Putin, Russia and the People: Part 1

Our analysis aims at studying the new system that is a result of the large-scale reforms and intended policy in Russia conducted by Putin, the process of its establishment, its essence and results. The analysis will focus on the events that have taken place only inside Russia by December 31, 2015. We will reveal the problems of not only the economy progress and stabilization of the country, but also the level of corruption, the oligarchic and backward economy system and violations of human rights as well. 

In August, 1999, Vladimir Putin, the Secretary of the Security Council and the director of the Federal Security Service of the Russian Federation was appointed the First Deputy Prime Minister and later acting Prime Minister of the RF. On August 16, the State Duma approved his appointment as the PM with 233 votes in favour. The time of his appointment corresponded to the start of large-scale activities against terrorists by the Dagestan Federal Forces. Putin was the main organizer of this operation and enjoyed a splendid triumph. He managed to raise up the moral and psychological state of the frustrated army. Putin appeared to be a person who was able to unite his fellow citizens morally and psychologically and to lead them to victory.

On October 31, Boris Yeltsin, the president of the RF announced his resignation in the New Year congratulatory speech. He appointed Vladimir Putin the acting president of Russia. In the morning, at 11 a.m., Putin had already assumed his role as the acting president of the Russian Federation. On March 26, 2000, Putin was elected thepresident of Russia and assumed his office on May 7.

Consolidation of power

In the December 2003 Duma elections, the party “United Russia” (ЕдинаяРоссия) adherent to the President received the majority of votes. A year later, the parliamentary elections switched to a proportional system with party lists. Then, the State Duma adopted amendments in the federal legislation that allowed the parties winning in the regional parliamentary elections to propose their governor candidates to the Russian President. “United Russia” had this empowerment in the vast majority of regions. The cases when governors belonged to the ruling party became more and more frequent. At the beginning of 2007, 70 governors out of the 86 were members of the party. Managers of large industrial companies, heads of universities and their subordinate departments, high ranking officials of federal and provincial authorities were also members of “United Russia”. So, Putin managed to gather and keep under his control most representatives of not only economic, but also influential provincial circles through a simple party model.

The staff policy of Putin’s administration also contributed to the consolidation of the President’s power by appointing Putin’s personal friends and acquaintances in responsible offices who were loyal and responsible to the President himself, not to the state.

The youth organizations established in the course of Putin’s presidency are also remarkable. They aimed at increasing the legitimacy basis of the existing system especially among the youth and raising the prestige of Putin’s personality within the society.

In 2006, Vladislav Surkov, the Deputy Chief of the Russian Presidential Administration put forward the concept of sovereign democracy. According to this concept, the policy of the President should firstly enjoy the support of the Russian people, regardless of the response of the outside word. So, the thesis of “the Russian Democracy separate from the world” was introduced, a thesis that focused only on the legitimacy of the President and the upper stratum that surrounded him. Or, to be more precise, only the legitimacy of Putin and the elite surrounding him mattered.

Reforms during the first and second presidential terms

In August, 2000, the first major reform in the country’s constitutional and political system was the change in the order of the Federation Council. As a result of this, the governors and legislative leaders in provinces who had been ex officio in the Federation Council by then, were replaced by appointive representatives from each province. These representatives should work in the Federal Council on permanent and professional basis (one of them was appointed by the Governor who was appointed by the President in his turn, and the other was appointed by the local legislative body).

In the same year, Putin established a working group to improve legislation in the judicial system. The following year, Putin signed several key laws directed to the improvement of the judicial system. In 2001, he signed the new Criminal Procedural Code of the Russian Federation, the Arbitration Procedural Code in 2002, and on November 14, the same year, Putin signed the Civil Procedural Code of Russia.

In the 1990s, the average tax threshold of Russia was extremely high and unacceptable for businessmen. Despite the constant tightening of the tax legislation, the economy mainly consisted of shady parts: companies and businesses massively continued to avoid taxes. In the 2000s, Putin signed a set of laws that completed the tax legislation. The flat scale of income taxes was approved in 2001: 13% for natural persons. Besides, the income tax rate was reduced to 24%, the retrospective scale of a single social tax began to be implemented, circulation and sales taxes were abolished. Generally, taxes were reduced by 3.6 times (from 54% to 15%). The system of raw material taxes dramatically changed. The mechanisms of export taxes were modified and the natural resources consumption tax was introduced. This allowed to enlarge the oil and gas leasing sector that entered the government budget. In 2006, Sergey Shatalov, the Russian Finance Minister declared that the tax burden had been reduced from 34-35% to 27.5% due to the reforms and that are distribution of the tax load had occurred in the oil sector. The tax reform certainly contributed to the increase of collected taxes and stimulated the economic growth. In October, 2001, Putin signed the new Land Code of the Russian Federation which reinforced the right to own land (except from the lands used for agricultural purposes) and defined the mechanism of its trade. Next year, in July, Putin signed the federal law “On circulation of agricultural lands” that controlled also the trade mechanisms of those lands. In the end of the year, Putin also signed the new Labour Code of the RF that corresponded the labour legislation to the “requirements of market economy”. A number of other social-economic reforms were also implemented, e.g. Pension (2002), banking (2001-2004) and other reforms.

On January 1, 2004, the Stabilization Fund was established which chiefly aimed at providing the sustainable economic development of the country.

There was a significant increase of foreign investments in Russia (11 billion dollars in 2000, 115 billion dollars in 2010). The capital outflow, average 10-20 billion dollars in the 1990s, turned into inflow and in 2007, it reached unprecedented 81 billion dollars. The share of small enterprises in the Russian GDP increased in 2001-2004 and in 2007, their number exceeded one million. In 2009, the share of small and medium enterprises in the Russian GDP production amounted to 21%.

There was an increase of the GDP in the Russian economy in 2000-2008 (2000-10%, 2001-5.7%, 2002-4.9%, 2003-7.3%, 2004-7.2%, 2005-6.4%, 2006-7.7%, 2007-8.1%, 2008-5.6%). There was an increase also in the industrial and agricultural productions, construction and real income of the population. The number of people living below the local poverty line reduced (2000-29%, 2004-18%), the volume of consumer loans increased (in 2000-2006 it increased by 45 times). The productive branch of industry increased by 77% in 1999-2007.

In 2006, in his presidential speech directed to the Federation Council, Putin presented the incentives to increase the birth rate in the Russian Federation, e.g. increase of child allowances, introduction of the maternity capital and so on. In 2007, Putin declared that nanotechnologies were one of the primary ways of the development of science and technology and suggested establishing a Russian nanotechnology corporation that was done later in July, 2007.

In 2007, Putin signed the law 309 which removed the differentiating regional element of education in secondary schools. This was another evident step in the prolonged process to make the huge multi-ethnic federal state more centripetal. Generally, the whole period of Putin’s presidency can be referred to as the transition from confederatism that had raised in the last year of Yeltsin’s presidency to a strongly centralized and hierarchical system. At this stage, some attempts of the multi-ethnic state to standardize education and culture are already seen that are generally typical to strictly authoritarian societies.

In 1999-2008, the Russian economy increased due to the Ruble depreciation, major economic reforms (tax, banking, labor and land), strict budgetary-tax policy, proper macroeconomic policy, increase of domestic demand, large state reserve fund, the world’s third largest gold resources and, most importantly, favorable prices of raw material. All positions lost in the 1990s were not only returned into the economic sector, but also a new and almost persistent sector of services was created that almost didn’t exist during the Soviet period. But the economy was greatly dependent on the hydrocarbon energy resources and the “national champions” (large companies controlled by the state), the new gigantic corporations that exploited those resources. These corporations drowned large economy sectors in their inaction and corruption and irrevocably damaged the diversification of the Russian economy. Moreover, the denationalization of energetic assets (a process that had started even before Putin came to power) brought about the origination of a new class of oligarchs and financial polarization within the society. Marshall Goldman created the term “petrostate” (“oil state”) to define the economy model created by Putin. Russia was about to lose the historical opportunity to develop and diversify its economy.

Prime Minister Period

Regardless of the numerous appeals directed to him, Putin did not present a new package of constitutional reforms and did not put his candidacy for the third time constantly in the presidential elections. Instead, he supported the victory of one of his familiars, Dmitry Medvedev, by all means. On May 8, 2008, the next day after his inauguration, the new president of the Russian Federation, D. Medvedev appointed Putin the PM of Russia. Russia entered a period of being governed from the depth. The analyses that try to present this period as a stage of dual governing are nonsense. Putin continued to hold all the actual power, he was the one to make all the major decisions. When he became the Prime Minister, Putin moved all his team from the presidential administration to government. Putin’s PM period resulted in solving of domestic economic, territorial, local and sectoral problems, as well as elimination of the consequences of the great financial crisis (that had rather severely damaged the Russian economy).

Since this period, Putin has begun to act as an ideologist in the processes of joining with Belarus and Kazakhstan. The newly developing institution was named “The Customs Union”. In 2015, this organization evolved into the Eurasian Economic Union that has been the largest and most comprehensive integration institution in the region since the breakdown of the Soviet Union.

Putin from “United Russia” won in presidential elections in March, 2012, and was elected the president of Russia for the third time. Medvedev, the former president, was appointed the Prime Minister.

The third period of presidency and essence of the new system

The third period of Putin’s presidency was remarkable for the final development and adoption of the new social-political system, short economic successes and rise in culture and sports. But these were followed by the Ukrainian crisis, international isolation and international sanctions that resulted in severe economic problems. However, the positions of Russia and personally Putin in all these problems were greatly approved by the population. In May, 2014, the “Levada” center stated that the 85.9% of the Russian population supported the policy conducted by Putin. In general, Putin has been considered the most popular political figure in the Russian Federation since 1999. His rating has reached from 14% to 86% in 2015.

As a result of the Ukrainian crisis, the Republic of Crimea belonging to Ukraine peacefully joined the Russian Federation without any bloody fights. The Russian political thought almost unanimously relates this victory personally to Putin.

In the course of Putin’s governing, economic problems were not solved, but only veiled and frozen. Since the 2000s, Russia has begun to receive enormous profit from the oil, gas and other energy resources sales. This sector forms the half of the Russian government budget: the latter depends on the export of raw materials by 65%. Hence, the Russian economy is wholly dependent on the energy resources prices. There is no massive or other more or less developed production that will be able to compete with those in other states. So, Russia is the 8th country in the world with its nominal GDP that makes the 2% of the global GDP (the GDP of the USA and its allies makes more than 55% of the global GDP). Without the income from the export of the oil and gas resources, Russia stays out from the economic top 20 and its rates become almost equal to those of Sweden. The share of Ruble in the global trade makes 00.2% and its stability totally depends on the oil and gas prices. Moreover, the small and medium enterprises are in very unfavorable conditions (customs and tax policy) compared to the big ones. It is not random that in October, 2013, the analysts of the Swiss bank “Credit Suisse” came to the conclusion in their annual welfare report that 110 billionaires possess 35% of Russia’s national wealth.

Putin also faced serious problems with one of his priorities, which is providing security. More than 150 terroristic attacks have taken place in Russia since 1999. Yet, none of them has even shortly realized its primary aim, which is terrorizing the society.

Putin can be wonderfully characterized through his belief that the two pillars of the Russian statehood are traditional creeds and nuclear weapon which he considers tools to prevent internal and external threats.

The whole activity of the President proves that he considers the highly centralized method of management the only acceptable option for Russia. It is even expressed in cultural, educational and media sectors. Government propaganda has become the inseparable companion of the Russian administration. This has reached phenomenal successes considering the peculiarities of the 21st century society. The profound essence of the system lays in managing the country by a small nuclear team gathered around one single person. The whole system is built around his personality. This makes him irreplaceable in the system context and this is the main weakness of the modern Russian statehood. The system has one major objective. That is, to continuously increase and maintain legitimacy. This refers to the legitimacy of a single person’s power. This very context explains the nationalistic and aggressive foreign policy, disguising the critical economic state and enhancing the Putin-people connection (aka direct democracy) through numerous TV marathons and “direct lines. In a word, the modern social-political governing method of the RF can be referred to as “neobonapartistic”. It is a system built around one single person, a person who has been made a hero, a person who carries (or, at least, it seems that he carries) the ideas and moral character of the Russian people.

Author: Areg Kochinyan: © All rights are reserved.

Translated by Yeranuhi Antonyan

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Putin, Russia and the People: Part 2