By Eric Vandenbroeck and co-workers

Early in his presidency, Putin shocked everyone by passing reforms at a breakneck speed. Days after his inauguration, he began removing the oligarchs from national political power. He completely scrapped the system that gave Russia 89 regional territories, each of which had its own power broker or oligarch and its own set of laws. (It was estimated that under former Russian President Boris Yeltsin, more than 20,000 regional laws were passed without the Kremlin's knowledge.) Putin created seven federal districts that each had its own federal representative appointed by the president. Within his first year in power, Putin had assumed direct control of the overall administration of the country. Of course, this created disarray and fear among Russia's governors, whose resistance prompted Putin to scrap gubernatorial elections and handpick each instead.

Putin then began removing Yeltsin supporters from their influential positions in the government and big business, even though the "Old Guard" had helped Putin ascend to the presidency. In a radical shake-up in 2001, Putin ditched a slew of ministers who had been loyal to Yeltsin -- including the defense, interior, atomic energy and security ministers -- and began building his own team. Since the Cabinet had only been in place under Putin for a year, this move was unexpected and left people wondering how much further Putin would purge the government. Moreover, the shake-up revealed a theme: Putin's team would consist mostly of former security officials (customarily KGB, like Putin) and people who served with Putin in St. Petersburg's regional government (nicknamed the Petersburgers). The new president was placing people he had known and trusted in the past, as well as those who thought like him, in important posts.

But just as the government got comfortable under Putin, he began a new series of moves meant to solidify his hold on power and keep everyone guessing. Putin shook up the government again in 2004, naming the relatively unknown Fradkov as prime minister. Fradkov is neither a Petersburger nor a former spook; he is a banker allied to an oligarchic clan previously barred from the Kremlin. Putin had broken the mold again by creating a new group of technocrats faithful to him and completely unbalancing the recently rebalanced oligarchic power structure. Of course, the technocrats could not get too comfortable either, as illustrated by Putin's recent decision to replace Fradkov with new Prime Minister Viktor Zubkov.

The group Putin has most famously targeted is the oligarchs who rose to power by rallying behind Yeltsin and his politicians. In return, Yeltsin allowed the oligarchs to usurp many state assets in the early 1990s. Putin saw the oligarchs' rise and influence as a threat to Russia's national security, and early in his presidency, the oligarchs realized they were the next logical target for Putin's purges.

Not long before Putin's re-election, there was doubt about who wielded more power in Russia: the president or the most powerful of the oligarchs -- Mikhail Khodorkovsky. A string of investigations and criminal charges diminished Khodorkovsky, his lieutenants and his giant oil firm Yukos. By mid-2005, Khodorkovsky was sitting in jail with a decade-long sentence and Yukos was being swallowed piece by piece by Putin's state-controlled energy champions Gazprom and Rosneft.

Other oligarchs fled after their initial clashes with Putin, such as billionaire Boris Berezovsky, a dominant economic force who controlled auto manufacturer Avtovaz, oil firm Sibneft and the airline Aeroflot. Some became very friendly with the Kremlin and Putin, willingly selling their valuable assets to state-controlled groups. For example, Roman Abramovich sold his oil firm Sibneft -- after acquiring Berezovsky's stake -- to state natural gas behemoth Gazprom in 2005.

During his first year in power, Putin also began eyeing the military for complete restructuring -- something that horrified military leaders, who historically had enjoyed much political power. But the sinking of the Kursk submarine in 2000 and the military's inability to get the Chechen insurgency in hand were national embarrassments for Russia, and Putin took them as clues that the military had a huge overhaul coming its way. The problem was that the military had largely decayed, not just in its capabilities but also in its foresight, since quite a bit of research and development had been abandoned. Also, the chaos surrounding the fall of the Soviet Union in the early 1990s left Russia with a military that was not only unaffordable but also in pieces and scattered around other former Soviet states. Russia's military was highly convoluted, backward and utterly unorganized -- leaving it scrambling to gain any control, much less to have a strategic mindset.

The first sign of restructuring came in 2001, when Putin appointed the first civilian Russian defense minister: Sergei Ivanov. Though this outraged and confused the military leaders, there was no uprising against Ivanov because he and Putin were backed by the Russian Federal Security Service. The military establishment feared Ivanov and allowed Putin to begin restructuring the military and defense establishment.

Ivanov began reorganizing and purging the military's top posts and defense-related companies, reining in much corruption and unprofessionalism. The glut of high-ranking officers was scaled back, allowing Putin and Ivanov more control. Ivanov also began scaling back the countless defense manufacturers, vertically integrating them into large national champions -- such as Rosoboronexport and United Aircraft Corp. -- with a clear focus on specific projects and on functioning efficiently, maximizing productivity and quality, and minimizing waste and corruption. Also, Russia began actually pouring funds back into these defense companies, thus reviving manufacturing and production. This allowed for more military equipment, along with some new gadgets, such as the ballistic missile submarine Yuri Dolgoruky.

This has been one of the slowest changes Putin has had to make, though the military is one of Russia's most difficult, largest and most important sectors. Furthermore, Putin must illustrate that Russia is not trying to return to the Soviet military model but is planning and forming a modern military. This is not to say that the military is back to its former glory, but its terrible erosion and decline has been blocked and the turnaround is under way.

 

The Backlash?

Many ask where the backlash against Putin is. Those who have been hung out to dry are upset, but either Putin has masterfully intimidated them into silence or they have been forcefully silenced. This was seen recently in the takeover of energy company Russneft, whose owner, Mikhail Gutseriev, silently fled to Turkey and then the United Kingdom after charges were brought against him in August.

Moreover, the Russian people and many within government institutions have seen some very good things come out of Putin's consolidation of power. For example, the masses have seen Russia's abundant petrodollars pouring into social programs and construction projects, while the military has been kept content with new equipment. Many of these perks seem like quick fixes, but they have held off countermovements and revolutions thus far, and Putin's popularity within Russia exceeds 80 percent.

With each sweeping move, Putin has shown that Russia's decline is no more. This does not mean he is done, though. As Putin showed by appointing Zubkov as prime minister, he still has plenty of tricks up his sleeve, and there are still certain geopolitical imperatives for Russia's resurgence. Putin's possible moves include:

Further purges of the Kremlin's positions and people

Balancing or wiping out the increasingly dangerous competition among the Russian energy companies

Purging the highly tangled banking sector and pulling it directly under Kremlin control

Consolidating the vast remaining companies in the defense industry

Creating "national champions" outside of energy and defense, such as auto manufacturing, minerals, metals, diamonds and gold

Clearing out the rest of the Caucasus militancy

Breaking down ethnically autonomous regions, such as Bashkortostan and Tatarstan

Overall, Putin's moves have done what he wanted most: made Russia impossible to ignore. Though Russia has made quite a bit of noise since Putin came to power, much more is yet to come. But no matter what unexpected moves occur, Putin's path for Russia is clear, and he is determined to blow through all the commotion to keep the country's focus forward. Putin is definitely in control, and he will remain in charge whether or not he runs for re-election in 2008. Regardless of how much real progress his shake-ups are creating for Russia, the perception that Putin is creating a strong and intimidating Russia has made the country matter once again.

With the European Union divided and faltering as a global power, in the near term Moscow will turn its attention to China, India and other non-European actors, which all have reasons of their own to work with Russia.

Nevertheless,  the Kremlin will not abandon Europe as a potential ally and believes that the core geopolitical and national interests of major continental European powers (such as France, Germany, Spain and eventually Italy) would draw them into alliance with Russia - a continental power - and away from the United States, which is perceived as an aggressive sea power whose core interests call for a weakening of the Continent. This belief will drive Moscow to continue its collaboration particularly with Germany.

Meanwhile, Russia will continue to build relations with other states that pose current or potential challenges to the United States - particularly Iran, under newly elected President Mahmoud Ahmadinejad, as well as India, Brazil, and Venezuela.

In Moldova, Ukraine, Georgia and Kyrgyzstan, the governments will face increasingly urgent political and economic issues, highlighting the fact that the challenges of regime change do not end with the actual change of regime.

There will be further instability in Uzbekistan and Tajikistan, where President Imomali Rakhmonov probably will see resistance developing from within his own government and outside by Islamists and pro-Western groups alike. The United States is coming to the conclusion that it needs to pursue regime change sooner rather than later in Uzbekistan, and it could do the same in Tajikistan. Competition for influence in the Caspian Sea will increase, with the United States continuing to assert its presence -and Russia and Iran generating the primary resistance.

The Communist Party is likely finished in Russia; it will not be the driving force. And in the longer term, a new, anti-Western leading force will emerge.  The next regime will probably be religion-oriented, with the Russian Orthodox Church taking a leading role, joined by moderates from other large religious traditions in Russia, such as Islam and Buddhism. Also, it will probably be a very conservative regime, resting on the foundation of a production economy, with low-paid workers, intellectuals and peasants as well as those dependent on social benefits.

As the largest continental power and chief influence over Eurasia, Russia cannot escape its geopolitical fate: to maintain its territory by fighting seafaring powers (the United States, the United Kingdom and Japan) looking to assert influence in the strategically valuable Eurasian region. Russia and its immediate neighbors -within whose borders Russia has direct security interests -happen to be located in a very strategic area. If Russia disagrees with the U.S., U.K. and Japanese visions of its future and that of its neighbors, then Russia will have to fight. It will probably join forces with other continental powers—Germany, China and India.

Similar struggles between pro- and anti-Western forces will take place in all FSU countries this decade, with Muslim FSU countries also experiencing an upsurge in Islamist militancy and radicalism, which is attractive to the impoverished. The Islamist force with the most potential to succeed is not a militant group, such as the Islamic Movement of Turkestan, militant groups have drawn the attention of intelligence and security services and are thus more likely to be crushed. A radical organization called Hizb ut-Tahrir, which is not militant in nature, could avoid defeat as it spreads the message of overthrowing secular regimes in Central Asia during the coming decade.

As in Russia’s case, various outcomes are possible in these countries, from the disintegration of some states to armed conflict in others. In the end, when a reversed, militarily and politically stronger Russia emerges sometime in the next decade, some FSU nations will realign themselves with Russia while others will remain in the pro-U.S. camp.

This would not be “the end of the fall” in terms of the Russian and FSU economic crisis. The region already is in freefall, and nothing can stop that immediately or even in 5 years.

 

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