Russia's Dead End: An Insider's Testimony from Gorbachev to Putin

by Andrei A. Kovalev

  Were there any free individuals in the USSR? No. But the prisoner in the GULAG and a member of the party-state nomenklatura, for example, experienced different kinds and degrees of servitude.

  Paradoxically, those with the least spiritual and material needs may be considered the freest. How may we compare the freedom of hereditary alcoholics (of which, regrettably, there is no small number in Russia), whose only interest in life is their bottles, with the freedom of a scholar, a writer, or an artist? Even the highest-ranking Soviet officials were slaves to Marxist-Leninist-Stalinist dogmas, to the Iron Curtain, to political investigations, to the benefits extended to them in connection with their duties.

  From this perspective, the nomenklatura is quite an interesting phenomenon. To reach this level one had to ascend the lengthy party-bureaucratic career ladder. For the overwhelming majority this was impossible without immersing themselves in the dogmas of the communist quasi-religion—in the spirit of hypocrisy and sanctimoniousness—or, at the very least, adapting to it. The slave thus becomes a slaveholder yet remains in a state of slavery (and even the members of the highest-ranking Soviet leadership were in such a position). What could be more unnatural and more dangerous? Let us not forget that we are speaking of the very people who ran the country or held responsible positions during perestroika and of their successors.

  The mild democratic reformation that was perestroika was doomed to defeat because it was top down, carried out by a narrow circle of the leadership. Moreover, to a significant degree the reformers themselves were dogmatic and set themselves unrealizable goals, including the humanization of the Soviet regime by relying on the CPSU. To no lesser degree perestroika could not be implemented successfully due to the absolute power of the repressive organs, the CPSU and the KGB, in the first place. Even though they were the most odious manifestations of the Soviet totalitarian system, though, they were far from monolithic.

  Here I should emphasize that perestroika alienated many people because it coincided with the start of the antialcohol campaign.7 Also, it proclaimed many incomprehensible slogans such as “Acceleration,” put forward vague goals and tasks, and instituted glasnost, or “transparency,” which unmasked the sins of the past as well as of contemporary Soviet life.

  The political struggle over the “democratization of Soviet society” unfolded primarily at the ideological level. Was “socialist democracy” a good thing? Was free enterprise compatible with Soviet-style socialism? Was a multiparty system permissible in “monolithic” Soviet society? Could a “formal approach” to human rights be adopted in the USSR? Could the USSR provide freedom of choice to the “people’s democracies” (Eastern bloc countries) and reach agreement with the “imperialists”—for example, on problems of disarmament—and cooperate with them to neutralize Iraqi aggression against Kuwait? These were the questions that engaged people. It was basically at this level that the struggle between dogmatism and common sense was waged.

  The fall of the Berlin Wall symbolized the end of the Cold War, but as subsequent events showed, it did not write finis to it. The politicians who came to power in Russia after the fall of the USSR, starting at the top with Boris Yeltsin, were insufficiently competent and inadequately prepared for the challenges they faced. Consequently, they were unable to work for the interests of the nation either in foreign or domestic policy. This occurred in large measure because of the glaring gap between the pro-Western aspirations of the liberals in Yeltsin’s entourage and the constantly growing mood of revenge in society and in the state apparatus. This mood characterized not only the military and the special services but also significant numbers of diplomats, politicians, and economists.

  Yeltsin, as well as most of his democratically inclined associates, had only a very remote understanding of Western values. This was to be expected considering their life experience, education, and upbringing in Soviet times. Naturally, on the crest of the political struggles of the 1980s, when a man who until quite recently had been the first secretary of the Sverdlovsk regional Communist Party organization was thrust into the national leadership of the democratic opposition, some things had to be explained to him. One must give Yeltsin his due: he did grasp some of what he was told but not enough for a deep understanding of what was going on in Russia and abroad. The liberal system of coordinates was quite unfamiliar to him. An important question is, who exactly prepared Yeltsin for the role of democratic leader? Even if one dismisses any conspiracy theories, even if the persons who pulled his strings were progressive, they were still Soviets with the characteristic aberration of political outlook that label implies.

  The special services, including agents who had penetrated every layer of society, also played an important role in Yeltsin’s ascent. Such agents are in a very distinct category. The overwhelming majority of them do whatever they consider necessary in discharging their specific functions or while awaiting new instructions. This is why many of them are not merely successful but also brilliant, especially since they are assisted by one of the most powerful special services of all times and places. When they get a new set of orders, they don’t ask whether it is from a committed democrat, a liberal, a state official, or a communist. Under Gorbachev and Yeltsin, these “sleeper agents” objectively did quite a bit of good. Then they were awakened. Those who had only recently stood on the barricades of democracy, either literally or figuratively, and even helped to build them now began to destroy them even more effectively.

  In his memoirs, Alexander Korzhakov, the former chief of the Presidential Guard, which later was elevated to an independent ministerial-level department—the Presidential Security Service—made a strikingly frank acknowledgment of the role of special service agents in contemporary Russia. As a man who knew very many agents, he wrote, “If a miracle occurred and a list appeared in the press just of those agents whom citizens knew by sight, a political crisis would occur in the country. To the questions of who our leaders are, who is governing us, the straightforward answer would be—agents of the special services.”8 The fundamental sources and vectors of influence upon Yeltsin are clear. What is not at all clear, however, is why this scandalous confirmation by such a well-informed source remained practically unnoticed. Perhaps from squeamishness? Not very likely. Perhaps from the new ruling ideology of “political correctness” that, in the name of decency, permitted one to close one’s eyes to the most scandalous things, especially when it was advantageous to do so?

  Speaking of Yeltsin’s presidency, it should be pointed out that at least in his outward action, the “early” Yeltsin appeared different from the “later” Yeltsin. His authoritarian ways, initially clearly visible only within the halls of power, were illuminated during the political crisis of September–October 1993, pitting Yeltsin’s executive authority against a legislature dominated by his opponents. This confrontation culminated in Yeltsin’s order to shell the Supreme Soviet on October 3, resulting in numerous casualties. This action unambiguously signaled a retreat from democracy. It was partly to be expected with the popularity of communists and fascist nationalists in Russia, on the one hand, and the unwillingness of Yeltsin and his circle to give up power, on the other. One may confidently mark the beginning of the authoritarian period in post-Soviet Russia from this date. One also should not lose sight of the fact that the members of the new Russian elite, upon which Yeltsin was extremely dependent and whose foundation was agents of the special services, would never have relinquished their power and wealth. For the time being, Yeltsin was the guarantor of that power and wealth.

  The outcome of the ill-considered cascade of privatization that commenced from the start of Yeltsin’s rule was the rise of a kleptocracy. (However, it is also possible that the kleptocrats skillfully carried out privatization in their own interest.) Along with the new secret police, with which it frequently overlapped, the kleptocracy squeezed out the very persons who had brought Yeltsin to power—namely, the democratic leaders of the late 1980s and early 1990s. The kleptocrat
s attempted to fashion a democratic leader out of yesterday’s party hack. By December 1992 the liberal government of Premier Yegor Gaidar had ceased to exist. After the shelling of the Supreme Soviet in October 1993, democratic leaders continued to be eliminated from Yeltsin’s entourage and to lose influence. Deprived of his democratic entourage and constantly in need of guidance (or support) because of his incompetence, Yeltsin fell under the influence of the siloviki and the nouveaux riches, who had no interest in promoting democracy in Russia. All they needed (and what they still need) was the semblance of democracy. Still Yeltsin evidently had absorbed a lesson or two from his tutors during his transformation into an ambiguous symbol of Russian democracy. For example, there were no serious assaults on freedom of the mass media during his administration. During this period, however, gross and massive violations of human rights began, first with respect to Chechnya. The First Chechen War started on December 11, 1994, and was not concluded until the fall of 1996. During the war the entire spectrum of rights, including the right to life, was destroyed for the inhabitants of this republic. From the outset, political rights were effectively suppressed by Yeltsin’s authoritarianism.

  During Yeltsin’s term the symbiosis of all levels of power, business, and the criminal world occurred. This was particularly dangerous, given the criminalization of the law enforcement organs that were boldly penetrating the highest levels of state power. They succeeded in doing this in the late Yeltsin era. Corruption at every level became the basic feature of Russian power. Everything was for sale. In Yeltsin’s first term, government officials already began selling their services to business. A few words from the “appropriate” minister conveyed to a particular firm cost tens of thousands or even hundreds of thousands of dollars. Press secretaries sold the rights to interview their bosses. Even deputies’ inquiries had their price. Corruption penetrated medicine, education (including secondary education), and all aspects of life. However, the full-scale flowering of corruption came after 2000.

  Under the distinct influence of the special services, Yeltsin and his entourage viewed Russia as a Russian Orthodox country and consequently interpreted religious freedom narrowly as freedom for Russian Orthodoxy alone. Right after the collapse of the USSR, this led to denying the rights of those who were not Orthodox.

  Yeltsin’s most egregious mistake was underestimating the human factor in pursuing his reforms. The Russian people, hoping to better their conditions quickly, endured massive impoverishment and lost all their savings early in Yeltsin’s rule. His entire presidency was marked by flagrant and massive destruction of a wide range of socioeconomic rights, with wages withheld over many months. The manipulation of election results also began during Yeltsin’s presidency. By the time Putin came to power, people were already so accustomed to such manipulation that they no longer reacted negatively. What developed in Russia under Yeltsin was a system of rule that may be called authoritarian kleptocracy, which transformed bandit capitalism into oligarchic capitalism—that is, a system fully controlled by, or at least entirely dependent upon, a narrow circle of persons who ran the country.

  The ruination of minds, which the Soviet writer Mikhail Bulgakov called Russia’s main disaster after the Bolshevik coup d’état, brought about the further disintegration of the country. In turn, it provoked a crisis of Yeltsinocracy and the further powerful onset of revenge and reaction.

  Fortress Destroyed

  A strange fate befell Russia in the twentieth century. From the time of Lenin, the country prepared to fight the whole world. Initially Russia was supposed to be the launching pad for the “world proletarian revolution.” Later on even more confusing reasons were offered. The entire history of the USSR until Gorbachev’s reforms was directed toward achieving impractical goals. Naturally this led inexorably to collapse. The senseless arms race not only sucked dry the material resources of the USSR but also its intellectual resources. The normal development of nonmilitary production became impossible.

  In trying to make the USSR an impregnable fortress, the Soviet leadership destroyed it. The decisive loss in the Cold War during the years of stagnation (1964–85) set the stage for the USSR’s repudiation of traditional, Soviet aggressive messianism during the Gorbachev era. Orthodox communists viewed this sensible adjustment in Soviet foreign policy as a retreat from “Leninist norms” and as a surrender to the “imperialists.”

  After the breakup of the USSR, Gorbachev’s thorough and rational approach to changing the Soviet role and position in the international system devolved under Yeltsin to the absence of any real foreign or domestic policy. This led to the complete loss of Russia’s international positions and maximum economic and financial weakening. By 2000 a country that had been built as a fortress had collapsed into ruins.

  Russia’s downward slide in the world economy demonstrates this point. Between 1992 and 1997, its GDP decreased by almost 40 percent, industrial production by almost 50 percent, and agriculture by 35 percent. By the latter date Russian production constituted just 2 percent of world production, and Russia’s per capita GDP ranked forty-fifth in the world.

  Russia’s dependence on foreign markets increased. The share of imports in consumer goods reached 50 percent, and many Russian products practically vanished from the domestic market. Imports of equipment grew as the capacity of the domestic machine-building industry declined. An economic model emerged based on the export of energy and raw material resources and the import of machines, equipment, foodstuffs, and consumer goods.

  Financial stabilization was officially proclaimed as the main economic goal of all Russian governments from 1992 to August 1998. This meant overcoming a high rate of inflation and shrinking the budget deficit. To accomplish this, the money supply was squeezed to the maximum possible extent, budgetary expenditures and the budget deficit were curtailed, and the latter was covered with the help of so-called noninflationary sources: domestic short- and long-term treasury bills and state bonds and foreign loans.9

  Russian authorities declared these goals achieved in 1998.10 However, this had been accomplished by squeezing the money supply to the limit, making it impossible for production to function normally. On January 1, 1992, the money supply in Russia constituted 66 percent of GDP; by the beginning of 1998 it had dropped to 14 percent and continued to contract mostly with the help of noncash methods—that is, the working assets of enterprises.

  The lack of an adequate money supply required for normal commodity-production exchange led to complete disorder in the monetary payments system. By September 1, 1998, creditors’ loans amounted to the enormous sum of 2.3 trillion rubles, or close to 85 percent of annual GDP. Approximately 70 percent of the transactions between enterprises were carried out through barter or via quasi-monetary means. The contraction of the money supply and the crisis in payments created artificial limits on demand and accelerated the decline in production.

  The high profitability of short- and long-term treasury bills and federal loan bonds, and the opportunity for banks to reap large profits from dealing in them and in currency transactions and from manipulating budgetary funds, led to a complete separation between the financial system and the real economy. Financial resources were concentrated in the financial markets, while the real economy was practically bled white. These developments constantly reduced the tax base and made it more difficult to fulfill the revenue side of the budget, thereby requiring even greater curtailment of expenditures and the supplementary contraction of the money supply. Budgets were not met even in sequestered form. The entire chain repeated itself over and over again in a vicious circle.

  A second vicious circle came about in connection with the growth of internal and external government debt. The domestic debt in treasury bills and state bonds as of October 1, 1998, constituted 387.1 billion rubles. Moreover, the redemption of previously issued treasury bills and state bonds required the increasing issuance of new series. The funds needed to service the external debt also grew. To pay off the old debts, mo
re and more new credits were needed.

  The decision by the government and the Bank of Russia on August 17, 1998, to depreciate the ruble drastically demonstrated the need to find a way out of the existing situation. A devaluation of the ruble was implemented to reduce the budgetary deficit via inflation and to increase revenues. To emerge from under the curtain of debt, a default was declared.

  Naturally, these decisions failed to yield positive results. In fact, the negative results were overwhelming. In August inflation stood at 3.7 percent and in September at 38.4 percent. The major banks that had invested their assets in frozen treasury bills were now on the brink of bankruptcy; the interbank credit and currency markets stopped functioning. Payments ceased. Russia forfeited the confidence of foreign creditors and became utterly dependent on the decisions of international financial organizations for the provision of credits. At the very least, Russia became dependent on ineffectively utilized financial assistance from the West.

  The threat of further devaluation of the ruble remained, presaging renewed inflation. There were enormous hard currency savings (according to expert estimates, from $40 billion to $60 billion, which far exceeded all potential foreign credits and investments). At an exchange rate of 15–18 rubles to the dollar, this equaled 600 billion to 900 billion rubles, a sum that was one and a half to two times greater than the budget revenues approved by the State Duma. The total value of government debt relative to GDP exceeded 138 percent. The ratio of external debt to GDP exceeded 110 percent.

  The level of imports of new industrial machinery and equipment was eight to ten times lower than what was needed simply to replace obsolete and depreciated working stock. By this time, fully two-thirds of the basic working stock was outmoded. Even in the most successful export-oriented branches, the share of new equipment had decreased by two to three times compared to 1990.