Lacking the support of either the electorate or the parliament, Yeltsin became ever more imperious and erratic. As his threat to cancel elections in 1996 revealed, he was hardly a convinced democrat; faced with universal unpopularity, he acted more like a party boss determined to impose his will, regardless of the Duma or public opinion. Most, including former close associates, concur with a former press secretary that Yeltsin ‘has no ideology of his own except the ideology of power’. For Yeltsin, ruling meant decreeing: in 1996, when the Duma passed 230 laws, the president promulgated 1,000 personal ukazy (decrees) and signed another 2,000 edicts and directives from his Presidential Administration. Apart from ‘ukazomania’, Yeltsin showed a strong penchant for wilfulness, with no apparent purpose other than to remind his entourage who was boss. During one yachting trip in Siberia, ‘Tsar Boris’ became furious with an aide and had him thrown overboard; another aide, positioned on the lower deck, saw the figure soar past, extremities wildly flailing, and at first glance thought it to be some exotic Siberian fowl. Yeltsin’s fondness for drink did not help; after imbibing the president was reportedly fond of drumming out rhythms on the foreheads of hapless aides and allegedly even bestowed this honour on President Oskar Akaev of Kyrgyzstan. Yeltsin turned the state cabinet into a royal court.
The court did not want for new faces: Yeltsin’s self-assertiveness expressed itself most dramatically and destructively in a high turnover of top officials. After Yeltsin sacked Viktor Chernomyrdin as prime minister in March 1998 (for appearing more presidential than the president), the country witnessed a parade of four different prime ministers in sixteen months. The Kremlin turned into a game of musical chairs; altogether, during his second term, Yeltsin had five prime ministers, three foreign ministers, three defence ministers, five finance ministers, five chiefs of staff, and seven heads of the national Security Council. Worse still, competence and tenure appeared to be inversely related, as the hasty dismissals of Aleksandr Lebed (as secretary of the Security Council in November 1996) and Evgenii Primakov (as prime minister in March 1999) attest. Given Yeltsin’s inability to govern, the turnover only accelerated the breakdown of rational, orderly governance.
It also flung the door wide open to corruption, with inordinate influence devolving upon close advisers and supporters, collectively known as the ‘Family’. An inner circle dominated by Yeltsin’s daughter (Tatiana Diachenko, officially appointed a paid presidential adviser in 1997) controlled access to Yeltsin and shaped decision-making. The entourage included some ‘oligarchs’, rich businessmen who had amassed fabulous wealth by dubious means and connections to high officials, and who repaid the favours by financing Yeltsin’s re-election in 1996. This élite included figures like Boris Berezovskii (former mathematician, car dealer turned plutocrat), who openly boasted that the oligarchs controlled ‘50 per cent of the Russian economy’, played a critical role in Yeltsin’s re-election in 1996, and therefore claimed the right to ‘occupy the key posts in the government and to benefit from the fruits of victory’. Berezovskii himself became deputy head of the Security Council; another oligarch, Vladimir Potanin, served as deputy prime minister responsible for economic policy. But the oligarchs soon squabbled over the spoils of victory and used their control of the media to disseminate kompromat (compromising materials) about top officials, further eroding public trust in the Yeltsin government.
As the ‘centre’ imploded, the eighty-nine ethnic republics and regions became increasingly independent and assertive. In his struggle with Gorbachev, Yeltsin himself had encouraged centrifugal tendencies by urging local authorities to withhold taxes and act on their own—most vividly telling the leadership in Tatarstan in 1990 to ‘grab as much sovereignty as you can swallow’. The breakdown of central authority accelerated after the collapse of the Soviet Union, as republics and oblasti all across Russia withheld taxes, proclaimed ‘sovereignty’, appointed officials, and—in seventy of the eighty-nine regions—adopted laws and constitutions at variance with the federal constitution and laws. In Yeltsin’s second term, as the political and economic crisis deepened, some regions adopted price and export controls to protect their citizens. As in the case of the oligarchs, Yeltsin dispensed privileges and property in exchange for political support, codifying such deals in bilateral treaties with over half of the regions.
A critical factor in the breakdown of the central government was its inability to collect taxes from citizens and enterprises. Thus, between 1989 and 1997 state revenues fell by nearly 45 per cent, partly because the regions reduced the transfer of revenues, partly because individuals and enterprises simply refused to pay taxes (in 1997, only 16 per cent of the taxpayers paid in full and on time, 50 per cent partially and belatedly, and 34 per cent nothing at all). When the government proposed tax reform for small businesses, petty entrepreneurs were aghast: ‘Don’t do anything: it is fine as it is! We evade all taxes, from the profit tax to the value-added tax. We’ve learned how to circumvent all the assessments for social services.’ Yeltsin had partly ‘legalized’ the tax evasion by making special deals with influential companies; others simply refused to pay (the top eighty enterprises accounted for 40 per cent of the tax arrears). Other factors behind the decline in tax revenues included the breakdown of the state apparatus for tax collection, the proliferation of a ‘shadow economy’ unrecorded in accounting books, and corruption vigorously promoted by organized crime. Tax collection came to resemble civil war: in 1996 twenty-six tax officials were murdered and eighteen tax offices subjected to bombings and armed assault. In October 1997 Yeltsin conceded the magnitude of the peril and established an ‘extraordinary commission’ (invoking the same Russian initials as the first Soviet secret police, VChK) to collect taxes. A desperate government imposed a plethora of new taxes (more than 200 separate taxes were on the books in 1997), but these were riddled with special-interest concessions and open to arbitrary interpretation and manipulation. By the late 1990s, government revenues amounted to a mere 16 billion dollars—equivalent to 1 per cent of the revenues flowing into the US Treasury.
A poor state is a corrupt state: underpaid civil servants, from ministers to militiamen, openly demanded bribes. Venality permeated the highest ranks of the government; the most sensational case involved accusations by Swiss investigators that Pavel Borodin (a Kremlin official in charge of presidential properties and patron of the future president Vladimir Putin) had accepted 65 million dollars in kickbacks from two Swiss firms for contracts to renovate Kremlin properties. Corruption also created opportunities to appropriate state assets at a nominal price. One oligarch observed in 1997 that politics was the most lucrative business in Russia—a candid allusion to insider deals, special privileges, and ‘fire-sale’ prices on state property for those with the right political connections.
As tax revenues plummeted, the state had to cut back on basic services—from law enforcement and national defence to education and public health. Although the number of state employees increased (especially those in the ‘Presidential Administration’), the government steadily reduced its allocations for essential services. The budget for law enforcement, for example, fell by 17 per cent; the inevitable result was a personnel flight that hobbled not only the Interior Ministry but even the fearsome KGB (now the FSB, the Russian abbreviation for ‘Federal Security Service’). This breakdown led to a privatization of violence, as private security firms—non-existent in 1992—swelled to 10,804 firms with 156,000 employees in 1998 (of whom 23 per cent came from the Interior Ministry and 8 per cent from the FSB).