[Stratfor fills out their argument. Complete article at http://www.stratfor.com/SERVICES/GIU/082399.ASP]
GLOBAL INTELLIGENCE UPDATE
Putin: Yeltin's Madness or Silent Coup?
August 23, 1999
SUMMARY
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.
ANALYSIS
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
madness."
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
moment.
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.
<snip>
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
countries.
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.
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