PUTIN'S NEXT TEST

Boris Berezovsky is working hard. The man who once was Russia's most powerful business tycoon and political kingmaker lives in London, exiled under a cloud of growing criminal investigations. Yet he's doing his best to stay a player. Recently he told one French newspaper that he would "struggle to the death" against his former political protege, Vladimir Putin. And last week he delivered what he clearly hoped would be a body blow to the Russian president, launching a TV documentary alleging that the Russian security service, the FSB, staged a spate of bombings in Moscow and other cities, which claimed 300 lives in 1999.

As every Russian knows, Putin blamed the atrocities on Chechen terrorists--and promptly launched a brutal military campaign to subdue them. If the president helped engineer the plot as a pretext for his crackdown, killing innocent Russians, wouldn't that be treason? Berezovsky poses the question bluntly, as he told NEWSWEEK in London. "Putin says the Chechens are responsible but has never given any evidence," he says. "No one is in jail, nor has there been a proper investigation."

This wasn't the first time the ousted oligarch has tried to mix up Kremlin politics by remote control. When Putin was asked to comment on one of the tycoon's earlier broadsides from abroad, he responded laconically: "Boris Berezovsky? Who's that?" This time around he didn't even trouble to reply. The reason is simple enough. On the face of things, Putin has never looked stronger. Public-opinion surveys show the president's approval ratings at around 75 percent. The economy is looking back on three years of solid growth at a time when most of the world is still in recession. The government is doing its job with an aura of businesslike calm that stands in stark contrast to the tumult of the Yeltsin years. The long and unpopular war in Chechnya has fallen from the headlines, even if it's not over. Internationally, the picture is even rosier. Putin is the new friend of America and Europe, credited with transform-ing traditional Russian xenophobia into a newly promising strategic alliance with the West.

Yet look again. For all his recent success, Putin stands at the threshold of daunting new challenges. Now comes phase two, the really hard part: cracking down on a massively corrupt police force; rejuvenating a hidebound state bureaucracy, judiciary and tax authority; reassuring military elites who do not trust him or share his vision of the future, even as he prods them to reform. Small wonder that Putin has lately come under some surprising attacks, of which Berezovsky's is but one. Nor have the doubters been protesting the issues of yore--hungry workers fearing economic disruptions, or intellectuals objecting to the Chechnya war. These days, the voices are the far more powerful constituencies of the Russian ruling class--the elites of the very institutions that Putin seeks to change.

It's highly unlikely that Berezovsky would somehow be able to foment such opposition. Last week's docudrama added little to the mystery surrounding the 1999 bombings, and certainly did not provide a smoking gun pointing to Putin. Indeed, it is hard to imagine how anyone could dare right now to confront the president, let alone topple him, as Berezovsky seeks to do. But make no mistake. There are dangers aplenty. Consider the economy. Putin and his team have pushed some striking reforms through Parliament. Among them: measures to reduce government red tape, simplify the tax system and allow the sale of land. But the tasks to come are even trickier. One is the upcoming plan to hike prices that Russians pay for housing maintenance and utilities. That will hit households right in the pocketbook. Another is desperately needed banking reform. Creating a bona fide money market will challenge some of the country's biggest vested interests--including the Central Bank, a bureaucratic behemoth whose murkiness is extraordinary even by Russian standards.

Putin must tread warily as he enters another minefield as well. Topping his agenda for the future is reform of Russia's civil service--cripplingly inefficient, hopelessly unresponsive and legendarily corrupt. That's a very tall order, especially in the face of presumably stiff opposition from the bureaucrats who have so much to lose. "Putin does face huge resistance from the middle and upper levels of the bureaucracy," says political analyst Tom Adshead of the Troika Dialogue brokerage in Moscow. The bureaucrats will fight back, he predicts, either by failing to implement laws that have been passed, or by putting in place rules of their own that confuse or thwart the intent of legislation approved by Parliament. Some civil servants are already fighting an effective rear-guard action, lobbying deputies in the Russian Parliament--many of them former bureaucrats themselves--to reject or water down Putin's forthcoming legislative program.

Nothing is more dangerous than Putin's strategic alliance with the United States. He has supported U.S. military action in Afghanistan and signed on to an expanded American presence in Central Asia. An expanded NATO is no threat, he's said, even if it includes the Baltic states. He has moderated Russian resistance to U.S. policy on Iraq. In return, he has hoped for concrete economic benefits--for example, Washington's support for Russia's bid to join the World Trade Organization. He's also gambled that NATO will bring Russia into a closer partnership at some of the alliance's decision-making conclaves. Putin has also sought to present his countrymen with a dramatic cut in strategic nuclear arms at a planned summit with George W. Bush in St. Petersburg and Moscow in May.

So far, Putin has mostly come up empty. Last week Moscow's WTO bid came under threat after the Bush White House hiked tariffs on imported steel from Russia. That prompted the Kremlin to announce countermeasures against U.S. poultry imports, raising the prospect of a trade war. In the talks on nuclear-arms cuts, the United States insists that any warheads removed from its missiles be merely stored, not destroyed. What's the point in talking about "drastic cuts," the Russians respond, if the warheads in question aren't really being eliminated? No compromise appears to be in the offing. As for the prospect of Russia's being integrated into NATO, it's an on-again, off-again affair, with a satisfactory formula for participation eluding even those in favor of the idea.

All this could sooner or later result in a nationalist backlash and a stark reversal of policy. Anatoly Kvashnin, head of the Russian General Staff, recently seized on a big military maneuver in Poland and Norway as renewed evidence that NATO is still up to its cold-war shenanigans. "Is it all being done for practicing so-called peacekeeping operations on the territories close to Russian borders? Further comments are not necessary," the general acidly remarked. Suspicions of U.S. intentions have deepened with the announcement that as many as 200 American soldiers would soon be heading to the former Soviet republic of Georgia. The professed aim: to help the government cope with the deteriorating security situation in the Pankisi Gorge, a canyon along the Russian border that has become a refuge for Islamist guerrillas from adjacent Chechnya (as well as some non-Chechen fugitive members of Al Qaeda, according to U.S. officials). The announcement triggered a wave of indignation among Russian politicians, who accused Washington of maneuvering to expand its influence in Russia's strategic backyard. Putin's personal intervention, calling it "no tragedy" if Americans helped with a problem that worried Moscow as well, defused the storm. But it is an artificial calm on an issue that will continue to smolder. Twenty retired generals had already lambasted Putin's acceptance of a U.S. presence in formerly Soviet Central Asia in a letter to a communist newspaper shortly before the Georgian fracas broke--yet more evidence that anti-American sentiments run deep in the largely unreformed military. Meanwhile, needless to say, Putin's ambitious plans for transforming Russia's bloated armed forces into an effective professional military threatens to put plenty of generals out on the street.

As things look now, Putin's opponents are fragmented and without real voice. The country's Neanderthal communists, who object to Putin as insufficiently nationalist and excessively promarket, have little in common with the liberal democrats who accuse him of moving toward dictatorship. And neither of those groups has much in common with the civil servants or the restive regional leaders whose own economic interests will be threatened by planned reforms. But if the economy should weaken, or if Putin finds himself forced to back off from his embrace of the United States, he could find himself in the sort of trouble that would make a Berezovsky slaver.

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