By Luke Rodeheffer, an analyst at Global Risk Insights
As Russia continues into its second decade under Putin’s leadership, and questions of his successor are swirling, the question of how Russia has been governed under Putin’s network has become pertinent.
In the book Can Russia Modernize?: Sistema, Power Networks, and Informal Governance, Alena V. Ledeneva, a professor of Politics at University College London, provides the most comprehensive study available of the informal power networks in Russia, penetrating and interlinking the spheres of politics, governance, and economy.
Ledeneva traces the development of informal power networks, or sistema, to the Soviet period, when these networks used informal influence to gather and distribute resources within the planned economy, and describes their evolution in post-Soviet Russia under Boris Yeltsin and Putin.
The author’s research details the rise of Putin’s power network from his time as a KGB officer and a member of the mayoral administration in St. Petersburg to his time in the Kremlin, when he began to appoint former friends and colleagues, particularly siloviki, or security service employees, to positions of power. A decade and a half later, these elite networks now dominate the Russian state and strategic industries, forming the pinnacle of a complex web of informal networks.
Putin’s elite reversed the trend of “state capture” – the takeover of the state by private interests that had characterized the 1990s – with the takeover of businesses by state officials. Ledeneva’s research demonstrates that raiding private companies by manipulating laws and gathering shares, the appointment of Putin elites on company boards, and the increase in state-controlled shares at large companies have become the tools of choice for increasing the power of Putin’s sistema.
The book also discusses how informal networks function and dominate: in addition to power access, the core modus operandi of sistema is the distribution of kickbacks and informal income, which has played a major role in the formation of Russia’s nascent middle class. In addition to sharing spoils, the glue that keeps the system together is fear: kompromat, or the collection of compromising information on one’s subalterns and rivals, ensures loyalty and serves as a useful weapon in times of confrontation.
Concomitant with the spread of Putin’s sistema is the growth of the Russian state’s role in the economy, particularly in strategic industries like oil and gas. The logic of sistema brings with it a natural reflex to increase state influence to solve any problem, and the use of strategic industries, particularly in the energy sector, for the pursuit of Russian foreign policy goals is predicated by formal and informal state control.
As a result, Ledeneva notes, Putin’s regime has also been characterized by a dramatic rise in the size of the bureaucracy at all levels of governance, with the number of federal officials reaching over half a million. The 2,000-strong Presidential Administration serves as the lynchpin of the state, manipulating the political system, media, and judiciary.
The consequences of this all-encompassing system have been catastrophic for Russia’s entrepreneurial climate: a mere 2% of Russians surveyed by the Global Entrepreneurial Survey indicated an interest in entrepreneurial activity, one of the lowest numbers in the world. These informal power networks have also destroyed any chance of an independent judiciary. Figures from 2012 indicate that 99.3% of individuals brought to trial in Russian courts are found guilty as charged, a result of manipulation and the selective appointment of judicial officials.
Even modernization projects such as Skolkovo rely on the state’s use of informal networks to force Russian companies into participation while allowing officials to enrich themselves, further demonstrating the difficulty of modernizing sistema. All the while, state elites are whisked to the Kremlin in luxury BMWs from their mansions in Moscow’s suburbs, while outside of Moscow, officials are dispatched by helicopter to solve problems in regions lacking paved roads.
As the problems associated with the brazenness and corruption of informal governance mount, so too does the desire to bring an end to the system. Yet the system has become omnipotent: one businessman glumly notes, “everyone is fed up with Putin’s sistema, but there is no way out of it.” Ledeneva notes that the pervasiveness of these power networks is so great that only during times of political stability and economic growth is there a chance for them to slowly be dismantled.
Unfortunately for Russia, the window of opportunity is rapidly closing: political stability is fading as Putin’s popularity continues to slowly sink and ethnic conflict spirals out of control. Even more ominous are warnings from the Economic Ministry of economic sclerosis and stagnation, indicating that the era of rapid economic growth has clearly come to an end. Instead of targeting sistema, Putin has allowed it to become deeply entrenched within Russia’s economy and state, and there is little doubt that the elites would be willing to let Putin himself fall before sacrificing own privilege.
As Professor Ledeneva notes regarding sistema in her conclusion, “its leader is also its hostage.“ Can Russia Modernise? is essential reading, not only for anyone interested in Putin’s regime, but for those seeking to understand the interplay between politics and business in Russia.