Putin: Yeltin's Madness or Silent Coup?

Michael Pollak mpollak at panix.com
Mon Aug 23 06:00:24 PDT 1999

[Stratfor fills out their argument. Complete article at http://www.stratfor.com/SERVICES/GIU/082399.ASP]


Putin: Yeltin's Madness or Silent Coup?

August 23, 1999


The appointment of Vladimir Putin appears to be another of an endless

round of random appointments by Boris Yeltsin. We think it is of

greater, more lasting significance. Putin, a lifetime operative for

the KGB, currently sits on top of Russia's intelligence apparatus.

Unlike the other Yeltsin appointees, he has an institutional base with

a distinct, sophisticated agenda. Given the converging crises inside

of Russia and Yeltsin's inability to control the situation, we see the

appointment of Putin as part of an attempt by the intelligence and

defense communities to arrest and reverse the catastrophic slide of

Russia into the abyss. Putin may or may not succeed. He has enormous

opposition and problems. But his appointment is moving Russia to a

different place.


On August 9, 1999, Boris Yeltsin fired Sergei Stepashin, his prime

minister of a few short months, and replaced him with Vladimir Putin,

head of the renamed KGB (the FSB) and of the State Security Council.

Putin is the latest of a string of prime ministers appointed by

Yeltsin, none of whom lasted more than a few months. The obvious

question is whether this latest firing and appointment has any real

significance or whether, in the words of Yuri Luzhkov, Moscow's mayor

and contender for national power, this represented the "continuous,

nonstop absurdity of those in power." Or, as Boris Nemtsov, a former

deputy prime minister and power broker put it: "It is hard to explain


There are two competing explanations for what is going on in Moscow.

One is that, in the words of Macbeth, "It is a tale told by an idiot,

full of sound and fury signifying nothing." Yeltsin is an old,

confused alcoholic, and nothing is happening but his random whims.

Then there is the other explanation, which we subscribe to, that there

is in fact meaning behind the political maneuverings: a struggle for

the soul of Russia between two insufficiently defined factions, with a

third, darker force waiting in the wings. This view is not in any way

incompatible with the notion that Yeltsin is not in control of his

faculties, although we very much doubt that this is true. Nor is it

incompatible with the idea that there are many other more personal and

private issues involved. History is rarely clear cut. Nevertheless, it

is our view that the emergence of Vladimir Putin represents a

breakpoint in recent Russian history and may well be a defining


Putin's appointment is not like the appointment of his predecessors.

Putin is a different personality who comes directly from the

intelligence community. He has his own bureaucratic power base, and

that power base has its own agenda. We believe that agenda is

increasingly divergent from Yeltsin's and his backers and followers.

Indeed, it is our view that the appointment of Putin is not simply a

new, random action by Yeltsin, as much as it is an attempt by the

intelligence-defense community in Russia to gain control of a badly

deteriorating situation. It is not clear to us, in fact, whether

Yeltsin selected Putin or whether Putin was forced on Yeltsin.


As we said, there are two factions competing for power inside the

Kremlin, with another waiting outside the walls. The first faction,

the faction that has dominated Russia since the fall of Gorbachev, is

the Russia of the extreme reformists and Westernizers. Their intention

was to transform Russia into a constitutional democracy with a

functioning market economy. For them, the very existence of the Soviet

Union was an encumbrance, forcing the more developed regions of Russia

to stop and wait for the less developed ones. Intimately linked to

Western academics and bankers, this revolutionary faction intended to

transform Russia into a modern European state.

The extreme reformists and Westernizers failed. Russia used to be poor

but powerful. Today Russia is much poorer and much less powerful. At

the heart of the reformist failure was Russia's deeply embedded

inefficiency and the faction's own corruption. Money invested in

Russia did not turn into capital. It did not generate more production,

but was simply soaked up in consumption and corruption. In the face of

Russia's resistance to effective structural change, the reformers

turned into thieves. Vast amounts of Western investment and aid was

stolen by leading reformers, moved out of Russia and invested in the

West. The breathtaking extent of this thievery is only now being

calculated with some precision, although the order of magnitude has

been known for a long time.

The second faction might be called Gorbachev's heirs, of whom Putin is

a prime specimen. Putin has spent his career in the state security

apparatus. He rose from a KGB field operative in Germany to the head

of the renamed KGB. Contrary to the popular view of the KGB as

mindlessly brutal, the KGB's cadre was probably the most educated,

well-traveled and sophisticated social group in the old Soviet Union.

By the very nature of their jobs, they were forced to confront the

degree to which the Soviet Union was falling behind the West

technologically and economically. As guarantors of the regime inside

the Soviet Union, they knew better than anyone the levels of

inefficiency, corruption and cynicism that had gripped the Soviet

Union. Along with their counterparts in the upper reaches of the

military, they understood how much trouble the Soviet Union was in

long before Western experts got a sense of it.

Gorbachev was very much their invention. Gorbachev's mission was to

reform the Soviet Union, not dismantle it. Gorbachev understood that

the old Stalinist model of central planning had to be replaced by

market mechanisms. He also understood that intellectual liberalization

was necessary in order to increase economic efficiency. Finally,

Gorbachev understood that Western investment and technology transfer

were essential if the Soviet Union was to become competitive. It

followed from this that the Cold War had to be ended if the West was

to be induced to invest in the Soviet Union. Gorbachev tried to

negotiate an armistice that would leave the Soviet Union in a position

of equality with the West.

What Gorbachev never intended happened. Relieving pressure on the

system meant that the centrifugal forces within the Soviet Union took

over, shredding it along many lines. Soviet institutions were torn

apart. The Gorbachevites tacked with the wind, attaching themselves to

various reform factions. The key thrust of the Gorbachevites - the

radical reform of the economy and Soviet society - was also the

position of Yeltsin and the reformers, albeit with a Russian focus and

an even more radical bent. This was not intolerable to the

Gorbachevites. The subordination of Russian national interests to the

West followed even from Gorbachev's own strategy of détente in

exchange for investment. Men like Putin could live within the dynamics

of Yeltsin's Russia. Indeed, they would have disappeared invisibly

into a reformed Russia had everything not gone disastrously wrong.

In all of this, one institution remained relatively intact: the KGB,

now renamed the FSB in a purely cosmetic shift. The FSB was genuinely

committed to reform because of its obsession with national security.

The same impulse toward national security caused the FSB to maintain

its old internal and external infrastructure. The FSB did not

dismantle the KGB's infrastructure. It put parts of it on hold, parts

of it in the deep freeze and continued operating other parts of it.

But all of the structure continued to exist. The KGB, as the leading

reformist faction within the Soviet Union, collaborated comfortably

with the new reformers, both in their legitimate and illegitimate

activities. But in the final analysis, while they shared much with the

reformers, they differed in one fundamental way: they were Soviet men.

They believed, if not in the ideology of the Soviet Union, then in its

imperial mission. Their tentacles ran throughout the former Soviet

Union and into Eastern Europe as well. So long as reform held out the

promise of a greater Russia, they were prepared to give their loyalty

to the reformers. But there were limits.

Three limits were hit within a short period of time:

1. Kosovo: When Kiriyenko was fired and replaced by Primakov, another

KGB man, Stratfor was able to predict the Kosovo crisis. It was

our view that Primakov would take Russia on a more assertive

course in relation to the West, and as a result, the Serbs would

be encouraged to take greater risks than they had before. When

Primakov was overthrown in the middle of the war, Serbia's

geopolitical position collapsed. Russia essentially abandoned

Serbia under Chernomyrdin's and Stepashin's hands, forcing

Milosevic to capitulate. There was a major crisis at the time,

including the Pristina airport affair. Stepashin survived, but the

sense of humiliation ran deep in both the military and the FSB.

Most important, it was not clear that Russia was receiving

anything of value in return for its services in Kosovo.

2. In the past few weeks, the crisis in the Caucasus has been coming

unhinged. There was real fear of losing Dagestan. Giving up the

Soviet Union was one thing. Allowing Russia itself to disintegrate

was another. Stepashin clearly had no clear-cut idea about what to

do with that crisis. Given Russia's economic problems, the

inability to contain that crisis could have led to disintegration.

3. The West was about to find out just how much money had been stolen

by Russian oligarchs under the reform regime. The revelation in

the New York Times of the Bank of New York's role in money

laundering in Russia was just the tip of the iceberg. The vast

amounts of diverted money were now going to come to light. With

that revelation, any hope of further investment, loans or aid to

Russia had gone out the window. Paradoxically, the same people

that the West liked to deal with, the reformers, were precisely

the ones who would be shown to have been most deeply involved in

the theft of the century. The justification for their presence -

that men like Chernomyrdin were known and trusted by the West -

was about to be turned on its head. The reformers were the last

ones to be trusted by anyone.

Putin, even more than Primakov, represents the return of the

Gorbachevite - men interested in reform as a means to preservation of

the state apparatus and the national interest. Putin struck quickly.

The Swiss bank accounts of Berezovsky, a leading oligarch closely tied

to Yeltsin, were frozen while criminal investigations moved forward. A

massive military force was gathered around Dagestan, including air

power. Significantly, Putin announced that these soldiers would be

paid the same amount as troops in Kosovo: US$1,000 a month for

privates, not the US$100 promised and frequently not paid. Russia

began raising the specter of Russian troops not remaining under NATO

command and instead collaborating with Serb forces in order to protect

Kosovo Serbs from the KLA. Russia began building pressure on the

Baltics. Russia condemned and threatened Latvia on human rights

violations concerning Russian citizens in Latvia. Russia cut off

energy supplies to Lithuania.

On August 25, Boris Yeltsin will visit Beijing to hold a summit with

Jiang Zemin. Topics to be discussed include military cooperation,

Kosovo and other issues, according to ITAR-TASS. We remain more

convinced than ever that an alliance between the two countries will

eventually emerge. With Putin as prime minister we are further

convinced of this fact, even though officially his portfolio only

concerns domestic matters.

The reason for our conviction is the third faction we alluded to

earlier as the "darker force": Zhirinovsky and the Communists. The

current situation in Russia is intolerable and cannot continue. The

idea that somehow this will remain the permanent condition in Russia

is absurd. Russia has its periodic flirtations with the West and

Western culture and then invariably returns to its own course. The

debate now is how far in the anti-Western direction Russia will swing.

Putin represents a moderate anti-Western faction. He will assert the

Russian national interest both within the former Soviet Union and

globally. But he is a Gorbachevite. He understands the need for

Western investment and technology. He will not simply impose blockade

and conflict. But there are others outside the Kremlin walls who are

far more anti-Western and are less interested in economic development.

If Putin fails, the deluge nears.

But Putin has strong cards. He owns the famous personal files on

everyone. He knows where the money has gone, he knows who has taken

it, and he even knows how to get some of it back. If Yeltsin decides

to fire Putin, Putin may not be as willing to go as were Stepashin,

Primakov or Kiriyenko. He has his own cards to play and they include

some very high ones. He also has cards to play in the West. He

remembers the old Soviet principle of linkage. If you threaten Cuba,

we threaten Berlin. He is already orchestrating his Baltic card and

his China card. But his best card is the money card. He knows where it

went. Whether he tells or doesn't tell will effect individuals and


We can't be sure, of course, but Putin is a man who looks like he has

staying power. A coup involves illegality. There was nothing illegal

here. But we think something definitive has happened in Russia. Putin

is not just another pretty face. The KGB is sitting in the prime

minister's chair. To put it differently: having forced Primakov out of

the chair, the shadow forces fighting the KGB in the Kremlin lost

another round, and put the boss himself in charge. Yeltsin announced

to anyone who would listen that he is healthy and doesn't need

hospitalization. That may be true. But it isn't clear that he is still

in charge.

info at stratfor.com

© 1998, 1999 Stratfor, Inc. All rights reserved.

More information about the lbo-talk mailing list