Statecraft. Margaret Thatcher

the truth: not just a tale of two Russians, but also a tale of two Russias.

      The collapse of the August 1991 coup provided the opportunity for a triumphant Boris Yeltsin to order the banning of the Communist Party and to oversee the orderly dissolution of the Soviet Union. In recent years it has become the fashion to scorn Mr Yeltsin’s weaknesses, which were doubtless real enough. But they were more than matched by astonishing courage and large reserves of political wiliness. And had bravery and cunning not also been accompanied by a typically Russian ruthless streak he could never have scored victory after victory against the communists who wanted to drag Russia back to its Soviet past.

      Boris Yeltsin’s shoulders were broad. But history’s burden was still too heavy for them. The habits, instincts and attitudes developed by Soviet communism made the transformation of Russia into a ‘normal’ country immensely difficult. This has been glaringly apparent in the growth of lawlessness.

      Long before the end of the Soviet era, Russians had come to regard the state itself as their enemy. For those who chose to proclaim their individuality it was an oppressor. But for many more the state was essentially a thief.

      There was, of course, no law in a Western sense in communist society. Indeed, though there were rules and regulations at every turn there was no concept of equity, according to which a single set of obligations based on what each was due as a human being was applied to all equally. As the writer and dissident Alexandr Zinoviev strikingly put it: ‘In Communist society a system of values prevails which is founded on the principle that there should be no general principles of evaluation.’*

      In fact, the only dominant principle was that of predatory egotism. Such habits die hard, or not at all. It is important to stress that although the scale and violence of Russian crime have snowballed since the end of the USSR, its psychological and systemic roots were planted under communism. In the last years of Leonid Brezhnev’s presidency corruption in high places became notorious. But from the mid-1980s, crime became fully institutionalised, not least through the activities of the KGB which, according to a senior CIA source,

      sold cheaply acquired Soviet commodities abroad at world prices, putting the proceeds into disguised foreign accounts and front companies … [Its] lines of business came to include money laundering, arms and drug trafficking and other plainly criminal activities.*

      There was, understandably, little confidence that this disordered state of affairs would change under the new dispensation: most Russians had grown so accustomed to it that criminality appeared the ordinary way in which things were done. How could it be otherwise when so many of the same people who had held high positions under communism re-emerged under capitalism as the new masters?

      Russia has accordingly become a notoriously criminal society. It is thought that between three thousand and four thousand criminal gangs operate there. The Russian Ministry of Internal Affairs says that organised crime controls 40 per cent of the turnover of goods and services; some estimates are higher. Half of Russia’s banks are thought to be controlled by criminal syndicates. Not surprisingly, the European Bank for Reconstruction and Development (EBRD) considers Russia the most corrupt major economy in the world. Public opinion polls have suggested that Russians despair of honest effort as the means to advance. Instead, 88 per cent listed ‘connections’ and 76 per cent dishonesty as the best ways to get ahead.†

      Estimates of the size of the black economy – always difficult to gauge – put it at between a quarter and a half of Russia’s national income. Much of this is, of course, a matter of unpaid or badly paid Russian workers trying to earn a decent income; much of the rest reflects the chaotic circumstances in which all enterprises have to operate. But it is still a recipe for extortion and gangsterism.

      In such circumstances violence has become a tempting method of settling scores, instilling fear, and deterring both competition and criticism. Russia’s murder rate is now probably the highest in the world. Those who speak out against abuses in high places must expect to be targeted.

      Such, for example, was the fate of that brave and principled lady, Galina Starovoitova. I first met her in London during the 1991 attempted coup, when she and I discussed how to help rally support for Boris Yeltsin. Mrs Starovoitova was a leading figure in the biggest political party at that time, ‘Democratic Russia’. She became a personal adviser to President Yeltsin on inter-ethnic issues – a position she relinquished because of her opposition to the Chechen War. She was later elected as a member of the Duma representing St Petersburg, where she denounced the anti-Semitism and corruption which had become unpleasant facets of the life of that great city. She also proposed a draft Law of Lustration intended to prevent high-level former Communist Party and KGB members from occupying high state positions. This, though, was rejected by the communist majority in the Duma.

      Galina Starovoitova was murdered on the night of 20 November 1998 as she climbed the stairs to her apartment. It was a well-prepared assassination with what her family later told me had all the marks of the old KGB style. I was horrified by this and wrote to President Yeltsin. But her murderers have never been brought to trial. She is a martyr to the ideal of the Russia most Russians long to see. It is impossible to have much confidence in the Russian authorities’ promises to stamp out crime while her, probably well-connected, murderers remain at large.

      ECONOMIC REFORM AND THE IMF

      Lawlessness in all its forms has impinged on attempts to reform the Russian economy. And this should be remembered as a background to the agonised debates which have taken place since the crash of August 1998 on the theme of ‘Who lost Russia?’ In fact, the question is badly put for three rather obvious reasons: first, Russia is not necessarily lost; second, it was certainly not the West’s to lose; and third, the loss for which the International Monetary Fund (IMF), senior politicians and advisers should be required to answer is that of billions of dollars by Western taxpayers in futile bail-outs.

      Elsewhere, I consider more fully what might constitute a proper role for the IMF.* But it is worth rehearsing the arguments for and against its deep and costly involvement in Russia. The main argument for relying on an international organisation rather than, say, the Group of Seven (G7) major economic powers to help Russia out of the mess it inherited from communism, was that the IMF allegedly had the expertise to undertake the task and the neutrality to avoid outraging Russian sensitivities about the country’s sovereignty.

      In fact, things have not worked out that way. The IMF’s decisions were increasingly politically motivated, clearly intended to keep President Yeltsin in and the communists out of power; and it found itself increasingly pilloried by Russians as an agent of malign Western intervention. Of course, the prior question is: did such massive programmes of assistance make sense in the first place?

      The argument against the provision of loans and other aid to insolvent sovereign borrowers is well-known: it mirrors in many respects the problem involved in lending to insolvent individuals. Quite apart from whether the money will be repaid – which may not be the first consideration – such action creates what is called ‘moral hazard’. This means that it is assumed by the recipient of the aid – or by others who benefit from it indirectly, or may wish to benefit in the future – that irresponsibility will not be penalised. And that, of course, increases the likelihood of its recurring.†

      Taken to its extreme, this argument would suggest a policy of rigid international non-intervention in Russia’s economic affairs. It should be said at once that this argument has its merits. Insofar as the West’s billions of dollars have helped shore up a structurally unreformed economy and a corrupt plutocracy they have done harm not good. But the fact remains that Russia is too great a potential danger to her neighbours and the world to be allowed to fail entirely. In these circumstances, the needs of politics will always tend to override the requirements of economics. The practical challenge is to ensure that intervention is correctly timed, targeted, monitored – and known to be limited.