Suny R.G. (ed.) The Cambridge History of Russia, Volume 3: The Twentieth Century
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republics, and Yeltsin most certainly was not going to order troops into these
places to defend Soviet territorial integrity. After all, he had declared Russia a
sovereign country a year earlier. Instead, Yeltsin devoted his energies to guiding
the Soviet Union to peaceful disintegration.
Yeltsin first banned the Communist Party of the Soviet Union, dissolving
the only organisation potentially capable of making and implementing pol-
icy at the all-Union level. Yeltsin also suspended the publication of several
Communist newspapers, and purged the leadership at other important media
outlets. Though most were senior CPSU officials, leaders in other republics
did the same in their territories. Next, Yeltsin and his allies moved quickly to
recast most of the ministries and organisations of the Soviet state as Russian
entities. The strategy regarding most of these state organs was co-option, not
coercion or dissolution.
7
Yeltsin and his government adopted a more cautious
strategy regarding the so-called power ministries. With the CPSU in disarray,
the Soviet armed forces, the KGB and the Ministry of Internal Affairs were the
only organisations that had the capacity (and quite possibly the legitimacy) to
construct an alternative all-Union administrative authority. After all, most of
the Soviet Union’s armed and best-trained troops were stationed beyond the
Russian Republic’s borders.
8
To begin to neutralise these institutions, there-
fore, Yeltsin appointed loyal allies to head them. But in contrast to his strategy
towards other ministries, Yeltsin allowed the power ministries to remain under
Soviet jurisdiction during this transitional period. He eventually incorporated
these ministries into the Russian government after Soviet dissolution, but with-
out initiating any serious internal reforms within these ministries.
9
Nor did
Yeltsin establish firm civilian control over these bodies. Above all else, Yeltsin,
as well as other republican leaders, feared a divided and polarised army.
There were two Soviet state institutions that Yeltsin did not want to seize,
but rather destroy – the Soviet Congress of People’s Deputies and the Soviet
presidency. He and his government first sought to discredit the Soviet parlia-
ment by blaming Soviet legislators for tacit acquiescence to the coup. As Yeltsin
stated the week after the coup attempt, ‘During the days of the putsch, there
was no supreme legislative power in the country, there was no parliament. The
junta had a free hand. Through its inaction, the Supreme Soviet provided the
7 On the process, see Egor Gaidar, Dni porazhenii i pobed (Moscow: Vagrius, 1996).
8 Dale Herspring, ‘Putin and the Armed Forces’, in Dale R. Herspring (ed.), Putin’s Russia:
Past Imperfect, Future Uncertain (Armonk, N.Y.: M. E. Sharpe, 2003), p. 155.
9 Yeltsin did divide the KGB into three separate bureaucracies. Reforms within the Ministry
of Internal Affairs and the Ministry of Defence were minimal.
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junta with most-favored status.’
10
In response to Yeltsin’s prodding, the Soviet
Congress approved on 5 September 1991 a new law on governing the Soviet
Union during a transitional period in which the Congress de facto surrendered
its governing authority to an executive body called the USSR State Council.
The axe fell next on the Soviet presidency. Although enjoying Gorbachev’s
co-operation during this volatile period, Yeltsin wanted to use the opportunity
of the failed August putsch to eliminate his nemesis from politics forever.
11
To
eliminate Gorbachev’s position and prevent the Soviet leader from attempting
to create a new looser union, Yeltsin met with his counterparts from Ukraine
and Belarus to sign the Belovezhskaia Accord on 8 December 1991. This short
accord effectively dismantled the USSR.
12
Amazingly, it met little resistance in
any of the three signatory countries. By the end of the year, the largest country
in the world ceased to exist.
The new political system
Like many other revolutionary leaders in similar situations, Yeltsin could have
taken advantage of August 1991 to establish an authoritarian regime.
13
Several
of Yeltsin’s advisers did urge him to consider an authoritarian strategy, at least
as an interim solution to collapsing state power throughout the country and
as a means for introducing unpopular economic reforms. On the other hand,
Yeltsin could have taken steps to consolidate a democratic polity. He could
have disbanded old Soviet government institutions, adopted a new constitu-
tion codifying the divisionofpower betweenexecutive, legislative and judiciary
as well as federal and regional bodies, and called new elections to stimulate
the development of a multi-party system. Many leaders in the democratic
movement expected him to do so. Yeltsin, however, pursued neither strategy.
10 Yeltsin, speech to Extraordinary Congress of the USSR Congress of People’s Deputies,
in Izvestiya, 4 Sept. 1991,pp.4–7; reprinted in The Current Digest of the Soviet Press 53, 37 (16
Oct. 1991): 3.
11 Yeltsin and Gorbachev despised each other. On their criticisms of each other during the
autumn of 1991, see Mikhail Gorbachev, Memoirs (New York: Doubleday, 1996), chs. 30
and 31; and Boris Yeltsin, The Struggle for Russia (New York: Random House, 1994), ch. 3.
For an independent assessment of this complicated relationship, see George Breslauer,
Gorbachev and Yeltsin as Leaders (Cambridge: Cambridge University Press, 2002), ch. 7.
12 ‘Agreement of the Creation of the Commonwealth of Independent States’, 8 Dec. 1991;
reprinted in Alexander Dallin and Gail Lapidus (eds.), The Soviet System: From Crisis to
Collapse, revised edn (Boulder, Colo.: Westview Press, 1995), p. 638.
13 On this pattern, see Theda Skocpol, ‘Social Revolutions and Mass Military Mobilization’,
World Politics 40, 2 (Jan.1988): 147–68.
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Although he did not attempt to erect a dictatorship, he did little to consoli-
date a new democratic polity. Importantly, he resisted calls for new national
elections and actually postponed regional elections scheduled for December
1991. He also did not form a political party. He delayed the adoption of a
new constitution, even though his own constitutional commission had com-
pleted a first new draft as early as October 1990. Yeltsin also failed to disman-
tle many Soviet-era governmental institutions, including, most importantly,
the Supreme Soviet and the Congress of People’s Deputies of the Russian
Republic.
14
Launching economic transformation
Yeltsin’s priority was not the creation or consolidation of a new democratic
political system (or a new authoritarian regime). Rather, once the borders of
the new Russian state were secure, Yeltsin turned his attention to disman-
tling the command economy and creating a market economy. He and his new
government inherited a bankrupt economy – no hard currency reserves, a
ballooning budget deficit, foreign debt of $80 billion, declining industrial pro-
duction, a monetary overhang and a scarcity of goods that compelled many
experts to predict starvation. After some hesitation, Yeltsin came to believe
that only radical reforms could redress these desperate economic conditions.
He hired a team of young reformers, led by his new deputy prime minister
for the economy, Egor Gaidar, to initiate such reforms, which acquired the
unfortunate label of ‘shock therapy’.
15
Gaidar’s programme for economic reform called for immediate liberali-
sation of prices and trade while at the same time achieving macroeconomic
stabilisation through control of the money supply and government spend-
ing.
16
Once stabilisation had been accomplished, massive privatisation was
to follow. Gaidar’s plan was consistent with his neo-liberal approach to mar-
kets and market development; the less the state intervened in the market the
better.
14 On the reasons for inaction, see Michael McFaul, Russia’s Unfinished Revolution: Political
Change from Gorbachev to Putin (Ithaca, N.Y.: Cornell University Press, 2001), ch. 4.
15 On the general formula, see Anders Aslund, Post-Communist Economic Revolutions: How
Big a Bang? (Washington: Center for Strategic and International Studies, 1992); and Jeffrey
Sachs, Poland’s Jump to the Market Economy (Cambridge, Mass.: MIT Press, 1993).
16 On the formation of this team, see Anders Aslund, How Russia Became a Market Economy
(Washington: Brookings Institution Press, 1995).
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The consequences of Yeltsin’s reform
sequence and strategy
Yeltsin’s greatest achievement as president was the peaceful dissolution of the
Soviet Union. Initiating economic reform was another important accomplish-
ment. Executing the measures successfully, however, was not.
In January 1992, Yeltsin and Gaidar did succeed in introducing dramatic price
liberalisation. Prices on most food items (exceptionswere milk, breadand other
main staples) as well as almost all consumer durables were freed overnight.
Significant price controls, however, remained in the energy sector. At the
time, government officials, trade union chiefs and journalists all predicted
riots, work stoppages and general social unrest. Gaidar himself predicted his
own dismissal by the end of the month. None of these scenarios transpired.
This peaceful transition towards free prices represented a monumental step
for a country where prices had been controlled for over sixty years. By the end
of the decade, few goods were rationed, long queues were rare and Russian
shops were filled with goods to sell.
The January 1992 price liberalisation produced a sharp rise in inflation.
What is striking in retrospect, however, is how low inflation was in compar-
ison with the rates to follow. Monthly inflation rates steadily declined from
38 per cent in February 1992 to 9 per cent in August 1992. Politics, however,
quickly eroded Gaidar’s ability to implement macroeconomic stabilisation.
17
Tight government money threatened directors and workers of large state
enterprises. These groups used the moment of the Sixth Congress of People’s
Deputies in the spring of 1992 to launch an assault against Gaidar’s reforms.
Rather than call for Gaidar’s dismissal, leaders of the parliamentary faction,
Industrial Union, mobilised other conservative forces in the parliamentary
body to strip the president of his extraordinary powers. Ambiguously defined
rules of the game, including most importantly the absence of a new Russian
constitution, made possible this kind of strategy. Although Yeltsin fought and
defeated the original move to dilute his executive powers, he did later compro-
mise with the anti-reform coalition in the parliament by agreeing to appoint
three new deputy prime ministers closely associated with the industrial lobby –
Vladimir Shumeiko, Georgii Khizha and Viktor Chernomyrdin – into his gov-
ernment. During the painful first year of the transition from the command
economy, Yeltsin began to lose confidence in his young team of economic
17 For details, see Andrei Shleifer and Daniel Treisman, Without a Map: Political Tactics and
Economic Reform in Russia (Cambridge, Mass.: MIT Press, 2000), ch. 3.
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advisers.
18
By the end of the year, Yeltsin acquiesced to pressure from the Rus-
sian Congress and dropped his acting prime minister Gaidar. Yeltsin replaced
Gaidar with the more conservative Chernomyrdin, the former head of the
gas company, Gazprom. For many, this was the end of economic reform in
Russia.
The consequences of these political battles for macroeconomic stabilisa-
tion were profound.
19
By the summer of 1992, government transfers to state
enterprises began to increase dramatically. Even more importantly, however,
Gaidar and his team lost control of monetary policy. As part of this compro-
mise with the industrialists, Viktor Gerashchenko was appointed head of the
Russian Central Bank. Soon after his appointment, Gerashchenko approved
the clearing of inter-enterprise debt as well as cheap credit lines for state
enterprises. As a result of these changes in both fiscal and monetary policies,
inflation began to soar again in the autumn of 1992, reaching 25 per cent per
month by the end of the year. Central Bank credits amounted to 31 per cent
of GDP.
20
Though sequenced to begin after liberalisation and stabilisation, privati-
sation has been singled out as the ‘driving force behind economic reform in
Russia’ and ‘the heart of the transformation process’.
21
As defined by Yeltsin’s
first post-Communist government, the policy of privatisation of large state
enterprises aims to create privately owned, profit-seeking corporations owned
by outside shareholders that do not depend on government subsidies for sur-
vival. If enterprises must generate profits to cover expenditures and pay div-
idends to stockholders, then they will be compelled to rationalise assets, a
process that will include downsizing, restructuring and bankruptcy.
On paper, Russian privatisation looked successful. By January 1994, 90,000
state enterprises had been privatised. The record on the actual creation of real
private property rights, however, was less rosy. Privatisation of small shops
and services created actual owners endowed with clearly delineated property
rights. Privatisation of large state enterprises did not. Instead, by the sum-
mer of 1993, insiders had acquired majority shares in two-thirds of Russia’s
privatised and privatising firms, state subsidies accounted for 22 per cent of
18 Yeltsin, The Struggle for Russia,p.165.
19 See Timothy Frye, ‘The Perils of Polarization: Economic Performance in the Postcom-
munist World’, World Politics 54, 3 (Apr. 2002): 308–37.
20 Bridget Granville, The Success of Russian Economic Reforms (London: Royal Institute of
International Affairs, 1995), p. 67.
21 Stanley Fisher and Alan Gelb, ‘The Process of Socialist Economic Transformation’,
Journal of Economic Perspectives 5, 4 (Fall 1991): 98.
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Russia’s GDP, while indicators of actual restructuring (bankruptcies, downsiz-
ing, unemployment, unbundling) were not positive.
22
Again, the problem was politics. Well before the collapse of the Soviet
regime, the Soviet institutional arrangements governing property rights
allowed directors to appropriate many of the rights associated with ownership.
When the Yeltsin government’s privatisation programme threatened to re-
allocate property rights, these directors organised to defend their claims.
23
Their venue of struggle once again was the Congress of People’s Deputies.
While Gaidar and his privatisation tsar, Anatolii Chubais, had hoped to imple-
ment their original privatisation programme through presidential decree,
industrialists in the Congress argued that such an important act had to have
the force of law. After some hesitation, Yeltsin agreed to submit the privati-
sation programme for parliamentary approval. Over a hundred amendments
were added to Chubais’s original privatisation programme, including two new
options for privatisation, which allowed managers to acquire control of their
firms. Not surprisingly, insiders acquired the majority of enterprises privatised
under this new law.
Polarisation over economic issues between the president and his govern-
ment on the one hand and the Russian Congress on the other eventually
provoked conflict over basic political issues. The absence of well-defined polit-
ical rules of the game fuelled ambiguity, stalemate and conflict both between
the federal and sub-national units of the state. Both confrontations ended in
armed conflict.
October 1993
The Russian Congress of People’s Deputies was an odd foe for Boris Yeltsin. In
1990, this body had elected Yeltsin as its chairman. After Yeltsin became presi-
dent,this Congressthenelected Yeltsin’sdeputychairman,RuslanKhasbulatov
to become speaker. In August 1991, Yeltsin, Khasbulatov and their supporters
huddled inside the Congress building – the White House – as their chief defen-
sive strategy for thwarting the coup. In November 1991, the Congress voted
overwhelmingly to give Yeltsin extraordinary powers to deal with economic
22 Joseph Blasi, Maya Kroumova and Douglas Kruse, Kremlin Capitalism: Privatizing the
Russian Economy (Ithaca, N.Y.: Cornell University Press, 1997). For an even more critical
assessment, see Clifford Gaddy and Barry Ickes, Russia’s Virtual Economy (Washington:
Brookings Institution Press, 2002).
23 Michael McFaul, ‘State Power, Institutional Change, and the Politics of Privatization in
Russia’, World Politics 47, 2 (Jan. 1995): 210–43.
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reform. In December 1991, the Supreme Soviet of the Russian Congress rati-
fied Yeltsin’s agreement to dissolve the Soviet Union. Only six deputies voted
against the agreement.
The portrayal, therefore, of the Congress as a hotbed of Communist con-
servatism is misleading. To be sure, Communist deputies controlled roughly
40 per cent of the seats in the Congress and the anti-Yeltsin coalition – which
included Communists and non-Communists – grew over time.
24
Yet, the ini-
tial balance of power within the Congress did not prevent Yeltsin from being
elected chairman. It should not have prevented him from reaching agreement
with this Congress about the rules of the game that governed their interaction
with each other.
Initially after the putsch attempt, the institutional ambiguity between the
president and Congress did not have a direct impact on politics, as most
deputies in the Congress at that time supported Yeltsin. After price liberalisa-
tion and the beginning of radical economic reform in January 1992, however,
the Congress began a campaign to reassert its superiority over the president.
The disagreement over economic reform in turn spawned a constitutional
crisis between the parliament and president.
25
With no formal institutions
to structure relations between the president and the Congress, polarisation
crystallised yet again, with both sides claiming to represent Russia’s highest
sovereign authority. During the summer of 1993, in preparing for the Tenth
Congress of People’s Deputies, deputies drafted a series of constitutional
amendments that would have liquidated Russia’s presidential office altogether.
Yeltsin pre-empted their plans by dissolving the Congress in September 1993.
The Congress, in turn, declared Yeltsin’s decree illegal and recognised Vice
President Aleksandr Rutskoi as the new interim president. In a replay of the
1991 drama, Russia suddenly had two heads of state and two governments each
claiming sovereign authority over the other. The October 1993 ‘events’ – the
euphemism coined to describe the armed conflict between the president and
the parliament on 3–4 October 1993 – was a national tragedy for Russia. For the
second time in as many years, debates about institutional design moved beyond
the realm of peaceful politics and into the arena of military confrontation. In
1991, the military stand-off took the lives of three defenders of the White House.
In 1993, several hundred people died in the fighting between warring branches
of the Russian state. In addition to the loss of life, the October events ended
24 Josephine Andrews, When Majorities Fail: The Russian Parliament 1 990–1 993 (Cambridge:
Cambridge University Press, 2002).
25 See Thomas Remington, The Russian Parliament: Institution Evolution in a Transitional
Regime, 1989–1 999 (New Haven: Yale University Press, 2001), ch. 4.
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Russia’s romantic embrace of democracy. If the end of the military stand-off
in 1991 triggered rapturous support for the new regime and the democratic
ideals that it claimed to represent, the end of fighting in 1993 marked a nadir of
support for the Russian government and the end of optimism about Russia’s
democratic prospects.
This tragic moment also created opportunity. After dissolving the parlia-
ment in October 1993 through the use of force, Russian President Yeltsin was
free to draft the constitution as he and his aides saw fit. This new constitution
spelled out a set of basic guarantees for all Russian citizens and codified a new
system of government, which included the office of the president, a prime min-
ister and the government, and a bicameral parliament, consisting of a lower
house, the State Duma, and an upper house, the Federation Council. In the
first election to the Duma, held in December 1993, a presidential decree ruled
that half the seats (225) were to be determined by a majoritarian system in
newly drawn electoral districts while the other half (225) were to be allocated
according to a system of proportional representation (PR). Parties had to win
at least 5 per cent to win seats on the PR ballot.
26
Later codified as law, these
rules for electing the Duma have remained in place ever since. Two represen-
tatives from each region of Russia – that is eighty-nine republics, krais, and
oblasts of the Russian Federation – constitute the Federation Council, though
the process of selecting these two representatives has changed over time.
The new constitution gave the president extraordinary powers, compelling
some to label the new regime a form of authoritarianism.
27
The president
appoints the prime minister. The lower house of parliament, the State Duma,
must approve the president’s choice for prime minister. But if they reject the
president’s candidate three times, then the Duma is dissolved and new elections
are held. Not surprisingly, votes against the prime minister have been few and
far between. The president also has the right to issue decrees, which have the
power of law until overridden by a law passed by both the upper and lower
houses of parliament and signed by the president. The president also controls
the nomination process of judges in the Constitutional Court and Supreme
Court.
28
26 See Robert Moser, Unexpected Outcomes: Electoral Systems, Political Parties, and Represen-
tation in Russia (Pittsburgh: University of Pittsburgh Press, 2001).
27 Donald Murray, A Democracy of Despots (Boulder, Colo.: Westview Press, 1995); Lilia
Shevtsova, Yeltsin’s Russia: Myths and Realities (Washington: Carnegie Endowment for
International Peace, 1999); and Peter Reddaway and Dmitrii Glinski, The Tragedy of
Russia’s Reforms: Market Bolshevism against Democracy (Washington: U.S.Institute of Peace,
2001).
28 For details, see Eugene Huskey, Presidential Power in Russia (Armonk, N.Y.: M. E. Sharpe,
1999).
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Yeltsin’s opponents ridiculed this new basic law, claiming not without merit
that the new constitution gave the president extraordinary powers and the pro-
cess of drafting the constitution was undemocratic. There was no compromise
between different parties or regional leaders in the making of this constitution.
Rather, Yeltsin imposed his will and then offered voters the choice to reject or
accept his constitution. Nonetheless, most of Yeltsin’s opponents participated
in the December 1993 elections, in effect signalling that they were willing to
acquiesce to these newly imposed rules. Perhaps most importantly, the lead-
ership of the Communist Party of the Russian Federation decided that it was
in the party’s best interest to participate in rather than boycott the December
1993 vote.
29
In a referendum in December 1993 marred by claims of fraud,
a majority of voters approved the constitution.
30
After the referendum, no
major political force in Russia mobilised to challenge the constitution. After
years of ambiguity, Russia had a new set of formal rules for organising politics
accepted both by the majority of the population and by all strategic political
actors.
Chechnya
The same constitutional ambiguity that fuelled conflict between Yeltsin and
the Congress also allowed federal conflicts to fester. Eventually, one of them –
Chechnya – exploded into a full-scale war.
Tensions between Moscow and the regions arose well before the 1993
executive–legislative stand-off.
31
Immediately after the August 1991 coup
attempt, General Jokhar Dudayev and his government declared Chechnya’s
independence. In March of the following year, Tatarstan held a successful
referendum for full independence. The first of several federal treaties were
signed in March 1992, but negotiations over a new federal arrangement embed-
ded within a constitution dragged on without resolution into the summer
29 Joan Barth Urban and Valerii Solovei, Russia’s Communists at the Crossroads (Boulder,
Colo.: Westview Press, 1997), p. 107.
30 Timothy Colton, ‘Public Opinion and the Constitutional Referendum’, in Timothy
Colton and Jerry Hough (eds.), Growing Pains: Russian Democracy and the Election of 1993
(Washington: Brookings Institution Press, 1998), pp. 291–310; and A. A. Sobianin and
V. G. Sukhovolskii, Demokratiia, ogranichennaia falsifikatsiiami: vybory i referendumy v Rossii
v 1 991 –1 993 gg. (Moscow, 1995).
31 For overviews, see Steven Solnick, ‘Is the Center Too Weak or Too Strong in the Russian
Federation?’, in Valerie Sperling (ed.), Building the Russian State: Institutional Crisis and the
Quest for Democratic Governance (Boulder, Colo.: Westview Press, 2000), pp. 137–56;and
Kathryn Stoner-Weiss, ‘The Russian Central State in Crisis’, in Zoltan Barany and Robert
Moser (eds.), Russian Politics: Challenges of Democratization (Cambridge: Cambridge
University Press, 2001), pp. 103–34.
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of 1993, prompting several other republics as well as oblasts to make their
own declarations of independence complete with their own flags, customs
agents and threats of minting new currencies. Yeltsin allowed these federal
ambiguities to linger. Consumed with starting market reform and then dis-
tracted by the power struggle with the Congress, Yeltsin opted not to devote
time or resources towards constructing a Russian federal order. Moreover,
the Russian state was too weak to exercise sovereignty over a breakaway
republic like Chechnya, which enjoyed de facto independence during this
period. After the October 1993 stand-off, Yeltsin did put before the people
a new constitution, ratified in December 1993, which formally spelled out a
solution to Russia’s federal ambiguities (see Map 13.1). The new constitution
specified that all constituent elements were to enjoy equal rights vis-
`
a-vis the
Centre. Absent from the document was any mention of a mechanism for
secession.
The formal rules of a new constitution did not resolve the conflicts between
the Centre and the regions. Negotiation over the distributionof power between
the central and sub-national governments continued. But all sub-national gov-
ernments except one – Chechnya – acquiesced to a minimalist maintenance of
a federal order. Ironically, the clarity of rules generally highlighted the specific
problem of Chechnya’s status.
After solidifying his power with the defeat of the Russian Congress and
the adoption of a new constitution, Yeltsin committed to a military solution
following a series of challenges from Dudayev regarding Russian sovereignty
during negotiations over the federal treaty in the spring of 1994 and a spate of
bus hijackings in the region that summer. A failed coup attempt orchestrated
by Russia’s Federal Security Service was followed by a ground assault on
1 December 1994 and a full-scale air attack beginning on 11 December 1994.
32
For the second time in as many years, Yeltsin had ordered the deployment of
Russian military forces against his own people.
33
On the eve of attack, Defence Minister Pavel Grachev predicted that the mil-
itary action would be over within hours. The results of the invasion, however,
were disastrous as Russia’s armed forces proved ill-prepared to fight such a war
(see Plate 24). By the time Russia finally sued for peace in the summer of 1996,
an estimated 45,000–50,000 Russian citizens had lost their lives.
34
Moreover, the
32 Shevtsova, Yeltsin’s Russia,p.111.
33 For accounts of the war, see John Dunlop, Russia Confronts Chechnya: Roots of a Separatist
Conflict (Cambridge: Cambridge University Press, 1998); and Anatol Lieven, Chechnya:
Tombstone of Russian Power (New Haven: Yale University Press, 1998).
34 John Dunlop, ‘How Many Soldiers and Civilians Died during the Russo-Chechen War
of 1994–1996?’ Central Asian Survey 19, 3 and 4 (2000): 338.
365