"Putin, the Victor - The Russian People, the Losers?"

Sydney M. Williams

Thought of the Day

“Putin, the Victor – The Russian People, the Losers?”

September 27, 2011

In the wake of the collapse of the Soviet Union, capitalism, in varying forms, swept the globe. Over the past two decades its benefits have improved the lives of millions of people from China to Chile to the Czech Republic. To almost all, it was a welcome antidote to socialistic societies that had morphed into repressive dictatorships under the moniker, Communism. For years the Soviet Union was able to compete against the U.S., in terms of defense and space, but at the expense of the lives of their citizens who suffered deprivation and hope. Now, with the announcement that Vladimir Putin will replace Dmitri Medvedev as President, it appears possible (perhaps not probable) that Russia could well retreat into the darkness and repression that was the Soviet Union. (Both men are members of the ruling United Russia party.) Of course, the capitalism they practice is a form of oligarchy, allowing for a small number of politically connected people to become immensely rich while the bulk of the population struggles. Any dreams Boris Yeltsin might have had twenty years ago for a more open society today appear lost.

The announcement did not come as a complete surprise. Four years ago when Mr. Medvedev was named President, replacing Mr. Putin who was constitutionally limited to two consecutive terms, there was speculation that this might be the result. But the timing was earlier than expected. Nevertheless, no matter how the decision is phrased, it likely marks further erosion in personal and economic freedoms. It is interesting to note the Presidential term has been extended to six years from four, meaning that Mr. Putin will remain in office until 2024! – Twenty years as President now seem likely plus four as Prime Minister. As the Wall Street Journal reminded us yesterday, Russia is what Mr. Putin once called a “managed democracy.”

In addition to their varied backgrounds – Putin was a Colonel in the KGB and Medvedev was a policy wonk, first in the office of the Mayor of Moscow and later in the presidential office – fundamental differences distinguish the two Russian leaders. Medvedev has always been more accommodative to the West than has Putin. Alexei Kudrin has long been a close advisor to Mr. Putin. He has been Finance Minister since 2000, but apparently quit over the weekend when informed that he would be working directly for Mr. Medvedev who would become Prime Minister. While Medvedev has lobbied for entry into the World Trade Organization, Putin has argued for greater protectionism and for building a trade bloc of former Soviet republics – perhaps an explanation by four former members of the Warsaw Pact last spring to form a battle group within the Visegrad Group . The decision by Mr. Putin will likely elevate and hasten the desire of former Soviet satellites to put a missile defense system in place – and not just against Iran. For the U.S., that decision may mean that our state department will have to re-set the re-set button that was never fully reset two and a half years ago.

Despite Mr. Putin’s apparent desire for greater protectionism – an admission, in my opinion, of an inability to compete globally – the fact that half their economy is dependent on energy has meant that they have had to work deals with foreign companies and countries. But companies strike deals with Mr. Putin at their peril. Last spring, British Petroleum’s deal with Rosneft (Russia’s state owned oil company) collapsed when BP could not work out a deal with its partners in its 50-50 owned joint venture, TNK-BP, a group headed by Russian billionaire and Putin ally, Mikhail Fridman. That opportunity, to drill in the oil-rich Arctic has now been offered to Exxon-Mobil who will partner with Rosneft. Success in Russia can mean nationalization. In 2006, Royal Dutch Petroleum, after spending $20 billion off Sakhalin Island was forced to sell half its stake to a Russian state-owned oil company. The law in Russia can be altered to fit the requirements of the plaintiffs. The judicial system serves at the whim of the President. The law in Russia is not held in the same esteem as it is in real democracies.

Reactions around the world to the changes in the Kremlin are clearly divided. Western Europe is dependent on Russian energy. Gerhard Schröder, former chancellor of Germany, is chairman of Nord Stream, a gas pipe line linking Russia to Europe across the Baltic Sea; the company is a subsidiary of Gazprom, the largest producer of natural gas and Russia’s largest company. Thus, for obvious reasons, Western Europe will work with whoever is in charge in Russia, as will the United States. On the other hand, former satellite Soviet nations – Eastern Europe and the Baltic states – see the changes as representing a re-assertive Russia.

The crisis in the European Union, according to Stratfor, may have hastened Putin’s decision. He may have felt the need to reassure the Russian people that the financial crisis will not impact Russian financial institutions. But Putin may also see the fracturing of Europe and especially the divisions within NATO, as a pending crisis that would be a terrible thing to waste. Western Europe believes that NATO should have a close alliance with Moscow. On the other hand, Eastern Europeans believe NATO should serve as a barrier against a resurging Russia.

The Russian people have been suppressed for centuries. The power of the Tsars was absolute. The Revolution in 1917 overthrew the Tsars, but their absolutism was soon replaced with a Communist dictatorship. Josef Stalin held power from the death of Lenin in 1924 until his own death in 1953. Under his regime, millions were deported to prisons in Siberia and hundreds of thousands, if not millions, were executed. The collapse of the Soviet Union in 1991 brought the hope for democracy and freedom. But political power remains entrenched in the arms of the political elite and money power in the hands of a few oligarchs. Together they control the country, and now it appears that Mr. Putin is attempting to further consolidate his power. For the Russian people, freedom looks to be as elusive as ever.

The infamous fatalist attitude of the Russian people was summed up by the writer Viktor Erofeyev in an article written by Ellen Barry in Monday’s New York Times. Ms. Barry writes of Mr. Erofeyev: “He shrugged off the notion of lasting disappointment and predicted that Russians would adjust by turning their attention inward. ‘This is a country that teaches you to look after your life and not fall into depression.’” But Russian novelists from Tolstoi to Solzhenitsyn suggest that the soul of that great nation cannot be easily extinguished, no matter the attempts of autocrats like Putin and regardless of the discouraging words from Viktor Erofeyev.