Vladimir Yakunin - The Treacherous Path - An Insider's Account of Modern Russia

By 1998, reformers from both within and without the country had been urging red-blooded capitalism on Russia for years. They believed that if we introduced a layer of owners into the top of society then everything would change: wealth would trickle down, enriching us all. It was an illusion, based on the false premise that the same medicine can be administered to patients suffering from different ailments (and look what eminent economists like Joseph Stiglitz are saying now – perhaps neo-liberalism was not even the answer in the West). They knew everything there was to know about the free-market economy, but in truth they knew nothing about the situation in Russia. Sometimes I wonder what they think about it now. Do they look at the destruction and chaos they left in their wake and feel regret?

The PPP arrangement we introduced felt as if it illuminated a different path for Russia to follow; one that showed that the state still had a role as a major actor, whether or not it was collaborating with private interests. Instead of constantly pleading for help from the West, we could find another way to build our economy through developments such as Ust-Luga, and, despite substantial internal and external opposition, we could also remind our country of the extent to which its infrastructure is also its backbone.

You do not always realise during the course of your first encounter with someone the role they might go on to play in your life. Hindsight is a wonderful thing, though sometimes I wish it did not wait so long before revealing its wisdom.

Though we had both served in the secret services, I did not meet Vladimir Putin properly until 1992, in St Petersburg, although I was familiar with his name; it is a small enough city that you soon hear about anyone of interest. We met when I was involved in a number of projects designed to attract investment into the region. We knew that support from the local government would be crucial, and to this end arranged a meeting at the office of the deputy mayor (as he was then), where we talked him through a new business venture that I was contemplating together with a number of partners. Time went by, we managed to persuade investors to put money up to boost the city’s development, and we gave little more thought to the quiet, attentive man who had seemed somewhat interested in our proposals.

It was not until the aftermath of the constitutional crisis of 1993, when President Yeltsin’s dispute with the Duma ended with tanks shelling the White House, that we thought of contacting Putin again. With the Communist Party now completely prohibited, it became clear to us that the outlawed organisation owned, or perhaps I should say controlled, a great deal of property (after all, the concept of private ownership had not really existed in the Soviet Union), and that the mayor’s office might be interested in selling it for the benefit of the city. Since we had contacts on both sides then, we realised we might be the best people to arrange this joint venture.

Which is how we found ourselves in Mr Putin’s company once more. I have known him for a long time now, and am alive to his many qualities, but I do not think that either of us, as we sat in his office all those years ago, could have imagined the future that lay before us, or, indeed, our country. For the avoidance of doubt it is perhaps worth me saying this here: since Vladimir Putin became President in 2000, I believe that his achievements include preventing the disintegration of the Russian Federation, establishing a stable political system, introducing a clear administrative structure, and reformulating the relationship between business and the state. Under his leadership, a number of major infrastructure projects have been completed, something that I believe has made an important contribution to the nation’s wellbeing. I supported too his attempts at the beginning of his time in office to strengthen relationships with the West. But I am certainly not someone who has cheered everything he has done – I do not agree, for instance, with the economic policies that his government has pursued and is still pursuing, notably the prioritisation of social and other current budget expenses over capital investments, and the allocation of the nation’s foreign reserves. My opinion is that pursuing a course of pure monetarism is not sufficient to meet the demands of restoring an economy still reeling from the brutal blow it suffered during the first years of perestroika. But I am getting ahead of myself.

Perhaps we had all hoped for too much in the immediate aftermath of the Soviet Union’s collapse. It now seems barely conceivable that anyone could have believed in the possibility of creating a healthy, functioning, market-orientated society out of the rubble of the Soviet Union. Britain has a long experience of parliamentary rule, one that has evolved gradually over many centuries and which is embodied in many institutions and traditions that extend well beyond Westminster itself – but in 1991, our people did not even have a picture in their head of how a democracy really worked. A disproportionate share of the nation’s economy, as well as almost the entirety of its media, was controlled by a handful of apparatchiks, remnants of the old system whose presence reminded us how little had really changed. There is more to a democracy, we learned during these years, than simply holding elections. The right to vote means very little when your business is seized from you by criminals, or yet another financial collapse sees your savings disappear overnight.

It is still stranger to remember that there was a time when Boris Yeltsin had been the most popular figure in the country, the only politician who many of the population had ever trusted. But all of this goodwill had been squandered by the end of the millennium.

The ailing President alternated between bouts of incoherent disorientation and periods of withdrawal that might easily have been mistaken for depression. He had suffered several heart attacks already even before the 1996 election, and there were whispers too that his drinking habit had corroded his mind – but what caused his weakness was perhaps less important than the fact that it left a black hole at the centre of government, one which frustrated any attempt to inject the administration with energy or direction. It was a drifting, aimless husk of a presidency whose very emptiness threatened the country Yeltsin was supposed to be safeguarding. There were odd moments, increasingly rare ones, when he would still be animated by a lightning bolt of enthusiasm, recovering for a couple of days his old flamboyance and energy, his capacity to pull political solutions from the ether, the atomic fizz of his charisma. They were long enough to prompt a half-blink of hope within his circle, and yet even they would soon be disappointed again.

The surprise appointments that he had once used to wrong-foot opponents and allies alike no longer had the galvanising impact of times past. He was a senile magician, confusedly casting old spells that had long since lost their power. Prime ministers would be sacked and then reappointed six months later. He brought in young tyros and weather-bitten veterans, but none seemed able to make the difference our country so desperately needed. The only lasting effect of his fickleness was the alienation of an entire generation of experienced bureaucrats and politicians, a process that left Yeltsin exposed and lonely, and overly reliant on a tiny inner circle that soon became known as ‘the Family’. This group included at various times his daughter, Tatyana; Tatyana’s husband, Valentin Yumashev, who afterwards became the head of the presidential administration; Oleg Deripaska (who was married to Yumashev’s daughter from his first marriage); the chief of staff, Alexander Voloshin; the head of security Alexander Korzhakov; Anatoly Chubais; and the oligarchs Boris Berezovsky (who had not yet discovered the enthusiasm for democratic accountability that he would be so vocal about in later years) and Roman Abramovich. [10] If you are interested in how these people operated, and the principles of the world they inhabited, the transcripts of the case Berezovsky tried to bring against Abramovich in the London courts several years later make highly informative reading. They insulated the President, but in the process created an airless, suffocating atmosphere that cut him off from reality. He was no longer able to speak to, or understand, the annihilating lack of hope felt by the majority of his subjects. That many houses had televisions now meant little; their inhabitants had lost almost everything else.