Russia (50 page)

So the connection between economic power and politics became ever closer. Viktor Chernomyrdin, who bought a major stake in the huge natural-gas enterprise Gazprom, which he had run, was to serve twice as prime minister. He also made a personal fortune estimated at $5 billion. This was hardly surprising given that Gazprom’s value grew from $250 million in 1993/4, when it was auctioned, to $40,483 million by 1997.
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Others made similar killings. The new billionaires, on visits abroad, wore innocent expressions: they admitted to having occasionally done things normally regarded as wrong, but claimed they had had no choice. The law was not always clear, and they had had to protect themselves. They were playing a game not of their making, and played it according to the uncertain rules of the time.
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Russia had suffered almost as serious a decline in international standing as it had economically. Its strategic position had been weakened by the loss of empire, and its rival was exploiting its advantage. Disregarding undertakings it had given to Gorbachev, who had represented a state which no
longer existed, the United States decided that NATO should after all expand eastward and, having effectively excluded Russia’s navy from the Black Sea, it declared the Caspian to be a region affecting vital US interests — an indication that it was prepared to intervene there militarily The Caspian was strategically important. It was a hinge between Russia, the Caucasus and Central Asia, and it contained considerable oil and natural gas deposits. But Russia’s interests there were no less vital than America’s, and Yeltsin was determined to preserve them. These circumstances help to explain the war in Chechnya which began in December 1994 and continued into 1996.

This war has often been explained in terms of a classic struggle between an imperial power (Russia) and a new nation striving to be free (the Chechens). This view derives in large measure from the propaganda issued by Chechnya’s president of the time, Djokar Dudaev. Dudaev beat the nationalist drum. Yet his own legitimacy as president was questioned and his declaration of independence, like his commitment to the Koran as the basis of his regime, breached the 1993 Constitution of the Russian Federation of which Chechnya was a part. However, they brought him financial aid and volunteers from Afghanistan and Saudi Arabia who saw him now as a potential leader of jihad. Dudaev’s regime was corrupt, associated with organized crime in both Chechnya and Russia, and less than popular among the Chechens themselves. A leading Western historian of post-Soviet Russia has gone so far as to call Dudaev’s rule ‘a disgrace to minimal standards of political decency’.
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But there were other dimensions to the coming struggle in Chechnya.

Chechnya was a transit centre for oil from western Siberia as well as the Caspian, and Dudaev and his associates were reselling a great deal of it abroad for foreign currency to their own considerable profit and that of their Russian friends. Chechnya was formally a semi-autonomous province of Russia, so the trade was illegal. The losses to the exchequer were serious, yet they did not precipitate Yeltsin’s decision to intervene militarily in Chechnya. Rather it was another, more traditional, form of Chechen piracy: kidnapping. In May 1994 a Chechen war band descended on the quiet resort town of Mineralnye Vody not far to the north. They proceeded to kidnap busloads of Russians and hold them to ransom for several million dollars. Security forces eventually succeeded in thwarting the attempt, but meanwhile a storm of outrage had been raised in Russia. In any case the Kremlin was becoming concerned that Chechnya might become a base for militant Muslim fundamentalism, and so in August the Kremlin decided to move troops in and take Dudaev out.

It was easier said than done. Despite their tanks and helicopter gunships, the Russian forces were unprepared for such a conflict. Too many raw recruits were used, and they suffered heavy casualties. The war was dirty, and the government deserved the bad press it got both at home and abroad for the cruelties inflicted on the Chechens. However, the atrocities were by no means one-sided.
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The insurgents fought viciously, slitting the throats of Russian prisoners they had taken in view of cameras, and the army responded as viciously. The army eventually secured the ruins of Chechnya’s capital, Grozny, but the war had become unpopular in Russia. Then in June 1995 a Chechen commander, Shamil Basaev, hitherto a political rival of Dudaev and reputed to have fought alongside the
mujahidin
in Afghanistan, penetrated the town of Budennovsk in southern Russia with a band of guerrillas. After a shoot-out resulting in over a hundred deaths, he and his men occupied the local hospital, taking patients, staff and visitors hostage. This crisis brought Prime Minister Chernomyrdin to the scene and the negotiations were televised. Most of the 1,600 hostages were released, but the guerrillas were allowed to withdraw to Chechnya taking the rest with them, and Russia’s premier was exposed to public humiliation.

If 1995 had been disappointing, 1996 was hardly better. Russia’s gross national product fell by 6 per cent that year — the fifth consecutive year it had fallen. Total production was half of what it had been in 1990, and the government was able to collect only 65 per cent of the taxes due to it. In 1988-9 it had withdrawn Soviet forces from Afghanistan, but now, seven years later, Russia had commitments there again, backing at least one faction in the north; the war in Chechnya ground expensively on; and NATO proceeded with its plan for eastward expansion to Russia’s frontiers. Having received no pay for five months, the miners of Vorkutka finally went on strike; Russia was forced to conclude an agreement with France, undertaking to compensate the descendants of those who had invested in Russian bonds since 1830; the police registered 574 contract killings, of which only 64 were solved; and the Vatican, egged on by Cardinal Ratzinger, launched a missionizing campaign to give desperate Russians the consolation of the Catholic Church.
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There were, it is true, some more promising developments. Inflation was cut to 22 per cent a year, and the tax police became more aggressive in pursuing defaulters; the state’s traditional money-spinner, the liquor monopoly, was restored; and several Central Asian states drew closer to Russia for fear of the Taliban. As in the early seventeenth century, the Catholic missionizing campaign met with obdurate, though less violent, resistance, and public opinion began to call for the state to reassert itself.
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Since it was also an election year, policy sails were trimmed accordingly. The loss of an entire armoured regiment, ambushed in a mountain pass by Chechen guerrillas led by an Arab incomer called Khattab,
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hastened a resolution and in April 1996 the war was brought to an uneasy end. Dudaev himself was killed by Russian special forces on the last day of that month. The following January Asian Maskhadov was elected to replace him. But he proved unable to control either the Muslim fundamentalists organizing for war or the Chechen gangs, whose kidnapping targets soon included schoolchildren and British communication workers. Maskhadov subsequently accused Boris Berezovskii of abetting the kidnappers by arranging ransom payments to them. Whether this allegation was true or not, Berezovskii’s contacts fitted him for the role,
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and he was also to play a key role in Yeltsin’s re-election.

Despite growing indifference to the democratic process, opinion polls suggested that the President’s chances were poor, and so he thought of postponing the election. The Chechen war had brought no glory; the scandalous shares-for-loans scheme had necessitated the dismissal of Ana-tolii Chubais, the key official in charge of the privatization programme; and Yeltsin’s own health was deteriorating. His drinking problem became all too obvious on an official visit to Germany, and he was developing serious heart problems. Nevertheless, he had a small number of very powerful political helpers, all of them beneficiaries of privatization, and all of them terrified that a resurgent Communist Party might gain an electoral victory and destroy their business empires. Berezovskii brought them together to fund Yeltsin’s re-election campaign; Chubais was drafted in to be campaign manager, and Yeltsin’s daughter was included in the committee to ensure ready communication with the President’s office.
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The law limited funding for every presidential candidate to $3 million, but Yeltsin’s re-election committee soon gathered at least $500 million and perhaps as many as $1 billion.
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Those who contributed were to be richly rewarded for their generosity. The Communist campaign could count on up to 500,000 workers, but it could not get access to television in order to transmit its message. Yeltsin, on the other hand, enjoyed a virtual monopoly of television exposure. Leading American and British public-relations and advertising experts were also recruited to help his campaign. Everything was done to promote a favourable image of the President; every dirty trick was used against his Communist rival, Gennadii Ziuganov. Soft-sell, sentimental advertisements were particularly effective and teams
of hecklers went everywhere that Ziuganov went, in order to disrupt his meetings. When a bomb killed four people in the Moscow metro the Communists were blamed and the electorate was invited to vote for Yeltsin, civic peace and stability. On 3 July Yeltsin won the second round of voting with 54 per cent of the poll. This was not an overwhelming endorsement, even though the election had been a travesty of constitutional democratic process. However, relieved that the Communists had been defeated, Western governments did not protest.

Moves soon began to remove the President on grounds of his ill health. He had undergone a quintuple heart bypass operation in 1996, and many felt that his health was too poor to sustain the burdens of office. Yeltsin soldiered on nevertheless. Troops were being withdrawn from Chechnya but there were troubles enough on other fronts. Reports were arriving from Latvia that the authorities there were discriminating against the country’s substantial Russian minority on linguistic grounds. Similar complaints were being voiced in Estonia and other formerly Soviet states. Public opinion was exercised about the issue: surely the government had a responsibility to those 20 million Russians who, though no fault of their own, had suddenly found themselves classified as aliens in another state.
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Nor were these the only problems. There were difficulties reaching agreement with Iran and the former Soviet republics of Azerbaydzhan, Kazakhstan and Turkmenistan over rights to the Caspian oilfields, and negotiations with Ukraine over how to divide up what had formerly been the Soviet Black Sea fleet proved both hard and protracted. Agreement was finally reached in May after more than five years of talks. In August, US warships visited the Crimea and joined others from Turkey, Romania and Bulgaria — all three now aligned with the USA — for exercises in the Black Sea. This flag-waving outside Russia’s new back door was resented. As the weeks passed it also became clear that extremists were taking over in Chechnya. In January 1997 Boris Berezovskii was appointed deputy head of Russia’s Security Council, perhaps as a reward for his help in getting Yeltsin re-elected, but Berezovskii had interests in Chechnya and contacts with Chechens.

By 1997 the outlook seemed to be brightening. For the first time since the collapse the economy grew a little. But black clouds soon gathered once again. A financial crisis in Asia was soon to affect Russia, and 1998 showed the economic upturn
of
the previous year to have been a false dawn. More than one Russian in four was now living below the poverty line; the government was still short of revenue, and the financial system was close to collapse. That January interest rates rose to over 40 per cent. Worse was to come. In the first half of the year world oil prices fell 40 per
cent below the average for 1997, and in April the value of the ruble tumbled as Russia’s indebtedness soared. In May the parliament, which Yeltsin had been forced to reinstate, passed a motion impeaching Yeltsin for treason by a vote of three to one. However, the constitution demanded a two-thirds vote in the Federal Council too before the President could be forced out. The delay saved Yeltsin for the moment.

In July the IMF advanced almost $5 billion to support the ruble, but the currency could not be saved. In August the government was forced to devalue it sharply, declare a moratorium on foreign creditors, and default on its domestic debt. Banks collapsed, and crowds of worried, angry people crowded round their bolted doors in the vain hope of trying to withdraw their savings. Yeltsin had no alternative but to appoint a premier whom parliament would find acceptable. The least objectionable to Yeltsin himself was an experienced foreign-affairs specialist, Yevgeny Primakov. At the same time Vladimir Putin, who had been a KGB operative in East Germany before the collapse and had since worked for the city of St Petersburg, became chief of security. But Yeltsin was already overdrawn on his political account. His days in power were numbered.

That year the ruble had lost nearly three-quarters of its value, the economy contracted by another 5 per cent, and inflation rose to 80 per cent. Parliament’s impeachment vote of May 1998 proclaimed that Yeltsin had betrayed his country. It could indeed be argued that, whatever his intentions, he had served the interests of the United States rather better than he had served those of Russia, and he had certainly broken trust with the people. According to Stiglitz, an American economist who had held senior office in the IMF:

The [Russian] government was virtually giving away its valuable state assets, yet was unable to provide pensions for the elderly or welfare payments for the poor … [It] was borrowing billions from the IMF, becoming increasingly indebted, while the oligarchs who received such largesse from the government were taking billions out
of
the country

The IMF had encouraged the government to open up its capital accounts, allowing a free flow of capital. The policy was supposed to make the country more attractive for foreign investors; but it was virtually a one-way door that facilitated a rush of money out of the country.