The Russian
Federation
Political and
Economic Changes
Presentation Outline
IV. Political and Economic Changes
a) The Yeltsin Years (1991-2000)
b) The Putin Years (2000-present)
IV. a) The Yeltsin Years (1991-2000)
1) Shock Therapy (from command economy to
market economy)
2) Rise of the oligarchs
3) Democratization
4) Political and economic instability
Shock Therapy
• Yeltsin rapidly implemented the market
reforms which had begun under Gorbachev
• All state-owned industries were rapidly
privatized between 1992-1996 including the
oil and gas industries
Between 1992-93 each Russian citizen was supposed to be
given an “equal share” of privatization vouchers which they
could use to invest in former state-owned companies. In
reality, not every citizen got the vouchers and many
desperately poor citizens sold their vouchers to more wellconnected and richer Russian businessmen.
Loans for shares
• Facing a severe deficit and short funds for the
1996 presidential election campaign, Yeltsin’s
government needed to raise money
• The government auctioned off shares in major
state -owned oil, gas, and mining companies
at very low prices
• This short-term solution temporarily eased
the deficit but put Russia’s major resources in
the hands of a small group of private citizens
Major Privatizations
Mining: World’s
largest nickel and
palladium producer
Natural Gas: largest
extractor of natural
gas in the world
Steel: Russia’s largest
steel company
Oil: Russia’s major oil
producer and exporter
Television: Channel One
station, Russia’s largest TV
station
Rise of the oligarchs
• A small group of citizens quickly built gigantic
fortunes by acquiring control of major industries
• Many of the “oligarchs” previously had
connections in the Soviet regime and were in the
right place at the right time to gain control of
former state-owned industries
• The oligarchs were close allies of Yeltsin, and
helped fund his 1996 re-election campaign
• The oligarchs had tremendous political and
economic influence in the 1990s
Some of the well-known oligarchs
Boris Berezovsky
Owned Channel
One TV Station
Worth 3 billion USD
in 1997
Mikhail Khodorkovsky
Owned Yukos Oil
Company
Worth 7 billion USD in
2003
Valdimir Potanin
Owned Norlisk
Nickel Mining
Company
Currently worth
5 billion USD
Democratization
• Yeltsin’s presidency was confirmed by a statewide
referendum in 1991
• Yeltsin introduced a democratic constitution in
1993 which was approved in another statewide
referendum
• The 1993 elections to the Duma were considered
very competitive
• Yeltsin won re-election in 1996 in a second round
run-off against his Communist challenger
Unlike Putin,
Yeltsin was an
independent
and had NO
Party!
No party had a majority of the seats in the Duma
which made it very hard for Yeltsin to get legislation
passed. He did NOT get along well with the Duma
but it was democratic.
1996
Presidential
Election
Political and economic instability
•
•
•
•
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Russia’s GDP fell by 50% during the 1990s
Inflation was over 25%
Unemployment reached 13%
Life Expectancy dropped
Russia’s currency (ruble) was devalued
Yeltsin ruled by decree during the early 1990s
The Duma tried to impeach (remove) Yeltsin
before the 1993 Duma elections but failed to
get the supermajority needed (66%)
• Yeltsin dissolved the Duma in 1995 (first and
only time this has happened)
The Yeltsin Years were characterized by economic
instability. Russia’s GDP was significantly lower
under Yeltsin than under Gorbachev.
IV. b) The Putin Years
1) Campaign against the oligarchs
2) Creation of United Russia
3) Constitutional Reforms
4) Political and economic stability
Campaign against the oligarchs
• Between 2000-2003 Putin began a campaign to
discredit and persecute oligarchs who did not
support him politically
• Boris Berezovsky fled Russia and is currently
living in the U.K.
• Mikhail Khodorkovsky was charged with fraud
and corruption and is currently serving a 10
lengthy sentence in a Russian prison (Amnesty
International believes he was wrongly accused)
• The oligarchs lost control of the media which
was now under state control
• Putin also nationalized the oil and gas
industries, giving the Russian government a
huge source of revenue and control over two
key resource industries
• A few oligarchs loyal to Putin were allowed to
keep control of some industries
The two largest state-owned oil and
natural gas companies
Oligarchs are not
popular in Russia
and Putin’s
campaign against
the oligarchs had
substantial public
support.
United Russia
•In 2000 Putin created United
Russia which would run candidates
in Duma elections
•United Russia would become the
dominant party in the Duma which
gave Putin influence over the
Duma
•In 2005 United Russia created a
Youth Wing called the Young Guard
of United Russia
•By 2003 United
Russia had a near
majority in the
Duma
•By 2007 it had an
overwhelming
majority
Constitutional reforms
• In 2000 Putin created 7 new federal districts each with an envoy
appointed by the President to ensure that the 83 federal subjects
adhere to Russian federal law.
• The Constitution was amended in 2003 to allow the President to
appoint or remove regional Governors (elections for Governor
were reinstated in 2012)
• In 2005, Putin amended the electoral system- eliminating SMDNow Russia’s Duma is elected entirely based on proportional
representation
• Also in 2005, Putin added a 7% minimum threshold for political
parties to win seats in the Duma- Before 2005, the threshold was
set at 5%
Parties which get under 7% of the popular
vote get no representation in the Duma.
This has reduced the number of parties in
the Duma.
The old switcheroo
•Medvedev amended the
Constitution in 2011 to
allow Putin to run again as
President and also
extended the president’s
term from 4 to 6 years.
•Many political scientists
believe that Medvedev had
worked out a deal with
Putin back in 2008.
Political and economic stability
• Russia’s GDP has grown significantly since
Putin took power in 2000 and continued
growing under Medvedev
• Unemployment has been much lower
• Living standards have risen
• Poverty is still a problem but is lower than it
was under Yeltsin
• There have been no major disagreements
between Putin and the Duma
Source: PEW Research
Keep in mind that President Obama’s
approval ratings are around 50% and
Boris Yeltsin’s were under 5% in 1999