Volume 9 Number 4

Fall 2000

Constitutional Watch
     A country-by-country update on constitutional politics in Eastern Europe and the ex-USSR

Russia - Over the course of the summer, President Vladimir Putin began to put in place a new legal and administrative framework designed to restore a "vertical" system of power in Russia and restrict the powers of the influential regional governors. After extensive debate, in late July, the Federation Council finally approved several laws proposed by Putin in the spring to reform center-regional relations. (See Russia Update, EECR, Vol. 9, No. 3, Summer 2000.) The first of these will replace the governors and speakers of regional legislatures, who currently serve in the Federation Council, with full-time delegates. One delegate is to be selected by the governor and one by the regional legislature, and the appointees are to be subject to recall. In a concession to the incumbents, the new law will not go into effect until either the next election cycle or the end of 2001, whichever comes first in a given region. Despite lively debate, the final law was adopted by the Federation Council by a vote of 119 to 18, as most governors apparently concluded that any veto would be overridden by the Duma. In addition, two other laws providing for the replacement of regional governors by the president and of local administrators (mayors) by the governor also passed in July. However, the final bill on dismissing governors was considerably weaker than the initial Kremlin draft, since Putin agreed to amendments that would make the process of dismissing governors more tightly controlled by courts.

As a partial consolation for being dispossessed from the Federation Council, on September 1, Putin signed a decree creating a new institution, the State Council of the Russian Federation comprising the governors and heads of republics of Russia’s 89 constituent units. The powers of the new State Council remained vague, though it seemed chiefly advisory in nature. The full State Council would only meet every three months, but Putin also created a presidium to meet more frequently. The Presidium will consist of one governor (or republican president) from each of the seven federal districts, newly created by Putin in the spring, and would rotate semiannually. In September, Kremlin officials suggested that the governors on the Presidium could set an example to their fellow governors by resigning early from the Federation Council, rather than serving out their terms as provided for in the final Federation Council reform bill.

Outside Moscow, the seven presidential representatives (or governors-general) to the new federal districts spent most of the summer organizing their staffs and establishing their turf. Many federal ministries, including the Ministry of Interior and the federal security services (FSB), have restructured their field operations to better align with the new federal district structures. Control over the security apparatus at the district level is an important tool for the governors-generals, especially since the districts themselves coincide with Russia’s internal military districts. Governors-general have also been hiring inspectors to supervise federal activities in each region. These inspectors will essentially take the place of the old presidential representatives in each region, though they will have the enhanced authority of the governors-general at their disposal. In the Volga region, Governor-General Sergei Kiriyenko hired 25 district inspectors through an open Internet-based competition. Over 5,000 applicants underwent a complex screening procedure developed by psychologists at Moscow University, and 120 semifinalists were brought to the Nizhni Novgorod oblast for a battery of interviews and simulations. The open competition was one of the first ever for a high-level federal position, though a federal law in 1995 and presidential decree in 1996 had mandated a shift toward competitive hiring for civil service posts. One of the inspectors hired was Marsel Galimardanov, who became inspector for the republic of Tatarstan. Boris Yeltsin had never named a presidential representative to Tatarstan, and Galimardanov’s appointment as inspector was another sign of Putin’s new policy of denying special treatment to the ethnic republics.

Certain chapters in the new tax code, approved by parliament in July, will also diminish the regional governors’ autonomy. The new code had created a single unified social tax to take the place of separate payments to the pension fund, social-insurance fund, and medical-insurance fund. The regional administrative branches for these extrabudgetary funds were often controlled by allies of the regional governors. In addition, the new code cut the turnover tax on enterprises by 75 percent. This tax, which had financed regional road and housing budgets, is to be eliminated completely by 2003. Finally, the new code stipulates that the value-added tax (VAT), which was previously shared with regions on a negotiated basis, is to be collected in its entirety by the center. In practice, this reform may make it impossible for regions to offer tax breaks to potential investors by forgiving the regional share of the VAT (a bill to permit such breaks was defeated by the Duma on October 27). Taken together, the changes in the new code will produce a dramatic redirection of revenue flows to the center when it goes into effect on January 1, 2001. In return, Prime Minister Mikhail Kasyanov pledged that revenues in the consolidated budget would be split evenly between the federal and regional levels, though governors complained that the draft budget submitted by the government in the fall failed to honor this agreement.

The regional governors mounted little effective resistance against the erosion of their powers. The apparent leaders of regional opposition to the Kremlin include the president of Chuvashia, Nikolai Federov; the governor of Sverdlovsk, Eduard Rossel; and the president of Bashkiria, Murmaza Rakhimov. Federov, a former federal justice minister, has been highly critical of the new "vertical power" system. Rossel and Rakhimov, more recently, spoke out directly against the ability of the regional presidential representatives to appoint local security officials without the agreement of local officials. Rossel’s comments rapidly brought him a sharp rebuke from the presidential representative for the Urals region, Peter Latyshev. Speaking a day later, to a group of industrialists in Sverdlovsk Oblast, Latyshev warned Rossel that if he was determined to oppose the president’s policy, "unspecified measures would be taken." What such measures might be is not clear, but the governors’ position is looking increasingly precarious, even before they lose their immunity from prosecution in January 2002, when they are all due to stand down from the Federation Council. For his part, on October 26, Rakhimov issued a statement claiming that he had no differences with the presidential administration or with the president’s representative in the region.

The recent round of elections of regional chief executives has also presented the Kremlin with an opportunity to gain greater influence in the regions. Elections are being held in 30 of the 89 subjects of the federation between October and December, and these elections are emerging as the Kremlin’s preferred method for attempting to oust uncooperative governors. According to Kommersant-Daily, governors in Kaliningrad, Bryansk, and Voronezh and the president of the Republic of Mari El were at the top of the administration’s hit list. For those governors and other candidates not so obviously out of favor, the search for Kremlin endorsement has become an important part of the electoral process. In Perm, for example, where elections were held on December 3, the sitting governor, Gennady Igumnov, withdrew his candidacy, despite a significant lead in the polls, following a meeting with officials of the presidential administration. (He later changed his mind when it became known that a criminal investigation into the activities of his daughter had been instigated by the mayor of Perm, Yuri Trumnev, in whose favor Igumnov had withdrawn. Trumnev ultimately won the election.)

The Kremlin’s role was similarly murky in the apparent ouster of the sitting governor of Kursk Oblast, Alexander Rutskoi. Rutskoi was a key supporter of Yeltsin during the 1991 coup and became his vice president, only to lead the opposition to him in October 1993. After being amnestied and released from jail, Rutskoi reentered politics and, in 1996, was elected governor of Kursk Oblast. Going into the elections in Kursk on October 22, Rutskoi was strongly favored to gain reelection to a second term. However, in the days running up to the vote, the head of the Kursk branch of the FSB, Viktor Surzhikov, who was also running for the office among others, challenged the legality of Rutskoi’s candidacy, alleging inaccuracies in Rutskoi’s financial declaration and abuse of the regional administrative resources in the campaign. With only 13 hours to go until the polls opened, an oblast court declared Rutskoi’s candidacy invalid. Security forces surrounded the local television station and prevented Rutskoi from gaining access to any broadcast outlet from which he could orchestrate a boycott of the election, which went ahead peacefully the following day, with 52 percent of the electorate voting. Surzhikov survived the first round but was defeated by the Communist deputy in the Duma, Alexander Mikhailov, in a runoff on November 5. The Kursk outcome demonstrated that while the Kremlin may have had a hand in removing Rutskoi from office it was unable to replace him with its chosen candidate.

The Rutskoi affair marked the first time that a sitting governor has been struck off the list of candidates for infringements of electoral law. Until now it was assumed that regional governors controlled the courts. The Rutskoi case suggests that this may no longer be an appropriate assumption. While Putin insisted the Kursk decision was a judicial affair over which he had no influence, the federal government has a variety of tools at its disposal for undermining governors facing reelection. Less than a week after the Kursk episode, the governor of Chukotka, Alexander Nazarov, was summoned to Moscow for investigation by federal tax police.

Nazarov, who had planned to seek reelection, withdrew from the race a little over a week before the December 24 election. Oligarch Roman Abramovich, a Duma deputy from Chukotka and an erstwhile member of Yeltsin’s inner circle, now looks like a shoo-in. Rumor has it that Nazarov will find a key post in an Abramovich administration—perhaps as Abramovich’s representative to the Federation Council.

Results of some of the mid-December gubernatorial elections and run-offs are filtering in. In general, incumbents and Communists appear to have done well. Nikolai Vinogradov was reelected in Vladimir, Oleg Bogomolov in Kurgan, Vladimir Ishaev in Khabarovsk Krai, Anatoly Yefremov in Arkhangelsk, and Yuri Lodkin in Bryansk. Communist incumbents Alexander Chernogorov in Stavropol and Vyacheslav Lyubimov in Ryazan also held onto their seats.

In Kamchatka, local Communist leader Mikhail Mashkovtsev emerged the winner in a runoff election. Communist Alexander Mikhailov won in the Kursk region. Voters in the Komi-Permyak Autonomous Okrug gave the boot to incumbent Nikolai Poluyanov, electing Gennady Savelyev. In other upsets, Ivanovo voters opted for the Communist Duma deputy Vladimir Tikhonov over incumbent Anatoly Golovkov; the electorate in Mari El backed Leonid Markelov over incumbent Vyacheslav Kislitsin; and Kaliningrad voted for Admiral Vladimir Yegorov over Governor Leonid Gorbenko.

Overall, Communists did better than they had in the 1996 elections. They have managed to capture a few more regions, so far winning a total of 12 to 15 of the 34 gubernatorial posts up for grabs.vOn July 28, Putin convened a meeting with a group of 18 of Russia’s top business and financial magnates to much public fanfare. The meeting was mediated by the leader of the Union of Right Forces and a former deputy prime minister, Boris Nemtsov. At the meeting, Putin reportedly laid down the law to the so-called oligarchs, and they in turn reportedly promised to abide by the law in the future. After the meeting, Nemtsov announced that "oligarchs have been done away with in Russia, because no one has gained special terms for himself and everybody is prepared to live by general rules." For his part, Putin reportedly agreed not to reopen the question of the legality of privatizations held during the period from 1994 to 1998. This position was reflected in the October 19 appearance before the Duma of the deputy procurator, Yuri Biryukov. Biryukov confirmed that there would be no further investigation of irregularities in the "loans for shares" privatization of such companies as Norilsk Nickel, Svyazinvest, and Sibneft.

Two businessmen with significant holdings in the mass media, Boris Berezovsky and Vladimir Gusinsky, were not present at the July meeting with Putin and have not signed on to the new entente. In June, Berezovsky dramatically broke with the regime, resigned his seat in the Duma, and issued an appeal to the nation in the form of an open letter also signed by a number of prominent Russians from the media and the arts. The appeal warned that democracy in Russia was in danger and committed Berezovsky and his cosignatories to the formation of a principled political opposition. Berezovsky denounced his fellow "oligarchs" as "timid as rabbits" after their amicable meeting with Putin. However, Berezovsky’s own history as a Kremlin insider during the Yeltsin years makes it difficult for him to play, credibly, a new role as the nation’s democratic conscience. Indeed, in late November, Berezovsky was in self-imposed exile, refusing to heed a summons from the procurator general to return to Russia to answer questions about profit-skimming from Aeroflot.

In addition to owning a range of newspapers and magazines, Berezovsky controls 49 percent of the shares in the main television channel ORT. The station was instrumental in the strong showing of pro-Putin forces in the December elections to the Duma and has been a key pillar of support for Putin himself. As he has moved more openly into the opposition, Berezovsky has also moved to divest himself of his stake in ORT before the government seizes it directly. He proposed establishing a group of a dozen journalists and intellectuals, picked by Berezovsky himself, to act as trustees, managing his holdings in ORT. Each of the trustees would contribute around $100,000 to the capital of a company called Teletrust, which would manage Berezovsky’s shares while still allowing him to contribute financially to ORT.

Berezovsky’s fellow media magnate, Vladimir Gusinsky, has faced more-direct pressure from the Kremlin to divest his media holdings. Gusinsky’s Media-Most group of companies owns, among other properties, NTV, the only national broadcast channel critical of Putin and his administration. Gusinsky was temporarily arrested in July, thereby igniting a widespread scandal. (See Russia Update, EECR, Vol. 9, No. 3, Summer 2000.) Later in the summer, it was revealed that while under arrest, Gusinsky had signed documents that would give control of the Most group to Gazprom. Any sale to Gazprom would put the media properties under government control, since the Russian government is a controlling stakeholder in Gazprom. According to Gazprom, it lent Media-Most $473 million in recent years in return for a 40 percent stake as collateral, and it offered to buy out Gusinsky’s holding for $300 million after Media-Most defaulted on the loan. In September, Gusinsky charged that the sale to Gazprom was the price of his release from jail, and he presented a protocol to the sale signed by Minister of Media Mikhail Lesin guaranteeing that charges against Gusinsky would be dropped after the sale was consummated. Lesin’s role was clearly embarrassing to the government, since it appeared to be part of an orchestrated blackmail of Gusinsky. Prime Minister Kasyanov publicly admonished Lesin for his role but did not remove him from his post.

In late October, Gazprom and Media-Most agreed to an out-of-court settlement through a stock swap that would preserve NTV’s editorial independence. The following week, however, the procurator general’s office announced that it was launching a new criminal investigation into Gusinsky’s business affairs. A Media-Most spokesman accused the procurator’s office of attempting to derail the agreement between Gazprom and Gusinsky. In mid-November, however, a swap did take place. Gusinsky was left with a 35 percent share in Media Most, thus losing control of the company. Shortly thereafter, the new partners were looking about for a foreign investor to take a 25 percent stake in the media empire. Meanwhile, Gusinsky, who left Russia after his release from prison in July, again had a warrant issued for his arrest after refusing to return to Moscow to meet with procurators. Gusinsky now sits in jail in Madrid, arrested on the basis of the Russian warrant. Considered a flight risk, he will remain behind bars pending a decision by the Spanish High Court on extradition.

The government’s hostility to a pluralist media was certainly intensified by the aggressive coverage of the August sinking of the nuclear-powered Kursk submarine. The Russian media were deeply critical of the government’s handling of the disaster, in which the entire crew of 118 perished. Navy officials were condemned for their delay in requesting assistance from Norwegian and British navies to attempt a rescue of the crew, and Putin himself was attacked for failing to interrupt his Black Sea vacation when the crisis broke. Putin’s frustration with the media became apparent during a meeting with family members of the Kursk crew when he blamed the "people on television" for "destroying the army and navy." A new law on the media is being prepared for submission to the Duma.vThe Putin administration continued with the implementation of economic reforms outlined in the so-called Gref plan. The recent focus has been on restructuring the monopolies that dominate the economy. The first in line is the railway monopoly, which looks set to be reorganized along the lines of the seven federal administrative regions. This restructuring would go against the plan proposed by Minister of Railways Nikolai Aksenenko. The reform of the electricity monopoly RAO UES will likely be next. In a major victory for shareholder rights, UES director Anatoli Chubais revised an initial reorganization plan under pressure from foreign investors. If these two restructurings go ahead successfully, the government will be in a stronger position to address the more politically challenging restructuring of the gas giant Gazprom. According to the Gref blueprint, Gazprom’s transport and production divisions are to be spun off into separate organizations.vIn November, Putin submitted to the Duma a draft law on the Constitutional Court that would extend judges’ terms and eliminate the retirement age of 70. Judges’ terms will be extended from 12 to 15 years. The abolition of the age limit will benefit current Court Chairman Marat Baglai, who turns 70 next year, and Justice Tamara Morshakova, who is also nearing retirement age. According to Izvestiia, both justices have been perceived as generally friendly to the Kremlin.

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