Russia

A clash between the democratically elected President and the democratically elected parliament was, perhaps, inevitable. The social cost of transition had been causing great distress and alienating people from economic reform. Many Russians who had believed the promises that market reforms would conjure up an economic miracle were now disenchanted; nostalgia was growing fast for the past that had been lost, and the change in mood was reflected by parliament. The truth was that, given Russia’s circumstances, democracy was incompatible with a market economy.

It made for a fraught political scene. Accusations of corruption had been flying; an attempt was launched to impeach President Yeltsin. Despite the frantic efforts of his political staff, he received only a narrow endorsement in a national referendum, which had also rejected his proposal to dissolve parliament. At this point one of his staunchest supporters, the former air-force general Aleksandr Rutskoi, suddenly joined the opposition. Appointed by Yeltsin to chair a commission on corruption in government, he had found evidence of unlawful dealings leading straight to the door of the President’s office and implicating several of his associates. Rutskoi denounced him on television, and was himself accused in his turn. So the President’s stand-off with parliament continued.

Negotiations on the constitution made some progress, but on 21 September Yeltsin announced that he was dissolving parliament. The Supreme Court declared this to be illegal, and demonstrators, some of them armed, gathered in the parliament building. Security troops then surrounded the building and cut off all services to it. An ultimatum was delivered: the parliament building must be cleared by Monday 4 October. On 3 October crowds marched to the television tower and the parliament building. There were exchanges of fire, and at least 100 casualties. Yeltsin had won. It has been suggested that the parliament and its defenders were partly to blame for the bloodshed. However, Roy Medvedev has found evidence of Yeltsin’s intent to abolish parliament, if necessary by force, whether it was defended or not. ⁹ So the people’s defenders were defeated, and a constitution which increased Yeltsin’s powers as president was imposed. In the words of a leading Western historian of the post-communist period, Yeltsin had got his way only by the use of ‘methods involving electoral fraud. The birth of the new Russia was induced by anti-constitutionality, violence and corruption.’ ¹⁰ Despite this, the United States issued no protest. As the leading proponent of both market economies and democracy, it regarded the former as much the more important.

By now Yeltsin was hardly popular among Russians, but the media were supportive of him, as were most Western governments. No challenger of any political stature was visible, and he did not yet have to seek re-endorsement. So he continued to preside over Russia’s transformation and its decline both at home and abroad. Auctions of state enterprises now took place. However, which huge enterprises would go to whom and at what prices was to a great extent determined by a small group of officials and businessmen in advance of the auctions, and the auction process itself was fraudulent. Competitors were bought off or threatened, and sometimes the successful bid was the only one. ¹¹ Then the government introduced a new scheme to raise money: offering the new industrial oligarchs shares in lucrative industries as security against loans. If the government was unable to repay the loans, as seemed likely, then the lenders were entitled to take possession of the shares.

So the connection between economic power and politics became ever closer. Viktor Chernomyrdin, who bought a major stake in the huge natural-gas enterprise Gazprom, which he had run, was to serve twice as prime minister. He also made a personal fortune estimated at $5 billion. This was hardly surprising given that Gazprom’s value grew from $250 million in 1993/4, when it was auctioned, to $40,483 million by 1997. ¹²Others made similar killings. The new billionaires, on visits abroad, wore innocent expressions: they admitted to having occasionally done things normally regarded as wrong, but claimed they had had no choice. The law was not always clear, and they had had to protect themselves. They were playing a game not of their making, and played it according to the uncertain rules of the time. ¹³