transformation of the elite had ended. The movement of officials from party to state that had begun under Gorbachev now showed its results. Throughout Russia, administrations were being formed from the same sources – the leading figures within a network that had evidently modified its composition but retained its overall monopoly of political advantage. If an observer had gone to sleep in Russia at the start of 1990, wrote Nezavisimaya gazeta at the end of 1992, and then woken up to be shown a list of the current Russian government, he would be bound to conclude that the reformist wing of the Communist Party headed by Boris Yeltsin had finally come to power (3 December 1992: 5). Some, indeed, thought the Communists had never actually left office (see Argumenty i fakty no. 23, 1994: 2). Under Brezhnev it had been all but impossible to become a member of the power network without passing through the hierarchy of leading officials known as the nomenklatura, or missing out any of the normal stages of advancement. There were of course some ‘outsiders’ within the CPSU Central Committee and the USSR Supreme Soviet, such as a small number of ‘genuine’ workers and collective farmers, but these were deliberate exceptions. There were further changes in the perestroika years, and even leading positions in the party network became accessible to a wider circle. The most important new source of recruitment to leading positions within the power network was, however, the Soviet election of 1989 and the Russian election of 1990. During the post-Communist years a still greater proportion were recruited to leading positions in the power network by those who came from outside it; nearly half of all party leaders, and more than half of all the business elite, were new people, and so too were a third of all deputies. More striking was the degree of continuity at leading levels of government: three-quarters of the presidential administration and nearly three-quarters of the Russian government within the power network of the early Yeltsin years were former nomenklatura officials, and among the regional leadership over 80 per cent had similar origins (Kryshtanovskaya and White 1996: 727–8). Most of the Yeltsin leadership, equally, had spent a considerable time in leading positions in the former regime. Among those who held leading positions in the new network, more than a third had begun their progress through the nomenklatura in the Brezhnev years,

24 The Formation of Russia’s Network Directorate

and more than a third under Gorbachev; only one in ten were new to a leading position, in that they had begun their professional careers in the post-Soviet period. More than half of the regional leadership of the time had begun their nomenklatura careers under Brezhnev, and all had inherited rather than acquired their elite status. Among those in the Yeltsin directorate who were former nomenklatura members the average age of service was more than 11 years, ranging from an average of 10 years among the Yeltsin government to nearly 15 years among his regional administrators. Just as there were typical career paths in all of these periods, there were typical paths from one period to another. Regional first secretaries, for instance, became chairmen of local soviets and then heads of local administrations. The presidential administration and the regional elite tended to emerge from former structures of government; the business elite were more likely to have a background in the Komsomol or Young Communist League. The Russian government, for its part, became more professional, with its origins increasingly in economic management, diplomacy and the former security services (Ibid.: 728–9).

1.3 Consolidating the network directorate The central tasks of the Putin leadership were to consolidate the power it had inherited, and to develop a set of mechanisms that would protect the network and those who directed it from external challenges of any kind. Their model was the former party leader Yuri Andropov, a figure Putin ‘almost self-consciously seemed to take … as his role model and posthumous mentor’ (Baker and Glasser 2005: 257). When perestroika and then Yeltsin’s reforms led to a sharp deterioration not only in the system of government, but also in society as a whole, senior officials from the security services (including Putin) came to the conclusion that Andropov had been right after all. They also concluded that a return to the Andropov model was still feasible. In any case, they had before them the positive example of China. Accordingly, soon after Putin and his team had come to power they formulated as their key objective the restoration of effective state power in all spheres of Russian life. This meant eliminating the centres of power that had begun to compete with the Kremlin for resources and influence. The governors were a potential danger in this connection (especially those from the rich donor regions). So were the Duma,

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and the oligarchs that had come to think of themselves as beyond reach, and the independent media, opposition parties and public organizations that were not controlled by the Kremlin. Each was dealt with one by one. One serious potential source of instability was the electoral system, where extensive use of the Kremlin’s control of the media and of ‘administrative resources’ had been necessary to ensure an increasingly favourable outcome. All the same, Putin’s margin in the March 2000 presidential election, at just under 53 per cent, was barely sufficient for a first-round victory. The Beslan hostage-taking crisis of September 2004 allowed a series of further measures to be introduced, all of which had the effect of strengthening central control and ensuring a system in which ‘the result was known in advance, but not the rules; unlike Western electoral systems, where the rules were fixed and it was the outcome that was unpredictable’ (to adapt Przeworski 1991: 10). In the most important of these changes, the single-member constituencies were abolished in a new election law of May 2005; in later amendments the minimum turnout requirement was dropped, and the possibility of voting ‘against all’. And a new provision was introduced that allowed candidates who had declined their seat at the moment of election to take it up at a later date. This was of particular benefit to United Russia, more than a hundred of whose successful candidates – including the Russian President and all but one of the governors – had stood down within a week of the vote (Vestnik no. 19, 2007: 28–38). Moves against the independence of the governors had begun even earlier, indeed within days of Putin’s inauguration. In May 2000, a presidential decree established federal districts together with a series of envoys (polpredy), most of them with a military or security background, as intermediaries between the Kremlin and the regions (‘Polozhenie o Polnomochnom’ 2000). Then in August the composition of the Federation Council was changed and governors lost their automatic representation (‘O poryadke’ 2000); they became members of a newly established State Council the following month, but this had no more than consultative powers (‘Polozhenie o Gosudarstvennom’ 2000). Most important of all, the Kremlin made sure not to ‘waste’ the Beslan crisis of September 2004 by ending the direct election of governors and making other centralizing changes, under legislation that was already in force by the end of the year

26 The Formation of Russia’s Network Directorate

(‘O vnesenii’ 2004). The last direct election to a governorship was in February 2005; the first election of a governor by the regional parliament, under the new rules, took place the following month. Overall, the effect was to ensure that governors became ‘representatives of the President’ in their region, rather than representatives of their region within the federation as a whole (Ivanov 2008: 203). There were more super-rich during the Putin years than ever before, but they had a rather different relationship with the state authorities. In particular, the new leadership was keen to establish that it would expect to be dominant in all relations of this kind, and that it would not tolerate any oligarchs who were too independent or (still more so) who expressed any political ambitions. Putin’s ‘Open Letter to Voters’, published shortly before the 2000 presidential election, made it clear that if he was elected, the ‘so-called oligarchs’ would be treated ‘like everybody else. The same as the owner of a small bakery or a shoerepair shop’ (Putin 2000a: 4). Interviewed in his campaign headquarters two weeks later, Putin was even more insistent that there would be ‘equal conditions for everyone who takes part in the political and economic life of Russia’; in particular, ‘no clan, no oligarch should come close to regional or federal government – they should be kept equally distant from power’ (Putin 2000b: B/1). And in a radio interview on the eve of the poll he appeared to call for the ‘liquidation of the oligarchs as a class’, which was what Stalin had said about rich peasants in the late 1920s. He avoided these precise words, according to the contemporary record, but the substance of his remarks was not very different. If oligarchs were simply the representatives of big business, there would be the same kind of cooperation with them as with anyone else. But if it meant the fusion of power and capital, he told Mayak on 18 March, ‘there [would] be no oligarchs of this kind as a class … In this sense there [would] be no oligarchs’ (Putin 2000c: B/3). After Putin’s election, a meeting in the Kremlin in July 2000 took place at which ‘something like a set of boundary lines’ was apparently established (Segodnya 29 July 2000: 1). These were based on the principle of mutual non-interference: the Kremlin would not interfere in the affairs of the oligarchs, provided the oligarchs themselves did not interfere in politics. Not all of them were immediately persuaded that the new rules of the game were to be taken seriously, believing their great wealth would be sufficient to allow them to carry out

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whatever political projects they wanted. Vladimir Gusinsky’s NTV television channel, for instance, continued to criticize the conduct of the second war in Chechnya. He was the first oligarch to be arrested, in mid-June, and was placed in Moscow’s disease-ridden Butyrki prison on charges of the ‘misappropriation of state property on an especially large scale’ – the first time an action of this kind had taken place (Kommersant 14 June 2000: 1; Gusinsky fled the country immediately afterwards and has not returned). A higher-profile victim was Yukos chief executive Mikhail Khodorkovsky, Russia’s richest man at the time and one of the world’s most wealthy, who was arrested in 2003 and sentenced to eight years in prison on charges of fraud and tax evasion, but in practice (it appeared) for presuming to support political parties that represented an alternative to those that were favoured by the network directorate itself (Sakwa 2009). By Putin’s second presidential term, the terms on which business was allowed to operate had become very demanding indeed. Not only were the richest owners required to keep out of politics, they also had to refrain from public activity of any kind, unless it was on the network’s own instructions. Even philanthropy might be considered a covert attempt to establish the kind of public image that could be used to mount an electoral challenge at some point in the future. All that remained was to finance projects that the Kremlin itself had identified as appropriately ‘patriotic’, such as Viktor Veksel’berg’s acquisition of the world’s second-largest collection of Fabergé eggs for ‘more than $90 million’ (Izvestiya 6 February 2004: 1), or Alisher Usmanov’s acquisition of the Rostropovich-Vishnevskaya art collection for $72 million so that it could adorn the Russian President’s St Petersburg residence (Ibid. 18 September 2007: 1), or Veksel’berg’s $1 million to finance the return of the bells of the Danilov monastery from Harvard University to their original home (Komsomol’skaya pravda 13 September 2008: 2). Oligarchs could also take part in Kremlin-sponsored projects such as the consultative Public Chamber: Vladimir Potanin and Mikhail Fridman – two of the ‘seven bankers’ that had supposedly met at Davos in early 1996 and agreed to do whatever was necessary to ensure the victory of Boris Yeltsin later in the year – were among its first members. More positively, there were attempts to establish a more comprehensive network of the kind that had been provided by the Communist Party in the Soviet period, which would bind together

28 The Formation of Russia’s Network Directorate

leading officials at all levels of the system in a manner that might be expected to ensure their commitment to the network as a whole. Increasingly, it became apparent that the outcome would be very like the CPSU itself. Its congresses were certainly reminiscent of those of its Soviet predecessor: the same lengthy reports with lists of impressive achievements, the same stormy applause, the same unanimity. The congress in October 2007 at which Putin was approved as the leading candidate on the party’s list at the Duma election was almost a parody of Soviet practices. Putin’s opening address received a five-minute standing ovation. Party leader Gryzlov promised in reply that all the tasks the President had outlined – ‘behests’, as they used to be called – would be ‘fulfilled in their entirety’. He was followed by a weaver from the Ivanovo region, who called for Putin to remain for a third term, and by a businessman and a full member of the Academy of Sciences, who called on the President to head the party’s election list and then the new government. There was further ‘grateful applause’ when Putin graciously accepted (Nezavisimaya gazeta 2 October 2007: 3).

1.4 The state-business network For any authoritarian regime, private business, with its own resources, is a potential threat. Accordingly one of the main tasks of Putin’s second presidential term, when most of his domestic opponents had been defeated or marginalized, was to take control of the major companies. Apart from this, the force-ministry siloviki that were the backbone of his administration were animated by the perfectly understandable wish to get rich. Coming to Moscow from St Petersburg it was immediately apparent how negligible their own wealth was when compared with that of the ‘real’ oligarchs – a sort of envy of millionaires of billionaires. But now they could change the situation. Under Yeltsin, state companies had been losing ground from year to year. All the commercially attractive enterprises had been auctioned and sold off to private owners. All that remained in the hands of the state was the single oil company Rosneft’ (which was the least profitable), the natural resource monopolies, the enterprises that were in the military-industrial complex, and loss-making but socially important smaller enterprises. Their boards of directors normally

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included low-level officials from ministries and the committee for state property. Under Putin, the situation changed radically. State companies began to play an increasingly prominent role in the economy, in some sectors pressuring private business. The role of Gazprom, Rosneft’ and other giants rose steadily, and their boards were joined by people from among Putin’s closest associates. In August 2004 the government took a decision to transfer a series of the largest Russian companies to the direct control of the government itself (‘Ob utverzhdenii’ 2004). These companies were divided into two lists (we shall call them List A and List B). List A included 27 companies (see Table 1.1), while List B comprised 47. These companies covered three main sectors of the economy: • the fuel and energy complex (including electricity and the atomic industry) • the military-industrial complex • infrastructure (transport and communications). The distribution of companies by sector is shown in Table 1.2. Table 1.1 List A Companies (in which key decisions are agreed with the Russian government) Company

Sector

United Aviation construction corporation United Ship construction corporation Atomic energy-industrial complex Rostekhnologii Rosnanotekh NPO mashinostroeniya Izhevsk engineering factory VTB Bank Agency for housing credits/mortgages Roskhimzashchita Corporation OAO Rosgazifikatsiya Okeanpribor OAO Zarubezhneft’

Transport, Militaryindustrial complex Transport Atomic energy Military-industrial complex Engineering Military-industrial complex Military-industrial complex Finance Finance Military-industrial complex TEK/Fuel-energy complex Equipment manufacture Fuel-energy complex (continued )

30 The Formation of Russia’s Network Directorate

Table 1.1 (Continued) Company

Sector

Avionika concern RAO ‘YeES Rossii’ Gazprom Rosneft’ Transneft’ Russian railroads Svyaz’invest First Channel of television Aeroflot Sheremet’evo international airport PVO Almaz-Antei Rocket-cosmic corporation ‘Energy’ Russaya Elektronika ‘Tactical rocket weapons’ corporation

Transport Fuel-energy complex Fuel-energy complex Fuel-energy complex Fuel-energy complex Transport Communications Media Transport Transport Military-industrial complex Military-industrial complex Electronics Military-industrial complex

Source: Database of the Institute of Applied Politics, Moscow.

Table 1.2 Sectoral distribution of key state companies

Companies directly subordinated to the RF government (number): Of which (number): Military-industrial complex Infrastructure Fuel-energy complex Finance Other

Total

List A

List B

68

27

41

23 22 10 6 6

9 5 7 2 3

14 17 3 4 3

Source: As Table 1.1.

After 2003, when the Putin team had more or less been formed, his people began systematically to join the boards of directors of the key companies. It was well known that Igor’ Sechin had become chairman of the board of Rosneft’, that Dmitri Medvedev headed the board of Gazprom, and that Viktor Ivanov headed two of the companies in List A: Aeroflot and Almaz-antei. Immediately after his appointment, the new head of the presidential administration, Sergei Sobyanin, similarly became the head of a company in the atomic

31

Table 1.3 Officials on the boards of major state companies, c. 2010 Name

Position

Medvedev, Yu. M.

Deputy head of Roskomimushchstvo RF Deputy head of Roskomimushchestvo RF Deputy head of the board of Roskomimushchestvo RF Deputy head of Roskomimushchestvo RF Deputy head of Rosprom RF Head of department at Minpromenergo RF Deputy minister of transport RF Minister of industry and energetics RF Deputy head of department of Roskomimushchestvo RF Deputy minister of industry and energetics RF Deputy minister of industry and energetics RF Acting head of the board of Roskomimushchestvo RF Head of department at Roskomimushchestvo RF Head of department at Roskomimushchestvo RF Deputy head of department in the RF government Minister of transport RF Minister of economic development and trade RF Deputy minister of economic development and trade RF Department director at the Ministry of finance RF General director of ‘Rostekhnologii’ Aide to the RF President Head of the board of Rosprom RF

Pridanova, L. I. Murav’ev, N. M. Nikitin, G. S. Puginsky, S. B. Salamatov, V. Yu. Misharin, A. S. Khristenko, V. B. Barinov, S. A. Dement’ev, A. V. Manturov, D. V. Uvarov, A. K. Maksimenko, V. M. Fedorkov, Ye. A. Ampilogov, V. N. Levitin, I. Ye. Nabiullina, E. S. Popova, A. V. Savatyugin, A. L. Chemezov, S. V. Shuvalov, I. I. Potapov, A. V. Source: As Table 1.1.

Top-list rating 10 9 8 8 8 8 7 7 6 5 5 5 5 5 4 4 4 4 4 4 4 4

32 The Formation of Russia’s Network Directorate

industry. But a closer scrutiny of the composition of the boards of all 68 companies indicates that the most common new members of the boards of directors were politicians with a much more limited public profile. The list of officials who are members of the boards of the biggest companies, and which is shown in Table 1.3, includes many that are not familiar to Russian society and are virtually never mentioned in the media. Who are these people? The overwhelming majority are government officials of various rank. The more important the company, the more likely that its board will include ministers. The status of the company, in other words, corresponds to the status of its board members. The presence on the board of a representative of the presidential administration is a clear indicator of its particular significance. Regional officials are much less well represented on the boards of the 68 largest state companies (see Table 1.4). In the companies in List A they account for no more than 2 per cent of the total board membership. In the companies in List B they are somewhat better represented, but still no more than 7 per cent. Most common is a situation in which an enterprise in a particular region is managed through the head of the local administration who either has no ability to influence its development, or else has very little opportunity to do so. It is notable that the heads of companies themselves are not always members of the boards. In List A they are represented on the Table 1.4 Elite groups on the boards of key state companies Elite groups Total companies Number of companies on which elite groups are represented Presidential administration RF government Siloviki (minimum) Representatives of other companies Representatives of regional government Top managers of companies Source: As Table 1.1.

List A company boards

List B company boards

27

41

23 27 23

6 41 19

10

12

4 21

16 9

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boards of 21 out of the 27; in List B, only 9 out of the 41. This means that the top management are kept away from the most important decisions on the future and development of their companies, and have a purely executive function to perform. Representatives of business itself are also represented on the boards. A network analysis of the relations among the individual companies shows that only two of the 68 companies are ‘extraverts’, delegating their representatives to many other business structures. These are Rosoboroneksport and Gazprom. In all the key state companies the presence of siloviki is notable (see Table 1.5). However, a biographical analysis provides less than the full picture. Of the 566 individuals who are members of the boards of the 68 largest state companies, the only accessible biographies are those who have a status not less than that of a head of department. The remainder are practically inaccessible to an outsider. Accordingly, in seeking to determine the share of siloviki in the management of such companies, we are limited to the proportion whose biographical details are available for analysis; these, however, represent about two-thirds of the total. As far as the remaining one-third is concerned, the presence of siloviki is very probable and particularly so in enterprises in the military-industrial complex. The proportion of siloviki in such positions will accordingly be larger Table 1.5 Share of elite groups on the boards of state companies Elite groups

Staff of the presidential administration Government officials Siloviki (minimum) Representatives of other companies Representatives of regional government Company top managers

Boards of directors of List A companies (n⫽261)

Boards of directors of List B companies (n⫽305)

13 64 35

2 83 17

7

5

2 9

7 3

Source: As Table 1.1. Figures show rounded percentages. Column percentages exceed 100 per cent, as the same person may be defined as a silovik and as a member of another elite group.

34 The Formation of Russia’s Network Directorate

than can be directly demonstrated, and we have indicated that these are cautious estimates by designating them as ‘minimum’ levels in our calculations. The data that are available clearly show that siloviki were relatively twice as numerous in the more important List A companies as compared with those in List B companies. In other words, the more important the company, the greater the representation on its board of siloviki. During Putin’s first presidential term, rather more attention was paid to the introduction of siloviki into various levels of the state bureaucracy, after which they began to join the management boards of the various companies on an ‘ex officio’ basis. The process of increasing the proportion of siloviki in government structures did not affect all spheres to the same degree. Most of all it concerned the Ministry of Economic Development (Minekonomrazvitie), the State Property Committee (Roskomimushchestvo), the Ministry of Industry (Minprom), the Ministry of Communications (Minsvyazi) and the Ministry of Transport. In these bodies siloviki have important positions at the second or third level of management (deputy ministers and heads of department). Analysing the composition of the management boards of the 27 companies in List A, more often than not we encounter the names of figures such as Valerii Nazarov, Andrei Kruglov, Konstantin Chuichenko, Leonid Reznikov, Yevgenii Shkolov, Valerii Golubev and others. All of these are former officers of the security services, little known to the broader public. The presence of siloviki is especially large in enterprises in the military-industrial complex, where a special role is played by the arms export corporation Rosoboroneksport and the defence corporation Almaz Antei. The first is headed by a close Putin associate, Sergei Chemezov, and the second by Putin’s aide, Viktor Ivanov.

1.5 The network directorate and the Medvedev presidency The Russian elite experienced far-reaching change over the course of the Putin presidency. Two stages in its reconstitution can be identified. A first stage, from 2000 to 2003, saw a high level of turnover while very large numbers were recruited from business and security circles; at the same time a St Petersburg group was being constituted. The

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second stage, from 2004 to 2007, saw a stabilization in the composition of the elite, with a shift from renewal and upward mobility to rotation. New people were still being recruited to leading state positions, but not in large numbers; at the same time the rules of the game were being refined, and the administrative system as a whole was being carefully redesigned. As of the end of the Putin presidency, the Russian network directorate as we define it consisted of 825 individuals, including the leading members of the Presidential Administration and the apparatus of the Security Council (39 people), the federal government (86 people), Duma deputies (450 people), and Federation Council members (186) and governors (86 people). More than 90 per cent were males, with an average age of 54 years. The youngest group on average was in the government, and the oldest were the governors. Just over 82 per cent of those who had taken up leading positions in the network had taken up their positions after 2000, and could with every justification be called the ‘Putin network directorate’. The largest proportion of these new members were in the Presidential Administration (97 per cent), and the smallest among the governors (59 per cent). For the most part, the political class of the Putin era had assumed their positions by 2003, which was when the mass recruitment of new members came to an end. Throughout the period, the St Petersburg representation rose steadily, and currently stands at nearly 26 per cent. It was clear to Putin at an early stage of his presidency that Dmitri Medvedev was one of the likely candidates for the succession, as he fitted the parameters perfectly: he had a Russian surname, was already a member of the network directorate, and was a ‘weak’ politician (in other words he lacked a broad basis of support within the wider society and did not have a strong group of associates). This, however, did not mean that Medvedev had not formed a network of his own in the course of his years in Moscow. His student friends and colleagues from St Petersburg University had already begun to move to Moscow in large numbers in 2005, which suggests that a decision may already have been taken that he would in due course become Putin’s ‘successor’. This is certainly consistent with the work that began at the same time to improve his image. From an overweight head of the Presidential Administration he became a slimmer and more affable figure, and one who took

36 The Formation of Russia’s Network Directorate

any opportunity to advertise his commitment to the ideals of the Russian intelligentsia. The Medvedev network, according to our evidence, currently consists of 55 people. Some of the people close to Medvedev are from the younger members of the Putin leadership (such as first deputy premier Igor’ Shuvalov, ministers Aleksei Kudrin, Dmitri Kozak and El’vira Nabiullina, and presidential aide Arkadii Dvorkovich). But others represent a Medvedev team in a more direct way (such as justice minister Alexander Konovalov, who spent two years in the same Faculty as the future President at Leningrad University; or deputy Procurator General Alexander Gutsan, another Medvedev classmate; or Mikhail Krotov, another Leningrad law graduate who is currently the President’s representative in the Constitutional Court; or Konstantin Chuichenko, a former KGB officer who had studied with the future President at Leningrad University Law Faculty and then became head of the management directorate of the Presidential Administration). More than half of the 55 are qualified lawyers, and many continue to work in law enforcement, particularly in the Higher Arbitration Court and the Constitutional Court (which now meets in the northern capital), in the Procuracy General and in the Ministry of Justice. Just 9 per cent have had some experience of work in the KGB or its successor bodies, 2 per cent in the Ministry of Internal Affairs and 15 per cent in the Procuracy. Only one of Medvedev’s associates, as of the time of his election, held a leading position in a force ministry or agency: Nikolai Vinnichenko, the Leningrad University classmate who became head of the Federal Bailiffs Service at the end of 2005. But the remaining force ministries appear to have no clear Medvedev associates, and Putin has evidently retained the overall direction of these agencies for himself. Accordingly Medvedev, who assumed responsibility for the management of the force ministries when he took office, has few supporters among their leading representatives. There are certainly people in the Medvedev team who are connected with the force ministries, as we have seen, but they work either in business or at relatively modest levels of the state bureaucracy, and can lay no claim for the moment to more senior positions. This suggests that Putin may be constructing a new system of checks and balances in which Medvedev will be given relatively limited opportunities to manage security matters, and may be entirely excluded from them.

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1.6 Conclusions Medvedev’s coming to power in 2008, with the reputation of a ‘liberal’, has led some to doubt that the Russian power network will retain its militocratic character. But Russia’s entire history and the nature of the changes that have taken place since 2000 suggest that the defence and security complex will remain a central component. Putin spent eight years in order to strengthen the siloviki, and to install them in leading state positions – hardly to give it all up at a later stage. It is more likely that Putin has begun to dislike his silovik image. The task before the national leadership from 2008 onwards has accordingly been not to remove the siloviki from power, but to obscure them as far as possible from public view. This is a congenial position for those who have previously worked in intelligence and who prefer to take the key decisions without necessarily assuming first-rank positions in government. The changes in the political system that took place over the two terms of the Putin presidency could be understood as a process of ‘Sovietization’, involving the liquidation of alternative centres of power and the regularization and subordination of all the elements of the state machine (Kryshtanovskaya and White 2009). This was accompanied by a return to the basic principles of state management that had been characteristic of the late Soviet period, but in a modernized, technocratic form. The network directorate that led these changes changed itself. Charismatic public figures – Vladimir Ryzhkov, Mikhail Kas’yanov, Dmitri Rogozin – were gradually marginalized or eliminated from the network altogether and replaced by ‘network loyalists’ who had worked in the state service, were loyal to the new leadership and bound to it by membership of the new ruling party and a share of the benefits of office. The network had, in effect, been restored. It was less clear that the new network directorate had retained the ‘self-stabilizing’ mechanisms that had allowed the Soviet system to maintain itself for so long. It was more exposed than the Soviet system had been to ‘shocks’ from the external environment, most obviously the international economic crisis that began in late 2008. And it had not incorporated the mechanisms that helped to ensure that governments in other countries did not abuse their position, such as genuinely competitive elections, even though there were

38 The Formation of Russia’s Network Directorate

attempts, under the Medvedev leadership, to reduce ‘legal nihilism’, improve the representation of minor parties in the Duma and restore government control over the police. Still more important, the network that ran the USSR had no rights of ownership over the resources they commanded. ‘They are not your pillows, comrade’, Dmitri Polyansky was told after he had to been forced to resign as a first deputy prime minister in the early 1970s. ‘They belong to the Central Committee’ (Klose 1984: 271). In the power network that had come into existence by the end of the Putin presidency there was no longer a distinction of this kind: power was wealth and wealth was power. This suggested that the network that controlled the post-Communist Russian system would face new challenges. It had ensured its own continuation at the end of Putin’s second presidential term while still respecting the Constitution. It had survived the international economic crisis, although the economy contracted sharply and the federal budget moved into deficit. It had eliminated any kind of rival, such as Mikhail Khodorkovsky, who had been one of the world’s richest men but who refused to go into emigration and in 2010 was facing a second trial that might extend his prison sentence by another twenty years. But a network that had become unaccountable was likely to become more corrupt; as it became more corrupt, it was likely to become increasingly resented; and if there were no constitutional channels for expressing discontent it might take the form of spontaneous demonstrations – as had taken place at Pikalevo in the Leningrad region in May–June 2009, and at Kaliningrad in February 2010. A network state could assume the loyalty of those who held its positions of power and enjoyed its benefits, but it had also to ensure a degree of popular consent that would be sufficient to allow it to continue.

Note We acknowledge the support of the UK Economic and Social Research Council to Stephen White under grant RES-062-23-1542, and of the Leverhulme Trust for its Major Research Fellowship under grant F/00 179/AR. The final version of this chapter was prepared while Stephen White was a Program Visitor in the Political Science Program at the Research School of Social Sciences of the Australian National University in Canberra.

2 Can Medvedev Change Sistema? Informal Networks and Public Administration in Russia Alena Ledeneva

2.1 Introduction Every ruler who aims to modernize Russia faces the problem of reforming its specific ways of governance – namely its dependence on informal practices and reliance on informal networks – and of solving the so-called governance puzzle (Ledeneva 2006). In this chapter I will focus on the latter, which can be summed up as a vicious circle of non-transparency. The rules of the game are kept non-transparent or frequently change so that the existing legal framework does not function coherently. The complexity and/or incoherence of formal rules compels almost all Russians, willingly or unwillingly, to violate them. Anybody can be framed and found guilty of violating some formal rules because the economy operates in such a way that everyone is bound to disregard at least some of those rules. For example, national army conscription results in only 11 per cent recruitment, while the remaining majority of young men find a way to dodge it (Daucé and Sieca-Kozlowski 2006). Nearly everybody is compelled to work in the informal economy – a practice that is punishable, or could be made so (Guariglia and Kim 2001). Businesses are taxed at a rate that forces them to evade taxes in order to do well, and additionally taxed in the form of kickbacks to state officials (Radaev 2000; Barsukova 2009). The ubiquitous nature of such practices makes it impossible to punish everyone. Thus punishment becomes a resource in short supply. Where it does occur, punishment is selective and applied on the basis of criteria developed outside the legal domain. While everybody 39

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Can Medvedev Change Sistema?

is under threat of punishment, the actual punishment is ‘suspended’ but can be enforced at any time. The principle of ‘suspended punishment’ became a routine practice for the authorities as formal rules were impossible to follow and it was not feasible to prosecute everyone. ‘Unwritten rules’ compensate for defects in the rules of the game. The violation of unwritten rules can result in the enforcement of written ones, which paradoxically makes it just as, if not more, important to observe the unwritten rules as the written ones.1 This perpetuates the reliance of governance structures on the non-transparent rules of the game.2 Given the dependence of the Russian governance system on the unwritten rules – otherwise known as sistema (the system) – restructuring the formal rules of the game has a limited effect. This is partly because top-down efforts are difficult to sustain, and partly because changes in the formal rules are simply interpreted as yet another constraint to be dealt with informally. This often results in the readjustment and reconfiguration of the informal workings of the system around the new constraints, rather than a decline in the significance of the unwritten rules. When the USSR collapsed, so too did the political system whereby the Communist Party directed affairs from behind a façade of bogus institutions. During the Yeltsin period, these highly personalized arrangements were supposed to be replaced by new, transparent institutions and market mechanisms. However, the new institutions proved to be weak and ineffective. It was not long before informal practices, modelled on those of the Soviet period while differing from them in important respects, sprang up to bridge the gap. The combination of the defects in formal institutions and the use of informal means to make up for them is what Russians are referring to when they speak of sistema. The intricacies of the unwritten rules, informal exchanges and inner workings of the informal networks at the top or even at the regional levels of state institutions constitute a ‘black box’ for a number of reasons. First and foremost, it is a problem of access – physical access to the ‘sites’ of the workings of the state does not include exposure to the workings of sistema. Secondly, the formal sites of the workings of the state lose their relevance due to the ‘network’ character of the state that emerges through the personal contact between state officials in various branches of public administration and/or between them and their counterparts in politics and business, law enforcement,

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the judiciary and the legislative system. Thirdly, the hidden nature of the workings of sistema leaves no trace or record, making it impossible for researchers to substantiate their findings. To date, ‘elite studies’ have focused on the quantitative and qualitative analysis of discourse (Drobizheva 1996; Lev, Dubin and Zorkaya 2007, 2008; Oleinik 2008a, 2008b); the formation of clans (Kryshtanovskaya and White 2003; Wedel 2003; Mukhin 2005; Kosals 2007; Mitrokhin 2008); anti-modern networks (Rose 2000); the network state (Steen 2006) and the network society (Castells 2000), and the association of state networks with the middle class (Brym and Gimpelson 2004; Lev, Dubin and Zorkaya 2008). Yet little research has been conducted into the inner workings of sistema.

2.2 What is sistema? Lilia Shevtsova defines the Russian system as a specific type of governance structure whose characteristics include paternalism, the state domineering over the individual, isolation from the outside world, and ambitions to be a great power. The heart of the system was the all-powerful leader, above the law and a law unto himself, concentrating in his hands all powers, without a balancing accountability, and limiting all other institutions to auxiliary, administrative functions. The Russian system did not need fixed rules of the game; it needed fixers. (Shevtsova 2003: 16) According to Anton Oleinik (2008b), content analysis of the vocabulary used by the Russian elite showed that sistema was among the three most frequently used terms (the other two were business and money).3 Despite its vagueness, the term highlights important dimensions of the ‘regime’, ‘authority’ and ‘them’, constituting an informal institution with its own initiation rites, unwritten rules, assigned roles and behaviour, as well as sanctions and rewards, and which shadows the workings of formal institutions in Russia. The power of sistema rests upon principles of suspended punishment, compromise, krugovaya poruka and the sustained vulnerability of individuals vis-à-vis the system, each of which principles has a binding, reproducing quality in itself, and is supported by informal networks.4

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Can Medvedev Change Sistema?

In Soviet days, an important managerial skill was competence in sistema. Verbal and personal commands had to be taken more seriously and followed more closely than written decrees (ukazy) and instructions (rasporiazheniia). The ‘command’ principle remained important in the post-Soviet context (Colton 2007: 82, 325; Baturin et al. 2001: 424). One of my informants, a former party apparatchik, explained the importance of the process of the ‘selection of cadres’ (podbor kadrov) then and now, and its purpose to test character, compatibility and team qualities, which results in independent-minded ‘cadres’ not being recruited or promoted.5 Colton recounts a story about a post-Soviet official who reproached his subordinate for implementing his written instruction: ‘If I wanted you to do something, I would have called you.’6 The punchline of this story not only highlights the significance of verbal communication in the top echelons of power in Russia, but also implies that subordinates must be alert to the status of various documents and be able to interpret them correctly. Idiomatic expressions and folk wisdom illustrate the necessity to read signals and to comply with verbal commands competently in a number of ways. As an often-quoted aphorism goes, a ‘get it done’ resolution on a document can mean anything from ‘do it immediately’ to ‘don’t do it no matter what’ (Zhvanetskii 1986). The colloquial advice ‘to avoid falling out with the system’ includes: ‘don’t complicate life for yourself or others’; ‘don’t play with fire’ (ne igrai s ognem), ‘don’t go overboard’ (ne lez’ na rozhon), ‘don’t run in front of the train’ (ne begi vperedi parovoza), ‘don’t be more saintly than the Pope’ (ne bud’ svyatee papy rimskogo), ‘cut corners and don’t focus on them when unnecessary’ (ne obostryai tam gde eto ne nado); ‘don’t politicize matters when unnecessary’ and other unspecified instructions that presuppose the skills to distinguish between ‘when necessary’ and ‘when unnecessary’, as well as the sensitivity to perceive threats and signals unnoticeable to outsiders.7 Recruitment and promotion procedures are in place to communicate tacitly that loyalty, submissiveness and compliance with the informal code of sistema are essential for operating in administrative structures. Viktor Ilyukhin of the State Duma anti-corruption committee explained that the formation of cadres, especially at the top level of managers in presidential and federal administrative structures, is based not on the principles of professionalism but on the basis of

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acquaintance, personal loyalty, compliance with unwritten rules, and nepotism (kumovstvo). He referred to the recruitment of personnel from St. Petersburg (piterskie) as unfair to the rest of Russia. Similar practices are replicated at regional levels (Il’yukhin 2008). Clan-based appointments generate a stifled atmosphere produced by the arbitrary nature of power (Ilyukhin estimates bribes to public officials as equivalent to one third of the federal budget). A recently appointed employee of the state IT services sector, Ivan, who moved from the business sector but maintained his interest in business, said: I had always been sceptical about state officials. But now I hold them in even lower regard. [The atmosphere of] denunciation, set ups, incompetence, and unwillingness to work – [is widespread] not just throughout our service but in most state structures. If people knew the scale of the theft that is occurring, they would come and simply set fire to it all. (Iusupova 2007) Denunciations and set-ups refer to the widespread use of compromising material (kompromat), or blackmail files (Ledeneva 2006). Yet kompromat is also a mechanism of control in sistema. The rise to power is accompanied by one’s willingness to compromise oneself in order to pass the informal loyalty test and create collateral for one’s liberty in the future (Gambetta 2002). The context of non-transparent governance requires that none of its members has a stake in making the system transparent or changing it. Should such a stake emerge, the compromising information ensures that the credibility of this person is ruined. Appointments which may look arbitrary in terms of professional qualifications are not arbitrary in terms of the informal criteria (Huskey 2005). Such criteria guarantee appointees’ submissiveness and cooperation in the future. This is not to say that the values of loyalty and obedience entirely supersede qualifications and professionalism. However, the impact of closed networks and informal criteria for appointments, as well as other forms of (ab)use of ‘administrative resources’ remain non-transparent (Panfilova and Sheverdiaev 2004). Personalizing appointments in public administration has more functions than the simple channelling of information or help with obtaining a job. Blat appointments tie appointees into informal

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commitments to the boss and the contact who recommended him/her. As one of my informants, a banker, explained: There is also a system of personal vouching or recommendation (poruchitel’stvo). For example, a minister wants to appoint somebody and invites him for a friendly chat, normally to establish who he knows and how, and my name comes up. So the minister calls me and asks me if I recommend this person. I speak very generally: ‘as far as I know he is korporativnyi chelovek’ (a man who follows corporate rules). So the appointment goes through. The funny thing is that if there is an issue with the appointee, I will be asked to step in to solve the problem. In societies where loyalty is the essential operating principle in public administration, with rewards distributed through the system of informal kickbacks, an independent professional with whistleblowing potential is unemployable. Whereas ‘modern’ networks are relatively open and recruit independent agents on the basis of professional expertise, kin and social networks in Russia function in a ‘pre-modern’ way, on the basis of loyalty and compliance with the informal ways of getting things done (Rose 2000, Ledeneva 2001).8 When asked why they comply with the demands of sistema, the insiders came up with the following typology of arguments: 2.2.1

Forced cooperation/fear

• ‘No choice: in order to be appointed in the first place, one must “hang” on a hook (na kryuke ili v kompromisse). In other words, leverage is applied to ensure that the appointee is compliant with the unwritten rules and is loyal in daily operations, as well as interested in propagating the system’. • ‘One such hook is to appoint people who are unworthy of the positions they are given. They constitute the type of state officials who are a priori not fit for office, but are keen to gain a position and go along with whatever is required of them. Another hook is the system of kompromat. Almost invariably covert, kompromat is created when necessary or they appoint people that are dependent, for whom kompromat already exists’. • ‘There are firm agreements at the time of appointment which, of course, can be broken at a later stage, but there are also mechanisms

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to keep them in place. If some agreement has been broken for some reason (or if one says “no” in a situation where one is supposed to say “yes”), then psychological factors come into play. It’s not even personal, it’s just that you are a member of the team, of a network and everything is defined by a certain code that you can’t deviate from without breaking out of the team or networks. Reliance on such practices backs up the bezpredel of the state bureaucratic machine’. 2.2.2 Tradition/habit/everybody does the same • ‘This is not a system that you can choose to enter or avoid. You fall into it from the moment you are born, but there are, of course, also enforcement mechanisms that help to propagate it. In the Soviet Union, everyone possessed corporate loyalty; they were korporativnye – nuts and bolts of the same “system”, only now there seems to be more competitiveness within networks and clans’. • Habitual behaviour (a reflex of compliance created by all large organizations where individual resistance is futile). 2.2.3

Emotional ties/obedience/loyalty

• ‘Although appointments might seem arbitrary, it’s a long-term process of “building your inner circle” (rastyat svoikh lyudei). In order to get an appointment or to be promoted to a certain position, one should demonstrate compliance – that is the way to get there. Svoi lyudi can be built up by emotional ties of friendship, camaraderie or loyalty’. 2.2.4

Economic rationality/pragmatic interests

• A consensual or coordinated (soglasovannye) relationship between the top and the bottom against a background of generally dysfunctional vertical relationships (nowadays a policeman won’t even go to work unless he receives a backhander: chto eto ya poedu na obysk bez deneg). The same principle applies to the controlling organs – nobody finds themselves there by chance, they mostly represent certain corporate interests. • ‘Kickbacks – a person has to live, right? They make a living for themselves, for the boss, for the whole economy through the mechanism of kickbacks. Law enforcement organs operate on the basis of informal pay for ordinary duties’.

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These replies suggest a lack of personal choice and a network-locked economic interest, which account for the so-called korporativnost’ of sistema. Just like families, ‘corporate’ networks have an intrinsic capacity to propagate themselves. Charles Tilly (2005) notes that ‘rightly fearing that unscrupulous rulers would break them up, seize their resources or submit them to damaging forms of intervention, strong networks of trust such as kinship groups, clandestine religious sects and trade diasporas’ devise measures of self-preservation. It is often assumed that informal networks are a Soviet legacy that will wither away over time. By contrast, my research shows that informal networks, particularly those based on interaction between public administration and business, or the banking services, are essential for the operation of both the formal and informal economy and for compensating for the defects of impersonal systems of trust in Russia (Ledeneva 2006; Shlapentokh 2006). Informal payments, or kickbacks (otkat), have become the core modus operandi of the informal exchange of favours and imply a high degree of interpersonal trust, loyalty and dependence on informal transactions. Measurements of business corruption are an important indicator of the power of the personal networks that link business to the state. Businesspeople report that they fork out considerable sums on interactions with corrupt officials. Added to this, every bribe requires a support network to provide information, introduction, delivery, security and performance. According to a Price Waterhouse Coopers survey, 59 per cent of the 125 biggest Russian companies have reported at least one economic crime in the past year, up from 49 per cent in their 2005 survey (Reuters 2007). Lump-sum corruption is unlikely to contribute to these statistics, but the use of black cash, or the unofficial payments fund (chernaya kassa) is. With the expansion of the role of the Russian state in the economy in 2004–6, as indicated in the OECD 2006 report, grey areas emerged and spread, particularly in ‘strategic’ sectors such as oil and gas. The report argues that ‘the expansion of state ownership in important sectors will probably contribute to more rent-seeking, less efficiency and slower growth’ (OECD, Economic Survey of the Russian Federation 2006: 33–8). According to Alexander Chepurenko of the Higher School of Economics, Moscow, state officials accumulate significant economic resources by combining rent-seeking behaviour and the corresponding

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income from ‘administrative rent’ with entrepreneurial activities and profits received by their family, relatives or associates. In his view, the rental income from the use of the ‘administrative resource’ is the hidden foundation of the growing middle class in Russia today. Therefore, the social stability associated with the middle class is rather specific as it is based upon shadowy rental incomes that state officials squeeze out of their positions in formal and informal hierarchies – ‘in other words, bribes and kickbacks’ (Iusupova 2007). At the top end of the hierarchy of kickbacks is rental income associated with state capture. According to expert estimates, the ‘governmental services’ include: introduction of an entry into the budget – from 4 per cent of the allocated sum; signing of additional export quotas – from 10 per cent of market value; kickbacks for the signature of a state order – 20 per cent of the sum; transfer of a budget allocation – from 5 per cent of the sum; and kickbacks for the export of cheap gas – 50 per cent of the difference between the market and agreed price (Davydova 2006). Actual numeric estimates are not as important as the identified patterns of services – the informal practices that penetrate all branches of power. In the legislative branch, the so-called deputatskie services include: custom-made legislation – from $0.5m; introduction of draft legislation for consideration in the State Duma – from $0.5m; introduction of amendments to legislation – from $0.2m; adoption of legislation on tax, customs tariff and customs regulation – from 10 per cent of the potential profit; a vote in favour of a certain outcome – from $2,000 (per vote); and organizing a deputy request for the General Prosecutor’s Office – from $50,000 (Davydova 2006; see also Nemtsov and Milov 2008). Research conducted by the Moscow-based think tank INDEM shows that although half of the businesspeople approached refused to disclose their experiences of corruption, the answers received to a question about the percentage of the monthly turnover of their firms that goes on bribes suggest that 25 per cent of companies pay up to 5 per cent of their turnover, 13 per cent of firms from 5 to 10 per cent, 5 per cent of firms pay from 10 to 20 per cent, and 2.5 per cent pay state officials as much as 20 to 50 per cent of their turnover. According to INDEM data, only 10 per cent of the corruption market in Russia serves household needs, and about 90 per cent of bribes are business-related and involve a ‘state service’ such as

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export licensing and quotas, state budget transactions and transfers, tax transfers, customs duties, privatization deals and servicing debts to the federal and regional budgets, and land and premises rentals (Satarov et al. 2005). Small and medium-sized businesses are ‘given away’ to regional and local officials to ‘feed from’, thus administrative barriers are often created on purpose in order to extort payments from businesspeople. Administrative rent is a burden that hampers the growth of small and medium-sized businesses. According to INDEM, kickbacks vary from 10 per cent on deliveries of IT equipment to 50 per cent on orders for scientific research. The formalities are preserved: there are open competitions and tenders,9 but companies often win public tenders because their owners or managers are related to (or financially associated with) the officials appointing tender commissions or are actual members of these commissions.10 Just as the structural holes in social networks are filled by intermediaries, or brokers, institutional brokers also function in a similar way. Russian commercial banks play a dual role vis-à-vis the state tax organs by being both taxpayers to, and agents of, the fiscal organs. With a substantial share of tax revenues collected via the payments system, tax authorities rely heavily on banks not only to provide information about clients’ finances, but also to cooperate in tax collection (Tompson 2007). This practice creates an incentive for firms to conduct transactions in cash. However, firms’ use of black cash strategies is limited, and typically requires the banks’ help in obtaining large quantities of cash in violation of restrictions on the use of cash for inter-company transactions. Hence banks play a critical role in so-called ‘tax optimization’ strategies. The centrality of banks in managing financial flows is crucial to an understanding of the scale and the modus operandi of the informal economy of contemporary Russia. The relationship between taxpayer and tax collector is not, as a rule, based on negotiation, but in Russia, as Tompson (2007) points out, ‘The bargained tax bill is no more a paradox than was the bargained plan’. Unlike the use of black cash or bribes (tenevye skhemy), many tax schemes are grounded in legal loopholes and can be more appropriately described as tax avoidance/tax optimization than tax evasion. They exploit defects in tax legislation which, according to some respondents, may have purposely remained in

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place. The centrality of the law in such creative scheming, however, is a noticeable and positive development. In mature democracies, lobbying is associated with the establishment of intermediaries. It is regulated by both the legislation on lobbying and preventative measures to protect legislative, judicial and law enforcement institutions against lobbyism. No such legislation exists in Russia, despite the efforts and initiatives of various think tanks.11 As mentioned above, efforts by certain groups to influence the country’s legislature for their own benefit involve significant cost and expertise. These networks of acquaintances strive to push through amendments to certain laws or new legislation that will bring them economic advantages, often through their own shadowy mechanisms of lobbying (Tolstykh 2006: 140–9). Given the economic rationale for and dependence on kickbacks, it is little wonder that administrative reform in Russia is struggling and that the principles of the separation of powers and the rule of law are not operational (Manning and Parison 2003; Leksin, Leksin and Chuchelina 2006). Yet the impact of sistema is not seen as exclusively negative, even at the level of public statements by top officials. One cliché about corruption in Russia is that the economy would not be able to function without it – the problems associated with administrative reform, ‘administrative rent’ and the independence of the judiciary have to be resolved before anti-corruption policies can become effective. In the meantime the informal pressure of networks can serve as an effective policy tool. Russian leadership is known for imposing ‘corporate responsibility’ and using informal leverage to promote a modernization agenda and to achieve strategic goals. In the long run, however, informal tactics undermine the strategic goals of modernization: the separation of powers, property rights and equality under the law. This is the ‘modernization trap’ of the network state: once the state uses the potential of informal networks, it becomes locked into the consequences. For example, just as Medvedev’s path to the presidency was being facilitated, it was made correspondingly harder for him to consolidate his own power base. Whereas networks of power enable their participants to mobilize resources effectively in the short term, they also create long-term lock-in effects for the elites that are detrimental to Russia’s modernization. Thus, much of what has already been initiated by President Medvedev can be viewed, perhaps optimistically, as a significant

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challenge to the operations of sistema. His anti-corruption initiatives, exposure of legal nihilism and dependent courts with their ‘telephone justice’, and creation of alternatives to blat appointments pose challenges to sistema and have to be monitored as indicators of change. Systemic defects of this kind have never before been publicly acknowledged at the presidential level, and the very existence of such an acknowledgement speaks volumes. The measures to promote change, if successful, could help to break the vicious circle of Russia’s governance model. The following section will focus on these initiatives in more detail.

2.3 Challenges to sistema: Anti-corruption initiatives In the same vein as President Putin’s pronouncement on the ‘dictatorship of law’, an anti-corruption announcement was one of the early undertakings of President Medvedev. Analogous in its timing and concern, the anti-corruption theme was also in accord with what Putin was saying all along: the priorities of his presidency were stability and economic growth, without which the anti-corruption struggle made little sense, and it would be up to his successor to tackle corruption directly (Kosyrev 2007). Before the economic crisis hit Russia, Medvedev certainly followed that line of thinking by stating that ‘we must consider how we can eliminate the conditions that breed corruption’ and ‘we must do something. The time for waiting is over. Corruption has become a systemic problem and we must respond systemically’ (Medvedev in Gazeta.ru, 19 May 2008). Medvedev directly acknowledged the systemic nature of corruption12 and interpreted it as ‘a threat to national security’ (Medvedev in Gazeta.ru, 2008). The 2008 plan included ‘modernization of the anti-corruption legislation’, ‘countering and prevention of corruption in the economic and social spheres, and the creation of incentives for anti-corruption behaviour’, setting up ‘an anti-corruption standard of behaviour – nothing will work out without it’, and some checks and balances – an ‘assessment of corruption on the part of society’, the mass media and public organizations. In the context of concerns about the ‘network state’, Medvedev emphasized ‘transparency in conducting state procedures connected with contracts, tenders, and administrative regulations’ and the need to create a favourable business environment (Stanovaya 2008).

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As part of his anti-corruption programme, President Medvedev introduced a number of bills in the State Duma that were adopted in the third reading in December 2008. Critics argue that these bills are riddled with loopholes and will be used only in the pursuit of personal vendettas. Originally the legislation was supposed to come into force in 2009, but it has been extended to 2010, allegedly illustrating the power of bureaucratic lobbying and giving top bureaucrats enough time to organize the transfer of assets to offshore locations (Kabanov 2009). Enforcement issues are being hotly debated at the time of writing. A new version of the code of conduct for state officials includes a request for accountability concerning the material situation of state officials and judges. In March 2009, Medvedev submitted a public declaration of his personal income and property as well as those of his family members, just like many other top officials in the government, the president’s administration and regional administrations (for details see Vedomosti, 9 April 2009). An important first step in the anti-corruption campaign was not without its own loophole: officials are only requested to declare the income and property of their family, including their wives and underage children. The income or property of their adult children is out of consideration, an example of how a formal constraint can be creatively circumvented by an easy transfer of ownership of assets to other relatives and trusted persons. According to Kabanov, the public reacted to these declarations with sarcasm and a sense of hopelessness. Most saw Medvedev’s move as a deceptive PR ploy to convey the impression that Russia’s leaders are fighting corruption (Kabanov 2009). The third set of controversies centred around business matters. Medvedev spoke of corruption that ‘demoralized the business environment’, but critics argued that it was naive to speak about a ‘set of measures on anti-raiding issues at a time when the country’s main raider was the state power structure’ (Gazeta.ru, 19 May 2008). Judicial institutions and law enforcement agencies both come under pressure in the context of favourable court decisions and other services that the tax, fire and sanitary authorities are known to perform (Ledeneva 2006: Ch. 7). The pricelist includes: initiation of a legal case against a competitor – from $100,000; ‘purchasing’ a court decision on the confiscation of assets – from $50,000; initiating a decision on the freezing of a bank account or its reversal – from

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30 per cent of the sum; facilitating the outcome of a commercial dispute in an arbitration court – from $50,000; and the arrest of shares or other assets – from $30,000 (Davydova 2006). The courts, under President Putin, appear to have become instruments of raiding and the redistribution of assets for the benefit of people close to the regime (Gazeta.ru, 19 May 2008). On a positive note, Vedomosti reported that President Medvedev’s request to stop the harassment (koshmarit’) of businesses with unexpected and unjustified inspections resulted in the General Prosecutor’s office and the fire authorities taking concrete steps towards change (Vedomosti, 31 March 2009). Although not all business needs were met,13 it showed progress and generated a lively discussion in the Vedomosti blog. Public support should not be underrated as Medvedev needs the allegiance of those outside sistema if his campaign is to succeed. However, public reactions generate little optimism for the future of anti-corruption measures. This is not surprising given that corrupt practices are seen as being more the rule than the exception. For example, ‘forced payment’ in the health and education sectors is considered normal by 27 per cent and 23 per cent of the population respectively, and a further 59 per cent are prepared to pay for guarantees of quality (Gudkov, Dubin and Zorkaya 2008: 37). Russian society continues to place its trust in very small communities – rather than in impersonal systems. Most citizens consider themselves defenceless in the face of the arbitrary power exercised by state institutions such as the courts, the police and the tax authorities. Fifty-three per cent of ‘middle class’ respondents rank ‘arbitrariness and extortion by state officials’ as the second most acute problem (Gudkov, Dubin and Zorkaya 2008: 38). Nevertheless, the existence of the anti-corruption plan and the political will to stand behind small and medium-sized businesses is a sign of change.

2.4 Challenges to sistema: combating ‘telephone justice’ If the advent of President Putin was associated with a decline in the influence of criminal groups in favour of the influence of siloviki, the arrival of President Medvedev might result, if successful, in the replacement of the influence of siloviki with the influence of civiliki, a network of graduates from the law department of Leningrad

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State University, now holding key positions in the Arbitration and Constitutional Courts (Stack 2008: 8–10).14 Following through on his pre-election promise to tackle society’s ‘legal nihilism’, President Medvedev has declared a crackdown on so-called ‘telephone justice’ – the practice of exerting pressure, making informal requests or offering money for certain decisions in court (NEWSru.com, 20 May 2008). ‘Telephone justice’ can be traced back to Soviet times (Huskey 1992; Solomon 1992; Gorlizki 1997). When a top official wanted a particular outcome in court, he would simply phone the judge and explain the party line. Judges were susceptible to pressure because they relied on local Communist leaders for their jobs – being re-appointed every five years by the local Party boss – and for favours, such as apartments and holidays (Solomon and Foglesong 2000: 29). In Soviet times, the mechanisms of checks and balances that help to ensure patterns of good governance, such as an independent media, public opinion and civil society, were not developed enough to tackle those areas where verbal commands predominated, but this was partly compensated for by party discipline. The Communist Party regime made state intervention the norm and allowed, if not legitimized, certain informal practices in order to help the economy, achieve political goals and support the ideological struggle, including matters in the judicial sphere (Berliner 1957; Nove 1977; Solomon 1992). Although the Communist ideology is long gone, the pressure on courts prevails – in spite of the judicial system reforms of the 1990s and Putin’s 40 per cent pay rise for judges and financial support for the courts (Pastukhov 2002). After almost two decades of reform, the situation has not improved to any great extent (Hendley 2007). Medvedev’s priority is to eliminate ‘the practice of unfair decisions made through connections or for money’ and ‘to make the judicial system genuinely independent from the executive and legislative branches of power’ (Medvedev 2008). In September 2005, a woman was sentenced for attempting to influence a court decision by making a telephone call about a property in Central Moscow, pretending to be calling on behalf of the Chairman of the Supreme Arbitration Court (Kulikov 2005). In an interview for Parlamentskaya Gazeta at the time, the Chairman of the Moscow District Federal Arbitration Court, Liudmila Maikova, was asked ‘How prevalent is telephone justice in Russia? Is it hard for a court to be independent?’ She dismissed the whole idea as

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gossip and myth (Maikova 2005), as did the Chair of the Moscow City Court, Olga Egorova (Yamshanov 2005). But after Medvedev came to power, Maikova was suspended on charges of unethical behaviour (Kommersant-Online, 20 May 2008). There was also a defamation case against a journalist who accused a Kremlin official of ‘giving orders to the Supreme Arbitration Court’ in a radio broadcast. This 2008 case is unprecedented: the Deputy Chair of the Supreme Arbitration Court, Elena Valyavina, was summoned as a witness and actually confirmed the use of influence on the part of the presidential administration (Dymarskii 2008). Although her statement must have received clearance from the Court Chairman, Anton Ivanov, the fact of the matter is that political will was exercised at the top. Ivanov himself could have consulted his co-author of an awardwinning textbook on the Russian civil code, the man who is now the President (Gutterman 2008). Just how widespread is telephone justice in courts in Russia in general? In an all-Russia 2007 national survey, almost one third of respondents seemed satisfied with the workings of the courts (12 percent replied that all court decisions are made by law and 18 per cent replied that only a few judges take bribes and are subject to pressure). More than half of the respondents, however, acknowledged the susceptibility of judges either to corrupt payments or other forms of pressure: 25 per cent of respondents said that judges take bribes as a rule, although principled judges also exist, and a further 20 per cent said that even these principled judges would react to pressure in particular cases. Interestingly, the most pessimistic choice – indicating that practically all court decisions are taken after a bribe or under pressure ‘from above’ – was also the least popular at 7 per cent. The remaining 18 per cent of respondents were ‘don’t knows’. In another question, ‘Do you think that the Russian judicial system has been used for unlawful purposes in the last seven years?’ (respondents were invited to select from among multiple choice alternatives), a dismally low percentage of respondents associated the judicial system with the rule of law: only 4 per cent were convinced that the judicial system was not used for any unlawful purposes. The remaining responses emphasized the misuse of law for political purposes (21 per cent for political ends or 27 per cent for show trials), closely followed by commercial purposes (20 per cent) and personal purposes (16 per cent). Nineteen per cent assumed that the judicial

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system might be used manipulatively, but pointed out the lack of information about it, with 27 per cent finding it difficult to answer (Ledeneva 2009). It is not surprising, therefore, that at any level in the hierarchy, the dependence on superiors and the fear of impending punishment makes their verbal commands and the overall informal order rather effective. Insiders understand the limitations of formal rules and the necessity to work around them, and they develop a routine behaviour which, in fact, makes situations of real choice or a lack of directive uncomfortable. It is also notable that in response to the question ‘If you were to have a case considered before a court, and, in your opinion, it was unfair, which of the following would you most likely do next?’ 33 per cent of respondents said they would go to a lawyer for advice about further action, 14 per cent stated they would appeal, and 9 per cent replied that they would go to an independent human rights organization.15 Russian legal experts largely agree on the following: while not every court case in Russia is decided according to directives from above, the means to influence a particular case could be found if necessary. Thus, pressure does not have to be pervasive to be fully effective. Moreover, the form of influence can be chosen according to the personality of the judge. Court chairs have a variety of ways of dealing with noncompliant judges renowned for their personal integrity. Importantly, direct forms of influence might not even be necessary where the dependence of judges on court chairs facilitates self-censorship – the so-called chilling effect. The difficulty with tackling ‘telephone justice’ stems from the fact that it relies upon informal rather than formal means – verbal rather than written communication. The difficulties therefore lie in dealing with this informal process formally. Medvedev’s proposed working group will introduce new legislation and measures to push forward judicial reforms such as ensuring the financial independence of courts from local authorities, providing security and social protection for judges, and eliminating administrative influences on judicial appointments and disciplinary procedures. Most measures of this sort have been initiated before and have not worked to date. Perhaps the informal influence is best tackled informally, through verbal commands, thereby turning the tables on the informal system. Just as in July 2000 when Putin redefined the rules of the game for oligarchs by warning them not to meddle in politics, from May 2008 onwards

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Medvedev may have been sending a ‘verbal command’ (at least to his own presidential administration) not to meddle with the courts.

2.5 Challenges to sistema: creating alternatives to blat appointments As suggested above, sistema tends to recruit and promote on the basis of personal contacts rather than experience in the specified field of work. The overriding aim is not that an individual will do a good job, but that they will look up to the patron who promoted them. In July 2008, however, President Medvedev raised concerns over appointments through personal contacts or by payment and suggested the creation of a national database of public administrators, as well as a presidential quota for appointing professionals (Viktorova 2008). In Komsomolskaya Pravda, the leader of the LDPR faction in the Duma, Vladimir Zhirinovskii, claimed that the trade in appointments is a national practice and revealed the pricelist, with the notable exception of the price for a place on a party list for State Duma elections. His list read as follows: from 5 to 7 million euros for the position of governor, from 5 to 7 million euros for a seat in the Federation Council and between 3 and 4 million euros for the position of head of the Federal Service or head of department (Viktorova 2008). A representative of the committee set up to fight against corruption, Anatolii Golubev, said these figures are realistic, but also added that the price depends on the level of contact through which the appointment has been lobbied (Viktorova 2008). Contacts are the key dimension of appointment procedures, and the figures are indicative of the expectations of the return on the ‘investment’ for the appointee, but also of the kickbacks to whoever had helped with the appointment. In sharp contrast to the business sector, personal contacts rather than professionalism are critical in public administration appointments. According to a survey of 170 top Russian managers and owners of large companies in different sectors conducted in 2004 by a headhunting firm, Rosekspert, and the Association of Managers of Russia, contacts have been ranked relatively low (5.84) and in 8th place in comparison to the top three factors of success: professionalism (2.64), leadership qualities (3.08) and education (3.67), with 1 being the most important factor of success in business (Promptova and Chernov 2004). Ten years earlier, VTsIOM data confirmed that contacts were the key

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factor for success. The authors of the survey interpreted the decline in the role of contacts as a function of the rise in competitiveness – not a solution for public administration. Qualitative data from the same survey, however, suggest that it is impossible to distinguish between factors, for example between education, professionalism and contacts (Promptova and Chernov 2004). The meaning of ‘contacts’ has undergone a change as well. If in the 1990s the entire business sphere worked on the basis of a priori existing relationships and trust – what used to be called blat – the development of markets since then has resulted in the need to expand contacts, which implies networking skills rather than blat.16 In 2008, Medvedev said he was against the practice of placing state officials on the boards of major corporations, stating ‘I think there is no reason for the majority of state officials to sit on the boards of those firms’ (Elder 2008). At present, nearly all of the country’s top officials – from Deputy Prime Minister Igor Sechin, who chairs the oil major Rosneft’, to Finance Minister Alexei Kudrin, who chairs the diamond monopoly Alrosa – also head the boards of state companies. Yet Medvedev maintained that the state continues to play a role. ‘They should be replaced by truly independent directors, whom the state would hire to implement its plans’, he said, but no progress has been reported since then, and is unlikely to occur in the aftermath of the 2008 economic crisis (Elder 2008). ‘True independence’ in the context of strong informal ties and loyalties is unlikely, but a formal dissociation from the government and the Kremlin is possible. For example, German Gref, former Minister of Economic Development and Trade, and one of the past propagandists of the administrative reform, was elected chief executive of Russia’s largest state-controlled bank, Sberbank.17 Crossing over from state jobs to state-run companies or to private banks and firms is a fairly legitimate practice around the world, but the pressure of informal networks and personal integrity on state officials may vary.18 The role of contacts in small and medium-sized businesses is different. According to a study of small entrepreneurs and experts conducted by the Independent Institute of Social and National Problems, personal contacts in local administrations, law enforcement organs and inspectorates (sanitary, fire etc.) took the third, fourth and fifth places respectively when it came to launching a business, with the requisite entrepreneurial spirit and start-up capital

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coming first and second (Promptova and Chernov 2004). Aidis and Adachi (2007) found that networks between enterprises and officials are significant for business survival and growth, so new businesses without such connections are more likely to fail. In their comparative study of entrepreneurship, Aidis, Estrin and Mickiewicz (2008) discovered that those already in business, ‘entrepreneurial insiders’, may have more advantages over newcomers in starting new ventures in Russia. Eight months after Medvedev’s complaint about the number of official appointments procured through money or personal connections, and the announcement of his intention to create a national pool of suitable candidates to fill senior management posts in the federal administration, the first one hundred nominees of the planned 1,000-strong ‘Golden List’ were publicized. While some commentators have welcomed the list as evidence of Medvedev’s determination to root out corruption in Russia’s inefficient bureaucracy, sceptics have pointed to the lack of transparency with which the list was compiled. Because the list represents a departure from the way in which state officials have been appointed to high office up to now and contains a national pool of talent, its candidates are worthy of note. None of the nominees are over 50, and the majority are young, dynamic, successful managers and professionals. Such a database for recruiting government officials certainly runs counter to the principles of sistema, as do the latest changes in regional appointments (Elder 2009). These measures, however, have to be coupled with persistent effort and a wider set of institutional reforms in order to make a difference.

2.6 Conclusions It must be acknowledged that signs of change are as yet only tenuous. In one sense, Medvedev himself is a classic product of sistema and will find it hard (many would say impossible) to reform the system. I do not argue that Russia’s course has changed, just that Russia’s discourse has. Modernization claims are important. Yet sistema is powerful – it’s an informal institution with long roots and, what is more, it is strong. But the fundamental features of sistema – verbal commands from the executive branch of power to the judiciary (telefonnoe pravo) and corrupt practices in public appointments (blat appointments) – have

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never before been publicly targeted at the presidential level, so the measures to promote change require monitoring. In my view, sistema can only be changed by incremental means, through small changes at grassroots level. The paradox of this situation is that, if Medvedev does want to make changes, he will have to work informally through the system in order to do so. One of the latest tendencies, noted by legal experts, for example, is that judges receive telephone calls instructing them to judge cases on their legal merits! Every ruler, president, governor, minister or manager whose goal is to modernize Russia will inevitably find themselves wrestling with the forces of sistema: either sistema withstands the challenges and blocks the changes or the manageability of sistema will be lost by cutting the branch on which the executive power has been resting. In any event, it’s a no-win situation for the Russian leadership.

Notes 1. Oxbridge unwritten rules are spelt out in Cornford (1908). 2. Arguably, the system cannot be changed because of the human material in Russia. This argument is not related to ‘the culture of corruption’ and other myths about Russia (See Medinskii 2008) but to the features of ‘narod’, as depicted in Petr Lutsik’s Okraina (1998) and Aleksei Balabanov’s Trofim (1996). 3. The absolute frequency of the term is 142 and it appears in 74.4 per cent of the transcripts of the 43 in-depth interviews (148,369 words in total) with 14 experts, 8 businessmen, 13 legislators and 8 high ranking state administrators, conducted in Moscow in 2005–6. See results in Gudkov, Dubin and Levada (2007); for the discussion of the method see Oleinik (2008b). 4. Note both the vigilance and permissiveness of krugovaya poruka (Ledeneva 2004). 5. I have conducted 26 expert interviews in preparation for the survey on ‘telephone justice’, some in London in June 2006, but mostly in Moscow in August–September 2007. 6. Timothy Colton’s comment on the paper that I delivered at the Postcommunist Comparative Politics Seminar at the Davis Centre, Harvard University, 31 October 2005. 7. I have assembled the list of idioms from the novels of Pavel Astakhov. 8. See the discussion of ‘network society’ by Manuel Castells vis-à-vis ‘premodern’ institutions in Russia by Richard Rose (Ledeneva, Global and Local Networks, 2001). 9. For example, Dmitri Medvedev declared ‘transparency in conducting state procedures connected with contracts, tenders, and administrative regulations’, but it can remain a formal transparency (Gazeta.ru 2008).

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10. See, for example, ‘U Ministerstva oborony RF ukrali 11 millionov rublei s pomoshch’yu fiktivnogo konkursa’ (Ministry of Defence was robbed of 11 million roubles through a fictitious tender). NEWSru.com, 15 October 2008. 11. See the anti-corruption analysis of forestry legislation in M. A. Krasnov, E. V. Talapina, Yu. A. Tikhomirov et al. (2004), Analiz korruptsiogennosti zakonodatel’stva [Analysis of Corruption-Linked Loopholes in Legislation: The Case of Forestry]. Moscow: Tsentr Strategicheskikh Razrabotok. The authors argue that legislation should not only prohibit public administrators from getting involved with entrepreneurial activities, directly or indirectly, and from receiving payments for facilitating certain decisions, but also be monitored for the number of loopholes that allow for arbitrariness and lobbying. 12. ‘In 2007, according to official statistics alone, more than 10,500 cases were investigated,’ he stated (Stoyanova 2008). 13. The business lobby asked for a special authorization procedure without which the inspections would not be legitimate. 14. Note that Medvedev’s base in the anti-corruption campaign is the General Prosecutor’s Office, that is, siloviki in general, and Yuriy Chayka in particular (unless there is a change in the General Prosecutor’s Office and SKP [Prosecutor’s Office Investigations] Committee), just as the prosecutor’s office used to be Putin’s chief instrument in suppressing oligarchs. Although the prosecutor’s office is currently a weaker structure institutionally (it was stripped of its investigating functions) and politically (Chayka’s political weight and networks are nothing like Ustinov’s in 2003–6), it is what Medvedev has to work with (Stoyanova 2008). 15. For more details and a regional distribution of data see Ledeneva (2008a). 16. Opinions differ on the impact of blat on job markets. Some anecdotal evidence suggests that job markets are predominantly dependent on the use of blat (a recent advertising slogan was ‘if you don’t have blat, come to a job centre’). Another view is that professionalism is essential for large, international firms, where employees are meant to be competent and hardworking, but senior managerial positions, especially in the state-owned enterprises, invite competition not only in professionalism but also in contacts (Elena Nesmachnaya, ‘Ego velichestvo blat’, Pravda Severa, 9 March 2006). 17. Former deputy minister of property relations, Zumrud Rustamova, left for a position in business after her marriage to Arkadii Dvorkovich, former deputy minister of economic development and now head of the department of experts in the presidential administration (see Karpov and Salakhitdinova 2007). 18. The personal integrity of state officials in Russia is undermined by the necessity for them to work in the context of systemic corruption and so-called clan wars. A particularly high profile case, sometimes interpreted as an attack on the Minister of Finance, Aleksei Kudrin, was the arrest on 17 November 2007 of his deputy, Sergei Storchak, who was

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charged with embezzling $43.4m in a large-scale fraud scheme. ‘Russian Prosecutors Confirm Arrest of Deputy Finance Minister’, 17 November 2007, accessed at www.en.rian.ru December 2007. Storchak was released in October 2008. Recent scandals surrounding the Amur Krai governor, the mayor of Kaliningrad and the mayor of Tolliatti reflect developments at the regional and local level. The governor of the Nenetsk Autonomous District was arrested, as were the mayor and the chairman of the city parliament of Volgograd. The governor of the Vologda oblast, Nikolai Podgornyi, was charged with bribery and embezzlement and sentenced to 7 years in prison, but freed by amnesty. The governor of the Smolensk oblast, Alexander Prokhorov, was also sentenced for theft and unlawful road-building for 3 years, and also freed by amnesty. The governor of Tver’, Vladimir Platonov, was sentenced to 5 years for embezzlement and the misuse of public office, but his sentence was reduced to 3 years after appeal (Vyzhutovich 2006).

3 Crooked Hierarchy and Reshuffled Networks: Reforming Russia’s Dysfunctional Military Machine Pavel Baev

3.1 Introduction The military hierarchy would appear to be a perfect example of the strictly centralized system of power that Vladimir Putin saw as the only way to exert presidential control, and which is still seen by the ruling elite as the most ‘organic’ for Russia despite President Dmitri Medvedev’s penchant for liberal rhetoric. Indeed, the Commander-inChief (CinC) should be able not only to order the launch of any number of strategic missiles by opening the legendary ‘black suitcase’, but also strategically to direct a military operation in every potential theatre of war; he also controls the money flow (since the military system is not supposed to have independent sources of income) and makes major decisions on numerical cuts/increases and reorganizations. In reality, however, an order from the top might not arrive at all at the combat units concerned, not only because the means of communication are unreliable but also, more importantly, because the twisted chain of command has too many weak links. The Russian High Command (vyssheye komandovaniye) has traditionally included two major super-structures – the Defence Ministry and the General Staff – with overlapping responsibilities and competing authority, while the territorial system of military districts has never worked in sync with the functional system of special commands for each branch of the Armed Forces. The system of logistics and maintenance was designed for the task of supporting a mass mobilization for a protracted war, but did not cover the basic needs of combat 62

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units, particularly in the period of severe cuts in resource allocation in the 1990s. These structural redundancies and shortcomings make it all but impossible to formulate a consistent set of guidelines as entrenched clans advance clashing agendas, and so the Military Doctrine as well as the consecutive Armaments Programmes (Gosudarstvennaya programma razvitiya vooruzhenii) became compendiums of wishful thinking. The many contradictions and inconsistencies in Russia’s security policy cannot be attributed solely to the sloppiness of the ‘decider’, and an important part of the explanation can be found in the interplay between competing networks inside the military hierarchy. Since the early 2000s, the top brass has had limited access to security decisionmaking in Putin’s ‘inner circle’, comprised mostly of siloviki from the FSB and other special services. With the arrival of Medvedev in the Kremlin, the military networks have been further isolated from the centre of political power, and so the launch of a far-reaching and longpostponed military reform has come as a surprise to the officer corps. The logic behind the decision to initiate the expensive and painful reform right at the onset of a devastating economic crisis cannot be fully explained at the time of writing, and it appears entirely possible that in hindsight it might be seen as a mistake. As of mid-2010, it is clear that the resources that have been earmarked and allocated for advancing the reform project are insufficient to meet the initial goals (centred primarily on eliminating the ‘skeleton’ units and pensioning off tens of thousands of redundant officers) in the very short time frame specified by the original plan (2010–12). It is also clear that these goals and further aims are not adequately presented in either the National Security Strategy, approved in May 2009 with the express purpose of defining priorities in managing the wide range of risks that Russia is facing, or in the remarkably low-content Military Doctrine approved in February 2010.1 It is beyond the scope of this chapter to provide more than a provisional evaluation of the ongoing transformation of military structures, focusing on the role of networks in pushing for or slowing down policy change, which used to be sluggish and has now turned rather radical. The chapter takes the decision-making on launching the war with Georgia as its point of departure. It then examines the clash of interests around the reform project advanced by Defence Minister Anatoly Serdyukov, further looks into the diverging priorities in the strategic domain, and concludes with an assessment of reform-related risks.

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3.2 Decision-making on waging war with Georgia Throughout the years of his presidency, Vladimir Putin was careful enough not to alienate the military elite by enforcing any uncomfortable restructuring or painful cuts, exercising his control primarily by limited reshuffling of the top brass, such as the replacement of the quarrelsome Chief of the General Staff Anatoly Kvashnin in summer 2004.2 It is not that easy to explain why this cautious ‘do-no-harm’ approach was abandoned in the first year of his power-sharing with President Medvedev, who certainly cuts a rather unconvincing figure as the Commander-in-Chief. Some light could be shed on this sharp change of course by analysing the remarkably haphazard performance of the High Command during the war with Georgia in August 2008. In hindsight, this short but spectacular war appears utterly predictable – but that does not disprove the proposition that it was entirely preventable. In July, most experts in Moscow argued that Russia had no interest in launching a real war with Georgia, so tensions in Abkhazia and South Ossetia would remain under control, as they had been since summer 2004.3 The ‘Kavkaz-2008’ military exercises in the North Caucasus could be interpreted as preparation (badly mishandled in setting the order of deployment and preparing transport equipment) for the combat operation, but in all probability they were intended as a demonstration of force establishing the fact – further emphasized by several provocative military incidents – that Georgian leader Mikhail Saakashvili was incapable of doing anything about the defiant behaviour of separatists in Abkhazia and South Ossetia.4 Retrospectively, Western commentators suggested a range of motives – from energy intrigues to a ‘paranoid aggressive impulse’ – for Russia’s devastating attack on Georgia, but none are entirely convincing in rationalizing the decision to deploy military instruments in such a massive and chaotic way.5 Russia’s post-war behaviour demonstrates that the sudden shift to ‘revisionism’ was a deviation from the careful approach of a status quo power, even if often accompanied by bombastic rhetoric. Much basic information about the war is still muddled, and its timeline remains controversial, but the task in hand is confined to examining the flow of signals and orders through the chain of command. This is undoubtedly where the clue to one of the most remarkable features of the war lies, namely the speed of deployment

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of the Russian forces, which engaged Georgian troops on the outskirts of Tskhinvali on the afternoon of 8 August, some 15 hours after the outbreak of hostilities. It has been established that some units of the 58th Army arrived in Dzhava (in the middle of South Ossetia) in the first week of July, but many other units started the march from their bases in the North Caucasus on the morning of 8 August and moved through the Roki tunnel (the main checkpoint in the extremely vulnerable single line of supply) before noon.6 This deployment proceeded in a fairly disorderly fashion, which hardly attests to careful preparation and detailed planning, yet it is patently obvious that the order to start moving towards the zone of combat was issued on the morning of Day 1 and triggered into action not only the pre-designated units of the 58th Army but also the 76th Airborne Division, based in Pskov.7 The question about the authority behind and the trajectory of this order is far more complicated than the standard notion of the chain of military command would suggest; in fact, this question pertains to the very nature of control over the military networks by the increasingly divided political leadership.8 Two indisputable facts are that President Medvedev was enjoying a Volga holiday and was able to get to Moscow and assemble the Security Council no earlier than 15.00 on 8 August, while Prime Minister Putin was in Beijing at the opening ceremony of the Olympic Games and arrived in Vladikavkaz on 9 August before meeting with Medvedev in the small hours of 10 August. It was certainly entirely possible for the duumvirs to communicate via phone (though no such contacts are officially recorded on the log of the presidential website), and for Medvedev to issue orders from any location via the Commander-inChief’s special lines of communication. His immediate contacts on these lines, however, are Defence Minister Anatoly Serdyukov, who has the good sense never to interfere in military operations, and Chief of the General Staff Nikolai Makarov, an Army General who was appointed to this position in early June and hardly had time to learn the ropes or to get to grips with the situation in the Caucasus where he had never served. Medvedev had a meeting with these two on the morning of 10 August, but could hardly have received a full update on the situation around Tskhinvali. The problem was that the two key HQs that should have been responsible for monitoring and controlling the situation – the Operational Department of the General Staff (GOU) and the Command of the Army – were profoundly

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disorganized by the cadre reshuffling (the GOU premises were also closed for repairs). The Chief of GOU, Colonel General Aleksandr Rukshin, had been fired in mid-July with no replacement, while the Army Commander-in-Chief, Army General Vladimir Boldyrev, had only just been appointed on 5 August 2008; on 9 August he left for Vladikavkaz in order to organize the HQ for the operation. Colonel General Anatoly Nogovitsyn, who became the main ‘talking head’ for the media covering the war, was appointed head of the MilitaryScientific Committee of the General Staff as late as mid-July, and had no experience of serving in the Caucasus. Such complete incapacitation of several top layers in the rigid military hierarchy under the completely inexperienced CinC precludes any possibility of finding a definitive answer to the question about how the combat order was issued, and necessitates some informed guesses. In all probability, the key role was played by Lieutenant General Vladimir Shamanov, who was returned to active service in October 2007 and appointed to the important but far from powerful position of Chief of the Main Directorate for Combat Training of the MoD; it was he who organized the July exercises ‘Kavkaz-2008’ (which were not attended by the High Command). The two main figures responsible for implementing orders for combat deployment were probably Lieutenant General Sergei Makarov, Commander of the North-Caucasus MD, and Major General Anatoly Khrulev, Commander of the 58th Army, who both served under Shamanov in the Second Chechen War. The only higher-ranked person who could have covered Shamanov’s initiative was Colonel General Aleksandr Kolmakov, First Deputy Defence Minister (appointed in September 2007, former commander of the Airborne Troops, fired in June 2010), while another important ally could have been Lieutenant General Aleksandr Moltenskoi, Deputy Commander of the Ground Forces (appointed in September 2002, former commander of the federal forces in Chechnya, fired in June 2009). This small trust-based network probably agreed to place the main responsibility on Khrulev, who accepted it by leading the first column of troops into South Ossetia, where it was ambushed outside Tskhinvali. This speculation might be off-target, but it stems from the indisputable fact that the Russian leadership started a massive shake-up of the High Command in summer 2008 and so was hardly planning to launch a war with Georgia – and was quite possibly taken by surprise by

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Saakashvili’s blitzkrieg.9 Medvedev (who claims that he can ‘remember minute by minute’ that ‘most difficult day’ of his life) and Putin (who found himself formally out of the chain of command) were hardly pleased with the independent decision-making by a gang of ‘Chechen warriors’. The spectacular victory absolved their ‘sins’, but it is typical that nobody from the group of ‘suspects’, not even Khrulev, who was wounded in action, was promoted or rewarded. Shamanov’s appointment as the Commander of the Airborne troops in May 2009 (more on this will follow) was certainly influenced by his readiness to take the initiative in a high-risk situation – and not to claim any rewards. More importantly, however, the shock of the war revealed great redundancy in the High Command organization and much over-staffing in the officer corps, convincing Medvedev and Putin that Serdyukov should be unleashed to execute the most radical version of the reform plan. The ‘five-day’ war, therefore, marked a turning point in reconfiguring the military networks, while its impact on the European security system, which appeared to be massive in the weeks following the outbreak of hostilities, has turned out to be rather insignificant.

3.3 Serdyukov’s gamble with reform without reformers The appointment of Anatoly Serdyukov to the traditionally highprofile position of Defence Minister in February 2007 (just a week after Putin’s famous ‘Munich speech’) was entirely unexpected for the top brass and truly flabbergasting for the commentators, who had no idea whether Sergei Ivanov’s appointment as the second First Deputy Prime Minister was a promotion or a demotion (in hindsight, the latter appears to be the better guess).10 Serdyukov did not rush through any reorganization and survived two cabinet changes (in September 2007 and May 2008), gradually mastering the levers of bureaucratic control and silencing his critics. His first major test came in spring 2008, when the outspoken and respected Chief of General Staff, Yuri Baluyevsky, indicated his opposition to the first highly tentative proposals for reorganizing the Armed Forces, and his dismissal in early summer signified Serdyukov’s graduation to a real boss of the military domain.11 As the propaganda fanfare gradually subsided after the glorious (or inglorious, for most Western observers) victory over Georgia,

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Serdyukov received a ‘go-ahead’ signal from his two masters (who, however, preferred not to claim authorship) and announced a plan for ‘optimizing’ the military structures that had two main goals: to disband the ‘reduced strength’ units in the Army and to rectify the misbalance between officers, NCOs and soldiers, so that the latter would amount to 50 per cent instead of 30 per cent of the total. These goals were entirely commonsensical, but their translation into precise figures was nothing short of shocking: the number of units in the Ground Forces was to be reduced from 1890 to 172, and the strength of the officer corps was to be cut back from 350,000 to 150,000.12 The possibility of such draconian cuts was never contemplated in the protracted discussions on reforming the army, which had centred on the issue of abandoning the draft and shifting to an all-professional model. It is reasonable to assume that the conclusion which Serdyukov drew from those deadlocked debates was that the senior officers en masse were bent on preserving the existing structures, unsustainable as they were, so without a major shake-up in this cohort no modernization would ever take place. Given even a short warning, the top brass would have been able to mobilize and block such a shake-up, so only a sudden and narrowfocused effort had a chance of success. The element of surprise was definitely achieved, so for a few months Serdyukov was able to proceed without serious resistance, despite the fact that the CinC did not grant him any support (not even showing up at the annual meeting of the High Command) and only vaguely referred to an ‘innovative army’, promising at the same time to prioritize ‘social issues’ from housing to pensions.13 Since the middle of 2009, however, tensions in the ranks have started to escalate, and Serdyukov has kept his project on track thanks only to the inability of the General Staff and other top HQs, disorganized and even demoralized by the ‘purges’ of 2008, to mobilize their networks for a meaningful opposition. It was relatively easy to proceed with disbanding the ‘reduced strength’ units that were nothing more than empty shells around some old depots. The proposition to transform or split mechanized and armoured divisions into brigades was also successfully implemented, particularly since very few divisions had a full complement of regiments, so even the proud Tamanskaya division ceased to exist after marching for the last time in the Red Square parade.14 Greater difficulties have emerged due to the radical idea of getting rid of the

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whole category of NCOs (praporshchiki) and replacing them with professional sergeants, since the recruitment and training of the latter are tasks that cannot be resolved within the unrealistically reduced timeframe of 2009–10.15 This seemingly minor fault in the reform plan has severely undermined the cohesion of the ‘permanent readiness’ units, which were supposed to include only experienced soldiers serving on contract (kontrakniki) and led by professional NCOs, but are in fact now comprised of conscripts (serving just 12 months) led by sergeants serving on short-term contracts. The main problem, however, has turned out to be financing – which is supposed to be Serdyukov’s strongest competence. He was clearly instructed not to request extra funding, and so presented his reform project as a low-cost undertaking, which initially did not seem to be that much of an issue, since defence expenditures were supposed to increase by no less than 25 per cent in the 2009 state budget and keep rising. It quickly transpired, however, that orchestrating the mid-career retirement of thousands of officers is a very expensive proposition, requiring not only large cash payments and re-training costs, but also granting housing, always a stumbling block in military cadre matters. Some campaigns aimed at forcing officers to resign by ‘choice’ (which is much cheaper) were launched, albeit without much success – and with much indignation among the ‘target group’.16 The most resounding confirmation of failure over financing the much-vaunted reorganization was the resignation of Deputy Defence Minister Lyubov Kudelina, who had earned a reputation as a tough manager of defence expenditures.17 It is probable that Serdyukov had planned to gain extra funds by selling off some surplus Defence Ministry property, particularly around Moscow, but the prices for land (often requiring extensive clearing) collapsed as the Russian economy sank into recession and local authorities have been able to claim their share of the profits.18 As criticism of reform aims and particularly methods mounted, Serdyukov discovered that the initial advantage of launching a surprise attack on the military establishment was short-lived.19 He could not rely on the newly appointed top brass, whose main qualification for the job was consent for the supposedly wellfinanced plans for streamlining their domains, since discontent in the ranks spreads quickly and the generals increasingly prefer to embrace it rather than suppress it. His own team of loyalists

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in the huge MoD bureaucracy was miniscule, so he had to look for allies, and duly decided to enlist Lieutenant-General Vladimir Shamanov. This seasoned ‘warrior’ argued forcefully in favour of reforms with one particular aim in mind – to eliminate as much ‘dead wood’ in the military organization as bureaucratically possible in order to focus attention on the real combat capabilities, which had to be upgraded and expanded. Becoming increasingly dependent upon this support, Serdyukov promoted Shamanov to the potentially high-profile position of Commander of the Airborne Troops (VDV), who constitute the main part of the combat-capable core of the Ground Forces. The day after the presidential order for his appointment was signed, Shamanov announced that airborne divisions would not be transformed into brigades, that the numerical strength of these ‘elite’ troops would be increased instead of cut, and that new units would be formed, so officers need not worry about early retirement.20 While this ‘exceptionalism’ is strictly limited to the Airborne Troops, it will inevitably strengthen the counter-reform opinions and intensify the bottom-up transfer of discontent in other branches of the Armed Forces, particularly as funding for the much-advertised housing programme dries up, while the retired officers feel at liberty to voice their grievances. One particularly unpleasant setback for Serdyukov’s intention to make Shamanov a ‘champion’ of reforms (while granting him a free hand to modernize the VDV) was a corruption scandal involving Shamanov’s personal order to dispatch a detachment of paratroopers to protect a business controlled by a relative against a criminal investigation.21 Shamanov has shrugged off the official reprimand, but this high-resonance case reminded the top authorities that combat troops could easily be deployed in pursuit of any kind of agenda of their commanders, including political ones.22 Overall, the very narrow bureaucratic basis for Serdyukov’s revolutionary reforms has determined their shortcomings in selecting targets and setting milestones, while the smart tactical detour around the key issue of conscription still leads to the same dead-end of the progressively shrinking draft pool. Even as President Medvedev has started to commit himself more to advancing the ‘optimization’ of the Armed Forces, it turns out that the lack of conceptualization of reforms makes it impossible to formulate any consistent guidelines

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that could have been reflected in the National Security Strategy or indeed the Military Doctrine.

3.4 Competing networks feeding grand strategic ambitions Vladimir Putin’s rise to power was facilitated and maybe even determined by a local clash in Dagestan that quickly escalated into a complex combination of low-intensity warfare, counter-insurgency and counter-terrorism commonly called the Second Chechen War. That protracted engagement dictated the emphasis on rapiddeployment conventional capabilities in the military build-up, which Putin, nevertheless, remained reluctant to endorse. As a backdrop to the war, a full-blown bureaucratic battle escalated in Moscow between the Chief of the General Staff, Anatoly Kvashnin, and the Minister of Defence, Igor Sergeev, which in fact was not a clash of egos but a squabble for resources between the networks of ‘big battalions’ and ‘missiles-R-us’.23 The first of these networks had deep roots in the Soviet military machine and involved the proponents of a massive conventional army; it suffered a humiliating setback in the first Chechen war, which created an opening for a much smaller network of generals from the Strategic Missile Forces (RVSN) to gain control over the MoD and set priorities towards upgrading the strategic arsenal. Putin had to go with the Chechen ‘warriors’ led by Kvashnin, while Sergeev got the sack, but as early as autumn 2003, the CinC asserted that ‘The main foundation of national security in Russia remains, and will remain for a long time to come, nuclear deterrence forces’.24 It is hardly possible to rationalize that proposition from the point of view of threat assessment, but it is clear that the promises of the defeated but not destroyed network of ‘missile-men’ of providing greater ‘roar-for-rouble’ resonated not only with Putin’s ambitions to restore Russia’s status as a ‘Great Power’ but also with his concerns about a possible hidden agenda of the network of ‘Chechen generals’. As the war in Chechnya was brought to an end (which can hardly be defined as ‘peace’), Putin apparently arrived at the conclusion that conventional forces would receive funding for personnel and some combat training, while money for modernization should be channelled to the strategic forces. In the 2006 Address to the Federal

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Assembly, he established that ‘over the next five years we will have to significantly increase the number of modern long range aircraft, submarines and launch systems in our strategic nuclear forces’.25 His statement couldn’t have been further from reality: it was clear beyond a shadow of a doubt that the number of ICBMs would continue to decrease rapidly, while the number of submarines and strategic bombers could at best be maintained at the same level for five years, after which time it would also decline.26 Putin was obviously misled, but the last two years of his ‘reign’ saw no attempts at projecting conventional power (they were, in fact, the most peaceful period in Russia’s post-Soviet history) but much emphasis on flexing strategic ‘muscle’. Finding himself in the role of the CinC, Dmitri Medvedev (who was even less prepared for performing it than Putin was in 2000) has continued on this course, visiting missile divisions and submarine bases; the new National Security Strategy confirms the readiness to maintain ‘parity with the United States in strategic offensive weapons’, which is a questionable proposition indeed.27 It was precisely this fixation on numerical parity that limited the scope for compromises in the Russian–US negotiations on a new treaty, so despite Medvedev’s (as well as Obama’s) commitment to deliver on the idea of ‘reset’, the text was not ready by 5 December 2009 when the START I expired, and was hammered out only by April 2010 becoming the yet-to-be-ratified Prague Treaty.28 A simple explanation for this penchant for strategic bluff and self-deception may be presumed in the influence of a powerful missile-nuclear lobby (particularly since there is not a single ‘hard security’-minded person in Putin-Medvedev’s inner circle of aides); a closer examination shows, however, that there are no fewer than six separate and bitterly competing networks that push barely compatible agendas. The most influential network ties together the command of the Strategic Missile Forces, the Institute of Thermal Technology, Moscow, and the Votkinsk Machine-Building Plant, functioning as a micro-model of the Soviet military-industrial complex (VPK). The key project – Topol-M ICBM – has been well on track since the mid1990s and has undergone only a minor modification in equipping the missile with multiple warheads (which is prohibited by the START I Treaty, so the missile has been presented as a new design, Yars or RS-24).29 The main breakthrough achieved by this lobby in the late 1990s was the decision to adapt a modification of the Topol-M missile

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for equipping a new generation of strategic submarines (Borey-class). It would have been entirely possible for Putin to reverse that decision and re-launch the Bark missile project at the Makeev Design Bureau, Miass but he went along with Sergeev’s preference. The promised lower costs and shorter schedule probably shaped a logical choice, resulting in the Bulava missile becoming Putin’s pet project, perhaps coloured by a vision of him stepping on the deck of a brand-new submarine at the end of his presidency and thus erasing the horrible memory of the sinking of the Kursk in August 2000. It was, however, not to be as the Bulava project has turned into an embarrassing flop with a series of failed tests and uncertain prospects; the ‘missile’ network, nevertheless, feels confident about further funding since there is no alternative.30 Two different networks are pulling the air leg of the strategic triad in opposite directions. Big bombers were traditionally the weakest element in the Soviet deterrence system but acquired an unprecedented profile when Putin announced that ‘strategic patrols’ had been resumed since August 2007. It soon transpired that the much-trumpeted ‘patrols’ only amount to a once-a-month flight by several unarmed bombers, but the high visibility of these demonstrations were sufficient for the command of the Long-Range Aviation to make the case for increasing their assets.31 Putin’s fullest attention, however, was not enough to organize production of the reasonably modern Tu-160 bombers at the Kazan aircraft plant, which has considerable problems even with current repairs due to a lack of unique spare parts.32 In fact, the industrial aircraft-building lobby is focused primarily on export markets, and the directives from the Kremlin regarding gathering all assets in one state corporation cannot overcome the feud between several companies competing for orders from Algeria or Venezuela. The perfectly orchestrated air show over Red Square in May 2010 may very well constitute the crowning achievement of the Air Force, which did not perform even to minimal expectations in the war with Georgia.33 A similar disconnect exists between the Navy Command and the ship-building lobby, which are the much-diminished remnants of the once omnipotent Gorshkov’s ‘blue-water’ naval-industrial complex.34 The tight network of admirals seeks to distance itself from the Bulava disaster (which is indeed not of their making) and to establish a unique strategic profile of the Navy, exploiting the ‘Russia – great maritime

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power’ myth. The war with Georgia unexpectedly played into their hands, and the winter of 2008–9 saw an unprecedented effort to show the ‘St. Andrew’ flag in the Mediterranean, the Caribbean and even in the Gulf of Aden. This pattern is hardly sustainable (and, indeed, was not replayed the following winter) given the logistical problems at every major naval base from Baltiisk to PetropavlovskKamchatskii, and from Severomorsk to Sevastopol, but the admirals are nevertheless eager to use the ‘window of opportunity’ for all it is worth. Their great ambition involves adding several aircraft carriers to the combat order of the Russian Navy, and President Medvedev expressed some enthusiasm for that vision – before the sobering impact of the financial crisis.35 As for the ship-building industry, its interests are primarily focused on the export markets, particularly India, where state support is crucial for winning big contracts that are far more lucrative than the orders from the Navy. A particular branch of this industry specializes in dismantling decommissioned nuclear submarines, but here too a major part of the funding comes from abroad, including the US Cooperative Threat Reduction Program. Finally, a particular lobby is led by the Space Forces Command, which coordinates and advances the interests of various research institutes and industries. This network is better able to balance commercial interests related to launches of foreign communication satellites and military agenda centred on the Global Navigation System (GLONASS) project. The ‘space’ lobby has successfully ‘sold’ this project to Putin (former Defence Minister Sergei Ivanov is the key ‘salesman’), who promised that GLONASS would work better than the US-controlled GPS. Despite generous financing, the Space Forces Command is not yet able to build a sufficient grouping of satellites, as their life-cycle is shorter than planned; the main problem with the GLONASS project, however, is that the industry is unable to produce equipment that would be competitive against the GPS, while most military users have neither the tools nor the skills for computer navigation.36 Overall, the complex and dynamic interplay of these networks creates the phenomenon of over-funded de-modernization, whereby the steadily increasing expenditure on particular projects leads to the degradation of many other crucially important assets and infrastructure and, in the final analysis, causes setbacks in the prioritized projects, Bulava and GLONASS being prime examples. Parochial interests in

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various elements of the strategic forces are so deeply entrenched that the currently executed reform effort touches upon them only tangentially, despite their increasing claim on the defence budget.

3.5 Conclusions: Mistiming and mismanagement of reforms The need for reforming the seriously outdated Soviet-style structures of the Russian armed forces was demonstrated and examined in great detail by many experts, yet the forceful launch of a reform project by Defence Minister Anatoly Serdyukov in autumn 2008 took everybody by surprise.37 This narrow-focused but well-targeted effort constitutes a clear break with the cautious policy of buying the loyalty of the military and keeping them away from politics, which Putin adopted in his second presidential term. What becomes more apparent with every fresh delivery of economic statistics, is that it constitutes an even greater departure from the pattern of anti-crisis policy oriented primarily towards damage-limitation and minimizing the impact of the recession on the political system.38 Indeed, the military is the only state institution that is currently undergoing a radical reform, and the rationale for this singling out of the most conservative and heavily armed organization is neither self-evident nor convincingly explained. The reform was indeed long overdue, but it would have been perfectly possible to postpone it even further. The most obvious stumbling block to Serdyukov’s reform is money; previous attempts at transforming the army, half-hearted as they were, proved beyond doubt that reform was an expensive proposition, so the very idea of making massive cuts in the officer corps without a clearly earmarked increase in the defence budget was dubious at best. As President Medvedev admitted, the speed and scale of the crisis took the political elite by surprise, so the possibility that the state budget for 2009 would run into a 7–10 per cent deficit and the 2010 budget would have to be sequestrated was simply not taken into consideration.39 A severe recession in the manufacturing sector has influenced the decision to channel more resources into the military industry by expanding the ‘defence order’, but that has added to the shortage of funds for streamlining the redundant structures.40 Cancelling the cuts and reorganizations that cannot be financed is far worse than not starting them in every management strategy,

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but as far as the armed forces are concerned such back-pedalling is certain to generate dangerous reverberations. The officers not only lose confidence in the competence of the top leadership, but begin to see them as the ‘enemy’. This hostile attitude is inevitably increased due to the lack of attention to the fate of tens of thousands of officers forced into early retirement in the initial reform plan that President Medvedev tried to correct with his trademark discourse on ‘social aspects’. Hastily drafted programmes for retraining have proved to be quite useless as the labour market has contracted sharply, showing very few prospects for management-type jobs. Yet another shortcoming in Serdyukov’s approach is the assumption that a fast and hard shake-up of the officer corps would in a matter of a few years make it possible to relaunch the transition to an all-professional army. It is obvious now that the target figure for the total strength of 1,000,000 uniformed personnel cannot be sustained and that the combat readiness of the newly formed brigades has dropped to a new low; besides, the proposition about creating a strong cohort of professional sergeants is still badly under-developed, particularly as far as education and training are concerned.41 There is no way around the plain fact that the pool of young men available for draft is shrinking (unless draconian measures targeting students are enforced). It is also undeniable that the newly-introduced reduction of the conscript period to 12 months leads to a shortage of trained troops, while the number of soldiers serving on contract is also declining due to a lack of funds for attracting volunteers. The misbalance in the top-heavy Armed Forces that Serdyukov sought to correct has given way to several other distortions in the force structure, so his chances of holding onto the job are not good. The most detrimental fault in Serdyukov’s enterprise could, however, turn out to be his lack of leadership or disposition to build a team of committed reformers and win support for the long-overdue reforms both with the officer corps and with the public. The strategic rationale for restructuring has never been developed, which is understandable as Serdyukov has little grasp of ‘grand-strategic’ issues, but still makes the sensible if not quite feasible changes susceptible to challenges from the ‘patriotic’ camp. For that reason, the strategic forces, as well as the Navy and the Air Force, are to all practical intents and purposes excluded from the cuts and their commanders are forcefully rolling

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back the initiatives concerning their reorganization.42 The newly approved National Security Strategy and Military Doctrine, with their pronounced emphasis on threats emanating from the US and NATO, provide a ‘theoretical’ foundation for these lobbies demanding a greater share in the inevitably stagnating defence budget. Serdyukov’s decision to promote Shamanov to a key command position most probably reflects his recognition that the lack of his own networks necessitates the building of useful alliances in the Army leadership. Shamanov is indeed eager to advance reforms, but he puts the emphasis on strengthening the ‘permanent readiness’ units, primarily the Airborne Troops, drawing on ‘lessons learned’ in the August war. This seemingly rational combination of eliminating useless redundancies and upgrading necessary combat capabilities actually creates an interplay between two kinds of risks: the broad discontent in the officer corps and the ability to act decisively in a small number of elite units. For the first time since the late General Aleksandr Lebed, the Army now has in General Shamanov an experienced and respected leader, who might entertain political ambitions. Putin’s system of power still appears solid, but the experimental ‘two-headed’ leadership has been tested by the unexpected economic crisis. An opening for a decisive challenger just might be in the making.

Notes All web sources for this chapter were accessed by the author on 8 December 2010. Sustained support from the Norwegian Defence Ministry for my research on Russian military matters is greatly appreciated. 1. Unlike most other documents, the text of the National Security Strategy is available on the presidential website in Russian only (http://president. kremlin.ru/text/docs/2009/05/216229.shtml). The new Military Doctrine can be found on the Russian Security Council website (http://www.scrf. gov.ru/documents/18/33.html), and the delay in approving this meaningless document has no rational explanation. 2. That replacement has been examined in P. Baev (2004). ‘The Decline of the General Staff Leaves Reform in Limbo’, Jane’s Intelligence Review, October, pp. 48–9. 3. See, for instance, L. Radzihovsky (2008). ‘Lobachevsky Diplomacy’, Rossiiskaya gazeta, 5 August; Y. Simonyan (2008). ‘There will Be No War’, Nezavisimaya gazeta, 28 July.

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4. On the exercises, see V. Mukhin (2008). ‘Militant Peacekeepers’, Nezavisimaya gazeta, 18 July; on Russia’s possible aims in the war, see A. Illarionov (2009). ‘The Russian Leadership’s Preparation for War, 1998–2008’. In S. E. Cornell and S. F. Starr (eds). The Guns of August 2008: Russia’s War against Georgia. Armonk NY & London: M. E. Sharpe, pp. 49–84. 5. From the plethora of articles on this subject, I would single out Roy Allison’s sober and precise article R. Allison (2008). ‘Russia Resurgent? Moscow’s Campaign to “Coerce Georgia to Peace”‘, International Affairs, vol. 84, no. 6, November–December, pp. 1145–71. The report of the independent international fact-finding mission organized by the EU is available at (http://www.ceiig.ch/Report.html); for a succinct commentary, see ‘The Blame Game’, The Economist, 1 October 2009. 6. A detailed and valuable account appears in Y. Latynina (2008). ‘On the Russian-Georgian War: 200 km of tanks’, Ezhednevny zhurnal, 19, 20, 21 November (http://ej.ru/?a=note&id=8579). 7. According to Lieutenant General Vladimir Shamanov, the columns of the 19th and 42nd motorized divisions (based in Vladikavkaz and Grozny respectively) lost more than half of their vehicles on the march to Tskhinvali, and it was the rapid deployment of the airborne troops that decided the outcome of the battle for that city. See V. Shamanov (2009). ‘The War Proved the Need for Reforms’, Krasnaya zvezda, 11 February. 8. This question has been examined in P. Baev (2008). ‘Vae Victors: The Russian Army Pays for the Lessons of the Georgian War’, PONARS Eurasia Memo 46, Washington: Georgetown University, December. 9. Pavel Felgengauer holds a contrary view: ‘As the Russian military staffs made preparations for the planned August 2008 invasion of Georgia under the cover of the military exercises Kavkaz-2008, additional strategic reinforcements were mobilized for a possible escalation of hostilities in the eventuality that Washington would offer Tbilisi assistance and get directly involved in the fray.’ See P. Felgengauer (2009). ‘After August 7: The Escalation of the Russian-Georgian War’. In S. E. Cornell and S. F. Starr (eds). The Guns of August 2008: Russia’s War against Georgia. Armonk NY & London: M. E. Sharpe, pp. 162–80, on p. 180. I have not found sufficient evidence to support such a hypothesis. 10. A sharp commentary is A. Golts (2007). ‘Civilian Control Putin-Style’, Ezhednevny zhurnal, 24 February (http://ej.ru/?a=note&id=6230). 11. See V. Litovkin (2008). ‘Under-Carpet Victory’, Nezavisimaya gazeta, 4 June; V. Litovkin (2008). ‘Generals’ Demarche’, Nezavisimoe voennoe obozrenie, 28 March. 12. A good overview of reform guidelines is V. Solovyev (2008). ‘Military Reform 2009–2012: Full Collection of MoD Essays’, Nezavisimoe voennoe obozrenie, 12 December. 13. See V. Solovyev (2008). ‘The CinC Did Not Come to the Generals’, Nezavisimaya gazeta, 14 November. 14. See V. Mikhailov (2009). ‘Russian Military-Brigade Order’, Nezavisimoe voennoe obozrenie, 22 May.

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15. Former Defence Minister Pavel Grachev argues that the idea of eliminating the professional group of praporshchiki goes completely against the main thrust of reform (of which he is very critical) towards greater professionalism in the Armed Forces; see V. Umantsev (2009). ‘No Point in Learning from our Adversaries’, Nezavisimoe voennoe obozrenie, 20 March. 16. See A. Golts (2009). ‘The Break of the Contract’, Ezhednevny zhurnal, 5 May (http://ej.ru/?a=note&id=9047). 17. See V. Litovkin (2009). ‘Two Sensations in One Week’, Nezavisimaya gazeta, 24 April. 18. The government has granted the MoD the right to organize auctions to sell off the surplus land since January 2009, but half of these auctions were cancelled due to a lack of claims; see D. Aizenshtadt And E. Surnacheva (2009). ‘Voentorg to itself’, Gazeta.ru, 15 January (http://www.gazeta. ru/politics/2009/01/15_a_2924742.shtml); A. Stepanov (2009). ‘Not an Inch to the Enemy!’, Versiya, 2 November (http://versia.ru/articles/2009/ nov/02/prodazha_voennih_zemel). 19. A full-blown assault on Serdyukov’s reform project is O. Elensky (2009). ‘A New Military Profile is in ‘Shock and Waver’’, Nezavisimaya gazeta, 29 May. Even such a mainstream liberal expert as Aleksei Arbatov confirmed that ‘all this reforming, call it whatever you want, leaves a very unpleasant impression’. See A. Arbatov (2009). ‘Current Issues and Logic of the Military Reform: Round Table at the NVO’, Nezavisimoe voennoe obozrenie, 24 April. 20. See I. Konovalov and M. Muradov (2009). ‘Nobody But Him’, Kommersant, 26 May; V. Solovyev and V. Ivanov (2009), ‘Generals Launch a CounterOffensive’, Nezavisimaya gazeta, 28 May. 21. See R. Anin (2009). ‘General and Glyba’, Novaya gazeta, 21 September. 22. See P. Felgengauer (2009). ‘18 Brumaire of Vladimir Shamanov’, Novaya gazeta, 28 September. 23. For my detailed examination of that intrigue, see P. Baev (2008). Russian Energy Policy and Military Power. Routledge. London, particularly pp. 82–3. 24. The speech at the meeting of the High Command is available in the archive of the presidential website at (http://www.kremlin.ru/eng/ speeches/2003/10/02/2017_type82912type82913type84779_162593.shtml). 25. See (http://www.kremlin.ru/eng/speeches/2006/05/10/1823_type70029 type82912_105566.shtml). 26. A large volume of data and commentary has been amassed on the blog ‘Russian Strategic Nuclear Forces’ edited by Pavel Podvig at Stanford University; on the total numbers, see ‘Long-Term Force Projections’, 25 January 2009 (http://russianforces.org/blog/2009/01/long-term_force_ projections.shtml). 27. See A. Hramchihin (2009). ‘Mixture of Syndromes, Self-Deception and Lies’, Nezavisimaya gazeta, 29 May. 28. See P. Podvog 2009). ‘The START Treaty Expires’, RSNF, 4 December. (http:// russianforces.org/blog/2009/12/start_treaty_expires.shtml); M. Vildanov (2010). ‘White Spots in the START-3’, Nezavisimoe voennoe obozrenie, 16 July.

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29. See V. Solovyev 2009). ‘Odd Metamorphosis in Military Reforms’, Nezavisimaya gazeta, 16 January. 30. See A. Hazbiev and V. Tyumenev (2009). ‘Bulava will Hit Like a Boomerang’, Expert, 2 February. 31. See A. Golts (2007). ‘Flying, but Very, Very Low’, Ezhednevny zhurnal, 23 August (http://ej.ru/?a=note&id=7348). 32. See V. Myasnikov (2009). ‘High-Flying Words from the Generals’, Nezavisimoe voennoe obozrenie, 13 February. 33. The loss of one Tu-22M long-range bomber was a particularly shocking setback; see V. Kamenev (2008). ‘What Can Russian Pilots Fly?’, Nezavisimoe voennoe obozrenie, 19 September. 34. Admiral Sergei Gorshkov was the Commander-in-Chief of the Soviet Navy from 1956 to 1985 and organized its expansion into a powerful oceangoing force that was particularly strong in submarines but had no aircraft carriers. For a good description, see ‘Russia: Power Play on the Oceans’, Time, 23 February 1968; a sober Russian view is G. Kostev (2000). ‘The Phenomenon of an Admiral’, Nezavisimoe voennoe obozrenie, 25 February. 35. See V. Litovkin (2008). ‘No Place for Building Aircraft Carriers in Russia’, Nezavisimaya gazeta, 13 October. 36. See ‘Sergei Ivanov Considers the Management of the GLONASS Programme to be Inefficient’, Kommersant, 26 January 2009. 37. See for instance, S. Miller and D. Trenin (eds) (2004). The Russian Military: Power and Policy. The MIT Press. Cambridge MA & London; and a more recent argument in A. Arbatov (2006). ‘Russian Military Policy Adrift’, Briefing Paper, vol. 8, no. 6, November. Carnegie Center. Moscow. 38. On the scope of the crisis, see A. Illarionov (2009). ‘Big Leap Back’, Gazeta. ru, 30 April (http://www.gazeta.ru/comments/2009/04/29_x_2981108. shtml); on the impact on the system of power, see N. Petrov (2009). ‘Russian Political Mechanics and the Crisis’, Lecture at the Bilingua club, 21 May, available at (http://www.polit.ru/lectures/2009/05/14/petrov1.html). 39. D. Medvedev (2009). ‘The Elite are Elite Precisely because They Learn Fast’, interview with Kommersant, 4 June. 40. Responding to questions from the ‘general public’ in December 2009 in the traditional live TV show, Putin emphasized that ‘industry, as I said, is expected to contract by 13%, but the defence industry will grow by 3.7%’; the official translation is at (http://premier.gov.ru/eng/events/4255. html). On the problem of setting priorities in the 2010 defence budget, see V. Solovyev (2009). ‘Military Balances of the CinC’, Nezavisimoe voennoe obozrenie, 20 November. 41. One of the strongest proponents of the professional sergeant corps is Vitaly Shlykov. See, for instance, N. Poroskov (2009). ‘Brave Accountant: Experts on the Military Reform’, Vremya novostei, 15 January. 42. On the resistance to the plan to downgrade the status of the Caspian Flotilla, see V. Muhin (2009). ‘Military-Caspian Metamorphosis’, Nezavisimaya gazeta, 4 June.

4 Who is Running Russia’s Regions? Nikolay Petrov

4.1 Introduction The direct effect of the centre on political and economic development of Russia’s regions has increased significantly in recent years, with governors playing a key role in this process. Instead of representing the regional elites’ interests at the centre, as in the past, they are shifting closer towards representing the centre’s interests in the regions. A highly centralized United Russia, fiscal centralism and an increase in the centre’s control over law enforcement and the judiciary serve as the main leverage in this respect. Along with the dekorenization1 of the corps of governors, further expansion and development in the depth of the dekorenization of key federal officials in the regions is taking place under the banner of restoring the horizontal rotation of cadres. If, when Putin came to power in 2000, it was only the FSB chiefs who were carving out careers for themselves in areas other than the regions in which they were serving, horizontal rotation gradually spread to militia chiefs, prosecutors and chief federal inspectors. Now the practice is in full swing with regard to the chairs of regional courts. The latter give the centre a controlling share in the executive, legislative and judicial branches in the regions. The only problem is that despite having a controlling share, the centre, like a dog in the manger, can’t use it effectively. In addition, the centre, contrary to the commonplace notion of ‘the power vertical’, is not united when it comes to the regions. A single powerful vertical chain of command doesn’t exist. Instead, 81

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there are many disparate narrow verticals poorly related to each other. The lack of coordination between federal agencies and the sometimes direct competition between them now seems to be a much more serious problem than any regional disobedience, which Moscow suppressed by radically reconstructing the system of management. There are far fewer problems when it comes to the implementation of standard schemes uniform to all the regions. It is the individual approach which causes complications. In the absence of strong institutions, the centre’s influence is exerted by means of different kinds of formal and informal networks. These consist of corporations in the broadest sense – from state corporations to agencies like the FSB, siloviki in general, lawyers, and teams and clans with regional or commercial interests, for instance. The problem stems from the fact that the centre, driven by ease of handling considerations, is constructing a system from the top down without caring much about the need to transmit impacts from the bottom up. What is more, there is nobody at the bottom capable of constructing the system in the opposite direction. As a result, the centre exercises tough control over the regions, blocking their self-development rather than managing them effectively. It is unlikely that the regions will derive either political or economic development when managed from a distance and given inadequate feedback. In order to explain and illustrate these points, I will begin with an analysis of the management system, followed by a description of the networks in terms of both their structure (who runs them) and their processes (how they are run).

4.2 Putinian centralization maintained under the Medvedev–Putin tandem Until the 2000s, the question ‘Who’s running Russia’s regions?’ would have been fairly simple to answer. The regions were run by governors (regional heads), who in many cases had created their own political machinery. The rapid centralization that coincided with Putin’s coming to power resulted in significant changes. Now it is at the federal level where the situation most closely resembles a political machine, albeit an extremely ineffective one. At the regional level, the situation is becoming more complex, with

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regions losing their connectivity to the so-called power verticals reaching them from the centre. The on-going disinstitutionalization and corporatization at the upper level are heralding Russia’s transformation into a network state. This, in turn, necessitates an analysis of the regional level management from the perspective of the network state. The ruling elite regards Russia as a corporation in many respects. Following this line of thinking, the regional ‘share portfolio’ has shrunk in recent years from a controlling interest to a blocking one. Following further depolitization – a decrease in political competition and public politics as a whole – political structures and methods have gradually been replaced by corporate ones. The role of majority shareholders in the corporation of Russia is played by major business-political clans who make deals among themselves. Without the means to consolidate themselves, the minor regional shareholders do not have the capacity to block decisions, and are often disregarded. This scheme worked well enough until the ordinary shareholders, represented by the Russian citizens, started to receive dividends. The federal reforms announced by Putin in the week after his inauguration in 2000 reshaped the Russian political system, making it less federal and less democratic in nature. Seven federal administrative districts – a new level of administration between the centre and the 89 regions – were created and headed by specially appointed presidential representatives. In September 2004, at the beginning of his second term in office, and in the aftermath of the Beslan tragedy, Putin pushed through the second anti-federal reform to eliminate the popular election of governors. In effect, this gave the president the power to appoint and dismiss regional leaders. The Kremlin’s principal stance with regard to the governors didn’t change when Medvedev took on the presidency. Even the stylistic changes that ensued were not particularly marked. This stance has appeared shortsighted in the past and has become even more so due to the economic crisis – persisting with an overcentralized model is clearly a serious political mistake. The political system in general, and centre-region relations in particular, are unstable, with the crisis making their internal instability even worse. Both the institutional and personal vulnerability of the governors makes them a weak link

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in the chain, and makes the chain itself weaker in the face of the economic crisis.

4.3 System of management: key features and evolution The key features of the new system of management, both of and in the regions, which emerged by the end of the 2000s are unification and depersonalization, tougher subordination, a general strengthening of vertical connections and a weakening of horizontal ones, depolitization, a decrease in publicity, an extreme weakening of societal feedback and sharply intensified personnel rotation with numerous and sometimes haphazard replacements of individuals and of whole management blocks. The system of managing the regions as a whole as well as some of its important elements have been described previously in a number of publications.2 Yeltsin’s system was far from ideal, but nevertheless had a number of advantages over this new one. It has to be kept in mind that if the old system underwent tensile testing, having weathered a number of political and economic crises, the new one existed until very recently in hothouse conditions. The management was reduced to distributing the growing financial resources, staying on an even keel with citizens, and maintaining amicable relations with the authorities in a time of noticeable well-being and growth. However, when the centre tried to instigate large-scale social-economic reforms at the beginning of Putin’s second term in office, the decision-making procedure and the implementation of decisions immediately demonstrated just how inefficient the whole process was. 4.3.1 Evolution of the system of management: basic outline The system of management, both of the Russian regions and within them, has undergone substantial changes since 2000. During Putin’s first presidential term, these changes can best be described as the federal centre reprising the role it was unable to play earlier due to its systemic weakness and various financial constraints. The pendulum, which had swung too far in the direction of the regions, was now swinging back. A raft of legal and organizational changes was introduced, including the establishment of a new system for forming

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the Council of the Federation, the restoration of the centre’s full control over appointing regional militia heads, the introduction of Chief Federal Inspector (CFI) post, the unification of the electoral and political systems, the redistribution of joint commissions in favour of the centre, and the inclusion of the regional level in numerous new vertical chains of command, such as anti-terrorist and antinarcotics commissions, electoral commissions, parties and so forth. The further financial strengthening of the centre (which made it possible, among other things, for the judiciary to become independent of the regional authorities) and the adoption of a new Budgetary Code, which gave the centre additional leverage, have also played important roles. If, at the end of Yeltsin’s presidency, the regions’ share of the consolidated budget in relation to the federal budget was in the ratio of 60:40, the new Budgetary Code defined it as 50:50, while the present-day ratio is closer to 35:65. Putin’s second term in office was marked by further expansion of the centre at the expense of the regions, a situation which prevailed during the subsequent Medvedev-Putin term. Outcomes have included the takeover of joint commissions, as well as a revision of the whole balance of powers and financial resources in favour of the centre. The first phase of the changes got underway with the centre’s struggle in the Federation Council (The State Council) for domination of the ‘interaction spaces’ in the federal districts, which supplanted the associations of inter-regional cooperation. The positional weakening of governors during the first phase entailed cutting them off from key supporters and allies at the regional level, represented by regional siloviki who were gradually transformed into ‘Varangians’3 rather than representatives of the regional establishment, allowing the centre to deprive them of independent legitimacy by switching to gubernatorial appointments in 2005. These appointments, which used to be more formal to begin with, signified increasingly radical changes among the regional elites, in keeping with the centre’s penchant for the ‘Varangian’ model. However, the centre did not get its own way in all cases, with the result that some ‘heavyweights’ have managed to hold onto power in a number of regions until 2010 when the leaders of Tatarstan and Bashkortostan (Mintimer Shaimiev and Murtaza Rakhimov) had to give in to the pressure from Moscow to step down.

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4.3.1.1 A managerial network with overdeveloped radial and underdeveloped concentric ties If the system of managerial connections can be described as a network, then it had under Yeltsin relatively weak vertical connections or ‘Centre-regions’, rather weak horizontal inter-regional connections and very dense horizontal inner-regional connections. Under Putin, the vertical ties were not only strengthened considerably, but now resemble multi-core cables. The managerial net looks like a cobweb with overdeveloped radial and underdeveloped concentric links. What this means in practical terms is that as in the case of Moscow or any other city with an inherited medieval spatial pattern, the shortest route between two neighbouring regions (or agencies in our case) is through the centre. Regional borders continue to cause a bottleneck. They are far from absolute in nature and are apparent in all the managerial networks without exception. Even the roads are falling apart at the regional borders, and the country’s crazy quilt has few stitches holding the pieces together. The whole fabric of the country consequently resembles a lace cover with sparse connections between the pieces, which are much better connected to the centre than they are to each other. 4.3.1.2 Top-down and bottom-up elements There are two main elements in the management system flows – from the top down and from the bottom up. In recent years there was a ‘top to bottom’ element which was constantly being reinforced. Commands, conditions, plans and so on are pushed through from the top to the bottom by the following means: • the inclusion of governors in the Kremlin’s vertical • the practice of the horizontal rotation of regional heads of federal agencies • the subordination of the inter-regional level to the centre • the centralization of political parties, with the inclusion of regional parliaments dominated by United Russia in the ‘party vertical’. These methods have both positive and negative consequences. Increased openness on the part of the regional elites, a decrease in

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autarky, an improvement in managing from above, and a reasonable degree of unification can all be regarded as positive. The severing of connections, which has resulted in a decrease in management efficiency within a region, unification beyond reasonable limits and an upsetting of the balance between direct ties and feedback are among the most notable negative consequences. In effect, there is a topsy-turvy delegation of powers which can be described by the counter- subsidiarity principle, whereby the highest level transfers to the lower levels only those powers it has no further interest in. 4.3.1.3 Network patterns The creation of semi-formal hierarchical management patterns was initiated in 2005 after the Orange Revolution in Ukraine and the wave of anti-monetization protests. It was carried out alongside the deconstruction of networks which were not controlled by the Kremlin – such as ‘Open Russia’. Although the 2001–2 increase in public reception rooms for presidential envoys to the federal districts can be regarded as an indicator of what was to come, it wasn’t until 2005 that the network proper started to emerge. It developed into a pyramid of public chambers with the federal one at the top (July 2005), public councils at the district level and regional and municipal chambers at the base. Next to appear was the Presidential Council for the Implementation of National Projects (October 2005), with regional branches led by governors. Subsequently, on the eve of federal elections, two special network patterns were constructed: the National Antiterrorist Committee (February 2006) and the National Anti-narcotics Committee (October 2007), led by the Federal Security Service (FSB) and the Federal Drug Control Service (FSKN), with governors leading its regional branches. Although they are all still functioning, they are past the peak of their activism. Almost at the same time, United Russia became the ruling party, with a membership currently approaching 2 million. Both pattern-oriented and project-oriented networks exist, with the United Russia cadres reserve project being a good example of the latter. According to the United Russia website, almost 24,000 people have participated in the project ‘Cadres reserve – a professional team for the country’ with the 300 best candidates between the ages of 24 and 46 being presented to Vladimir Putin.4

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4.3.1.4 Destruction of foolproof mechanisms Since 2000, almost all the political institutions and actors have become weakened, with the exception of the presidential office. As a result of this weakening, which in some cases led to the total elimination of the independent media (2000–3), ‘oligarchs’ (2000–3), the upper house of the parliament – the Federation Council (2000–2), the lower house – State Duma (2000–4), governors (2000–4) and NGOs (2005–), the destruction of foolproof mechanisms took place. The directly elected governors played a key role in this regard. They were the ones who acted as a filter in rejecting or postponing any decisions and initiatives by the centre which could turn out to be harmful for a region. When getting directives from above, they could choose how quickly and how fully to realize them (if at all), ensuring that at the end of their term of office and when seeking re-election, the successes achieved under their leadership would satisfy the requirements of both the centre and the voters. Since 2005, this is no longer the case, even if some of the same people have retained their seats in the governors’ offices. For one, a governor no longer has a 4–5 year term to prove his worth; and second, his efficiency, just like that of any other official, is now measured by how strict and how quick he is in implementing orders, rather than by the region’s bottom line. It was governors’ ‘Fronde’ in mid-2004 over the cash for benefits reform which prompted the Kremlin to repeal the system of direct governors’ elections, which had been practised since the early 1990s. The failure of the reform, which caused massive social unrest in early 2005, proved that the governors were right and that trying to shut them up would have negative consequences. The Kremlin’s failure to understand this taught them a lesson of a different kind. The municipal reform, which was initially planned to come into force in January 2006, was postponed until 2009. 4.3.1.5 Etatization and primitivization of managerial schemes The expansion of state management can be seen with regard to political parties and NGOs on one side and self-government on the other. Verticalization and quasi-verticalization is taking place vis-à-vis political parties and NGOs. With the adoption of a new law on political parties which has banned regional parties and established a prohibitory threshold, the number of registered parties has

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dropped from 37 to 7. In reality, the figure is even lower because only 4 parties represented in the State Duma are now financed by the state and enjoy many other benefits, making it practically impossible to compete with them. The big four are United Russia, The Communist Party (KPRF), The Liberal Democratic Party (LDPR) and Just Russia. Other political parties, for example the liberal Yabloko, were more or less ousted from the political field by means of increased administrative and financial pressure. In the October 2009 elections, the participation of non-parliamentary parties was minimal, with only one region out of five managing to get into the regional assembly. At the same time, the civil society quasi-vertical with the Public Chamber at the top was under construction as well. The formation and delegation of these quasi-public bodies from bottom to top, and distribution of budgetary sources from top to bottom ‘to provide support to civil society’ appeared to be under administrative control. Valery Fadeyev, head of the Institute for Public Projecting, and Public Chamber founding member, serves as a good example as he not only administers state money given to civil society, but is also the organizer of the United Russia Party discussion club. 4.3.1.6 Inclusion of self-government in the state management vertical The municipal reform that got into full swing in the regions in January 2009 has made the municipal level much more dependent, in spite of its declared goals. As Cameron Ross has put it, ‘Putin’s local government reforms also need to be viewed as an integral component of the wider centralizing political agenda, and his assault on the principles and practices of federalism.’5 Putin’s new system of local self-government marks a victory for the proponents of the ‘statist concept’ of local selfgovernment over those who championed the ‘societal concept’, codified in Article 12 of the Russian Constitution. The new definition of local self-government as a form of ‘public power’ is, in reality, an abandonment of the key constitutional principle of the separation of local government from the state. Moreover, the adoption of the 2003 Law has led to the ‘governmentalization’ of local self-government, and paved the way for the full integration of local self-government into Putin’s ‘power vertical’ when the law was fully implemented

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in 2009. It also heralds the victory of ‘local government’ over ‘local self-government’. Mayors, especially those of regional centres, appeared to be one of the major elite group casualties, as about a dozen were ousted from the political scene or even put behind bars during the 2008–9 term. The latest political development makes elected mayors even more vulnerable as the new amendment gives city council deputies the right to dismiss them. The 2003 Law made provision for three basic schemes of local power organization, including one whereby the municipal head is elected indirectly by deputies among themselves and a ‘city-manager’ is hired. Although this originally ‘Soviet’ model, with a head elected by deputies, was more widespread in the countryside, with big cities adhering to the model of direct elections, the significant weakening of mayors and the understandable conflict between appointed governors and elected mayors is gradually leading to a switch to a system of city-managers in an increasing number of cases.6 The switch to a proportional system in local elections announced by President Medvedev in his 2009 State of the Nation speech implies putting mayors in the centralized United Russia vertical. Although rather more negative than positive on balance, the municipal reform has played a decidedly positive role in pushing for elections to municipal bodies everywhere and by attracting new managers.7 4.3.2 Who is running Russia’s regions? 4.3.2.1 The political geometry of centre-region relations The configuration of the power networks and their disposition vis-à-vis each other is of tremendous importance. Before 2000, the federal network confronted the regional ones with its wide base, while the regional networks confronted the federal one with their governors at the apex. It was the regional head who played the key role of a bridge in the hourglass – a node through which the federal network was connected with the regional one. Almost all contacts between federal and regional elites were moderated by a governor, who served as the main presenter of the regional elites’ interests. Now the pattern has changed radically with the federal network covering the regional ones, and growing into them. The power networks have interpenetrated each other, and many of the verticals from the centre to a region bypass a governor. What

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we now have is a rather unified centre-regional network, which to varying degrees has swallowed and digested the regional networks, which used to be autonomous. A governor no longer acts as a senior representative of the regional elite, representing their interests at the centre as he used to do in the past. Instead, s/he is now the representative of the centre, appointed to a specific region. In effect, s/he has been transformed into a senior federal appointee to a region. There has only been a single case of a governor who used to head another region in the past, namely Oleg Kozhemyako, the governor of the Amur oblast, who used to head the Koryak autonomous district and before that competed for the position of Primorsky Krai governor. An analogy can be drawn here between the new system of appointing governors and the old Soviet system of partially functioning Obkom secretarial appointments, as a large number of key regional officials working just below the level of governor consist of ‘condottieres’ who travel from one region to another.8 4.3.2.2 Governors: group portrait 2009 Fifty-one of the current 83 Russian governors can be regarded as politicians, 26 as officials and 6 as managers from the real economy (khozyaistvenniki). This proportion has shifted in recent years in favour of officials. For example, over half (11 persons) of the appointees for 2008–9 were officials, while the proportion of politicians has been little more than a quarter (4 persons). In the past, a large number of governors were siloviki, consisting of members of the armed forces and law enforcement. Only four of them remain in power.9 They are colonel-general Boris Gromov in the Moscow oblast, and three ‘natives’: former regional minister of the interior general Alexander Berdnikov in the Altai Republic, army colonel (now promoted to the rank of general) Yunus-Bek Yevkurov in Ingushetia and militia colonel Sergey Morozov in the Ul’yanovsk oblast. In addition, some other regional heads served as officers in the past, although they did not take up office directly after military service. Former army officers Vyacheslav Dudka (Tula) and Dmitry Dmitriyenko (Murmansk), militia officer Igor Slyunyayev (Kostroma) and military prosecutor Leonid Markelov (Komi) come under this heading. The President of Chechnya, Ramzan Kadyrov, is a special case as he attained the rank of general in the militia in 2009.

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There are 28 governors in the ‘pre-Putin conscription’, who came to office before Putin was elected in 2000, including eight who were in office in the early Yeltsin or even pre-Yeltsin years, who had headed regions in 1990–91. They are Bashkortostan and Tatarstan Presidents Murtaza Rakhimov (1990) and Mintimer Shajmiyev (1990), the governors of the Omsk (Leonid Polezhayev), Rostov (Vladimir Chub) and Tomsk (Victor Kress) oblasts, the mayor of Moscow, Yury Luzhkov (1992), the head of the Jewish Autonomous Oblast, Nikolay Volkov (1991), and the head of the Khanty-Mansi AO, Alexander Philipenko (1989). (By mid-2010 five of these had been replaced, namely Rakhimov, Shajmiyev, Chub, Volkov, Philipenko.) Former ‘Red governors’ like Nikolay Vinogradov (Vladimir), Nikolay Maksyuta10 (Volgograd), Aman Tuleyev (Kemerovo) and Petr Sumin (Chelyabinsk) constitute an important part of the remaining old-timers. They came onto the scene as Communist candidates who defeated ‘democrats’ in elections, and either withdrew from the CPRF long ago or, in the case of Maksyuta and Vinogradov, retained their membership. (By mid-2010 Maksyuta and Sumin had left office.) In Soviet times, the promotion of Communist leaders of large industrial regions to the CPSU Central Committee apparatus served to strengthen the clan system and the connections between the federal and regional elites. At the top of the federal government there are currently three officials who originated from the regional echelons of power: Sergey Sobyanin (Tyumen governor in 2001–5), Victor Khristenko (Chelyabinsk vice-governor in 1991–6) and Yury Trutnev (Perm governor in 2000–4). Although there are several former governors at the deputy ministerial level, their posts are more like sinecures than stepping stones in their career.11 At the same time, the number of former federal level bosses in governors’ offices has increased considerably.12 These include Alexander Misharin, Sverdlovsk (deputy minister of transportation, 1998–2002 and 2004–9); Dmitry Mezentsev, Irkutsk (first deputy speaker of the Federation Council, 2004–9, previously deputy chair of the state committee on media, 1996–9); Alexei Gordeyev, Voronezh (minister of agriculture, 1999–2009); Alexander Kozlov, Orel (deputy minister of agriculture, 2004–9, previously head of the department dealing with regions of the government apparatus, 1992–8, deputy head of the government’s apparatus, 2002–4); Dmitry Dmitriyenko, Murmansk (deputy head of the federal agency

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of sea and river transportation, 2006–8, deputy head of the federal fishery agency, 2008–9); Sergey Mitin, Novgorod (deputy minister of economics, 1998–2000, deputy minister of industry, science and technology, 2000–4, deputy minister of agriculture, 2004–7); Igor’ Slyunyayev, Kostroma (deputy minister of cooperation with CIS countries, 1998, deputy minister of transportation, 2000–4) and Alexander Karlin, Altai Krai (deputy minister of justice, 2000–4, head of the presidential staff department of state service, 2004–5). Stavropol governor Valery Gayevski is a special case. Being appointed from the position of deputy minister for regional development, where he worked for a couple of months, he used to work as the deputy presidential envoy to the Southern federal district from 2006–8, and was previously the deputy head of the Stavropol Krai government in 1996–2006. A new type of career trajectory is becoming increasingly common, namely appointment to governor via the State Duma or the Federation Council. Officially, it looks like a move towards a political career, although in reality it is similar to the custom in Soviet times of giving officials and business/industrial managers trial runs in the capital (just like the CPSU Central Committee inspectors) before appointing them to a region. This is the case as far as Nikolay Denin (Bryansk), Vyacheslav Shport (Khabarovsk) and Sergey Antuf’yev (Smolensk) are concerned. A trial run of a different kind also exists whereby before being appointed to the post of governor, a Varangian first becomes a representative of a region in the Federal Assembly, like Andrey Turchak (Pskov) and Dmitry Mezentsev (Irkutsk). Although the route taken by Kabarda-Balkaria leader Arsem Kanokov would appear to be similar, he actually gained admission to the Duma thanks to the LDPR ‘sponsors’ ticket. There is also a special category of businessmen-politicians such as Alexander Khloponin (Krasnoyarsk, 2002–10), Dmitry Zelenin (Tver’), Georgi Boos (Kaliningrad), Oleg Kozhemyako (Koryak autonomous okrug, 2005–7, Amur oblast, 2008–) and Arsen Kanokov (KabardaBalkaria, 2005–). The most recent practice is to appoint young technocrats from the business world after a kind of probation period just below the top level of the regional administration. Examples include Vladimir Yakushev (Tyumen, 2005–), Anatoly Brovko (Volgograd, 2010–) and Vyacheslav Gaizer (Komi, 2010–).

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A similar kind of trajectory involves cross-fertilization, whereby a vice-governor of one region is promoted to governor of another region. Moscow nurtured three such governors, namely Valery Shantsev (Nizhny Novgorod, 2005–), Georgi Boos (Kaliningrad, 2005–) and Mikhail Men’ (Ivanovo, 2005–), whereas Buryatia President, Vyacheslav Nagovitsyn (2007–), is from Tomsk. The governors’ role in the regions has been transformed as the Kremlin’s efforts to weaken the governors at the federal level and increase control over law enforcement has led to the loss of their dominant role. The restoration of a system of checks and balances at the regional level emerged in a number of regions as a side effect of this. The governors have been weakened both institutionally and personally, with a great many heavyweights being replaced such as Yegor Stroyev in February 2009 and Eduard Rossel in November 2009. In 2010 Moscow replaced two more heavyweights – the leaders of Tatarstan and Bashkortostan. 4.3.2.3 The appointment of governors The head of the Mari El Republic, Leonid Markelov, who was appointed by Medvedev on 29 December 2009 and was approved by parliament for a third term in office on New Year’s Eve 2010 was the twenty-third governor to be appointed by Medvedev and the last among the 83 regional leaders to be formally elected to office. The first full cycle of appointing governors to all the regions, which started in January 2005, is thus complete. The initial scheme of selecting and appointing candidates to governors’ offices, which gave the key role to presidential envoys in federal districts, was established by Putin’s presidential decree in late 2004. However, it wasn’t regulated rigorously enough. In many cases the timeframe was violated as some envoys were informed about candidates post-factum, with the result that none of their candidates were chosen. It should be noted, however, that there were no system failures in the sense that none of the 105 candidates for governor posts announced in 2005–9 were voted down by the regional deputies. In a few cases, there was urgent feedback of sorts on the part of the regional legislators firstly in 2005, when Nizhegorodskaya oblast deputies addressed the president, asking him not to appoint Gennady Khodyrev as governor, and later in 2008 when the Irkutsk assembly requested that governor Alexander Tishanin be replaced.

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A similar plea to the president was issued by Dagestan deputies from the republican parliament in November 2009, this time in support of the incumbent leader, publicly requesting additional consultation with them before the final choice was announced by President Medvedev. A few days later, under pressure from the Kremlin, they revised their position and concurred in advance to any candidate chosen by the president. With Medvedev’s accession to office, some innovations occurred in connection with the workings of the system of appointments. For instance, four regional heads were replaced in one fell swoop in February 2009 – in Voronezh, Orel, the Pskov oblast and the Nenets autonomous district. This was done, perhaps, in order to pre-empt the rising tide of moves by governors against the centre, which could have resulted in a kind of collective action with the Orel governor, Yegor Stroyev, former speaker of the Federation Council, taking the lead. It also ushered in some new faces, a new generation of cadres to replace the age-old regional leaders. Although the majority of newly appointed governors came from the ranks of the governmental bureaucracy, there were three brand-new appointees who sparked speculation about Medvedev’s new approach. They were Boris Ebzeyev, former Constitutional court justice appointed to the Karachay-Cherkess republic; Yunus Yevkurov, military colonel appointed to Ingushetia; and Nikita Belykh, the former semiopposition Union of Rightist forces leader appointed to the Kirov oblast. All three appointments took place in 2008 and nothing of a similar nature occurred in 2009. Another innovation was the new ‘party’ way of choosing candidates for appointment, introduced in 2009 on Medvedev’s initiative. It is no longer the envoys but the political parties who win in regional legislative elections who should nominate the candidates. The catch is, firstly, that there is a single political party these days which dominates in any elections – United Russia – and secondly, that it’s the UR federal leadership, not the regional one, that has the final word. Some experts see these changes as increasing the role of the parties, while others regard them as giving Putin – the UR chairman – an additional formal leverage to control the appointment of governors. In any event, the new system led to more publicity for the appointment process at all stages. A list of candidates started accumulating on Medvedev’s desk in early September 2009 when the new system of party nominations

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was introduced. During the last four months of 2009, United Russia gave the president the names of candidates for 13 governor positions. Of those, only five were appointed by the end of 2009. The incumbent Alexander Zhilkin was reappointed as the governor of Astrakhan, the incumbent Oleg Bogomolov kept his position as Kurgan governor and the incumbent Leonid Markelov was retained as the head of the Mari El Republic. Among the two new governors appointed to the Sverdlovsk and Volgograd oblasts was a governmental official who originated from the region and a local deputy governor who made his career in business. The backlog of appointments is bound to increase significantly, considering that the terms for one-third of all governors are set to expire in 2010 and that the current list – with the exception of Dagestan – does not include any particularly difficult cases. By the end of 2009, 51 candidates had been nominated for 15 regions with only 5 appointments – to Sverdlovsk, Astrakhan, Kurgan, the Volgograd oblasts and the Mari El Republic – already being made. The number of candidates on the regional lists varied from 3 to 5. In 10 cases, 3 candidates were nominated, and in 4 cases there were 4. In the case of Dagestan, 5 candidates appeared on the list. The incumbent leaders are ubiquitous (except for the tiny Jewish autonomous oblast) in order not to create instability during the three months that it takes the president to make his choice. Perhaps this will be different in the future, as in December 2009 the law was amended to reduce the time allocated. Incumbents were appointed in 3 regions out of 5 in November–December 2009. In addition to these, there were several types of candidates including (1) deputy governors or in some cases the chairs of regional governments (in 9 regions out of 15 with one finally being appointed – in the Volgograd oblast); (2) speakers of legislative assemblies (6 regions); (3) Federal Assembly deputies (5 regions); (4) federal government officials (4 regions including the Sverdlovsk oblast where one was appointed); (5) mayors (2 regions) and (6) university rectors (2 regions). Summing up the results of 2009 in an end-of-year interview, Dmitry Medvedev said I am not a supporter of reckless personnel rotations – this is just not right, not ethical with regard to persons, and even dangerous for the state. But at the same time the renewal should be real.

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New governors appointed during the last eighteen months comprise about one fifth of the gubernatorial corps. It doesn’t mean that they are free of shortcomings, however they are new people who are eager to get to work in new conditions. They should be given the opportunity to prove themselves. This personnel work is an ongoing process.13 Let’s look at how the system of appointments works in terms of numbers to ascertain whether any new elements have appeared. The variation in the number of appointments per year is attributable to two main factors: the expiration of governors’ terms in office and early appeals by governors to earn the president’s trust. The latter were mainly inspired by the Kremlin in the earlier stages and intensified once again in 2007 on the eve of the ‘transfer of power’. Table 4.1 shows that, at first, the Kremlin was eager to reappoint incumbent governors and when looking for replacements, candidates from a particular region were employed more often than the ‘Varangian model’ of appointing a person from outside the region without any connections to the local elite clans. However, the proportion of incumbents being reappointed has declined over time. This can be explained by two factors. Firstly, the initial aim was to make the new system work rather than to replace particular governors.14 Secondly, finding a Varangian appeared to be much easier than negotiating over a local candidate acceptable to the major

Table 4.1 Governors’ appointments in 2005–10 by years Year 2005 2006 2007 2008 2009 2005–9 2007–10 2005–10

Number of appointments 44 8 25 12 15 104 26 130

Incumbents/ newcomers 32/12 5/3 14/11 2/10 6/9 59/45 12/14 71/59

Incumbents, % 73 62.5 56 17 40 56.7 46.1 54.6

1

2

3

4

2 1 3 2 1 9 6 15

6 2 4 1 2 15 6 21

4 – 4 7 6 21 2 23

9% – 13% 60% 40% 20% 8% 17.6%

Note: 1: Number of representatives of top administrative elites among appointees; 2: number of other ‘regionals’; 3: number of ‘varangians’; 4: share of ‘varangians’.

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elite groups, not to mention the fact that it was easier to manage a Varangian than a local candidate with roots in a region. That’s why when choosing between loyalty, which by definition is stronger in the case of a Varangian, and efficiency, which should be stronger in the case of a homegrown candidate who is well connected regionally, the Kremlin increasingly opted for loyalty. One might add that in 2005 the sample could hardly be regarded as arbitrary – only those governors whose positions vis-à-vis the centre were strong enough were permitted to appeal for trust and were trusted in return. With the economic crisis looming, the Kremlin expanded the use of the Varangian model or extra-territorial approach to appointing governors, as it did earlier with regard to the ‘regional generals’ – the heads of key federal agencies in areas like the militia/police, prosecution and even chief federal inspectors. Loyalty to the centre in a time of crisis was considered to be much more important than connectedness and efficiency in dealing with the regional elites. Efficiency at the national level was interpreted as loyalty, and subordination was preferred to efficiency at the regional level. It is interesting to note that six out of seven Varangians appointed in 200915 have direct personal connections to Putin either due to their work in the federal government (4), or in the St. Petersburg mayor’s office (1), or by being a child of Putin’s closest colleague from St. Petersburg (1). It is widely held that Russia no longer has gubernatorial elections, but this simply isn’t true. They still exist, although only one voter, or perhaps two, are allowed to cast their votes, and the campaigning to win that vote can be intense. The most recent example concerns Eduard Rossel, former governor of the Sverdlovsk region, who spent three months before the ‘election’ in a frenzy trying to show his single constituent that he was influential, loyal and, at 72, still physically fit. But all of his efforts were ultimately in vain. In November, President Dmitry Medvedev replaced Rossel, who had headed the Sverdlovsk region since 1990, with Alexander Misharin, the former deputy transportation minister who had previously served as head of the Sverdlovsk Railway. Instead of public competition between parties, there is covert competition between influential groups when nominating a candidate. They include large state corporations, such as Rosneft’, Russian

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Technologies, Russian Railways and Rusnano. At the same time, the siloviki structures seem to be losing ground, with their representatives gradually disappearing from the gubernatorial ranks. In December 2009, Medvedev signed a law rendering the permitted timeframe for nominating gubernatorial candidates two to three times shorter. The president said he introduced the change to the rules because the procedure for confirming regional heads should be ‘faster, more understandable and should strengthen the government’s authority’. That sounds logical enough, except that the president has had no qualms about violating the deadlines that the administration has interpreted rather broadly. Now, only one month is permitted for ‘presenting an approved list’ of candidates, as if existing lists are not approved in advance by the presidential administration anyway. The new ‘party system’ of nominating governors only perpetuates the worst problems of the previous system of appointments — namely, the fear of strong competition for the post of governor from the regional political elite and an overreliance on representatives of state corporations. The list of backup candidates is also diminishing. The upshot of this is that not only are increasing numbers of St. Petersburg representatives of the Putin-Medvedev tandem being tipped for these jobs, but also their children and acquaintances. Medvedev is correct in his assertion that the present system of selecting gubernatorial candidates is ineffective, yet the solution does not lie in papering over the cracks in the system, but in changing the system altogether. According to a poll conducted by the Levada Center in June 2009,16 57 per cent of Russians support the return of direct elections for regional governors, while only 23 per cent oppose it. In addition, 40 per cent of respondents were in favour of returning single-mandate districts for State Duma elections. Does that mean that Russians have changed their mood as a result of the crisis? It would seem so, although not to a significant degree. By comparison, when people were surveyed to gauge their opinions of then-President Vladimir Putin’s new political programme after the 2004 terrorist attack in Beslan, 40 per cent of respondents were opposed to the cancelling of direct gubernatorial elections, while slightly more than 40 per cent were in favour. Later, people grew accustomed to the new arrangement and the number opposing the move decreased.

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What does all this mean for the ‘social contract ’ that many observers are now claiming has been cancelled? By coincidence, Putin came to power just as energy prices were beginning to rise. The influx of petrodollars enabled him to strengthen the centralization of the state and to create the illusion – first in the minds of the people and later among the rulers themselves – that the economic growth was proof of the correctness of the country’s course and the political system as a whole. It was clear what the people were getting out of the arrangement: much-valued order and stability and an increase in the standard of living that even outpaced the country’s economic growth. They also witnessed a return to the familiar paternalistic relationship with regard to state leaders and the impression that social justice had been restored for both small-time business owners and oligarchs alike. What did the Russian people lose in this deal? Free elections and democratic institutions? Perhaps. But their short experience of both only led to disillusionment with the process itself and with its results. From the people’s point of view, the social contract means that the country’s leaders have a free hand to resolve their own problems in return for providing citizens with an orderly life and a decent standard of living. And the people received all of this without having to actually give anything in return. They simply did not resist when the authorities took something away, such as the free election of governors. But as a rule these were things the people did not value highly in the first place. The latest Levada Center survey offers evidence of significant changes in the public’s consciousness – not radical changes, perhaps, but important nevertheless. The shift boils down to the growing realization in the public mind that the old social contract no longer operates and that the authorities are in no condition to fulfil their obligations. The results of the Levada Center survey look especially interesting against the backdrop of a survey measuring trust in regional and federal authorities that was conducted by the Kremlin-connected Public Opinion Foundation and ‘declassified’ in May 2009. It is only natural that citizens who are dissatisfied with the effectiveness of the authorities begin to ask themselves why those officials are ineffective. From there, it isn’t long before they begin challenging the foundation of that system – first in words and later in deeds.

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As the full cycle of replacing popularly elected governors with presidential appointees came to an end in 2010, it is now possible to evaluate the efficiency of the new system in terms of both the workings of its mechanisms and the results obtained. Although some recent improvements have made the system slightly more transparent and public, it remains pretty closed to the regional political elites, not to mention the ordinary citizens. Although the governors’ corps underwent an almost 50 per cent renewal over five years, this renewal had nothing to do with the initially proclaimed aim of drafting out semi-criminal governors and inefficient populists and improving management at the regional level. There were some elements of ‘cross-fertilization’ among regions as well as among corporations, but the balance of pros and cons as a result of the introduction of the new system is clearly negative. Not only is the system of gubernatorial appointments poor in terms of both procedure and results achieved, but it becomes even more so due to internal reasons connected with the depletion of personnel reserves in conditions of very limited public politics, and in the face of the growing risk of economic and political turbulence due to the ongoing economic crisis. 4.3.2.4 Presidential envoys and their role Presidential envoys to eight federal districts act as moderators between Moscow and the governors, serving as district-level heads of the presidential staff. If personnel reshuffling among the presidential staff itself was minimal during Medvedev’s first one and a half years in office, changes among envoys were rather significant. Two polpreds out of seven17 – Dmitry Kozak from the Southern district and Alexander Konovalov from Volga – were appointed to the government. Later, when Kozak was promoted to the position of deputy prime minister in charge of the Sochi Olympics, deputy polpred to the Urals Victor Basargin came to Moscow to replace him as minister for regional development. Before Konovalov’s promotion to the post of Minister of Justice, he was considered to be Medvedev’s only man among the envoys. The situation is not that different now with Nikolay Vinnichenko taking up the post in the Urals, a man who was in the same class as Medvedev at Leningrad University Law School. Now only one out of eight polpreds is at the centre – Georgy Poltavchenko, who has occupied this position since the beginning

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of 2000. The other seven districts have new polpreds, with two districts – Southern and Far Eastern – having experienced multiple replacements of envoys. The current envoy to the South, Vladimir Ustinov, a former Prosecutor General, is fifth in line, while the envoy to the Far East, Victor Ishayev, the long-serving Khabarovsk governor, is fourth. In April 2009, Viktor Ishayev became the first governor appointed as presidential envoy to a federal district. What was the logic behind the Kremlin’s decision to appoint Ishayev to this post in the Far East Federal District? There may, in fact, be more than one explanation. Sometimes officials are appointed as presidential envoys in an effort to resolve problems affecting the whole region, but more often this assignment is intended as an ‘honourable discharge’. The Far East is a tangled web of serious political and economic problems that have only deepened during the economic crisis. It is no coincidence that presidential envoys to that particular trouble spot have been switched with such frequency. Ishayev is not only a successful manager who has served as the regional head for almost two decades, but also heads the Association for Economic Cooperation of the Far East and Zabaikalsky Regions and is a member of the Academy of Sciences in economics. In addition, he developed an alternative government programme for the country’s economic development and has successfully lobbied for more attention for the Far East. It would seem that Ishayev has the necessary tools to help develop the Far East Federal District. What is more, Vladivostok is slated to host the Asia-Pacific Economic Cooperation summit in 2012, but preparations for the event lag far behind schedule. The region needs a leader who can provide strict supervision of Primorye’s political and economic elite. Who better to fulfil that role than a local leader with experience of the rough and tumble of the region’s competing groups? But there is a more compelling reason why the Kremlin appointed Ishayev to the presidential envoy post. In 2004, he headed a movement against the government’s plan for the monetization of benefits. That action greatly upset the Kremlin and became the deciding factor in the then President Putin’s decision – announced shortly after the Beslan hostage crisis ended on 3 September 2004 – to switch from the direct elections of governors to a system of appointing them

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from Moscow. But the Kremlin was unwilling and unable simply to remove such a powerful and popular governor from his post. A somewhat similar incident occurred in February 2009. The Khabarovsk parliamentary speaker was removed from his post for expressing an opinion to Moscow that was not in line with the Kremlin’s position. Immediately after the speaker lost his position, Ishayev took him on as the deputy chairman of his government. In moving Ishayev from the governor’s post to the presidential envoy spot in the same region, the Kremlin set a precedent and killed several birds with one stone. In effect, the Kremlin created a powerful and competent government lobbyist for the interests of the Far East, someone who was capable of preventing mistakes like the poorly made decision to raise duties on used cars imported from Japan. In addition, the Kremlin was able to apply pressure on Primorye with the goals of preparing for the APEC summit and preventing a situation like the mass protests in December 2009. On 19 January 2010 the Southern Federal District was divided into two parts and the new Federal District – North Caucasus – was created, which consists of 5 ethnic republics and Stavropol Krai. Krasnoyarsk governor Alexander Khloponin has been appointed as the presidential envoy. He was also appointed to the post of deputy prime minister. For the second time since the 2004 tragedy in Beslan, the Kremlin has undertaken strong political measures to end the violence in the North Caucasus. By choosing Khloponin, the Kremlin has opted for a business model over the siloviki model. It has decided that it would make sense to apply Khloponin’s Krasnoyarsk business model18 to another region badly in need of investment and efficient management. The biggest novelty in this appointment is that by combining the posts of presidential envoy and deputy prime minister, Khloponin is an envoy of the Putin-Medvedev tandem and answers to both leaders. This makes sense. Of all the regions, Prime Minister Vladimir Putin has always been most concerned about the Southern Federal District, with the Far East Federal District in second place. As a matter of record, the envoys of these two regions have been dropped and reappointed more frequently than in any other regions. There is no doubt that Khloponin is highly effective as a crisis manager. He has strong business experience and connections,

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understands the institutions needed for development and how to use them, and knows how to rely on a qualified team for support. But those skills alone are no guarantee of success in his new post. Although Khloponin has a strong track record in attracting large investment projects, ensuring the proper and transparent expenditure of funds and battling corruption, his expertise and personality do not match the previous presidential envoys to the region in dealing with the deeply rooted tensions and conflicts between various ethnic groups and clans, as well as extremism in the North Caucasus. As envoy to the North Caucasus Federal District, Khloponin faces a Herculean managerial task that is split between three levels: at the top, navigating between Putin, Medvedev, federal ministers and the Kremlin; at the bottom, handling the tricky relations with North Caucasus leaders; and in the middle, trying to bring his own team on board. There is a danger, however, that the interests of the various influential groups in both Moscow and the region are too much at odds – or in outright conflict – for Khloponin to cope with them effectively, no matter how much independent authority and power he is given. 4.3.2.5 Regional networks and cadre rotations The decrease in the autonomy and individuality of the regional political elite networks represents a major shift in recent years, with the latter becoming increasingly transformed into a mere projection of the federal power construct onto regional padding. This can give the wrong impression at first, however. The general uniformity is true for the majority of regions with the exception of Moscow and some national republics with their political machines. As in the past, real power in the regions is concentrated in the hands of five to ten people. However, if their influence has formerly been realized through informal institutions, status and hierarchy now figure much more prominently. Fewer places in the regional networks are now secured and more places are occupied ex officio. The role of senior representative of the regionally rooted political elite is increasingly being played by the speaker of a regional assembly or mayor of a regional capital. Governors and their teams, including those recruited from the ranks of business managers of companies who put the governors in office, are fulfilling the role of replacing the political elite.

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The centre’s efforts to renew the political elites on the ground have added to the natural development and generational shift taking place in the regions. Those who had been retained in the elites since Soviet times have all but gone. The generational shift in the business elites occurred even earlier, the main trend in this respect being the integration of regional business into national and international concerns, with the resulting replacement of former autonomous owners with managers, appointed from outside the region. Regional social-political monitoring by the Carnegie Moscow Center pinpointed some important changes which took place in the regions in 2008–9. In many regions the position of chair of the regional government was separated from the position of governor with the former gaining in influence. The role of the United Russia functionaries represented by the secretary of the UR regional executive committee and by the leader of the UR faction in a regional assembly (combined with the position of a speaker in many cases) has been enhanced. The prosecution office has increased its role and is now represented by two top officials instead of one, in that the head of the Investigative Committee has been joined by a prosecutor. Conversely, the role of the chief federal inspector has diminished, firstly because governors have replaced them in many cases as chief federal officials and, secondly, the rotation of chief federal inspectors is becoming more and more widespread with ‘Varangians’ from different regions being appointed to this position. The chairs of regional courts, who used to make their careers in a region and remain in office for many years, are also new subjects for rotation. What this implies is that the mechanism of horizontal rotation, which was widely used during Stalin’s time and later retained only within the FSB, has been reintroduced in the regions step by step. The two most important principles of the rotation mechanism are (1) the need to make a break before being appointed to the highest position in a region (either in another region or in Moscow); (2) automatic rotation after 4–5 years in office, viz. FSB–Ministry of Interior–Prosecution–Chief Federal Inspector–Chair of regional court–Governor. This sequence shows not only the expansion of rotation mechanisms, but also the proportion of ‘Varangians’ among regional generals in agencies that do not have roots in a region.

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4.4 A tale of two regions In order to illustrate some of the points discussed above and to demonstrate how the interaction between the federal and regional administrative elites works in practice, it is worth examining two instructive cases – those of the Irkutsk oblast and Bashkiria. The Siberian Irkutsk oblast is a national champion in terms of its gubernatorial headcount, as there have been five governors since 1991. The present incumbent, Dmitry Mezentsev, the third in the last two years, was appointed in June 2009 after his predecessor, Igor’ Yesipovsky, died in a helicopter crash after serving in office for exactly one year. The search for a governor for the region did not exactly run smoothly. Boris Govorin, who ran the region in 1997–2006, was born there. He started his career in ‘Irkutskenergo’, one of the key companies in the region, served for almost 15 years in the municipal administration, including the last five years as mayor of Irkutsk, and was backed in the 1997 gubernatorial elections by his predecessor, Yury Nozhikov, a charismatic leader whose background lay in constructing hydro-electric power stations. When the Kremlin decided to replace Govorin in 2006, the search for candidates soon hotted up. While the senator from the region, Valentin Mezhevich, was the preferred choice of one of the major Kremlin clans, another clan was on the lookout for a lessautonomous and influential candidate who would be more likely to side with the centre and ‘Gazprom’ in a conflict over the Kovykta gas deposits. At the end of the recruitment phase, Mezhevich was invited to the Kremlin presumably with the expectation of being offered the post by the president. President Putin appeared to be busy at the time and Mezhevich was offered tea in his reception office. Little did he know that while he was left sipping tea for more than an hour, another candidate had slipped in to see the president by a different door and was duly offered the post.19 The lucky candidate was the 39-year-old head of the EasternSiberian Railway, Alexander Tishanin, a supposedly distant relative of Putin’s long-time friend and colleague, Vladimir Yakunin, the head of Russian Railways. Tishanin, whose team had been assembled from condottieres and railway men, didn’t manage to strike the right balance between the major elite groups in the region, however,

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clashed sharply with the regional assembly and was forced to step down in 2008. After leaving the region, it came as no surprise when he was offered the position of vice president of Russian Railways. So the search for the new Irkutsk governor got underway again. On this occasion, the process was almost totally controlled by another of Putin’s friends, Sergey Chemezov, head of the ‘Rostekhnologii’ state company and head of the Irkutsk fellow countrymen association in Moscow. Igor’ Yesipovsky, a Duma deputy from the Far East and ‘Rostekhnologii’ employee was chosen this time. He appeared to be more efficient than his predecessor, establishing better connections with the regional elites, but his career was cut short in May 2009 when he was fatally injured in a helicopter crash while on a hunting trip. While the two previous Irkutsk governors were protégés of Putin’s friends and colleagues, the present incumbent, Dmitry Mezentsev, actually worked alongside Putin in the St Petersburg mayor’s office. For several years he had represented the Irkutsk oblast in the Federation Council, where he occupied the high position of deputy speaker. The second case concerns Bashkortostan, which is one of last regional strongholds. Its perennial leader, Murtaza Rakhimov, spent the first three decades of his career at Ufa oil refinery (1960–90), where he rose to director, while for the last two decades he has headed the republic, firstly as the Supreme Soviet chair (1990–3) and since 1993 as the president. Moscow tried to replace Rakhimov by intervening in the 2003 Bashkortostan presidential election. This wasn’t that easy bearing in mind that law enforcement generals, although being formally subordinated to Moscow, were in fact completely under Rakhimov’s control. In order to seize illegal copies of ballots at the local publishing house, FSB officers were dispatched from Moscow instead of locally. Rakhimov’s rivals, supported by federal clans, managed to get almost 50 per cent in the first round compared to Rakhimov’s 43 per cent. The republican prosecutor’s first deputy read the situation wrongly and publicly announced that it was the Bashkortostan presidential staff and their head, Rady Khabirov, who had personally ordered20 the printing of illegal ballots. Although the prosecutor tried to mitigate the situation by refuting what his subordinate had said, both were immediately forced to leave, and the prosecutor suffered a heart attack as a result. Rakhimov then went cap in hand to Putin after the first round and obtained a yarlyk or decree to stay

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in power in exchange for transferring a petrochemical complex to the federals. Rakhimov has been ostracized little by little, with federal offices being removed from his control one by one, along with major assets including first of all the petrochemical complex. In 2007–9 almost all the federal generals were replaced in Bashkortostan. The new chief federal inspector, Petr Kapishnikov, came from Orenburg, the Supreme Court chair from Rostov and the Arbitrage Court judge from Sverdlovsk. The long-time Minister of the Interior was replaced by a militia man from Karelia, while the former minister became a vice premier. However, not all the odds were stacked against Rakhimov and he was doing a good job in ‘domesticating’ the new Moscow appointees. Recent news reports emanating from the republic stated that the new chief federal inspector’s son’s trading company had won a profitable contract to process oil at Rakhimov’s refineries. The final stage in replacing Rakhimov took place during one week in mid-summer in which it was shown that the Kremlin was afraid of nationalistic youth which could perhaps be mobilized. The new Bashkirian president is Rustem Khamitov, a ‘Moscow Bashkirian’ – former Bashkortostan minister and chief federal inspector who left the republic in the early 1990s, later heading some federal agencies. Khamitov is an extremely balanced choice by all measures: ethnically he is a semi-Bashkir, semi-Tatar who has Russian wife, thus combining all three major ethnic groups in the republic. There is no direct evidence of his belonging to any major corporations or clans. It seems that he had been handpicked by Moscow some time ago, after it was decided to replace Rakhimov before his term was up last year. Rakhimov tried to resist by playing the nationalist card. But it is possible that he fought back a bit too hard, which only accelerated his departure. The mass media released compromising material against the Rakhimov clan, including Rakhimov’s son Ural, who lost control of Bashneft and fled to Austria. The game was over when Rakhimov met with President Medvedev, asked for an early resignation and received the highest state order in exchange.

4.5 Conclusions The Kremlin’s actions with regard to managing the regions are reactive and situational, although not as haphazard as they may appear at

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first glance. There is a certain method, and even a strategy, in the madness. The problem is that the strategy is more counter-negative than positive, with the Kremlin trying to prevent undesirable scenarios rather than realize desirable ones. The situation has changed drastically in the course of the last decade. The Kremlin has managed to break the autarky in the regions and restore a system of appointing high-ranking officials from Moscow, a practice which would have been unthinkable some time ago. The system is echeloned and works at the level just below that of governor, with Varangian governors cultivating teams in their regions. When it comes to running the regions, corporate networks are used principally to provide candidates for gubernatorial office, especially where ‘Varangians’ who didn’t have a connection to a region in the past are concerned. In this case, corporations can be relied on to form a team for a newly appointed governor and provide him with various resources including connections at the centre. Although it has its benefits (especially when compared to what was in place in the second half of the 1990s), the new system clearly has its drawbacks, too. Some of these have already become apparent, while others pose a potential threat. First, when implementing the new management schemes, the Kremlin has undermined self-government and self-organization. In order to block unwanted development (both for itself and for the system as a whole), the Kremlin has, in effect, quashed development on the ground – throwing the baby out with the bathwater. Second, the new management system constructed by the Kremlin may well be effective in times of stability, at least in the short term, but not in a crisis. A crisis throws an appointed governor into a situation where manageability is more important than connectedness, and where fast decisions should be made and realized, which makes his connections to the regional elites of greater significance than any strong connections at the centre. In making the governors increasingly dependent on the centre, the Kremlin has succeeded in incorporating power steering in the steering wheel, but the connection between the steering wheel and the road wheels has weakened in the process. In conditions of extreme weakening of the regional representation in the Federation Council this not

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only increases the risk of malfunction when transferring a signal from top to bottom, but also, and especially, when transferring a signal from the bottom up.

Notes 1. The term korenization or korenizatsiya was initially used to describe the early Soviet nationalities policy of promoting representatives of titular nations into local government, management, and officialdom in the corresponding national entities. The term derives from the Russian (‘root population’) referring to indigenous nationals and is used here in the broader – regional but not necessarily ethnic – sense. 2. For example, N. Petrov and D. Slider (2010). ‘The Regions Under Putin and After’; ‘Overmanaged Democracy in Russia: Governance Implications of Hybrid Regimes’. CEIP working paper (Co-authored with Maria Lipman and Henry Hale), (Washington, DC), p. 25. 3. Varangians is a term applied to newcomers from outside the region who haven’t been connected to the region in the past. It’s similar to American carpet-baggers. 4. http://profkomanda.edinros.ru/ Accessed on 5 December 2010 5. C. Ross (2009). Local Politics and Democratization in Russia. Routledge, London and New York, p. 200. 6. According to Vladimir Gel’man and Tomila Lankina, the number of regional centres with city-managers instead of directly elected mayors had doubled by 2008 (from 10 towns in 2003 to 24). V. Gel’man and T. Lankina (2008). ‘Authoritarian Versus Democratic Diffusion: Explaining Institutional Choices in Russia’s Local Government’, Post-Soviet Affairs, vol. 24, no. 1, pp. 40–62. Their number now seems to be much greater with the biggest cities like Nizhny Novgorod, Perm and Chelyabinsk, along with Ul’yanovsk, Penza and Vladimir being excluded from direct mayoral elections at the end of 2009/beginning of 2010. 7. The 2003 Law ‘On the General Principles of Organizing Local SelfGovernment in the Russian Federation’ led to the municipalities doubling in number – from 11,957 to 24,208. The first major round of elections to these new municipalities took place during the period 2004–5 and by December 2005, 198,815 deputies and 13,655 heads of local administrations had been duly elected. L. F. Dem’yanchenko (ed.) (2006). ‘Reforma Mestnogo Samoupravleniya v Rossiyskoy Federatsii: Itogi Munitsipalnykh Vyborov v 2004–2005 godakh’, Vestnik Tesntralnoy Izbiratel’noy Komissii Rossiiskoy Federatsii, vol. 2, no. 193, p. 11. 8. G. Derlugian (2009). ‘Stabilization: Political System in Search of Dynamism?’. The Institute of Public Projecting first annual report ‘Evaluation of Russia’s Political System: Current State and Prospects in 2008–early 2009’. http://www.inop.ru/page529/page484/ Accessed on 5 December 2010

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9. Although at the beginning of Putin’s presidency, the Kremlin went out of its way to promote generals to governor positions, including FSB chiefs like Vladimir Kulakov in Voronezh, Victor Maslov in Smolensk and Murat Zyazikov in Ingushetia, and militia chiefs like Alu Alkhanov in Chechnya, and army generals like Vladimir Shamanov in Ul’yanovsk and Georgy Shpak in Ryazan’, later, in the face of their poor efficiency, the Kremlin became dissatisfied, replaced a number of them and hasn’t appointed any new ones since. 10. Left office on 12 January 2010. 11. Alu Alkhanov, former President of Chechnya (2004–7), is now deputy minister of justice, while Alexander Chernogorov, former Stavropol governor (1996–2008), is deputy minister of agriculture. 12. It should be noted that the migration of federal officials to the regions had taken place in the past as well. For example, Nikolay Fedorov, Chuvashia’s president since 1994, used to be the first Russian justice minister (1991–3); Boris Gromov, Moscow region governor since 2000, used to be USSR first deputy Interior Minister (1990–1) and the Russian deputy minister of defence (1992–5); Alexei Chernyshov, Orenburg governor since 1999, used to be deputy minister of agriculture (1993–4) and Valentina Matviyenko, St. Petersburg governor since 2003, used to be deputy prime minister (1998–2003). 13. http://www.kremlin.ru/transcripts/6450. Accessed on 5 December 2010 14. It is important to note that when the new system of gubernatorial appointments was announced by the Kremlin in September 2004, it didn’t give rise to massive opposition from the governors and was even welcomed by many due to the fact that, first, many of them were coming to the end of their third term, which was considered to be the last in accordance with the then legislation; and, second, sensing the widening gap between loyalty to the Kremlin and the need to seek the necessary popular support to be re-elected, they deemed it easier to seek the Kremlin’s support alone. 15. If Alexander Misharin is added, who, although originating from the Sverdlovsk region where he was appointed governor, has spent the last decade in the federal government, apart from a break during 2002–4 when he served as head of the Sverdlovsk Railway. 16. http://www.levada.ru/press/2009062604.html Accessed on 5 December 2010 17. Seven federal districts were established by Putin in 2000 before the new North Caucasus district was separated from the Southern one in January 2010. 18. The Krasnoyarsk region is renowned for its successful leadership under Khloponin. In recent years, the government in the Krasnoyarsk region has become a training ground for the export of effective managers. A former head of the Krasnoyarsk government, Alexander Novak, serves as a deputy to Finance Minister Alexei Kudrin, and is charged with supervising major federal programmes. Former Deputy Governor Anatoly

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Tikhonov became the first deputy chairman of Vneshekonombank responsible for major investment projects, and Deputy Governor Sergei Sokol was once sent to strengthen the Irkutsk administration and was a candidate for a gubernatorial post in a number of regions. 19. A story I’ve heard from different sources both in Irkutsk and Moscow. 20. Rady Khabirov, the former chief of staff to Bashkortostan President Murtaza Rakhimov, was fired in July 2008 just before he was supposed to be appointed to the presidential administration in Moscow, with responsibility for overseeing the regions. The formal reason stemmed from allegations of corruption, but it was really as a result of a power struggle between the Bashkortostan republic and Moscow. The real reason was connected with Rakhimov’s concern that after a short probation period and training session in the Kremlin, his former subordinate could easily replace him in the office of Bashkortostan president. Khabirov, who headed the United Russia ticket in the December 2007 elections and brought in 90 per cent of the vote for the party, has been accused of putting pressure on the republic’s election commission and falsifying election results for the benefit of, strangely enough, the Communist Party. Rakhimov used his political muscle to have Khabirov investigated on corruption charges and Khabirov was duly expelled from the United Russia Party. The struggle between Rakhimov and the Kremlin over Khabirov continued for several months before Khabirov emerged as victor. He is now a deputy to Kremlin first deputy chief of staff Vladislav Surkov. However, his reputation took a battering.

5 Networks, Cronies and Business Plans: Business–State Relations in Russia Philip Hanson

If the state says we must give up our companies, we will give them up. I do not separate myself from the state. (Oleg Deripaska, main owner of the world’s largest aluminium company) What difference does it make whether something isstate property or private property? (Igor Sechin, deputy prime minister of Russia) You might think that getting into bed with the Kremlin was like playing cards with the devil, but Russia’s oligarchs have long ago learnt how to beat the devil at his own game. (Yulia Latynina, writer and commentator.)1 My aim in this chapter is to characterize more precisely the relations between the central state and big business in Russia. The questions addressed are: is the central Russian state a unitary actor in its dealings with business, or is the notion of rival ‘clans’ or networks closer to the mark? Have people in the state apparatus been seeking to place more assets in state ownership in general or to ensure that trusted magnates will control assets in the interests of particular groups of politicians, or is there some mix of these objectives across sectors and across factions? 113

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To put the state of affairs in Russia into perspective, I will begin by setting out the liberal ideal of anonymous dealings between the state and particular firms, and its severely limited applicability – in any country. This will be followed by a brief review of claims that highlevel politics is entwined in Russia with the personal enrichment of senior political figures. After that, a number of Russian case histories will be reviewed. They include the failure of the Gazprom-Rosneft’ merger plan; the removal of Russneft from Mikhail Gutseriev; the rise of Rostekhnologii; the ‘Russian BHP Billiton’ proposal, as it came to be known (see below); and the management of anti-crisis measures in late 2008 and early 2009. The conclusions that follow are nothing more than plausible inferences from what is routinely disparaged as ‘anecdotal evidence’. They are not tested hypotheses.

5.1 State and business: the impossible liberal ideal The liberal ideal is that the state should be the setter of a limited number of general rules, equally applicable to all businesses. Its agencies should enforce those rules evenly across all firms, whether the rules are to do with weights and measures, minimum wages or the mis-selling of insurance policies. When the state purchases goods and services from private suppliers, it should do so in an open way, allowing all possible suppliers to compete – for example, through public tendering. This ideal is consistent with the belief that competition is, generally speaking, preferable to monopoly and that the market allocation of resources generally works better than allocation by the state. The liberal does not trust any detailed arrangements made between state officials and particular entrepreneurs. One does not have to be a radical libertarian to see that there is a lot to be said for this set of desiderata. But one would have to be a long-term inmate of an ivory tower not to notice that reality always falls a long way short of the ideal. Many lines of business are dominated by a few large firms – auditing, aircraft production and oil, for example. If a government department has to deal, as a purchaser or a regulator, with such an industry, the officials in that department can hardly avoid getting to know senior executives in the industry concerned. The rules of transparency, open tendering and the like go some way towards keeping access

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and competition open. But many of the business–state dealings involved concern long-term contracts to provide, say, IT systems for a national health service, or to build and perhaps then manage a hospital, or to run a train service over a state-controlled rail network. If, as sometimes happens, agreed targets are not met, or there are cost overruns, negotiations proceed between officials and a particular firm. A close and long-lasting relationship develops. In the UK, under the Private Finance Initiative, even in the absence of outright corruption, this often produces dubious results. The private-sector executives regularly run rings around the officials, and often succeed in passing the risks and liabilities de facto to the taxpayer.2 In assessing networks, clans and corrupt dealings between business and the state in Russia, therefore, we should not forget the reality of relations between the state and business in developed Western countries. It is far from the liberal ideal. Established personal links between officials and businesspeople, with the potential for both avoidable inefficiency and corruption, exist everywhere. To underline the point, let’s consider the January 2009 UK government decision to approve the construction of a third runway at London’s Heathrow Airport. The government is very close to BAA [the airport operating company] and BA [the airline], the principal beneficiaries of a Heathrow expansion. Although both firms were privatized in the 1980s (and BAA is Spanish-owned), they are still quaintly regarded in Whitehall as ‘national champions’. The bond between BAA and the Department for Transport is so close that it is sometimes hard to see where one ends and the other begins. When the DfT wanted to show that a much bigger Heathrow would not be in breach of European pollution rules, it asked BAA to supply much of the data. The government’s own Environment Agency has expressed concern over the way in which the favourable forecasts were arrived at. (The Economist, 17 January 2009: 29). The networks that link business and state officials are a human, not an especially Russian, phenomenon. The tycoon who cultivates politicians and high officials is a worldwide phenomenon. Our conjectures about Russia are not about whether there is cronyism in dealings between the state and the world of big business. Of course there is.

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More to the point is the extent to which Russian business–state dealings are marked by outright corruption, and by struggles for asset control between competing groups of officials rather than being guided by some coherent strategy deemed to be in the public interest. With this in mind, the following sections will review a number of developments in Russia in recent years.

5.2 Accusations of corruption on the part of leading politicians and officials Holders of public office – in any country – might enrich themselves by syphoning wealth out of publicly owned companies or by abusing their position to obtain funds from, or stakes in, private companies. Accusations of both sorts of corruption by holders of high office have been made in Russia in recent times. Georgii Satarov of Indem put one very widely held view rather clearly: ‘Before 2003, officials took a cut of the profits. After Yukos, they started taking the firms themselves’.3 In December 2005, Andrei Illarionov described borrowing by state companies to buy private companies as ‘the scam of the year’. He went on to call initial public offerings (IPOs) of shares by Russian state-controlled companies the ‘anti-idea of the year’.4 He was referring in particular to plans for the Rosneft’ IPO that came later – in 2006 – following Rosneft’s acquisition of most of Yukos. The implication was clear: the might of the state, plus money borrowed from abroad, was used to acquire an asset. The vehicle for that acquisition, Rosneft’, is not wholly state-owned; therefore those who controlled it could sell shares and cash out – collecting at least some of the proceeds for themselves. Similar concerns about rent-seeking through state-controlled entities underlie questions raised in 2006–8 about the batch of state corporations (goskorporatsii) created in 2007, and about the conglomerate Rostekhnologii in particular. These holding companies can receive budget funds but are not subject to the budget code. Nor are they subject to bankruptcy legislation, and they can sell assets without attracting any more than standard corporate profits tax. The Ministry of Finance reportedly sees these holding companies as channels for siphoning off budget funds. Rostekhnologii, in a presidential edict of 14 July 2008, was given control of at least 426 enterprises.

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Corrupt relations between office-holders and private business are frequently said to be prevalent in Russia. With a few exceptions, these assertions are hard to document. Before considering one of those exceptions, however, we should take stock of some institutional arrangements that provide the setting. The concentrated ownership characteristic of most Russian big-business groups facilitates close, informal relations between tycoons and officials. A typical situation in developed countries is that the identifiable boss of a big company is the Chief Executive Officer, the company has widely dispersed ownership and the CEO owns only a minute fraction of its equity. That kind of ‘boss’ cannot convincingly pledge company assets to political leaders on behalf of the shareholders. A businessman who owns 55, 70 or 80 per cent of ‘his’ company, can.5 The opacity of ownership of many (not all) Russian companies also helps to blur the distinction between business and politics. This includes companies controlled from Russia but registered offshore. The Reiman case is one example of high-level corruption that has been documented. Leonid Reiman was for several years Minister of Telecommunications in the Russian government. While he held that post, a Zurich commercial tribunal concluded that an unnamed witness who looked very like Reiman was the sole beneficiary owner of the Bermuda-based IPOC International Growth Fund; and that IPOC was used to launder funds that Reiman had obtained through ‘abuse of [his] official powers’. Reiman had denied any connection with IPOC.6 He did not lose his post when the Zurich finding was made public. When Putin stepped down from the presidency, Reiman did lose his job – but only to move across to the Kremlin as an advisor to President Medvedev. The new president, around the time he assumed office, frequently spoke of his intention to combat corruption. Allegations about the hidden wealth of leading Russian politicians abound. Such allegations were often made about Leonid Reiman. Were it not for the findings of the Zurich tribunal, they would remain mere allegations to this day. What can usefully be said about allegations that have not been tested in court? One thing that can be said is that those who make such allegations are rarely sued for libel. The most conspicuous example is the assertion by Stanislav Belkovskii that Vladimir Putin had in late 2007 a concealed personal fortune of some $40 billion, based on indirect holdings of 4–5 per cent of Gazprom, 37 per cent of Surgutneftegaz

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and 75 per cent of Russia’s largest port oil trader, Gunvor (Belkovskii interview in The Guardian [London], 21 December 2007). Some background to these allegations is set out at length in a book published in Ekaterinburg in 2006 by Belkovskii and Golyshev.7 But the book, for all its length, lacks clear and conclusive evidence. The little that can be verified about the ownership of Gunvor and Surgut can be set out much more briefly.8 Gunvor is owned by a Dutch company, which in turn is owned by a company registered in Cyprus, and that belongs to a ‘closed box’ business registered in the British Virgin Islands. Surgutneftegaz stopped reporting its results under Generally Accepted Accounting Principles (GAAP) in 2003 – which enabled it to conceal ownership information.9

5.3 The growing involvement of politicians in business It has been said that Russia is run by those who own it. In 1997 that would have been taken to mean that the tycoons were in charge of policy. In recent times it has meant that top politicians own, secretly, major assets. I suggest that a more nuanced, and therefore less striking, formulation would be closer to the truth, namely that a large part of Russia’s wealth is controlled by an alliance or alliances of leading political figures and what we might call overt tycoons. The role of such alliances looks especially interesting in the case of the oil industry. Most hydrocarbon-exporting nations, from Mexico to Norway, have established state-controlled national oil companies – usually as a state monopoly. Russia, starting in 1992 from an initial condition of pervasive state ownership of everything, moved rapidly to privatize a great deal of the economy. This included the oil industry, but not the gas industry. From the arrests of Platon Lebedev and Mikhail Khodorkovskii in 2003 through to the slide into a state takeover of Yukos, beginning in late 2004, it began to look as though Russia, too, would shift to overall state control of the industry, perhaps by a single state firm, conforming to the general pattern of oil-exporting countries. But it has not. The rise of state ownership of Russian oil-industry assets since 2003 has been significant, but limited. The share of state-controlled companies in Russian oil production in 2003 was about 24 per cent; in 2007 it was just under 40 per cent.10 It is by no means clear that the Russian state will continue this development to the point of

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total, or near-total, nationalization of the industry. If that were the policy, would we not have seen more movement in that direction by now? It may well be that in many oil-exporting countries the assets of the major international oil companies were nationalized because they were foreign, not because they were private. This was not the situation in Russia in 2003. Most of the industry was owned by Russian tycoons. Perhaps the ruling elite can secure its objectives by alliances with ‘trusted’ (doverennye) private businesspeople as well as, or better than, it could by outright ownership. All that was needed was to remove from the field of play those tycoons who were not ‘trusted’ – notably Khodorkovskii.11 That would send a message to the rest. My conjecture is that alliances of high officials and private businesspeople operate in Russia primarily in the natural-resource and high-tech sectors. I suggest that the control is exercised by separate alliances that are sometimes in conflict with one another. The objectives of these alliances may be many and varied, but personal enrichment and continuation in high office are probably among the leading sources of motivation. It is to circumstantial evidence of this that the next section is devoted.

5.4 Rent-seeking by public-private partnerships 5.4.1 Gazprom and Rosneft’: the merger that wasn’t In September 2004, President Putin publicly approved plans to merge the two leading state-controlled hydrocarbons companies, Gazprom and Rosneft’.12 Gazprom had, and still has, a near-monopoly of natural gas production in Russia (about 85 per cent) and a complete monopoly of gas storage and gas export pipelines. Its chief executive was, and still is, Aleksei Miller, a Putin appointee. The chairman of the Gazprom board was Dmitrii Medvedev, who was at that time also head of the Presidential Administration. The chair of the Rosneft’ board was Igor Sechin, who at that time was also a deputy head of the Presidential Administration. Rosneft’ was a leading Russian oil company but not, at that time, the largest. The state’s attack on the Yukos oil company, following on from the attack on its chief stakeholder, Mikhail Khodorkovskii, was underway but had not at that point brought any Yukos assets into either Gazprom’s or Rosneft’s hands.

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Yukos assets were obtained by the state via an administrative pincer movement: the Federal Tax Service claimed large amounts of back taxes due, and the courts froze Yukos bank accounts. The first substantial result was the enforced selling-off of the company’s main production asset, Yuganskneftegaz. It had been quite widely expected that Gazprom, by far the richest of the state oil and gas companies, would buy Yugansk. However, legal action in the West forced the banks that would have financed Gazprom’s purchase to withdraw from the loan. Having seizeable assets abroad, Gazprom would have faced possible legal risks even if it had found alternative sources of finance. In the event, there was only one bidder, a shell company unknown to the business world, called Baikalfinansgrup.13 This turned out to be acting as a front company, not for Gazprom but for Rosneft’. The acquisition beefed up Rosneft’ and is understood in the industry to have blocked the merger.14 The simplest and most plausible explanation for this action – the devising of which is generally ascribed to Sechin – is rivalry between Sechin and Medvedev.15 Whether that rivalry was over the control of assets for personal gain or the control of assets to support a particular political ‘clan’ is an open question. 5.4.2 Russneft: a contested asset The fate of Russneft, a small-medium independent oil company accounting for about 3 per cent of Russian oil production, is at the time of writing something of a mystery. In 2007 it was subjected to the usual battery of administrative pressures (back-tax claims, pollution charges, threats to withdraw licences). Its main owner, Mikhail Gutseriev, was forced to sell the business and move – as losing Russian tycoons do – to London. He had reached an agreement to sell Russneft to Oleg Deripaska’s business group, Basic Element. Through 2009 the completion of the sale of the company to Deripaska was held up by the absence of approval for the transaction by the Federal Anti-Monopoly Service (FAS) – a record delay in the history of the FAS. Deripaska, in dire straits with debts of about $25bn, was reported to be trying to sell Russneft; at that time Gazprom Neft, not Rosneft’ (see below), was rumoured to be the likely buyer.16 In early December 2008 the Russneft licence to develop three fields in the Tomsk region was withdrawn. Then its 50 per cent stake in the Zapadno-Malykovskoe field was frozen during the hearing of a

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suit by a Rosneft’ subsidiary. The commentator Stanislav Belkovskii, mentioned above for his claims about Putin’s alleged secret wealth, had asserted in August 2007 that the battle over the company was between Deripaska and Igor Sechin.17 In late 2009 reports circulated that Gutseriev would return to Russia from London. Some charges against him were dropped. Then remaining charges of ‘unlawful entrepreneurship’ ceased to have effect because the ‘offence’ was de-criminalized (Anastasiya Kornya, Vedomosti, 23 April 2010). The sale of Russneft to Oleg Deripaska was never completed. On 23 April 2010 Gutseriev, presumably having earlier reimbursed Deripaska for the sum handed over ahead of completion of the sale, sold 49 per cent of the company to Sistema. He then returned to Russia, but initially to the North Caucasus; he was reportedly expected to help stabilize Ingushetia by investing in it (Irina Reznik, Vedomosti, 10 May 2010). In late June 2010, having once again taken possession of Russneft and sold 49 per cent of it neither to Gazprom nor to Rosneft’ but to Sistema, Gutseriev was elected president of Russneft at the shareholders’ meeting (RIA-Novosti, 28 June 2010). Some background helps in interpreting this case – or, rather, in narrowing down the number of credible interpretations. Mikhail Gutseriev trained as a petroleum engineer but initially worked in local industry in Grozny, Chechnya, and then in the late 1980s set up one of the early cooperative banks and a Russo-Italian furniture-making joint venture. He became a Duma deputy in 1995, and a deputy speaker of the Duma, in which capacity he claims to have played a role in negotiating the end of the first Chechen War. He returned to business, of a very state-directed sort, in 2000, when he left the Duma and became president of Slavneft.18 It seems likely that his leaving Slavneft and setting up Russneft was associated with some falling-out with one or more leading officials. Alternatively or additionally, Russneft’s rapid development, including some acquisitions or attempted acquisitions of Yukos assets, made Gutseriev enemies in high places. In any event, if he had a protector among senior political figures, that protector did not prevail. Gennadii Seleznev, a former Speaker of the Duma, said: ‘This was a battle, not against Gutseriev, but for his asset. I wouldn’t rule it out happening today to Deripaska and tomorrow to Rosneft’.’19 The fact that a Russian political insider offers an assessment of how and why things are done in his country is no guarantee of the

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truth of that assessment. But Seleznev’s comments must have been framed in terms that made sense to a Russian audience. He would hardly have referred only to some fantasy world that well-informed Russian readers and listeners would not recognize. If the battle for Russneft was between Sechin and Deripaska, neither combatant enjoyed a walkover. The long delay in Deripaska’s assuming control – already a long delay before Russian tycoons began to receive margin calls and while finance was not yet an issue – suggests that the contenders were evenly matched. But if those contenders were who the Russian pundits said they were – Sechin and Deripaska – one was a high official and the other a private businessman. This suggests that Deripaska had one or more political heavyweights on his side.20 He probably did have. In 2007 Oleg Deripaska declared that he would be happy to give up his business and his fortune to the state if they were required, saying ‘I do not separate myself from the state’.21 In normal countries, tycoons do not say things like that. At any rate, normal tycoons don’t. In late December 2008, in a meeting with ‘oligarchs’ on anti-crisis measures, Deripaska’s then-presumed rival for Russneft, deputy prime minister Igor Sechin, reportedly asked, ‘What difference does it make whether something is state property or private?’22 The anonymous author of the Argumenty nedeli report that quoted this treated it as a hint that Sechin was aiming for more state takeovers. Perhaps that is the correct interpretation, but the intention could equally have been to convey a rather different message: whoever the formal owner of a major asset happens to be, we, the authorities, will be in charge. One conspicuous absentee from the meeting was Deripaska.23

5.5 State corporations, especially Rostekhnologii In 2006–8 six state holding companies were created under controversial legislation. They were: Olimpstroi, responsible for construction for the Sochi Winter Olympics; the Housing and Municipal Infrastructure Development Fund, responsible for major repair and maintenance of the housing stock and housing utilities; Rosatom, responsible for both civilian and military nuclear development; Rosnanotekh, responsible for the development of nanotechnology, headed by Anatolii Chubais; the Development Bank (VEB with a revised mission); and Rostekhnologii (henceforth Rostekh), responsible for production

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and foreign trade in a wide range of mostly military and dual-use equipment and materials. Criticism of the new state corporations came, in 2007–8, mainly from the Ministry of Finance (MinFin) and the Federal Anti-monopoly Service (FAS), with others joining in over Rostekh. The concern voiced by MinFin in particular was to do with financial responsibility and fiscal revenue. The companies are subject neither to the budget code nor to bankruptcy legislation, but they receive budgetary funds. The fear was that they would be a drain on the budget. The FAS view was that VEB and Rostekh did not have well-defined functions. They feared that Rostekh, in particular, would exercise control over previously competing enterprises and thereby damage competition. Behind much of the discussion lay the fear that at least some of these new entities would be feeding-troughs for corrupt officials.24 In March 2009 fundamental criticism came from another quarter: a presidential council set up to codify civil legislation recommended to President Medvedev that the status of the goskorporatsii should be revised; the special legislation establishing them should be scrapped and they should be re-established, in some cases as commercial entities and in others as organs of state power, instead of the peculiar mix of the two statuses with which they were at present endowed.25 The implementation of that proposal would be evidence that Medvedev’s speeches about legal reform had some real content. Rostekh has excited the most media comment by far. The company is headed by Sergei Chemezov, a former special services officer who served in Dresden as a trade representative, reportedly living in the same building as Putin. His subsequent career has apparently been a matter of moving up with, and under the patronage of, Vladimir Putin.26 Medvedev, as Putin’s successor, signed a presidential edict (ukaz) posted on 14 July 2008, confirming the allocation of either 426 or 435 enterprises (reports vary) to Rostekh. Chemezov’s original shopping list was said to be about 600 companies, but most analysts consider the outcome to be, nonetheless, a victory for him. The formal description of Rostekh is a ‘state corporation for assisting the development, production and export of high-technology industrial output’. The Rostekh estate is an extraordinary affair. Many of the enterprises coming under the Rostekh umbrella are majority-privately-owned; the state holding company has formally taken over the state stake in

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those companies. Others are majority-state-owned; 180 are wholly state-owned federal state unitary enterprises (FGUPs), which have yet to be turned into corporations. Chemezov’s empire includes the car-maker AvtoVAZ, the truck-maker KamAZ, and the world’s largest titanium producer, VSMPO-Avisma, several airlines (in a joint venture with Airunion) and two spas, as well as a large number of defencerelated research and development institutes, design bureaux and plants. Rostekh, moreover, can buy and sell assets and – apparently – retain the proceeds over and above normal corporate taxation. One commentator has questioned whether Rostekh’s powers are in conformity with the law on privatization.27 Finance minister Aleksei Kudrin reportedly suspected that Rostekh would make off with what should be budgetary funds. The battle-lines over the general idea of these state holding companies have been straightforwardly liberals versus statists. The battle-lines over Rostekh have been more complicated. The minister for economic development, Elvira Nabiullina, opposed the takeover of private firms as a matter of principle. So did her predecessor, German Gref. She is, however, listed as a member of Rostekh’s supervisory board, over which she may possibly exert some liberal influence. Opposition reportedly also came from Sergei Ivanov, whose track record is that of a statist, while supporters of Chemezov’s grand plan reportedly included Igor Shuvalov, usually considered to be a liberal, at any rate by comparison with other members of the policy-making elite. Evidently, it was not only the market versus the state that was at issue in the setting-up of the Rostekh empire. Personal and perhaps group rivalries were also involved, and they seem to have cut across the doctrinal divide. Whatever, exactly, the disputes were, the negotiating process lasted, from the signing of the law on Rostekh to the official confirmation of its list of constituent enterprises, more than seven months (late November 2007 to mid-July 2008). Rostekh is based on, and now incorporates, Rosoboroneksport (ROE). It was the latter company which, under Chemezov, built up much of the present Rostekh empire before Rostekh itself was formally established. Its responsibilities include the import and export of military and dual-use items, but do not include the supply of hardware to the Russian military. Rostekh participates in, but does not control, the latter. In 2007, ROE sought control of the Russian military hardware supply but failed to procure it.

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Even with this qualification, Rostekh’s power and reach are great. For example, its predecessor organization, ROE, acquired a controlling stake in the titanium producer VSMPO-Avisma against the wishes of its previous, private owners, and did so after the deployment of the sort of administrative pressure that the Russian state has used against Yukos, Shell, TNK-BP and Russneft.28 With that sort of political muscle at its disposal, Rostekh was destined to be a major influence in the Russian economy. Clearly, Rostekh and those who support its overall design can be very broadly classified as siloviki – people with a security services or military background and statist views. Chemezov is reported to believe that ‘the state should supervise key branches of the economy and the role of foreigners [in those branches] should be limited’, though not excluded altogether.29 He is clearly linked with Putin. On the other hand, Putin’s role as – to use Richard Sakwa’s phrase – chief faction manager means that many people of diverse views and allegiances have important links with him. Perhaps more informative is the circumstantial evidence of Chemezov’s close association with Sechin. In particular, at the late 2008 meeting with tycoons (from which Deripaska was absent), Sechin reportedly had one-to-one conversations with the businesspeople present and then left in company with Chemezov.30 Chemezov’s state-funded entrepreneurship extended in October 2008 to buying up, with the Moscow city government, a number of ailing Russian regional airlines and creating a new state-controlled airline. Initially known as Avialinii Rossii, it was subsequently re-named Rosavia. The Rostekh stake was variously reported as 50 per cent plus one share and 51 per cent, with Moscow city holding the balance and both Chemezov and Yurii Luzhkov, the mayor of Moscow, on the board.31 Why a second state-controlled airline was created is unclear. Competition for Aeroflot is desirable in itself, but in this case the competition will be in part for state support. At all events, the battle appears to be underway. Soon after Rosavia’s establishment, Rostekh and Luzhkov requested that the FAS look into the competitive advantage that Aeroflot gained from having royalties for overflights of Russia paid to it by foreign airlines.32 This looks like another case of rival fiefdoms in the Russian state sector slugging it out for reasons that may or may not have anything to do with any coherent government policy. The chairman

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of the board of Aeroflot is Igor’ Levitin, the transport minister. It is anomalous that the minister responsible for overseeing the development of national transport networks should be involved on one side of a competitive battle with another state-controlled company. Levitin is another silovik, an army reserve colonel whose military career was as an army railway engineer. Some commentators consider his appointment as transport minister to have been facilitated by the support of Aleksei Mordashov, the boss of Severstal, for whom Levitin worked before entering government.33 Therefore the Rosavia-Aeroflot rivalry pits against one another two men who could from their earlier careers be classified as siloviki, Chemezov and Levitin, with Mayor Luzhkov on the side of the former and another silovik, Aleksandr Lebedev (ex-KGB; his National Reserve Corporation owns 27 per cent of Aeroflot) on the side of the latter. One clue may be political associations. Lebedev, though a silovik by background, is politically liberal, reportedly close to Mikhail Gorbachev and said to be at odds with the Putin team. Valerii Okulov, until recently the General Director of Aeroflot, is a son-in-law of the late Boris Yeltsin. Rosavia would appear to have substantial advantages when it comes to political connections.34 The contest between Rosavia and Aeroflot will be in part market competition and in part political infighting. Whatever the mix, the identities of the principal participants cast doubt on any simple idea of the siloviki as a cohesive group with a shared economic agenda. 5.5.1 The ‘Russian BHP-Billiton’ scheme In December 2008–January 2009 several companies were drawn into a scheme – it is not clear how willingly – to create a giant metals conglomerate. This was labelled in the Russian media ‘a Russian BHP Billiton’, because the resulting conglomerate, if the plan had succeeded, would have been a world-scale metals giant comparable, at least in size and product range, to the Australian-based group of that name. In its most expanded variant, the conglomerate would have comprised Norilsk Nickel, Metalloinvest, Evraz, Mechel and – oddly – the potash producer Uralkalii.35 The scheme was reportedly developed by Vladimir Potanin, who owns 30 per cent of Norilsk Nickel (henceforth, NN) and Oleg Deripaska, who owns 25 per cent of NN and had to borrow $4.5bn

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from VEB to re-finance his borrowing from foreign banks to acquire that stake. They took it to Sechin, who was reported as referring it to MinEkon for study. Under the scheme, the component companies’ large debts to the state (mainly to VEB) would be converted into equity to the amount of 25 per cent ⫹ 1 share (a ‘blocking stake’, giving a veto on major strategic decisions); this would be the property of Rostekh. The existing owners of the companies involved would have pro rata stakes in the resulting conglomerate. At the time of writing it is not too clear who, apart from Potanin, Deripaska and probably Chemezov (Rostekh) was really keen on the amalgamation. Yulia Latynina and others suggested that the whole exercise was really about getting very large NN debts off the backs of (mainly) Potanin and Deripaska.36 Dmitrii Rybolovlev, the main owner of Uralkalii, may have been put under pressure by Sechin and Chemezov seeking large penalties for a very peculiar accident: the town of Berezniky, near Perm, was reportedly sliding into a giant crater as one of his potash mines had collapsed, taking with it a section of the railway to Rostekh’s best asset: the VSMPO-Avisma titanium works. A senior official of the FAS has said that anything beyond a Norilsk Nickel-Metalloinvest merger would probably be blocked by the anti-monopoly authority.37 Once more, Medvedev’s aide, Arkadii Dvorkovich, had a walk-on part as a spoilsport. He argued that the proposed conglomerate would not be efficient. Though it might be observed that the proponents of the scheme did not have economic efficiency as their priority, the building of a large business empire, with reduced debt, by the deployment of political connections seems more likely to have been the name of the game. In any event, the plan failed to garner state support. Much – indeed most – of what was really going on here can only be a matter of speculation. What does seem clear is that we are not observing anything resembling a purposeful industrial policy pursued by a coherent and unified state administration. The proceedings also seem to entail alliances between particular officials and particular tycoons. That these alliances are competing above all for control of assets is likely.

5.6 Anti-crisis manoeuvres in the dark The Russian economy went into recession in the third quarter of 2008. This was not understood by the authorities until several

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months later because preliminary GDP figures for the second and third quarters showed increases (over the preceding quarter), and only later revisions of the figures showed declines. The Russian stock market went on rising until May 2008. Industrial output began to decline in July 2008, the month in which the oil price peaked. Bank lending to firms and households was still rising between the second and third quarters of 2008. The foreign exchange reserves peaked in early August 2008. The leadership showed little sign of concern before September 2008. A variety of anti-crisis measures have, at the time of writing, been introduced. The Minister of Finance, Aleksey Kudrin, has played a leading role in devising these. Discretionary tax cuts and spending boosts in the 2009 budget were about 3 per cent of GDP – a comparatively large stimulus package by international standards.38 For the purposes of this chapter, the question is how different alliances have responded to the crisis and how to rescue policies. Two examples have already been discussed. The first is the Chemezov-led establishment of Rosavia. This was based on the cheap acquisition of a number of troubled domestic airlines. Then Chemezov apparently used political connections to build up a challenge to the politically less well-connected Aeroflot. The second is the ‘Russian BHP Billiton’, the would-be metals conglomerate that could have eased the debt burdens of Oleg Deripaska and Vladimir Potanin. (The scheme was given this nickname by commentators, in reference to the world’s largest, and Australianbased, metals firm.) Both these stories begin with damage done by the economic crisis. Other developments, yet again, typically raise more questions than answers. Big Russian companies, both private and state-controlled, lobbied in late 2008–early 2009 for assistance channelled for the most part through the state banks – and mainly through VEB. Commentators were worried that, in Russia even more than elsewhere, increased state assistance would entail an increase in state control – and that the increase would be especially hard to roll back when the economy recovered. Meanwhile, this begs the question of who got assistance, and how? And on what terms? Mechel, after its costly denunciation by Putin in July 2008, was offered a $1.5bn re-financing loan by VEB at the end of 2008.39 The credit offered could be taken up in March 2009. Meanwhile,

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Mechel’s bosses (including the apparently unpunished Igor Zyuzin) were reportedly unhappy about the cost of the VEB loan and the amount and nature of the collateral required (equity in Mechel subsidiaries). They were said to be looking for alternatives.40 They eventually opted to take a loan from Gazprombank, instead. It was at a higher rate of interest but was based on taking only 25 per cent of Mechel’s two major coal-mining subsidiaries as collateral. VEB would have required 100 per cent.41 Zyuzin’s apparent insouciance leaves the innocent bystander puzzled. Was Putin’s original outburst against him on 24 July 2008 a mere fleeting $5bn tantrum, provoked by Zyuzin’s act of lèse-majesté (not attending a meeting when told to)? Was it more purposeful? If so, what purpose was achieved that allowed a merciful state, five months later, to lend him 30 per cent of what it had liquidated in July? Was the whole exercise simply a demonstration of power, intended to remind all Russian tycoons how much the Putin leadership could hurt them if they acted up? If some concession was sought from Mechel beyond the routine fines for abuse of market power levied by the FAS, what was that concession? Perhaps it was something in the terms of the VEB loan that was proving hard for Mechel to stomach. But the loan terms were quite rigid for all those applying for state aid. Severstal was reported to be unhappy about the terms of its VEB loan, as well.42 Schism Theory is all the rage in Moscow.43 By that I mean that many commentators see divergences and discrepancies between pronouncements by Putin and pronouncements by Medvedev, since the latter became President, as signs of a real struggle for authority, based on fundamentally different visions of the future that is desirable for the country. This is not the place to embark on an assessment of this view. Suffice it to say that there clearly are differences of emphasis and priority between the two leaders, and that these have allowed aides, advisors and analysts to enlarge on those differences and run with agendas that may well be their own and not those of either the president or the Prime Minister. Certainly there are also commentators who make fun of the idea that the differences between Putin and Medvedev are anything other than superficial. For our present purposes the question is: are different business interests lining up behind the two riders of the tandemocracy, the President and the Prime Minister?

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Certainly, some public statements on the crisis by Putin and Medvedev can be read as divergent. Medvedev’s 11 January 2009 criticism of the government for slow implementation of anti-crisis measures was a much-cited example.44 Such possible divergences have, in themselves, no bearing on the role of rival business alliances. Members of governments around the world commonly disagree and quite often do so in public. It is intriguing, however, that Medvedev’s reported meetings on the crisis involve, from time to time, a different cast of characters from those attending Putin’s meetings. Of course, on many of these occasions the most prominent tycoons – many of whom have become suppliants – are present whether the meeting is led by the Kremlin or by the White House. But this is not always the case. Both the President and the Prime Minister have begun more actively to develop their own ‘reserve cadres’.45 The experts who took part in Medvedev’s 28 December 2008 meeting on the crisis included academics and members of think tanks (Sergei Guriev and Dmitrii Badovskii), but also a number of senior executives and directors from the business sector: The general director of Renaissance Capital, Ruben Aganbegyan; VTB board member Ol’ga Dergunova; the general director of Novye gazovye tekhnologii – menedzhment, Aleksei Bel’tyukhov; the general director of the coal-mining company SUEK, Vladimir Rashevskii; the head of Orgresbank, Igor Kogan; an independent director of Promstroigroup, Nikolai Kovarskii; and the president of the investment bank Aton, Yevgenii Yur’ev.46 This is a mainly, though not exclusively, young group of businesspeople, several of whom work or have worked with foreign-controlled firms or joint ventures. There is a strong thread of experience in financial services and with de novo, post-communist businesses in the group. (Some details are in the Annex.) Asked why the meeting involved these particular people, the President’s advisor, Arkadii Dvorkovich, offered no answer; one of the participants, however, said that those present had known one another for a long time and quite often discussed economic topics.47 One forum shared by some of them is Club 2015, of which Dergunova and Kovarskii are members. It was formed by young managers after the 1998 crisis and is concerned with Russia’s long-term development as an open, market economy.48 One politician who is a member is the liberal Irina Khakamada, who has spoken frequently about the interests of small firms.

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Medvedev’s subsequent reported meeting on the crisis, on 11 January, was not with managerial young Turks but with (mainly) high officials, including Shuvalov, Kudrin, Sechin, Sergei Ivanov, Central Bank of Russia deputy president Aleksei Ulyukaev and – less predictably – Mayor Luzhkov and Chief of the General Staff, Nikolay Makarov. At this meeting Medvedev excited the schism theorists by criticizing the government’s implementation of anti-crisis measures. Only 30 per cent of what had been planned had actually been carried out, Medvedev said. An official told the press – presumably in an effort to calm the schismists – that this criticism had been agreed beforehand with Prime Minister Putin.49 The figure of 30 per cent was said to be derived from an assessment by Konstantin Chuichenko and his presidential kontrol’noe upravlenie, or monitoring unit.50 Chuichenko, a law-studies classmate of Medvedev in Leningrad, who later worked for the KGB, moved to Gazprom after Medvedev became chairman and then moved on with Medvedev to the Kremlin. Outsiders can only guess at any links between these two very different meetings. Questions raised at the second meeting included the following: shouldn’t the state’s assistance be systemic and general rather than selective and (allegedly) anti-competitive? This sounds like a Club 2015 concern rather than one that would emerge from a KGB and Gazprom background. Still, one has to acknowledge that the use of stereotypes is not a reliable guide to the truth. The second meeting was held at the Salyut aero-engine works in Moscow. Soon afterwards it became known that Salyut would be allowed to export independently; it would not be required to sell through Rosoboroneksport, the core state business on which Rostekh was based.51 One Russian analyst was quoted to the effect that Salyut was the first defence producer to be given this exemption from Rostekh control since the latter was founded in 2007. The financial relationship between the Russian state and leading Russian tycoons in the 2008–10 crisis is an upside-down version of the mid-1990s relationship that produced the loans-for-shares deals. At that time, the state was desperately strapped for cash as ‘cash privatization’ had stalled. It was drawn into a deal under which it borrowed from the tycoons against the security of state-owned companies. Now the tycoons were the ones seeking injections of cash from the state and were being drawn into deals in which

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they borrowed state money against the security of stakes in their own companies. In the loans-for-shares deals, the tycoons ended up obtaining the pledged assets. In late 2008–early 2009 some observers were suggesting that once again the lenders could end up being the long-term owners, in a reversal from privatization to nationalization. Both Putin and Medvedev denied that this was either intended or considered desirable. There is no obvious reason to doubt their sincerity. Even in the oil industry, Putin had not, in better times, presided over a wholesale return to state ownership. State control through trusted and compliant cronies in the private sector is probably the greater danger in contemporary Russia. If anything, the crisis tends to strengthen that compliance. It may have the same effect on what we might call state entrepreneurs – businesspeople who build up empires composed of assets that are officially state-owned. Sergei Chemezov is, at the time of writing, the most notable state entrepreneur. The enterprises he assembled under the Rostekh umbrella had debts totalling R630bn at end-September 2008 (equivalent to $23bn then; $18bn by the end of January).52 In his more recent quests for political favours, he has not always succeeded, whereas in 2007–early 2008 he was collecting assets on something like the Imelda Marcos mining principle.53 He asked MinEkon to support the idea of a 15 per cent price preference for Russian producers in public tenders, and failed to get it. He sought a 50 per cent up-front payment to suppliers in each year’s scheduled arms procurement process, but got only 30 per cent.54 For both private tycoons and state entrepreneurs, close relations with people in political power have become even more necessary for survival than they already were. Oleg Deripaska’s business group, Basic Element, had in spring 2009 a total debt of about $25 billion, most of it to foreign creditors. Of this, more than $7bn was owed by his core company Rusal. As was noted above, Deripaska got $4.5bn from the state in the form of a VEB loan. In June he was publicly humiliated by Putin over plant closures at Pikalevo55 and forced to agree to keep a loss-making plant working; this was apparently (according to personal information from a Russian analyst) a rehearsed exercise to show a TV audience that Prime Minister Putin was coming to the rescue of ordinary workers and ticking

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off a well-known tycoon to help that tycoon’s employees. Shortly afterwards Deripaska, far from being dismissed from favour, received $630m in state loan guarantees.

5.7 Conclusions ‘The authorities went from building a market economy to building a business …’ This was how the economist Evsey Gurvich characterized the shift from Putin’s first to his second term as president.56 But is it a business or several businesses controlled by different groups? The extraordinary interview given by Oleg Shvartsman to Kommersant on 30 November 2007 suggests the latter. Shvartsman, who was then the head of an outfit called Finansgroup, was attending a conference at Palo Alto when he gave the interview. He said his group managed the assets of senior political figures or, more precisely, members of their families. The ‘power ministries’ (defence, security, internal affairs) supposedly supported the project, and the whole exercise was guided by Igor Sechin and was aimed at getting assets – by implication either protection money or directlyowned stakes in companies – to support the siloviki, personally and as a group. This was all swiftly denied, and remains no more than a series of allegations. But the interview came out at a peculiarly fraught time, ahead of an uncertain transition as Putin neared the end of his constitutionally acceptable stay in the presidency. Cats were being let out of bags every day. Unfortunately, they were usually black cats emerging from black bags in pitch-dark cellars, and Shvartsman’s remarkable performance was no exception. If the interview’s contents fell short of being hard evidence, however, the fact that such arrangements could be aired and treated as plausible tells us something. The relationships between Russian political leaders, big business and state entrepreneurs like Chemezov are opaque; allegations of serious abuses of power for personal enrichment are not uncommon and not challenged in court; very occasionally, as in the case of Leonid Reiman, a foreign investigation concludes that there was such abuse. At the same time, case studies of the kind reviewed here suggest a pattern in Russian practice. Someone who begins to build up a fortune and who either crosses the leadership or is merely not beholden

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to it – such as Mikhail Gutseriev or Mikhail Khodorkovskii57 – finds the powers of the state arrayed against him until he is detached from his business. There may then be competition between rival groups to acquire the business: Gazprom and Rosneft’ in the case of Yukos; Rosneft’, Oleg Deripaska’s Basic Element and latterly Gazprom, in the case of Russneft. The winner may not be a state company. If it is a private company, however, it is likely to have succeeded in part because it has friends in high places; those friends may also be beneficiary stakeholders in the successful company, but that is extremely hard to demonstrate. The rise of a state entrepreneur like Chemezov suggests a somewhat different game. Some of Rostekh’s expansion, such as its acquisition of VSMPO-Avisma with the help of administrative pressure, recalls the Yukos and Russneft modus operandi. But much of it is bureaucratic turf war: acquiring control rights over entities that are already state-owned and getting access to state finance with minimal supervision and auditing. The masters of Rostekh, if they do well out of being masters of Rostekh, will have Russian taxpayers to thank, for the most part, not expropriated private businesspeople. Does the ‘modernization’ campaign point to a change in the system? In late 2009 and early 2010 it was President Medvedev, not Prime Minister Putin, who seemed to be leading the campaign. His presidential commission on the modernization and technical development of the economy of Russia has harnessed the powerful intellectual and managerial capabilities of Anatolii Chubais in its cause; planned and appropriated funds for the development of a ‘Russian Silicon Valley’ at Skolkovo; brought Viktor Veksel’berg, the boss of Renova, on board to help manage that project; and persuaded Cisco to promise an investment of $1 billion over ten years in Skolkovo. (Sergei Smirnov, Vedomosti, 23 March 2010; Anastasiya Golitsyna and Natal’ya Kostenko, Vedomosti, 24 June 2010.) These developments display a considerable pragmatism about the use of public-private partnerships and about cooperation with foreign firms in ‘strategic’ areas. But they do not clearly announce a change of the basic mode of operation of the Russian economy. The Skolkovo scheme, like the modernization campaign as a whole, remains state-led and top-down. These developments certainly do not signal an end to patron-client arrangements and to asset-grabbing by rival alliances.

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None of these developments reviewed here looks like a coherent industrial policy. They look more like a series of Churchill’s dog-fights under a carpet. The dogs are fighting in teams, but identifying the membership of any particular team is tricky. Have Deripaska and Sechin been in combat over Russneft and then at war over the creation of a Russian BHP Billiton? Do they shake hands at the end of the day’s play, head for the showers and then have a beer together? Perhaps they do. The trouble is that in the course of these asset struggles in Russia lesser folk get shot or sent to prison.

Notes 1. Deripaska in July 2007, quoted in RFE/RL Newsline, 2 October 2007. Sechin in December 2008, quoted in Argumenty nedeli, 15 January 2009. Latynina in Moscow Times, 28 January 2009. 2. P. Foot (2006). P.F.EYE. An Idiot’s Guide to the Private Finance Initiative. Private Eye, London. N.d.; later issues of Private Eye, passim. 3. Quoted in A. Ostrovsky (2008). ‘Enigma Variations. A Special Report on Russia’, Economist, 29 November, p. 10. 4. Vedomosti, 22 December 2005 (interview). 5. Often, in Russia as in India and several other countries, the tycoon controls a ‘pyramid’ of companies, owning, say, 51 per cent of the holding company at the top of the pyramid, which in turn owns 51 per cent of each of the companies in the tier below, which in turn own 51 per cent of each of the third-tier companies, and so on. The tycoon in this example controls companies of which he owns only 12–13 per cent, so that his ability to commit assets in deals with state officials can go well beyond his direct ownership. See ‘Economics Focus: Pharaoh Capitalism’, Economist, 14 February 2009, p. 90. 6. J. Kent (2008). ‘The Rise and Fall of IPOC’, The Royal Gazette (Bermuda), 28 May. 7. V. Belkovskii and V. Golyshev (2006). Biznes Vladimira Putina, Ekaterinburg: Ul’tra.kul’tura. 8. C. Belton and N. Buckley (2008). ‘On the Offensive: How Gunvor Rose to the Top of Russian Oil Trading’, Financial Times, 14 May. In April 2009 Surgut purchased 21.22 per cent of the Hungarian oil and gas company MOL from the Austrian OMV. This looked very much like a purchase sponsored by someone else, and led among other things to the Hungarian Ministry of Foreign Affairs requesting that the Russian government supply more information about Surgut. I. Malkova and O. Petrova (2009). ‘Bogdanov ne poskupilsya’, Vedomosti, 31 March; I. Maalkova (2009). ‘Bilet na voinu’, Vedomosti, 10 April. 9. Belton and Buckley, op.cit. 10. Renaissance Capital (2008). Oil and Gas Yearbook 2008, Moscow: Renaissance Capital, p. 25.

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11. On the reported political-elite terminology, contrasting doverennye businesspeople with kosmopolity (cosmopolitans) or offshornye aristokraty (offshore aristocrats), see P. Hanson (2007). ‘The Turn to Statism in Russian Economic Policy’, The International Spectator, 42, no. 1 (March), 29–42, pp. 34–5. 12. Finansovye Izvestiya, 14 September 2004. 13. Kommersant, 20 December 2004. 14. Private communication with a senior oil-company executive. 15. Oil industry analyst Nina Poussenkova describes the Rosneft’ bosses as seeking to preserve their independence from Gazprom. N. Poussenkova (2007), ‘Lord of the Rigs: Rosneft as a Mirror of Russia’s Evolution’, study sponsored by the Japan Petroleum Energy Center and the James A. Baker III Institute for Public Policy, Rice Unversity, pp. 66–72. 16. E. Mazneva (2009). ‘Dobavi $2 mlrd’, Vedomosti, 3 April. The reports implied that the sale was feasible, despite the purchase not having been completed. Reuters report of 10 July 2008 (by Yelena Fabrichnaya) for the delay in the FAS decision. Vedomosti 19 December 2008 (report by Yelena Mazneva) for subsequent state actions. 17. Belkovskii’s reply to a ‘Question of the Day’ (Pochemu prodolzhaetsya pressing Gutserieva?) posed in Vedomosti, 29 August 2007. 18. See http://eng.russneft.ru/biografy; accessed 30 July 2008. 19. Irina Reznik (2007). Vedomosti, 30 July. Seleznev evidently believed, along with the press commentators, that Rosneft was the main contender for control of Russneft. 20. It would have to be a Russian political heavyweight. Even Lord Mandelson would not cut it. 21. RFE/RL Newsline, 2 October 2007. 22. Argumenty nedeli, 15 January 2009. What, if anything, the assembled tycoons said in reply is not recorded. Probably nobody offered a reading list from the Journal of Law and Economics or the speeches of Anatolii Chubais. 23. Ibid. 24. See Y. Pis’mennaya (2008). Vedomosti, 14 and 17 July; and D. Kaz’min (2008). 18 July. 25. O. Pleshanova, Y. Kisileva and D. Butrin (2008). ‘Regardless of Legal Entities, Dmitry Medvedev Advised to Abolish the State Corporations’, Kommersant, as reported by BBC Monitoring. 26. G. Stack (2007). ‘ZAO Kremlin: The Chemezov Code’, Russia Profile, 5 September. 27. Pis’mennaya in Vedomosti, 17 July 2008. 28. P. Finn (2006). Washington Post, 19 November, pp. A1, A13. 29. Stack, op. cit. 30. Argumenty nedeli, loc. cit. 31. A. Dagayeva (2008). Vedomosti, 22 October; M. Antoniva (2008). Moscow News, 22 October. 32. A. Dagayeva (2008). Vedomosti, 14 November. The overflight fees are in breach of international agreements about overflying national territories.

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35.

36. 37. 38. 39. 40. 41. 42. 43. 44.

45. 46. 47. 48. 49. 50. 51. 52. 53.

54.

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Russia is supposed to be reducing them and in 2013 finally eliminating them as one of the conditions of its agreement with the EU on accession to the World Trade Organization. In any case, there is no good reason for such fees to be paid to just one out of a number of Russian airlines. http://www.russiaprofile.org/resources/whoiswho/alphabet/l/levitin. wbp; accessed 26 January 2009. A. E. Kremer (2008). ‘Behind Challenge to Aeroflot, Political Rivalry’, International Herald Tribune, 28 November, p. 16; ‘Russia’s New State Airline Will Stifle Competition’, Airwise, 11 November 2008 (http://news. airwise.com/story/view/1226396700.html; accessed 30 January 2008). The account of the merger proposal that follows is based on the following reports and commentaries: Y. Fedorinova (2009). ‘Ob’edininit’ vse’, Vedomosti, 19 January; Y. Fedorinova, ‘Noviy BHP’, Vedomosti, 21 January 2009; Y. Latynina (2009). ‘The Oligarchs’ Kondratyev Crisis’, Moscow Times, 28 January; I. Titova (2009). ‘V Kremle vystupayut protiv sozdaniya “rossiiskogo BHP Billiton”‘, RB.ru, 20 January. Y. Latynina (2009). ‘The Oligarchs’ Kondratyev Crisis’, Moscow Times, 28 January, p. 8. Y. Fedorinova (2009). Vedomosti, 10 February. For details see Hanson (2009), ‘Russia to 2020’, Finmeccanica occasional paper, November. A. Denisova (2009). Vedomosti, 12 January. A. Terent’eva et al. (2009). Vedomosti, 29 January. A. Denisova (2009). Vedomosti, 10 February. Ibid. For example, V. Ukhov (2009). ‘Duumvirat raskalyvaetsya?’ New Times, no. 1–2 (19 January), pp. 5–8. Reported by Y. Pis’mennaya et al. (2009). Vedomosti, 12 January. That report cites an aide to Medvedev as saying that the criticism had been agreed with the Prime Minister. Medvedev has inherited Putin’s presidential role of criticizing the government in public; the difference from Putin’s time is that on such occasions the Prime Minister now is not present on these occasions (Aleksandr Minkin in Moskovskii komsomolets, 23 January 2009). Ukhov, op. cit. Y. Pis’mennaya (2008). Vedomosti, 29 December. Ibid. See http://www.club2015.ru/. Accessed 12 February 2009. Y. Pis’mennaya et al. (2009). Vedomosti, 12 January. Ukhov, op. cit. A. Nikol’skii (2009). Vedomosti, 16 January. Y. Pis’mennaya (2009). Vedomosti, 19 January. Legend has it that Imelda Marcos would travel around the Philippines and from time to time point to a factory or hotel and say, ‘That’s mine’. She was thus said to be in the mining business. O. Kuvshinova et al. (2009). Vedomosti, 30 January.

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55. Oxford Analytica Daily Brief, 11 June 2009. 56. ‘Dva sroka’, Gazeta.ru, 4 March 2008. 57. Igor Yurgens, director of the Medvedev-linked Institute of Contemporary Development, describes the origin of the Yukos affair as follows: Those who planned it worked on Putin’s sensitivities, saying, ‘You’ve been deceived …’ ‘Est’ li zhizn’ v ‘verkhnykh sloyakh atmosfery’?’ interview with I. Yurgens by O. Shorina (2009). New Ti Vedomosti, 10 February 2009.

6 The Russian Network State as a Great Power Stefanie Ortmann

6.1 Introduction As this volume argues, Russia remains a network state; if one follows Russian and Western media images about Russia, Russia is now a Great Power and a strong state. There is something incongruent about describing the Russian network state in this way, both in looking at conventional parameters of state strength and if we take the image of Russia in official discourse as its basis. In this image the Russian state appears as sovereign and autonomous, ruled by the ‘dictatorship of the law’ as Putin famously declared when he came to power – and thus the exact opposite of the network state and the way it has been captured and ‘privatized’ by elite networks. Until recently, this incongruence was equally applicable to Russia’s international standing. In an often-cited article, Hannes Adomeit contrasted the ‘images’ and the ‘reality’ of Russian claims to Great Power status shortly after the end of the Soviet Union and proclaimed that ‘true greatness, whether among men or among nations, does not need advertising. It should be evident’ (Adomeit 1995). This argument chimes with an assessment that rather than confirming Russia’s status, the Kremlin’s insistence on being a Great Power reveals a continued deep insecurity over Russia’s place in the new post-Cold War world order (Morozov 2002; Macfarlane 2006). This chapter addresses the reasons for the incongruity between the network state and its images as Great Power and strong state. As I will argue, there is a certain logic to the persistence of this 139

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image of Russia. This is true for its specific content, which has often been characterized as somewhat old-fashioned, wedded to a form of international politics more to do with the nineteenth century than the twenty-first. This ‘Westphalian’ nature of Russia’s Great Power image, an insistence on sovereign autonomy as the essence of Russia’s Great Power status, has indeed been dominant under Putin and Medvedev and has been taken up by numerous analyses of ‘rising Russia’. However, I argue that it is not descriptive, not simply a reflection of Putin’s state building or the fact that Russia has now a new material basis for its Great Power claims. Instead, this remains a normative projection of a specific identity for the Russian state, which has its roots in the very weakness of the new state in the early 1990s. And even if the narrative is now being enacted to a much larger degree than in the Yeltsin period, it continues to coexist with very really weaknesses of Russia as a regional and even more an international actor. In this sense the image of Russia as Great Power remains ‘virtual’, a simulation similar to the ‘virtual democracy’ that has become such a prominent feature of the Putin years (Wilson 2005). As will be argued below, the continuity of this narrative and the centrality it places on sovereign autonomy is ultimately the result of the domestic exigencies of the network state. This refers in particular to the need for a consensual self-legitimizing narrative – legitimizing above all to the elite networks themselves, and in second place to the Russian population at large. The question of legitimacy remains precarious for Russia’s state networks. Channels of democratic legitimation are increasingly eroded, not only through the manipulation of elections, but also through the Kremlin’s control of the public media; at the same time ineffective state institutions and pervasive low-level corruption mean that output legitimacy also remains fragile. In all of this, the self-legitimation of elites remains central, and Russia’s Great Power narrative has come to fulfil this function. As will be discussed below, the image of Russia as a Westphalian Great Power first emerged in response to a deep legitimation crisis faced by Yeltsin and his networks. It has remained the central legitimizing identity narrative for the current state elite networks and as such arguably points to the continuing fragile legitimacy of the Putin/Medvedev regime.

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6.2 Putin and Medvedev: state-building and the network state It has been argued by Iver Neumann that the domestic political structure of the Russian state is a determining factor in its international identity and its recognition as a Great Power by the West. In Neumann’s reading, there has been a long history of ‘lagging behind’, of Russia holding on to forms of political organization superseded in the West, or at least only partially adapting to Western forms of governance – with liberal democracy as the latest example (Neumann 2008). Following from this, the story behind the image of the state put forward by the Kremlin could be read as a simple reflection of state-building under Putin, which once again picked up a model that is being abandoned by the Western powers – in this case, the modern Westphalian state, at a time when the West is turning to post-modern forms of statehood. As Western Europe turns to multiple layered sovereignty regimes, and economic globalization leads to an erosion of sovereign borders and state control over key policy areas, the state is transformed into a post-modern construct far removed from the absolute monopoly of sovereign power postulated by the Westphalian narrative. Against this post-modern reformulation of statehood, the Westphalian image of the strong, autonomous state is not only reflected in the way that Russia is represented as Great Power, but also was at the core of Putin’s domestic agenda, a trend that has not decisively changed under the ‘duumvirate’ of Putin and Medvedev. The Kremlin’s vision of the central state as fundamentally autonomous, defining its own version of political order within the territory it controls, thus once more appears out of touch not only with political choices, but also with a perceived reality of global politics in the West. A popular assessment of the Putin era – and of course the preferred reading by the Kremlin – is that of the re-assertion of the central state’s domestic sovereignty after the period of weakness and disorder that was the result of the ‘privatization’ of the state under Yeltsin. Putin’s programmatic speeches and documents, published when he was ushered in as president in 1999/2000, linked the way that Russia was ‘destined to be a Great Power’ with the image of a strong state in domestic affairs, famously claiming that ‘Democracy – this is a dictatorship of the law, not of those placed in

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an official position to defend that law’.1 His aggressive re-centralization of state structures over the following years only seemed to confirm that this was a re-emergence of the autonomous central state, liberated from the hold of private elite networks and back in control of its territory. Putin has strengthened the ‘power vertical’, curbing the power of regional governors, and launching a second war to bring Chechnya back under the control of the central state (Sakwa 2004). He has also removed some of the most powerful business networks of the Yeltsin era from political influence and re-appropriated assets for the state, especially in the oil and gas sector (Hanson 2009). The people he brought into the Kremlin were ‘of the state’ in a more traditional sense: the ‘new elites’ were drawn from the security services, the army and the St Petersburg city administration (Kryshtanovskaya and White 2005; White 2008). Thus, it could be argued (and has indeed been argued) that the Russian network state, understood as a ‘captured’ or regime state in the grip of private elite interests, was a historical phenomenon of the Yeltsin era which now has been superseded by the Putin state building project. All of this of course coincided with the meteoric ascent of the price for fossil fuels which formed the basis both for the increased effectiveness of the central state and for claims that Russia was re-emerging as a Great Power. If this were true, the domestic and international identity projected by the Russian state does nothing more than express the success of this state-building project: the Russian state is strong again, in a Westphalian (and Russian) tradition of re-establishing order through re-establishing the state as absolute Sovereign. At the same time Russia is re-emerging as a Great Power, part of a group of rising non-Western powers (the BRICs) in a world order which is being transformed into a multipolar system – in this common reading, these are mere descriptive statements, which confirm developments in Putin’s Russia. However, this binary distinction between a weak network state under Yeltsin and a strong, authoritarian state under Putin is problematic, both in assuming that the network state has been replaced by a Westphalian model, and in assuming that Russia’s state identity is nothing more than a reflection of Putin’s state-building policies. Instead, both the network state and the legitimation problem it faces persist in Putin’s Russia, though the form that it takes has undergone a considerable evolution. At the same time, the representations of state identity used by the Kremlin equally highlight a perhaps

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surprising continuity between the Yeltsinite and Putinite political projects. This volume is not alone in arguing that the ‘network state’ has by no means ended in contemporary Russia (Wilson 2005; Wallander 2007; Shevtsova 2007a; Mendras 2008). Elite networks may have profoundly changed from Yeltsin to Putin – the explicit and highly visible ‘privatization’ of the state by the oligarchs under Yeltsin has been replaced with new ‘power elites’ spanning the state and the large state holding companies. Nevertheless, these are still networks, cutting across institutions and sectors, and resulting in the continued under-institutionalization and personalization of Russian politics, and above all a continued conflation of private (business) interests and the interest of the state. What has emerged could be described as an even more complex form of network politics, one in which state and the pivotal sectors of Russian industry – the state holding companies in the energy sector, but also the transport and the military sectors – are welded together by a form of personalized politics that is far removed from the Westphalian image of the autonomous state. As Yakovlev has argued, in a reversal of the main trends of the Yeltsin era, state elite networks have now captured Russian business –on top of the corporate interests of government agencies, which are seeking to extract more general rent from the field under their control (Yakovlev 2008). Thus, Russia continues to be a network state – the ‘regime politics’ that Sakwa once identified as characteristic for Russia under Yeltsin have not fundamentally changed, with the difference that the personalized networks that now rule claim at the same time to be the state, to speak in the name of the Russian state and indeed for the interest of the Russian state. At the same time, Russia’s status as a Great Power remains more precarious than official Russian discourse suggests. Increase in wealth does not in itself confer Great Power status, even if this linkage is made in the concept of the BRICs (in itself originating in a report on investment opportunities by Goldman Sachs that said little about the BRIC’s potential to create a new world order). And while Russia has kept some of the foundational markers of Great Power status, such as the nuclear arsenal and the seat on the UN Security Council (UNSC), its real military capabilities are limited and long-overdue reforms of the military have only just started. To some extent, here too it is the network state itself which hampers Russia’s return to being an effective

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Great Power – the resistance to the reform by entrenched networks in the military and the continued under-institutionalization of the state have all undermined Russia’s ability to project power abroad, as has the hybridization of public and private sector that is symptomatic for the network state under Putin. Ultimately, this underpins the way that Russia’s foreign policy remains overwhelmingly reactive, even in its declared sphere of influence, the FSU. This has even been true for the August 2008 invasion in Georgia, often cited as evidence of a new Russian assertiveness, which nevertheless seems to have been a reaction to Georgian military action in South Ossetia (Shearman and Sussex 2009). A rare proactive move, Medvedev’s recent proposal for a new European security treaty, could equally be read as an advance reaction to NATO’s forthcoming new strategic concept, and has in any case been largely ignored in the West. Thus, there exists a noticeable and persistent divergence between the image of the state as Great Power and strong state that is presented in official discourse and the workings of the network state under Putin and Medvedev. While it would go too far to refer to an official ‘state ideology’, tropes referring to Russia’s derzhavnost’ and gosudarstvennost’ have appeared in numerous official documents and speeches by the political elite, beginning with Putin and Medvedev themselves, without much variation between those directed at an international and a domestic audience.2 The basic theme of these tropes, a theme which has become more central from about 2005 onwards, has been the sovereign independence of the Russian state. This was a constant marker of Russia’s Great Power status under Putin, expressed in references to Russia as a ‘democratic Great Power’ – democratic precisely not because of its institutional form as a liberal democracy, but because Russia was in the vanguard of the fight for a more democratic world order, expressed as the autonomous actions of different power poles (Ortmann 2008). This implied a desire not to submit to the diktat of hegemonic Western values and above all of the dominant power claiming to represent them, the USA – a point that was put forcefully by Putin in his infamous 2007 speech at the Munich security conference.3 However, this has been a long-standing theme, both under Putin and Medvedev. Already in 2004 Putin stated in his annual address, Whether or not we can become a society of truly free people – free both economically and politically – depends only on us. Reaching

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our priority national goals depends only on us. (….) It is far from everyone in the world that wants to have to deal with an independent, strong and self-reliant Russia.4 Likewise, Medvedev claimed in a recent article that ‘Russia is one of the world’s leading economies, a nuclear power and a permanent member of the UNSC. It should openly and explicitly explain its position and defend it in all venues, without weaselling or giving in to pressure to conform’.’5 Both Putin and Medvedev – and many other members of the state elite networks – have continued to stress the need for Russia to strengthen state institutions and to combat corruption – and to democratize, though in its own time and without slavishly imitating Western models. In more than one way, this tension between the narrative of the sovereign, autonomous state and the continued reality of Russia’s network politics parallels the theme of virtual politics that has been used to describe the development of Russia’s democratic institutions under Yeltsin and in particular Putin (Wilson 2005). The simulation of open political competition and public political space, complete with fake opposition parties and a fake liberal candidate in the last presidential elections, hides the network politics which constitute the reality of political life in Russia. In a similar vein, the current Westphalian image of the strong state could be called virtual, at least to the extent to which it simulates strong, autonomous statehood in the face of the continuation of the network state. This virtuality also highlights that this is a discursive representation of the state, rather than the state itself – and it raises questions about the role of this narrative in Russian politics and in the constitution of the network state. Through increasingly state-controlled public media, the Kremlin and the array of PR agencies and spin doctors at its disposal self-consciously perpetuate the image of Russia as a Great Power and strong state, the narrative of the restoration of order within Russia and the projection of a multi-polar world order without (Ortmann 2008). However, these are by no means new images of the Russian state, nor are they associated only with the Putin period. As will be explored in the next section, the narratives of Russia’s virtual democracy and of Russia as hyper-Westphalian Great Power have been foundational narratives of Russia’s state identity ever since the emergence of the new Russian state in 1991. It is because of the function they

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had in this protracted emergence, in particular the way that these representations could be endorsed by all sides of a deeply divided political scene, that they remain crucial to the (self-)legitimation of the state elite networks until today.

6.3 Identity, legitimacy and the network state Thus, the origins of Russia’s Westphalian identity as a Great Power and strong state highlight the way in which this image was and is above all a narrative, a normative projection of state identity, rather than just the result of Putin’s domestic transformations. In fact, its emergence was a reflection of precisely the kind of chaotic network politics that dominated the Yeltsin era. In this, it is closely linked to the sense of fragile legitimacy that affected both the Yeltsin regime and the new Russian state itself. Throughout the 1990s, Yeltsin’s regime was highly unpopular, due in part to perceptions among the population that oligarchs were running the country – a result of the ‘capturing’ of the state by private business networks and the pervasive corruption that occurred on all levels of the state (Holmes 2005; Wedel 2001). Yeltsin’s regime, the new liberal democratic state and the liberal economic reform programme all suffered a legitimacy problem which increased as the decade went on, culminating in the crisis year of 1999, when for a while it seemed as if Russia was once again on the brink of collapse. However, the population at large was only one part of this legitimacy problem. Rodney Barker has suggested that the self-legitimation of rulers is an intrinsic part of the exercise of power, and that this self-legitimation is all about establishing a legitimizing identity – for oneself, for the state in whose name one speaks, and above all between oneself and the state (Barker 2001). In this reading, legitimacy is not so much an attribute bestowed by the population onto its rulers. Instead, it is a largely self-referential activity – it is the leaders themselves who must believe in the legitimacy of their actions (Barker 2001: 13). The establishment of a firm claim to leadership relies on this self-identification. It also relies on some form of minimal consensus among the political elites about the legitimacy and identity of the polity over which they claim power – even if otherwise there are deep political and ideological divisions. In this sense, this remains an intra-elite game first and foremost, rather than

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looking to the population at large as the main audience for these identity narratives. This second form of legitimation was arguably central in establishing the fundamentals of the current narratives of Russia’s state identity. Arguably, the representation of Russia as hyper-Westphalian Great Power has acquired a self-legitimizing function both for the new Russian state and for the elite networks that claim to speak in its name. At the same time, as will be seen below, the tension between this narrative and the realities of the Russian network state is one of the factors which mean that this legitimacy was constantly challenged under Yeltsin and remains surprisingly fragile even now, 20 years after the emergence of the new Russian state. In this sense, the dynamics that have driven the development of Russia’s Great Power identity are to be found in domestic developments rather than in international interactions. This is not to say that international developments did not matter for the evolution of this narrative – but they were interpreted and given meaning within a framework in which the legitimacy conveyed by the narrative of Russia as Great Power and strong state is central. This is a process which became perhaps exceptionally visible in the early post-Soviet era, when not only the legitimacy of the Yeltsin regime, but also the legitimacy of the new Russian state was heavily contested from within a deeply divided political elite. During this period Russia not only went through a very public and widely discussed ‘identity crisis’, but the legitimacy of the new Russian state as well as that of the reformers around Yeltsin was under heavy attack from rival political factions – the ‘red-brown coalition’ of communists and nationalists. Much of the ideological division was about whether or not Russia should follow the ‘Western path of development’ chosen by Yeltsin and the young reformers. However, one part of this attack was precisely the question of whether or not the new Russian state could lay claim to being a continuation of ‘Russia’ – by no means a settled issue when the Russian Federation emerged almost by default in 1991. No Russian state had ever existed within the borders of the Russian Federation and its diminished size and changed location meant that traditional markers of Russia’s state identity, such as the notion of Russia as vast ogromnaia strana and of course as empire, were no longer applicable. This was all the more the case as under Yeltsin’s leadership the Russian Federation had

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initially emerged out of an explicit rejection of the Soviet Union and its imperial legacy. In addition to all this, the collapse of the USSR and the prolonged economic crisis of the 1990s led to widespread feelings that the new state had lost the Great Power status that had been part of Russia’s international identity ever since Peter I put Russia on the map of Europe in 1709. In spite of formal markers of this status, such as nuclear weapons and the seat on the UNSC, the opposition in particular constantly challenged the notion that this new Russian state actually was a Great Power. As Aleksandr Rutskoi, one of the leaders of the nationalist opposition, asked in 1992: ‘Why is a once great and powerful country that the whole world took into consideration turning into something vague before our eyes, with no clear borders, statehood or even name?’6 In sum, because of the weakness of the new Russian state, there was real uncertainty about the question of whether or not it could conceivably be seen as a continuation of ‘Russia’, and this became one of the deep fault-lines along which political factions were split in the 1990s (Tuminez 1996; Tolz 1998; Ortmann 2008). It was imperative for the liberal reformers around Yeltsin to establish this continuity, and with this the legitimacy not only of the new Russian state, but also of their claim to power. After all, the new form of the state as liberal democracy had been shaped by Yeltsin and his reformers – the very identity of the state was therefore intrinsically partisan and open to political contestation. In fact, achieving some form of intra-elite consensus about the identity of the new state and thus Yeltsin’s claims to power became more important as time went on. By the mid-1990s, the fragile legitimacy of state and regime was compounded by the development of the Yeltsinite version of the network state and the way that this impacted on state effectiveness. Yeltsin’s deep unpopularity among the Russian public, which was partly a result of this process, made it difficult for the regime to draw on alternative, democratic sources of legitimation and thus made Yeltsin even more reliant on bargaining with the often deeply antagonistic elite networks that formed the opposition. The deep ideological fault-lines among the political elites made it impossible for a consensus to emerge around that other great identity narrative, the question of Russia’s relationship with the West. However, in spite of the hostility between Yeltsin’s regime and the opposition, there was a widespread consensus, from the start,

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that any Russian state would need to be a Great Power to be fully Russian. References to Russia as a Great Power in public political discourse were surprisingly widespread, and could be found both among the liberal reformers and the nationalist opposition. What was much more contested was whether the new Russian Federation could lay claim to this status, and what precisely this identity entailed. In 1992, retrospectively known as the phase of ‘Utopian Westernism’, Russia’s liberal foreign minister Andrei Kozyrev tried to re-define the meaning of Russia as a Great Power by linking it to Russia’s new identity as a liberal democracy. Russia was to become a ‘normal Great Power’, part of ‘Western Civilization’ – all of this by virtue of its Western choice, its movement towards liberal democracy and a free market economy (Light 1996). This attempted re-definition was rejected by the rival domestic factions with which Yeltsin was by 1993 in political deadlock. In this context, the Yeltsin camp started to emphasize the historical continuity of the new state, its perpetuation of a 1,000-year legacy of Russian statehood, and the unique spiritual nature of Russia’s status as a Great Power – all also prominent topics of the ‘red-brown’ coalition. This narrative of strong-statehood and Great Powerness as core identities of the Russian state (gosudarstvennost’ and derzhavnost’) represented the state as the same independent, autonomous actor in domestic and in international space, expressed in the person of the ruler. This, of course, had been the traditional image of the Tsarist autocratic state, and as such was popular with the nationalist elements in the opposition; it now became a central narrative of the Yeltsin presidency, as a narrative that could underpin claims to legitimacy in a highly fractured political environment. The transformation in this discourse may have had something to do with the first disappointments in the interaction between Russia and the West. The association of Great Power status with integration into a Western community of values implied that recognition of Russia as a ‘normal Great Power’ was to come from the West. Yet, it quickly became clear that Russia in its weakened state was by no means accepted as a true equal by the Western powers. This was vividly illustrated by the eastward enlargement of NATO, which was announced in 1994 in spite of vocal Russian protests. However, the central dynamics of the discursive changes outlined above was not to be found in international developments or interaction with the Western powers but in domestic developments. The endorsement of a

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more traditional understanding of Russia’s nature as a Great Power emerged in the prolonged political struggle with the opposition, which ended with Yeltsin’s storming of the parliament in October 1993. As Yeltsin forced the opposition to accept a new, hyper-presidential constitution, he began to use the traditional connection between Russia as a Great Power externally and a strong, autonomous state domestically, which had previously been avoided by the liberal reformer camp. In this context, appealing to a core image of state strength as sovereign autonomy both legitimized the shift of power to Yeltsin and was perhaps a necessary concession to the opposition by a president who was already highly unpopular. This shift set the frame for the way that Russia’s Great Power identity appeared in official discourse. While these tropes evolved and became more specific in subsequent years, the basic parameters of the discourse no longer changed fundamentally. There was no return to the image of Russia as Great Power by virtue of its adoption of Western values. Differences between the Yeltsin camp and the opposition did remain; for once, in contrast to the nationalist opposition, and contrary to the actual weakness of Russia’s foreign position in the 1990s, the Yeltsin camp insisted that Russia was a Great Power in its present form. Nevertheless, by taking up a shared notion of Russia’s Great Power identity, the various elite networks had arrived at a common imagery and a common language in describing the new Russian state – a fundamental, if vague, consensus about its identity, whether actual or as future projection. This consensus did not extent to Russia’s attitude to the West; there remained obvious ideological splits over this question, and the swings between pro- and anti-Western attitudes both under Yeltsin and under Putin show that there remained a fundamental ambivalence towards Russia’s relations with the West among the power elites which has remained unresolved – the latest pendulum swing from declarations of a ‘new Cold War’ after the Colour Revolutions to a marked warming of relations with Obama’s USA is yet another illustration of this. During the 1990s, in the context of a state-building project which was flawed in multiple ways, the intertwining of notions of gosudarstvennost’ and derzhavnost’ took on a paradoxical dual function. On the one hand, they did serve as legitimizing discourses for Yeltsin’s state elite and delineated a shared vision of Russia’s identity in the face of insurmountable ideological divisions over Russia’s relation with

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the West. Russia’s external weaknesses, and the resulting spectacular setbacks and withdrawals that characterized Russian foreign policy during the 1990s – and the lack of external recognition as Great Power following from this – were no obstacle to the continued invocation of Russia’s Great Power status for domestic consumption. As the Kremlin’s PR machine developed, there still were enough opportunities for virtual displays of derzhavnost’ – or rather for simulations of external recognition projected to a domestic audience and not least to the elite networks themselves. Nuclear weapons as a marker of Great Power status were referenced and celebrated at every available opportunity (Tsypkin 2009). A certain self-stylization as the guarantor of international law in the shape of the UN allowed the Kremlin to cast Russia as protector of an international normative order endangered by Western moves towards a doctrine of humanitarian intervention. This of course was linked to Russia’s seat on the UNSC – another incontrovertible marker of status that could be used to project Russia’s Great Power identity to a domestic audience. In fact, any opportunity for asserting Great Power status was sought, from the militarization of Russia day parades to the quest for inclusion into the G7/G8 (finally achieved only under Putin). In one pertinent example Russia’s role as member of the ‘quartet’ during the Ramboillet negotiations between Serbia and Kosovo led the newly appointed Prime Minister Sergei Primakov (a strong gosudarstvennik, and himself member of a rival elite network) to declare to the Federation Council: ‘Look only how Russia’s position is being taken into account in the world. This was the case during the Iraq crisis and it is still the case now in Kosovo.’7 This was October 1998, only months before the Kremlin, despite its best efforts, failed to prevent Operation Allied Freedom, something that revealed the full extent of Russian international weakness. The case of Kosovo, and the domestic political crisis that came to a head in early 1999, illustrates that there was a certain danger for the regime inherent in what were effectively simulations of Great Power status for a domestic audience. After all, the continued invocation of derzhavnost’ and gosudarstvennost’ as core Russian identities risked highlighting the divergence between these identities and the increasing weakness of the network state, and thus had the potential to undermine this legitimizing discourse. In a word, this narrative rather paradoxically both served a legitimizing function

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and perpetuated a sense of the fragility of Russia’s statehood. The weakness of the central state under Yeltsin was highly visible – in part due to the factors outlined above, but increasingly also because of the erratic behaviour of Yeltsin and his ‘family’ of oligarchs which dominated the first half of 1999. In the context of external and domestic weakness which characterized the late 1990s and in particular the developments of 1999, tropes which alluded to Russia’s Great Power status without the need for external recognition of this status became central in official discourse. The hyper-Westphalian image of Russia as a Great Power based on its independence of action was one such trope, since independence of action could be asserted without external recognition as equal by other Great Powers. As such, it was easier to simulate – for example in the aftermath of the infamous Prishtina incident, when Russian troops temporarily occupied Prishtina airport during the peacekeeping operation in Kosovo. The stress on sovereign independence was not the same as a rejection of the West and its values – in fact, it sidestepped the binary choice between inclusion on the basis of liberal norms and exclusion that was the preferred Western way of framing the relationship with Russia. Rather than being intrinsically anti-Western, this narrative took up a recurrent theme in Russia’s engagement with the West – that of Russia as ‘true Europe’, upholding the essence of European values for a corrupted, degenerate Western Europe (Neumann 1996, 2008). During Soviet times, this had been Communism; now it was the essence of the European order, sovereign independence as a basic norm of the Westphalian system of states that was threatened by the emerging doctrine of humanitarian intervention and later by Western policies of democracy promotion. Thus, while the narrative of Russia as a hyper-Westphalian Great Power was not in itself an anti-Western one, there were implicit points of friction with the West. The same was true for another enduring aspect of the representation of Russia as Great Power, adapted from Eurasianist thinking. In this image, Russia was a natural pole in a future multipolar world order, by virtue of its size, but also by virtue of its geo-cultural location – the only large power to participate in three different cultural regions, Europe, Asia and the Muslim world (Laruelle 2008). The promotion of these narratives is often associated with the figure of Evgenii Primakov, foreign and finally prime

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minister from 1996 to 1999. However, by 1999 these were recurrent tropes in statements by Yeltsin and the state elite more widely and, as public reactions to the Kosovo crisis 1999 showed, they had gained widespread acceptance across different elite circles, including the Liberals.8 Another of Primakov’s concepts that appeared widely in public discourse by 1999 effectively re-defined the meaning of Russia as a ‘democratic Great Power’, a concept that in 1992 had seemed to herald Russia’s socialization into the post-Cold War normative order. Primakov’s version no longer associated the meaning of democracy with Russia’s domestic structure as a liberal democracy. Instead, it expressed his vision of multipolarity and Russia’s identity as a Great Power, defined by its independence of action. A multipolar world order was above all one not dominated by the United States, nor by a bloc of Western powers, but constituted by a balance of power between a number of Western and non-Western Great Powers – effectively a global version of the eighteenth-century ‘Concert of Europe’. In all of this, the meaning of Russia as ‘democratic Great Power’ was almost reversed – this was no longer about identification with the West, but the preservation of Great Power status, against an ‘undemocratic’ world order dominated by a single superpower (Ortmann 2008). This specific narrative had and continues to have a central function as a foundational identity discourse for the Russian state, in spite of the continuing contradictions between the image of Russia presented in the narrative and the realities of the network state. The depiction of Russia as a hyper-Westphalian ‘democratic Great Power’ aiming to protect and promote sovereign independence had gained ground among political elites in 1998/99, during a period of external weakness and a domestic crisis of state and regime. The 1998 financial crisis brought the state to the brink of bankruptcy and necessitated a humiliating scramble to obtain IMF emergency loans, while the Kosovo crisis and the dual event of NATO’s enlargement and Operation Allied Force highlighted the gap between aspirations to Great Power status and the realities of Russia’s lack of influence even in developments which were perceived as being of direct concern to Russian security. It was at this point of extreme weakness that ‘Project Putin’ was launched and the network state reinvented. This has often been analysed as an attempt to turn the hyper-Westphalian narrative of Russian statehood into reality – but, as will be seen below,

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in many ways this was more akin to the kind of virtual reality that also characterized Russian democracy (Wilson 2005). The central function of this discourse remained the same – not a framework or even grand strategy for a new Russian foreign policy, but a legitimizing discourse for the state elite networks, which retained a sense of fragile legitimacy even amidst the apparent successes of the Putin statebuilding project – hyper-Westphalian rather than Westphalian.

6.4 The network state as Great Power The basic narrative of Russia as a hyper-Westphalian Great Power, with its stress on sovereign independence, presents the tropes of Russia as a Great Power and a strong state as inextricably intertwined. In this, the ground was prepared for Putin’s statism when he was ushered into power later in 1999, beginning with his widely cited programmatic articles published before he became president.9 In fact, it is fair to say that this image of Russia as a democratic Great Power, as well as that of a strong state, was part of the official discourse of the Putin regime from the start, even during his early ‘turn to the West’. During a visit to Mongolia in 2000, for example, Putin explicitly referred to the need to establish a democratic world order directed against ‘attempts to force the creation of a unipolar system’.10 The parallels between this comment, and the rhetoric during the post-2005 ‘new Cold War’ are self-evident. Putin’s infamous Munich speech of 2007, and other official statements may express the critique of American unipolarity more forcefully, but the underlying sentiment is shaped by an understanding of Russia as hyper-Westphalian Great Power that was already in place in 1999. What these parallels once again illustrate is that this identity narrative does not automatically imply an anti-Western identity – though the issue of identification with or differentiation from the West is an important identity discourse in its own right and did gain new significance as Bush more explicitly connected his democracy promotion agenda to US activities in the former Soviet space. The difference between the Putin and the Yeltsin period is therefore not to be found in the development of the hyper-Westphalian narrative, nor does it lie in the fact that the network state has been entirely replaced by a Westphalian state-building project. As shown elsewhere in this volume, the modern image of the state as

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an autonomous legal-rational agent remains problematic in Russia. The identification of state interests with the private interests of the elites is a persistent factor and the networks continue to transcend public and private, continuing the weak institutionalization of the state and hampering its effectiveness. The network state therefore persists; what did change was the combination of a turn-over of elites and the way that the narrative of Russia as a strong state and hyper-Westphalian Great Power could be simulated more effectively as state revenues increased and a changing international scene seemed to affirm the vision of multipolarity it contained. Because of this turnover and because of various developments to do with the reinforcement of Russia’s virtual democracy – namely the establishment of Edinaia Rossiia as dominant party and the Kremlin’s increasing control over public media and nominal opposition parties – Putin no longer faced the open ideological competition that had challenged Yeltsin throughout his period in office. The change from Yeltsin to Putin brought into power elite networks which were identified and identified themselves as ‘statespeople’ – people from the security services and civil servants – and, as such, the underlying consensus about Russia’s hyper-Westphalian nature was, if anything, strengthened. Nevertheless, not only was there continuity of the narrative, but also of the way that the narrative was intertwined with a fundamental problem of self-legitimation of the state elite networks. This may appear counter-intuitive, given the high personal popularity of Putin and the state networks’ by now almost total control of public political space and ‘official’ channels of legitimization such as elections. All the same, this sense of fragile legitimacy persisted among the state elites themselves and spectacularly came to the fore in the Kremlin’s almost hysterical reactions to the Colour Revolutions in Georgia and especially Ukraine in 2003 and 2004. The Colour Revolutions were seen by parts of the state elite as a major threat to Russia’s position in its sphere of influence, part of a possible wave of revolutions in CIS states directly or indirectly targeted against Russia – a result of seeing the outcome as a zero-sum game determined by US democracy promotion strategies. However, perhaps more than any concern about geopolitical implications, the immediate effect was to unveil once again the gap between a narrative that presented Russia’s influence in the CIS as a cornerstone of its resurgence as a Great Power and the very real limits to Russia’s ability to project influence in the CIS,

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thus once again temporarily revealing the virtuality of this narrative. In reaction, the Kremlin introduced measures aimed at increasing Russia’s ‘soft power’ in the CIS, starting with a new ‘presidential department for interregional and cultural ties with foreign countries’ whose task it was to ‘sell’ Russia to the CIS, as well as financing pro-Russian NGOs and news media, and, it was rumoured, parties and politicians. However, the impact on the Kremlin’s hyper-Westphalian selfidentification was only one aspect of this. The other was the way that many in the Kremlin seemed to see this as a potential attack on the Russian state and really Putin’s regime, often conflated with the state itself – or, as one newspaper put it, ‘The day before yesterday: Belgrade. Yesterday: Tbilisi. Today: Kyiv. Tomorrow: Moscow’.11 Tellingly, the aftermath of the Colour Revolutions saw rather disproportionate attempts to eliminate any possible challenge to the regime in Russia itself. The political commentator Andrannik Migrainian stated that ‘uncoordinated efforts are taken to prevent the revolution though the Kremlin is not certain who could stage the revolution’.12 This included not only a heavy-handed clamp-down on a few hundred protesting pensioners in August 2005, but also various ‘administrative measures’ such as the creation of a virtual pro-Kremlin youth movement, Nashi, a controversial law regulating and restricting the activities of foreign NGOs on Russian soil and not least the tightly controlled change-over from Putin to Medvedev in the 2007/08 election cycle. It also included the launch of the script of ‘sovereign democracy’ that very consciously played on the existing hyper-Westphalian narrative to insulate the Kremlin from Western and domestic criticism and which served to legitimize the Kremlin’s administrative measures – as well as its attacks on Western ‘double standards’, which were in themselves an interesting take on the theme of virtuality.13 As a Russian commentator close to the Kremlin put it, ‘Sovereign democracy and everything that is associated with it is the discourse of “catching-up” – we argue with the West in its own language, the language of post-communist transition’.14 This, once again, revealed a deep-seated sense of instability, a real fear in the Kremlin that the ‘wave of Revolutions’ could topple the state elite networks themselves (Ambrosio 2007). The Kremlin’s reaction also indicates the extent to which the networks identified themselves as the state, implicitly equating their potential overthrow

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in a Colour Revolution with the collapse of the Russian state itself. The threat emanating from the Colour Revolutions was a different one to that of the 1990s, where the continuity of the state, in fact its very existence as a unitary state, were put in question. Now the trope of ‘Russia in danger’, still intertwined with that of Russia as hyperWestphalian Great Power, concerned not territorial sovereignty but sovereign control – the regime as the state, perpetuating the conflation already established under Yeltsin. Given this, the gap between the realities of the network state and the hyper-Westphalian image of sovereign control and sovereign independence, both in domestic and in international affairs, remains a potential source of instability for the regime. This remains the case especially as the Kremlin continues to use democratic forms, yet another area where tensions between image and reality are part of the nature of the network state. After the Colour Revolutions, the US move towards democracy promotion, effectively understood as an external attack on the regime’s legitimacy, made it all the more paramount to insulate Russia from the need for external recognition by Western ‘significant Others’ and contributed to the alienation between Russia and the West. Within Russia, the tensions between the narrative and the realities of the network state both under Yeltsin and in the Putin/Medvedev era seem to be tolerated, given that an increasingly tightly controlled media environment allows for the simulations of successes as a strong international and domestic actor to a domestic audience. Not least, the recent warming of relations between Russia and Obama’s USA has led to increased opportunities to present Russia as a Great Power and an important international actor. Nevertheless, these tensions exist and indicate that the state elite networks remain unsure of their hold on power – the self-legitimizing narrative seems to fail to fully convince its authors and those to whom they are mainly directed.

6.5 Russia as virtual Great Power In the Kremlin’s reactions to the Colour Revolutions, the hyperWestphalian narrative did take on an anti-Western hue. However, this was a reactive stance, a protection against Western interference rather than a commitment to a ‘clash of values’ or even rejection of the West, as the current warming of relations with the US shows.

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This defensive stance needs to be understood within the context of the continuation of the network state under conditions of ‘virtual democracy’, as seems to remain the preferred option of the Kremlin. As outlined above, the basic parameters of this reaction – and the emphasis on sovereign independence – have survived the ‘duumvirate’, even though Medvedev has publicly denounced the actual term of ‘sovereign democracy’. In fact, it is only during Medvedev’s period in office that the narrative of Russia as a Great Power has really become productive, engendering actions and reactions in Russia and the West. Throughout the 1990s there had been attempts to project this narrative in international relations but, given Russia’s weakness, this projection was largely symbolic, relying on some token markers of Great Power status, like the nuclear arsenal and Russia’s seat on the UNSC. Interestingly, the hyper-Westphalian nature of this projection became stronger as the decade went on, even though this made external recognition of Russia’s Great Power status much more problematic. After the end of the Cold War, the now dominant Western powers had re-defined the basis of Great Power status, away from the Westphalian emphasis on sovereign independence, towards ideas of international community, where identification with liberal values is an essential precondition for recognition as legitimate Great Power (Hurrell 2006; Suzuki 2008). Given that external recognition by peers – admittance into a ‘Great Power club’ – is generally considered to be an essential element of Great Power status, the refusal by Russia to submit to this re-definition of what it means to be a Great Power is remarkable – also because it contrasts with the behaviour of China, which has been much keener to engage with the international normative order (Suzuki 2008). The persistence of Russia’s hyperWestphalian narrative in the face of external pressures demonstrates its centrality for the self-legitimation of Russia’s state elite networks. The West’s own terms for recognizing Russia as a Great Power do revolve, however, around the issue of antagonism or integration, inclusion and exclusion (Malia 1999). It is this framing in terms of inclusion and exclusion that has been sidestepped by the Kremlin’s insistence on the hyper-Westphalian narrative and its clear implication that Russia is indeed Europe – an older Europe, and perhaps even the true Europe. There are, therefore, multiple competing narratives about Russia in play in the interaction of Russia with its Western

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‘significant Others’. However, while these narratives are fundamentally contradictory, their interplay has in recent years helped to reinforce Russia’s hyper-Westphalian Great Power image. Undoubtedly helped by changing international circumstances such as the rise of China and the decline of American ‘soft power’ after 2005, the Kremlin has been more successful in projecting its own brand of Great Power-ness to the outside world – and, arguably, it has started to get recognition for this narrative by the West. Russia is once again described as a Great Power, and even a brief survey of Western public media in the wake of the events such as the Ukrainian ‘gas wars’, the invasion of Georgia or the April uprising in Kyrgyzstan suggest that the image of a hyper-Westphalian Great Power does now appear in European and American media representations of Russia. Western images of Russia are of course themselves rooted in long-standing narratives about Russia and its relation to the West (Neumann 1999). They do not just reproduce the images found in the discourses of Russia’s state elite – neither the Kremlin’s self-stylization as the preserver of international order, nor claims to the fundamentally benign nature of Russia’s hegemony in the CIS are accepted in the West. The image of Russia presented in the securitization of the energy relationship with Russia in the wake of the Russo-Ukrainian gas wars is rather more typical of Western narratives: a representation of Russia as a direct threat to European energy security shows Russia as a dangerous, uncontrollable power on Europe’s doorsteps, willing to use its energy capabilities for political ends. Drawing on images of Russia as ‘barbarian at the gate’, driven not least by the new EU member states, this was nevertheless a recognition of Russia as a major player and a potentially disruptive power in European affairs. Reactions to the invasion of Georgia made this narrative even more explicit. The invasion of Georgian territory was decried by both Western European states and the USA as blatantly in breach of the liberal order and appears on one level (also in Russian reflections on the event) as a clear example of a traditional Westphalian sphere-of-influence politics which does not hesitate to use force to underpin Russian claims. In spite of initial protests, this policy was affirmed by Western acquiescence and the burying of Georgia’s NATO membership hopes – as well as a public discourse in Western media coverage and analysis which implicitly or explicitly acknowledged Russia’s hyper-Westphalian Great Power identity.

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Interestingly enough, the Kremlin did appeal to liberal norms and the language of ‘responsibility to protect’ to justify its intervention (in a double move, one motive may have been the intent to unveil Western ‘double standards’ in the application of liberal norms), while at the same time referring to hyper-Westphalian language more generally when it talked about Russia’s right to regard the CIS as its sphere of influence. This recent reflection of Russia’s hyper-Westphalian identity in Western media does not necessarily lead to an increased Russian influence in European affairs – this influence is still limited, and is actively resisted, as the reactions to Medvedev’s recent proposal for a new European security treaty show. Nevertheless, it has helped to underpin the latest version of the Kremlin’s hyper-Westphalian narrative, stating that Russia is now indeed recognized as a Great Power and that this already is a multipolar world order in which Russia serves as one of the poles. However, a sense of fragility remains, and the Kremlin’s confidence has been shaken yet again by the effects of the global economic crisis on Russia. During the crisis it has become abundantly clear that the narrative could be easily undermined by the very real entanglements of Russia with the global economy and in particular the overt reliance of the Russian economy on the hydrocarbon sector. Western media reactions to the crisis in Kyrgyzstan, and especially hints that Russia had a concerted strategy to replace Bakiev and thus considerable power over its sphere of influence, show that the hyper-Westphalian narrative is still alive in Western images of Russia. Nevertheless, the tension between simulations of Great Power status and the real exigencies and limitations of Russia’s foreign policy remain.

6.6 Conclusion The hyper-Westphalian narrative is a central self-legitimizing discourse of the state elites but, as I have argued above, it also carries an inherent danger to this legitimation, given the inevitable tension between this narrative and the realities of the network state. These tensions underpin an intrinsic and ongoing crisis of legitimacy that could be resolved only by bringing the Russian state closer to its public identity – a choice that is implicitly acknowledged by the Kremlin, both in Putin’s initial state building programme and more recently,

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when Medvedev called for the eradication of corruption and a state-led modernization. A similar tension may be said to exist in the external relations of the Russian network state as a Great Power; after all, there exists a certain tension between the preservation of power and profit as the ultimate aim of the networks (Trenin 2006) and the projection of a Great Power identity that includes a commitment to unilateral action and behaviour likely to challenge Western perceptions of international order. One of the immediate consequences in the days following the invasion of Georgia in 2008 was a mass flight of FDI from Russia – proof of the ultimate contradictions that may exist between the desire to integrate into a globalized world economy and the enactment of hyper-Westphalian ideas about spheres of influence and unilateral pre-emptive action. Nor was this the first time that this contradiction had arisen: the confidence of foreign investors had already been shaken in previous years, during the Yukos affairs and other instances of the selective application of laws to drive out foreign investors, such as in the case of Royal Dutch Shell’s Sakhalin Island development. However, while this ultimate incompatibility is continuing to cause problems, for example hampering the attempts of Russian companies to acquire downstream assets in Western Europe, it is not entirely clear whether full integration into the world economy really is the current aim of the ruling networks. Just as the concept of ‘sovereign democracy’ serves to repeal foreign criticisms of Russia’s virtual democracy, it also serves the rent-seeking and profitmaking instincts of the network state – at least for the time being. As Celeste Wallander has argued, there is a strong tendency among the elite networks to ensure their hold on assets and their capability to distribute rents by only selectively integrating into the global economy. This is particularly the case in their relationship with the former Soviet space, where they can draw on existing transnational elite networks to acquire assets (Libman 2007; Wallander 2007). In this sense, and slightly ironically, the narrative of Russia as hyperWestphalian Great Power is underpinned by international network politics which once again have very little to do with the Westphalian model of sovereignty that is propagated in the narrative. It may well be that the global economic crisis has upset this balance, but it remains to be seen in which ways this is acted out. In all of this, the aim of the Kremlin in the post-Soviet space is certainly not imperial re-integration, alarmist commentators

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notwithstanding. Neither is it simply political control (which in any case is less far-reaching than often assumed – see the refusal by the Central Asian states to recognize South Ossetia, and the general declining attendance at CIS summits). As with network politics in general, there is no clear line of hierarchy in which ‘the state’ controls business activities for its own political ends. Instead, the enmeshment of public and private, and the identification interests of the state with the interests of ‘statespeople’ within the networks, served to produce a ‘fuzzy’, somewhat contradictory and predominantly reactive foreign policy at odds with the ‘grand strategy’ of a Great Power. Ultimately, the narrative of Russia as Great Power, fundamental though it may be for the self-legitimation of the state elite, is at the bottom of tensions in both the domestic and the international politics of the network state – tensions which mean that the present success in simulating the Russian state may be short-lived.

Notes 1. V. Putin,‘Russia at the Turn of the New Millennium’, Rossiiskaya Gazeta, 31 December 1999, and ‘Open letter to Russian voters’, Krasnaya Zvesda, 2 March 2000. 2. This may have to do with the way that even statements made at international events are projected back to a domestic audience – covered in state television and newspapers. Indeed, this domestic audience may be the main recipient of these statements, as will become clear below. 3. ‘Putin’s Prepared Remarks at 43rd Munich Conference on Security’, The Washington Post, 12 February 2007. 4. V. Putin (2004), ‘Annual Address to the Federal Assembly’, 26 May, available at http://www.kremlin.ru/text/appears/2004/05/71501.shtml. Accessed 6 June 2006. 5. Medvedev, ‘Go Russia’, 10 September 2009, available at http://eng. kremlin.ru/text/speeches/2009/09/10/1534_type104017_221527.shtml. Accessed 12 February 2010. 6. A. Rutskoi (1992). ‘Silnaia vlast’ – dla demokratii’, Nezavisimaia Gazeta, 13 February. 7. ‘Russia on the Turn of the New Millennium’ and ‘Open Letter to Russian Voters’. 8. ‘Putin Visits Mongolia, ORT News Item’, (www.lexis-nexis.com: BBC Summary of World Broadcasts, 14 November 2000). See also Putin’s 2005 interview with CBS anchor, published in Mezhdunarodnaia Zhizn’ and on the Kremlin website, in which Putin’s reference to a democratic world order is made in the direct context of his criticism of US unilateral action over Iraq. Putin interviewed by CBS Anchor Mike Wallace (9 May 2005);

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12. 13.

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available at http://www.kremlin.ru/eng/speeches/2005/05/09/0842_ type82916_87807.shtml. Accessed 12 October 2006. For other instances, see for example ‘Igor Ivano’s Remarks During a Visit to India’, Radio Rossiia, 3 May 2001. Itogi magazine, quoted in Herd (2005). ‘Putin Visits Mongolia, ORT News Item’, (www.lexis-nexis.com: BBC Summary of World Broadcasts, 14 November 2000). B. Makarenko, ‘Predposlednee Poslanie: Staryi Zhanr, Novyi Diskurs’ [ The Penultimate Speech: Old Genre, New Discourse], Politicheskii Zhurnal, vol. 17, no. 112 (15 May 2006). Migrainian, A. (2005), ‘The Upheaval in Andijan’, Nasledie Otechesto 13. July, available at www.integrum.ru (accessed 05 June 2010) Surkov, V. (2005). ‘Transcript of Speech by Vladislav Surkov at “Delovoi Rossii”, Business Forum’, 17 May, (www.integrum.ru). Nasledie Otechestvo, 13 July 2005. Makarenko, B. (2006). ‘Predposlednee Poslanie: Staryi Zhanr, Novyi Diskurs’ [The Penultimate Speech: Old Genre, New Discourse], Politicheskii Zhurnal 17 (112), 15 May.

7 Conclusions Vadim Kononenko

The state of networks, the networks of the state This volume was compiled with the aim of examining the processes of governance in contemporary Russia in order to understand the ambiguous nature of the post-Soviet Russian state. If, after a careful observation, it is obvious that the Russian state remains deeply problematic, how can one make sense of its diffuse and contractory workings? The preferred scholarly tradition when answering these question and tackling the elusiveness of the Russian state has been either to draw on the narrative of a strong state personified in the figure of the incumbent leader (who often demonstrates paternalist and/or reformist inclinations) or, as was the case in the early to mid-1990s, to embark on the transition paradigm. True, Russia’s history, with its moments of revolutionary change and reforms coupled with periods of stagnation, or zastoi, might be conducive to the persistence of these binary assumptions. However, taken separately or combined, these schools cannot adequately explain what the Russian state actually is, what its relation with society is, and where the ‘state-society boundaries’ lie (Mitchell 1991: 77). Indeed uncertainty about what is private and what is public in Russia and where to locate the state along this continuum remains a problem highlighted by every author of this book. This uncertainty also makes it difficult to understand in the most practical sense how certain policies, events and decisions emerge and relate to each other. 164

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The way that was chosen to address this problem by the authors of this book was to take the elusive character of the state in Russia to be the very key to understanding its nature. Instead of overcoming the uncertainty by attaching fixed definitions of a ‘strong’ or ‘weak’ state, ‘autocracy’ or ‘democracy’, the authors factored the very ambiguity and complexity of the state into their analyses. Indeed, this ambiguity is not a new phenomenon for students of Russia, nor is it exclusively characteristic of the post-Communist period of large-scale changes. Even during the Soviet period, when the state apparatus was encroaching on society in the most aggressive and ideological manner, the Soviet state arguably retained its ambiguous, network-like character. As Kryshtanovskaya and White argue in this volume, the late Soviet state institutions overlapped with various power networks. Some of these networks even survived the collapse of the state, only to re-emerge in the form of the powerful siloviki network under Putin. In this regard, one could argue that the difficulty of building democratic institutions in the post-Soviet Russia has not been due to authoritarian Soviet or primordial paternalist legacies, but also because of the resilience of the networks that have historically underpinned the body of the state. Indeed, the break with the specific practices of power exchange, informality and social networks have not been as severe as the change of political and economic conditions after 1991 would imply. As has been shown in this book by every author, networking between ruling elites is traceable at every level of policy-making. In some instances the familiar patterns of sectoral lobbying (for example, in Baev’s case of the military industries) reemerged despite the demise of a planned economy almost two decades ago.

Main themes and open questions With this in mind, the issue of the relationship between institutions and policy networks, and of the organization of the state in Russia, needed to be re-assessed. In doing so, the book traced three main themes: stability, economic development and political legitimacy. One such theme concerns the problem of reconciling the goals of maintaining the status quo/stability and the goals of development/ governability. As the network state is undeniably problematic and imbued with internal contradictions, the balance between various

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elite networks, becomes crucial to the status quo and stability of the current power-sharing arrangements and agreements. It is easy to see how maintaining the status quo – the dominant position of certain state networks and groups – is related to social stability (for example, the loss of power would lead to conflicts between the elite groups and a possible wider social turmoil). However, there remains a problem of governability of such a state and development of the society at large. How can such a system be governed and respond to the external challenges and internal demands for development and modernization? Is the status quo stability compatible with the goals of modernization? Finally, can development be implemented by networks given that the state instutions are chronically handicapped? It is worth pointing out that in the mainstream academic literature and in political discourse, both stability and the country’s development are seen to depend on whether the leadership demonstrates the capacity to foster the ‘strong state’, mobilize the population and steer reform from above. However, the empirical cases that this volume cites suggest that the Russian state, in its configuration as a network state, finds it difficult to combine these two objectives. Russia is stable in the sense that the possibility of a territorial collapse or independent movement in the regions seems unlikely, even though it was not unthinkable during the turbulent Yeltsin period. As Petrov argues in Chapter 4, the effect of the centre on the regions has increased significantly: ‘Instead of representing the regional elites’ interests at the centre as in the past, they are shifting closer to representing the centre’s interests in the regions. A highly centralized United Russia, fiscal centralism and the increase in the centre’s control over law enforcement and the judiciary serve as the main leverage’. The centralization process did not lead to centrifugal reactions on the part of the regional leaders – even when stripped of most of the quasi-feudal privileges of the Yeltsin era, the governors did not revolt against the centre. This goes to show that the process of Putin’s centralization has been more complex than building a hierarchical and authoritarian ‘power vertical’. Petrov notes that there was privatization of the managerial schemes and co-optation of regional leaders into policy networks, of which United Russia has played the central role. In some way, this move has secured stability and prevented the risk of territorial collapse. While the ‘power vertical’ might have always remained a blueprint and an element of Putin’s discourse,

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what the centre did manage to build was the balance of regional networks with the United Russia Party that served as an overarching elite alliance network. At the same time, governance and the prospects for development remain problematic, despite the seemingly stable political status quo. In particular this has been picked up in this book by Baev and Ledeneva. Both authors examine how the practices of governance emanate not from a coherent and autonomous state but rather from a series of state networks. Baev unravels the complex system of military reform and decision-making surrounding Russia’s intervention in Georgia in August 2008. According to his analysis, different power networks were involved in the decision-making process over the war in Georgia, which goes against the received wisdom that the decision on such a strategic issue stemmed from a coherent and self-contained dual Medvedev–Putin leadership. Likewise, when it comes to the process of military reform, argues Baev, one cannot understand it fully without taking into account the power struggle between the siloviki network, the military-industrial network and the high echelon of military policy. Ledeneva’s conclusion regarding the prospects for modernization reforms voiced by Medvedev and his associates in 2008–10 remains cautious. The informal networks that underlie Russia’s governance system both subvert the formal rules and at the same time make it possible for them to work. Change will be hard to achieve, but Medvedev’s proposals to modernize Russia in three areas – judicial reform, personnel appointments and anti-corruption legislation – are important to monitor. It appears that the problem that President Medvedev faces is what Ledeneva calls sistema – the dependence of Russia’s governance on unwritten rules and a particular logic of loyalty and transgression that counteracts the logic of transparency, efficiency and professionalism. Obviously, loyalty, non-transparency and a reliance on unwritten agreements are factors which have a great impact on the relationship between president and prime minister and Russia’s political system at large. The second theme of economic development was explored by Hanson who examined Russia’s response to the recession of 2008–9 calling it the ‘anti-crisis manoeuvres in the dark’. Although shaken by the crisis, Russia’s economy withstood its initial assault following the summer of 2008, given the financial resources accumulated in

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previous years. The crisis, however, might have fuelled internal dissension in the ranks, namely a conflict of interests among the state-business networks, posing challenges to the system from within. Hanson in his chapter shows how the elite networks responded to the crisis with examples of the establishment of state corporations by several oligarchs in order to ease their debt burden. As Hanson notes, ‘The tycoons were the ones seeking injections of cash from the state and were being drawn into deals in which they borrowed state money against the security of stakes in their own companies. In late 2008–early 2009 some observers were suggesting that once again the lenders could end up being the long-term owners, in a reversal from privatization to nationalization’. However, this increased state control or even ‘nationalization’, as some might call it may, in fact, turn out to be a redistribution of assets and property between the elite groups, similar to the situation which arose in the early 2000s following the economic crisis of 1998 and the first years of Putin’s presidency. Ironically, that crisis led to a reshuffling of the networks under the financial and institutional ‘carpet’ provided by the state. Finally, the third theme of political legitimacy of the network state was picked up by Ortmann. In her chapter, she points to a serious legitimation problem that the network state faces both in terms of addressing the Russian society and the outside world. The difficulty in sustaining an effective relationship between state and society is a problem for any state and government. However, as Ortmann points out, it is particularly difficult in the case of Russia because this relationship was based on projecting the image of the strong state – and garnering public support – rather than actually building one. The discursive strategy that the current elites in power opted for has been to present the state as strong and sovereign, an independent actor, both at home and abroad. This, as Ortmann calls it, ‘hyperWestphalian narrative’ has posed problems for the Russian elites not only because of a mismatch with reality but, more importantly, because it created a deep legitimation problem for the regime itself. While this book claimed that the Russian state cannot be fully comprehended without taking into consideration the role and place of ruling networks within it, it does not propose a mono-causal model of analysis. There certainly remains an open question about the relationship between institutions and policy networks. More precisely, the question becomes whether it is possible to say when

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established policy networks become institutions and when institutions of the state become private, in effect privatized, networks? For example, some of the networks of the Kremlin appointees in the regions – the Varangians – emerged as a result of the reform of 2004 replacing the regional elections of governors with direct appointment. The Kremlin position was that the governors, despite being elected, became too corrupt to fulfil their task; the Russian state was disintegrating because of the regional mafias and wide-spread nepotism. Moscow had to interfere lest the regions broke away. However, in the words of one US policy analyst, the actual outcome of the reform was that ‘Putin had replaced power-sharing agreements with Russia’s regions and direct elections with a network of his own emissaries or viceroys’ (Hill 2005). The controversy of this decision points precisely at the uncertainty over the relationship between networks and institutions. Had the Kremlin kept the previous institution of elections in place, the old networks would have eventually undermined Russia’s federalism, or at least this is how the leadership in Moscow perceived the threat. However, setting up a new institution of appointment of governors might have prevented the ‘flight from sovereignty’, but it certainly did not eliminate the practice of networking. Another theme that was outside the scope of the book but certainly is worth further research is the interaction between the elite networks in power and those networks that do not have access to the institutions of the state and do not have the authority to represent the state in the same way as the ‘statespeople’ have. One direction for such research would be the Internet and the Russian-language blogosphere. According to Yandex, the Russian search system, in the spring of 2009 the Russian-language section of the Internet included 7.4 million blogs. By the end of November this figure exceeded 11 million. A million posts and comments are produced daily (Yandex 2009). It is often said that the Russian Internet, or Runet, has become a refuge for independent voices and opinions. However, media reports point out that the situation is changing rapidly as the Kremlin-associated networks attempt to control or at least influence debate on the Internet with the creation of ‘abuse team’ monitoring. (http://www.nytimes.com/2006/10/25/ opinion/25iht-edmorozov.3280324.html; accessed10 December 2010). Although the impact of the blog networks on Russia’s politics is uncertain and difficult to estimate, the point here is that the social-political scene is very complex and can hardly be understood

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through narrow models. As one scholar puts it succinctly: ‘probably the most striking feature of the Russian blogosphere is a paradoxical mixture of the public and the private. Most blogs are publicly accessible but very few follow the norms of public discourse; the dominant mode is informal in-group communication. Informality, symbolic action and laughter are the key aspects of the Russian blogosphere’.1

Beyond the Russian network state: implications for future research Although this book does not draw such parallels, the discussion presented here has wide implications for the way other post-Soviet states are being analysed and the uses of networks as a concept in political science and area studies in general. Russia is certainly not unique in demonstrating tendencies of network politics, or the fusion of state institutions and elite networks. It is beyond the scope of this book to assess whether and to what extent states in Central Asia, or Ukraine or Belarus can be analysed as network states. However, a central point in this book was about how tracing the nodes and connections within ruling networks made the analysis of state policies more comprehensible. There is also a point about the way the state is approached in the post-Soviet context, whereby a tension between institutions and elites is always depicted, be it a ‘transitologist’ or ‘neo-patrimonial’ framework of analysis. This tension is more an assumption conditioned by the normative stance of the ‘Weberian’ strand of political science. However, as the Russian experience demonstrates, the tension does exist but it is located elsewhere, for example in the incongruities between rhetoric and actual decisions, conflicts between networks, and inefficiency of governance. When it comes to the dynamics between networks and institutions, the answer is always ambiguous and in many ways depends on what is assumed by ‘the state’ in the actual research. What this book has aimed to make clear is that we have to be careful when choosing our concepts of analysis and be aware of their limitations when discussing complex social and political developments. In the case of the current Russian state it might simply be inadequate to attach to it such labels as ‘transitional’, ‘neo-feudal’, or ‘patrimonialist’. These categories are essentially contested and

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should be seen as such inasmuch as they are part of the dichotomous debate between scholarly approaches.2 In this way, the discussion in this volume, although centred around the post-Soviet Russian state, contributes to a larger debate in political science on the problematics of the concept of the state and its analysis in various contexts.

Notes 1. G. Eugine. ‘Understanding the Real Impact of Russian Blogs’. http:// jeffersonhosting.info/projects/russia/node/513. Accessed on 17.01.2011. 2. A good example is an article recently under the title ‘Pre-Modern StateBuilding in Post-Soviet Russia’ (Cappelli 2008). The author argues that ‘Transitology ’, or the study of transitions from communist rule to what was expected to be applications of Western-style democracy, suffered from fatal misapprehensions that ensured its failure to explain, predict or effectively guide the developments that took place during the 1990s. In particular, it lacked a historical dimension and it misunderstood the proper function of the state in establishing a political regime. While criticizing the transitology paradigm, Cappelli insists that historical analogies with ‘feudal’ and ‘absolutist’ political regimes are helpful in explaining the task that confronted Putin on assuming office as the designated heir of the chaotic legacy of Boris Yeltsin. The assertion of state power under Putin’s leadership should not be seen as an authoritarian reversal that followed a democratic wave, but is comparable with the pre-modern process of statebuilding that took centuries following the decline of feudalism in Western Europe.

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Index Page numbers in italics indicate tables. Not all cited authors are listed in the index; readers requiring a complete list of cited works and authors should refer to the bibliography. Abkhazia 64 Adachi, Y. 58 administrative reform 49 Adomeit, Hannes 139 Aeroflot 125–6 Aidis, R. 58 Airborne Troops 70 aircraft building 73 airlines 125–6 ambiguities 3–6, 165 Ambrosio, T. 156 Andropov, Yuri 24 ‘anonymous’ dealings 16 anti-corruption committee 42–3 anti-corruption initiatives 50–2 anti-corruption legislation 51 anti-crisis measures 127–33 appointments, personalizing 43–4 Armaments Programme 63 authoritarian regimes, threat of private business 28 autonomy 5, 140, 141, 149 backhanders 45 Baev, Pavel 9, 16, 62–77, 165, 167 Baker, P. 24 Baluyevsky, Yuri 67 banks 48 Barker, Rodney 146 Barsukova, S. 39 Bashkortostan 107–8 Baturin, Yu.M. 42 Belkovskii, Stanislav 117–18, 121 Beslan crisis 25 ‘big battalions’ 71 blackmail 43

blat appointments 43–4, 56–8 blogs 169–70 Boldyrev, Vladimir 66 Brezhnev, Leonid 20–1, 23, 24 Brezhnev, Yuri 20–1 bribes 47–8 BRICs 142, 143 brokers 48 Burchell, G. 12 bureaucracy, maintenance of privilege 22 business elite groups on boards 32–3, 32, 33 and government 57 List A companies 29–30 lists 29–30 officials on boards 31 politicians in 30–1 sectoral distribution 30 and state 15–16 terms of operation 27 as threat to authoritarianism 28 business corruption, measuring 46–7 business-state relations 113–35 see also state-business network anti-crisis measures 127–33 corruption 116–18 institutional arrangements 117 liberal ideal of 114–16 oil industry 118–19 politicians in business 118–19 Rosneft’ and Gazprom 119–20 ‘Russian BHP-Billiton’ scheme 126–7 Russneft 120–2 182

Index

state corporations 122–6 summary and conclusions 133–5 cadres 42 career mobility 21 career patterns 21, 24 career specialization 21 Carnegie Moscow Centre 105 Carothers, T. 12 cash transactions 48 Castells, M. 10 Central Committee, under Gorbachev 21–2 centralization 11–12, 13, 25–6, 62, 81, 82–4, 166–7 centre, effect on regions 81 Chechnya 4, 8–9, 142 checks and balances 20 Chemezov, Sergei 123, 124, 128, 132 Chepurenko, Alexander 46–7 Chernov, A. 56, 57–8 chief federal inspector, diminished role 105 Churbanov, Yuri 20–1 CIS 155–6 civil society, construction 89 civiliki 52–3 code of conduct, state officials 51 Collier, D. 11 colloquialisms 42 Colour Revolutions 155–6, 157 Colton, T.J. 42 Command of the Army 65–6 communism, to post-communism 22–4 Communist Party 19 companies see business competitive authoritarianism 12 complexity 165 of network state 14 social-political scene 169–70 compromising material 43, 44 conflicts, internal 4 constitutional crisis 4 continuity, of power 23–4 contradictions, internal 3–4

183

corporate responsibility 49 corporatization 83 corruption 4, 46–9, 52, 116–18 criminalization 4 cronyism 115 Daucé, F. 39 Davydova, M. 47, 52 decision-making 6–7 Defence Ministry 62 dekorenization 81 democracy 11 ‘democracy with adjectives’ 11 democratic Great Power 153 democratization 21 denunciations 43 depolitization 83 deputatskie services 47 Deripaska, Oleg 113, 120–1, 122, 126–7, 132 derzhavnost’ 144, 149, 150–1 development, after communism 2 disinstitutionalization 83 disorder 3, 4–5 domination, and power 12 duality, goals and practices 3–4 Dymarskii, V. 54 economic changes 22 economic development 167–8 economic rationality, sistema 45 Edinaya Rossiya 9 Egorova, Olga 54 Elder, M. 57 elections, 1989 and 1990 23 electoral system, changes to 25 elite children 20–1 elite groups 5, 32–3, 32, 33 elite networks changed 143 position in state 6, 10 during Putin administration 14–15, 28–35, 155 regional 104–5 transnational 161 elite studies, focus 41

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Index

emotional ties, sistema 45 entrepreneurship 47 envoys 25 European security treaty 144 Fadeyev, Valery 89 fear, sistema 44–5 federal agencies, lack of coordination 82 federal reforms 83 federalism 8, 25 Federation Council 25 feudalism 12 financial crisis, 1998 153, 167–8 Foglesong, T.S. 53 folk wisdom 42 forced cooperation, sistema 44–5 forced payment 52 foreign investment 161 foreign policy 144 Foucault, Michel 12–13 fractionalism 19 functions, of state 8–9 future research 170–1 G7/G8 151 Gambetta, D.H. 43 games, strategic 12 Gazeta.ru 50, 52 Gazprom 7 and Rosneft’ 119–20 General Staff 62 Georgia, war with 16, 64–7, 144 Glasser, S. 24 Global Navigation System (GLONASS) 74 ‘Golden List’ 58 Gorbachev, Mikhail 21–2 Gorlizki, Y. 53 goskorporatsii 116, 122–6 gosudarstvennost’ 144, 149, 150–1 gosudarstvennoye stroitel’stvo 4 governance 167 and government 5 non-transparency 43 practices and processes 12

within state 9 through network state 13 government see also state and business 57 and governance 5 institutions of 1–2 governmental technologies 12 governmentality, Foucauldian view 13 governors appointment of 94–101, 97 candidate nominations 98–9 career trajectories 93–4 changing role 25–6, 88, 90–1 portraits 91–4 Great Power 71, 139–62 see also hyper-Westphalian Great Power network state as 154–7 overview and background 139–40 precarious status 143–4 recognition as 158–9 redefinition of 158 Russia as 17 state-building 141–6 summary and conclusions 160–2 virtual 157–60 Guariglia, A. 39 Gudkov, L. 52 Gurvich, Evsey 133 Gusinsky, Vladimir 27 Gutseriev, Mikhail 120–1 Gutterman, S. 54 habit, sistema 45 Hanson, Philip 15–16, 113–35, 142, 167–8 harassment, of businesses 52 Heathrow Airport 115 Hendley, K. 53 High Command 64–7 Hignett, K. 4 Hill, F. 169 Holmes, L. 146 horizontal rotation 81, 105 Hurrell, A. 158

Index

Huskey, E. 43, 53 hybridization, public and private sector 144 hyper-Westphalian Great Power 145, 147, 152–61 see also Great Power hyper-Westphalian narrative 154, 156, 157, 158, 160, 168 identity domestic and international 142, 145–6 legitimacy and the network state 146–54 ideologies, competing 148 idiomatic expressions 42 Illarionov, Andrei 116 Ilyukhin, Victor 42–3 implicit contract 20 INDEM 47–8 independence 149 Independent Institute of Social and National Problems 57–8 influence, informal 55–6 informal economy 39 informal influence 55–6 informal networks, as essential 46 informality 15 instability 25, 156 institutional brokers 48 institutions 13, 169 institutions of government 1–2, 88 interaction, patterns of 15 internal conflicts 4 internal contradictions 3–4 international community 158 international role 151 Internet 169–70 Irkutsk 106–7 Ishayev, Viktor 102–3 Iusupova, D. 43, 47 Ivanov, Anton 54 Ivanov, Sergei 7, 30, 67 Ivanov, V. 26 Izvestiya 27

185

Jessop, B. 13 judicial institutions, corruption 51–2 Kabanov, K. 51 ‘Kavkaz-2008’ military exercises 64, 66 Khamitov, Rustem 108 Khloponin, Alexander 103–4 Khodorkovsky, Mikhail 27, 38, 119 Khrulev, Anatoly 66, 67 kickbacks 39, 45, 46, 47 Kim, B.Y. 39 Klose, K. 38 Kolmakov, Aleksandr 66 Kommersant 27 kompromat 43, 44 Komsomolskaya Pravda 56 Kononenko, Vadim 17 koshmarit’ 52 Kosovo 151, 153 Kosyrev, D. 50 Kozyrev, Andrei 149 Kremlin, relations with oligarchs 26–7 Kryshtanovskaya, Olga 14–15, 19–38, 21, 37, 142, 165 Kudelina, Lyubov 69 Kudrin, Aleksey 128 Kulikov, V. 53 Kvashnin, Anatoly 64, 71 language, use of idioms 42 Laruelle, M. 152 Latynina, Yulia 113 law enforcement, corruption 51–2 leadership, dual 17 Ledeneva, Elena 15, 39, 39–59, 43, 44, 46, 51, 167 legal-rational state 1–2 as ideal 11 legislation, anti-corruption 51 legitimacy 9, 140, 160, 168 identity and network state 146–54 Leira, H. 12 Levada Center survey 100

186

Index

Levitin, Igor 126 Levitsky, S. 11 liberal democracy 149 liberal ideal, of business-state relations 114–16 liberal values 158 Libman, A. 161 Light, M. 149 List A companies 29–30 lobbying 49, 74 loyalty 44 sistema 45 Maikova, Liudmila 53–4 Makarov, Nikolai 65 Makarov, Sergei 66 Malia, M.E. 158 manual control 10 maritime resources and power 73–4 Markwick, R. 12 Mawdsley, E.M. 22 measurement difficulties, of network state 14 measuring, business corruption 46–7 Mechel 128 media, state control 145 Medvedev, Dmitri 9, 15, 16, 30, 53 alleged split with Putin 129–31 anti-corruption 49–52 appointment of governors 95–9 blat appointments 56–8 as Commander in Chief 72 dual leadership 17 Gazprom 119–20 network 36 network directorate 35–6 rhetoric 62 Russia as leading economy 145 war with Georgia 65, 67 middle class, rent-seeking 47 military districts 62 Military Doctrine 63, 77 military hierarchy, competing networks 63 military reform 62–77, 143–4, 167 competing networks 71–5 context and overview 62–3

criticism 69 financing 69, 71–2, 75 resources 63 role of Serdyukov 67–71 summary and conclusions 75–7 war with Georgia 64–7 ‘missiles-R-us’ 71 Mitchell, T. 164 mobility, career 21 mobilization, of population 9 modernization 13, 39, 49, 71–2, 134, 167 Moltenskoi, Aleksandr 66 Naftna Industrija Srbije (NIS) 7 national interest 7 National Security Strategy 63, 72, 77 Navaro-Yashin, Y. 3 neo-patrimonial state 2 nepotism 20–1, 43 network directorate, formation 19–38 communism to postcommunism 22–4 consolidation 24–8 extent of directorate 35 Medvedev presidency 35–6 overview and background 19–22 state-business network 28–34 summary and conclusions 37–8 network directorate, ‘self-stabilizing’ mechanisms 37–8 network state 1, 6–7 as analytical category 10–14 challenges to 17 conceptualization 2–3 dualism of 5 as Great Power 154–7 identity and legitimacy 146–54 measurement difficulties 14 power and profit 161 and state-building 141–6 as way of organizing governance 13 networks 6 see also sistema informal 46 as institutions 169

Index

military hierarchy 63 and military reform 71–5 potential for change 15 region-based 15 regional management 87, 104–5 Neumann, Iver 141–6, 152 Nezavisimaya gazeta 28 Nogovitsyn, Anatoly 66 nomenklatura 23–4 non-transparency 39 North Caucasus 103 NTV television 27 ‘O poryadke’ 25 ‘O vnesenii’ 26 ‘Ob utverzhdenii’ 29 obedience, sistema 45 OECD, Economic Survey of the Russian Federation 2006 46 oil industry, business-state relations 118–19 Oleinik, Anton 41 oligarchs 26–7 oligarchy, self-stabilizing 20 ‘Open Letter to Voters’ 26 Operational Department of the General Staff (GOU) 65–6 Ortmann, Stephanie 17, 139–62, 144, 145, 148, 153, 168 otkat 45, 46 ownership, of companies 117 Panfilova, E. 43 Pannier, B. 9 parad suverenitetov 8 parade of sovereignty 8 party system, reform of 3–4 Pastukhov, V. 53 paternalism 10 patrimonialism 2, 12 patriotism 27 patterns of interaction 15 perestroika 23, 24 personal contacts, public administration appointments 56–7 personal vouching 44

187

petrodollars 100 Petrov, Nikolay 15, 81–110, 166–7 philanthropy 27 policy-making 7 political competition, simulation of 145 political parties, ban 88–9 politicians alleged hidden wealth 117–18 in business 30–2, 32 involvement in business 118–19 ‘Polozhenie o Gosudarstvennom’ 25 polpredy 25, 101–4 Polyansky, Dmitri 38 poruchitel’stvo 44 Potanin, Vladimir 126–7 power continuity 23–4 and domination 12 power elites 143 power verticals 81–2, 83, 89–90, 142, 166 pragmatism, sistema 45 Prague Treaty 72 presidential envoys 101–4 Price Waterhouse 46 Primakov, Evgenii 152–3 Primakov, Sergei 151 private interests, and state interests 155 private wealth 22 ‘Project Putin’ 153 promotion procedures 42–3 Promptova, O. 56, 57–8 Przeworski, A. 25 public administration 39–59, 56–7 Public Chamber 27 public-private partnerships, rentseeking 119–22 punishment 39–40 Putin, Vladimir 2, 3–4, 5, 6–7, 8, 28 alleged hidden wealth 117–18 alleged split with Medvedev 129–31 appointment of governors 94–5 attitude to military 64

188

Index

Putin, Vladimir – continued centralization 11–12, 16, 62, 82–4, 100, 166–7 consolidation 24–5 democratic Great Power 144–5 dual leadership 17 military financing 73 ‘Open Letter to Voters’ 26 paternalism 10 popularity 155 priorities 50 Second Chechen War 71–2 second term 27, 28 siloviki 33–4 Sovietization 37 state-building 141–2 state companies 28–9 war with Georgia 65, 67, 144 questions

165–70

Radaev, V. 39 Rakhimov, Murtaza 107–8 re-centralization 10 recession 127–33, 167–8 recommendations, personal 44 recruitment procedures 42–3 ‘red-brown coalition’ 147, 149 reform, of party system 3–4 regime politics 143 region-based networks 15 regional management appointment of governors 94–101, 97 Bashkortostan 107–8 centralization 89–90 centre-region relations 90–1 destruction of foolproof mechanisms 88 effect of reforms 100–1 etatization and primitivization 88–9 evolution of system 84–90 governors 91–4, 169 Irkutsk 106–7 managerial network 86 network patterns 87

networks and cadre rotations 104–5 overview and background 84 presidential envoys 101–4 summary and conclusions 108–10 top-down and bottom-up 86–7 verticalization 88–9 regional parties, ban 88–9 regions 81–110 see also regional management centralization 82–4 context and overview 81–2 effect of centre 81 Reiman, Leonid 117 renewal, of elite networks 14–15 rent-seeking 46–7, 116, 119–22, 143 research focus on institutions 1–2 future 170–1 Reuters 46 Rigby, T.H. 20 Rosavia 125–6, 128 Rose, R. 44 Rosneft’ 116 and Gazprom 119–20 Rosoboroneksport (ROE) 124–5 Ross, Cameron 89 Rostekhnologii 116, 122–6, 134 ruchnoje upravlenije 10 Rukshin, Aleksandr 66 rules, non-transparency 39 ‘Russian BHP-Billiton’ scheme 126–7 Russian election, 1990 23 Russian Federation 147–8 Russian High Command 62 Russian reality 3 Russneft 120–2 Rutskoi, Aleksandr 148 Saakashvili, Mikhail 64, 67 Sakwa, Richard 2, 3–4, 27, 125, 142, 143 Satarov, G. 47–8, 116 Schism Theory 129–31 scholarly perspectives 164–5 Sechin, Igor 30, 113, 119–20, 122, 127

Index

Second Chechen War 71 security policy 16 ‘selection of cadres’ 42 Seleznev, Gennadii 121–2 self-legitimation 140, 146, 160 self-recruitment 20 ‘self-stabilizing’ mechanisms, network directorate 37–8 self-stabilizing oligarchy 20 separation of powers 49 separatism 8–9 Serdyukov, Anatoly 65, 67–71, 75–7 Sergeev, Igor 71 set-ups 43 Shamanov, Vladimir 66, 67, 70, 77 Shearman, P. 144 Sheverdiaev, S. 43 Shevtsova, Lilia 4, 41 ship building 73–4 Shlapentokh, V. 12, 46 Shvartsman, Oleg 133 Sieca-Kozlowski, E. 39 siloviki 28, 33–4, 37, 52, 63, 85, 91, 125, 165 sistema 15, 39–59, 167 see also networks anti-corruption initiatives 50–2 blat appointments 56–8 defining 41–50 reasons for complying with 44–6 summary and conclusions 58–9 ‘telephone justice’ 52–6 small and medium size enterprises (SMEs) 48, 57–8 Sobyanin, Sergei 30–2 social contract 100 Solomon, P. Jr. 53 South Ossetia 64, 144 sovereign democracy 156, 161 sovereign independence 144–5, 151–2, 158 sovereignty 8, 9, 10, 12, 140 Soviet election, 1989 23 Soviet system 19 Sovietization 37 Space Forces Command 74 special interests 5, 7

189

specialization, career 21 stability 165–70 Stack, G. 52–3 Stanovaya, T. 50 state see also government and business 15–16 as governance 5 images of 145 importance of 7–10 independence 149 under-institutionalization 144 scholarly perspectives 164–5 understandings of term 1–2 vision of 141 weakness 5, 148, 151–2, 158 state-building 4, 141–6 state-business network 28–34 see also business-state relations state/business nexus 6 state companies 28–9 state corporations 116, 122–6 State Council 25 state holding companies 122–6 state interests, and private interests 155 state officials, code of conduct 51 state-private partnership 7 statespeople 3 Steen, A. 6 strategic games 12 Strategic Missile Forces (RVSN) 71 strategic patrols 73 suspended punishment 40 Sussex, M. 144 Suzuki, S. 158 symbiosis 5 ‘tax optimization’ strategies 48–9 taxation 39, 48, 128 technologies, governmental 12 ‘telephone justice’ 52–6 terrorism 8–9 The Economist 115 themes 165–70 Tilly, Charles 46 Tolstykh, P.A. 49 Tolz, V. 148

190

Index

Tompson, W. 48 tradition, sistema 45 transition paradigm 11, 164 Trenin, D. 160–2 Trotsky, Leon 22 Tskhinvali 65, 66 Tuminez, A.S. 148 under-institutionalization 144 United Aircraft Corporation (OAK) 7 United Nations Security Council (UNSC) 151 United Russia 9, 25 United States, weapons parity 72 unwritten rules 40 see also sistema Usmanov, Alisher 27 USSR, collapse of 40 ‘Utopian Westernism’ 149 Valyavina, Elena 54 Varangians 85, 97–8, 169 Vedomosti 51, 52, 121 Veksel’berg, Viktor 27 Viktorova, L. 56 Vinnichenko, Nikolai 36 virtual democracy 161

VTsIOM 56 vyssheye komandovaniye, structures 62 Wallander, Celeste 161 weakness, of state 5, 148, 151–2, 158 wealth, private 22 Weber, Max, idea of state 1–2 Wedel, J.R. 146 West, interactions with 149–50, 158–9 Western images 159 Westphalian state 141–2, 145, 147 White, Stephen 14–15, 19–38, 21, 22, 37, 142, 165 Wilson, A. 140, 145 world order, multipolar 153 Yakovlev, A. 143 Yamshanov, B. 54 Yandex 169 Yeltsin, Boris 2, 22–4, 40, 146, 147–9, 150 Yukos 119–20 Zhirinovskii, Vladimir 56 Zhvanetskii, M. 42 Zyuzin, Igor 129