1991–1996: First term
Just days after the dissolution of the Soviet Union, Yeltsin resolved to embark on a programme of radical economic reform. Surpassing Gorbachev's reforms, which sought to expand democracy in the socialist system, the new regime aimed to completely dismantle socialism and fully implement capitalism, converting the world's largest command economy into a free-market one. During early discussions of this transition, Yeltsin's advisers debated issues of speed and sequencing, with an apparent division between those favoring a rapid approach and those favoring a gradual or slower approach. On 1 February 1992, Yeltsin signed accords with U.S. president George H. W. Bush, declaring the Cold War officially over after nearly 47 years. A visit to Moscow from Havel in April 1992 occasioned the written repudiation of the Soviet intervention and the withdrawal of armed forces from Czechoslovakia. Yeltsin laid a wreath during a November 1992 ceremony in Budapest, apologized for the 1956 Soviet intervention in Hungary and handed over to president Árpád Göncz documents from the Communist Party and KGB archives related to the intervention. A treaty of friendship was signed in May 1992 with Lech Wałęsa's Poland, and then another one in August 1992 with Zhelyu Zhelev's Bulgaria.
On 2 January 1992, Yeltsin, acting as his own prime minister, began a major economic and administrative reform, ordering the liberalization of foreign trade, prices, and currency. At the same time, Yeltsin followed a policy of "macroeconomic stabilization", a harsh austerity regime designed to control inflation. Under Yeltsin's stabilization programme, interest rates were raised to extremely high levels to tighten money and restrict credit. To bring state spending and revenues into balance, Yeltsin raised new taxes heavily, cut back sharply on government subsidies to industry and construction, and made steep cuts to state welfare spending.
In early 1992, prices skyrocketed throughout Russia, and a deep credit crunch shut down many industries and brought about a protracted depression. The reforms devastated the living standards of much of the population, especially the groups dependent on Soviet-era state subsidies and welfare programs. Through the 1990s, Russia's GDP fell by 50%, vast sectors of the economy were wiped out, inequality and unemployment grew dramatically, whilst incomes fell. Hyperinflation, caused by the Central Bank of Russia's loose monetary policy, wiped out many people's personal savings, and tens of millions of Russians were plunged into poverty.
Some economists argue that in the 1990s, Russia suffered an economic downturn more severe than the United States or Germany had undergone six decades earlier in the Great Depression. Russian commentators and even some Western economists, such as Marshall Goldman, widely blamed Yeltsin's economic programme for the country's disastrous economic performance in the 1990s. Many politicians began to quickly distance themselves from the programme. In February 1992, Russia's vice president, Alexander Rutskoy denounced the Yeltsin programme as "economic genocide". By 1993, conflict over the reform direction escalated between Yeltsin on the one side, and the opposition to radical economic reform in Russia's parliament on the other.
Reporter Fred Kaplan, who served as the Moscow Bureau chief of the Boston Globe from 1992 to 1995, noted that when he arrived in Moscow and tried to find places where bottom-up democracy was being built, soon discovered that there weren't any: despite press freedoms, Yeltsin's government had remained top-down.
Throughout 1992 Yeltsin wrestled with the Supreme Soviet of Russia and the Congress of People's Deputies for control over government, government policy, government banking, and property. In 1992, the speaker of the Russian Supreme Soviet, Ruslan Khasbulatov, came out in opposition to the reforms, despite claiming to support Yeltsin's overall goals. In December 1992, the 7th Congress of People's Deputies succeeded in turning down the Yeltsin-backed candidacy of Yegor Gaidar for the position of Russian prime minister. An agreement was brokered by Valery Zorkin, president of the Constitutional Court, which included the following provisions: a national referendum on the new constitution; parliament and Yeltsin would choose a new head of government, to be confirmed by the Supreme Soviet; and the parliament was to cease making constitutional amendments that change the balance of power between the legislative and executive branches. Eventually, on 14 December, Viktor Chernomyrdin, widely seen as a compromise figure, was confirmed in the office.
The conflict escalated soon, however, with the parliament changing its prior decision to hold a referendum. Yeltsin, in turn, announced in a televised address to the nation on 20 March 1993, that he was going to assume certain "special powers" to implement his programme of reforms. In response, the hastily called 9th Congress of People's Deputies of Russia attempted to remove Yeltsin from the presidency through impeachment on 26 March 1993. Yeltsin's opponents gathered more than 600 votes for impeachment but fell 72 votes short of the required two-thirds majority.
During the summer of 1993, a situation of dual power developed in Russia. From July, two separate administrations of the Chelyabinsk Oblast functioned side by side, after Yeltsin refused to accept the newly elected pro-parliament head of the region. The Supreme Soviet pursued its foreign policies, passing a declaration on the status of Sevastopol. In August, a commentator reflected on the situation as follows: "The President issues decrees as if there were no Supreme Soviet, and the Supreme Soviet suspends decrees as if there were no President." (Izvestia, 13 August 1993).
On 21 September 1993, in breach of the constitution, Yeltsin announced in a televised address his decision to disband the Supreme Soviet and Congress of People's Deputies by decree. In his address, Yeltsin declared his intent to rule by decree until the election of the new parliament and a referendum on a new constitution, triggering the constitutional crisis of October 1993. On the night after Yeltsin's televised address, the Supreme Soviet declared Yeltsin removed from the presidency for breaching the constitution, and Vice-president Alexander Rutskoy was sworn in as acting president.
Between 21 and 24 September, Yeltsin was confronted by popular unrest. Demonstrators protested the terrible living conditions under Yeltsin. Since 1989, GDP had declined by half. Corruption was rampant, violent crime was skyrocketing, medical services were collapsing, food and fuel were increasingly scarce and life expectancy was falling for all but a tiny handful of the population; moreover, Yeltsin was increasingly getting the blame. By early October, Yeltsin had secured the support of Russian Armed Forces and Ministry of Internal Affairs. In a massive show of force, Yeltsin called up tanks to shell the Russian White House (parliament building). The attack killed 187 people and wounded almost 500 others.
As the Supreme Soviet was dissolved, elections to the newly established parliament, the State Duma, were held in December 1993. Candidates associated with Yeltsin's economic policies were overwhelmed by a huge anti-Yeltsin vote, the bulk of which was divided between the Communist Party and ultra-nationalists. However, the referendum held at the same time approved the new constitution, which significantly expanded the powers of the president, giving Yeltsin the right to appoint the members of the government, to dismiss the prime minister and, in some cases, to dissolve the Duma. This led to the de facto establishment of a super-presidential system.
Boris Yeltsin initially prioritized relations with the West, paying little attention to relations with China. During a visit to China, Russian foreign minister Andrei Kozyrev criticized China's human rights policies. Russia also moved to strengthen unofficial ties with Taiwan. The CCP in turn considered Yeltsin as a traitor and anti-communist, but decided to maintain pragmatic ties; a leaked Politburo meeting in January 1992 said that "Even if Yeltsin is very reactionary we can internally curse him and pray for his downfall, but we shall still have to maintain normal state relations with him".
By summer of 1992, Yeltsin started pursuing a less pro-Western foreign policy. China invited Yeltsin to visit China in March 1992. On 23 December 1992, Yeltsin made his first official visit to China, where he met with CCP general secretary Jiang Zemin and Chinese president Yang Shangkun. Former leader Deng Xiaoping refused to meet with Yeltsin. Yeltsin and Yang announced a joint declaration, which said that China and Russia were "friendly countries" and "good-neighborly and mutually beneficial". Yeltsin also noted that "the ideological barrier" had been removed. The two countries also signed twenty-five documents ranging from cooperation in technology to space exploration.
During the 1990s, cooperation between China and Russia was facilitated by the two countries' mutual desires to balance the influence of the United States and establish a multi-polar international system. Yeltsin moved Russian foreign policy towards one that balanced the East and the West, while Russian foreign policy discussions were divided on liberals that favored more alignment with the West and Eurasianists that sought closer ties with China. Tensions between Russia and NATO also contributed to Yeltsin's shift towards China. The relationship between the two countries were upgraded from "friendly countries" to a "constructive partnership" in September 1994, and was further upgraded to a "strategic partnership of equality and mutual trust for the 21st century" in April 1996.
The U.S. Department of State seemed to confuse Yeltsin over German re-unification and dismemberment of the Helsinki Final Act and ensuing Partnership for Peace (PfP) push for NATO expansion. There is some question as to the involvement of his Minister of Foreign Affairs Andrei Kozyrev, who in August 1993 was painted by Lech Wałęsa as a saboteur of Polish aspirations for NATO membership but was regarded by domestic opponents as suborned by the United States. In Yeltsin's letter to Bill Clinton dated 15 September 1993 he strongly favored "a pan-European security system" instead of NATO and warned:
Not only the opposition, but moderate circles as well [in Russia], would no doubt perceive this as a sort of neo-isolation of our country in diametric opposition to its natural admission into Euro-Atlantic space.
After his August visit to Warsaw, Yeltsin saw the explosion of fright over NATO in the old guard and thereafter the window of détente slammed shut. By December 1994, the month in which the Budapest Memorandum was signed, Clinton began to understand that Russia had concluded he was "subordinating, if not abandoning, integration [of Russia] to NATO expansion". In July 1995, by which time the Russians had signed up to PfP, Yeltsin said to Clinton, "we must stick to our position, which is that there should be no rapid expansion of NATO.. it's important that the OSCE be the principal mechanism for developing a new security order in Europe. NATO is a factor, too, of course, but NATO should evolve into a political[-only] organization."
In December 1994, Yeltsin ordered the military invasion of Chechnya in an attempt to restore Moscow's control over the republic. Nearly two years later, Yeltsin withdrew federal forces from the devastated Chechnya under a 1996 peace agreement brokered by Alexander Lebed, Yeltsin's then-security chief. The peace deal allowed Chechnya greater autonomy but not full independence. The decision to launch the war in Chechnya dismayed many in the West. Time magazine wrote:
Then, what was to be made of Boris Yeltsin? He could no longer be regarded as the democratic hero of Western myth. But had he become an old-style communist boss, turning his back on the democratic reformers he once championed and throwing in his lot with militarists and ultranationalists? Or was he a befuddled, out-of-touch chief being manipulated, knowingly or unwittingly, by—well, by whom exactly? If there were to be a dictatorial coup, would Yeltsin be its victim or its leader?
In 1995, a Black Brant sounding rocket launched from the Andøya Space Center caused a high alert in Russia, known as the Norwegian rocket incident. The Russians were alerted that it might be a nuclear missile launched from an American submarine. The incident occurred in the post-Cold War era, where many Russians were still very suspicious of the United States and NATO. A full alert was passed up through the military chain of command to Yeltsin, who was notified and the "nuclear briefcase" (known in Russia as Cheget) used to authorize nuclear launch was automatically activated. Russian satellites indicated that no massive attack was underway and he agreed with advisors that it was a false alarm.
Following the dissolution of the Soviet Union, Yeltsin promoted privatization as a way of spreading ownership of shares in former state enterprises as widely as possible to create political support for his economic reforms. In the West, privatization was viewed as the key to the transition from Communism in Eastern Europe, ensuring a quick dismantling of the Soviet-era command economy to make way for "free market reforms". In the early 1990s, Anatoly Chubais, Yeltsin's deputy for economic policy, emerged as a leading advocate of privatization in Russia.
In late 1992, Yeltsin launched a programme of free vouchers as a way to give mass privatization a jump-start. Under the programme, all Russian citizens were issued vouchers, each with a nominal value of around 10,000 rubles, for the purchase of shares of select state enterprises. Although each citizen initially received a voucher of equal face value, within months the majority of them converged in the hands of intermediaries who were ready to buy them for cash right away.
In 1995, as Yeltsin struggled to finance Russia's growing foreign debt and gain support from the Russian business elite for his bid in the 1996 presidential elections, the Russian president prepared for a new wave of privatization offering stock shares in some of Russia's most valuable state enterprises in exchange for bank loans. The programme was promoted as a way of simultaneously speeding up privatization and ensuring the government a cash infusion to cover its operating needs.
However, the deals were effectively giveaways of valuable state assets to a small group of tycoons in finance, industry, energy, telecommunications, and the media who came to be known as "oligarchs" in the mid-1990s. This was because ordinary people sold their vouchers for cash. The vouchers were bought by a small group of investors. By mid-1996, substantial ownership shares over major firms were acquired at very low prices by a handful of people. Boris Berezovsky, who controlled major stakes in several banks and the national media, emerged as one of Yeltsin's most prominent supporters. Along with Berezovsky, Mikhail Khodorkovsky, Vladimir Potanin, Vladimir Bogdanov, Rem Viakhirev, Vagit Alekperov, Alexander Smolensky, Viktor Vekselberg, Mikhail Fridman and a few years later Roman Abramovich, were habitually mentioned in the media as Russia's oligarchs.
On 5 December 1991, Senator Jesse Helms, ranking member of the Minority on the U.S. Senate Committee on Foreign Relations, wrote to Yeltsin concerning U.S. servicemen who were POWs or MIAs: "The status of thousands and thousands of American servicemen who are held by Soviet and other Communist forces, and who were never repatriated after every major war this century, is of grave concern to the American people."
Yeltsin responded with a statement made on 15 June 1992, whilst being interviewed on board his presidential jet en route to the United States, "Our archives have shown that it is true— some of them were transferred to the territory of the USSR and were kept in labour camps... We can only surmise that some of them may still be alive." On 10 December 1991, five days after Helms had written to Yeltsin regarding American servicemen, he again wrote to Yeltsin, this time concerning Korean Air Lines Flight 007 (KAL 007) requesting information concerning possible survivors, including Georgia Congressman Larry McDonald, and their whereabouts.
One of the greatest tragedies of the Cold War was the shoot-down of the Korean Airlines Flight 007 by the Armed Forces of what was then the Soviet Union on 1 September 1983... The KAL-007 tragedy was one of the most tense incident of the entire Cold War. However, now that relations between our two nations have improved substantially, I believe that it is time to resolve the mysteries surrounding this event. Clearing the air on this issue could help further to improve relations.
In March 1992, Yeltsin handed over KAL 007's black box without its tapes to South Korean president Roh Tae-woo at the end of the plenary session of the South Korean National Assembly, saying "We apologize for the tragedy and are trying to settle some unsolved issues." Yeltsin released the tapes of the KAL 007's black box (its digital flight data recorder and cockpit voice recorder) to the International Civil Aviation Organization (ICAO) on 8 January 1993. For years the Soviet authorities had denied possessing these tapes. The openness of Yeltsin about POW/MIA and KAL 007 matters may also have signaled his willingness for more openness to the West. In 1992, which he labeled the "window of opportunity", he was willing to discuss biological weapons with the United States and admitted that the Sverdlovsk anthrax leak of 2 April 1979 (which Yeltsin had originally been involved in concealing) had been caused as the result of a mishap at a military facility. The Russian government had maintained that the cause was contaminated meat. The true number of victims in the anthrax outbreak at Sverdlovsk, about 850 miles (1,368 km) east of Moscow, is unknown.
In February 1996, Yeltsin announced that he would seek a second term in the 1996 Russian presidential election in the summer. This announcement came after weeks of speculation that Yeltsin's political career was nearing its end because of his health problems and growing unpopularity in Russia. At the time, Yeltsin was recuperating from a series of heart attacks, and both domestic and international observers had noted his occasionally erratic behavior. By the time campaigning began in early 1996, Yeltsin's popularity was close to being non-existent. Meanwhile, the opposition Communist Party had already gained significant ground in the parliamentary elections held on 17 December 1995. Its candidate, Gennady Zyuganov, boasted a strong grassroots organization, especially in the rural areas and small towns, and effectively appealed to nostalgia for the Soviet Union's international prestige and the domestic order under state socialism. At the same time, during and after the elections, the Communist Party secured the stability of Yeltsin and his regime, who relied on anti-communist rhetoric and on the fear of a resurgence of a strong communist party. During the elections, Yeltsin positioned himself as the only credible anti-communist candidate, able to prevent a new revolution and civil war and lead Russia toward stability and peace. The pro-government and pro-Yeltsin forces launched an anti-communist propaganda campaign in the media and established a special anti-communist newspaper Ne Dai Bog ("God forbid") promoting Yeltsin.
Panic struck the Yeltsin team when opinion polls suggested that the ailing president could not win; some members of his entourage urged him to cancel the presidential elections and effectively rule as a dictator from then on. Instead, Yeltsin changed his campaign team, assigning a key role to his daughter, Tatyana Dyachenko, and appointing Chubais as campaign manager. Chubais, acting as both Yeltsin's campaign manager and adviser on Russia's privatization programme, used his control of the privatization programme as an instrument of Yeltsin's re-election campaign.
In mid-1996, Chubais and Yeltsin recruited a team of a handful of financial and media oligarchs to bankroll the Yeltsin campaign and guarantee favorable media coverage to the president on national television and in leading newspapers. In return, Chubais allowed well-connected Russian business leaders to acquire majority stakes in some of Russia's most valuable state-owned assets.
U.S. president Bill Clinton also threw his support behind Yeltsin's campaign. At the White House's direction, American advisors were sent to join the campaign team of the sitting Russian president to teach new electoral techniques. Several European governments also showed their support for Yeltsin. French prime minister Alain Juppé visited Moscow on 14 February, the day Yeltsin's candidacy was announced, and said he hoped the election campaign would be "an opportunity to highlight the achievements of President Yeltsin's reform policy". On the same day, German chancellor Helmut Kohl visited Moscow, describing Yeltsin as "an absolutely reliable partner who has always respected his commitments".
Yeltsin campaigned energetically, dispelling concerns about his health and maintaining a high media profile. To boost his popularity, Yeltsin promised to abandon some of his more unpopular economic reforms, boost welfare spending, end the war in Chechnya, and pay wage and pension arrears. Yeltsin had benefited from the approval of a US$10.2 billion International Monetary Fund loan to Russia, which helped to keep his government afloat.
Zyuganov, who lacked Yeltsin's resources and financial backing, saw his early lead gradually erode. After the first round of voting on 16 June, Yeltsin appointed Alexander Lebed, a popular candidate who had finished in third place in the first round, as secretary of the Security Council of Russia. At Lebed's behest, Yeltsin fired defense minister Pavel Grachev and, on 20 June, sacked a number of his siloviki, one of them being his chief of presidential security Alexander Korzhakov, viewed by many as Yeltsin's éminence grise. In the run-off on 3 July, with a turnout of 68.9%, Yeltsin won 53.8% of the vote and Zyuganov 40.7%, with the rest (5.9%) voting "against all".
