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By Tatiana Kamoza, Liubov Tsukanova

Irina Khakamada: the liberals will answer for everything
An interview with Irina Khakamada of the Union of Right Forces

Novoe Vremya, No. 28, July 15, 2001, pp. 8-13

Question: It would appear that you have asked the first question yourself. Didn't you say that you had discussed the new law with Putin, and that he did not accept the existence of criminal proceeds in Russia?

Khakamada: On the contrary. Why is there any intrigue about the passage of this law? After all, several similar laws have been adopted: on combating corruption and the proceeds from crime. The present law has been submitted by the Cabinet, and was prepared at the demands of the European Union and the United States. If we fail to adopt such a law, there will be a general feeling that Russia is reluctant to tackle any problems related to the proceeds from crime and that Russia has a completely opaque economy - and our credit rating will be reduced.

It all sounds so progressive and democratic. But when you look at the content of this law, it transpires that the definition of "proceeds of crime" applies to all revenues earned in connection with failure to pay taxes or customs duties, for example. Given our ineffective taxation system, which has only just begun to change, and our hideous tax policies, I consider such measures absolutely unacceptable. If we confuse "grey" revenues in Russia with the proceeds of crime, we will destroy business entirely: all business, whether transparent or non-transparent. We would be destroying business as such.

That is the idea I tried to convey to the president. We argued for about fifteen minutes. He said: but we're making progress on legalising revenues, and the 13% flat-rate income tax is working. I replied: the fact that we're making progress is exactly the reason why we shouldn't impede it. Give it another two or three years, time for business to finally learn to trust the government and start emerging into the light. Proceeds of crime do exist: drug trafficking, trade in children, prostitution, arms trafficking. Go right ahead and fight that, use all the force of criminal law. The appropriate laws do exist, but they simply aren't working, because state bureaucrats and key people in law enforcement are bribed. That is not a problem with the laws themselves. It is a problem related to the implementation of these laws, and the structure of state authorities: what impact it has on decision-making.

Incidentally, the president agreed that we only need the law to persuade the West to tick off this box (they are also bureaucrats) and then it would be easier for Russia to gain access to Western markets and the World Trade Organisation. However, we will only support the law if all the amendments made by Shokhin are approved. And the essence of the amendments is that no commercial proceeds or proceeds made from failure to pay taxes and customs duties should not be considered criminal proceeds.

Question: Is it possible that we will have to demand a special law for every situation, and every time it will differ from internationally accepted laws, and every time this logic (we are special, we are not properly developed) will be used to justify some completely unusual construction?

Khakamada: I would put it this way: at present, any kind of generalisation would be detrimental to Russia. It is impossible to get anything done in Russia if you are trying to do it in accordance with some general standards. There should just be some principles: it is necessary to lower taxes, remove barriers, reduce the number of state officials, increase their wages – this is a whole concept. It has nothing to do with the USA, as the USA has had democracy for 200 years, and Russia has had it for only ten years.

Question: If I am not mistaken, the basis of the "grey" business area concerns games with taxes and duties. In this case, all Russian business is "grey". Are we in danger of eventually having a "grey" middle-class, which will never manage to become "white"?

Khakamada: A vast legislative base helps with the fight against illegal business. At present it is not a legal issue, but rather an issue concerning the rules of the game which have been formed by the authorities over the past ten years. They were formed not for business, but for the authorities themselves to enable them to make "grey" money by themselves, violating laws. That is why we keep saying that about $20 billion is taken out of the country each year. Both Russia and the West keep talking about this issue.

There is no need to state this to the public, as it knows everything. The people live in accordance with the rules that they can live by. Corruption, bribes, tax evasion are the only way for small businesses and the private sector to survive. The corruption connections in Russia are so vast and intricate that presently corruption is not a negative phenomenon in Russia, but simply a way of life, an environment.

To change the environment, it is necessary to change the rules: that is why new rules, a kind of public agreement, need to be created before starting the fight against the "grey" business. Today we are going through the very first stage of forming these rules.

It is only possible to create a perfect democracy if the state provides ideal market legislation and administrative reform; judicial reforms need to be accelerated to ensure that this legislation is enforced: people should not only have and exercise their rights: they should also be able to protect their rights. Then, in ten or maybe fifteen years time, we will have a system that will be called a developed democracy.

Question: Do you think ten to fifteen years is a realistic term? Are you considering such issues as social inertia, the inertia that has accumulated in Russia over the past four centuries?

Khakamada: I only say that it is necessary to create a system which would make it worth one’s while to pay taxes, judge people fairly and protect people and private property, and where it would be unprofitable not to take such steps.

Question: Yes. However, over the past ten years not a single law has been passed without a "fork" as you say,. And there are no signs that such a law will be passed in the next ten years.

Khakamada: It will. At present we are working on this. I think that we will gradually have the right laws. If the president listens to one team only for ten or fifteen years, and if he trusts that team, and if he does not back down, then everything will work out. If we start compromising again, we will start another vicious circle.

Question: Which team are you talking about? It is considered a media cliche that the president has two teams: a team of St. Petersburg liberals, who are probably the best economic minds in the country; and a second team comprising the military and security services. So which team do you mean?

Khakamada: I believe that the democrats are to blame for the destruction of the military elite. And the military elite must have a role to play in society: it must not take any political decisions and must not have an opportunity to form independently political and civil systems. However, it must fulfil its functions: to defend the country from external enemies. However, the Russian military elite has been destroyed morally, economically and professionally. A part of the military has started up businesses, somewhere in the market; others were hired by security agencies. As a result, we have neither a normal market, nor the consciousness of a military organisation in the country.

Naturally, the time has come for their revenge. And now the military organisation is ready to fulfil functions it is not supposed to fulfil. And this is the most disturbing development. That is why the authorities would be very wise to restore the elite status of the military organisation; it should provide a distinct definition of what is permitted and prohibited: the military must not even attempt to take any decisions on key issues of civil life: here Gref's team should dominate. I believe that some kind of battle is going on at present and if this results in an enormous increase in the role of the military, everyone will suffer.

Question: How did President Putin react to your criticism of the law on preventing legalisation of criminal proceeds?

Khakamada: The President said – this is not a direct quote, though - "Irina, I understand your concept, and I agree with you that the pressure of the West is tremendous on this issue, that is why we will try to create an image law, which will provide some signals. In reality, we will only apply this law after establishing corresponding good conditions for business”

Question: I have the impression that the President very often responds like this. The interlocutors are always different, but the answers are always similar. Each interlocutor comes back absolutely fascinated and believes that he or she has just managed to privatise the President. In your opinion, what is the President like in reality?

Khakamada: I have never met the President tete-a-tete, only as a deputy Duma speaker and together with other deputy speakers. I can only say that if you were the President you would act in the same way. He has an elevated ability to communicate. He is incredibly passionate. Even if he does not agree with you, he will listen to you for a long time. If you want to talk to him as an equal, you must be able to pose you question very professionally, and not only criticize but also make very concrete suggestions. If an opponent does not suggest anything, the President loses all interest in this individual - it is a very technological approach. I cannot generalize, but I believe that the President has several features. First, he knows perfectly well the sphere in which a particular well-known individual is a professional. For example, if I start speaking about oil and gas , he will not listen to me. He would prefer to listen to Grigory Yavlinsky on the issue of the death penalty than me.. However, whenever I start speaking about business and the development of market relations, I am entitled to engage in a dialogue with the President. His second feature is that if you give him specific grounds explaining what is wrong and right about a particular issue, if you can prove your point and he agrees, he will take a decision immediately. Putin is an intellectual technocrat.

However in terms of political ideas many things remain unclear. His views remain unclear about what he is going to build, what is his model of Russia, what is his ideal. He announced that Russia must join the Council of Europe. However, I cannot understand him at mental and psychological levels. At the same time, from the point of view of liberalisation of the economy he is very democratic.

Question: So what is Putin liberal about?

Khakamada: About the market. Until at least 50% of owners and employees have a market mindset in Russia, there will be nothing normal and no improvement in the country. Only a new society will be able to create a civil structure independently of the authorities. Only this new society will be able to rear new politicians, and real parties that will be really supported by the electorate. That is why it is absolutely unreal for Russia to become a democratic country with a half-dead market. When the new elite has no ground to grow on, it starts to reproduce itself: consequently, even young people will act exactly like the elderly. I do not believe in the generation model: that as soon as a new generation comes, everything will be fine. No, we are growing the same bureaucrats, bribe-takers, and retrogrades.

Question: Once you wrote that Gaidar had paid for the transition to market mechanisms; however, here are prerequisites for the emergence of a middle class in Russia. In 1998 the middle class and Kiriyenko's government partially paid for everything, including the death of the middle class. So who will now pay for the possible restoration of the middle class, if, according to your logic, it is impossible to have a future without it?

Khakamada: The Union of Right-Wing Forces will pay for this in full. We will pay as we have paid before. Why? The reason is very simple: to survive politically, you need to establish a position and distinguish yourself: either you are in opposition, and follow the traditions of the Yabloko movement, or you are the party of power, bureaucracy, which means you are a member of the Unity; or you are part of the left-wing opposition. Theoretically, we should become an opposition, but we will not become such a force, as we are trying to reach agreement with the authorities and assist them with the adoption of priority economic, legislative, judicial and administrative reforms. And we will pay for that with our popularity rating, as our position is not clear and distinct. And the middle class is not large enough to support us, and this will become very obvious during the next elections.

Question: So you are going to annihilate yourself as a political force?

Khakamada: No, we will never annihilate ourselves, because a new middle class is growing in the country. In fact, we are a bourgeois party; Yabloko is a party of the protection of rights; Unity and Fatherland are bureaucratic parties, the communists are a left-wing party.

Question: With the current model it is highly likely that Putin's liberalisation will be carried out, but a civil society will never develop.

Khakamada: It will grow, it is already growing. Here is a classic example of the growth of civil society: all magazines and journals devoted to the market are writing about the emergence of a new class, a class of hired employees, whose profession is unique: I am referring to anti-crisis managers. They extricate an enterprise from the abyss and then promote it on the markets, and all that only at the expense of correct management decisions. It is a unique profession: it is not very well paid and had never existed in Russia before. Special presidential programmes were established to send people abroad and teach them to do this. These people decided for themselves: yes, it is easier to move away from Russia, we speak ten languages each, we know management, we work for foreign companies, we study in Harvard, abroad, we are cosmopolitan, but we want to live in Russia. We like it first because we speak Russian, and second, because this market offers vast prospects. We cannot keep passively watching developments in this country, that is why we made this decision and we will try to influence the decisions of the authorities.

This is called the growth of civil society: these are absolutely new people. They have developed potential development scenarios of the country, where they indicated all the threats facing our country today, as well as the chances for positive development. These are mostly very young: they are 25 to 35 years old. They all are self-sufficient, they all have good professions. They do not work like others: steal - sell - disappear. They make serious human investments and they need a long-term development strategy for Russia. If they perceived that Putin's reforms had no future, they would have left Russia long ago.

Question: You say that you cannot understand the political thinking of the president. However, many people suspect he has some paternalistic - state concepts of authority in mind.
Could you imagine economic liberalisation combined with tremendous state power?

Khakamada: A Chinese model, but a milder variant.

Question: Actually, it is a very Russian model: to have grandeur, to have power, to outdistance the Americans, and to have some liberal clubs as well.

Khakamada: Such a scenario is also possible. Moreover, Russia will really be tempted to following this path, as our democracy is so imperfect.

Question: And what about civil society?

Khakamada: I have already said that we need to grow this society first. Then it will sweep away this authoritarian model.

Question: You spoke about two major reforms: judicial and administrative reforms. The judicial reform is clear enough, but what about the administrative one: what stage has it reached?

Khakamada: It is in a dire state: that is why we have so many problems. The administrative reform implies reform of the authorities. Since Gorbachev's era the authorities have been reforming society for 15 years. They always forget about themselves. As a result, it has been growing all that time, and now the bureaucracy cannot even feed itself, and it has already started to hurt itself as well. Consequently today it is seriously necessary to understand the burden of the state in the economy is and the exact functions of the state.

The state’s role in the economy should be reduced and also be made more efficient in some areas, such as defence: wages of budget-sector employees; child benefit; free state health system; penitentiary system; courts (judges must receive enough money from the state so that they cannot be corrupted); military reform. It is not right for the Nuclear Ministry to have its own businesses and enterprises; and it is not right that the Energy Ministry is unable to resolve any issues. Why do we need a minister who cannot resolve any issue, why do we need more than a thousand people who work in his ministry, who always receive wages in time; who drive cars, and have state summer houses (and we pay for all with taxes)? So I believe that reform involves a reduction of state functions in the economy and a concept on its role in society.

The minister should be directly subordinate to the prime minister and the government: I cannot understand why there is a whole apparatus above each minister. Plus, there is the issue of relations between the federal centre and the regions. We either provide every region with as much freedom as it can swallow: as a result they have been transformed into feudal principalities, with no freedom of information, no market freedom, and the institution of a personal power hierarchy. Subsequently we try to establish a single power hierarchy and everyone starts shouting about a unitary state.

Question: Does the Union of Right-Wing Forces have a complete concept for administrative reform?

Khakamada: I have not talked with Anatoly Chubais about this yet. He believes that this is so difficult that it is better to first resolve economic and market issues. The internal resistance of bureaucracy is so vast that a president who tries to break this machine risks losing the next presidential elections. So I personally believe that if President Putin plans to be President for two terms only, without violating the constitution and changing it much, in his first term he will try to consolidate society as much as possible, bureaucracy, and promote such priorities as the economy and judicial reform. And the administrative reform should be postponed: otherwise, state officials will immediately be transformed into opponents, even enemies of everything. However, if the President wins the next presidential elections, in the second term he will be freed from the aforementioned priorities, and he will carry out a radical administrative reform.

Question: Do you think Putin is prepared for this?

Khakamada: I cannot judge, he is not a close friend or a colleague of mine. However, I do believe that the President is thinking over the issue of managing this huge "Russia" corporation and achieving maximum efficiency in its management.

Question: Then, how should we assess his latest actions for concluding a new agreement between the authorities and large businesses? For instance, Gazprom is a new union of the Kremlin and gas money. Does that prove that Putin is a potential administrative reformer?

Khakamada: The story with tycoons is a different story. Western governments also have to agree on certain things. And if there is a monopoly, nothing can be done until you de-monopolize it, otherwise you will have to reach agreements.

Question: Putin would not de-monopolize it.

Khakamada: You always return to the "authorities-tycoons" issue, while I am speaking about another issue: administrative reform is a reform of the officialdom, which takes decisions, of the actual government structure.

Question: How would you assess the present parliament? Do you think that the President may dismiss it?

Khakamada: I think the present parliament is very stable and is convenient for decision-making; actually if all the centrist and right-wing parties agree, it is possible to pass any decision: the Land Code proved that. Right now President Putin does not want to destabilize society, on the contrary, he wants stability. By the way, it is also important for Russia's image in the west. Why do you think that China receives so much investment, even though their system is so inimical? They have a very stable system and provide state guarantees. These are the most important things for investors.

At the same time, it seems that President Putin is not completely satisfied with the government as a tool. He would like it to be faster, more flexible and more consistent.

Question: We have not talked about the Union of Right-Wing Forces yet. Have you really parted ways with human rights advocates?

Khakamada: No, we have joined the Democratic Council, we have passed a common resolution, and I have been pushing it through the parliament. We still carry out our human rights advocacy functions. We have lots of problems with other Duma factions, because they did not vote consistently, and scuttled this statement. We are also developing our relations with Yabloko and are even trying to assess whether we have any chance of contesting the elections as a united bloc. Today we are trying to work more seriously and to be more consolidated.

Question: Nonetheless, there was your recent conflict with Kovalev. Have you broken up completely? How do you feel about this?

Khakamada: First of all, I believe that Sergei Kovalev was very honest, by the way, just like Sergei Yushenkov. It is not correct to remain in an organisation, if you are dissatisfied with its programme, and merely abstain all the time, thereby stirr!
ing up a conflict. It is more honest either not to join it at all, or to quit, and here both Yushenkov and Kovalev acted as politically mature, honest and conscientious people.

Question: But, in some ways, you have lost the moral resource of Sergei Kovalev...

Khakamada: You are returning to the start of our conversation. We have to pay. And some day Sergei Kovalev will thank us, when he sees the kind of new people growing up in Russia.

Question: I am afraid that you will not hear his "thanks" very soon...

Khakamada: I am not waiting for it, I just hope. Anyway, I believe that the extremely orthodox ideology is the main problem of the human rights movement in Russia. In my opinion, the right choice for any politician is to try to assess the situation as objectively as possible, based not only on the orthodox values they accept, but also on their final goal.

Novoe Vremya, No. 28, July 15, 2001, pp. 8-13

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