The Russia Conundrum

The Russian people had seen living standards fall and many were plunged into poverty. After decades of artificially maintained price controls, backed by billions of roubles of state subsidies (which even then did not manage to keep the shelves filled), Yeltsin and the Chicago Boys had freed prices for all but the most essential goods. Inflation had rocketed; people’s savings were being spent on just a few days’ worth of food. Hordes of beggars appeared on the streets; people were forced to sell their family possessions to stay afloat. The collapse of the USSR and the Soviet system of central planning had left factories without suppliers and without government orders. Unable to adapt to market conditions, they could no longer pay wages to their workers or taxes to the state. In an attempt to balance the national budget, Yeltsin slashed state spending and raised taxes. When entitlement to free healthcare was sharply reduced, few could afford the paid services that replaced it. Illnesses and infant mortality increased, along with alcoholism and suicide; male life expectancy fell to 57 years. The result was that the nation felt cheated and belittled. And at the same time, Western Europe and North America seemed to be thriving. Many Russians resented the apparent decline of their country from a global superpower to an impoverished third world country. And they knew who to blame. Powerful voices in society accused malevolent foreign powers of trampling on Russia’s national interests and called for the restoration of national pride by the rejection of all cooperation with the West.

By a stroke of ill fortune, the Yugoslav crisis – following reports of Serbian ethnic cleansing of Kosovar Albanians – broke out just at the moment when revanchist demands in Russia were at their height. In 1999, the Kremlin was still actively engaging with the international community, pursuing internationalist policies and in return receiving Western financial support. With Boris Yeltsin incapacitated by a series of heart attacks, the country was effectively being led by the prime minister, Yevgeny Primakov. On 24 March that year, Primakov was due to fly to Washington to ask the International Monetary Fund for an additional $4.2 billion, and he took me with him as a member of the Russian business delegation. As we took off from Moscow, Primakov explained that he was not optimistic that the loan would be granted: the West had already pumped large sums into Russia, with little indication that it was making any difference to the crisis in our economy. In addition, there was growing popular anger in Russia that Yeltsin was perceived as going cap-in-hand to the Western ‘enemy’ who had brought us to our knees. A further flashpoint had emerged: NATO countries announced their intention to intervene in the Yugoslav conflict by bombing Serbian military forces accused of the ethnic cleansing of Muslim Albanians in Kosovo, further inflaming Russian opinion.

We were already in the air when Vice President Al Gore called Primakov to tell him that the bombing campaign was about to begin. Primakov had to decide what to do. Most Russians regard the Serbs as our historical allies, fellow Slavs who fought with us against Muslim forces threatening from the east. After hurried discussions, Primakov ordered the crew to turn the plane around in mid-flight over the Atlantic and return to Moscow, scrapping a long-scheduled round of high-level economic and security talks with the Clinton administration. It was a dramatic protest against Western military action against Serbia, but also a symbolic U-turn in Russia’s whole relationship with the West. Even though I was on that plane, I am not sure that I fully understood at that moment the fateful consequences of what was happening. There was, however, a very real sense of a historic drama being played out before our eyes. At Shannon airport in Ireland, where we landed for refuelling on the way back home, I bought a box of Irish whisky and we all shared it to drown our anxiety about the future. We didn’t know it, but in a little over six months Yeltsin would be gone, and Russia would be under the rule of a very different type of leader.

CHAPTER 5

THE HUMBLING