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History of post-Soviet Russia

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                                                         History of Russia
                                                          Early East Slavs
                                                                   Khazars
                                                            Rus' Khaganate
                                                               Kievan Rus'
                                                           Vladimir-Suzdal
                                                         Novgorod Republic
                                                            Volga Bulgaria
                                                           Mongol invasion
                                                              Golden Horde
                                                                   Muscovy
                                                          Khanate of Kazan
                                                            Russian Empire
                                                        Revolution of 1905
                                                        Revolution of 1917
                                                                 Civil War
                                                              Soviet Union
                                                        Russian Federation

   With the dissolution of the Soviet Union in December 1991, the Russian
   Federation became an independent country. Russia was the largest of the
   fifteen republics that made up the Soviet Union, accounting for over
   60% of the GDP and over half of the Soviet population. Russians also
   dominated the Soviet military and the Communist Party. Thus, Russia was
   widely accepted as the Soviet Union's successor state in diplomatic
   affairs and it assumed the USSR's permanent membership and veto in the
   UN Security Council; see Russia's membership in the United Nations.

   Despite this acceptance, post-Soviet Russia lacked the military and
   political power of the former USSR. Russia managed to make the other
   ex-Soviet republics voluntarily disarm themselves of nuclear weapons
   and concentrated them under the command of the still effective rocket
   and space forces, but for the most part the Russian army and fleet were
   in near disarray by 1992. Prior to the dissolution of the Soviet Union,
   Boris Yeltsin had been elected President of Russia in June 1991 in the
   first direct presidential election in Russian history. In October 1991,
   as Russia was on the verge of independence, Yeltsin announced that
   Russia would proceed with radical market-oriented reform along the
   lines of Poland's "big bang," also known as " shock therapy."

   Russia today shares many continuities of political culture and social
   structure with its tsarist and Soviet past.

Dismantling communism

Shock therapy

   The conversion of the world's largest state-controlled economy into a
   market-oriented economy would have been extraordinarily difficult
   regardless of the policies chosen. (For details on state economic
   planning in the former Soviet Union, see Economy of the Soviet Union.)
   The policies chosen for this difficult transition were (1)
   liberalization, (2) stabilization, and (3) privatization. These
   policies were based on the neoliberal " Washington Consensus" of the
   IMF, World Bank, and U.S. Treasury Department.

   The programs of liberalization and stabilization were designed by
   Yeltsin's deputy prime minister Yegor Gaidar, a 35-year-old liberal
   economist inclined toward radical reform, and widely known as an
   advocate of " shock therapy". Shock therapy began days after the
   dissolution of the Soviet Union, when on January 2, 1992, Russian
   President Boris Yeltsin ordered the liberalization of foreign trade,
   prices, and currency. This entailed removing Soviet-era price controls
   in order to lure goods back into understocked Russian stores, removing
   legal barriers to private trade and manufacture, and cutting subsidies
   to state farms and industries while allowing foreign imports into the
   Russian market in order to break the power of state-owned local
   monopolies.

   The partial results of liberalization (lifting price controls) included
   worsening already apparent hyperinflation (after the Central Bank, an
   organ under parliament, which was skeptical of Yeltsin's reforms, was
   short of revenue and printed money to finance its debt) and the near
   bankruptcy of much of Russian industry.

   The process of liberalization would create winners and losers,
   depending on how particular industries, classes, age groups, ethnic
   groups, regions, and other sectors of Russian society were positioned.
   Some would benefit by the opening of competition; others would suffer.
   Among the winners were the new class of entrepreneurs and black
   marketeers that had emerged under Mikhail Gorbachev's perestroika. But
   liberalizing prices meant that the elderly and others on fixed incomes
   would suffer a severe drop in living standards, and people would see a
   lifetime of savings wiped out.

   With inflation at double-digit rates per month as a result of printing,
   macroeconomic stabilization was enacted to curb this trend.
   Stabilization, also called structural adjustment, is a harsh austerity
   regime (tight monetary policy and fiscal policy) for the economy in
   which the government seeks to control inflation). Under the
   stabilization program, the government let most prices float, raised
   interest rates to record highs, raised heavy new taxes, sharply cut
   back on government subsidies to industry and construction, and made
   massive cuts in state welfare spending. These policies caused
   widespread hardship as many state enterprises found themselves without
   orders or financing. A deep credit crunch shut down many industries and
   brought about a protracted depression.

   The rationale of the program was to squeeze the built-in inflationary
   pressure out of the economy so that producers would begin making
   sensible decisions about production, pricing and investment instead of
   chronically overusing resources—a problem that resulted in shortages of
   consumer goods in the Soviet Union in the 1980s. By letting the market
   rather than central planners determine prices, product mixes, output
   levels, and the like, the reformers intended to create an incentive
   structure in the economy where efficiency and risk would be rewarded
   and waste and carelessness were punished. Removing the causes of
   chronic inflation, the reform architects argued, was a precondition for
   all other reforms: Hyperinflation would wreck both democracy and
   economic progress, they argued; they also argued that only by
   stabilizing the state budget could the government proceed to dismantle
   the Soviet planned economy and create a new capitalist Russia.

Economic depression and social decay

   Russia's economy sank into deep depression by the mid-1990s, was hit
   further by the financial crash of 1998, and then began to recover in
   1999–2000. Russia's economic decline was far more severe than the Great
   Depression, which nearly paralyzed world capitalism following 1929. It
   is about half as severe as the catastrophic drop borne out of the
   consequence of the First World War, the fall of Tsarism, and the
   Russian Civil War.^5

   The most striking consequence of the economic reform has been the sharp
   increase in the rates of poverty and inequality, which have grown
   sharply since the end of the Soviet era.^6 Careful estimates by the
   World Bank based on both macroeconomic data and surveys of household
   incomes and expenditures indicate that whereas 1.5% of the population
   was living in poverty (defined as income below the equivalent of $25
   per month) in 1988, by mid-1993 between 39% and 49% of the population
   was living in poverty. Average per capita monthly income had fallen, in
   dollar terms, from $72 to $32. ^7 Per capita incomes fell by another
   15% in 1998, according to government figures.

   Public health indicators show a dramatic corresponding decline. In
   1999, total population fell by about three-quarters of a million
   people. Meanwhile life expectancy dropped for men from sixty-four years
   in 1990 to fifty-seven years by 1994, while women's dropped from
   seventy-four to about seventy-one. Both health factors and sharp
   increase in deaths of mostly young people from unnatural causes (such
   as murders, suicides and accidents caused by increased disregard for
   safety) have significantly contributed to this trend. As of 2004, life
   expectancy is higher than at the nadir of the crisis in 1994, yet it
   still remains below the 1990 level.

   Alcohol-related deaths skyrocketed 60% in the 1990s. Deaths from
   infectious and parasitic diseases shot up 100%, mainly because
   medicines were no longer affordable to the poor. There are now roughly
   one and half times as many deaths as births per year in Russia.

   While the supply shortages of consumer goods characteristic of the
   1980s went away (see Consumer goods in the Soviet Union), this was not
   only related to the opening of Russia's market to imports in the early
   1990s but also to the impoverishment of the Russian people in the
   1990s. Russians on fixed incomes (the vast majority of the workforce)
   saw their purchasing power drastically reduced, so while the stores
   might have been well stocked in the Yeltsin era, workers could now
   afford to buy little, if anything.

   By 2004 the average income has risen to more than $100 per month,
   emblematic of the mild recovery in recent years thanks to a large
   extent to high oil prices. But the growing income is not being evenly
   distributed. The social inequality has risen sharply during the 1990s
   with the Gini coefficient, for example, reaching 40%. Russia's income
   disparities are now nearly as large as in Argentina and Brazil, which
   have long been among the world leaders in inequality, and the regional
   disparities in the level of poverty are still growing sharper.

Backlash against reform

   Structural reform lowered the standard of living for most groups of the
   population. Thus, reform created powerful political opposition.
   Democratization opened the political channels for venting these
   frustrations, thus translating into votes for anti-reform candidates,
   especially those of the Communist Party of the Russian Federation and
   its allies in the parliament. Russian voters, able to vote for
   opposition parties in the 1990s, often rejected economic reforms and
   yearned for the stability and personal security of the Soviet era.
   These were the groups that had enjoyed the benefits of Soviet-era
   state-controlled wages and prices, high state spending to subsidize
   priority sectors of the economy, protection from competition with
   foreign industries, and welfare entitlement programs.

   During the Yeltsin years in the 1990s, these groups were well
   organized, voicing their opposition to reform through strong trade
   unions, associations of directors of state-owned firms, and political
   parties in the popularly elected parliament whose primary
   constituencies were among those vulnerable to reform. A constant theme
   of Russian history in the 1990s was the conflict between economic
   reformers and those hostile to the new capitalism.

Reform by decree

   On January 2, 1992, Yeltsin—acting as his own prime minister—enacted
   the most wrenching components of economic reform by decree, thereby
   circumventing the Supreme Soviet and Congress of People's Deputies,
   which had been elected in June 1991, before the dissolution of the
   USSR. While this spared Yeltsin from the prospects of parliamentary
   bargaining and wrangling, it has also destroyed the hopes for any
   meaningful discussion of the right course of action for the country. In
   retrospect, despite the great price paid by Russian people for these
   authoritative decisions, they did not help the country in the
   transition to market economy.

   However, radical reform still faced some critical political barriers.
   The Soviet-era Central Bank was still subordinate to the conservative
   Supreme Soviet as opposed to the presidency. During the height of
   hyperinflation in 1992–1993, the Central Bank actually tried to derail
   reforms by actively printing money during a period of inflation. After
   all, the Russian government was short of revenue and was forced to
   print money to finance its debt. As a result, inflation exploded into
   hyperinflation, and the Russian economy continued in a serious slump.

Clashes of power, 1993-96

The 1993 constitutional crisis

   The struggle for the centre of power in post-Soviet Russia and for the
   nature of the economic reforms culminated in political crisis and
   bloodshed in the fall of 1993. Yeltsin, who represented a course of
   radical privatization, was opposed by the parliament. Confronted with
   opposition to the presidential power of decree and threatened with
   impeachment, Yeltsin "dissolved" the parliament on September 21, in
   contravention of the existing constitution, and ordered new elections
   and a referendum on a new constitution. The parliament then declared
   Yeltsin deposed and appointed Aleksandr Rutskoy acting president on
   September 22. Tensions built quickly, and matters came to a head after
   street riots on October 2– October 3. On October 4, Yeltsin ordered
   Special Forces and elite army units to storm the parliament building,
   the "White House" as it is called. With tanks thrown against the
   small-arms fire of the parliamentary defenders, the outcome was not in
   doubt. Rutskoy, Ruslan Khasbulatov, and the other parliamentary
   supporters surrendered and were immediately arrested and jailed. The
   official count was 187 dead, 437 wounded (with several men killed and
   wounded on the presidential side).

   Thus the transitional period in post-Soviet Russian politics came to an
   end. A new constitution was approved by referendum in December 1993.
   Russia was given a strongly presidential system. Radical privatization
   went ahead. Although the old parliamentary leaders were released
   without trial on February 26, 1994, they would not play an open role in
   politics thereafter. Though its clashes with the executive would
   eventually resume, the remodeled Russian parliament had greatly
   circumscribed powers. (For details on the constitution passed in 1993
   see Constitution and government structure of Russia.)

The First Chechen War

   In 1994, Yeltsin ordered 40,000 troops to prevent the separation of the
   southern oil-producing region of Chechnya from Russia. Living 1,000
   miles south of Moscow, the predominantly Muslim Chechens for centuries
   had gloried in defying the Russians. Dzhokhar Dudayev, the Republic of
   Chechnya’s nationalist president, was driven to take his republic out
   of the Russian Federation, and had declared Chechnya's independence in
   1991. Russia was quickly submerged in a quagmire like that of the U.S.
   in the Vietnam War. When the Russians attacked the Chechen capital of
   Grozny during the first weeks of January 1995, about 25,000 civilians
   died under week-long air raids and artillery fire in the sealed-off
   city. Massive use of artillery and air strikes remained the dominating
   strategy throughout the Russian campaign. Even so, Chechen insurgents
   seized thousands of Russian hostages, while inflicting humiliating
   losses on Russia's demoralized and ill-equipped troops. Russian troops
   had not secured the Chechen capital of Grozny by year's end.

   The Russians finally managed to gain control of Grozny in February 1995
   after heavy fighting. In August 1996 Yeltsin agreed to a ceasefire with
   Chechen leaders, and a peace treaty was formally signed in May 1997.
   However, the conflict resumed in 1999, thus rendering the 1997 peace
   accord meaningless (see Second Chechen War). Chechen rebels continue to
   resist the Russian presence to this day.

The "loans for shares" scheme and the rise of the "oligarchs"

   The new capitalist opportunities presented by the opening of the
   Russian economy in the late 1980s and early 1990s affected many
   people's interests. As the Soviet system was being dismantled, some of
   the well-placed bosses and apparatchiks in the Communist Party, the
   KGB, and the Komsomol (Soviet Youth League) were cashing in on their
   Soviet-era power and privileges. A few of them created banks and
   businesses in Russia, taking advantage of their insider positions to
   win exclusive government contracts and licenses and to acquire
   financial credits and supplies at artificially low, state-subsidized
   prices in order to transact business at high, market-value prices.
   Great fortunes were made almost overnight.

   At the same time, a few young people, without much social status, but
   with lots of entrepreneurial spirit, as well as sound quantitative and
   problem-solving skills, saw opportunity in the economic and legal
   confusion of the transition. Between 1987 and 1992, trading of natural
   resources and foreign currencies, as well as imports of highly demanded
   consumer goods and then domestic production of their rudimentary
   substitutes, rapidly enabled these pioneering entrepreneurs to
   accumulate considerable wealth. In turn, the emerging cash-based,
   highly opaque markets provided a breeding ground for a large number of
   racket gangs.

   By the mid-nineties, the best-connected former nomenklatura leaders
   accumulated considerable financial resources, while on the other hand
   the most successful entrepreneurs became acquainted with government
   officials and public politicians. The privatization of state
   enterprises was a unique opportunity, since it gave many of those who
   had gained wealth in the early 1990s a chance to convert it into shares
   of privatized enterprises.

   The Yeltsin government hoped to use privatization to spread ownership
   of shares in former state enterprises as widely as possible to create
   political support for his government and his reforms. The government
   used a system of free vouchers as a way to give mass privatization a
   jump-start. But it also allowed people to purchase shares of stock in
   privatized enterprises with cash. Even though initially each citizen
   received a voucher of equal face value, within months most of them
   converged in the hands of intermediaries who were ready to buy them for
   cash right away.

   As the government ended the voucher privatization phase and launched
   cash privatization, it devised a program that it thought would
   simultaneously speed up privatization and yield the government a
   much-needed infusion of cash for its operating needs. Under the scheme,
   which quickly became known in the West as "loans for shares", the
   Yeltsin regime auctioned off substantial packages of stock shares in
   some of its most desirable enterprises, such as energy,
   telecommunications, and metallurgical firms, as collateral for bank
   loans.

   In exchange for the loans, Yeltsin handed over assets worth many times
   as much. Under the terms of the deals, if the Yeltsin government did
   not repay the loans by September 1996, the lender acquired title to the
   stock and could then resell it or take an equity position in the
   enterprise. The first auctions were held in the fall of 1995. The
   auctions themselves were usually held in such a way so to limit the
   number of banks bidding for shares and thus to keep the auction prices
   extremely low. By summer 1996, major packages of shares in some of
   Russia's largest firms had been transferred to a small number of major
   banks, thus allowing a handful of powerful banks to acquire substantial
   ownership shares over major firms at shockingly low prices. These deals
   were effectively giveaways of valuable state assets to a few powerful,
   well-connected, and wealthy financial groups.

   The concentration of immense financial and industrial power, which
   loans for shares had assisted, extended to the mass media. One of the
   most prominent of the financial barons, Boris Berezovsky, who
   controlled major stakes in several banks and companies, exerted an
   extensive influence over state television programming for a while.
   Berezovsky and other ultra-wealthy, well-connected tycoons who
   controlled these great empires of finance, industry, energy,
   telecommunications, and media became known as the " Russian oligarchs".
   Along with Berezovsky, Mikhail Khodorkovsky, Roman Abramovich, Vladimir
   Potanin, Vladimir Bogdanov, Rem Viakhirev, Vagit Alekperov, Viktor
   Chernomyrdin, Victor Vekselberg, and Mikhail Fridman emerged as
   Russia's most powerful and prominent oligarchs.

   A tiny clique who used their connections built up during the last days
   of the Soviet years to appropriate Russia's vast resources during the
   rampant privatizations of the Yeltsin years, the oligarchs emerged as
   the most hated men in the nation. The Western world generally advocated
   a quick dismantling of the Soviet planned economy to make way for
   "free-market reforms," but later expressed disappointment over the
   newfound power and corruption of the "oligarchs."

The 1996 presidential election

Campaigns

   Early in the campaign it had been thought that Yeltsin, who was in
   uncertain health (after recuperating from a series of heart attacks)
   and whose behaviour was sometimes erratic, had little chance for
   reelection. When campaigning opened at the beginning of 1996, Yeltsin's
   popularity was close to zero. Meanwhile, the opposition Communist Party
   of the Russian Federation had already gained ground in parliamentary
   voting on December 17, 1995, and its candidate, Gennady Zyuganov, had a
   strong grassroots organization, especially in the rural areas and small
   towns, and appealed effectively to memories of the old days of Soviet
   prestige on the international stage and the socialist domestic order.

   Panic struck the Yeltsin team when opinion polls suggested that the
   ailing president could not win; members of his entourage urged him to
   cancel presidential elections and effectively rule as dictator from
   then on. Instead, Yeltsin changed his campaign team, assigning a key
   role to his daughter, Tatyana Dyachenko, and appointing Anatoly Chubais
   campaign manager. Chubais, who was not just Yeltsin's campaign manager
   but also the architect of Russia's privatization program, set out to
   use his control of the privatization program as the key instrument of
   Yeltsin's reelection campaign.

   The president's inner circle assumed that it had only a short time in
   which to act on privatization; it therefore needed to take steps that
   would have a large and immediate impact, making the reversal of reform
   prohibitively costly for their opponents. Chubais' solution was to
   co-opt potentially powerful interests, including enterprise directors
   and regional officials, in order to ensure Yeltsin's reelection.

   The position of the enterprise directors to the program was essential
   to maintaining economic and social stability in the country. The
   managers represented one of the most powerful collective interests in
   the country; it was the enterprise managers who could ensure that labor
   did not erupt in a massive wave of strikes. The government, therefore,
   did not strenuously resist the tendency for voucher privatization to
   turn into "insider privatization," as it was termed, in which senior
   enterprise officials acquired the largest proportion of shares in
   privatized firms. Thus, Chubais allowed well-connected employees to
   acquire majority stakes in the enterprises. This proved to be the most
   widely used form of privatization in Russia. Three-quarters of
   privatized enterprises opted for this method, most often using
   vouchers. Real control thus wound up in the hands of the managers.^8

   Support from the oligarchs was also crucial to Yeltsin's reelection
   campaign. The "loans for shares" giveaway took place in the run-up to
   the 1996 presidential election—at a point when it had appeared that
   Zyuganov might defeat Yeltsin. Yeltsin and his entourage gave the
   oligarchs an opportunity to scoop up some of Russia's most desirable
   assets in return for their help in his reelection effort. The
   oligarchs, in turn, reciprocated the favour.

   In the spring of 1996, with Yeltsin's popularity at a low ebb, Chubais
   and Yeltsin recruited a team of six leading Russian financiers and
   media barons (all oligarchs) who bankrolled the Yeltsin campaign with
   $500 million, despite the fact that the campaign limit was set at $3
   million according to the Russian electoral law (Truscott 2004). And
   guaranteed coverage on television and in leading newspapers directly
   serving the president's campaign strategy. The media painted a picture
   of a fateful choice for Russia, between Yeltsin and a "return to
   totalitarianism." The oligarchs even played up the threat of civil war
   if a Communist were elected president.

   In the outlying regions of the country, the Yeltsin campaign relied on
   its ties to other allies—the patron-client ties of the local governors,
   most of whom had been appointed by the president.

   The Zyuganov campaign had a strong grass-roots organization, but it was
   simply no match to the financial resources and access to patronage that
   the Yeltsin campaign could marshal.

   Yeltsin campaigned energetically, dispelling concerns about his health,
   exploiting all the advantages of incumbency to maintain a high media
   profile. To assuage voters' discontent, he made the claim that he would
   abandon some unpopular economic reforms and boost welfare spending, end
   the war in Chechnya, pay wage and pension arrears, and abolish the
   military draft program (he did not live up to his promises after the
   election, except for ending the Chechen war, which was halted for 3
   years). Yeltsin's campaign also got a boost from the announcement of a
   $10 billion loan to the Russian government from the International
   Monetary Fund.

   Grigory Yavlinsky was the liberal alternative to Yeltsin and Zyuganov.
   He appealed to a well-educated middle class that saw Yeltsin as a
   drunken scoundrel and Zyuganov as a Soviet-era throwback. Seeing
   Yavlinsky as a threat, Yeltsin's inner circle of supporters worked to
   bifurcate political discourse, thus excluding a middle ground—and
   convince voters that only Yeltsin could defeat the Communist "menace."
   The election became a two-man race, and Zyuganov, who lacked Yeltsin's
   resources and financial backing, watched helplessly as his strong
   initial lead was whittled away.

Elections

   Voter turnout in the first round of the polling on June 16 was 69.8%.
   According to returns announced on June 17, Yeltsin won 35% of the vote;
   Zyuganov won 32%; Aleksandr Lebed, a populist ex-general, a
   surprisingly high 14.5%; liberal candidate Grigory Yavlinsky 7.4%;
   far-right nationalist Vladimir Zhirinovsky 5.8%; and former Soviet
   president Mikhail Gorbachev 0.5%. With no candidate securing an
   absolute majority, Yeltsin and Zyuganov went into a second round of
   voting. In the meantime, Yeltsin co-opted a large segment of the
   electorate by appointing Lebed to the posts of national security
   adviser and secretary of the Security Council.

   In the end, Yeltsin's election tactics paid off. In the run-off on July
   3, with a turnout of 68.9%, Yeltsin won 53.8% of the vote and Zyuganov
   40.3%, with the rest (5.9%) voting "against all". Moscow and St.
   Petersburg (formerly Leningrad) together provided over half of the
   incumbent president's support, but he also did well in large cities in
   the Urals and in the north and northeast. Yeltsin lost to Zyuganov in
   Russia's southern industrial heartland. The southern stretch of the
   country became known as the "red belt", underscoring the resilience of
   the Communist Party in elections since the breakup of the Soviet Union.

   Although Yeltsin promised that he would abandon his unpopular
   neoliberal austerity policies and increase public spending to help
   those suffering from the pain of capitalist reforms, within a month of
   his election, Yeltsin issued a decree canceling almost all of these
   promises.

   Right after the election, Yeltsin's physical health and mental
   stability were increasingly precarious. Many of Yeltsin's executive
   functions thus devolved upon a group of advisers (most of whom had
   close links with the oligarchs).

The crises of 1998

Financial collapse

   The global recession of 1998, which started with the Asian financial
   crisis in July 1997, exacerbated Russia's economic crisis. Given the
   ensuing decline in world commodity prices, countries heavily dependent
   on the export of raw materials, such as oil, were among those most
   severely hit. The sharp decline in the price of oil had severe
   consequences for Russia. A political crisis came to a head in March
   when Yeltsin suddenly dismissed Prime Minister Viktor Chernomyrdin and
   his entire cabinet on March 23. Yeltsin named a virtually unknown
   technocrat, Energy Minister Sergei Kiriyenko, aged 35, as acting prime
   minister. In an effort to prop up the currency and stem the flight of
   capital, Kiriyenko hiked interest rates to 150%. The IMF approved a
   $22.6 billion emergency loan on July 13. Despite the bailout, Russia's
   monthly interest payments still well exceeded its monthly tax revenues.
   Realizing that this situation was unsustainable, investors continued to
   flee Russia despite the IMF bailout. Weeks later the financial crisis
   recommenced as the value of the ruble resumed its fall. On August 17,
   Kiriyenko's government and the central bank were forced to suspend
   payment on Russia's foreign debt for 90 days, restructure the nation's
   entire debt, and devalue the ruble. The ruble went into free fall as
   Russians sought frantically to buy dollars. Foreign investment rushed
   out of the country, and financial crisis triggered an unprecedented
   flight of capital from Russia.

Political fallout

   The financial collapse produced a political crisis as Yeltsin, with his
   domestic support evaporating, had to contend with an emboldened
   opposition in the parliament. A week later, on August 23, Yeltsin fired
   Kiriyenko and declared his intention of returning Chernomyrdin to
   office as the country slipped deeper into economic turmoil. Powerful
   business interests, fearing another round of reforms that might cause
   leading concerns to fail, welcomed Kiriyenko's fall, as did the
   Communists.

   Yeltsin, who began to lose his hold as his health deteriorated, wanted
   Chernomyrdin back, but the legislature refused to give its approval.
   After the Duma rejected Chernomyrdin's candidacy twice, Yeltsin, his
   power clearly on the wane, backed down. Instead, he nominated Foreign
   Minister Yevgeny Primakov, who on September 11 was overwhelmingly
   approved by the Duma.

   Primakov's appointment restored political stability, because he was
   seen as a compromise candidate able to heal the rifts between Russia's
   quarreling interest groups. There was popular enthusiasm for Primakov
   as well. Primakov promised to make the payment of wage and pension
   arrears his government’s first priority, and invited members of the
   leading parliamentary factions into his Cabinet.

   Communists and trade unionists staged a nationwide strike on October 7
   and called on President Yeltsin to resign. On October 9, Russia, which
   was also suffering from a bad harvest, appealed for international
   humanitarian aid, including food.

Recovery

   Russia bounced back from the August 1998 financial crash with
   surprising speed. Much of the reason for the recovery is that world oil
   prices rapidly rose during 1999–2000 (just as falling energy prices on
   the world market helped to deepen Russia's financial troubles), so that
   Russia ran a large trade surplus in 1999 and 2000. Another reason is
   that domestic industries, such as food processing, have benefited from
   the devaluation, which caused a steep increase in the prices of
   imported goods. Also, since Russia's economy was operating to such a
   large extent on barter and other non-monetary instruments of exchange,
   the financial collapse had far less of an impact on many producers than
   it would had the economy been dependent on a banking system. Finally,
   the economy has been helped by an infusion of cash; as enterprises were
   able to pay off arrears in back wages and taxes, it in turn allowed
   consumer demand for the goods and services of Russian industry to rise.
   For the first time in many years, unemployment in 2000 fell as
   enterprises added workers.

   Nevertheless, the political and social equilibrium of the country
   remains tenuous to this day, and power remains a highly personalized
   commodity. The economy remains vulnerable to downturn if, for instance,
   world oil prices fall at a dramatic pace.

Succession crisis, 1999-2000

   Yevgeny Primakov did not remain in his post long. Yeltsin grew
   suspicious that Primakov was gaining in strength and popularity and
   dismissed him in May 1999, after only eight months in office. Yeltsin
   then named Sergei Stepashin, who had formerly been head of the FSB (the
   successor agency to the KGB) and later been Interior Minister, to
   replace him. The Duma confirmed his appointment on the first ballot by
   a wide margin.

   Stephashin's tenure was even shorter than Primakov's. In August 1999,
   Yeltsin once again abruptly dismissed the government and named Vladimir
   Putin as his candidate to head the new government. Like Stephashin,
   Putin had a background in the secret police, having made his career in
   the foreign intelligence service and later as head of the FSB. Yeltsin
   went so far as to declare that he saw Putin as his successor as
   president. The Duma narrowly voted to confirm Putin.

   When appointed, Putin was a relatively unknown politician, but he
   quickly established himself both in public opinion and in Yeltsin's
   estimation as a trusted head of government, largely due to the Second
   Chechen War. Just days after Yeltsin named Putin as a candidate for
   prime minister, Chechen forces engaged the Russian army in Dagestan, a
   Russian autonomy near Chechnya. In the next month, several hundred
   people died in apartment building bombings in Moscow and other cities,
   bombings Russian authorities attributed to Chechen rebels. In response,
   the Russian army entered Chechnya in late September 1999, starting the
   Second Chechen War. The Russian public at the time, angry over the
   terrorist bombings, widely supported the war. The support translated
   into growing popularity for Putin, who had taken decisive action in
   Chechnya.

   After the success of political forces close to Putin in the December
   1999 parliamentary elections, Yeltsin evidentially felt confident
   enough in Putin that he resigned from the presidency on December 31,
   six months before his term was due to expire. This made Putin acting
   president and gave Putin ample opportunity to position himself as
   frontrunner for the Russian presidential election held on March 26,
   2000, which he won. The Chechen War figured prominently in the
   campaign. In February 2000, Russian troops entered Grozny, the Chechen
   capital, and a week before the election, Putin flew to Chechnya on a
   fighter jet, claiming victory.

The Putin administration, 2000-present

   In August 2000, the Russian submarine K-141 Kursk suffered an
   explosion, causing the submarine to sink in the shallow area of the
   Barents Sea. Russia organized a vigorous but hectic attempt to save the
   crew, and the entire futile effort was surrounded by unexplained
   secrecy. This, as well as the slow initial reaction to the event and
   especially to the offers of foreign aid in saving the crew, brought
   much criticism on the government and personally on President Putin.

   On October 23, 2002, Chechen rebels took over a Moscow theatre. Over
   700 people inside were taken hostage in what has been called the Moscow
   theatre hostage crisis. The rebels demanded the immediate withdrawal of
   Russian forces from Chechnya and threatened to blow up the building if
   authorities attempted to enter. Three days later, Russian commandos
   stormed the building after the hostages had been subdued with a
   sleeping gas, shooting the unconscious militants. The gas, which
   Russian officials refused to identify to doctors treating the hostages,
   was implicated as the cause of death for over 115 hostages.

   In the aftermath of the theatre siege, Putin began renewed efforts to
   eliminate the Chechen insurrection. (For additional details on the war
   in Chechnya under Putin, see Second Chechen War.) The government
   cancelled scheduled troop withdrawals, surrounded Chechen refugee camps
   with soldiers, and increased the frequency of assaults on rebel
   positions.

   The Chechens responded in kind, stepping up guerrilla operations and
   rocket attacks on federal helicopters. Several high-profile attacks
   have taken place. In May 2004, Chechen rebels assassinated Akhmad
   Kadyrov, the pro-Russia Chechen leader who became the president of
   Chechnya 8 months earlier after an election conducted by Russian
   authorities. On August 24, 2004, two Russian aircraft were bombed. This
   was followed by the Beslan school hostage crisis in which Chechen
   rebels took 1,300 hostages. The initially high public support for the
   war in Chechnya has declined. Only 19% of Russians supported continuing
   military action in September 2006, according to a Levada-Centre poll.

   Putin has confronted several very influential oligarchs ( Vladimir
   Gusinsky, Boris Berezovsky and Mikhail Khodorkovsky, in particular) who
   attained large stakes of state assets, allegedly through illegal
   schemes, during the privatization process. Gusinsky and Berezovsky have
   been forced to leave Russia and give up parts of their assets.
   Khodorkovsky is jailed in Russia and has lost his YUKOS company,
   formerly the largest oil producer in Russia. Putin's stand against
   oligarchs is generally popular with the Russian people, even though the
   jailing of Khodorkovsky is mainly seen as part of a takeover operation
   by government officials, according to another Levada-Centre poll.

   These confrontations have also lead to Putin establishing control over
   Russian media outlets previously owned by the oligarchs. In 2001 and
   2002, TV channels NTV (previously owned by Gusinsky), TV6 and TVS
   (owned by Berezovsky) were all taken over by media groups loyal to
   Putin. Similar takeovers have also occurred with print media.

   Putin's administration exercises a significant control over the content
   in Russian media. Most editors and managers are willing to pull an
   article or to fire a journalist upon an informal request from the
   presidential administration. While many of Yeltsin-era problems (such
   as war in Chechnya and strikes over unpaid wages) still exist,
   journalists are now asked to ignore or downplay them, producing a
   positive picture of Russia.

   Putin's popularity, which stems from his reputation as a strong,
   effective leader, stands in contrast to the unpopularity of his
   predecessor, but it hinges on a continuation of economic recovery.
   Putin came into office at an ideal time: after the devaluation of the
   ruble in 1998, which boosted demand for domestic goods, and while world
   oil prices were rising. Indeed, during the seven years of his
   presidency, real GDP grew on average 6.7% a year, average income
   increased 11% annually in real terms, and a consistently positive
   balance of the federal budget enabled the government to cut 70% of the
   external debt (according to the Institute for Complex Strategic
   Studies). Thus, many credit him with the recovery, but his ability to
   withstand a sudden economic downturn has been untested. Putin won the
   Russian presidential election in 2004 without any significant
   competition.

   Some researchers assert that most Russians today have come to regret
   the collapse of the Soviet Union in 1991. On repeated occasions, even
   Vladimir Putin—Boris Yeltsin's handpicked successor — stated that the
   fall of Soviet rule had led to few gains and many problems for most
   Russian citizens. In a campaign speech in February 2004, for example,
   Putin called the dismantlement of the Soviet Union a "national tragedy
   on an enormous scale," from which "only the elites and nationalists of
   the republics gained." He added, "I think that ordinary citizens of the
   former Soviet Union and the post-Soviet space gained nothing from this.
   On the contrary, people have faced a huge number of problems."

   Putin's international prestige suffered a major blow in the West during
   the disputed 2004 Ukrainian presidential election. Putin had twice
   visited Ukraine before the election to show his support for the
   pro-Russian Viktor Yanukovych against opposition leader Viktor
   Yushchenko, a pro-Western liberal economist. He also congratulated
   Yanukovych on his victory before election results were even made
   official and made statements opposing the rerun of the disputed second
   round of elections, won by Yanukovych, amid allegations of large-scale
   voting fraud. In the West, the reaction to Russia's handling of, or
   perhaps interference in, the Ukrainian election evoked echoes of the
   Cold War, but relations with the U.S. have remained stable.

   In 2005, the Russian government replaced the broad in-kind Soviet-era
   benefits, such as free transportation and subsidies for heating and
   other utilities for socially vulnerable groups by cash payments. The
   reform, known as the monetization, has been unpopular and caused a wave
   of demonstrations in various Russian cities, with thousands of retirees
   protesting against the loss of their benefits. This was the first time
   such wave of protests took place during the Putin administration. The
   reform has hurt the popularity of the Russian government, but Putin
   personally is still popular, with a 77% approval rating.

   Russia has just pulled the plug on its participation in a technology
   fair scheduled to be held in a Tel Aviv hotel out of solidarity with
   Lebanon in connection with the 2006 Israel-Lebanon War.

Russia's relationship with the West

   In the early period after Russia became independent, Russian foreign
   policy repudiated Marxism-Leninism as a putative guide to action,
   emphasizing cooperation with the West in solving regional and global
   problems, and soliciting economic and humanitarian aid from the West in
   support of internal economic reforms.

   However, although Russia's leaders now described the West as its
   natural ally, they grappled with defining new relations with the East
   European states, the new states formed upon the disintegration of
   Yugoslavia, and Western Europe. Russia opposed the expansion of NATO
   into the former Soviet bloc nations of the Czech Republic, Poland, and
   Hungary in 1997 and, particularly, the second NATO expansion into
   Baltic states in 2004. In 1999, Russia opposed the NATO bombing of
   Yugoslavia for more than two months (see Kosovo War), but later joined
   NATO peace-keeping forces in the Balkans in June 1999.

   Relations with the West have also been stained by Russia's relationship
   with Belarus. Belarusian President Alexander Lukashenko, an
   authoritarian Soviet-style leader, has shown much interest in aligning
   his country with Russia, and no interest in deepening ties with the
   ever-expanding NATO or implementing Western-backed neoliberal economic
   reforms. A union agreement between Russia and Belarus was formed on
   April 2, 1996. The agreement was tightened, becoming the Union of
   Russia and Belarus on April 3, 1997. Further strengthening of the union
   occurred on December 25, 1998, and in 1999.

   Under Putin, Russia has sought to strengthen ties with the People's
   Republic of China by signing the Treaty of Good-Neighborliness and
   Friendly Cooperation as well building the Trans-Siberian oil pipeline
   geared toward Chinese growing energy needs.

Change and continuity in post-Soviet Russian culture

Inheritance from the USSR

   Contemporary Russian culture is rooted in the legacies of the Soviet
   regime and the thousand-year heritage of the Russian state. The Soviet
   Union, itself the heir of a Tsarist state that had gained control of
   the major part of the Eurasian landmass over hundreds of years, with
   its vast bureaucracy, centrally administered economy, and the world's
   largest military, seemed profoundly resistant to change just shortly
   before its collapse to outside observers. Beneath the official
   propaganda, however, interest in both pre-Soviet traditions and the
   ways of the West grew during the so-called "period of stagnation."

   Russia inherited from the Soviet Union a diverse cultural heritage.
   Throughout the Soviet Union, intellectuals, artists, and teachers
   preserved over a hundred different cultural legacies and national
   languages. Even in the most repressive years of Stalinism, private life
   survived—lasting to this day—formed through strong family and
   friendship links. So too did a legacy of the Tsarist era through the
   great classic works of pre-revolutionary literature and art that
   generations of Soviet schoolchildren and university students were
   taught to respect and study.

   The imperative of providing the Soviet regime with a powerful
   scientific and technological capacity also required the regime to
   accept a certain level of openness and outside influences: scientific
   and cultural exchanges of people and ideas kept open channels through
   which the diverse influences of the outside world and especially the
   West filtered in the Soviet Union. As the Communist regime's machinery
   for shaping public values and reinforcing CPSU-rule (youth groups, the
   mass media, and Party-run workplace education) grew increasingly
   ossified and ineffectual after Stalin's death, these internal and
   external cultural influences assumed an ever-greater importance in
   shaping Soviet politics, culture, and public opinion.

   As the old regime's system for shaping public values and beliefs was
   breaking down in the late 1980s and 1990s, noncommunist ideologies such
   as liberal democracy, religious faith, and ethnic nationalism saw a
   revival. At the moment of collapse in 1991, a significant proportion of
   the population, likely the absolute majority, looked hopefully to the
   future. However, as the utopian vision of a prosperous and peaceful
   democracy gave place to the troubled and insecure reality, many became
   nostalgic for the days of the old Soviet superpower.

Post-Soviet realities

   The word best applied to post-Soviet Russian culture is eclectic. While
   coming to grips with, and in no way rejecting fully, the Soviet
   inheritance, Russians reached out to identify with their own pre-Soviet
   past and embraced, some would say indiscriminately, tendencies from the
   West.

   A very public debate has been waged about the nation's history.
   Revisionism has extended not merely to reappraisals of attitude, but to
   the chronological timeline itself (for example, the theories of Anatoly
   Fomenko). Nicholas the Bloody has become St. Nicholas the Martyr in
   various circles; Lenin would be buried by half the population; toponymy
   has achieved a balance between the Soviet and the Imperial past.

   But the present has had the greatest effect. Economic and political
   upheaval quickly made some of the formerly most respected or stable
   professions among the least desirable in material terms. Teachers
   worked for months without pay in some cases. Scientific workers lived
   on the poverty line or were thrown out of work when their research
   institutes were closed. The members of the artistic and cultural elites
   also had to learn to subsist with greatly diminished levels of support
   from the state. Some wilted, some emigrated, and some adapted.

   The Russian Orthodox Church has grown rapidly since 1991, as churches
   and monasteries have reopened and been restored, often by the work of
   their congregation. At the same time, Slavic neo-pagans have made their
   appearance. So too have foreign sects and other religions. Their
   proselytizing has been controversial, however, and has had to face
   roadblocks from the state and from some of the citizens. Still, though
   the holidays of Easter and Christmas have been reinstated (according to
   the Julian calendar), church attendance has grown substantially
   compared to Soviet era, and heretofore virtually nonexistent rituals
   such as church weddings have become common, most Russians have
   remained, if not confessed atheists, quite unobservant.

   The younger generation, especially, has embraced Western music and
   other types of pop culture. That and the growth of advertising has
   affected the Russian language, as many English words and constructions
   have become wildly fashionable. Drug abuse, which was kept tightly
   under wraps during the Soviet era, has come into the open with
   disastrous consequences. Today in Russia there are more than 3 million
   drug addicts. Heroin appears to be the drug of choice. Fueled by
   sharing needles by drug addicts, the AIDS epidemic is rampant - the
   number of HIV-positive people increased from less than 100 in 1989 to
   an estimated 1 million in 2003.

   While it took the publishing industry some time to switch from massive
   state orders to the consumer market, Russia remains a highly literate
   nation with considerable interest in literature. Crime fiction, romance
   novels, alternative history, and historical novels are popular and
   commercially successful. Conversely, poetry has declined.

   Spectator sports continued as a welcome diversion. Overwhelming
   successes at the Olympics and the great national ice hockey teams have
   become things of the past. Russian tennis players, on the other hand,
   have achieved highly profiled success.

   The attitude to the rest of the world has seen great perturbations. If
   in 1991 overall consensus toward the West was favorable indeed, it was
   quickly dimmed by the economic disruptions induced by the
   indiscriminate and corrupt privatizations. Many Russians perceived a
   continued distrust or even hostility from Europe and the United States.
   A sense of Russian political isolation was encouraged by overt
   political actions, especially NATO's 1999 bombing of Serbia over
   Kosovo.

   Thus a split became all too apparent. Many Russians, especially of the
   older generation, came to see the so-called "era of stagnation" under
   Brezhnev as a kind of stable golden age. A few, more visible than
   strong in numbers, placed their aspirations on Stalin. Letters in
   newspapers and the occasional leading article made it clear that by
   2003, at a moment of relative stability, many felt like immigrants in
   their own country. Russians who prospered or survived under the changed
   conditions often mocked the nostalgia. In the end, however, neither age
   nor material conditions fully determined the outlook.

   The strongest continuation in Russian outlook from the later Soviet
   period is that most citizens do not in any sense identify their culture
   with their government, or (to a somewhat lesser extent) with political
   ideology. Among the most controversial breaks with the past, if the
   tendency does not prove temporary, may be a post-imperial national
   awareness that places greater emphasis on ethnic belonging. Personal
   hostility from ethnic Russians to the so-called "national minorities"
   in widespread, assisted by demographics and based on perception of
   internal and international politics, appears to be considerably
   stronger than in the Soviet period.

   Overall, the official line today is a neutral acknowledgement of all
   phases of Russian history and culture. Underneath the circles of power,
   Russians are divided, as in ages past, between the "Westernizers" and
   the "Slavophiles" or "Eurasians", though it is too early either to
   speak of these tendencies as formal movements or to predict which one
   will prevail. At present, a kind of dynamic equilibrium appears to have
   been achieved after the chaos of the first post-Soviet years, but its
   permanence remains to be seen.
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