Moscow, December 25, 1991

Meanwhile, negotiations for a new union treaty between Gorbachev and the republics’ leaders continued over several sessions at the Novo-Ogarevo mansion during July 1991. Yeltsin would normally arrive last to underline his importance, and his driver and security agent Korzhakov would make sure his limousine was maneuvered to the front of the line of cars parked by the entrance—once infuriating the gardener by plowing up the lawn to get into position. Typically Gorbachev made some introductory remarks as each session began and invited responses, whereupon the republic presidents averted their eyes like schoolboys and waited to see how Yeltsin would react. Gorbachev became embarrassingly supplicant and Yeltsin more bullying. Once the Russian president told Gorbachev bluntly to allow him to continue speaking. Boldin described Gorbachev “looking at the protestor apologetically with his big, moist brown eyes.” On another occasion Gorbachev said that if the center’s ability to levy taxes was not maintained, “I might as well go home.” Yeltsin responded by saying, “Don’t force us to decide the matter without you.”¹⁰ After a long silence Gorbachev called for a break, and the issue was shelved.

A new structure for the Soviet Union emerged. The center would retain foreign policy, defense, and much financial authority, and the republics would otherwise govern themselves and gain control of their own resources and state security. The country would no longer bear the titles “Soviet” or “Socialist.” Gorbachev insisted, however, on a federal tax. Without it he would have no country.

Agreement was finally reached after a twelve-hour session that went on until 2 a.m. on July 29. A new union treaty, to be signed on August 20, would replace the 1922 treaty establishing the Soviet Union. Under it the republics would have sovereign control over their own political systems and the right to negotiate secession in the future.

But at its heart was a virus that could destroy the USSR. Gorbachev had yielded on the single tax issue. He had agreed that the levels of taxes to finance the institutions of the center would be determined “in consultation with the republics.” This meant that Russia and the other republics would have a veto on federal taxes. Western leaders had warned Gorbachev not to surrender on tax. Jacques Delors, chairman of the European Economic Commission, told him bluntly that he could only win the struggle if he insisted on a federal tax to finance a single armed force.¹¹

Gorbachev’s concession, in the opinion of economist Yegor Gaidar, signaled the moment the Soviet Union fell apart. “In essence this was the decision to dissolve the empire, raising hopes that it could be transformed into a soft confederation…. It ended the history of the USSR as a single state.”¹²

After the other presidents left at 3:30 a.m., Gorbachev and Yeltsin stayed behind with Nursultan Nazarbayev, president of the second biggest Soviet republic, Kazakhstan, who strongly supported a continued union. They began to discuss what they would do after the new treaty came into effect. At one point Yeltsin stopped talking. “What’s up, Boris?” asked Gorbachev. The Russian president made a sign and indicated they should retire to the balcony. He had a feeling that the KGB might be listening.

Sitting on cane chairs, they continued their discussion in the unseasonably chilly night air. Yeltsin said he would nominate Gorbachev for the post of elected president of the new union of sovereign states. However, he must get rid of his “odious entourage” in the cabinet—KGB Chairman Kryuchkov, Defense Minister Yazov, Interior Minister Pugo, and other notorious hard-liners—before the republics would sign up to a new center. Gorbachev replied, “We’ll remove Kryuchkov and Pugo.” He would ditch his unpopular prime minister, Valentin Pavlov, and Nazarbayev could take his place. He would also get rid of the vice presidency, held by the lackluster Yanayev.

Only much later would they discover, from KGB transcripts found in Boldin’s safe, that hidden microphones, placed on the balcony by Gorbachev’s KGB chief of security, General Medvedev, had picked up every word. Kryuchkov—though he would later deny it—had put Gorbachev himself under close surveillance. Copies of the Soviet president’s most intimate conversations were kept in a KGB file marked Subject Number 110. Raisa, too, was monitored. She was Subject Number 111. There was even a microphone at the hairdresser’s salon she frequented.¹³

Though they had negotiated in reasonably civil fashion, Gorbachev and Yeltsin still vied to upstage each other in front of the world. When George Bush arrived in Moscow for a summit with Gorbachev on July 30, Yeltsin demanded a separate meeting with him.¹⁴ The U.S. president agreed to give him ten minutes but stipulated that there would be no joint press conference afterwards.