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January, 2000. The battle for Grozny rages. The city is reduced to ruins by artillery bombardment and air strikes. Thousands of its inhabitants -- Chechens and Russians, women, old people and children -- are buried in the rubble.

Davos, a quiet, prosperous Alpine town. Skiers, tourists, politicians and world business leaders gather for the World Economic Forum. One of the plenary sessions is devoted to Russia. Answering a timid question from the floor about Chechnya, Anatoly Chubais condescendingly explains that the war there signifies the renaissance of Russia's army and of Russia itself, enabling it to overcome its Weimar syndrome and finally push ahead with liberal economic reform.

Western investors nod in agreement. "Yes, democracy and human rights are very good things," they confide in the corridors, "but not in Russia, and not right now. What you really need now is strong rule able to give security guarantees to foreign investors. This Putin of yours looks to be a decisive type. He ought to be able to ensure stability and bring some order to Russia."

December, 2000. Macroeconomic and political stability in Russia is ideal. An obedient Duma is ready to approve any legislation presented by the government. An obedient Federation Council voluntarily voted to dissolve itself. The real ruble exchange rate, gold reserves and GDP are all on the rise. It looks as though "this Putin of ours" has finally brought order to Russia.

But why did the optimism shown by investors in Davos fade away by year's end without bringing either direct or portfolio investment into the Russian economy? The flight abroad of Russian capital has actually increased and, without investment in the real sector to tie down an ever-growing money supply, inflation is on the rise. Finally, the Russian stock market collapsed in December to the majestic strains of the Soviet national anthem.

The thing is, by the end of the year, it had become clear that the root of Russia's problems is not so much in its macroeconomy as in its corporate governance.

No Russian corporation, from Gazprom to street kiosks, is transparent. Management is not accountable to shareholders, and companies are involved in barter operations, shadowy payments and incestuous relations with officials from local police to the highest levels of government.

Western investors aren't concerned by such abstract notions as democracy and human rights. They pump $50-billion annually into the Chinese economy. But they, and Russian investors, are very concerned by what happens to their own money and will never hand it to Russian managers with their thieving ways. In this sense, Vladimir Putin's "new order" hasn't changed a thing.

The so-called fight against the oligarchs turned out to be no more than the replacement of a few politically inconvenient oligarchs with other oligarchs unswervingly loyal to the authorities and Mr. Putin personally. The President's list of privileged oligarchs includes not only Roman Abramovich and Alexander Mamut, but a number of key government officials, minister-capitalists, all these 2 per cent and 5 per cent Mishas whose private businesses, registered in the names of relatives or front people, are flourishing thanks to their official posts.

It doesn't matter how many Petersburg Chekists there are, whether they're dressed in leather or in Pierre Cardin suits, whether they ride to the summits of power on machine-gun carts or in Mercedes-Benzes, they can't change this situation. At most, they can push one of the more blatant gluttons away from the trough and take the place themselves. And everyone knows this.

Putinism is no more than the impoverished philosophy of absolute power shared by the security services and the oligarchs close to them. It is yet another road to nowhere followed by Russia across the endless snow-swept plains of its history. Political commentator Andrei Piontkovsky is director of the Centre of Strategic Research in Moscow.

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