Is President Vladimir Putin serious about rescuing Russia?

By Gwynne Dyer

LONDON (JP): "It is an attempt at Communist and political revenge," said Anatoly Chubais, head of the electricity monopoly United Energy System, Russia's second largest company, when the parliamentary Audit Chamber announced on July 14 that he was under investigation for criminal activity. Maybe it is -- but it could also be a sign that President Vladimir Putin is serious about saving Russia.

Russia's core problem is the political corruption and legal anarchy that have allowed a handful of immensely rich and powerful "oligarchs" to loot the economy and control the political process. Former President Boris Yeltsin worked hand in hand with these men, and so did Chubais, who is widely believed to have made countless insider deals while he was in charge of the post-Soviet privatization program.

Vladimir Putin owes his presidency to Yeltsin (his first act as president was to give Yeltsin amnesty for all the crimes he might have committed), so nobody expected him to move decisively against the oligarchs. And for the first four months of his term, Putin lived down to expectations.

Some tax reforms started making their way through the Duma, together with legal changes to bring the regional governors (many of whom were behaving like independent potentates) under control. But the only oligarch who had any problems was media mogul Vladimir Gusinsky, whose NTV television channel, Sevodnya daily newspaper and Itogi news magazine have been outspoken critics of government policy.

Gusinsky is no saint, but the constant raids on his MediaMost headquarters by gun-wielding tax police, followed by his arrest and brief imprisonment last month, just looked like political harassment by Putin. Then, however, the pattern changed dramatically.

On July 11 charges were laid against Vagit Alekperov, chairman of Lukoil, Russia's largest oil company, for tax evasion. On the same day, Vladimir Potanin, who controls one of the world's biggest nickel producers, Norilsk Nickel, was asked by the state prosecutor's office to make a voluntary payment of US$140 million to the government to atone for buying Norilsk at a knock-down price at the height of the mid-90s privatizations.

On July 12, the head of the tax police charged that Avtovaz, Russia's largest car manufacturer, had "concealed huge sums" from the state. This was astonishing, as Avtovaz is generally believed to be linked with the biggest oligarch of all, Boris Berezovsky, whose support was vital to Yeltsin, and to Putin's own rise to power.

Then on Friday came the investigation of Chubais, who is charged with having sold more than 15 percent of UES's shares to foreigners during the privatization process despite legislation restricting them to Russian investors. Could it be that Vladimir Putin is really trying to turn the ship of state around?

If so, it will be a monumental task, for the rot has gone very deep -- so deep, in fact, that Russia's population is now shrinking faster than any other country in the world. The chaos of the past decade has been so bad that a quarter of young Russian women now say that they never intend to have children, while the average life span has plummeted by ten years.

Today's Russia still has 146 million people, but if current trends persist, the population will fall to only 90 million in forty years' time. As Putin told the Duma (parliament) in his "state of the nation" address on July 8, "We face the real danger of becoming a senile nation."

Meanwhile, many ordinary Russians now worry about where their next meal is coming from. In only eight years, the incomes of the richest fifth of Russians have swollen from 31 percent to 48 percent of total national income, while the incomes of the poorest fifth have shrunk from a 12 percent share to only 6 percent. The gulf between the richest and the poorest is already wider than in any other industrial country except, perhaps, the United States.

So how could one man -- even a man with the sweeping powers of the Russian presidency -- turn all that around?

It could certainly be done in theory. If Putin really enforced the law impartially, he would also be halfway to fixing the economy. Russia is still a country with immense human and natural resources, needing only a stable and fair legal environment to begin prospering. And if the economy were fixed, even the collapse in the population might be slowed.

Is Putin free to act like that? Perhaps, for he isn't as beholden to Yeltsin's "family" as he seems. The oligarchs who flourished under Yeltsin and backed his bid for a second presidential term in 1996 threw their support behind Putin last year because he seemed the safest bet to succeed Yeltsin. But now Putin has the power, and can use it as he wishes.

The Western media's general response to last week's upheavals has been to fret about the rise of a "new tsar" and the resurgence of Russia's authoritarian traditions. They may be right, for Putin has a KGB background, he cynically launched the second Chechen war as a way of building a reputation as a tough patriot, and his manner is ... well, authoritarian. But they may also be wrong.

Russia urgently needs to establish the rule of law after the venal chaos of the Yeltsin years, and all the steps Putin has taken so far are a logical part of that process. It remains to be seen whether he will act with equal determination against Boris Berezovsky and other tycoons who backed his rise to power, notably Roman Abramovich, head of the oil giant Sibneft. But it is too early to dismiss all this as merely the vengeful actions of a would-be tyrant.