The shooting on a Moscow street of Forbes Russia editor Paul Klebnikov on July 9th demonstrates the extent to which, despite talk about Russia becoming a normal country, the society is still a hostage to organized crime.
Russia today is not as violent as it was in the mid-1990s when the competition between gangs often led to massacres in city centers in the middle of the day. What this means, however, is that criminality in Russia today is institutionalized. Territory has been divided up so competing interests no longer need to wage war on each other. But these interests are corrupt in themselves and, when threatened with revelations about their operations, they can kill with impunity.
It was this situation that made possible the murder of Paul Klebnikov.
The killing of an American journalist is likely to inspire a temporary flurry of activity on the part of the Russian authorities. The prosecutor general Vladimir Ustinov has announced that he is taking the investigation under his personal control and the police have stated that they expect to have the case solved soon. The problem is not only that such assurances have been repeated numerous times in the past in similar cases with no results but that the lawlessness in Russia is actually necessary to the increasing authoritarianism of the Putin regime. Under conditions of genuine respect for law, not only would criminality be sharply reduced but the Putin regime would have to give up its drive for dictatorial control.
The system of power in Russia today is often described as “managed democracy,” a combination of market dynamism and manipulated politics. Some in the West praise this system but what they invariably miss is that the political manipulation is based on selective prosecution.
Perhaps the best example of the system is the case of Mikhail Khodorkovsky, the main shareholder in the Yukos oil company, who has been arrested on charges of tax evasion and fraud. In an interview with the newspaper Izvestiya, seven hours before he was killed, Klebnikov compared the charges against Yukos with the behavior of the Sibneft oil company owned by Roman Abramovich, a Putin favorite. He concluded that in all respects — nonpayment of taxes, non-patriotism and political interests — the record of Sibneft was considerably worse than that of Yukos but Sibneft was prospering whereas Yukos was being driven into bankruptcy. The reason was that Khodorkovsky, unlike Abramovich, had demonstrated independence and, by financing opposition political parties, had contributed to political pluralism.
The lesson of the Khodorkovsky case has been well learned in Russia. Breaking the law is not serious as long as it is accompanied by political conformity.
Now, not only oligarchs but also middle level businessmen, newspaper editors, judges, prosecutors and government officials understand that their sins will be forgiven as long as they do nothing to seriously challenge the regime, which, having taken over the executive branch of government and dominated the legislative and judiciary is concerned to choke off the two remaining sources of potential opposition in business and the press.
The threat of prosecution for economic crimes in Russia today works to enforce conformity the way the threat of political arrest worked in the old Soviet Union.
For this reason, the regime has no incentive to take the steps necessary to prevent contract killings. To do so would work against the legal and moral vacuum that is essential to the regime’s control.
The moral crisis of Russia today is difficult to remedy because it stems from misconceptions about the source of values that Russia shares — at least in part — with the West.
After the fall of the Soviet Union, the “young reformers” in Russia set about to create a market economy but preserved the faith in economic determinism that was fundamental to communist ideology. If the communists held that a classless society would be created by the abolition of private property, the reformers believed that a market-based democracy would emerge automatically as soon as property was put back in private hands. In neither case was there a realization that a genuine free market can only exist within a framework of law.
The handover of state property — the largest peaceful transfer of property in history — proceeded with astonishing speed. Between 1992 and 1997, the regime privatized 77 percent of large and mid-sized enterprises and 82 percent of small shops and retail stores. By the end of 1996, the private sector, which did not exist in 1991, accounted for about 70 percent of GDP.
The process moved so rapidly, however, because it was almost entirely unregulated. New businessmen — often former members of the Soviet nomenklatura or black market operators — bribed government officials and allied themselves with criminal gangs that acted as enforcers and engaged in a ruthless struggle to appropriate the country’s wealth. The result was that by 1996, Russia was dominated by a small group of super billionaires, the population was impoverished and the economy was on the verge of collapse.
Between 1992 and 1997, Russia’s GDP fell by half. This did not happen even under German occupation. Male life expectancy fell by more than six years to reach 57, the lowest in the industrial world. Acute stress, engendered in part by the spectacle of massive stealing and criminalization, led in the 1990s to an estimated six million premature deaths as Russians found it impossible to adapt to or accept the new social reality growing up around them.
By the time the new presidential elections approached in 1999, it was a foregone conclusion that there would be a reexamination of privatization and that a new leadership would hold the Yeltsin leadership to account. In September, 1999, however, Russian apartment buildings were blown up in terrorist attacks. In retaliation, Russia launched the Second Chechen War. Vladimir Putin, as prime minister and Yeltsin’s handpicked successor, was put in charge of the war and, on a wave of newfound popularity, was elected president. Yeltsin and his family were given a blanket pardon for any crimes committed and all talk of the redistribution of property was dropped.
In the four years of his rule, Putin, a former head of the FSB, has promoted veterans of the FSB and the military into positions of power. They now constitute 25 percent of the country’s senior officials. Increasingly, they have centralized power in the hands of Putin and his close entourage, ruling over a quiescent population that is unwilling to show the slightest independence for fear of being prosecuted for the crimes of the present or the past.
As he lay dying, Klebnikov could not think of who would have wanted to kill him, but it is a likely bet that the person who ordered his assassination figures in the list of the 100 richest persons in Russia printed in the May issue of Forbes. The article not only identified these persons, but also included detailed estimates of their assets and descriptions of how they acquired their wealth.
In a normal country, an article like this would, of course, have been innocuous. But in Russia the rich have no desire to call attention to themselves. In fact, the Putin system suits them perfectly. They have no intention of interfering with the regime’s increasingly dictatorial control because a corollary of the freedom from prosecution for those who don’t interfere in politics is the freedom that they have to eliminate those who question the sources of their ill-gotten gains.
Up until now, the Putin regime’s complacency toward organized crime and the slow strangulation of political pluralism that it facilitates have evoked little reaction from the United States. The murder of Paul Klebnikov needs to change that policy. American reporters have enjoyed seeming immunity from the attacks that have made Russia “one of the world’s deadliest countries for journalists.” If the United States does not react forcefully, even that limited immunity will be gone. At the same time, the Russians will do nothing to find Klebnikov’s murderers and a system that weds Russia’s future to dictatorship and organized crime will be confirmed.