Mr. Putin: Operative in the Kremlin, Part 5 of 14
Putin and Gaidar agreed: Surviving without being sovereign, without being able to autonomously shape your own destiny free from outside pressure or control, was essentially meaningless.
A fascinating question is how much Putin, from 2000 to 2022, felt he was living up to this ideal of strategic planning:
The idea of building up Russia’s reserves may also have been reinforced for Putin by an American textbook on strategic planning that he most likely read in the KGB academy... The main theme of the textbook, by University of Pittsburgh professors William King and David Cleland, was “how to plan in an uncertain environment.” The key point King and Cleland made was that the essence of true strategic planning is not long–range planning but “planning for contingencies,” for the unexpected. The question is how best to be prepared, and if not, how to adapt to the worst–case scenario when there are uncontrollable, unpredictable changes in the environment. The authors focused on the role of strategic planning in the management of a corporation. They went into great detail on the concept of strategic intelligence, with chapters on strategic corporate intelligence, including financial intelligence. King and Cleland also concluded that the key to strategic planning was to set up a hierarchy of goals and objectives. Anyone doing the strategic planning for a corporation would have to identify, define, and explain what is a constant objective and what can be adapted or even sacrificed.
Especially after 2014 it is known that he wanted to protect Russia from Western sanctions. His aides have spoken of a "Fortress Russia" which should have been invulnerable to Western pressure. And yet, of the $660 billion in reserves that Russia had saved up by early 2022, the West was able to quickly freeze $300 billion, because it was in banks that the West controlled. How did Putin overlook this? Did he think the Western governments would simply not freeze assets of the Russian central bank? Or did he leave the handling of the reserves to his underlings, and perhaps Putin did not realize how vulnerable Russia was?
In the early days, Putin relied heavily on Alexei Kudrin, who left the government (was pushed out?) in 2011. It is possible that Putin never again found anyone he could trust like he trusted Kudrin, or perhaps Putin was less inclined to listen to Kudrin's successors.
This link between state reserves and the economy is a critical one for Putin. In the same period of 2000–06, he extended the concept of amassing reserves from the material to the financial arena. Putin assigned another close St. Petersburg colleague to spearhead this task: Alexei Kudrin, an economist who had previously been deputy mayor in charge of finances in Sobchak’s administration. Kudrin moved to Moscow as deputy chief of the presidential administration in 1996 and then became Russia’s first deputy finance minister in March 1997. He helped to bring Putin to Moscow in 1996 by recommending him for a position in the presidential administration. In May 2000, Putin appointed him finance minister, and Kudrin went on to play the same role for President Putin and Russia as he had played for Mayor Sobchak in St. Petersburg, managing the finances at the macro-level. Kudrin’s and Putin’s shared goals were to reduce the state’s debt burden, reduce Russia’s exposure to the volatility of the global economy, and to build financial reserves sufficient to weather a major economic downturn. This would ensure not just the physical survival of the state but Russia’s survival as an independent state. One of the lessons Putin, Kudrin, and others around them had learned from the Soviet experience was the connection between a country’s financial and fiscal health and its sovereignty.
As the father and supporter of the prudent fiscal management policies, Kudrin had to endure strong criticism from other members of the government, who believed the money should instead be invested in the country's development. In the end, Kudrin's stance prevailed. The savings later proved crucial in helping Russia to come out of the financial crisis in a much better state than many experts had expected,[4] and Kudrin was widely credited for his policies.
As noted in earlier essays, I am mostly quoting from the Fiona Hill & Clark Gifford book (see below). The most surprising thing about the book is its avoidance of the subject of corruption. Much of the writing presents Putin as a rational actor who had reasons for doing what he did. Certainly, they write as if Putin had a long term strategy, which has been pursued since 2000. The whole thing is a bit clean. Their picture of Putin is too pretty. Think about the above emphasis on building up reserves and restoring a market economy, and then think about how much all of these goals are undercut by the rampant corruption in Russia. Does Putin himself underestimate how much corruption there is in Russia?
Putin will be remembered for overseeing a full cycle, first of rising prosperity, and then of increasing immiseration. From 2000 to 2008 Russia did exceedingly well, and it rebounded in the face of the crisis of 2008, doing much better than most Western nations. Yet all the good Putin did in those years was then undone, slowly after 2014 and then very suddenly with the invasion of Ukraine. And the full cycle, these last 22 years, will be remembered as being not just a financial cycle, but also a cycle of freedom from Western pressure, which Russia at first evaded, but now is facing again, more ferociously than ever before:
The fall of the USSR, as Yegor Gaidar clearly spelled out in his book Collapse of an Empire, showed that military power alone could not guarantee sovereignty if the state then lost its financial independence. Surviving without being sovereign, without being able to autonomously shape your own destiny free from outside pressure or control, was essentially meaningless.
For most of the stretch from 2000 to 2014, Putin defined himself in opposition to the nationalists. They were angry extremists, he said, whereas he was calm and rational and logical and objective. The Russian people themselves were hot-headed and likely to elect a dangerous war-mongering lunatic, if Putin wasn't there to save them from their own worst impulses. (The irony is thick.) How much did this rhetoric start with Putin, and how much was this the thinking of the economic liberals/libertarians who surrounded him, who were probably worried that the Russian people, if they voted in a free and fair election, would want to go back to some kind of socialism? Perhaps the economic liberals/libertarians felt that only Putin could save the kind of economic liberalism that the economists preferred?
This week, Anatoly Chubais resigned from the Russian government:
Anatoly Chubais, the architect of Russia's post-Soviet economic reforms, has quit his post as a Kremlin special envoy and left the country due to the war in Ukraine, two sources told Reuters, the highest profile protest by a Russian figure against the invasion.
...Chubais was one of small group of influential economists under Yegor Gaidar who tried to cement Russia's post-Soviet transition that threw tens of millions of former Soviet citizens into poverty.
He was one of the most prominent Russians of the chaotic immediate post-Soviet era: enemies cast him as the Kremlin puppet master who sold off the assets of a former superpower to a small group oligarchs in the privatisations of the 1990s.
But to supporters, Chubais was a hero who fought to establish a market in Russia - and prevented it from tipping into civil war. When trouble loomed, it was often Chubais who post-Soviet Russia turned to.
...Shortly after the Ukraine invasion, Chubais wrote that since Gairdar's death in 2009, an entire era had passed.
"It seems that Gaidar understood the strategic risks better than I - and I was wrong," Chubais said.
So now, and much too late, we are to believe that some of these liberal/libertarians have regrets about supporting Putin for so long. What might have been their motivation for staying loyal this long? One possibility is that, for many years, they felt that anyone else, besides Putin, would have been even worse. It's possible that many in elite positions in Russia really did believe the PR:
In all of these forays into the territory of Chechnya and the North Caucasus, ethnicity, religion, and Russian nationalism, Putin and the team around him painted a portrait of Mr. Putin as the most reasonable statesman in Russia – the only person capable of ensuring Russia’s survival. Putin’s PR team depicted him as standing above the fray and holding back reactionary forces, like Zhirinovsky, who would otherwise upend or rip apart the Russian state. A frequent refrain of Russian officials and Kremlin–connected commentators was that “Vladimir Putin is more reasonable than 99 percent of Russians,” with the clear inference that, as one independent Russian journalist remarked, “The Russian narod [people] would elect a ‘new Hitler’ if Vladimir Putin did not exist.”
How much was Putin merely repeating some of the more liberal ideas that his supporters were feeding him, versus how much was he saying what he believed? How much did he absorb these ideas and make them his own?
Putin emphasized the multi-racial and multicultural character of Russia. There is something about this that initially sounds liberal, till we realize how much this rhetoric can also be used to justify the invasion of Ukraine:
Putin’s final major address as prime minister to parliament in April 2012 hammered home this point – the dangers of dividing and thus destroying. It came in the form of an answer to a suggestion from a member of the Russian Duma that the preamble to the Russian constitution be changed from beginning with “We the multinational people [narod] of Russia,” to “We the [ethnic] Russian [russkiy] people and the people who have joined with it.” Putin retorted:
Do you understand what we would do [if we did that]? Part of our society would consist of first class people and part would be second class. We must not do that if you and I want to have a strong single [yedinaya] nation, a single people [narod], if we want each person who lives on the territory of the country to feel that this is their homeland, and that there is no other homeland, nor can there be one. And if we want each person to feel like that, then we have to be equal. This is the principle question. The fact that the [ethnic] Russian [russkiy] people are – without a doubt – the backbone, the fundament, the cement of the multinational Russian [rossiyskiy] people cannot be questioned….But to divide everyone up into first, second, third categories, you know, this is a very dangerous path. You and I, all of us, must not do this.
I'm a bit surprised at how liberal this sounds -- it sounds liberal until you realize how easily this justifies the invasion of Ukraine. I can see how his thinking here very easily becomes "Ukraine was never a real country, it was just one of the many ethnic groups that made up Greater Russia." That kind of inclusiveness becomes a kind of imperialism, of the kind that has echoes going back to Ancient Rome: this empire includes everyone, and we will kill you if don’t feel welcome in our warm embrace.
Reading over all of this material, we are left with the impression that Putin was once a reasonable person, but that he has slowly gone crazy. But why has he gone crazy? Is it perhaps that he has been corrupted by power? A contrary thought arises from the old saying "Power does not corrupt, but rather, it reveals who a person really is." So perhaps the man we see now is the real Putin. But why are we seeing him now, and not 20 years ago? One possibility is that his original situation was surprisingly weak, and it took him a long time to gain real power. Consider this bit:
Putin, with his humble family origins, was a double or even triple outsider in the St. Petersburg Ozero group and the Soviet nomenklatura (those who occupied state administrative positions). His family was never part of the intelligentsia. Putin was not part of the traditional structures of the Communist Party of the Soviet Union (CPSU). In many respects he was an outsider even within the KGB. He was not a KGB “golden boy” like his contemporary Sergei Ivanov – who later served as defense minister and deputy prime minister under Mr. Putin and was then appointed head of the presidential administration. The latter enjoyed early postings to Helsinki and London and always seemed to be on a fast track to somewhere as he rose through the academies and ranks of the KGB. In contrast, Vladimir Putin did not reach the upper echelons of the institution until he suddenly secured a political appointment to head the Federal Security Service (FSB) in 1998. Putin was an outsider even to Mikhail Gorbachev’s perestroika (restructuring or transformation)... In an interview she gave shortly after Putin was appointed prime minister in 1999, Russian analyst Lilia Shevtsova described him as “an outsider who previously served in St. Petersburg….He has not had the time to develop the personal relationships and the network of allies within the bureaucracy of the security services that is necessary to establish firm control.” Shevtsova and many others cautioned in 1999 against seeing Putin “as some kind of superman” based on his previous, and brief, position as head of the FSB, the successor to the KGB. They concluded – as observers of Pyotr Stolypin’s appointment a century early had also concluded – that “he [Putin] will be greatly limited in what he is able to do.”
He was an outsider, he was appointed by friends, he owed his position to others. His rise had been determined by Sobchak, the liberal mayor of St. Petersburg, and Putin was originally brought in and promoted by the same team of liberals who had been part of Sobchak's administration. (As previously noted, "liberal" doesn't exactly mean what it might in the West.) The "reasonable" Putin who seemed to govern during the era 2000 to 2008 was perhaps a constrained Putin, who had not yet had the chance to build his own power base. The "unreasonable" Putin who emerges more and more after 2008 is, therefore, the real Putin, it's what Putin can show the world once he is secure in his position.
Here, truly, is a man who could only do well while he was surrounded by people who could constrain and dam up his own worst vices. Here is a man who was certain to destroy himself, once he had the power to act on what he honestly holds to be true.
As with the previous essays, the above quotes were pulled from a longer excerpt:
Mr. Putin: Operative in the Kremlin
Fiona Hill & Clifford G. Gaddy
Copyright © 2013 The Brookings Institution
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Page 81–82
STRATEGIC PLANNING: BUILDING UP RESERVES
The idea of building up Russia’s reserves may also have been reinforced for Putin by an American textbook on strategic planning that he most likely read in the KGB academy (the Red Banner Institute) in 1984–85 – and which he used extensively when writing his dissertation in the mid–1990s. The main theme of the textbook, by University of Pittsburgh professors William King and David Cleland, was “how to plan in an uncertain environment.” King was in business administration and Cleland in engineering (“systems management engineering”). Their work, Strategic Planning and Policy, was first published in 1978 as a business school textbook. We cannot be certain that Putin actually read King and Cleland in the 1980s and, if so, when exactly, but the Russian–language edition of the book was published in 1982 in a very limited edition by the USA–Canada Institute in Moscow. It was almost certainly published on behalf of the intelligence services, and it may well have been used, or at least available, at the Red Banner Institute.
The key point King and Cleland made was that the essence of true strategic planning is not long–range planning but “planning for contingencies,” for the unexpected. The question is how best to be prepared, and if not, how to adapt to the worst–case scenario when there are uncontrollable, unpredictable changes in the environment. The authors focused on the role of strategic planning in the management of a corporation. They went into great detail on the concept of strategic intelligence, with chapters on strategic corporate intelligence, including financial intelligence. King and Cleland also concluded that the key to strategic planning was to set up a hierarchy of goals and objectives. Anyone doing the strategic planning for a corporation would have to identify, define, and explain what is a constant objective and what can be adapted or even sacrificed. A planner would have to distinguish the overarching from the temporal; and then, from that, see what needs to be made precise and what not. The goal was to separate the truly important, the strategic, from the lower–level, shorter–term concerns.
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Page 85–86
DEPLOYING RUSSIA’S FINANCIAL RESERVES
This link between state reserves and the economy is a critical one for Putin. In the same period of 2000–06, he extended the concept of amassing reserves from the material to the financial arena. Putin assigned another close St. Petersburg colleague to spearhead this task: Alexei Kudrin, an economist who had previously been deputy mayor in charge of finances in Sobchak’s administration. Kudrin moved to Moscow as deputy chief of the presidential administration in 1996 and then became Russia’s first deputy finance minister in March 1997. He helped to bring Putin to Moscow in 1996 by recommending him for a position in the presidential administration. In May 2000, Putin appointed him finance minister, and Kudrin went on to play the same role for President Putin and Russia as he had played for Mayor Sobchak in St. Petersburg, managing the finances at the macro-level. Kudrin’s and Putin’s shared goals were to reduce the state’s debt burden, reduce Russia’s exposure to the volatility of the global economy, and to build financial reserves sufficient to weather a major economic downturn. This would ensure not just the physical survival of the state but Russia’s survival as an independent state. One of the lessons Putin, Kudrin, and others around them had learned from the Soviet experience was the connection between a country’s financial and fiscal health and its sovereignty.
The fall of the USSR, as Yegor Gaidar clearly spelled out in his book Collapse of an Empire, showed that military power alone could not guarantee sovereignty if the state then lost its financial independence. Surviving without being sovereign, without being able to autonomously shape your own destiny free from outside pressure or control, was essentially meaningless. The late Soviet regime had enjoyed a period of high resource rents – that is, the value of its oil, gas, and other natural resources – and national wealth followed by a period of very low rents. But it had managed the rents poorly. It had become so deeply indebted to Western governments that it sacrificed its financial – and ultimately its political – sovereignty, its independence. Putin, Kudrin, and their colleagues were very aware of how the United States and the West had been able to leverage post–Soviet Russia’s indebtedness and dependence on International Monetary Fund (IMF) bailouts and World Bank loans in the early 1990s. The withdrawal of former Soviet troops from the Baltic states in 1994 was one glaring instance where Moscow had been forced to acquiesce on foreign policy issues.
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Page 87
The decade spent building up reserves helped Russia, and Putin, weather the global financial crisis of 2008–10. This stood in stark contrast to Russia’s performance in 1998 when, in the aftermath of the Asian financial crisis of 1997, Russia defaulted on its debt and devalued the ruble. The 2008 global crisis, and especially the accompanying oil price collapse, did hit Russia hard. From June 2008 to January 2009, the stock market lost nearly 80 percent of its value. In 2009, GDP dropped by 7.9 percent and industrial output by 10.8 percent from the previous year. Yet, thanks to a substantial package of bailouts and stimulus measures, households were largely protected. Real incomes continued to grow, albeit modestly, and job losses were less than nearly anywhere else in Europe. Russia’s ability to ride out the crisis reasonably well was due to Putin’s and Kudrin’s prudent fiscal and financial management during the oil boom period as well as a rebound in oil prices after early 2009. In contrast with the 1990s, Russia’s reserves played the critical role in protecting Russia’s financial sovereignty and the welfare of its citizens.
In Putin’s view, the 2008–10 crisis vindicated and reinforced his and Kudrin’s policy of fiscal conservatism and extreme self–insurance to enhance Russia’s resiliency to short–term shocks. Putin referred to this directly and very clearly in his last annual address to parliament as prime minister in April 2012. The speech also underscored his plans to continue on the same course once he was again inaugurated as Russian president the following month. Putin asserted in the address, “In assessing the results of the last four years, we can state – with full justification – that Russia has not only overcome the [economic] crisis, but we have made a serious, significant, notable step forward, we have become stronger than we were before.” The reserves were central to this achievement: “Where can we turn to [if there is a crisis]? Well Greece can go to Brussels for money, and will get it. But who will give us money? Someone could also give it to us, but with what conditions attached? I remember this situation very well after 2000, when we were overburdened with debts and when people forced conditions on us….In Russia we have a very specific set of circumstances – being without reserves is very dangerous.” The contrast with the 1990s could not be greater, he argued: “If at the beginning of the 1990s and in 1998 the economic blows turned into such a shock for millions of our people, then during the crisis period from 2008 to 2010, the government [vlast’] demonstrated its solvency [sostoyatel’nost’] when put to the test.”
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Page 96
In all of these forays into the territory of Chechnya and the North Caucasus, ethnicity, religion, and Russian nationalism, Putin and the team around him painted a portrait of Mr. Putin as the most reasonable statesman in Russia – the only person capable of ensuring Russia’s survival. Putin’s PR team depicted him as standing above the fray and holding back reactionary forces, like Zhirinovsky, who would otherwise upend or rip apart the Russian state. A frequent refrain of Russian officials and Kremlin–connected commentators was that “Vladimir Putin is more reasonable than 99 percent of Russians,” with the clear inference that, as one independent Russian journalist remarked, “The Russian narod [people] would elect a ‘new Hitler’ if Vladimir Putin did not exist.” This is one of many tools in Putin’s political arsenal. It is also another tactic tried and tested in the 1990s and with the same stock cast of characters. Boris Yeltsin and political team often conjured the idea of après moi le déluge with explicit reference to Vladimir Zhirinovsky and other nationalist politicians – suggesting that if Yeltsin were swept from office, a fascist regime in Russia would be only a step away.
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Page 97–98
In a January 2012 article in Nezavisimaya gazeta on ethnicity issues, “Russia: the national question,” Putin also directly criticized the calls to “stop feeding the Caucasus”:
I am convinced that the attempts to preach the idea of a “national” or monoethnic Russian state contradict our thousand–year history. Moreover, this is a shortcut to destroying the Russian people and Russian statehood, and for that matter any viable, sovereign statehood on the planet. When they start shouting, “Stop feeding the Caucasus,” tomorrow their rallying cry will be: “Stop feeding Siberia, the Far East, the Urals, the Volga region, or the Moscow Region.” This was the formula used by those who paved the way to the collapse of the Soviet Union. As for the notorious concept of self–determination, a slogan used by all kinds of politicians who have fought for power and geopolitical dividends, from Vladimir Lenin to Woodrow Wilson, the Russian people made their choice long ago. The self–determination of the Russian people is to be a multiethnic civilization with Russian culture at its core. The Russian people have confirmed their choice time and again during their thousand–year history – with their blood, not through plebiscites or referendums.
This Putin article is particularly significant in that it stresses the importance of ensuring the survival of the Russian state and tying that survival (which millions have died for) to protecting Russia’s multiethnicity. As is the case with so many of Vladimir Putin’s writings and pronouncements on the Russian state, the article reflects the ideas of other Russian thinkers, primarily from the 1990s. In this instance, some of the key ideas are those of Valery Tishkov, the director of the Institute of Ethnology and Anthropology at the Russian Academy of Sciences. In 1992, Tishkov set up Russia’s first ministry of nationalities for Boris Yeltsin to address and avert the threat of the Russian Federation’s disintegration. He served in the position of minister for only a year before returning to the Academy of Sciences. The ministry was most active during the period when Moscow was forced to conclude bilateral treaties with Tatarstan and other regions. It then expanded its mission to deal with migration issues. It was dismantled by Putin in 2001 when he began to stress the importance of a unified Russian state.
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Page 101 (might be 104)
Putin’s final major address as prime minister to parliament in April 2012 hammered home this point – the dangers of dividing and thus destroying. It came in the form of an answer to a suggestion from a member of the Russian Duma that the preamble to the Russian constitution be changed from beginning with “We the multinational people [narod] of Russia,” to “We the [ethnic] Russian [russkiy] people and the people who have joined with it.” Putin retorted:
Do you understand what we would do [if we did that]? Part of our society would consist of first class people and part would be second class. We must not do that if you and I want to have a strong single [yedinaya] nation, a single people [narod], if we want each person who lives on the territory of the country to feel that this is their homeland, and that there is no other homeland, nor can there be one. And if we want each person to feel like that, then we have to be equal. This is the principle question. The fact that the [ethnic] Russian [russkiy] people are – without a doubt – the backbone, the fundament, the cement of the multinational Russian [rossiyskiy] people cannot be questioned….But to divide everyone up into first, second, third categories, you know, this is a very dangerous path. You and I, all of us, must not do this.
With this retort, Putin underscored his view that the issue of ethnicity in Russia in neither a moral nor an ideological one. On a purely practical level, dividing the country into groups or allowing people to divide the country into groups weakens it. [[weblog co–author Kathryn Bertoni comments: “Hence the Russian campaign to divide Americans, to weaken the country. Well played, Putin.”]] This was a mistake made in both Russia’s imperial and Soviet pasts. To keep Russa, the state, intact – as he is determined to do – this mistake should not be repeated.
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Page 107–108
Putin, with his humble family origins, was a double or even triple outsider in the St. Petersburg Ozero group and the Soviet nomenklatura (those who occupied state administrative positions). His family was never part of the intelligentsia. Putin was not part of the traditional structures of the Communist Party of the Soviet Union (CPSU). In many respects he was an outsider even within the KGB. He was not a KGB “golden boy” like his contemporary Sergei Ivanov – who later served as defense minister and deputy prime minister under Mr. Putin and was then appointed head of the presidential administration. The latter enjoyed early postings to Helsinki and London and always seemed to be on a fast track to somewhere as he rose through the academies and ranks of the KGB. In contrast, Vladimir Putin did not reach the upper echelons of the institution until he suddenly secured a political appointment to head the Federal Security Service (FSB) in 1998. Putin was an outsider even to Mikhail Gorbachev’s perestroika (restructuring or transformation). He was posted to Dresden in East Germany during the critical period when Gorbachev took the helm of the USSR. Gorbachev was elected head of the CPSU in May 1985. Putin received his orders to relocate to Dresden that August. He remained there until after the fall of the Berlin Wall in 1989 and his return to Soviet Leningrad early in 1990. After his tenure as a deputy mayor of St. Petersburg, Putin was specifically brought into Moscow in summer 1996 as an outsider. As we will discuss, he was an operative on a mission to collect information on, monitor, and ultimately help the Kremlin rein in Russia’s unruly oligarchs.
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In an interview she gave shortly after Putin was appointed prime minister in 1999, Russian analyst Lilia Shevtsova described him as “an outsider who previously served in St. Petersburg….He has not had the time to develop the personal relationships and the network of allies within the bureaucracy of the security services that is necessary to establish firm control.” Shevtsova and many others cautioned in 1999 against seeing Putin “as some kind of superman” based on his previous, and brief, position as head of the FSB, the successor to the KGB. They concluded – as observers of Pyotr Stolypin’s appointment a century early had also concluded – that “he [Putin] will be greatly limited in what he is able to do.”