Another Original LR Translation: Without Putin

Former Russian Prime Minister Mikhail Kasyanov has a new book out entitled  Without Putin (Bez Putina) in which he carries on an extended dialogue with former NTV pundit Yevgeny Kiselyov.  Novaya Gazeta, whose publishing house is issuing the volume, has published an extended excerpt, and what follows is our staff translation (Dave Essel played no part and is not to be blamed for our errors, of which we would be pleased to be advised). If you are in Russia and want to buy the book, click here for the information.  Note that we’ve added some explanatory material [in brackets] that is not in the original text.

I.  Russia in Default

[LR:  Mikhail M. Kasyanov was deputy minister of finance from 1995 until May 1999, when he became Finance Minister.  The Ministry of Finance is analagous to the U.S. Treasury Department.   A year later he became deputy prime minister, and from May 2000 to February 2004 he was the Prime Minister of the Russian Federation under the newly-elected “President” Vladimir Putin. He is now a leading figure in the “Solidarity” opposition movement that seeks to unseat Vladimir Putin and roll back Putin’s anti-democratic crackdown.  When he sought to run for president against Dima Medvedev, his name was stricken from the ballot and he was placed under investigation for alleged electoral fraud.]

Mikhail Kasyanov

The situation at the beginning of 1998 was unusually tense.  The price of oil had dropped to 12 dollars, but the ruble was not moving down as it should have done.  In May, commenting on a report on the macroeconomic situation by the Board of the Ministry of Finance, I said what I thought was obvious:   “Listen, this means we have no choice but to urgently to devalue the ruble.”  [LR:  Kasyanov’s goal was to avoid default on Russia’s sovereign debt by increasing foreign financial flows with a discounted domestic currency.  This would, of course, heavily burden the pocketbooks of the people of the country.]  They fell on me like a pack of wolves. “How dare you make such a suggestion in the middle of a crisis!?” they shrieked.  But Oleg Vyugin, a fellow deputy finance minister, and I both insisted that an anti-crisis program be implemented immediately.  In particular, we needed a large infusion of cash from the IMF so as to buy time to implement reforms across the board in the public sector.

Yevgeny Kiselyov

Why was so much precious time lost?

Kasyanov

I realized later that although [Central Bank Chairman Sergei] Dubinin had a clear understanding of the nature of the crisis, he was desperately afraid of offending Yeltsin.  After all, the President had promised to create a “hard currency corridor” and to hold the ruble steady.  Dubininwas afraid that if he told the truth, there would be huge pressure to scapegoat him just as had happened to [former Central Bank Chairman Victor] Gerashchenko right after “Black Tuesday” [in 1994, when on Gerashchenko’s watch the ruble lost a quarter of its value in one day]. 

But the Ministry of Finance was soon unable to meet demand for T-bills, and the April data showed a serious shortfall in tax revenues.  The sale of Rosneft collapsed, and the domestic stock market followed suit.  The Central Bank’s FOREX reserves fell to $15 billion. That was big trouble.  In a crisis, it’s absolutely essential for the key ministries to exchange information and coordinate actions, but the exact opposite occurred. We were at each other’s throats. The tax collection rate, the budgetary figures, the deficit, the level of expenditures, the balance of payments, all these were treated like state secrets by the ministries that owned the data.  We would sit together grumbling and quarreling and on the verge of fisticuffs.  It went on day after day like that.  The Prime Minister [Sergei Kirienko] could do nothing with us.  We’d sit for a while like that, then we’d go home.

This of course meant we had only one hope left, a big deal with the IMF.  And such a package, providing credit support worth $22 billion, was in fact worked out jointly with the IMF and World Bank. But that wasn’t actually the hard part. The hard part was convincing the Duma to accept it and to enact the laws that would be required to implement it.  [Finance Minister Mikhail]Zadornov, working with Alexander Zhukov (who at that time headed the Duma’s Budget Committee) gave it their all, and for a while it seemed like the situation was actually under control.

Kiselyov

As I recall there was a special session, and there was the great deal of opposition. And it was the middle of July, and Yeltsin wouldn’t let them go home for the summer.

Kasyanov

Yes. Ultimately, the deputies rejected a number of the key bills that formed the backbone of the implementation package. We had failed!  Two days later the Board of Directors of the IMF met, determined we had not met our obligations, and our chance seemed to evaporate.

Kiselyov

The IMF was between a rock and a hard place. They couldn’t make the loan, and they couldn’t leave us to our fate.

Kasyanov

The IMF is not a political organization, it is a financial organization obliged by basic principles of economics.  But in this case, extreme pressure from the Clinton administration forced their hand, and the money finally came through.  Three days later, we were able to exchange $6 billion in Russian short-term treasuries for long maturity Eurobonds.  This exchange of debt spared us the collapse of the banking system, including Sberbank.  We shut down borrowing, and we got a $4.8 billion cash infusion from the IMF. We backed away from the precipice.

In the beginning of August, things seemed calm enough that a number of government officials felt they could leave Moscow on holiday. Chubais and Dubinin both did so.  And then suddenly the stock market imploded.  Rumors were circulating that the Communists in the Duma would block the next round of anti-crisis measures.  The interbank money market dried up completely.  Crisis borrowing began. [LR:  Today, buoyed by several years of soaring oil prices, Russian debt is about 20% of GDP; at the point Kasyanov describes, it reached a stunning 140%.]

But the next thing I knew, Zadornov told me there was nothing we could do until September, and he sent me off on holiday too.  I left Moscow on Thursday morning, August 13th. That same day George Soros made an announcement that the ruble had to be devalued immediately and that the IMF was underestimating the crisis.  The bottom fell out of the stock market. The next day, Friday, Yeltsin repudiated devaluation and called the Duma into emergency session.  Then things seemed to calm down a bit.

Now, the Ministry of Finance had to carry out joint financial operations with the Central Bank that same day, and before I left I had instructed by staff to carry out these formalities by coordinating with Sergei Aleksashenko at the CB.  But then I get a call, I’m on vacation, and they tell me:  “We can’t reach Aleksashenko or anybody else at the Central Bank.”  I called for myself. Nobody picked up the phone.   I told my guys to get in touch with Zadornov immediately.  Zadornov, however, wasn’t on speaking terms with Dubinin, he would communicate only with Kirienko. Nothing but childish nonsense, you see!  Saturday comes and goes, still no communication. By now, of course, I realize there is a serious problem.  And sure enough, on Sunday I get the call. They’ve made the decision, Russia will default on its debt and devalue the ruble.

II.  NTV

Kasyanov

By the way, speaking of Mr. Stepashin and your favorite child, little NTV, in the two short months while he was prime minister her really did make an effort to help out the NTV shareholders.  In July, the first payment on the Media-Most loan to establish NTV came due.  It was $15 million on a $150-million loan.  And ten days before it was due, [NTV CEO] Vladimir Gusinsky calls me up for a meeting [by then, Kasyanov had been promoted to Minister of Finance]. He was very pushy, and simply said he wasn’t going to pay. Not at all!  When I tried to explain the fact of life regarding a contract, he tells me: “You’re new here, you don’t understand the political contracts that have also been negotiated.”  Then he explained that in exchange for its “cooperation” during the 1996 election, all debts of Media-Most owing to the state had been written off.  I told him he still had to pay.  He got furious and said “you’re about to get a call from the Prime Minister.” 

And would you believe it, he takes out his cell phone and he hooks right up with Stepashin himself. And the next thing you know my office phone rings, and it’s the PM.  And he tells me:  “Think of something. A scandal is the last thing we need right now.”  So I told him:  “Well, if you want me to wipe out the obligation, if you have no problem with that, then that’s what I’ll do. There’ s nothing else I can think of to quiet him down.”  And then he dropped the subject.  I’m sure NTV’s stockholders still hold it against me to this day that I didn’t take such a simple step to make their lives better.  Well, the next day in Gusinsky’s newspaper Today[Cegodnya], an article appears with no byline. It says there are rumors on the street that the new Minister of Finance is taking kickbacks, for which he has now been nicknamed “Misha Two Percent.”

III.  Yukos

Kiselyov

I’ve heard that around the time of his arrest Kodorkhovsky was making noises about supporting legislation that would have permanently fixed the results of the privatization initiative. Is that true? [LR:  Again, Kasyanov had become Prime Minister in May 2000, just after Vladimir Putin’s election to succeed Boris Yeltsin, and would hold the job for three and half years; Khodorkhovsky was arrested in October 2003, on Kasyanov’s watch; Kasyanov himself was out of office within four months of the arrest.]

Kasyanov

Just so!  And just two weeks after that, there came the unfortunate incident* with Mr. Putin in the Kremlin.  Khodorkovsky came up to me at the reception after that meeting and, saying he spoke on behalf of the entire business community, he proposed terminating all claims relating to the privatizations in the 1990s.  But in exchange, a one-time tax on the increase in value would be levied, so the owners would compensate the government for their value.  And so that the payments are not eaten up by corruption, they should be collected in a special trust fund devoted to projects of national significance. And Khodorkovsky proposed that this fund would be managed by a public council consisting of deputies, governors and ministers.

Kiselyov

How much cash would have been collected, and what would the projects have been?

Kasyanov

I think it would have come to least $15-20 billion, and it would have been targeted at infrastructure projects like highways, high-speed rail lines, power lines, telephone lines, pipelines and modern airports.  Khodorkovsky left me with a proposal to prepare a draft bill for parliament, and a week later it was on my desk.  Just two pages, plain and simple. And before instructing the cabinet to look into it, I showed it to President Putin.

Kiselyov

Whose reaction was?

Kasyanov

He didn’t say a word, just took the two pages and we never spoke about the matter again.

Kiselyov

Why didn’t he follow up?

Kasyanov

I think he realized that to pass such a law would mean letting the wealthiest of the industrialists off the hook, giving up control over them. Such a thing was not, apparently, in his plans.

Kasyanov

I wanted to ask you about the famous remark Putin made the day after Khodorkovsky’s arrest.  He said:  “Knock off the hysterics!” («Прекратить истерику!»). Who was he talking about?

Kasyanov

By that time, only two public figures had criticized the arrest, and that was Chubais and me.  Obviously, Putin was warning not only the two of us but the entire country to keep our nose out of his affairs.  In early January 2004, I gave an interview to Vedemostiwhere I once again condemned the actions of law enforcement in regard to Yukos and Khodorkhovsky.  In response, Putin cracked down on both of them twice as hard.  At the next cabinet meeting, he made us sit there for more than an hour while the prosecutor read out all the charges against Khodorkovsky, as if hearing them spoken proved their legitimacy.  All the cabinet members sat their stone-faced, with no clue why it was being done.  As for me, I couldn’t keep from cracking a smile now and then as I listened to the blatant absurdities and fabrications. And, of course, throughout Putin was closely watching the reaction of the cabinet members, and mine was the only one at variance.  When it ended, of course, nobody had any questions or comments, and everybody walked out in silence.

IV.  A parliamentary republic?

Kasyanov

In the spring of 2003, I was surprised to hear about the notion that Russia might be on its way to becoming a parliamentary republic. It was my job to review the draft text of the President’s annual speech to the upper house of parliament, and I came across a sentence seeming to suggest that Russia move towards that state.  But there were no supporting statements, no evidence, no arguments why such a result might be possible or desireable. So I crossed out that sentence.  I thought that it was silly to make such a suggestion until the people of Russia had come to understand how political parties work and appreciate the need for them. At that time, in April 2003, we were a long way from that position.  So I send back the draft, but when I look at the revisions the sentence had popped right back up again, though worded slightly differently.  And I began to suspect that the phrase had a rather different meaning to the presidential administration than it did to me, and in fact was understood by them as a mechanism for preserving their power under a pretense of democracy.  So, I crossed it out again.

 Kiselev

Again?

Kasyanov

Yes, and that was just 20 minutes before the speech in the Kremlin.  But it didn’t matter, because the unrevised copy of the speech had already been circulated to journalists, who had already reported that the nation was making a transition to a parliamentary republic.  And after that I noticed other signs that the administration was working on the development of a mechanism for the future retention of power, and in fact after the 2007-2008 election cycle we emerged with just such a mechanism in place. Putin became “prime minister” and leader of the parliamentary majority.  It was quite a neat trick, really, the nation’s eye was taken off the ball using the decoy of the “horrific crimes” of Khodorkovsky, the groundwork was laid four years before the event. And it all happened largely without the public even noticing.

V.   Termination**

Kiselev

There were different theories about the reasons for your sacking as prime minister.  Some analysts believed that the decision was made well in advance but delayed for fear that the opposition might embrace you and create a dangerous political rival.  Therefore, according to that theory, they waited to fire you until a few days after the presidential candidate registration process had closed. 

But there is another version, namely that when you went skiing with Boris Nemtsov in Austria you carried out a political discussion regarding an anti-Putin coup d’etat, and they fired you as soon as they found out about it.

Kasyanov

When Putin announced my termination, he did not say why.  But that evening I was told the same story you just mentioned by people close to the president, and I came to believe it. I remembered what happened the day before, February 23rd, when we attended a gala concert at the Kremlin.  That night the President behaved strangely.  During intermission, he stood in a corner whispering with [Nikolai] Patrushev and avoiding everybody.  The next day, the 24th, Putin suddenly canceled a cabinet meeting and told me to come alone. [LR:  Patrushev replaced Putin as the boss of the KGB and at this time served as Putin’s deputy chief of staff; like Putin a career chekist, he was one of Putin’s closest confidants.]

Kiselev

Did he offer you a different position as was his habit?

Kasyanov

He strongly suggested I say in public service and become Secretary of the Security Council. Three times we talked about that position, the day of the termination, a few days later, and then right after the election.  When I had to decline for the third time, it was actually a little embarrassing.  He said:  “Listen, I make an offer to nobody more than three times.”  I told him I’d exhausted all the positions of state service except one, the one he held, and I had no interest in holding any lower position. I simply did not want to remain in public service any longer.  Later on he suggested I become mayor of Moscow, and I wasn’t opposed to that idea, because it was a directly elected position, elected by 10 million residents and 6 million voters.  But soon Putin gave up the idea of supporting the election of any local officials, so that idea withered on the vine.  Then he suggested I take the reins of the CIS State Bank.

Soon after that, the Belsan attack occurred.  It was a catastrophic failure of the security services, in fact of the authorities in general.  And rather than investigate and punish those responsible, and take reform measures, the regime made another choice, to infringe still further on the rights of citizens. There was the takeover of NTV, the arrest of Khodorkhovsky and Lebedev, the crushing of the reform movement at Gazprom and many others, they are all links in a single chain.

For more than a month I was seized by depression, realizing how very naive and short-sighted I had been.  And I finally decided that there was no longer anything anyone could do from within the regime to halt the process.  I met with Putin at his country residence and told him what I thought about these crackdown initiatives. I told him that under these circumstances I could not play any part in the operation of the state apparatus, including the bank.

Kasyanov

Was that the last time you saw him?

Kasyanov

No, there was one other. He brought up the bank again, and I told him I considered the topic to have been closed and informed him that I had in fact already started my own consulting business.  Then he warned me that if I began to engage in opposition activities, he’d deal with me no differently than anybody else. And he added that when I’d been Minister of Finance he’d heard the rumors about “Misha Two Percent.”  I told him he knew perfectly well that was nonsense, and he said:  “Where there’s smoke, there’s fire. Keep that in mind.”  Those were the last words I heard from him.

VI. Yeltsin

Kiselev

When did your relationship with Mr. Yeltsin become informal?

Kasyanov

The first time Yeltsin invited my wife and me to Gorky-9 [his country residence] was a few months after he resigned, in early 2000.  He was getting medical treatment, losing weight, and he was ina  wonderfully good mood.  After that, we began communicating frequently. He kept insisting on no formalities, only as friends.

Kiselev

What happened after your termination as prime minister?

Kasyanov

At first everything was the same, we went hunting several times with our spouses, usually over a weekend.  But then suddenly the invitations stopped coming, right before his 75th birthday. We had talked about how we’d celebrate his birthday while we were celebrating mine a few months earlier, talking about where to go, who to invite, what to do, surprise guests, and so forth. But just before New Year’s he called and said I shouldn’t postpone my vacation just to attend his party, no need for me to change my plans. Putin was going to host the party himself right in the Kremlin. He was sure I’d understand, he said, since I was “an intelligent man.”

Kiselev

Did you manage to offer your congratulations?

Kasyanov

I did call him, and after congratulating him he complained that all his phones were bugged and he could no longer find out what was going on in government circles as his connections were being broken.  Indeed, at one meeting of the Security Council Putin had mentioned to me that Yeltsin’s health was being upset by being excited at various bits of news that came out of visits from cabinet members, he said the doctors were angry. And after that, in fact, very few other than myself and Voloshin still went.

The last time I saw Yeltsin was in the fall of 2006, just after he broke his leg and was in the hospital on Michurinsky Prospect.  Nobody was allowed to visit him, but he insisted on seeing me.  I think about that meeting often.  He advised me to keep changing phones, buying cheap cell phones and discarding them.  With excited gestures he showed how to grab one, talk, and throw it away soon after, even if it was out of the car window.

And then in April, he died.

 *LR:  The original text contains this footnote, which explains that the reference is to “a meeting with Russia’s the leaders of Russia’s largest industrial businesses on February 19, 2003, at which there was verbal ‘swordplay’ between Khodorkovsky and Putin.”

**LR:  The Russian text makes use of the term “resignation.”  Since in no true sense did Kasyanov resign, we prefer the term “termination.”

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