The appointment of the Primakov government in September represents
more than a change in personalities or a shift in Russian economic
policy. It reflects profound changes in Russian politics, some of
which have serious implications for the United States.

Since its first days in office the Clinton administration has made
"strategic partnership" with Russia a focal point of its foreign
policy. But the administration's interpretation of strategic
partnership has gone far beyond what is conventional in
state-to-state relations. It has included de facto intervention in
Russia's domestic politics on behalf of President Boris Yeltsin and
the so-called "radical reformers", particularly former acting Prime
Minister Yegor Gaidar and former First Deputy Prime Minister Anatoly
Chubais.

Of course, as long as Boris Yeltsin remains Russia's president, he
deserves to be treated with appropriate respect and attention. And it
was only natural that Gaidar's and Chubais' enthusiasm for the
economic prescriptions of the U.S. Treasury Department and the
International Monetary Fund should be appreciated in Washington. But
the Clinton administration has not merely favored Yeltsin and the
radical reformers; it has acted as if their success would, almost by
definition, be good not only for Russia but for the United States as
well. As a result, President Clinton and his advisers have gone well
beyond whitewashing Yeltsin's personal transgressions--including his
excessive drinking and his propensity for grandstanding--and have
consistently urged him to stay on course with radical reform at
almost any cost.

No truly democratic government would ever have dared impose on its
citizens measures as harsh as those implemented by Yeltsin. Despite
this, and after the predictable backlash, the administration endorsed
Yeltsin's unconstitutional dissolution of the Congress of People's
Deputies in 1993, his shelling of the Russian White House (where the
parliament was located), and his virtual imposition of a new
constitution granting the Russian president almost dictatorial
powers. The administration clearly gave priority to its notion of
economic reform over democracy, and to Yeltsin's personal fortunes
over respect for Russia's constitution--and over the obvious U.S.
interest in the establishment of political checks and balances that
would discourage a future Russian autocracy from returning to an
aggressive foreign policy.

Later, in 1996, the administration deployed IMF loans in such a way
as to help Yeltsin win re-election, and then portrayed his victory as
a triumph of democracy. This proclamation came despite the fact that
Yeltsin's campaign team rendered legal spending limits meaningless
through massive violations; used the federal treasury as a campaign
war chest; exploited its de facto control over the media to undermine
not only the Communists but all of Yeltsin's rivals (even Grigory
Yavlinsky, the leader of the impeccably pro-reform Yabloko party);
pressed local officials to deliver the vote to Yeltsin, even through
fraud; and concealed his heart attack on the eve of the election from
Russia's voters.

As a result of its unstinting support of Boris Yeltsin, the
administration developed an enormous stake in his success and the
success of his radical reformer protégés. The appointment of the
Primakov government thus came as a double blow: it came about at the
initiative of opposition politicians in the Duma; and, for the first
time since the collapse of the USSR, the Russian government did not
include any of the administration's favorites.

Not On the Shoulders of Titans

Yevgeny Primakov was appointed prime minister after the humiliating
failures of his two predecessors, Sergey Kiriyenko and Victor
Chernomyrdin. Kiriyenko, dismissed in August, had announced Russia's
de facto devaluation of the ruble, its ninety-day moratorium on the
repayment of debts to foreign creditors (the equivalent of a
default), and its unilateral restructuring of short-term state bonds
(known as GKOs). He replaced Chernomyrdin, who was fired in March to
allow for "new blood."

Despite Yeltsin's claim, however, Chernomyrdin's original dismissal
had little to do with a sense that the Russian government needed new
energy and momentum. While there certainly was such a need, politics
rather than policies played the decisive role. By now it is clear
that Yeltsin and his entourage had become resentful of Chernomyrdin,
who seemed increasingly to be a real second-in-command with an
independent power base and ever more obvious presidential
aspirations. But the Russian prime minister fatally miscalculated
Yeltsin's willingness to tolerate his growing prominence. Whoever
became too visible under the aging and insecure president was bound
to activate his self-protective instincts. With little or no warning,
Chernomyrdin was dismissed in March less than one month after his
return from high-profile meetings with Vice President Al Gore in
Washington.

In retrospect, Yeltsin's decision to fire his prime minister of five
years appears to have been largely spontaneous. This is demonstrated
by the Russian president's initial announcement that he himself would
temporarily assume the duties of prime minister, followed only hours
later by the appointment of the relatively unknown thirty-five
year-old energy minister, Sergey Kiriyenko, as acting prime minister.
Although there have been numerous attempts at after-the-fact
rationalization of Kiriyenko's appointment--highlighting his youth,
competence, commitment to reform, and pragmatic approach to
politics--the mechanics of his arrival make clear that its principal
purpose was to unseat the powerful Chernomyrdin. Kiriyenko, a former
Komsomol leader and then business executive in Nizhniy Novgorod
brought to Moscow by Boris Nemtsov in 1997, had served only a few
months as a minister and was a virtual unknown to Yeltsin.

Kiriyenko's eventual confirmation by the State Duma was predictable.
After two strong but nevertheless pro forma rejections, the deputies
overwhelmingly approved Kiriyenko's candidacy in the face of threats
to force new elections with revised rules unfavorable to the
opposition. Transparent suggestions by the president himself that he
would "take care of the deputies' needs" if only they would cooperate
also helped.

Ultimately, though, the Russian constitution, narrowly approved in a
questionable referendum held after Yeltsin's 1993 assault on the
Supreme Soviet, was the decisive factor. It allowed Kiriyenko to
assume office in an acting capacity prior to his confirmation, and
also ensured that if the parliament rejected Kiriyenko in a third
vote, the Duma would face dissolution. The new Duma, too, would still
have to vote on Kiriyenko, if not a less palatable presidential
appointee. Although the opposition would perhaps have won additional
parliamentary seats if it had forced new elections, the Duma has so
little power that the opposition's strength is of little relevance if
Yeltsin feels confident enough to ignore the legislature. Yeltsin had
also put opposition leaders on notice that he might abolish by decree
the current system of proportional representation in any new
parliamentary elections. This would significantly damage the smaller
parties, particularly Yabloko, which has a substantial nationwide
electoral base but could win few races in single-mandate districts
outside Moscow, St. Petersburg, and a few other major cities. Because
the Duma would be unlikely to vote for such a change, Yeltsin could
probably not have introduced it constitutionally--but with his record
of acting outside the constitution, his threat had enough credibility
to sober the opposition into submission.

Kiriyenko won almost instant endorsements from the Clinton
administration and the IMF. Their quick support for the new prime
minister could hardly have been based on his reformist record--he had
served as a cabinet minister only since the previous November, when
he replaced his political mentor, Boris Nemtsov, as energy minister.
Nor was Washington's satisfaction based on any displeasure with
Chernomyrdin, with whom the administration had worked amicably for years.
Instead, the fulsome praise for the new Russian government seemed
to reflect the Clinton administration's predisposition to find
something positive in almost any move taken by Yeltsin on one hand
and, on the other, its trust in assurances from Nemtsov and former
First Deputy Prime Minister Chubais, whom Yeltsin had just appointed
to head Russia's electricity monopoly, United Energy Systems of
Russia. The fact that another radical reformer--Yegor Gaidar--was a
key unofficial adviser to the Kiriyenko team also reassured the
administration and its proxy international financial institutions.

The near euphoria in Washington was, however, totally divorced from
realities in Russia. Once Kiriyenko was confirmed, Yeltsin lost his
leverage over the Duma, which by then was deeply resentful at having
been railroaded into approving the young appointee. It was thus very
unlikely that the Duma would cooperate with the new radical reform
government and, without crucial legislation, the government was
unable to implement significant new policies. The new government,
even more than previous ones, was forced to turn to reform by decree.
But this failed to assuage the concerns of skeptical foreign
investors, undermined the legitimacy of the political system still
further, and did little to improve Russia's economic condition.

Thus, despite their monetarist rhetoric--which fell on enthusiastic
ears in the U.S. Treasury Department and the IMF--Sergey Kiriyenko
and his team had no realistic economic program. The government could
not simultaneously rationalize Russia's tax system and respond to IMF
pressure to improve tax collection, even though the latter was
objectively necessary. This was especially true as the drive to save
money by whatever means possible, including forced cuts in the
country's social safety net and the non-payment of wages and pensions
for months, further strained the government's relations with the
State Duma. That in turn made the necessary tax legislation even less
likely, because many deputies, including those committed to reform,
perceived tax collection efforts--such as widely publicized raids by
hooded tax inspectors armed with automatic weapons--as either
arbitrary or politically motivated attacks on opponents of the
government and its allies. Pressure to increase tax receipts also
stifled the development of Russia's cash-starved businesses and
scared off foreign investors, whom Moscow often saw as an easy source
of additional revenue. But in an economy in which about 60 percent of
cash turnover occurs beyond the reach of tax authorities in the
shadow economy, and in which 75 percent of transactions take place
through barter--a new tax system was of much more fundamental
importance than an improvised, one-time improvement in tax gathering.
As in the case of Gaidar's government, the Kiriyenko government
(which Gaidar advised) proceeded in a cavalier fashion with hastily
conceived radical measures implemented in an authoritarian style. It
never developed a systematic approach to what is, after all, a very
complex problem.