RUSSIA'S CAPITALIST REVOLUTION PUTIN’S POLITICS (Chapters 6 & 7) LECTURE NOTES BASED ON: Aslund, Anders. 2007.  Russia’s Capitalist Revolution: Why Market Reform Succeeded and Democracy Failed. Washington, D.C.: Peterson Institute for International Economics.  I. Vladimir Putin: KGB Lieutenant-Colonel 1.     Key Characteristics A. No pronounced political views B. Loyal to the KGB 2.    Greatest Quality A.  Ability to make people underestimate him. B.  Ability to flatter supervisors. 3.    “His rise signaled that Russia’s democratic revolution was over, and that the country had entered the stage of post-revolutionary stabilization, when people were tired of politics and wanted little but calm and economic growth.” (p. 199) 4.    Why did Yeltsin’s “family” choose Putin? ~He was loyal and tough. II. Putin’s Assumption of Power: Elections 1999-2000 1.    A.  Fall 1999-The “family” decided to form a political party called “Unity” *Centrist *Chose well-known non-political types as candidates         Why?  Russians were tired of politics. 2.   B.  1999 Duma Elections a.     Remember: The Duma is the Parliament in Russia. b.    Elections won by the Communists with 24.8% of the vote. c.     Unity received 23.8% *Putin allied with the Communists in the Duma.         =near majority of power in Duma 3.    C. Oligarchs Power Eclipsed by Presidential Administration *Set into action before Putin assumed presidency 1.  Before: Oligarchs could buy votes for pet legislation from the deputies. 2.  To stop this corruption, the presidential administration raised the deputies’ salaries to $5,000 a month to discourage them from accepting bribes.  3. This decreased oligarchs’ influence in the Duma.  Still, they could buy votes.  Vote buying continued but now only under permission of the presidential administration. 4.    D. Yeltsin Retires He resigned on December 31, 1999.  Putin was chosen as the interim president until the elections.  He began making policy before being formally elected.         1.  Putin’s first act: Decree that gave Yeltsin and his family a decent salary and legal immunity.         2.  March 2000 presidential elections                 a. Moving up the elections by 3 months made it very difficult for opposition parties to get a good campaign and candidates.                 b.  During the time before the elections, Putin did not campaign.                 c.  There were 10 opposition candidates.                 d.  Putin won the election with 53% of the vote. 5.   E.  Putin’s Definition of Democracy        1.  May 2000 (shortly after his inauguration)                 ~ Called for a “managed democracy”         2.   Later, he called it “sovereign          democracy”=authoritarian rule         3.   These definitions were cryptic.  Nobody understood what he meant by these.         4.  Aslund “Putin’s favorite democracy was no democracy”. P. 207 6.    F. Putin’s Presidential Characteristics *micromanager *slow-decision maker *once a decision is made, n.

1. RUSSIA'S CAPITALIST REVOLUTION
PUTIN’S POLITICS
(Chapters 6 & 7)
LECTURE NOTES BASED ON:
Aslund, Anders. 2007. Russia’s Capitalist Revolution: Why
Market Reform Succeeded and Democracy Failed. Washington,
D.C.: Peterson Institute for International Economics.
I. Vladimir Putin: KGB Lieutenant-Colonel
1. Key Characteristics
A. No pronounced political views
B. Loyal to the KGB
2. Greatest Quality
A. Ability to make people underestimate him.
B. Ability to flatter supervisors.
3. “His rise signaled that Russia’s democratic revolution was
over, and that the country had entered the stage of post-
revolutionary stabilization, when people were tired of politics
and wanted little but calm and economic growth.” (p. 199)
4. Why did Yeltsin’s “family” choose Putin?
~He was loyal and tough.
II. Putin’s Assumption of Power: Elections 1999-2000
1. A. Fall 1999-The “family” decided to form a political
party called “Unity”
*Centrist
*Chose well-known non-political types as candidates
Why? Russians were tired of politics.
2. B. 1999 Duma Elections
a. Remember: The Duma is the Parliament in Russia.
b. Elections won by the Communists with 24.8% of the vote.
c. Unity received 23.8%
*Putin allied with the Communists in the Duma.

2. =near majority of power in Duma
3. C. Oligarchs Power Eclipsed by Presidential
Administration
*Set into action before Putin assumed presidency
1. Before: Oligarchs could buy votes for pet legislation from
the deputies.
2. To stop this corruption, the presidential administration
raised the deputies’ salaries to $5,000 a month to discourage
them from accepting bribes.
3. This decreased oligarchs’ influence in the Duma. Still, they
could buy votes. Vote buying continued but now only under
permission of the presidential administration.
4. D. Yeltsin Retires
He resigned on December 31, 1999. Putin was chosen as the
interim president until the elections. He began making policy
before being formally elected.
1. Putin’s first act: Decree that gave Yeltsin and his
family a decent salary and legal immunity.
2. March 2000 presidential elections
a. Moving up the elections by 3 months made it very
difficult for opposition parties to get a good campaign and
candidates.
b. During the time before the elections, Putin did not
campaign.
c. There were 10 opposition candidates.
d. Putin won the election with 53% of the vote.
5. E. Putin’s Definition of Democracy
1. May 2000 (shortly after his inauguration)
~ Called for a “managed democracy”
2. Later, he called it “sovereign
democracy”=authoritarian rule
3. These definitions were cryptic. Nobody understood
what he meant by these.
4. Aslund “Putin’s favorite democracy was no
democracy”. P. 207
6. F. Putin’s Presidential Characteristics

3. *micromanager
*slow-decision maker
*once a decision is made, no changes
*divided people into friends and foes
Persecuted foes
*KGB man=suspicious and thought in terms of conspiracy
theories.
*believed in intelligence
*acted in secret until he made decisions
7. G. Goals for immediate action:
1. continuing war in Chechnya
2. media control
3. centralization of federal power
4. economic reform
*First term: Putin was “everything to everyone”. P. 208
III. First Term Goals
1. Muzzling the Media
*Background: Remember, during the Gorbachev era
the Soviet Union enjoyed “Glasnost” or openness in the media,
etc. This tradition continued and grew during the Yeltsin era.
The media diversified and reflected the divergent opinions of
the populace. At this time, the media was very
competitive. This period is considered the high point for
Russian media.
A. Vladimir Gusinsky and Media-Most
1. Gusinsky was an oligarch. He owned the most popular TV
channel (NTV) and the radio channel Ekho Moskvy.
2. He opposed the Kremlin and supported opposition candidates
Luzhkov and Primakov in the 1999 Duma elections.
3. Four days after Putin’s inauguration, Media-Most was
invaded by tax police. On June 13th, Gusinsky was arrested. In
order to get out of prison, Gusinsky had to give the state
(Gazprom) Media-Most and leave Russia for good. After
Gazprom took over, journalists and managers were fired.
4. In 2004, the European Court of Human Rights ruled that

4. Gazprom and Russia’s media minister colluded with law
enforcement to seize Media-Most. The court ruled that Russia
had to pay damages to Gusinsky.
B. The Kursk Submarine Crisis and Berezovsky
In the wake of the Kursk sub tragedy (August 12, 2000 a
nuclear submarine (Kursk) exploded in the Bering Sea and
killed 188 sailors), Putin remained on vacation in Sochi and the
military lied to the media about various facts about the tragedy.
Boris Berezovsky was another prominent media oligarch. His
ORT TV station exposed the military and the governments lies.
By October, Berezovsky was forced out of the country.
C. Mission Accomplished
1. Within a year, Putin had suffocated independent TV.
2. Businessmen close to the Kremlin bought newspapers and
magazine companies to help control the media.
3. Putin always claimed that he did not know what the state
agencies were doing but that they were acting independently
and according to law.
*”Putin reestablished the public lie as the standard as in the
Soviet Union.” P. 211
2. Centralization of Federal Power
A. Six days after his inauguration, Putin passed a decree
imposing more central control over the federal system.
*Before: 89 regions had been running independently.
They passed laws that contradicted federal laws. They did not
pass on federal revenues collected locally. They were behind in
paying state benefits to pensioners and for salaries.
Putin wanted to create a “Vertikal” of control. He wanted to
streamline the chain of command and to put himself in control
of it.
B. May 13, 2000, Putin launched a full-fledged attack on the
regional governors.
1. Eliminated governors’ position as senators in the Federation
Council. Putin would appoint the senators directly (bye, bye
democracy).

5. 2. Divided the country into 7 large regions. Each region was
headed by a new presidential envoy or “supergovernor”, hand-
picked by Putin.
3. Putin did not fire the governors. The Kremlin simply
interfered in local elections as the governors terms came up for
reelection. Most of the governors bowed under the pressure and
joined Putin’s party and became “Putin’s Men”. In this way,
Putin gained full control from the top down.
*”The Kremlin controlled most elections to such an extent that
hardly any democracy remained”. P.213
C. Putin the political authoritarian met his goals:
A. muzzled the media
B. brought the Duma under control and tamed
the regional governors
3. Putin’s Government
A. Putin formed his government from siloviki (KGB and
police).
B. There was a minor group of liberals, young economists, and
lawyers from St. Petersburg. The current Russian president
Dmitri Medvedev was one of this group.
C. Putin kept most of Yeltsin’s “family” in his administration.
D. Many prominent businessmen joined Putin’s administration.
4. . Dictatorship of Law
Background: Putin is a lawyer and legal reform was a priority
for him. The courts in the regions had become increasingly
corrupt because the market-value of their judgments went up.
The judges were acting increasingly independent of any control.
A. December 2001, a series of laws were adapted to remedy
this situation.
*enhanced status of judges
*gave better financing for the courts
*renewed all legal and procedural codes
*Result:
The judges received higher salaries from the federal
government and financing for their courts also. This allowed
them to work more independently of the local regional

6. administration.
=Further centralization under Putin
Now, they are dependent on the Kremlin.
5. Who is Mr. Putin? A warning to the oligarchs.
July 28, 2000 Putin met with 21 oligarchs to warn them to stay
out of politics (financing opposition campaigns, candidates).
He warned them…”stay out of politics and I will not revise the
results of privatization.” P. 226. Remember, most of these
oligarchs gained their wealth by illegal privatizations. Some
oligarchs have been called on to help finance special projects.
They do that to keep in favor of the government.
Summary:
Simply put, Putin acted quickly in his first term to gain
control of the government at all levels, subordinate the courts,
and control the media. It is becoming clear what he means by
“Sovereign Democracy”.
III. Putin’s Second Term
1. Elections 2003/2004
1. A. Official Kremlin Party: United Russia
1. Formed December 2001 as with the union of “Unity” and
“Fatherland All Russia” (Unity’s former centrist rival)
2. B. Getting Russians to Vote
a. 1. Most Russians were apathetic about voting in either
the Duma or presidential elections because they felt that
elections were controlled and everyone knew which party would
win (United Russia).
b. 2. The Kremlin hyped up the elections as the peoples’
opportunity to fight the oligarchs. The Russians were fed-up
with the fat-cat oligarchs and the Kremlin used this to their
advantage. The government media exposed that Yukos had
funded rival political groups like SPS, Yabloko,
and the Communist Party. So, a vote for United Russia would
be a vote against the oligarchs’ political power structure.
3. C. Duma Results
a. 1. UR won majority of seats in Duma with 37.6% of
the vote. This translates to a greater than 2/3 majority with 305

7. of 405 seats in the Duma.
b. 2. The Duma elections confirmed that the Russian
government was becoming increasingly authoritarian. These
elections were described as “free but not fair” by the Council of
Europe and the Organization for Security and Cooperation in
Europe (OSCE). The imbalanced and biased
media coverage was cited as key to this.
2. Presidential Election.
A. Putin could not get anybody to run against him. Finally, 6
candidates did run. Only 2 were true opposition. As in the first
election, Putin did not have any debates with the opposition
candidates.
B. Putin won with 71.3% of the vote.
IV. Putin’s Second Term: No Reform and More Control
1. A. Government Changes
1. New Prime Minister: The appointment of the weak
Mikhail Fradkov as PM signaled the goals of the new Putin
government. The siloviki dominated over the reforms. Result:
no new reforms.
B. New Government Structure
1. Putin reformed the way the state administration was
organized. Organized the Ministry by function. This squeezed
out the young reform-minded policymakers and replaced them
with older, conservative heads of departments. Results:
weakening of government and transfer of power to the
presidential administration.
V. Sword Rattling and Alienation of West: A Beginning of a
New Cold War???
1. A. Beslan Tragedy
On September 1, 2004, Chechen fighters seized a school and
held 1,200 adults and children hostage for three days. The
federal government (per Putin) ignored the crisis and minimized
the news coverage. The regional governors refused to go to
Beslan to negotiate with the rebels. On the third day, Russian

8. special forces were sent in and ended the crisis. Because of the
delay of action, many local men and soldiers fought with the
Chechens. As a result, 330 people were killed; 155 were
children. According to Aslund, this demonstrated that the
Russian government was callous and incompetent. Why?
1. minimized media coverage
2. concealed real number of hostages and victims
3. demonstrated how poorly overcentralized
Putin’s government could react in a crisis
2. B. Corruption
1. The definition of corruption for this book is:...."the
malfunction of state with politicians and civil servants selling
public goods for private benefit".
2. Corruption was prevalent throughout the new Russian
regime. It was rampant in the former Soviet Union.
3. The first term reforms and earlier governmental reforms
in the ‘90’s helped to stop a lot of corruption.
4. However, top level corruption increased under Putin’s
reign. Worse, he has done nothing about it as the siloviki’s
wallets get fatter and fatter. They seem to have legal immunity.
3. C. Orange Revolution
Putin meddled in the 2004 Ukranian presidential elections. He
campaigned, sent $300 million for the campaign, and sent
Russian political advisors to the Ukraine to help Viktor
Yanukovich to win the presidency. Putin did this because he
did not want the west-oriented and democratic Viktor Yushenko
and his Orange Revolution to win. He worried that having
Yushenko next door would influence similar movements in
Russia. Yushenko won and now Putin ignores the Ukraine.
4. D. Pipeline Politics
Before the fall of the Soviet Union, the former republics
received subsidies on oil and gas. This tradition continued until
Russia’s oil company (Gazprom) decided to make the former
republics (CIS countries now) pay market price for the oil and
gas. This was a sudden and huge hike in costs and Ukraine and
Moldova refused to accept this. Gazprom simply turned off the

9. tap. This not only affected Ukraine and Moldova, but also the
EU as 80% of Gazprom’s exports to the EU flowed through the
pipeline in Ukraine. This caused the EU and the US to protest.
The cut-off only lasted for two days, but the affects have
lasted. Combined with Putin’s anti-western actions in the
Orange Revolution, the West has begun to see Putin in a new
light.
5. E. Sword-Rattling
Putin’s hostile rhetoric about the United States and recent
sword-rattling about the anti-missle bases in Poland and the
Czech Republic are pitting the US and Russia more and more
against each other.
VI. Summary
1. Putin has dismantled all democratic institutions and built an
authoritarian system by:
1. 2. Strangling the major media and manipulating public
opinion by TV.
2. 3. Abolishing gubernatorial elections and recentralizing
the “vertikal” of control to himself.
3. 4. Stifling the political influence of the oligarchs.
4. 5. Subordinating regional judges to the presidential
administration.
5. 6. Eliminating democratic contests in Duma elections.
6. 7. Transferring of power from the council of ministers to
the presidential administration effectively stopping all reforms.
VLADIMIR PUTIN
1999-PRESENT
What I want you to know: Putin is a law and order man who
rose to the top politically precisely for that reason. The

10. question is whether or not his interpretation of his policy of
“Dictatorship of Laws” will turn Russia back to totalitarian
control or move Russia closer to a “ normal, democratic, and
prosperous state”.
I. Background
A. Putin describes his life in 1999 in his memoirs “First
Person” as:
“In fact, I have had a very simple life. Everything is an open
book.
I finished school and went to university.
I graduated from university and went to the KGB.
I finished the KGB and went back to university.
After university, I went to work for Sobchak.
From Sobchak, to Moscow and to the General Department.
Then to the Presidential Administration.
From there, to the FSB.
Then I was appointed Prime Minister.
Now I’m Acting President. That’s it!”
B. Strobe Talbot, former Deputy Secretary of State during
the Clinton adminstration and a well-known specialist on
Russia, said this about Putin at a Testimony before the Senate
Appropriations Committee Subcommittee on Foreign Operation
in April 2000:
“Mr. Putin has affirmed his support for Russia’s constitution
and its guarantee of democratic government and basic freedoms
for Russia’s people; he declared himself a proponent of a
competitive market economy; he’s promised quick action on tax
reform and investment legislation; he see Russia as part of
Europe and the West, that he favors Russia’s integration with
the global economy, that he wants to continue the process of
arms control and U.S.-Russia cooperation on non-proliferation”.
II. President Who?
A. Rise to Presidency
At the time of the coup in 1991, Putin was a KGB agent
working as a close assistant to St. Peterburg’s Mayor Anatoli

11. Sobchak. Putin resigned from the KGB on August 20th, 1991
(for the second time).
By 1996, Putin is out of work and wondering what to
do. Sobchak lost his bid for reelection. After a couple false
starts, Putin landed in Moscow working in Yeltsin’s
Administration as a Deputy for Chief of Staff Pavel Borodin
Then he had a quick succession of promotions:
1997: Head of Main Control Directorate
1998: First Deputy head of the Presidential administration
responsible for the regions.
1998: Director of FSB (former KGB) as a Civilian also he was
Secretary of the Security Council
1999: (August) Prime Minister
December 31st, 1999: Acting President
March 2000: President
B. Why Picked?
1. Huh?
Putin did not know he was being groomed as President Yeltsin’s
candidate for President.
2. Shock!
It came as a shock to him that he was being considered for the
post of President. He found out only when Yeltsin announced it
on TV.
3. Yeltsin Resigns
As a way of catching the opposition by surprise, Yeltsin
announced that he would resign on December 31st, 1999. Putin
became acting President and forced the election date up to
March. This virtually insured that Putin would be elected as the
next President. He won the election with 53% of the vote with
a 75% voter turnout. He was 47.
4. Why was he picked by the people?
The people had tired of reform and the disastrous
economy. They yearned for someone who would take a tough
stance on the economic crime and political corruption that was

12. running rampant in Russia. The wanted a strong state and law
and order. Putin was their man.
5. Lowest Common Demoninator
He was the choice of parts of the political and business elite,
the oligarch, the Kremlin’s inner circle otherwise known as the
“family” . It was assumed that Putin would protect the
powerful people who got him elected.
Also, Putin met Yeltsin’s desire to put “Siloviki” (officials with
experience in the Army, Police, Security Services) in key
positions to give law-and-order types input in the Government.
6. Chechnya
Though Putin was Prime Minster, he assumed the daily
command of the war in Chechnya.
Russia got involved in more hostilities in Chechnya in August
1999, just when the Russian Government had given
independence to the Chechens. War began again when Chechen
rebels attacked their neighbor Dagestan. Russians kicked them
out of Dagestan 4 times before the Russians decided to “
liquidate” the Chechen rebels for once and for all.
Putin was so committed to resolving this nationality and
terrorist problem that he said: “ I had already decided that my
mission…c onsisted of resolving the situation in the Northern
Caucasus.”< span> He also said in his memoirs: “This is what I
though of the situation in August, when the bandits attacked
Dagestan: If we don’t put an immediate end to this, Russia will
cease to exist.”
*The second reason that Yeltsin resigned early and let Putin
take over was the fear that another war in Chechnya would
“taint” his candidates chance at the Presidency of Russia.
III. REFORMS: WHAT WE KNOW FOR SURE
A. Strong Presidency and Strong State
Putin immediately sought to reverse the chaotic adminstration
of the Yeltsin era and put the power back in the President’s
hands.

13. 1. Vertikal Direct Control of the Provinces
As discussed before, to get the provinces to heed Moscow’s rule
and control the local Governors/Presidents, Putin recreated the
Institution of Presidential Representative that were loyal only to
him and his eyes and ears in each of the 7 Capitals.
2. Reform of Parliament
The Federation council no longer was composed of the 89
Governors/Presidents and the speakers of the Parliament in each
of the 89 regions. In the past, being a federal Deputy gave them
too much power at the national level. Putin said they needed to
stay home and take care of business there. The President let the
Governors/Presidents choose their two representatives from
their regions.
3. Attack on the Oligarchy
Oligarchs are the winners of the partition of the wealth of
Russia in the early 1990’s. They are the people who formed the
circle of confidants called the “family” in Yeltsin’s
administration and were the financial contributors of Putin’s
election campaign in 2000. They were also the reason why the
state was weakened and there was an absence of rule of law
when Putin took over.
Putin set out to:
A. Loosen their control on the media. Putin systematically
closed down independent TV, radio, and newspapers owned by
the handful of oligarchs. Some the state took back.
B. Reduce the ability of the oligarchs and other wealthy to
evade taxes. Putin created a stronger tax police (like our IRS)
and put agents in each province.
Jan 2001: 13% income tax, 35.6% Social Tax
2002: Profit tax dropped to 24%
4. Judicial Reform
Putin began legal reform in 2002. He added a number of
amendments and new laws on the courts and judges that
changed their role and status.
5. Election Laws
To improve formations of coalitions or “bloc” parties and to

14. refine election methods, several laws have been
passed. Notably, a June 2001 Law on Political Parties that
reduces the number of parties that appear on the Duma ballot by
limiting local only parties. Now each party must have 100
members in at least 35 of the nation’s 89 regions. Another law
limits Duma candidate campaign spending to 250 million rubles
($820,000 approximately). Also, the latest Parliamentary
election included candidates not only parties but also socio-
economic groups.
Vladimir Putin was recently elected to his third term (due to
changes in the Constitution) in March of 2012.
Update January 2013: "At Mr. Putin’s direction, half of the 450
seats in the State Duma, the lower house of Parliament, would
be filled using a proportional system based on votes for parties,
with each party then filling its allotted seats. The other half
would be filled by direct election of individual candidates,
creating a potential opening for independent
campaigns." http://www.nytimes.com/2013/01/03/world/europe
/putin-orders-new-system-for-russian-parliamentary-
elections.html?_r=0&pagewanted=print