Moscow, December 25th, 1991 (50 page)

Every sector of society feels the pain. Farms and factories lose their subsidies and cannot buy raw materials. In the first six months of rampant capitalism national income falls 20 percent, creating pressure on the Yeltsin team to reverse course. When Deputy Prime Minister Yegor Gaidar brings in a single exchange rate, the result is a collapse of the ruble and a huge demand for U.S. dollars to protect against inflation.

In March 1992, agitated by rumors of a global conspiracy to strangle Russian industry by liberalizing raw material prices, the Russian parliament blocks a plan to free domestic oil prices. Entrepreneurs who have acquired export licenses are able to continue buying Russian oil for next to nothing and sell it abroad for dollars. It is the start of a process that will lead to the emergence of the oligarchs.

Privatization minister Anatoly Chubais ends the state monopoly in property ownership with the largest privatization program in the history of the world. Ownership shares given to factory workers under privatization laws drawn up in collaboration with the International Finance Corporation in Washington are snapped up by industrial directors, most of them former stalwarts of the party, who become wealthy capitalists overnight. (E. Wayne Merry, head of the U.S. embassy political section from 1991 to 1994, complains to Washington that America’s “evangelical” attempt to remold Russia in its own image is enabling the rise of the oligarchs and initiating an era of crime and economic destruction.) Many of the new rich send their money abroad in hard currency for safekeeping. In the first two years of Russian independence, the Central Bank of Russia estimates that the flow of capital out of the country reaches $100 billion, more than the combined total of inward investment and international aid.

The nouveau riche gain a reputation for throwing their money around, spawning new anecdotes: A “New Russian�� asks another how much he paid for his Rolex. On being told $5,000, he retorts scornfully, “I know where you can get one for $6,000.” Another anecdote concerns an IMF official who moans that “everything the communists told us about communism was a lie. Unfortunately, everything the communists told us about capitalism turned out to be true.” One of the first Russian billionaires is Yelena Baturina, who runs a construction company. She is the wife of Yury Luzhkov, who becomes Moscow’s mayor in 1992 and oversees a two-decade building boom.

The common Russian perception of Yeltsin’s economic team is expressed by Alexander Solzhenitsyn, who returns from exile in the United States three years after the end of the Soviet Union. The writer and Nobel Laureate says that Gaidar has “thrown into poverty tens of millions of his compatriots, wrecking their savings” and that Chubais enacted privatization “with the same blind madness, the same destructive haste as the nationalization of 1917—18 and the collectivization of 1930.”
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Eight weeks before his death in 2009, in an interview in Moscow for this book, Gaidar said he had no regrets about the decisions he made in December 1991, as they were absolutely necessary. “People were awaiting food catastrophe, and there was a danger of a breakdown in energy supply. Only by freeing prices did food return to the shops.” He admitted some tactical mistakes in the transition from a command economy to a free market, “but strategically I think we made the right decision to avoid a humanitarian catastrophe in a nuclear country.”

In the postcommunist chaos few escape the rapacious demands of the ascendant Russian
mafiya.
A financial report prepared for Yeltsin in his first year finds that four out of five of the banks and large private enterprises in Russian cities are paying more than 10 percent of their revenues to organized crime. Even smalltime street hawkers are victims. “For some time in 1992 we hang out at Arbat selling stuff,” recalls Olga Perova. “Local gangsters protect us so that we won’t get robbed, and we pay them kickbacks.”
¹⁴
Contract killings became common. In 1993, 123 bank employees are gunned down or blown up. Privatization of state apartments results in a particularly ugly type of crime: Pensioners are persuaded to sell their living space and stay on rent free, and then are pushed under a bus.

To Gorbachev all this is confirmation that he was correct to oppose Yeltsin in breaking up the old order so brutally. He complains that the bloody shoot-outs in Moscow are worse than those in Chicago during the prohibition era and that the outflow of billions of dollars deposited in foreign banks to await the arrival of their gangster owners is made possible with the connivance, or inertia, of Yeltsin’s government. “Having beaten his way to power,” Gorbachev jibes in his 1995 memoir, “Yeltsin instantly forgot his wrathful speeches against abuses and allowed his associates to indulge in corruption and privileges such as the communist
nomenklatura
had never dreamed of.”

As living standards plummet, deputies in the Russian Supreme Soviet seethe with discontent. The shock therapy is increasingly seen as a Western imposition. Much anger is directed at the American and European experts who commute to Moscow to peddle their advice to the new government. The speaker, Ruslan Khasbulatov, attacks the “vile” monetarist policy imposed by the Americans. The demagogue Vladimir Zhirinovsky courts populist support by calling the United States “an empire of evil, the nucleus of hell” that conspires to rule the world.

Yeltsin resists the domestic clamor to restore subsidies and fix prices, but in December 1992 he is obliged to dismiss Gaidar from his government and replace him with Viktor Chernomyrdin, a politician more sympathetic to the plight of state industry, though Chernomyrdin soon finds that Gaidar’s reforms have gone too far for the reintroduction of price controls on food items. In a few months Gaidar has managed to smash the state planning system and establish a market economy in a country where civil society hardly existed and initiative had been crushed for the best part of a century.

The volatile Russian president becomes so depressed at the setbacks that he contemplates suicide. On December 9, 1992, he locks himself inside the overheated bathhouse at Barvikha-4 and is only saved from suffocation by Korzhakov, who breaks down the door and pulls him out. On another occasion in his Kremlin office, he produces a pistol given him by his security minister, Viktor Barannikov—before Yeltsin sacked him for corruption—and threatens to shoot himself. Aides persuade him not to be foolish. He doesn’t pull the trigger. The weapon, however, is not lethal: Korzhakov has taken the precaution of boiling the bullets in water to make them harmless.
¹⁵

In the Supreme Soviet the Russian president’s enemies proliferate, and the communists make up lost ground. Nevertheless, a motion to impeach Yeltsin fails by a narrow margin. “This means that the Russian people do not after all want to go back to the bright communist future,” observes Gaidar. But the parliament continues to pass antireform measures and mobilize against Yeltsin. It decks itself out in red flags and anarchist and fascist banners and stockpiles arms. It elects Rutskoy as provisional Russian president, and he names a new government. Russia once again faces a showdown between the White House and the Kremlin. The crisis comes to a head on September 21, 1993, when Yeltsin issues a decree dissolving the parliament. Armed White House “defenders,” many of them neo-Stalinists and protofascists, begin roaming the streets to show their defiance of the order, some in Cossack high hats and belts. In the following days they attack the television station and other key buildings in the city. On October 4 pro-Yeltsin army units fire several shells into the upper floors of the barricaded White House, forcing the communists and nationalists to surrender. The brief civil war results in the deaths of more than 150 people. The outcome is a more authoritarian style of presidential government.

Gorbachev blames Yeltsin for the crisis and calls the storming of the White House an act of madness. “The army was ordered to shoot at the people! It was unforgivable!” He charges Yeltsin with laying the groundwork for an absolute monarchy under the guise of a presidential republic.

The Russian constitution is changed in a referendum on December 12, 1993, giving stronger powers to the president. A new and weaker parliament, the Duma, is elected. One of its first acts is to grant an amnesty to the leaders of the White House revolt of October 1993, which Yeltsin endorses for the sake of peace.

The plotters of the August 1991 coup are released from prison without charges, but General Valentin Varennikov insists on standing trial. The case is heard in Moscow in 1994. Gorbachev is called as a witness and gives vent to his feelings about amnesties for coup plotters. “If we react to such crimes as nothing more than a farce, we would have one coup after another,” he declares. “We have already lived through the conspiracy of Belovezh Forest, which finished off the USSR by exploiting the consequences of the August coup. Then we had to live through the bloody events of 3—4 October 1993, when before our very eyes parliament was fired on.... If our future is to be determined by new coup plotters, we will never become a country in which everyone can feel a citizen.”

Varennikov walks free after all charges are dropped and claims that his acquittal is proof of Mikhail Gorbachev’s guilt. In 2008, a year before he dies, the former general presents the case in favor of Stalin in a popular nationwide television project seeking to identify Russia’s greatest historical figures. Stalin wins third place behind Grand Prince Alexander Nevsky of Novgorod and prerevolutionary prime minister Pyotr Stolypin. Neither Yeltsin nor Gorbachev figure in the final twelve.

In December 1994 President Yeltsin, whose outrage at the bloodshed in the Baltics in 1991 helped change Russian history, authorizes a full-scale and brutal invasion of the Russian republic of Chechnya to end its independence from Moscow. Russian forces fight an incompetent and savage war with Chechen guerrillas that destroys the capital of Grozny and results in the deaths of between 30,000 and 100,000 civilians. General Grachev, who ordered the storming of Grozny, reputedly when dead drunk, is sacked by Yeltsin when Russia is defeated, and a peace treaty is concluded in August 1996.

Yeltsin runs for reelection as president of Russia in 1996, amid widespread expectations that he will lose because of a collapse in his popularity and his poor health. He almost puts the election off because of a vote in the Duma on March 15, 1996, to renounce the decision of the Russian Supreme Soviet of December 12, 1991, approving the Belovezh Agreement—which raises questions about the legitimacy of the new Russia. His daughter Tanya helps talk him out of shutting down the Duma and delaying the election for two years, which could provoke a civil war.

His main opponent is Gennady Zyuganov, the candidate of the Russian Communist Party. Zyuganov campaigns to revive the socialist motherland, lumping Yeltsin and Gorbachev together with a world oligarchy as the destroyers of Russia. Convinced that “the country needs Gorbachev,” the former Soviet leader ignores the sage advice of his loyalists and runs as head of the fledgling Social Democratic Party.

The sixty-five-year-old Yeltsin stops drinking, loses weight, and manages to summon up one more great burst of energy to campaign for reelection. American and European leaders troop to Moscow to boost their free-market champion. Yeltsin’s campaign is helped by financial donations from the oligarchs, a timely announcement of a $10 billion loan from the IMF, the anticommunist bias of the television networks, and television advertisements produced with the expert advice of the American PR firm of Ogilvy & Mather. The Russian president wins reelection by 54 percent to Zyuganov’s 40 percent.

Gorbachev is humiliated by his performance in the election. With one section of the population accusing him of betraying socialism in the name of reform, and the other of sabotaging reforms to defend socialism, Gorbachev receives a mere half of 1 percent of the vote. In a further snub, Yeltsin removes his name from the guest list for his inauguration.

In his second term, Yeltsin’s Kremlin court becomes a hive of intrigue. It is a period of political and economic chaos during which Russia’s natural resources are being sold off to favored insiders at fire-sale prices. Yeltsin grows ever more irascible, yields power arbitrarily, and treats his staff abominably. Aides assume that as head of his security, Alexander Korzhakov is monitoring their phone calls, and they communicate with each other only in scribbled notes. Always suspicious of overfamiliarity, Yeltsin drops his preindependence collaborators one by one. He lets Gennady Burbulis go because his grey cardinal is annoyingly appearing every day “in my office, at meetings and receptions, at the dacha, in the steam bath.” Korzhakov survives for five years but is fired after a scandal over election funding. He writes an unflattering book,
Boris Yeltsins: From Dawn to Dusk,
which angers Yeltsin so much they never speak again.

Yeltsin’s first, and only, formal contact with Gorbachev after December 1991 comes seven years later. In 1999 he sends a telegram of sympathy to the sixty-eight-year-old ex-president as Raisa Gorbacheva lies dying of leukemia in University Hospital in Münster, Germany. “I want to express my deep concern for the ordeal that your family is going through,” he writes. “I know well how hard it is to experience the illness of a loved one. More than ever, in moments like these, mutual support, warmth and caring are needed. I wish for you, my esteemed Mikhail Sergeyevich, strength and perseverance, and, for Raisa Maximovna, courage in her struggle against the disease as well as a speedy recovery.”

Gorbachev shows the telegram to his old friend the Italian journalist Giulietto Chiesa as they stroll in a park near the hospital in Münster. “These are kind words, a very nice gesture,” he remarks.
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The illness of Raisa touches a chord in Russia, especially as she is struck down by a disease with which her charitable work is associated. When Gorbachev asks his staff to approach the new prime minister, Vladimir Putin, for help in getting a passport for Raisa’s sister, Lyudmila, so that she can be available in Germany to become a bone marrow donor for Raisa, Putin’s response is instantaneous.