Ben Judah - Fragile Empire - How Russia Fell in and Out of Love With Vladimir Putin

No one really knows who won the 1996 election, as fraud was so widespread and also used by the opposition. What we know for sure is that it was an unfair vote that paved the way for a new era of ‘no-alternative’ elections. Not sticking to the rules has consequences. ‘There is hardly any doubt who won,’ the future president Dmitry Medvedev is reputed to have said, ‘it was not Boris Nikolayevich Yeltsin’, fending off an accusation of rigging the 2011 parliamentary election. 30

Russia already had a monarchical presidency, where what really mattered was court politics around Yeltsin, who could not be dislodged by elections, had neutered parliament, and had surrounded himself with former KGB officers, military men and neoliberal economists. Institutions were in disarray, or had ceased to matter.

Yeltsin’s second term began to collapse barely after it had got going. It discredited Russian liberalism for a generation. ‘Liberals’ as a group have never really been in power in Russia. They were powerful in Yeltsin’s Kremlin, but jostled with free-market KGB types and pro-business military men. Their only real taste of power was the 1998 government of the ‘young reformers’ dominated by Sergei Kiriyenko, Anatoly Chubais and Boris Nemtsov, then favoured as Yeltsin’s successor, which was out and out for radical reforms, without a party backing, representing the kind of neoliberal agenda that only 4 per cent of the electorate had backed in the parliamentary vote. 31

Under them, Russia’s economic situation and accounts were deteriorating so badly that by 17 August 1998 there was no alternative left but to default. That night they invited the oligarchs one by one, to alert them. The millions about to lose their deposits were given no warning and no scheme was thought up to insure them. They woke up to the news that the International Monetary Fund (IMF) director Michel Camdessus had cut the country off from further credit and announced: ‘I alerted President Yeltsin that Russia would be treated no differently from Burkina Faso.’ 32

That night was the second founding of the state. This was when Yeltsin lost control of events. It was the moment when the elite got scared and moved further towards authoritarianism. According to Grigory Satarov, Yeltsin’s former aide, it was then the president ditched the idea of Nemtsov as the successor and decided Russia needed a robust, military man. Intellectuals began to debate the need for a ‘Russian Pinochet’ to defend the market, with the famous talking head Mikhail Leontyev even travelling to Chile to interview the ageing general for national TV – as a model for Russia. The act of defaulting washed out the remaining dregs of hope for democratic capitalism. Scores of banks folded, millions lost their savings, inflation hit 84 per cent and food prices soared. 33Kaliningrad in the west halted financial transfers to Moscow; Vladivostok in the east suspended food deliveries outside the city.

For ordinary Russians, the ‘transition’ seemed to have led nowhere – nothing undermines faith in democracy more than losing your life’s savings. Miners blocked the railroads; inside the government the fear was palpable. The country’s most famous anti-Soviet dissident and its moral authority, Alexander Solzhenitsyn, refused an award from Yeltsin’s government, which he said had ‘taken Russia to such dire straits’. 34In a moment of honesty, Yeltsin’s own prime minister, Viktor Chernomyrdin, blurted out what many truly felt inside the Kremlin: ‘There is still time to save face, but then it’s going to be necessary to save the rest of the body.’ 35

The feeling that Russia was approaching calamity was heavy and omnipresent. The mayor of Moscow, Yuri Luzhkov, and the former prime minister, Yevgeny Primakov, after he was dismissed by a Yeltsin nervous at his growing popularity, raised an alliance of governors and swung the national NTV channel behind him. There was real fear inside the inner circle known as the ‘family’ that they would put Yeltsin on trial if they seized power.

This circle needed a protector who could win the next election. This was the Kremlin that Vladimir Putin, then a young, impressive former KGB bureaucrat from St Petersburg, first started work in. His friends helped him get there. Yeltsin’s powerful minister for privatization, Anatoly Chubais, had worked for Sobchak in St Petersburg and brought his fellow Sobchakite, the economist Alexey Kudrin, with him. When Putin stuck by Sobchak and refused to serve under his successor, the ‘St Petersburg set’ helped him find work in the Kremlin too. He rose quickly, but the jobs he was assigned for – head of the notoriously corrupt property department, the presidential monitoring service, deputy head of the presidential administration charged with the regions, and then director of domestic intelligence (FSB) – taught him one thing: the Russian ‘federation’ was practically a fiction.

In the eighteen months after the default, the situation was bleak and the ‘family’ knew it. Sensing the changing political wind, even the loyal Boris Nemtsov was pushing Yeltsin to ‘throw the oligarchs out of the Kremlin’. 36‘The Russian economy was near collapse,’ remembered Berezovsky, barking this out in his Mayfair boardroom to stress the point. Yeltsin’s daughter, her husband, his chief of staff and their favourite oligarch – Berezovsky – began scrambling to find a successor. They had to find one who would neither imprison Yeltsin, nor confiscate their assets but also be strong enough to stop the collapse of Russia. This was ‘Operation Successor’.

Berezovsky had known Putin for a while. They had been introduced in his St Petersburg days by the oligarch Pyotr Aven. By now he was the rising bureaucratic star, and Berezovsky had been impressed that Putin had demonstratively attended his wife’s birthday party whilst he was fighting for influence with Yevgeny Primakov, the first of Yeltsin’s three ex-KGB prime ministers. Berezovsky thought he could trust this former KGB agent. But the ‘family’ had some misgivings about him: his rank was too low and he was quite short. But he had major selling points. He was impressed by Putin’s loyalty to his former boss, the ‘Yeltsin of St Petersburg’. This had gone as far as providing a government plane to help him flee to France when a corruption case (which presumably might have touched Putin himself) was opened against Sobchak.

Berezovsky felt he had hard evidence that this loyal servant would be a bulldog protector. Putin had been made head of the FSB and was using that position to be the ‘family’ bodyguard. He had purged it of their enemies, sacked as many as one-third of FSB officials and sealed it shut from incriminating leaks. He stymied investigations into corruption inside the Kremlin. Putin even released a graphic sex-tape discrediting the state prosecutor who had gone after Yeltsin’s daughter. When the prosecutor saw the video of himself with prostitutes on national TV, he suffered a heart attack.

Even better, this effective man, Putin, had no financial resources at all and was thus completely dependent on the ‘family’ money. Yeltsin started to like him a lot. Berezovsky was then charged with convincing him to accept life as the successor, visiting him several times including when Putin was on holiday with his family in the south of France. He looked loyal. Berezovsky remembered: ‘We were not friends, but Putin made a series of impressive steps, which were unusual – when Sobchak lost the election, he refused to serve under the new mayor.’ More importantly Putin held appeal to each part of the elite – he was ex-KGB, but he had worked for democratic Sobchak, he had shown himself to be loyal and he had shown himself able to lead. The oligarch was impressed, forgetting that strangers can be dangerous: