05.09.2009
An Exhausted Resource
№3 2009 July/September

The term ‘modernization’ is usually associated with the process
of democratization. However, all political systems are exposed to
evolution and monocentric states (i.e. states without real
separation of powers, with a single decision-making center) are no
exception.

Generally, political scientists call such societies authoritarian.
Nowadays this term has a negative connotation; therefore, a more
neutral expression which describes the same social phenomenon,
‘monocentric state,’ is more frequently used in Russian scientific
literature.

There is no doubt that the Soviet Union was an example of an
authoritarian state in which the rigidity of the state structure,
which sometimes assumed a totalitarian character, varied in
different periods. Massive state interference in society affected
all levels and systems of life. The powerful political police,
following up any signs of nonconformity and disobedience, was
formed with the explicit purpose of realizing this complex
task.

This rigidity in the state structure created many problems; with
the lapse of time, ideology degenerated into hollow demagoguery
detached from reality and the prestige of the ruling elite (with an
average age of seventy), was crumbling. Furthermore, the lack of
freedom of movement and the Iron Curtain created myths about
heavenly life in the West. Just as an increase in pressure in
physical systems inevitably leads to an explosion, in the Soviet
Union the seeds of independence and civil initiative that had been
forced to the underground eventually gave shoots and grew into
dissident coteries with an activity so desperate in its protest
that it could no longer be concealed from society.

Flexible materials bend when under pressure while inflexible
materials break. It was the inflexibility of the Soviet system
which caused its impetuous collapse.

In the spring of 2000, after a brief reflection, the new president
of Russia, Vladimir Putin, and his circle decided to veer from the
democratic way. The state was extremely weakened and it ceased to
be an effective network of administrative links controlled by a
single center.

The regional elites behaved more and more like feudal princes.
The financial oligarchs placed demands on the authorities, forcing
decisions that were advantageous for their businesses. The
separation of powers formally registered in the Constitution never
took root. The first attempts of the young parliament to oppose the
Kremlin’s decisions were repressed with tanks in 1993. The
bureaucracy lost their bearings and the hierarchy of power was
disturbed.

PUTTING THINGS IN ORDER

These huge problems could probably have been solved in different
ways, specifically by continuing democratic reforms. However, the
administration that came to power in 2000 chose a different path.
Vladimir Putin, succeeding Boris Yeltsin in the post of President
of the Russian Federation, concluded that Russia should be brought
back to its traditional mode of life, order should be restored in
the system, and modernization should be started only when he held
tight all the controls.

Thus a new goal was formulated – to regain state control in all
important spheres of life. What impeded them? The key hurdle was
the existence of several centers of power competing with the
Kremlin for the resources and controls. Potential danger was seen
in the governors (especially those from rich regions), the
freethinking and obstinate State Duma with a Communist majority,
the oligarchs who got an idea of their own omnipotence, the
independent mass-media, opposition parties, and public
organizations not controlled by the Kremlin. These centers of power
needed to be eliminated or placed under control.

The oligarchs. Putin tried to come to terms
with the oligarchs by peacefully concluding the so-called “kebab
agreement” in May 2000. The essence of the agreement was mutual
сoninterference: Putin would not interfere in the oligarchs’
businesses on the condition that the oligarchs would not interfere
in politics. However, the self-assured businessmen who used to
think that any political project could be realized with the help of
money, took a skeptical view on the “kebab agreement.” The NTV
channel owned by Vladimir Gusinsky persistently criticized the
second war in Chechnya launched by Putin. As a result, Gusinsky’s
activity was recognized by the authorities as most dangerous. The
persecution of Gusinsky began in 2000 and resulted in his fleeing
Russia, the crushing defeat of NTV channel and its subsequent
transfer into Gazprom’s ownership.

Simultaneously, Boris Berezovsky who controlled TV Channel 1
(ORT) and TV Channel 6, was also put under extreme pressure. In
spite of the vehement struggle, Berezovsky failed to retain his
channels and had to flee to Great Britain to avoid prosecution. In
2002, the NTV and ORT cases were settled and both channels went
under the control of the authorities.

In 2003, criminal proceedings were launched against another
major businessman, Yakov Goldovsky, the chief of SIBUR. The General
Prosecutor’s Office accused him of abuse of power. As a result,
SIBUR was placed under Gazprom’s control.

In the same year, an attack was leveled at Gosincor which was
headed by Boris Yeltsin’s friend and former chief of his
administration, Yuri Petrov. Petrov was accused of having stolen
300 tons of silver in 1996 through the intermediary of Guta-Bank,
of which his son, Alexander, was president. The case ended with
Gosincor’s liquidation and Guta-Bank’s turning under the control of
the state-owned Vneshtorgbank.

Finally, there was Mikhail Khodorkovsky. Not only did he control
the Duma majority but he was also very active in establishing Open
Russia, a non-governmental organization. The Federal Security
Service sent numerous warning messages to the Kremlin: the
ambitious oligarch had to be stopped immediately as Khodorkovsky’s
ratings were rising and his representative offices in the regions
were growing stronger. The Kremlin regarded it as preparation for
the presidential bid. The obstinate oligarch didn’t compromise with
the authorities and was imprisoned for 8 years.

The YUKOS case was the last straw that produced a real shock on
the Russian business community. It became clear that there was no
way to play games with Putin and that anyone testing the waters of
politics would be bitterly suppressed. The businessmen understood
perfectly well: the new rules of the game must be accepted,
otherwise they will have to leave the country.

Uneasiness and the awareness that the state would crush anyone
who angered the Kremlin reigned in business. Now direct
interference in politics, not only by business, but also through
any social activity was forbidden. It was believed that even those
engaged in charity were working to develop their image and could
therefore represent a potential threat at the polls. The role of
big business (if it wished to continue making money in Russia) was
clear: keep silent and sponsor only those projects that are
initiated by the Kremlin. Meanwhile, oppressive actions against the
oligarchs increased President Putin’s popularity, with approval
ratings rising to over 70 percent.

The result of the war between the state and big business carried
out during Putin’s first presidential term was the suppression of
the oligarchy. They gave up attempts to “play politics.” At the
same time a pool of private businessmen who actively supported
state social and political projects was formed. Some of these
businessmen belonged to the cohort of “Yeltsin’s oligarchs,” while
others were closely linked to the new presidential team.

Yet the main outcome of the tough reforms in this sphere was
that private business continued to exist, and this imparted a
different tone to the further development in the country. Having
taken a step back by curbing a number of democratic achievements of
the 1990s, the authorities did not continue to tighten the screw.
In fact, the presence of a free capital zone appears to be a source
of modernization ideas in today’s Russia.

The governors. The problem of the governors’
independence was resolved with the help of the following
reforms:

The summer of 2000 saw the formation of federal districts and
the introduction of presidential plenipotentiaries who formed a
layer between the Kremlin and the regions. The governors thereby
automatically moved down one rung on the ladder.

Simultaneously, the procedure of forming the Federal Council was
changed. The governors were ousted from the Council and therefore
lost a perfect platform for formulating a unified strategy. The
State Council, an advisory body to the Head of State, replaced this
function, with all the governors automatically becoming its
members.

In autumn 2004 the election of governors was abolished.

As a result of these reforms, the governors were politically
marginalized. They lost an open platform for discussions (sessions
of the upper house of parliament) and a new layer appeared between
them and the Kremlin in the form of presidential plenipotentiaries
(75 percent of whom were military officers, largely from
intelligence services). Governors were no longer guests on
political TV programs; the proceedings of the newly formed State
Council were not broadly covered by the media, while the President
was the main character of the brief news reports.

Gubernatorial behavior changed: gripped by fear they no longer
criticized the Kremlin or came out with populist declarations. Now
they were not politicians but economic executives who knew their
place and didn’t dare argue with the federal center. Thus the
authorities elevated the difficulties in controlling the once
defiant regional elite. Regional governors were now fully dependent
on the center’s attitude towards them.

Despite these innovations, the Kremlin still perceived the
regional elite as something alien. It feared that the regions might
still spring a surprise – the majority of the governors were still
holdovers from the Yeltsin era elite (as compared to the
Presidential Administration which was mostly comprised of Putin’s
associates – about 70% of his key staff by 2003).

With time, the body of the governors changed, yet these changes
were not abrupt but rather gradual. The new governors were in some
ways similar to their counterparts in tsarist Russia while in other
ways they bore some resemblance to the first members of the
regional Communist Party committees in Soviet Russia. They were
fully subjugated by the Kremlin; their role was reduced to showing
loyalty and devotion to the center. The sword of Damocles
threatened every governor with dismissal or criminal prosecution
for abuse of the old system of sinecure.

At the end of 2004, a new reform was undertaken as the final
step in this process. The new regulations changed the procedure for
forming executive agencies in the constituent entities of the
Russian Federation. The new federal law eliminated the election of
governors by plebiscite. From now on the president would recommend
a candidate for the governor’s post who would then be approved by
the regional parliament. Thus the regional political elite were put
under complete control of the federal center.

The year 2005 saw the launch of a new process – the enlargement
of regions. A referendum on the integration of the Krasnoyarsk
Region, the Taimyr (Dolgano-Nenets) and the Evenk Autonomous
Districts marked the start of the integration process. The
referendum showed that the residents of these regions favored
integration, which was reaffirmed in the corresponding
constitutional law. This procedure of integration was later used in
the Perm Region and the Komi-Permyatski Autonomous District, the
Kamchatka Region and the Koryak Autonomous District, the Irkutsk
Region and the Ust-Ordyn Buryat Autonomous District.

The State Duma. Another important problem to be
solved was subjugating the State Duma to the Kremlin and ousting
bright and popular opposition members from it. During the 1999
elections Putin was not ready to tackle an issue of this magnitude,
although the Presidential Administration did make an effort to form
a central political party by bringing together devoted like-minded
deputies. In 2003, Putin was prepared for the State Duma elections.
The Kremlin dedicated significant resources to the United Russia
party, which was by now consolidated both organizationally and
financially. A large number of regional elite and civil servants
joined the party supported by the president himself. Moreover, a
new party called Rodina was formed on the Kremlin’s initiative. The
party was designed to deprive the Communist Party of votes in order
to marginalize the Communists in the Duma.

The 2003 State Duma election campaign demanded incredible
efforts on the part of the authorities but it proved immensely
successful. Putin was able to secure a majority in the State Duma
in excess of the two-thirds he needed. The Democrats were ousted
from the parliament, making it possible for the Kremlin to carry
out any desired reform. The Duma was completely managed by the
Kremlin and ceased to be an independent arm of the government.

However, full restitution of a one-party system did not take
place. The ruling party was put into a competitive environment. On
short notice (acting upon directives from state authorities) new
parties were formed to create “opposition” to the United Russia
party. This kind of artificial competition between political
parties gradually changed the political scene of Russian
elections.

Now support from the Kremlin was no longer sufficient, each
party had to learn how to earn it and use it proficiently. The
mock-up political parties were thrown into real elections where
they had to learn to survive, and win. Perhaps the results were
already a foregone conclusion previously determined by the Kremlin,
which was not interested in electoral upheavals or orange
revolutions. The authorities needed legitimate elections and the
newly formed parties had no other choice than to learn how to
win.

The changes in the electoral legislation between 2004 and 2006
made the authorities’ intention even more obvious: the urgent
formation of larger parties which could be competitive at the
elections. This was the only way for the ruling elite to escape
overthrows, revolutions, or “hour-glass” elections that threaten
sweeping changes and can turn the system upside down.

THE ELECTORLA SYSTEM

During the same period, the electoral system also underwent
reform which increasingly normalized the political process. All
unaffiliated charismatic leaders disappeared from the political
arena; political parties became the sole instrument of political
struggle, forming the only instrument of public politics. In 2001
the electoral legislation underwent its first reforms, increasing
the minimum party size to 10,000 people. The process of enlarging
parties was further strengthened in 2004, when the minimum size was
increased to 50,000 people, thereby destroying a number of small
parties. In 2005, further amendments were made to strengthen
political parties. The mixed (majoritarian/proportional
representation) electoral system was replaced with a proportional
system (i.e. elections based on lists of candidates from the
political parties), a minimum of 7 percent of the vote was required
for election to the State Duma and electoral blocs were prohibited.
The admissible portion of inauthentic signatures for any given
political party was reduced from 25 to 5 percent.

These changes had a dramatic effect on the political process
across the country. On the one hand, the reforms surely aimed to
strengthen the multi-party system since they made it impossible for
charismatic singletons to succeed politically. On the other hand,
they led to the bureaucratization of political parties; they became
the only platform from which to launch a political career. Also,
there was now remarkable difference between old parties formed
under Yeltsin and the new parties. The old parties either joined
the opposition and became more radical, or left politics entirely
under pressure from the authorities.

The mission of the new ruling parties was to become
organizations that would endorse officials in power. The reforms
were perceived by different elite groups as a signal: those who
wanted to emphasize their loyalty to the Kremlin and the president
began to join the ruling parties en masse. Interestingly, the safer
the members of any given elite group felt, the less likely they
were to join a given party. Therefore there are now very few party
members among Kremlin officials close to the President and, at the
same time, most of the sidelined governors are members of United
Russia (see Table 1).

Table 1. The Portion of the Members of the United Russia
in the Elite Groups

*As of June 1, 2009, the number of the governors-members of the
UR increased to 72 people (the data of the UR Central Executive
Committee).

This conclusion is supported by the data on the rise to power of
key officials. Members of United Russia make up 85.7 percent of the
heads of sovereign entities appointed or elected before the year
2000 while among “the Putin governors” who assumed office after
2000, the percentage of UR members was only 77.1 percent. At the
same time, “the “sidelined made up a minority (less that 3 percent)
among the officials of the Presidential Administration and the
Security Council. This shows that membership in the party created a
protective shield, especially for those whose loyalty was called
into question.

United Russia further consolidated its position both
organizationally and financially. A majority of the regional elite
and officials became members of the party supported by the
President himself. The 2003 State Duma elections were marked by the
party’s impressive victory, which won more than two-thirds of the
seats. The next two years were marked by further UR victories at
the regional elections, which led to the party gaining the majority
of seats in the legislative assemblies. On average, UR deputies got
62 percent in the legislatures, while in some regions this number
exceeded 80 percent (Nizhni Novgorod and Omsk regions). This
provided an opportunity for the ruling party to control
gubernatorial appointments and the composition of the Federal
Council.

The 2007 elections affirmed that for the first time since the
dissolution of the Communist Party of the Soviet Union (CPSU), a
party was formed capable of becoming the backbone of the state. It
had all the features that made it similar to the CPSU – the wide
network of regional organizations, discipline, methods of the
agitation and advocacy, and the style as a whole. Like the CPSU,
United Russia was under the patronage of the Kremlin. The regional
officers of the party were directly managed by the governors, who
were personally responsible for the party’s position in the region
and the election results. However, there are also some differences:
United Russia was not an all-encompassing party. It did not have
that same multidivisional structure and it did not enjoy the
support in absolutely all social classes. It existed in a
competitive environment, even though it had an upper hand during
elections, financial superiority, the advantages in organizing
public events and support from the media. Nevertheless, United
Russia was a pro-state party, a party for the state, but never a
party-state.

Thus, in spite of all reservations we have to admit that there
was formed a multi-party system in Russia, and that United Russia
had to prove its resilience in a competitive electoral struggle.
There was one more important difference: it failed to become an
ideological party. Its political creed was unquestioning support of
the President. The ideology of “sovereign democracy” suggested by
the Kremlin remained an unsolved puzzle for society, who could only
make out that “Russia is not America,” and that “we will take our
own path.” What was that path? The answer was left out.

These huge efforts paid off in the 2007 parliamentary elections.
United Russia got 64.3 percent of the votes and won 315 seats in
the Parliament, which exceeded the two-thirds majority by 15
seats.

THE POLITICAL ELITE

The vast majority (82.1 percent) of today’s political elite were
appointed after 2000, so they can be justifiably referred to as
“the Putin elite.” The group with the highest share of officials
appointed after 2000 is to be found in the Presidential
Administration (97.4 percent) and the smallest share, among the
governors (59.3 percent). An analysis of career trends shows that,
by and large, “Putin’s team” was formed by 2003 (late summer 2002
is the average point of entry into service) when the inflow of new
recruits gave way to slight rotation of resources and the bulk of
the state authority was formed. From 2000 to 2008, the St.
Petersburg contingent was growing steadily; they currently
represent 25.6 percent of the top-level state officials.

The rotation of positions within the political elite goes along
two distinct trends: the first is related to electoral activity,
and the second to the designation to post. Movement within the
elite unites members of the government with the Presidential
Administration staff members who move within these structures and
swap cadres. For instance, 51.3 percent of the top-level officials
in the Presidential Administration came from the government, and
16.3% of the officials transferred in the opposite direction. At
the same time, only a few members of these structures became
deputies or governors (0.8 percent became governors, 4.8 percent
became State Duma deputies, and 1.6 percent became members of the
Federation Council).

The above suggests that the Russian political elite has split
into two groups – bureaucracy (those appointed to their positions)
and electocracy (those who are elected). These groups became
institutionalized and came to exist independently without mixing
much. The electocrats worked in political parties and engaged
themselves in election campaigns, in drafting bills, and in public
politics. The bureaucrats climbed the career ladder within the
departmental hierarchy, making but rare appearances in public
politics. The group of electocrats developed professionally by
including more and more lawyers and legal advisors. Bureaucrats
gradually moved towards management roles, becoming increasingly
capable of running huge systems.

Yet the public opinion differentiates between them in a
different way: the electocrats are labeled as demagogues and
babblers, the bureaucratic officials are perceived as
corrupted.

The style of work of the Russian establishment gradually
changed, depending on how many of those who had “Soviet
nomenclature experience” survived there. Whereas there were 38
percent with such experience during the first term of Putin’s
presidency, by 2008 their share dropped to 34 percent. The highest
proportion of the former bureaucratic elite can be found among the
governors (56 percent of them held office in the Soviet
bureaucratic system) and members of the Federation Council (48.2
percent). The lowest representation of this group is among the
members of the Presidential Administration (12.8 percent only).
This could be explained by the different rate of rotation: in the
upper levels of the bureaucracy mobility was much speedier than in
the regions – one can still find real sanctuaries of “Sovietism”
there.

Table 2. Features of the Political Elite in
2008

An important feature of the Russian political elite today is the
increased number of those officials who previously worked either in
economic structures or had business experience; 39.8 percent of the
elite fall into this category. Moreover, the younger an official
is, the more likely it is that he has an association with private
capital. The ratio between executive managers and owners in private
business is now 1:8 in favor of the former; and 52.3 percent of all
members of the government and 43.9 percent of the governors have
experience of working in economic structures. It is clear that the
piecemeal replacement of “Soviet-style executives” by “private
entrepreneurs” in the Russian establishment will also affect the
nature of the current reforms and the mindset of the ruling elite
in this country.

By 2009, the share of security officials holding highest
political offices reached 42.3 percent and the representation of
business rose to 40 percent. The proportion of women,
intelligentsia and youth has been declining while blue-collars have
disappeared from the bodies of government altogether.

Changes in the political system in 2000 through 2008 went under
the banner of Sovietization, elimination of alternative centers of
power, and regulation and subordination of every element of the
state machinery. This key trend in the political process was
accompanied by the return to basic principles of state management
that were characteristic of the late Soviet period in Russia’s
history and are now being revisited in a modernized and
technocratic form. The elite that was accountable for all these
transformations changed, too. Charismatic public politicians left
the establishment and were replaced by “people of the system” who
had relevant experience in government service, were loyal to their
leadership and shared its political views. The state grew stronger
and the statists became the dominant group within the political
class.

STATE CAPITALISM

The 2004 to 2008 period witnessed another process, that of
active penetration by the political elite into the management of
economic structures.

During Yeltsin’s tenure state companies were losing their
significance. All commercially attractive enterprises were put up
for auction and went private. The state owned only one oil company
– Rosneft, the least profitable and most technically
backward.  The state also owned natural monopolies,
military-industrial enterprises and unprofitable, yet socially
important, enterprises. As a rule, their boards of directors
included ministerial officials and members of the state property
management committee.

Under Putin things began to change. State companies started to
play an increasingly significant role in the economy, holding
private entrepreneurs at bay in some sectors. Gazprom, Rosneft and
other energy giants were getting stronger and stronger, while their
boards were increasingly staffed by Putin’s circle.

In January 2005, the government decided to bring a number of the
largest Russian companies under the direct control of the Cabinet
of Ministers. These companies can be divided into two groups (let’s
call them group A and group B). Group A includes 27 companies,
while B has 44 companies (in 2007 there were 41 companies in group
B). These enterprises cover the main sectors of the economy: fuel
and energy (including the electric power industry and the atomic
industry), the military industrial complex, transport and
communications, the banking sector, and the electronic media.

The more significant the company, the more ministers are likely
to sit on its board of directors. This means that a company’s
status is correlated with the status of its board members. Members
of the Presidential Administration on a board were an unambiguous
sign of the company’s special significance (see Table 3).

Table 3. Elite Groups Represented in the Boards of
Directors of the Key State Enterprises

* The sum by column is more than 100% as one and the same person
could be qualified both as a security, law-enforcement and defense
officer (silovik), and/or as a member of another elite group.

Nowadays the boards of directors of large state-owned companies
consist of government representatives (73.7 percent), members of
the Presidential Administration (7.5 percent), and security
officials (26.1 percent). Regional authorities do not have strong
representation on the board of directors. They are on the board of
less than 2 percent of the A-list companies and about 7 percent of
the B-list companies. This suggests that local administrations are
unable to influence the development of strategic companies or their
power is rather limited. It is also worthwhile noting that the
heads of the companies are rarely members of the board themselves.
In the A-list they are represented in 21 of the 27 companies, and
in B-list they are in the board of directors in 9 companies out of
41 (only 20 percent). This highlights the fact that top management
is excluded from the decision-making process and is limited to
exercising executive functions only.

THE OUTCOME OF THE AUTHORITARIAN MODERNIZATION

The result of the post-Yeltsin reforms was a profound
modernization of the Russian state. Attempts to quickly switch to
democratic practices created such a grave threat to the state that
the government decided to scale back some of the democratic
reforms, restore subordination and manageability of the system, and
only then restart the modernization process and soften the
regime.

The state itself became actually the only source for the
modernization efforts. The authorities  ousted opposition
leaders from the media, and then from politics. The Kremlin’s
opponents were forced to leave the political scene. The
radicalization of the democrats and the subsequent decrease in the
number of their supporters eventually brought a loss in their
electorate, who partly crossed over to Putin’s side as they
approved of his neo-conservative reforms.

Who supported the authorities in their modernizations efforts?
It was the broad political class who had a mass party and also
business people who were genuinely interested in the innovative
path of the country’s development. But those two allies could
hardly be active. The supreme power itself was guilty of the fact
that all those close to the party were afraid to take the
initiative, as they knew all too well what the consequences could
be.

This is the major problem of modernization projects in
authoritarian states: the government has to face social problems
alone. Even with the tacit support from the public, it is difficult
to address large-scale tasks in the absence of active civil
society. Innovations demand freedom, which is still lacking. For
too long, those who dared to ruin the parade, stand out and act on
their own, have been prosecuted. And Mikhail Khodorkovsky, who is
still in detention, reminds everybody who strives for independence
of what can happen when the state prefers “sovereign democracy” to
simple democracy.