Western criticism elicited scathing rejoinders from Moscow. In April 2007 Putin complained that such attacks seek to foment internal turmoil ‘in order to plunder once again the nation’s resources with impunity’ and ultimately ‘to deprive our country of its economic and political independence’. He complained that ‘there has been an increasing influx of money from abroad, which is being used to intervene directly in our internal affairs’. He called this intervention ‘colonialism’ in a new guise, with the old mission of ‘civilization’ glossed as ‘democratization’, but with the same goaclass="underline" to advance the authors’ vested interests. When the British foreign secretary demanded that Russia change its constitution (which blocked the extradition of a Russian citizen who, according to London, had murdered a former KGB officer residing in England), a livid Putin did not mince words: ‘The British officials are making proposals to change our Constitution that are insulting for our nation. London forgets that Great Britain is no longer a colonial power and that Russia has never been its colony.’ Rebuffing such Western intervention, Putin reaffirmed his commitment to ‘the development of a free, democratic country’, but on Russia’s terms: ‘Russia … will decide for itself the pace, terms, and conditions of moving towards democracy.’ He added that the United States—so eager to teach democracy to others—has failed to reform the electoral college (which subverts the will of the majority), to regulate campaign finance (to end the plutocratization of politics), or to avert the voting irregularities that determined the outcome of the 2000 presidential election.
Rebuilding the Russian State
Yeltsin had presided over the demolition of the centralized Russian state. That was partly due to the economic crisis: an impoverished nation could ill afford the subsidies, services, and military establishment of the Soviet era. But the state’s decline was also due to the neoliberal goal of minimizing the government and its budget (deemed unproductive). The ‘failing state’ syndrome in Russia also had political roots—the stalemate between the presidency and parliament, the decentralization that paralysed the centre’s capacity to rule and even collect taxes. Putin undertook to rebuild the state by transforming its tax system, institutions of governance, and the military.
One priority was re-establishing a centralized state administration. The eighty-nine administrative units became virtually autonomous under Yeltsin—issuing their own laws, ignoring directives from Moscow, retaining most tax revenues, and concluding ‘bilateral treaties’ with Moscow. From the outset Putin sought to create ‘a single vertical line of executive power’. He forced provincial units to increase tax transfers to Moscow (from 30 to 70 per cent), gave federal law precedence over local ‘constitutions’ and laws, and demanded strict observance of Moscow’s policies. He also established seven super-districts headed by a polpred (plenipotentiary), a viceroy charged with overseeing the subordinate administrative units and ensuring compliance with Moscow’s directives. But the polpred failed to control the subordinate regions, especially the popularly elected governors, and Putin then took steps to undercut the governors’ power. He first eliminated their ex officio membership in the Federation Council (the upper house of parliament) and replaced them with locally elected representatives. The key change, however, was to replace the popular election of governors by a new system: from February 2005 all were to be nominated by the president, with confirmation by the invariably pliant local legislatures. The governor henceforth represented Putin, not the local region.
A second focus was taxation. The first step was vigorous tax collection to detect fraud and combat arrears; in 2000, Putin’s first year as president, tax revenues jumped 60 per cent. The Putin government expanded tax audits (examining the filings of 440,000 enterprises and 311,000 individuals in 2001). The government, moreover, simplified taxation such that the government collected 98 per cent of its revenues from four main sources—the value-added tax, excise, profits, and user fees for natural resources. The government also adopted a flat income tax (13 per cent) and merged sundry levies into a single social security tax. Moscow made a concerted effort to combat the misuse of public funds by adopting a new budget code, increasing transparency, closely auditing state procurements, and resisting Duma proposals for a splurge in social expenditures. As a result, the government could cut taxes (for example, lowering the corporate tax rate) yet achieve a budget surplus (first in 2000, with a 6 billion dollar surplus, followed by surpluses every year through 2008).
In other spheres, however, Putin’s record was less impressive and, in some cases, such as reform of the judiciary, positively disappointing. Putin himself indulged in rhetoric about a ‘dictatorship of law’—a Rechtsstaat based on the rule of law. He did make some improvements, including increased funding for the judiciary (a fourfold increase in the salaries and 18 per cent increase in the number of judges) and decriminalization of minor offences (replacing incarceration with fines, thereby reducing the prison population from 1,084,000 inmates in 2001 to 878,000 in 2007). Much else remained on paper, including the lofty principles embodied in the Criminal Procedural Code of 2002, which enhanced the rights of defence lawyers, limited preliminary detention to 48 hours, affirmed habeas corpus, and guaranteed the accused a two-hour meeting with an advocate prior to any interrogation. In reality, as the Khodorkovskii case demonstrated, the Kremlin still resorted to ‘telephone justice’, with calls from above ensuring the ‘right’ verdict. Not only did the promise to expand the jury system to all eighty-nine administrative districts fail to have the desired impact, but the regime severely limited its competence in December 2008, specifically excluding the jury from cases involving terrorism, hostage-taking, illegal armed units, treason, attempts to overthrow authority, sabotage, and organizing massive disorder or revolt.
Nor did Putin’s team succeed in trimming the bureaucracy and improving its quality. On the contrary, the civil service became bigger if not better, growing by 50 per cent (from 1.0 to 1.5 million in 2000–6). Putin himself complained that state officials were ‘ill-prepared for working out and implementing the decisions appropriate to the country’s present needs’, and on another occasion declared that ‘we should limit the power of bureaucrats, make them comply with laws, and provide for the transparency and openness of bureaucratic procedures’. Despite some flowery rhetoric, Putin also failed to eradicate corruption; as he admitted himself in May 2006, little had been achieved in eliminating a ‘major obstacle’ to development—corruption.
Military reform proved equally elusive. The tragic sinking of the nuclear submarine Kursk in August 2000 symbolized the pitiable state of the military: the sole recovery vehicle of the Northern Fleet was inoperative, having been cannibalized for spare parts. The increase in state revenues did, however, enable the government to increase the military budget from 7 billion dollars in 2001 to 30 billion in 2006. That spending enabled the development and testing of a new ICBM, the RS-24 (with a 10,000-kilometre range and MIRV capability) and the renewed production of nuclear submarines (with the launching of several in 2007—the first in seventeen years). That same year the government adopted a seven-year, 200 billion dollar rearmament plan to create a new generation of missiles, planes, and aircraft carriers. However, as Putin emphasized in May 2006, ‘we must not sacrifice the interests of socio-economic development to develop our military complex’. As a result, the Russian military budget remained comparatively small (that of the United States being twenty-five times greater) and did not even suffice to achieve an acceptable level of combat readiness. As the chief of the general staff declared in December 2008, only 17 per cent of the military units were combat ready, half of the warships were at anchor, and the like. Finally, still more problematic was the transformation of the military from a conventional force into one better suited to fight insurgencies and respond rapidly to crises. In particular, the government failed to abolish conscription and create an all-volunteer professional army, partly because of the spectre of high costs (exaggerated by military opponents of the change) and partly because of the low rate of re-enlistment by contract soldiers. As a result, Putin left the military slightly improved, but much as he found it—underfunded, unprepared, and untransformed.