Analysis: Anno Putinus Zero

MOSCOW, Dec. 31 (UPI) -- In many ways 2004 has marked Vladimir Putin's first real year in power in Russia. For him and his nation, this year has been fraught with tragedy, change and controversy under the rubrics of Beslan, Yukos and Ukraine. Irrespective of what his critics at home and abroad claim, Putin's Russia is not going in the wrong direction. What will be crucial for Russia in the future is whether it can learn from past mistakes.

A yearend review of Russia cannot be separated from the presidency and the person of Vladimir Putin. After five years in power, Russia and Putin's fate are now synonymous. Re-elected for a second term this year in May and installing his own people of into positions of enormous influence and power, Putin has finally come into his own. Although very popular at home, his particular understanding and style of politics has put Russia on the defensive in the eyes of the world.

Three words sum up Putin's Russia in 2004: Beslan, Yukos and Ukraine.

Russia has been on the frontline in the war against terrorism this year and it is entirely unclear if progress has been made. After a series of suicide bombings in Moscow and the downing of two passenger liners, the world witnessed one of the greatest tragedies of the year -- the hostage crisis in Beslan's School No. 1. The fifty-two hour crisis left over 330 died; most of the victims were children. Chechen militants later claimed to have been behind the attack in North Ossetia.

Exactly what happened in Beslan is still unknown. Putin's reaction to this terrorist attack was swift, though very controversial. In the name of state security, Putin announced that the Kremlin would appoint regional governors. Widely condemned as a setback for Russia's democracy, Putin's announcement was very much in line with his efforts to centralize power in the Kremlin and limit the political influence of monied elites in the regions. How greater central control will aid in the fight against terrorism has yet to be tested. If the recent history of Chechnya is any kind of guide, greater central control may actually aid terrorists, as no one within the power structures is ever held responsible for making decisions on the ground.

Yukos -- once Russia's largest privately own oil company -- for all intents and purposes, no longer exits. The Kremlin's spectacular 18-month legal assault on the company and its core shareholders ended with the state again the primary owner of Russia's vast energy wealth through proxies. Endlessly reported as a Kremlin vendetta against former company chief executive officer Mikhail Khodorkovsky, the "Yukos affair" was about national security and Russia's foreign energy policy. The mere possibility that Khodorkovsky could have sold Yukos to a foreign concern was something the Kremlin could not tolerate.

The assault against Yukos is also part of the Kremlin's drive to limit the massive economic influence of the country's small group of super wealthy business leaders called the "oligarchs." Using the power of the tax authorities, all of the oligarchs have been put on notice that Kremlin has the means and reach to determine the country's overall economic future. However, the Kremlin has learned that the "the invisible hand of the market" can slap it back in the face. The Kremlin's implicit decision to forego foreign investment, leery of state interference in the market, for collection of back taxes negatively impacted one of Russia's most important achievements -- solid annual economic growth.

The Kremlin's handling of Ukraine's presidential election has been an unprecedented public relations failure for Putin. While not alone in meddling in Ukraine's internal affairs, Kremlin clumsiness has cost it enormously -- whipping up anti-Russia sentiment in the world not seen since the Cold War. A democratic and free Ukraine is in Russia's interests. The torrent of media stories that claim Ukraine will move to the West on the back of Viktor Yushchenko's election as president is simply nonsensical. Ukraine isn't moving anywhere. It will remain between Europe and Russia. Ukraine's economy is closely interconnected with Russia's. Ukraine's future interaction with European economic institutions will always have to consider Russia's interests.

"Anno Putinus Zero" will be remembered as the year that Putin finally came into his own. His plan to capture Russia's energy sector for the Kremlin has been a success, even though the tactics applied have unsettled many. The effectiveness of Putin's war on terrorism at home at home is questionable. Centralized political control should not be exclusively equated with authoritarianism. However, Putin's centralization policy has yet to be tested against terrorism.

With Ukraine's political upheaval and the Kremlin's miscalculations, this was also a critical event in Putin's "first" year in power. Knowing when to stand aside is sometimes the best way to help your closest friend.

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(Peter Lavelle is a Moscow-based analyst and the author of the electronic newsletter on Russia, Untimely Thoughts, at untimely-thoughts.com.)