All these problems were eventually settled. The state took greater control of the ports and legislation was introduced for their development, which included a provision allowing the government to set some tariffs (since it had built the ports and was responsible for safety and security, it was its right to do so). It was a period of adjustment, rationalisation and experiment that anticipated much of what would be happening elsewhere in the country over the following years. It had been a decade since we had swapped a malfunctioning version of socialism for a malfunctioning version of capitalism, but it was increasingly clear to almost everyone in the country that it was high time that the state reclaimed a measure of control over the operation of the economy. In return, it would assume responsibility, in accordance with the country’s laws, to foster favourable conditions (legislative, administrative and investment) for economic and social development, and establish an appropriate balance between public and private interests.
I was constantly on the move during the years I was at the ministry; it sometimes felt as if half my existence was spent 30,000 feet above Russia, on my way to another of the country’s farflung ports. Every visit would be made up of a constant round of meetings: with the port authorities, with the region’s governor, with representatives from the local transport authority, with private entrepreneurs and potential investors. How efficient were the safety and signalling systems in a particular port? Were government funds being spent in the correct fashion? Was each port being developed in accordance with the strategic plans we had laid out? My aim was always to secure as comprehensive a picture as possible as to how these very different elements, all of which had very different priorities, interacted with one another, and to identify where any grit had somehow been introduced into the machinery, so to speak, in order to help extract it.
It was during these years that I came to really know Russia. I saw more of her terrain than I ever had before, more than most will ever see in a lifetime: from Murmansk hundreds of miles north of the Arctic Circle, to Taman on the Black Sea, through to Nakhodka, which perches opposite Japan and the two Koreas. But this period was also an exemplary education in the way Russia worked at every level, its complex administrative ecology. I came to understand something of the intricacies of its government; how, so far from Moscow that they might as well be on another continent, the administrations of Russia’s most remote regions interacted with federal bodies; or the transformative impact transport infrastructure could have on towns that had previously been bereft of even basic medical care.
For decades, even those governors who had not tried to grab sovereignty away from the Kremlin had been accustomed to ruling their territories almost like feudal lords, so, perhaps unsurprisingly, it was sometimes hard to persuade them of the importance of supporting the coal industry when they were thousands of miles away from the nearest mine. They recoiled at any attempts to, as they saw it, undermine their authority over their fiefdoms. The withering away of the state’s authority under Yeltsin left them almost totally unresponsive to orders from Moscow, which for years had lacked the money or even the will to impose its governance. So your chances of achieving anything during this period of time depended substantially on the nature of your relationship with them.
In the KGB (as in many other administrative or managerial organisations) we believed there were two main ways one could be persuasive. The first, perhaps the most straightforward, was to obtain some kind of compromising information about your subject that you could deploy to influence their behaviour. The second was to make them your friend (perhaps it will surprise you to learn that Dale Carnegie’s How to Win Friends and Influence People was a key title on our syllabus). I had always favoured the second option – the bonds and obligations formed by that kind of relationship are far more durable and productive – and I built on the foundation I had established during my training when I encountered the friendly and open attitude displayed by the men and women I dealt with in New York, a city where it was never acceptable to use the word ‘problem’.
I was lucky enough that I was never on the end of a brutal refusal by any of the governors, but then I was always aware of the need to prepare properly for these conversations, and approach them in the appropriate manner. I knew that it was not sufficient to talk about abstract state interests. Why should a governor in the west of the country care about supporting industrial development in its eastern extremities? You had to demonstrate in clear terms how whatever project you were talking about at the time would ultimately bring benefits to his region.
There were other, more direct, ways of securing regional support, as I learned later when I joined the Railways Ministry in 2002. As a huge ministry, we had considerable purchasing power. So if, for instance, a particular territory in which we wanted to create a project also contained a factory making the kinds of boots our workers needed to ensure their safety and comfort, it was always possible to reach a mutually beneficial agreement in which the contract for manufacturing the boots would be given to this region’s factory (a contract big enough that it would help stimulate other elements of the local economy and provide ancillary social benefits too) in return for permission for us to implement another part of our national strategy.[15] The goodwill built up in the course of these exchanges meant that any future discussion would be all the easier and more productive.
As time went on, the administrative reforms enacted by Vladimir Putin began to erode some of the regions’ ability to defy Moscow’s authority. This culminated in December 2004 with the decision that the leaders of the Russian Federation’s regions and republics would in the future be appointed by the President rather than elected, and that a number of the Federation’s smaller units would be abolished. It was a decision attended by a huge deal of controversy and, in places, anger, but what has perhaps not been fully appreciated is the extent to which this centralisation of power was anticipated by the liberal finance minister Kudrin’s sophisticated reforms of the financial system. Mr Kudrin introduced changes that meant that the Ministry of Finance alone had the power – which was unchecked – to provide the subventions and subsidies upon which the governors relied so heavily. As a result, the regions were left almost wholly at the mercy of the federal government’s financial arm. Since the majority of the regions ran a more or less permanent debt (even today, only four or five are in profit) they were powerless to object. By the time the 2004 legislation was enacted, authority had already been de facto returned to the centre.
Nevertheless, it was a valuable reminder of the progress that had been made in just four years. Though a great deal of work lay ahead of the country, it was no longer on the verge of fragmentation or implosion, and the hold exerted over it by the oligarchs had been decisively broken – replaced with a new settlement in which it was acknowledged that the price these men would pay if they wanted to accumulate wealth was a complete withdrawal from the political arena. Much of the administrative apparatus of the country had been rationalised, something which would help provide a solid foundation for future economic growth, as would, of course, the work of the Transport Ministry.
I watched these later developments from the Railway Ministry. My role there was in many ways a continuation of the kind of work in which I had been involved under Sergei Frank, just focused on one particular element of the transport infrastructure. Leaving one ministry for another gave me the chance to reflect on everything that had taken place over the previous two years. Just as with the country as a whole, the scale of what we accomplished over the time I spent at the Transport Ministry was dwarfed by the scale of the work still to be done, but it still felt as if a corner had been turned. All around us, Russia was slowly being transformed, and we had played our part. It had felt, at the time, like a ceaseless round of conversation and persuasion played out in thousands of discussions that took place in every corner of the nation. These conversations are mostly forgotten now, their substance unrecoverable, but when I go, for instance, to the ports at Primorsk or Ust-Luga, St Petersburg, Vladivostok, Nachodka, Sochi, Taman, I can see how the countless arguments and consultations have been transformed into concrete achievements. Of that I am incredibly proud.
15
This took place before legislation that regulated the procurement of state-owned companies was introduced. Now they must buy goods and services in an open tender and auction process.