Source: Carnegie

By Anatol Lieven

Originally published in the Financial Times, July 23, 2004.

The writer is a senior associate at the Carnegie Endowment for International Peace; his next book, America Right and Wrong will be published in October.

Vladimir Putin is a convinced reformer, dedicated to modernising Russia and integrating it into the world economy. Both his language and his actions leave no doubt about this. Equally, it is obvious that Mr Putin is not a sincere or convinced liberal democrat, at least not for Russia in its present state or for many years to come.

For this there are bad reasons, stemming from Russia's legacy of autocracy and Mr Putin's own background in the security and intelligence services. But there are also good reasons, for which western supporters of Russian reform should have some sympathy - and which are to an extent integral to the history of successful modernisation worldwide. These concern the defence of the modernising state against the anarchy of the magnates, on the one hand, and the revolt of the suffering masses on the other. The first dictates a policy of reducing the power of the so-called oligarchs, represented by Mr Putin's fight against Mikhail Khodorkovsky's Yukos oil company. The second is summed up by mass anger over Mr Putin's necessary moves to reform the Soviet-era system of social subsidies. This kind of public anger, which has driven his popularity ratings below 50 per cent, is dangerous precisely because it is in many ways morally justified. Asking the poor of Russia to make sacrifices when their country has been looted by the elites is abominable. Such changes are nonetheless necessary to Russia's economic progress. Limiting the public reaction against them requires control over television from which most people in the modern world draw most of their news and many of their attitudes.

Many western commentators have the greatest difficulty in recognising these twin dangers. The right finds it hard to admit that unrestrained capitalism can generate forces that threaten, among other things, capitalism's own future. The left cannot easily admit that mass protest, even when directed against genuine injustice, may threaten the long-term progress of the masses themselves. That said, like any semi-authoritarian modernisation programme, Mr Putin's strategy also carries with it grave dangers. The first is represented by aspects of the attack on Yukos. It is that the wealth of selected magnates will be used not to benefit the Russian people but to reward the regime's supporters. If one is realistic, an element of this is politically inevitable in Russia today. The idea that Mr Putin could or should take on the entire oligarch class simultaneously is absurd. There is also nothing wrong in principle with prosecuting or breaking up Yukos, which in the hands of Mr Khodorkovsky posed a real threat of a renewed and dangerous economic oligarchy. Defeating this oligarchy is essential if key economic reforms are to be carried out - most notably, reform of the weak and corrupt banking sector.

Many believe that Mr Khodorkovsky and Yukos are guilty of the crimes with which they are charged, and making an example of them may persuade others to obey the law and pay their taxes. The power of Russia's oligarchs depended on their ability to buy up agencies of state power and public influence, from the media to the judiciary. To suggest that, in seeking to reduce their power, the state must be bound by strictly impartial rules of justice or should not employ the media as a weapon is to hand the oligarchs every card. Under some authoritarian regimes, China for example, someone who acted like Mr Khodorkovsky would have faced a firing squad by now - to only the faintest protests from the west.

However, the elements of Yukos that Mr Putin has decided to sell off must be sold according to contemporary international standards and in a fair and transparent fashion. The sale must lead to the maximum benefit for the Russian people and to increased competition in the Russian oil industry. If pieces of Yukos are sold at fire-sale prices to selected Russian companies, echoing the bad practices of the Yeltsin era, it would cause deep and justified concern to international investors.

Despite this threat, however, we must not forget that restoring the core powers of the Russian state is essential both for stable and successful capitalism and for the real long-term freedom of ordinary Russians. The recent assassination of Paul Klebnikov, the Russian-American journalist, is a reminder of just how much Russia, like so many developing countries, is threatened by the private violence and greed of the powerful. In the longer term, it is also true that both democracy and fully developed capitalism depend on a reasonably independent judiciary. Such a judiciary requires in turn a strong middle class that insists on impartial justice. This class is also necessary to create genuine mass parties. Capitalist economic growth may well create such a middle class in Russia over the next generation. It would be foolish to pretend they exist today. Without them, Russian democracy will remain in any case a sham.