POL 144B part 2

Political situation after coup

- Executive: Russian President - Legislature: Russian CPD o 1/3 communists o 1/3 DR o 1/3 independent: no particular vision - No political parties represented in CPD - Relatively free press - No working judicial system - No legitimate constitution o Brezhnev-era constitution, much amended

natural gas pipelines owned by Gazprom

- Key supply route to Europe is through Ukraine and Belarus - Putin's first term: continue policy of selling oil and natural gas to former republics and subsidized price - Putin's second term: Raise prices, negotiate trade of shares in pipeline companies in exchange for lower prices

Duma Campaign, 1993 Results

- LDPR got most votes, largely workers in factory towns that did not benefit from economic reform - St Petersburg and Moscow voted for Russia's Choice (2nd) and Yabloiko - Pensioners and rural areas supported the communists (3rd) - Very fractured Duma; lots of parties and no one group had majority; no unified voice from the Duma so not going to get support - Yeltsin does not join a party portrays himself as above it

State security under Yeltsin

- 1993: violent conflict over state power - 1994: civil war between Russian state and Chechnya - 1995: terrorists attacked hospital in Southern Russia - one of highest homicide rates in the world

Where are the checks and balances in the Russian system

- 2/3 Veto of the both chambers of legislature - The only body that can check the president's decree power is the constitutional court - What are the key powers of Russian presidents that remove checks and balances? - can veto legislation and legislate by decree - What are most problematic elements of the Russian constitution - some of the strongest decree powers in the world

Privatization of state industry: Late 1992-1995

- 25,000 large and medium enterprises (over 200 employees) o Employed 95% of Russia's workforce o 75% of labor force employed in enterprises with over 1000 employees - 5% of workforce employed in 170,000 small enterprises mostly shops o Privatized for cash, no state oversight, organized crime gained strong foothold in retail as a result - They have to privatize these huge businesses and almost everyone is employed in these

Industries not privatized via vouchers

- "Commanding Heights" of economy - Resource extracting enterprises o Norilsk Nikel o Gazprom o Others - Infrastructure o Rail o Aeroflot o Telecommunications - Communications o TV and print media

Legacy of economic reform as of 1996 (before election)

- 1-2 million Russians who earn 2K+ a month - 5-10 million Russians earn $500 to $2000 per month middle mostly live in Moscow - really rich Russians are former nomenklatura - Average Moscow resident's salary is 17 times greater than that of Russia's poorest regions - 50% of all money contributed to state budget comes from Moscow - The rich were now richer than had been in USSR

Two Foreign Policy objectives

- 1. Pragmatic motives tied to maintaining and expanding its market for oil and natural gas - explains relations with EU, former Soviet Republics, China, India, Africa - 2. Concern over national security: Defend and enhance Russia's position as a world power AND protect its borders - Explains relations with US, Britain, Chechnya, Syria, and others - 3. Puzzle: How to understand the intensification of anti-Americanism in Putin's rhetoric o Putin in many ways imitates US actions o The FSB believes that the west and its allies have hostile intent. Putin adopting an anti-American stance doesn't cost him

Results of elections to Russian CPD results (1990)

- 1/3 seats to candidates affiliated with DR - 1/3 seats to candidates affiliated with CPSU - 1/3 seats to independents - Yeltsin ran in his home town of Sverdlovsk won 84% of vote after having resigned at the USSR CPD level

December 1993 Referendum and Extraordinary Elections

- 178 members of the upper chamber, Federation Council (later appointed) - 450 members of the State Duma - Referendum on new Constitution - majority of people voted in favor of the constitution, but the turnout was more of a question at about 50%

1995 Duma elections

- 44 parties compete in PR contest; only 4 parties passed the 5% threshold - 40% of vote used on parties that did not pass this threshold - Many unhappy with LDPR, so switched to communists - KPRF got 40% (1st) and LDPR got 11% (3rd) totaling 51% (red/brown coalition) - Democratic reformers got total of 18% (2nd) - Even though this happened, nothing changed because the Duma had no power under new constitution - People became very cynical after these elections - Yeltsin's popularity was very low at this point, had taken blame for reform pains

Elections to state Duma

- 450 seats total - 225 by single member district plurality - names of candidates without party affiliation so didn't know what candidate stood for - 225 by proportional representation with 5% threshold one national district - point of interest o ballot structure o no party affiliation on SMDP ballots o 13 party lists on PR ballot

1996 presidential election: round 1

- 50% turnout is required - to win in first round, must get over 50% of vote - Otherwise a second round is held between top two - 11 candidates appeared on the first round ballot - major candidates o Yeltsin: continuing democratic and economic reform - avoiding horrors of communists o Zyuganov: calls privatization and shock therapy disaster; liability is his association with old communist party o Zhirinovsky: nationalist o Yavlinsky: Democratic reformer o Lebed: army general who was hero in Afghanistan - Round 1: Yeltsin and Zyganov are neck and neck - Yeltsin cut a deal with Lebed that if he asked his supporters to support him that he would head the security council - he did - This helped Yeltsin win second round

Commonwealth of Independent States (CIS)

- 9 members - Belarus Russia Moldova Armenia Azerbaijan Kazakhstan Tajikistan Uzbekistan Kyrgyzstan - Non-members: Terkmenistan, Ukraine - Former member: Georgia - Does not have the kind of economic benefits if EU, all former USSR - part of Russia's relations with Near Abroad o Pragmatic: Secure pipelines through former Soviet republics o National Security: protect national borders

Important source of presidential power in new constitution

- Ability to veto legislation passed by parliament; size of the veto override - Russian says max 2 successive terms for president - If the Duma refused to confirm three presidential nominations for Prime Minister, then the president can dissolve the Duma and call for new elections - If the Duma passed a vote of no confidence in the government twice in three months, the president can either dismiss the cabinet or dissolve the Duma - President can appoint and dismiss the Prime Minister at any time - President has the right to legislate by decree, can determine military policy, can draft the state budget, and controls the Central Bank

Aftermath of the coup

- All 15 republics declare their independence - 150,000,000 are of 250k of USSR in Russian Federation - USSR CPD disbands - Russian communist part remains - Russian CPD is Russia's national legislature - Yeltsin is Russia's President - Yeltsin literally takes Gorbachev - Red Army broken up but Russia inherits bulk of it

Russia's tangible accomplishments in Ukraine crisis

- Annexation of Crimea - Continuation of conflict in eastern Ukraine - But conflict is encouraging discussion of a pan-EU army - By highlighting NATO problems, conflict could foster a more militarily prepared Europe in future - Russia has used their tool of energy coercion against Georgia, Armenia etc., leading the EU to reduce their reliance on Russian energy by pursuing alternative sources

Relations with US: Putin's second term

- Anti-Americanism has a domestic audience; doesn't hurt Putin much in any sphere - Conference in Munich - In attendance: Robert Gates, John McCain, Angela Merkel - Putin : The world is witnessing "an almost uncontained hyper use of force," which is plunging into "an abyss of permanent conflicts." The US has overstepped its national borders in every way." This gave him stature on the world stage and helped him at home. He characterized its treatment of Russia as condescending.

Gorbachev sides openly with radical reform

- April 1991, signs agreement to restructure Soviet Union - Begins work on a new Union Treaty, to be signed on August 20, 1991 o Gives new powers to the republics o Accelerates transition to a market economy

War of Laws

- As Chairman of The Russian CPD, Yeltsin began an aggressive campaign to strengthen Russia; "War of Laws" - Russia should control its natural resources - Russia conducts its own foreign relations - Free economic zones - Revokes privileges of nomenklatura - Declaration of Russian sovereignty - Other republics follow; these programs contradict and challenge that of the USSR, leads to economic chaos - Creation of office of President of the Russian Republic o Election scheduled for June 1991

Putin's third priority: Restructure Russia's Federation

- At end of Yeltsin terms, 89 regions are each controlled by regional legislatures and regional governors, both elected - Head of legislature and governor sat in Federation Council - Result was chaos. WHY? o Most regions operated independently of national government - Putin created 7 new super districts - did not correspond to ethnic groups so that no ethnic group is concentrated in a single district. - Administrators of the seven new districts are appointed by the president

Chechnya conflict

- August 7, small army from Chechnya (Russian Republic) invaded Dagestan - September 9 and 13, bombs exploded in two Moscow apartment buildings killing about 300 people. Bombings were blamed on Chechen terrorists - Russia invaded Chechnya in October - Yeltsin gave Prime Minister Putin full responsibility for conducting the war in Chechnya (2nd) - more successful than first war - Since the dissolution of USSR, Chechnya had tried to secede from Russia - Yeltsin tried oppose because he feared it would lead to Russia falling apart

Time -frame of the coup

- August: 18 Gorbachev arrested - August 19 o Moscow radio announcement at 6 AM o Head of KGB orders Yeltsin's arrest o Yeltsin leaves his dacha at 9 Am o Makes his first public appearance at noon in Moscow o Perpetrators found union treaty threatening so they acted to prevent what they saw as coming dissolution of USSR - August 20 o President Bush sends message of support to Yeltsin o Yeltsin gains support of Baltic fleet, most prestigious unit of navy o Yeltsin calls for massive sgtrikes, which begin immediately - August 21: Coup collapses with almost no loss of life o Leaders of coup are arrested; Pugo commits suicide o Gorbachev returns to Moscow o Almost no loss of life in coup - In September different republic start declaring their independence, Baltic states are first to do so and are followed by others - Waffling within the KGB in capturing Yeltsin during the coup was due to his popularity and the unhappiness with CPSU

Privatization considered an initial success

- By June 1994 about 80% of medium and large enterprises were privatized o 77% of medium and large enterprises o 82% of small shops and retail o Technical ownership had been transferred out of state hands - Result of voucher privatization? o Managers wound up owning about 30-35% of the shares in their enterprise o Workers gained little - Voucher privatization was a distribution plans

Opposition to shock therapy begins

- By end of the summer 1992 Yeltsin had lost his majority support in the Russian CPD o 1/3 communists against him from the start o 1/3 of democrats were mostly for it, but were shocked at the social cost - offered only weak support o 1/3 independents did not support shock therapy - Khasbulatov turned into the mouthpiece of those in opposition to economic reform

Russian Finance, 1996-98

- Central bank determines he money supply, holds hard currency reserves, receives IMF loans, issues government bonds, pays government debt o Begins issuing short term gov bonds to fund Russia's foreign debt o 1996-97 value of GKOs rose o oligarchs invested heavily in GKOs o foreign investment in GKOs

1993: Struggle between Yeltsin and CPD intensifies

- Chairman Khasbulatov creates a private security force - justification was fear of executive coup - CPD tries to impeach Yeltsin - He thought Yeltsin was making the executive so powerful that it was undemocratic - Referendum in April on Yeltsin and economic reform o Do you support President Yeltsin (60%) o Do you support Yeltsin economic reforms? (55%) o Do you support early parliamentary elections? (45%) - The referendum vindicated Yeltsin - Khasbulatov publicly accuses Yeltsin of being an alcoholic - Yeltsin calls for a Constitutional Convention, summer - Khsabulatov refuses to attend or send delegation from CPD - no parliamentary CPD-supported version - Convention never amounted to anything

Khasbulatov vs. Yeltsin

- Chairman Khasbulatov goes on offensive - Lack of clarity in constitution fuels Khasbulatov's challenge to Yeltsin o President is Head of State and "chief executive" o Chairman of CPD is head of "highest organ of state power" - Who prevails? Constitution is not clear - Khasbulatov attacks the reform in much the way that Yeltsin attacked Gorbachev - Yeltsin can pass decrees but CPD can pass laws that supersede the decrees - So a war of laws commences

Speculation about what Russia trying to accomplish in Ukraine

- Change the course of Ukraine's domestic political development - Forcefully reconstitute USSR - Start a war with US - Only first seems plausible, but all three routinely discussed in western press

Loans for shares plan

- Chubais is the link between Yeltsin and these new oligarchs - Banks would loan the government money and take shares in factories as collateral (total amount loaned to state would be about $2 billion) - Banks would individually bid on the shares and these auctions would be open to foreign banks and transactions would be transparent - If the government failed to pay back the loans by a deadline the bankers would sell the shares and keep a 30% commission - government was supposed to get the rest - They presented the plan to the Russian government in March 1995 - Chubais endorsed it immediately - Most of the economic reformers on his team were against it however and were disgusted - Chubais supported it for political reasons, because it would be the "death blow" to communism - It would create powerful forces that would support their own private property, which would create a powerful opposition to communism

Ominous prospects for Yeltsin in 1996 presidential election after 1995 election

- Communist led "Red/Brown" majority in Duma - KPRF's Zyuganov become s a real contender for presidency in 1996 - Yeltsin's popularity is about 3% - Yeltsin took the blame for the economic reform

What is Putin trying to accomplish in Ukraine and what has he accomplished so far?

- Conflict has highlighted lack of unity between US and EU - Conflict has highlighted a lack of unity among EU leaders and member countries o Is Russia using the conflict to exacerbate these problems and so weaken the UE?

What has Putin/Russia accomplished so far?

- Conflict has highlighted lack of unity between US and EU - perhaps part of goal? - Strong economic ties of EU to Russia make them more reluctant than US to engage in sanctions against Russia - EU engages in meetings with France, Germany but without US to negotiate, exhibiting how US has been distanced from conflict' - Fighting as a result has decreased but not stopped

Why do hybrid regimes hold elections?

- Contested elections are risky, but the payoff can be great o Leader can lose - risk o If the leader/leading party wins, the elections because it is contested legitimizes the leadership o Election results, because contested, provide information to the leadership about their popularity relative to others - To sustain the leadership: election must be competitive enough to be legitimate and informative, but the outcome must be certain

New Constitutional Order: Semi-presidential system

- Executive o President (directly elected) o Prime Minister and government - Legislature (bicameral Federal Assembly) o Federation Council - 2 members per region o State Duma (lower house) - 450 directly elected members - Judiciary o Constitutional Court (10-20 members) - constitutionality o Supreme Court - criminal cases

Plundering of USSR

- Cooperatives that started in the Gorbachev period, connections were needed to be a part of one - The Law of Cooperatives provided a legal way to funnel money into a market environment, into banks - This set up institutions called banks that were begun in the late Gorbachev period where this money could be placed and was then invested into offshore banks or cooperatives - This was essentially state money laundering. - For those who had access to capital, the law of cooperatives allows them a legal space in which they can pool funds for their own use. - In this way, gold reserves were stolen between 1987-92. They well connected between the CPSU and KGB did this plundering

Russia's most persistent economic problem?

- Corruption - Russia is an extremely costly place to do business - Stunts the growth of small business - degree of corruption has not improved since beginning of post-Soviet period - income inequality is still very great, still many oligarchs

Creation of Democratic Russia

- Created in January 1990, Democratic Russia is an umbrella organization to encompass pro-democracy informal groups - Platform based on the ideas of Sakharov - Political leader was Boris Yeltsin - Platform o New constitution of Russian Republic emphasizing human rights o Repeal Article 6 (concerning dominance of CPSU) o Right to form political parties o Freedom of speech o Bring the KGB under control of elected legislature o Adopt a market style economy o Russian Republic should be a sovereign republic within the USSR

State Capacity: duties of the state

- Defend state borders o Military, border patrol - Maintain law and order o Policy and first departments - Provide infrastructure - Enforce laws o Government, judiciary ,law enforcement - Facilitate trade - Provide basic social services o In Russia includes healthcare and education

Building state capacity

- Democracies can promote state capacity o Rules/laws result of legislation o Independent judicial enforcement o Taxes provide revenue for provision of defense, law and order etc. o Key: governmental checks and balances o Support market economies, which require predictability and contractual enforcement - Communist system can also promote state capacity o Communist party defines and enforces rules o Source of state revenue is key

Political parties in 1993

- Democratic Reformer parties o Russia's Choice (gaidar) o Yabloko (Yavlinsky) o more in favor of integration with west and market economy, stood for continued shock therapy reforms. They were not anti-American. - Communists o Communist Party of the Russian Federation (KPRF) (Zyuganov) o rebuild Russian empire, socialist economy, reinstatement of a mostly state-run economy and strengthening the welfare state, anti-American - Nationalists o Liberal Democratic Party of Russia (LDPR) (Zhirinsky) o wanted to rebuild the empire and were in the middle ground between market and socialist. Anti-American, racist

Tactics of Democratic Russia vs. CPSU

- Democratic Russia o DR reviewed credentials of candidates o Mass demonstrations o Yeltsin was DR's public face - Communist Party o No set-aside seats o No message o Their success depended on manipulation of the nomination process and local press o The more remote the region, the more successful they were o They had a hard time making a defined message - couldn't run on a status quo platform - had a hard time articulating alternative message, had difficulty campaigning

EU underestimated significance of Russia's strategic interests' in leadup to Ukraine crisis

- Did not take seriously Russia's opposition to further expansion of EU to include former Soviet territory - Students in Ukraine protested rejection of agreement because felt they did not have a future - This was not like the Orange Revolution where demonstrating for democracy, much more desperate - EU and US send official representatives in response to help find a solution, Russia had negative response - clashes then lead to over 70 deaths which is the end of Yanukhovich politically - New government subsequently, largely considered illegitimate, outlaws Russian as second language

Relationships forged during the era of the command economy still in effect (1996-8)

- Directors are former managers - Local and regional governments staffed by former party officials who facilitated the plan - Workers are the same - Everyone has adapted to the new set of incentives, but not to the market - Consequences: the state is shrinking; taxes NOT paid - Obscures the scale of Russia's economic crisis

What changes between 1993 and 1995 elections

- Distribution of vouchers ends and privatization takes place - Big winners are communist party elite (managers and nomenklatura) and the very dishonest - Privatization perceived to be unfair - Same guys who had power in the old system simply changed their jackets - Yavlinsky - All of a sudden, lots of conspicuous consumption - 50% of the new rich were part of the nomenklatura - The new inequality was unpopular and the communists started to say this was evidence of it all being a mistake

Russian foreign policy relations with EU

- EU is Russia's largest market for natural resources - Trade/investment between EU and Russia are growing - All of Eastern Europe buys oil and natural gas from Russia - Increasingly, so does the rest of EU - Germany is Russia's closest Western ally - Germany is Russia's largest trading partner and largest investor - Germany is working to secure alternative sources of energy

Health in Russia 1996-8

- Economic conditions o Many do not get enough to eat o Private plots are critical - Between 1990-1998 o 30 to 40% decline in consumption of meat, milk eggs o 19% increase in consumption of potatoes o increase in consumption of alcohol and nicotine - health is deteriorating, AIDS tuberculosis on the rise - Birth rate dropping - life expectancy decreasing especially men (below 60) - crime increasing

Features of hybrid regimes

- Elections are held regularly, on schedule - Competition among parties/candidates is limited in number, quality, and originality - Media coverage is restricted for candidates who have charisma or have an ideology that might allow them to have a chance - Relatively few parties or candidates - Control of the media leads people to believe that a charismatic alternative to the current leadership is not available - With media control, there is less need for fraud, fraud is a last resort

Elections to Russian CPD, March 1990

- Elections to Russian CPD were more competitive than elections to USSR CPD - No set aside seats for Communist Party o 8 names per ballot on average o 26 districts with only 1 name - March 1990 right before election, Gorbachev rescinds Article 6 of Soviet Constitution, which mandates leading role of CPSU - Allows opposition to form

Snowden

- Exposed massive NSA surveillance - Leaked extensive information intelligence information - US immediately demands his extradition - Snowden flees Hong Kong to Russia - Spent more than a month in transit zone of Moscow's Sheremetyevo airport - Snowden states that he fears torture and possibly death if he returns to the United States - was told to by Putin as a condition of amnesty for asylum - He is now living in Russia - He is a hero in Europe and to many in the US as well. He has made several virtual appearances and accepted awards and avoided piercing scrutiny of his actions - Putin takes the high ground on human rights, wins in this instance by exposing American inconsistency

Birth of Russian Constitution was problematic

- Failed constitutional Assembly - Violent confrontation between Russia's legislature and president - Constitution presented to public by president in November of 1993 - Referendum to ratify occurred on December 12, 1993 - The Russian people followed Yeltsin's lead - no real backlash

Russian CPD First Session

- First session in May 1990 - 2 main blocs: DR vs. CPSU - Independents were decisive - DR was better organized than the CPSU - DR met before first session to prepare their strategy - The Russian flag was flown - Gorbachev attended as member of the audience

Russia's Economic and Political Relationship with Ukraine

- Former Soviet republic - East looks to Russia - West looks to Europe - 2004 Presidential election - East supports Yanukovich - West supports Yushcenko - Yushchenko wants Ukraine to join EU - Putin strongly favors Yanukovisch

Economic situation after the coup:

- Gaidar : economy was not functioning o Command system collapsed - no plans/directives shrinking state funds, but no market either o Many workers stop receiving wages - Large scale theft of state property begins o Billions worth of oil, gas, lumber stolen and sold abroad - Shops are entirely empty - Russia's hard currency reserves depleted which means that economy is bankrupt - Central bank begins printing money to try and keep economy going - causes inflation in the triple digits or higher, called hyperinflation - There is nowhere to buy materials or go for investment. Capital was needed and this was held by the KGB and communist party as well as foreign accounts

Georgian War

- Georgia invaded South Ossetia on August 8 - Russia deployed troops and defeated Georgia within five days

Russia's solution to privatization of state enterprises: voucher privatization

- Get the people involved o Distribute 144,000,000 vouchers o Give them a means to invest o Create incentives for the workers in a n enterprise to oversee the sale of the enterprise and to monitor the enterprise director

Yeltsin solicited competing plans to reform the Russian economy

- Gradual reform (modeled on Chinese reform) o Timeframe: 1 or more decades o Plans from several teams of Soviet-era economists - Rapid reform (shock therapy) o Create a market economy in 1.45 years o One plan, drafted by Gaidar, advised by Jeffrey Sachs o Yeltsin did this because he felt it would make a return to communism impossible - He then moved quickly, as facilitated by the CPD giving him the authority to reform the economy by decree for one year - Appointed Gaidar

Vladimir Potanin

- His bank got its start funneling money out of Eastern Europe - Next began to help certain centers of state power to invest their assets: State - What the bank did was the money is not known, no regulations, no laws on banking - Potanin's bank was extremely profitable and he became rich with several million dollars

Article 6

- In March 1990, Gorbachev rescinded Article 6 which was the one mention of the communist party in the document - This made the formation of opposition parties legal

Yeltsin replaces Chernomyrdin

- In March 1998, he dismisses Chernomyrdin (prime minister) - Replaces him with young economist, Sergei Kirienko - Kirienko has no clout in Moscow o Oligarchs ignore him o Confirmed by Duma on third vote o Takes charge of the government in the middle class of a growing financial crisis - The prime minister would become president if Yeltsin died or stepped down - Finally, Putin was final replacement; Yeltsin was convinced that Putin could be trusted with leading democracy and market reform and was a patriot

Russia's use of Gazprom to impact domestic politics in Ukraine 2006-2009

- In response to "Orange Revolution" election of pro EU president in Ukraine - 2006 cut off gas supplies through Ukraine pipelines - 2009 cut off gas supplies January 1. Supply to eighteen countries affected affected (7 EU members) - Economist: May cause EU to diversify away from Russian gas, it could not have picked better way

Putin's fourth priority: Crackdown on freedom of the press - begins immediately

- Information Security Doctrine prepared in 2000 by Putin administration - Doctrine creates legal basis to control the press o Need to balance the individual's right to information with society's right to "political, economic, and social stability" o Doctrine condemns "irresponsible" news reporting o President's regional representatives use this doctrine to control the press in their regions - As a result of this policy, two high-profile journalists executed

Stabilize the currency/control inflation: 1992 - late 1990s

- It is perhaps the most critical and difficult of all reforms o Have to end government subsidies (funds to enterprises) o Risk of massive unemployment - Gaidar team failed to accomplish this reform o Central Bank under control of Russian CPD o Central Bank kept printing money o Inflation in Russia is extreme - CPD was hostile to these reforms and supported the continuation of subsidies to businesses in Russia so the Central Bank continued to print money

Is Russia's claim to "great power status" legitimate?

- It may be a fragile system propped up by gas prices - Can it diversify and move away from this one-dimensional economic model?

Russia's Virtual economy

- It was based on non-monetary exchange - Neither command nor market - About 50-70% of economy operated without cash - Instead, economy was based on barter and government-issued credit - System evolved as a way for totally non-viable enterprises and the people who worked for them to survive - This good trading economy did not differ from how this was carried out in context of planned economy all that much - Enterprises work together to compensate for what the other does not have

Vladimir Putin background

- KGB intelligence officer in East Germany from 1975 to 1990 - Deputy mayor to Anatoly Sobchak, reformist mayor of St. Petersburg from 1990 to 1996 o Putin was Liaison for Licensing of Imports and Exports - powerful position in that allows to decide what enters and leaves which was very important in transition - used to make loyal connections - 1996, went to work in Yelstin administration - quickly rose through a series of postings - came to the attention of the regional governors - end of 1998, made chairman of Federal Security Service (FSB) , successor toKGB August 1999, Yeltsin made him prime minister - talented at inspiring loyalty in others

Strong Presidency, weak state (after 1996 election)

- Legal basis for market economy established by executive decree - Few laws passed by parliament - not empowered to create or enforce independence of judiciary - Executive branch not incentivized to create/enforce judicial independence - Judiciary understaffed; independence not legally protected - No legal basis for secure investment - its risky to invest in capital in this unstable legal environment - State fails to collect taxes (estimates 3% actually collected during Yeltsin's second term)

Putin second priority: Attack the power of the oligarchs

- Met with them immediately after the election - Demands o Stay out of politics o Pay your taxes o Limit amount secured in foreign banks - Direct attacks o Gusinsky o Berezovsky - Halted privatization of resource industry - Did not privatize pipelines - remained state-controlled - State must never give up majority ownership of resource industry - Oligarchs don't control FSB, with which Putin has close relationship, cannot outdo Putin. Remaining ones had to relinquish control of companies, give up politics

State- run companies control most of the world's oil and natural gas

- National oil com[anise manage 90% of the world's oil and natural gas - Largest of these used to be Saudi Aramcco - Gazprom recently became the world's largest national oil company - Russia is world's second biggest oil producer and exporter after OPEC - Russian government liberalized Gazprom stock in 2006

Gazprom today

- Natural gas prices in decline due to increased supply o Shale gas from US o LNG from Qatar now being offered to EU, displacing Gazprom o Gazprom dependent on pipelines - Gazprom is very closely tied to the Russian state so has been shielded from competitive pressures, so its accounting and ownership is still nontransparent and is reliant on pipelines built during the Soviet period - Other states are more efficient, technologically advanced - Things cost more due to greater corruption in Russia - It has been asserted that Gazprom is essentially run by the government, which may work at cross purposes with the incentive for profit - It is important to Russian GDP

Three biggest industries in Russia

- Natural resources, construction, and services - Mostly oil and natural gas o 12.7% of GDP in 1999 o 31.6% of GDP in 2007 o 80% of exports - Resulted in modernization of Russian economy, growth of service sectors o Financial o State jobs o Small businesses - Economic growth tied to resources o Russia sustained 57% growth when gas prices high o Difficult to retain growth hen gas prices not high, as has occurred recently, resulting in economic slowdown

Privatization

- New businesses - Main tasks o Create legal system to protect new businesses Create financial system to provide loans, investment, credit, etc. - State enterprises o Employed 95% of Russian workforce

Putin asserts Russia's role as world power: Transformation between 2003-06

- New objectives (distinct from Yeltsin) - Russia is an "energy" superpower - Dominance in the "near abroad" - Equality with world's major powers (US, EU and China) - The main motivation is to hold control of its oil supply line pipelines

Major political parties in 1999

- New parties o Union of Right Forces (Kirienko, Nemtzov, and Chubais) o Fatherland (Primakov and Luzhkov) o Unity (Putin) - Old parties o KPRF (Zyganov) o Our Home is Russia (Chernomyrdin) o Yabloko (Yavlinsky and Stephashin) o LDPR - renamed "Zhirinovsky Bloc

Yeltsin chose to reform the economy: there were hurdles

- No living tradition of entrepreneurship - No laws protecting property - No laws guaranteeing contracts - No real monetary system

State assets Yeltsin wanted to sell off

- Oil and natural gas, minerals o Russia's source of real wealth - Telecommunications o The key to political power - Yeltsin hoped to make $2 billion on the sale of these state assets - But, initially, there were no buyers - While the resources were attractive, Russia's laws were such that foreign companies were unsure whether they would gain ownership of the resources given Russia's legal arrangements in this area, causing them to stay away

Loan for shares: what actually happened

- Original 12 banks were allowed to organize the auctions and record the sales - Foreign banks did not participate - Transactions were not transparent - Not competitive: higher bids rejeted for lower ones - There is evidence that basically that the oligarchs divvied up industries amongst themselves, setting lower prices than the value of these industries o Potanin acquired Norilsk Nikel (worth $3.1 biullion) for $170 million o Khodorskovsky acquired Yukos oil (billions) for an unknown amount that was probably less than $150 million - The initial bids ended up being sales prices for what had originally been called just a loan - Government then very much entangled with the oligarchs. This is an example of insider privatization

Mikhail Khodorkovsky

- Owns Yukos Oil and personal wealth of 8 billion - Believed he could confront Putin - He starts negotiating with China for a pipeline delivery system to China, which did not follow Putin's directive - Publicly challenged Putin's corruption - Active in politics, bribing Duma deputies - Interested in running for president in 2004 - Putin cracks down on Yukos o Investigation into ukos o Tax payments o Privatization practices o Links to unsolved murders, organized crime o October 2003: Khodorkovsky is arrested o International outcry changes nothing o Main accusation was tax fraud

Dmitry Medvedev

- Part of Putin's St. Petersburg circle (Sobchak administration) - Never before held elected office (but neither had Putin) - Not FSB from intelligentsia - 2000, promoted to head Gazprom - 2005, Putin's first deputy prime minister - Putin announced that Medveddev was his preferred successor Dec. 10, 2007 - Why was he chosen - Putin trusts him - He has no independent power base, not a threat, Putin can reseize friends

Privatization process

- Phase 1: 51% were sold to insiders (managers and workers) for vouchers (1992-1993) managers benefitted most - Phase 2: 29% were sold to outsiders in public auctions for vouchers (December 1992 - June 1994) o Medium enterprises auctioned all over Russia o Large enterprises auctioned in Moscow o Managers and local communist party elite benefitted - Phase 3: 20% could be sold for money - This represents nomenclature privatization and this is what the government feared, but they did not have the state capacity to prevent it from happening

Crime rate (Putin)

- Post-Soviet Russia had one of the highest homicide rates in the world - Increased dramatically following collapse of USSR

Presidential Administrators

- Presidential Administrators were appointed by Putin to ensure order in the regions - Make sure regions comply with constitution and federal law - Beholden not to government but specifically the president - Select personnel in regions o Can fire regional governors or dismiss legislatures if they violate federal law of the constitution - Protect national security of the regions - Coordinate regional economies - Coordinate regional press and media o Single information space - Regional governors and heads of regional legislatures select 2 delegates to the Federation Council - provided way to oversee the press throughout Russia - regional governors have to support the president

Impact of financial crisis on Russia

- Price of oil, natural gas and metals dropped - 10% drop in GPD, stock market drops 60% - Russian government did not handle the crisis badly o Used the Stabilization Fund to save Russian banks and prevent financial collapse o Lowered corporate taxes o Increased unemployment benefits - GDP growth, 9% in 2007, -9% in 2008-9, recovered and has stayed steady at 4%, pretty good - This is good, but there are questions as to whether it is good enough to maintain the regime long-term

January 2, 1992: shock therapy begins with liberalization of prices

- Prices on 2/3 of goods are liberalized - could be raised in the store, not in backroom deals - many could not afford o Exceptions: bread, potatoes, milk, oil, gas (Fueled of heating and economy) o For this reason, it was very profitable to sell oil and natural gas abroad - Most prices rose 2-3 times in one day, and kept rising - BUT: goods begin to appear immediately o Outdoor markets for food o New foreign stores in Moscow and St. Petersburg o Kiosks, retail markets opened in Moscow, St. Petersburg (ALL were controlled by the mafia) o Only tourists and a new class of rich Russian entrepreneurs could afford these goods

Prognosis for Russia's Economy

- Putin 2008: Russia has regained its status of "mighty economic power" - His goal is to achieve economic and social development which befits "a leading world of the 21st century - Medvedev: Russia's economy is chronically backward, primitive, and dependent on raw material exports. He says system largely ignores needs of the people - Illarionov (Russian economist): Despite problems, only works when price of oil is at $80/barrel - Low growth/recession since 2014

1999 election

- Putin 5% (Sep) - Putin - Duma PR results (23%) (Dec) -upped by Chehnya conflict - Campaign issues o Economy o Corruption o Loss of empire/humiliation of Russia, declining importance o Competence - Role of Media o Berezovsky's ORT supports Unity o Gusinsky's NTV supports Fatherland o Statechannel supports Unity o But: free air time to all parties - Seat percentages o KPRF 25% o Unity 16% o Fatherland 15% o Democrats 12%

Putin and Chechnya

- Putin defended Russia against the threat of terrorism - Conducted Second Chechen war - Putin's approval rating with this jumped from 5% to 80% in November - Oversaw Second Chechen War - extremely aggressive campaign starts October 1999 - Some believe the bombs were planted to justify war that would drum up populist support for Putin - Yeltsin resigns on December 31, 1999 - Putin is acting president for 3 months preceding election

2000 presidential Election Round One

- Putin does not campaign but instead relies on media coverage of him acting presidential - Putin won with over 50% - When he enters office, Unity his party has 16% of the seats, Fatherland has 15%, Communists have 25% - Putin persuaded the Independents to form People's deputy and Russia Region, as well as Unity Party, Fatherland parties which gave him a majority coalition - Helped immediately by spike in gas prices - Putin had strong mandate and parliamentary majority

2004 presidential election

- Putin won at 71% - Putin's approval rating was 60-80%

President Putin and Russia's behavior change after Yanukhovich removed in Ukraine

- Putin's leadership begins a public relations campaign o Declares Yanukovychs' ouster a coup o Begins referring to new government as fascist o Asserts that crisis has been orchestrated by US (even though has more to do with EU) - Putin asks Duma to authorize the use of force to protect Russian speakers in Ukraine; Duma unanimously approves - Russia begins asserting military control over Crimea on February 28 - This may be serving to distract from economic situation at home, as there has not been a recovery from the recession

Putin's approval rating is meaningful even in a non-democracy

- Putin's power is based on his popularity - Current executive dominant system of elite politics depends on him to arbitrate among competing interests and factions - FSB, oligarchs, economists are not popular. Without Putin, they would likely have to resort to force to stay in control - Force and repression are very costly and few highly repressive regimes have thriving economies - System might not continue to function without someone like Putin

Putin's announcement of again running for president, succeeding Medvedev

- Putin's public approval went down during the Medvedev period - Medvedev would serve as prime minister - People were not happy Putin ran for third term - In the 2011 Duma elections, United Russia did not get a majority of the votes this time around, the strongest evidence for Putin decline in popularity - This was people expressing disapproval of Putin running again - They also fell due to the worsening economic situation during the recession/Medvedev presidential term

RTS: Russian Trading System(1996-98)

- RTS was key access point for foreign investment in Russia - RTS was an over the counter electronic stock exchange for investment - From 1996-7 Russian stock market tripled - Due to being resource rich - "hot" developing market 96-98 - While the boom is going on, the GDP continues to drop

Putin first priority: massive legislative package to promote/support market economy

- Relied on a team of market-oriented economists - Developed a working relationship with Duma - Putin was restrained in his use of the presidential decree - Putin worked closely with his parliamentary majority - Major legislation passed by Unity-led majority in Duma: Tax reform - led to better tax collection o Flat income tax (13%) o Corporate tax (24%) with appropriate business deductions - Regulatory reform - deregulation - Budgetary reform - Land reform (became legal to won land in Russia) - Bartering was outlawed and disappeared

Russia's interests in Crimea are clear

- Russian Black Sea Naval Fleet has been stationed in Crimea since Soviet era - Greater share of Black Sea resources now belong to Russia - Russia annexes Crimea on March18, 2914 - Referendum on joining Russia is held on March 16 - Officially 87% vote to join Russia, but Ukrainian speakers told not to turn out - Eastern regions supporting autonomy or independence do not want to become part of Russia generally, Russian troops deployed

Distrust of US and Europe

- Russian insecurity - 62% believe in strong chance of breakup - 60% believe outside forces, especially the US, are working to break up Russia - 50% of Russians see the EU as an economic threat - 2/3 of Russians regret breakup of Soviet Union - Yeltsin pursued policy of engagement with US and EU, accepted EU enlargement - Since late in Putin's first term, his administration has been dominated by those with a Cold War attitude

Yeltsin's response to financial crisis

- Russian ruble was devalued around 34% - The government defaulted on most of their debt - Most of the new private banks were bankrupted because they were highly invested in GKOs - Oligarchs lost a great deal - Russian government defaulted on most of its debt - RTS lost 90% of value

Governmental crisis by late summer 1993

- September 21, 1993 Yeltsin passes presidential Decree #1400 which o disbands the Russian CPD o Calls for new elections - A number of deputies remained in the "Russian White House " for a few weeks anyway - Then there was a standoff and mob violence - Yeltisn then sent in special troops to make the deputies leave by force - There was a confrontation between the well armed Yeltsin forces and CPD forces - About 200 died - Yeltsin did this instead of waiting for new elections because he was afraid communists would take the opportunity to retake power

Gazprom

- Soviet Era: Gazprom, as Ministry of Gas, was main provider of natural gas to Eastern Europe, and it still is - At end of Yeltsin years, Gazprom was 40% state owned; other investors included Russian oligarchs and foreigners - Putin's strategy was to buy back 10-20%, thus reestablishing state control o Government and Gazprom directors are often one and the same o Gazprom controls all of Russia's natural gas exports via its pipelines • Pipelines inherited from Soviet era

Capacity of the state to provide security (Putin)

- Soviet system with Putin's changes o Ministry of Defense (two agencies) o KGB (now 4 agencies, FSB clearly dominant) o Militia (police) - Defend state borders o Responsibility of the military and intelligence services (Ministry of Defense, military intelligence, and FSB) - Maintain law and order o Responsibility of the military and intelligence services (Ministry of Defense, military intelligence, and FSB) - Maintain law and order o Responsibility of the police and intelligence services (militia and FSB)' - Had been poor under Yeltsin - At the end of Putin's first term, 33% of national government ministers 77% of top governmental positions filled with those with security background

How is Russia Managing Resource profits?

- Stabilization Fund - Run by Ministry of Finance o Key source of stability for Russian ruble (state has approximately $500 billion in hard currency reserves) o Key to controlling inflation o Helped Russia ride the 2008-09 downturn with limited economic and political problems - Used for investment o Paid off foreign debt o Pensions increased o State salaries increased o Quality of medical care and services have increased

Strategy of EU response to Ukraine crisis

- The EU is very powerful within EU member states, but are not powerful beyond EU bounds militarily, can only give economic incentives - Only individuals states with strong militaries can play the military function - But a single member state military cannot act on behalf of EU - The US is totally dominant in NATO, so if the Ukrainian conflict comes to involve NATO, US will dominate - EU wanted it to remain an EU issue so the EU would spearhead the response, not the US - Conflict has highlighted the weakness of Europe's military defense readiness - Many of these countries depend on Russia for energy, so do not want to get involved. Action requires agreement of all member states, which for this reason will not occur

v

- Yeltsin and the Russian CPD were in a great position o Constant criticism of Gorbachev o War of Laws made matters worse o Blamed Gorbachev for problems, people largely sympathetic - Gorbachev was in a tough spot o Party was turning against him o His position as General Secretary of CPSU was threatened

Putin's Economic Model

- The economy began to grow under Putin - Main two factors o Putin's economic policies o Oil/gas prices - People's standard of living grew dramatically - Putin's strategy to reacquire Russia's natural resources emerged between 2003-05, corporatist state begins to emerge - The corporatist state, based on state majority ownership of oil and natural a gas - Structure of economy increasingly centralized - Russia, most significant change was the Russian government's control of Gazprom - With control of these resource companies they changed the managerial structure and the use of the profits

The little boys in pink shorts

- Their goal was to destroy the CPSU, the KGB, and the Red Directors - They believed they had to destroy them to get a real market economy - The young reformers brought in for shock therapy o Fyodorov - Finance Minister o Chubais - Minister of Privatization o Gaidar - Prime MInister

Voucher distribution

- They were distributed in 1992 and 1993 - Vouchers were worth 10,000 rubles - 97% of Russians picked up their vouchers o 25% bought shares in a voucher fund (funds then invested via voucher auctions) o 25% sold their vouchers for cash (to voucher funds, enterprise managers or investors) o 15% bought shares in their enterprise o 10% bought shares in other enterprises via auctions o 25% did nothing

Results of 2003 Duma Elections

- United Russia gets 38% of the vote and nearly half the seats - No support for far right - Elections was not free and fair according to media

Powers of Russian Parliament (National Assembly)

- Upper house: Council of the Federation o Popularly elected in 1993 only o Required for veto overrirde - Lower house: State Duma o Popularly elected (4-year terms) o Approves head of government o Passes laws o Required for veto override o Required for impeachment o Has vote of no confidence, but president can ignore first vote and dissolve Duma after second vote

Poverty in Russia 1990s-2000s

- WHO defines absolute poverty as living on less than $4 a day - 1998: 70% of RTussians living in absolute poverty - 2000: living in absolute poverty - 2010: less than 10% living in absolute poverty

Prelude to loans for shares

- Yeltsin government desperately in need of cash o Pension not being paid o Soldiers not being paid o Growing foreign debt - Group of Russian bankers proposed a plan: Who were they o Young, well connected entrepreneurs o They got their start through their connections, especially to CPSU o They made their money channeling, laundering money for groups within the massive crumbling state o Used this money to start cooperatives and private banks o Used the private banks to make more money

State of political system after election 1996 presidential election

- Yeltsin has open heart surgery; largely absent throughout 1996 and most of 1997 - Chubais is chief of staff for presidential administration ,in effect "acting president" - Oligarchs and their empires are most influential part of economy and their relations with the state determine economic policy - Number of executive/governmental decrees increases: mostly relate to tax rate, competition, and ownership laws to maintain oligarch position - Oligarchs use their influence to buy governmental decrees and protection from competition - Crony capitalism: corruption of the political system

1996 Presidential Election

- Yeltsin's liabilities were great - He was in poor health, had heart attack in October 1995 - Yeltsin's approval rating was 3% - Zyuganov's was 20% - Shock therapy was very difficult for Russans - 1-2 million Russians

How did Yeltsin win?

- Yeltsin's plan was initially to delay the election two years and outlaw the communists and disband the legislature - His daughter talked him out of it - In January of 1996, his chances looked dim - Rescued by Chubais and the oligarchs - Chubais has access to Yeltsin and the trust of western bankers more than the other oligarchs. He could negotiate loans with IMF better. - He largely went through Yeltsin's daughter - Chubais and the oligarchs met with Yeltsin in January 1996 - Chubais became Yeltsin's campaign manager, formulated reelection plan - Berezovsky provided most of the funds - They were aiming to beat Zyuganov of the communist party - New "owners" of mass media flooded the TV and newspapers with pro-Yeltsin advertising

Putin's foreign policy transformation

- Yeltsin's policy of engagement with US and Europe is now seen as a failure - made look weak as they expanded anyway - In his first two years, Putin was tentative and pragmatic - In 2001, Putin supported US post0/11 invasion of Afghanistan - But, when US invaded Iraq in 2003, Putin supported France and Germany in opposing the US invasion - Russia stands outside any major alliance structure - Russia's Cold War alliance structure alliance structure no longer exists - US still has its Cold War alliance (NATO + some former USSR satellite states)

Election of Russian CPD Chairman

- an absolute majority was needed to win - Democratic Russia nominated Yeltsin - CPSU nominated conservative Polozkov - Gorbachev pushed for centrist Vlasov - Candidates explained their platforms o Yeltsin: DR platform push for directly elected Russian Presidency o Polozkov: Law and order, against market "fetish" o Vlasov: Unclear; "let's not do anything crazy" - Yeltsin won the election and became chairman of the Russian CPD

State capacity under Yeltsin

- did not provide economic prosperity o no law and order, protected property rights, prosperity o economy could not secure investment and property rights o infrastructure an state service declined

Gazprom's profitability contingent on foreign markets

- domestic market: gas prices are mostly state-subsidized - makes Gazprom a tool of foreign policy - but also critical to Russian economy

State capacity: two main components

- economic prosperity o protect property rights o provide infrastructure o provide basic social services - security o defend state borders o maintain law and order • prevent coups • prevent crime

Economic situation, summer of 1990

- economy is in increasingly poor shape - enterprise managers on their own - period during "War of Laws" - chaos in the command system o production is decreasing o shortages become severe o lines grow longer and longer o inflation begins o black market grows

Duma Campaign, 1993

- first time media used in big way - Main Democratic/Reformist party was Russia's Choice - Party leader was Gaidar - Very serious, sober, and smart - Media was biased in covering them favorably - Yeltsin favored the party - Gaidar said that pain needed to be experienced for the reforms to work - very ineffective approach - Yavlinsky: was leader of second most reform-oriented party, Yabloko - KPRF leader Zyuganov had a charismatic leader and did not receive professional advice, highly ideological, passionate, serious, their rhetoric was too harsh for many Russians - Only campaign that resembled a mass campaign was the one run by the Liberal Democratic Party of Russia by Zhirinovsky

Putin's key priorities in first term

- first: implementation of comprehensive legislative package for market reform - second: reduce power of oligarchs - third: define freedom of the press - fourth: bring Russia's regions under the control of the state

Crisis in Ukraine

- four key actors include Ukraine, Russia, EU, and US - during Medvedev presidency EU reliance on Russian gas increased as relations softened - Eastern partnership with Ukraine in exchange for economic reforms - Yanakovich, a pro-Russian Ukrainian president wins but still continues negotiations with EU because Urkaine's economic situation was so bad that integration was appealing - They thought they could integrate but maintain close relationship to Russia, miscalculated - President Yanukovych then changed his mind because Putin interfered, probably threatened - Russia threatened to raise price of gas and raise trade sanctions on Ukraine

Lesson: EU is not a military power, the power it holds is economic (soft) power

- good economic times, EU is very powerful - poor economic times, EU is revealed to have important weaknesses o it is not a unified political identity o in a military confrontation, it is weak (and possibly vulnerable) because there is not a military it can mobilize, it can just precipitate an economic agreement to incentivize

1999 Russian public opinion polls

- government doing bad job at maintaining law/order, fighting organized crime, guaranteeing timely payment of wages, salaries, pensions - believe country going in wrong direction - support banning certain political parties - raising standard of living top priority, democracy low - reformed Soviet system most preferred across most age groups

State security under Putin

- more state security officials in high positions - little change; still one of most violent countries in world - however, no coups or major political violence under Putin

Why Khodorkovsky?

- oil wealth or political aspirations - Putin's attitude: "clarification of rules of the game" - State seized 45% of Yukos assets - Reacquired all of Yukos assets after the trial - In prison waiting trial during 2003 Duma elections and 2004 presidential elections - Yukos assets were sold in a private auction to state - Russian people did not sympathize with Khodorkovsky, in fact supported the action

Putin's primary goal during first two terms, strengthen the Russian state

- pressing problems o economic depression o financial crash in 1998 o alternative monetary instruments in place of the ruble o state unable to collect taxes o demographic crisis ( decreasing life expectancy and birth rate) o historically high crime and murder rates o centralization of economic power in hands of oligarchs and regional governors who were all implicated in corruption

Financial collapse in August 1998

- price of oil halved 1997 to 1998 - Central Bank began using hard currency reserves to pay off short term (GKO) debt - Stock market (RTS) began to lose its value - IMF dispersed 5 billion in July 1998 1998 - money went to pay off immediate GKO debt - was supposed to be used to stabilize currency, so loans were frozen - Russian government could not pay o It owed 22 billion o It had 10 billion - The oligarchs wanted the money to go to fund the GKOs because they needed the bank for continued investment - People were unhappy with direction of economy - At the time, did not believe was a democracy

Legacy of the Soviet economic system 1996-8

- purpose of shock therapy was to create incentives for new owners to invest in their enterprises - in theory: these large and medium enterprise would the restructure in order to succeed - problem: most Russian manufacturing was not salvageable; instead junked it and started from scratch - giant enterprises were "too big to fail" as they were major providers of essential services and employed so many - Directors, local/regional governments, workers all interested in their survival - How can such an economy function? o Gazprom still in state hands, propping up economy o UES, state electricity o State railway system

Obstacle for Russia becoming a world power

- small population 143 million - Military expenditures: US spends as much as everyone else combined, China second, Russia third - So these conflicts are not about a head to head military situation, there is no parity in this regard

Putin's resurgence in popularity after running for third term

- spike in Putin's approval after he invaded Crimea in 2014 - this highlights Putin's use of nationalism as a tool to boost public support as president - Putin is combatting the drop in his popularity by portraying himself as the best person to protect Russia against western efforts to impede Russia's growth into world power - Problem: Energy prices have gone way down and are very volatile, Putin cannot control them, much of Russia's future depends on the prices of these resources

Russia's Corporatist state

- state-controlled, resource-based economy o economic growth, increasing prosperity - incomplete market economy based on insecure private property o major reforms not yet implemented o result of incomplete reform/lack of transparency

Definition of a hybrid regime

- system with democratic and autocratic elements o leadership responds to public opinion but public opinion has not direct impact on policy o people do not have the ability to effect political system through competitive election because elections are not competitive - they are a stable form of regime, much more stable than countries actively in transition

Capacity of state to provide security under USSR

- three branches o Ministry of Defense: state borders o KGB: counter-terrorism, domestic intelligence, political crimes o Militia - police - law and order

Putin's third term 2012-2016

- two high profile foreign policy events that are key to understanding Russia's emerging role in world affairs as well as the goals of Russsian foreign policy - Both involve American interests o Civil war in Syria o Crisis in Ukraine - Continuation of anti-west and American rhetoric only it has intensified further

What is shock therapy?

1. Price liberalization (prices NOT set by state) 2. Control inflation/reduce subsidies to enterprises 3. Privatization o New businesses (mostly cooperatives) o Privatization of state owned enterprise - To work, there must exist a source of investment, of capital - Foreign money (FDI Foreign Direct Investment) is source that fueled economic reform in Eastern Europe - In Russia, corrupt money was the source o KGB - gold o CPSU - gold o Mafia

Two possible solutions to privatizing Russia:

1. Sell state property for money - problem - largely foreign capital ends up purchasing these 2. Distribution of state property to workers and populations through something such as a voucher. - Selling state property was unappealing because o Russia had natural resources, but, unlike Poland, did not have valuable businesses, so chose vouchers -selling these resources off to foreign investors was not considered appealing o Russian businesses were not valuable because Russia was so technologically backward