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    Central Asia
     Dec 6, 2007
SPEAKING FREELY
The birth of Russia's new energy class
By Justin Dargin

Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing.

Milovan Djilas, prominent Yugoslavian author and subsequent critic of Josef Tito, developed the theory of the "new class" - a phenomenon that took the vacated position of the ruling bourgeois/aristocracy. The new class, according to Djilas, did not seek property control but political control: not one of them had



significant holdings, but, as a class, they owned everything.

Djilas proposed that the new group incrementally came to the self-realization that it constituted a distinct class. However, once realized, it undertook rapid scale industrialization to buttress its power and exclude opponents, internal and external. The members of the new class, as long as they submitted to the group's goals, had superior access to the material rewards that the system has to offer.

President Vladimir Putin's Russia provides an opportunity to study the new class of socio-economic-political interests that are coalescing, based on the shared interest in and ownership of the state's energy resources. This triumvirate is composed of the security services (Siloviki), the politicians and the business elite.

In most oil and gas producing nations, taxation over the extractive industries is the primary tool for expropriation of previously generated wealth, present as infrastructure investments and capital goods. The class structure of a society is governed and defined by the relationships between specific groups of individuals and the interaction between the two methods of wealth acquisition, political or economic.

However, the more prevalent the political venues are in a society, then the more likely that the beneficiaries of expanding state intervention may be designated as a separate class. This new class comprises all individuals, and their political and biological kinsmen, whose positions in society stem from state expansion as the political means of wealth acquisition in society.

It is important to clarify that the class itself, or the individuals that comprise it, may not have a full understanding of the formation of a concretized group. A member may not realize aligned goals, or interests with others in that class. However, after a period of time, as it becomes evident that there are shared special interests, a common class consciousness evolves. Moreover, the ascension of a class identity will harden more in those that are net beneficiaries of the system (in Russia's case the oil and gas industry), rather than the more diffuse net losers from the political intervention in the market.

Russia's triumvirate of Siloviki, energy oligarchs and bureaucrats will obtain a decisive advantage in honing a consciousness of their common interests and promoting a broad consensus of the measures necessary to defend those interests.

The Siloviki comprised 58.3% of the Security Council in 2003, 33.3% in 1993 and an insignificant 4.8% in the Politburo of 1988. Instead of Djilas's massive industrialization, this group seeks expanded control over the mineral resources, which then allows the state to fund its expansion. In compliance with Djilas's new class, as long as members do not upset the prevailing social order, the new class has channels for material enrichment that are woefully closed to the average citizen.

The financial collapse of 1998 in the Russian banking and financial sector solidified the power of this class around the extractive industries. The collapse of Moscow’s banking sector decimated the power base of the Moscow-centered oligarchs in banking and finance but gave a corresponding boost to the regional oligarchs, who dominated local production around the oil and gas industry. The ruble's devaluation prompted the industrial sector’s enhanced role in politics, which oligarchs in the more Russo-centric regions occupied, to the detriment of the cosmopolitan elite in the financial sector.

However, the parasitical nature of affairs becomes increasingly manifest because the beneficiaries of the political means in an essentially capitalist system depend upon the uniqueness of the economic system to survive. Although the two classes coexist in a symbiotic relationship, the predatory political classes feed off the wealth-accruing groups, without which they would not survive. On the other hand, the groups that use economic tools can survive and in fact generally thrive in the absence of political interference.

In the Russian backdrop, the energy oligarchs and the Siloviki guiding the state ship are in a sense co-dependent. The state needs the revenue inflows generated by the oil and gas industry to survive; and the energy oligarchs and their state-dominated energy companies receive enhanced business opportunities. With these contradictions, it is Kafkaesque to surmise that Russia sails a sound ship of state. The New Russian State is gripped by an inherent instability, which resonates with contradictions the longer it prevails.

Although the 1990s were dominated by a relatively small group of tycoons, the dawn of the 21st century saw power spread across a larger, more geographically dispersed group, which actually showed greater dependence on the state institutions than had the Moscow-centered banking and finance oligarchs. Because Putin appointed important government figures to head state energy corporations, the post-2001 era saw the new class(es) develop apace.

During the preliminary stages of the current restructuring, a we/they dichotomy formed the basis of a new weltanschauung (worldview). A definite set of class interests develop at this period, which then becomes second nature during the subsequent socialization process. As the restructuring formalizes, the new class(es) assume a more cohesive form and a more synthetic shape, with resource nationalism as the glue that holds together their unity.

In contrast to the emergence of the new class under communism, Putin's new adherents seek to control the levers of the extractive industries and to exert Russia's power outward. The new class so to speak etches itself into the state machinery and state-dominated firms, just as Baron von Munchhausen's wolf eats itself into the horse and then finds itself harnessed and has to draw the sledge. Perhaps due to the necessarily dependent nature of the energy sector with regard to the oil-consuming nations, state centralism in Russia has a distinctly expansionary essence.

However, in its incipient phase, Putin stands iconically above the fray, as he plays one group against the other to maintain his personal power over the governmental apparatus. Putin's legacy will be that of a disciplinarian; he molded a heterogeneous group of people, with diverse interests and forged them, sometimes against their will, into a more cohesive unit.

Justin Dargin is the author of Rebuilding the Iraqi Oil Industry: Legal and Constitutional Strategies for Sustainable Post-Saddam Development featured in the forthcoming Rebuilding Sustainable Communities in Iraq (2008).

(Copyright Justin Dargin 2007.)

Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing.


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