The Hinge that Holds Russia Together

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Snapshot

Putin's Return and Washington's Reset With Russia

Andrew Kuchins

With Vladimir Putin now set to retake the Russian presidency, many are arguing that Washington's reset with Moscow is in jeopardy. Not so, as a rising China, cheap oil, and a need for international partners will force the Kremlin to play nice with the Obama administration.

Snapshot

The Temporary Return of Putin Co.

Lilia Shevtsova

Russia's ruling security-services clan, which has usurped power over the last decade, needs Vladimir Putin to return to power. Putin and this close-knit group plan to rule the country for life -- but economic stagnation and rising social unrest means they may be in for a shock.

Vladimir Putin's decision to return to the Russian presidency should not come as a surprise; he learned early in his career that democratic rule was dangerous. In the late 1980s, when he was a young lieutenant colonel in the KGB, Putin watched as his post was abolished and his country ruined as a result of democratic reforms in the Soviet Union. In 1996, having become deputy mayor of St. Petersburg and head of the electoral campaign for then mayor Anatoly Sobchak, he was kicked out of the political scene once more after Sobchak lost in a democratic election. Putin inherited the presidency from Boris Yeltsin in December 1999 and confirmed his authority in highly predictable national elections in March 2000. All told, Putin's dislike for democracy is, in a sense, understandable.

Putin has created a political system based on the redistribution of property, widespread corruption among government officials, the domination of security services, and informal flows of income distributed according to political necessity. Under Putin, the Russian elite has felt completely free to disobey or ignore the laws and rules imposed on ordinary Russians. For the Russian political class, Putin is the only guarantor of such liberties.

Since virtually all members of the Russian political elite have been directly appointed to their posts by Putin or his cronies, the group represents not a genuine team but a board of yes-men. This is why the current president, Dmitry Medvedev, will never be able to manage the political elite as well as Putin himself does, nor will Putin's other disciples. The risk of uncontrolled developments seems too huge for Putin to withdraw from office, since he feels that all these people have no obligations to each other, and in many cases do not even trust each other. 

Putin's decision to nominate himself for another presidential term also shows that the system he designed is now unable to reproduce itself in a fully legitimate way. If political change does come to the country, it will not result from major opposition parties and movements but from unsatisfied groups within the elite combined with some probability of a palace coup within the Kremlin. The resignation of Finance Minister Alexei Kudrin, who once initiated Putin's move from St. Petersburg to Moscow at Medvedev's urging, shows that no one at the top is untouchable except Putin himself. (Up until now, Putin had never allowed anyone to fire one of his close allies.) But Putin must be careful: if he rejects or eliminates for himself some longstanding rules of the game, others may feel free to ignore them as well. 

Those Russian politicians -- Valentina Matviyenko, a Putin protégé and the head of the Federation Council of Russia, and Boris Gryzlov, another Putin ally and speaker of the Russian State Duma, for example -- who believe that 2012 will see a different, more active and liberal Putin take power in the Kremlin are deeply mistaken. The past six or seven years have not presented Putin with an urgency to modify or upgrade his political philosophy. On the contrary, the 2008 war in Georgia, the progress in Russian relations with Ukraine, the success of Putin's agenda of moving natural gas exports to the forefront of Russian foreign policy, and the relatively light effect of the financial crisis in Russia have convinced Putin of the rightness of his own political course. 

Russia's economic modernization is likely to stall under the next Putin presidency. The role of state-controlled companies will grow, most industries will experience stagnation, and production costs will increase, driven up by rising tariffs and taxes. As these costs rise, the inflow of capital into the country will fall because it will become too expensive to produce anything from domestic raw materials. The economic system Putin created is designed to operate in an environment when oil prices are not only high but rising; among other benefits to the corrupt, such an atmosphere makes it easier for bureaucrats to pocket some money, a key incentive for many state officials in the Putin era. But today many prices and tariffs in Russia have already reached Western levels: for example, Russians pay even more for gasoline and electricity than do Americans. If such trends continue, any industrial activity in Russia may become unprofitable and imports will dominate. 

For the last ten years, the Russian government's budget has ballooned, from 1.96 trillion rubles in 2000 to 20.4 trillion rubles in 2011 ($63 billion to $680 billion). Much of this spending has come in the form of direct tributes to regional governors, as well as to some ministries and their officials. It will be difficult to maintain this level of expenditure, since today, more than at any other moment in Russia's history, state revenues depend on the price of fossil fuels; oil, gas, and other petroleum products make up 72 percent of exports. If oil prices continue to fall, Putin may have to cut the budget, which could have a dangerous and unpredictable effect.