WHEN BORIS Yeltsin, Russia's first post-Soviet president, greeted revellers in his traditional New Year's Eve broadcast in 1999, he surprised the country by resigning and appointing Vladimir Putin, then prime minister, as his acting replacement. In the presidential election of March 2000 Putin won 52% of the vote.
Rob Jones, Moscow
"Who is Mr Putin?" was the question on the lips of many commentators and world leaders, wondering whether they would be able to work with the new man in the Kremlin.
A more stark contrast between the outgoing and incoming presidents would be difficult to imagine. Yeltsin, a communist party official, came to the fore campaigning against the old Soviet party nomenclature [elite].
He presided over the re-introduction of capitalism in Russia and, following the deepest collapse of production in history, ethnic chaos and the disintegration of the state, ended up an embarrassing alcoholic.
Putin on the other hand is a former spy and head of the Federal Security Service, or FSB, (the successor to the KGB) and a fit teetotaller who enjoys judo, horse-riding, fishing and apparently any other sport that allows him to bare his chest in public! Since taking power, Putin has presided over considerable growth in the economy, restored the centralised state and raised Russia's profile on the world stage.
During the 1980s Putin was a KGB agent in East Germany. In 1990, following the fall of the Berlin Wall, he returned to his native city, Leningrad, where he was made responsible for overseeing the political views and activities of students and staff at Leningrad University. There he linked up with a group of professors around Anatoly Sobchak, who soon became the city's pro-capitalist mayor.
By 1996, Sobchak was voted out of office after his group lost support and had become shrouded in scandal. The next year, Putin was called to Moscow - where within a year he became head of the FSB.
The ruling elite were worried about who would succeed Yeltsin. To enable the speedy restoration of capitalism, the Yeltsin epoch had seen the break-up of the Soviet Union's centralised state apparatus, growing separatist movements and even the de facto breakaway of Chechnya, following the disastrous first Chechen war.
The economic collapse and hyperinflation in the first half of the 1990s was topped by the spectacular collapse of the rouble in 1998, when it was devalued by over 70% in six months.
By the end of the 1990s, Russia's new capitalism had spun out of control and the country's ruling elite required not further decentralisation, but on the contrary a reversal of the process, leading to the establishment of a new centralised capitalist state.
This was the background to the discussions within "The Family", the clique running the country, as Yeltsin was approaching the end of his second presidential term.
"The Family" was based on Yeltsin's daughters, a number of key advisors such as former KGB general Alexander Korzhakov and FSB chief Mikhail Barsukov, and leading oligarchs such as Boris Berezovsky and Roman Abramovich, who even lived in the Kremlin for a period. As Yeltsin degenerated into alcoholism, "The Family" took over the running of the state.
To this clique, Vladimir Putin seemed the ideal candidate. Little known, and therefore not as widely hated as some other possible candidates. Not only did he have a background in the security services but it was also clear that he would use a firm hand to restore key elements of a centralised state.
Some elements of the ruling elite around politicians such as Moscow Mayor Yury Luzhkov and former Prime Minister Yevgeny Primakov did oppose him, not for ideological reasons but because they were concerned that their business empires would be threatened. One of the first acts of the new president was to grant immunity from prosecution to the outgoing Yeltsin who was being investigated for corruption.
But first Putin had to be elected. Key to his success (apart from the clear bias in the media and the sudden mysterious increase of the electorate by 1.2 million people), was the launching of the second Chechen war in August 1999.
The first Chechen war, launched by Yeltsin in 1994, had been a complete disaster. Conscript troops had been unprepared to fight, and the Chechen rebels were determined to hold onto their land, buying their weapons from the demoralised Russian troops.
The battle for Grozny, the Chechen capital, in August 1996 saw the Russian army humiliatingly driven out of the city. The resulting ceasefire left the republic a de-facto independent statelet.
The second war was launched after a series of terrorist attacks, including the blowing up of two apartment blocks in Moscow. Many Russians believe these attacks were organised by the FSB to justify the war.
Whatever the truth, Chechnya was brutally attacked, using such devastating weapons as vacuum bombs. Following a two-month siege of Grozny, which left tens of thousands of civilians dead and hundreds of thousands of refugees, federal rule was restored.
A former rebel and religious leader, Akhmad Kadyrov, was installed as pro-Kremlin Chechen leader, and after his assassination in 2004, his son, the brutal warlord Ramzan Kadyrov, was eventually installed as Chechnya's president.
Having been pushed into power by "The Family", Putin moved to clip the wings of the oligarchs who had grown all-powerful under Yeltsin. Berezovsky, the former kingmaker, was hounded into exile. Khodorkovsky, who toyed with creating a parliamentary majority from the neo-liberal and Communist opposition to challenge Putin, was sent to jail.
Those oligarchs such as Roman Abramovich who restricted their interests to sport and kept out of politics were allowed to stay. In the place of the ousted oligarchs, a new layer of "state oligarchs" arose. A certain redistribution of wealth has taken place with the creation of a number of "state corporations" - not a form of nationalisation, but a concentration of key stake-holdings in strategic companies under the patronage of the state.
A so-called managed democracy based on the "power vertical" was introduced. Increasingly, the democratic rights introduced in the early 1990s were taken back. For example, following the 2004 terrorist attack on a school in Beslan, North Caucasus, the election of regional governors was abolished.
The only opposition parties tolerated are those set up by the Kremlin (Just Russia and Zhirinovsky's ultra-nationalist Liberal Democratic Party) and the tame Communists.
Even these parties experience difficulties in being allowed to participate in all elections if they pose any threat to the monopoly of power held by the ruling United Russia party. Anyone wishing to protest faces harassment and bans. Now activists are even being told that their children will be put into care as they are not suitable parents.
In the 1980s, Soviet workers grew fed up with the number of bureaucrats who sucked the lifeblood from the planned economy like parasites. They were led to believe that a capitalist economy would get rid of these parasites, but they were cruelly mistaken.
In Leonid Brezhnev's times [he was Soviet Communist Party leader from 1964 to 1982] there were one million bureaucrats in the whole USSR - now there are 1.6 million, just in Russia alone!
As Alexei Arbatov, an analyst at the Russian Academy of Sciences, pointed out: "Soviet bureaucracy was confined to a non-cash command economy: there were few financial incentives but significant perks (however modest by present standards). By contrast, Russian bureaucracy today is sponging off the privatised/over-monopolised economy with its astronomical profits."
In the first five years of Putin's rule, the amount of bribe-taking in Russia grew by nearly ten times - from $36 billion to $316 billion a year. There is little evidence to indicate the pace of growth has slowed.
In 2008, Putin was constitutionally bound to give up the presidency after two consecutive terms, and so he handed over the mantle to his protégé and close ally Dmitry Medvedev. Putin simply moved chairs to become prime minister, and today runs the country as Medvedev's senior partner.
The sheen on their joint rule is beginning to fade, however. Russia has suffered more from the world crisis than many countries (last year's fall in GDP was over 8%). Splits are beginning to appear in the state apparatus, and despite widespread repression the number of people prepared to participate in protests is growing.
One Kremlin spin-doctor even warned recently that the regime has such a weak base that conditions are beginning to mirror those at the beginning of 1917. It is therefore an open question whether in the 2012 election Putin will attempt to return as president or whether there will be an open split between the different wings of the ruling elite.
There is only one thing that is certain - the working class needs to urgently develop a political alternative to this corrupt and bureaucratic capitalism.
Bust, boom and bust
PUTIN'S COMING to power coincided with a new stage in Russia's economic development. The early 1990s saw a collapse in GDP of about 50%. Paradoxically, the collapse of the rouble in 1998, by making imports too expensive, caused a strengthening of demand for domestically-produced goods. This demand was turbo-boosted by the price of oil on the world market. From a low of $17 a barrel in January 1999, it increased steadily over the next eight years, eventually topping $140.
These two factors fuelled a rapid growth in the Russian economy. Production was restored to close to pre-1990 levels, incomes grew relatively quickly, and stock market and housing bubbles grew in parallel with those in the rest of the world.
For the mass of the Russian population, which had lived through the stagnation of the late Soviet period before experiencing the collapse of industry and living standards with capitalist restoration, this period appeared to be one of increasing prosperity. That was before everything started tumbling again in 2008.