Russia: Predictable”landslide” win for Putin

As was absolutely predictable "United Russia", Putin’s party has won a large majority (more than 312 out of 450) of seats in the GosDuma – Russia’s Parliament.

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Predictable"landslide" win for Putin

Three other parties, the communist party, Zhirinovskii’s Liberal Democrats and "Just Russia" gained respectively 12%, 8% and 7%, sufficient votes to cross the 7% barrier needed to gain seats. Naturally, Putin’s supporters were over the moon. Boris Gryzlov, leader of the party crowed on TV that this was a referendum on Putin’s programme (now labeled "Putin’s plan") and Putin has won hands down the first round of the presidential election. According to the constitution, Putin is currently not legible to run for a third term in March’s Presidential election, but United Russia now have enough seats for a two third’s majority, enough, if needed, to change the constitution. And that’s without having to rely on the extra 40 votes from the pro Putin party "A just Russia" or support from Zhirinovskii, who has never voted against the Kremlin since he has been in Parliament.

The main reason for Putin’s victory is that his period of rule has coincided with dramatic economic growth fuelled mainly by the high price of oil and gas on the world market. Consequently a significant layer of the population feel that the nightmare period of the nineties, when Russia was rocked by coups, ethnic conflict, economic collapse and hyperinflation is now in the past. Partly people voted positively, but a layer also voted for Putin because they were afraid that a change would lead to a return of instability.

Arranged elections

But many people did not vote freely. The so called administration resource based on the government, state and business structures, was mobilized completely behind "United Russia". College directors instructed their students to participate in pro Putin demonstrations if they want to pass examinations. Workforces are instructed how to vote by their directors. In one region, a referendum of school students was organized in parallel with the election so that parents would be pressurized to turn up to the polling station. In another, teachers were instructed to phone around parents on the election day to ensure they had been to vote. Regional governors, who are no longer elected but are now nominated by Putin, most of whom headed the regional list of United Russia were also responsible for controlling the work of the electoral commissions. They were instructed to ensure a certain level of turnout and vote in their region. Ramzan Kadyrev, warlord governor of Chechnya almost over performed. The population of Chechnya are apparently so keen on Putin that in a turnout of 99.2%, 99% voted for him!

Russia is not a democratic society. The last election was criticized as "free but unfair" by international observers. By this they meant that the mechanism of voting was mainly in order notwithstanding many cases of ballot fixing but in the period leading up to the election conditions were not provided to allow for the equal participation of all parties. This time the situation is far worse. Electoral laws have been significantly changed. Parties independent of the Kremlin found it impossible to be registered. If last time, half the Parliament was elected on a constituency basis and half by proportional representation of those parties gaining more than 5% of the vote so that individuals, small parties and independents could at least gain some representation, now only the four parties that won over 7% will be represented as the constituency seats have been abolished. Not only was the state and private media overtly biased but opposition parties complained that much of their election material was arrested. Criticism of the Kremlin was tightly restricted. For example, the long standing printer of the newly launched paper of the CWI in Russia (Sotsialist) refused to print the first issue on the orders of the Press ministry on the grounds that the paper was critical of Putin and called the electoral law "undemocratic".


But it also has to be said that the main opposition parties have been incapable of giving voice to the discontent that does exist in society. It would be wrong at this stage to say that there is a widespread and developed protest movement in society. Nevertheless there are pockets of militant resistance. In Beslan, where just over three years ago, 700 people, including many school students died after the Russian special forces botched the lifting of the school siege, parents of the dead children pasted up sign saying "Putin’s Plan" pointing at the ruins of the school. Workers in a number of factories, most notably Ford in St Petersburg have been involved in strike action. There was even the threat of a rail freight strike, partly inspired by the strikes in Western Europe in the lead up to the election. There is a latent discontent on a mass level, particularly at the raging inflation which is rapidly eating away any income increases which the government boasts about. And there are over a million people in Russia who are described as "conned investors" – people who paid building speculators in advance for new flats only to find that the speculators disappeared with their money.

Naturally the pro Western neo liberal opposition has been unable to tap in to this mood. They are still blamed by an overwhelming majority of the population for the hyper inflation, attacks on pensions and living standards and the general economic collapse of the Yeltsin years. Apart from this, the neo liberal aspects of their policies have been taken over by Putin leaving them with little to complain about but the lack of democracy, for their people of course. United Russia depicted them as a foreign force, representing ideas alien to Russia – one leader even depicted them as a "fifth column". The three liberal parties which in 1999 could still muster over 15% of the vote this time between them gained just 3.5%.

The organization "Other Russia" has been Widely publicized in the western media and received significant support from diplomatic circles, including from the British Ambassador. In response it has met with repression from the regime and was not able to register for the election. But even if it had succeeded, it would probably have gained even less support than the other neo liberal groupings. Chess master Gary Kasparov and former Premier Kasyanov, who represent the bourgeois wing of this strange alliance have never had any real base in Russia. Their alliance with the neo Maoist "Vangard of Communist Youth" and the neo fascist "National Bolshevik Party" have made them even less attractive as a genuine opposition force.

The communist party has also been effectively sidelined, gaining just under 12% of the vote, halving its vote since 1999 and gaining its lowest vote since 1991. A significant factor in this drop in support is that a large part of the communist electorate want stability and a strong Russian state, the very things that Putin is offering. At the same time the Kremlin set up its own "left party" – "A Just Russia" which at times appeared to offer a fresher form of socialism ("Socialism of the 21st century" and "Socialism 3.0") than the CP.

Putin’s two legs

Until a month ago, "United Russia" was officially just one of the main pro Kremlin parties although with majority control of both houses and all but 1 regional legislatures. But formally Putin was not a member. The Kremlin position was to promote two "pro Kremlin" parties representing a "right leg" (United Russia) and a "left leg" (A Just Russia). Huge resources were pumped in to promote the artificially created "left" alternative, partly to create an image of party plurality and, as importantly, to take votes from the CP. "Just Russia" led by the Speaker of the Upper House Sergei Mironov (who participated in the last presidential election on a platform "Don’t vote for me, Putin is the best candidate") has tried to present itself as a form of social democratic alternative, peppering its propaganda with socialist rhetoric and presenting itself as supporters of "socialism of the 21st century".

What should have been a fatal blow was dealt to "Just Russia" a month ago, when Putin and his entourage appeared to change tactics. Putin announced that he would head United Russia’s campaign, effectively saying that "Just Russia" should no longer be considered as Putin’s party. The Communist Party failed to pick up the gauntlet, allowing "Just Russia" to recover. It had become clear that Putin was maneuvering to find some way to stay in power after the election. To do this, he needed United Russia to win the biggest possible share of the vote in December with a high turnout. United Russia presents itself as the architect of the economic growth and stability, led of course, by the "national leader" Putin. In effect, the election was turned into a referendum for or against "Putin’s Plan". United Russia’s essentially neo liberal programme was hidden behind populist rhetoric. Leader of their parliamentary fraction, Andrei Isayev, not so long ago a leader of the anarchists, was given media prominence in his calls for fair wages and pensions to be paid!

Putin’s plan

According to an opinion poll this week, only 6% know what is in "Putin’s Plan" but 46% support it! Another poll said that the majority of the electorate thought that "United Russia" had won the TV debates although UR did not actually participate in any! This in reality confirms that many people associate the current stability and economic growth with Putin’s rule and are therefore prepared to give him the benefit of the doubt in the absence of any alternative. Boris Gryzlov, Speaker of the Parliament, describes the plan as consisting of five elements: defending Russia as a great and unique civilization; developing a competitive economy; providing a new "quality of life" for citizens by raising wages and pensions and solving the housing problem; establishing the institutes of civil society; developing Russia as a "sovereign state" by strengthening the state and supporting a modern military machine. Behind the populist demagogy however, this means more of the same. Since Putin came to power, the government has followed a policy of strengthening neoliberal reforms of the social and welfare sectors, strengthening strategic industries (in particular defense related) by reinstating elements of state control and huge state financed investment, increasing control of civil and political life by the state and its police and FSB (KGB) and by becoming increasingly aggressive on the international arena.

On the basis of the oil boom, a significant section of the population has experienced improvements in their living conditions. However, recent figures show that not only has corruption grown dramatically in the past period, so has the number of bureaucrats. One survey indicated that per head of the population, there are now 3 times more bureaucrats than during Brezhnev’s reign. At the same time, despite the huge influx of money into the economy, key sectors and parts of the infrastructure are still not getting sufficient investment to prevent further declines. In the past months, there has also been a huge spurt in inflation, reflecting a certain trend in the world economy but exasperated by the oil wealth sloshing around.

State of the economy

Russia is one of the "BRIC" countries, together with China, India and Brazil. Since 2000, GDP growth has been 5-7% a year, with the economy now worth 1.7 trillion USD (ppp). Depending on how the rating is calculated, Russia with the ninth largest population in the world now has the 9th, 10th or 11th largest economy, vying with Brazil. The apparent strengthening of the economy in the years since 1998’s ruble collapse and default has given the Russian ruling elite new confidence. But there are significant weaknesses in the economy.

Firstly, the Russian economy has barely caught up with the position it was in (as part of the USSR) in 1990. Output per employee only reached 1990 levels in 2004 and value added in manufacturing is still only about 75-80 percent of the Soviet maximum. GDP has only reached 1990 levels in 2007.

The driving force for growth has changed. In the years following the 1998 crash it was due to the boost to domestic industry caused by the collapse in the ruble (thus making imports too expensive for the population) and the increase in world oil and gas prices. In the first three months of 1999, crude oil export revenues totalled barely $2 billion. Now, Russia earns that much in crude exports in less than a week. In 2000, 10% of growth was due to the high world oil and gas price, by 2002 this had grown to 60%. This led to talk of the danger of "Dutch disease" – where the high reliance on natural resource prices pushes the currency up, therefore making it difficult for other sectors to attract investment.

In the last couple of years the input from oil and gas has declined to about 40% and growth in GDP driven by a large increase in investment, including direct foreign investment. But nearly 70% of investment has gone into the extraction industries, the finance and construction sectors. Despite a significant increase in investment in other sectors, growth is still sluggish. Investment in the electricity network for example is sufficient at best only to prevent further degeneration (following 20 years of practically no investment) but not enough to allow significant renewal and innovation.

As a result industrial production is not growing as fast as GDP, with growth rates ranging from 3-8% since 2000. Agricultural production is faring even worse. In 2007, it has grown at only half of the GDP growth rate, contributing to the dramatic explosion in inflation that shook the government in September. Meanwhile, although the rise in accommodation prices has eased, the cost of a square metre of living space in Moscow is now $4000. In 2000 it was $700. Barely a comment is passed by analysts about the danger of the bursting of the housing bubble, but the ratio between per square metre prices and GDP per capita in Russia is one of the highest in the world. In 2007 over $60 billion worth of new property has been built yet there are only $8 billions worth of mortgages available. These figures imply the threat of a collapse that could be as devastating as 1998’s default.

Against this background Putin has launched a number of national projects – in housing, health care, education and agriculture. Just in 2007 over $10 billion has been allocated to these sectors by the government to support various projects. A further $12 billion is being pumped into Sochi in preparation for the 2014 winter Olympics. Whilst schools, hospitals and clinics are undoubtedly being given a facelift, they are leading to a huge increase in backhanders and outright corruption and are helping to fuel inflation as bureaucrats agree inflated prices between themselves so that the surplus can be filtered off. It is under question whether these projects will continue, at least on the same scale, when the election cycle draws to a close.

Role of state corporations

At the same time the role of the state in the economy is being dramatically strengthened. Over the past couple of years, a number of "State Corporations" have been formed – in aircraft construction, ship building, arms exports, autoconstruction and atomic energy. The latest to be established are in "Olympic construction" and "Nanotechnology". Plans are being discussed for air transport and fishing. They join the big monopolies dominated by the state in the gas sector (Gasprom), electricity (RAO EES), the railways, insurance and oil sector (Rosneft). This should not, however, be mistaken for a programme of renationalization. There has, according to official statistics, been little change in the proportion of the economy in private hands, which in 2005 reached 79%, with less than 4% in purely state ownership and 5% in mixed ownership. However, private companies only employ 50% of the workforce, with 44% employed by the state and mixed sectors.

So what are these "State corporations"? The Brookings Institution compare them to one huge protection racket with Mr Putin as "the Chief Protector". Their argument goes that what matters is not who owns the company. The corporations have been used to seize control of the oil and gas revenues and use them "in the interests of the state". Put more simply, the oil and gas companies have been allowed to keep a reasonable share of the profits, with the rest going either as taxes to finance budget expenditure and the rest into other sectors. Oligarchs who did not agree with this division of the spoils are forced out or arrested. At the head of each of the corporations a senior government figure is nominated. Key roles are played by two of the Deputy Premiers Sergei Ivanov and Dmitrii Medvedev, who until recently were the two frontrunners to replace Putin. Under their guidance, investments either from the budget or from business are directed with the minimum of bureaucratic interference, thus allowing such money to be spent practically without control. Meanwhile, within the corporations the process of privatization and outsourcing continues apace. As a result the ruling elite use their control to divide up the resources, ensuring of course that those in government get the lion’s share.

The rich

In this situation, the ruling elite can not the tolerate the possibility that someone will rock the boat, by arguing for a bigger share of resources. The Putin era has seen the strengthening of the "power vertical". Opposition figures have been pushed out. If in the mid nineties the whole central belt of Russia was controlled by the Communist Party, step by step the CP has had its influence sidelined. In most cases that has been achieved by abolishing elections for Regional and City Mayors and nominating Putinites to every post, and occasionally by integrating former oppositionists into the power vertical. Now all regional governors and mayors of large cities are appointed by Putin. There is hardly a significant regional or local legislature which are still formally elected in which United Russia does not have a majority.

We frequently characterized the Yeltsin regime as bonapartist. By this, we meant that the in the context of a weak and barely developed capitalist class, the state apparatus, which in normal conditions manages and controls society on behalf of the capitalist class, had to play a more independent role. The state apparatus rose above society and did all in its power to ensure the conditions in which the newly emerging capitalist class could develop, accumulate capital and consolidate its forces. In a classic bonapartist fashion, the Yeltsin regime often acted against sections of the very capitalist class on which it was based. This occurred most spectacularly in 1993.

A recent survey by RBK Journal shows that most of the economy is directly controlled by leading members of the government. As one commentator explains: "Earlier, economic groups controlled the state by buying off key figures. Now the state controls business". This survey identifies 13 industrial interest groups, the annual proceeds of their combined businesses totaling half a trillion dollars – almost a third of GNP. The so called St Petersburg group of "siloviki" (crudely speaking former KGB) headed by key figures in Putin’s administration and the Minister of Justice, the St Petersburg group of lawyers led by Dmitrii Medvedev (First Deputy Premier), the group of "elected" representatives including many friends and colleges of Putin, the "Defence" group led by two deputy premiers Sergei Ivanov and Sergei Naryshkin, the ’liberals" led by Finance minister Alexei Kudrin and the "Moscow" group led by Moscow Mayor Luzkhov directly control between them half of this wealth. It has recently been revealed that Putin himself is a major shareholder in a little known company ’Gunvor" – which just happens to be the third biggest oil trader in the world! The clans linked to the Kremlin control over 54% of the country’s "independent" media – leaving aside the official state media. The remainder of the 13 groups are headed by those oligarchs such as Potanin, Abramovich and Friedman who have found agreement with the Kremlin and in general work with it.

At this moment in time, the states leading figures are leading figures in the capitalist class. The Putin regime is an authoritarian capitalist society, in which power is concentrated in the hands of a clique, hiding behind a slight but unconvincing veneer of parliamentarianism.The state acts in a bonapartist fashion, including when it feels necessary to warn even sections of the ruling elite not to step out of line. The recent high profile arrest of a Deputy Finance Minister, on the allegation of hiving off more than 40 million dollars from state funds, is not so much a blow against corruption but a warning to other players in this high stakes game that the rules are decided by the Kremlin.

Another feature of political life is the appearance of a number of pro Kremlin youth groups, financed and run by the Kremlin to further its political campaigns. Students are either instructed to participate or paid to join demonstrations and protests against people and groups opposed to the Kremlin. Earlier in the year they were sent to picket the Estonian embassy. The day after the election, 10,000 were mobilized in the centre of Moscow to ensure that no opposition protests against falsification could develop. They went to picket the BBC claiming Western opponents would use the BBC as a "base"!

Putin’s next job?

So what are Putin’s plans for the future? He is supposed to give up power at the end of his second term in March. But there is too much at stake for Putin and his entourage to just give up their power and prestige. Too much wealth is concentrated in their hands. Most of all they are worried that a transfer of power will lead to instability as clans attempt to redistribute power and wealth as happened to some degree when Yeltsin left office. The next few weeks will tell exactly how they plan to keep control.

The options they are currently considering include a transfer of powers from the president to the parliament with, Putin heading the government as premier. This requires that whoever takes over as president is pliable enough to accept a secondary role. The ideal candidate would be the new Premier Zubkov, who could easily retire on age grounds in a year or two, allowing Putin to come back as president. Within Kremlin circles, the option of Putin taking over as Head of the Security Council has been raised. This option is attractive, it allows the new president to run the country and as long as things are OK, there will be no need to intervene. But if things were to start getting out of control, Putin, as Head of the Security Council (ie with the support of the armed and police forces) , could step back in.

A third option has been raised on the website of United Russia. Before the Presidential Election, a "cobor" could be convened – this was essentially a congress of national and religious elders in the Middle Ages which agreed to unify parts of Russia behind a strong unifying tsar! Although cold water was quickly poured on this idea, Putin is, nevertheless, now regularly referred to as "the national leader" and it is assumed he will continue to play that role even after March’s election.

The last few weeks has seen a campaign whipped up by the Kremlin in support of "Putin’s plan", in effect, repeating what the former Soviet leaders did, by artificially whipping up the support of the masses in periods before elections and congresses. Given that this ’referendum" has shown overwhelming support for Putin, it now appears quite possible that the constitution will be changed, or some other maneuver made to allow Putin to stay in office as President.

The danger, at least for the ruling elite around Putin is concerned, is that whatever they do, the current conjecture in the world economy cannot last for ever. Then they will find it practically impossible to maintain the current levels of economic growth and apparent growth in prosperity. Then people will see the emperor for what he really is – without clothes!

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December 2007