Many ill-gotten gains found their way abroad, a large part of ‘capital flight’ being illegal. Capital flight is declining, but is still a problem. On 7 April 2001 President Putin signed into law a money-laundering bill after experiencing considerable international pressure. On 11 October 2002 the OECD task force on money laundering removed Russia from its blacklist of offending countries. On 16 December 2002 President Putin signed a law on copyright and trade-marks.

Grotesque inequalities in income and wealth have thus arisen. While the financial oligarchs have become obscenely rich and powerful in the ways described, vast numbers of Russian citizens (especially many older people) have become pauperized and demoralized. Factors such as the stoicism of a longsuffering people and the weakness of civil society (including trade unions) help explain the lack of a violent reaction. (A separate section in the summary is devoted to Putin and the oligarchs. See p. 62.)

Russia’s political transition

Chechnya

The origins of the second Chechen war have usually been traced to the invasion of the neighbouring province of Dagestan by large numbers of Islamic extremists (mostly Chechens but also some foreigners) on 7 August 1999, especially when an independent Islamic state was proclaimed three days later (without the support of many of the local Dagestanies, who were, in fact, overwhelmingly against the extremists). (Vladimir Putin became acting prime minister on 9 August 1999 and his extraordinarily rapid ascent to the top thereafter is largely attributed to the second Chechen war.) But periodic clashes between Russian forces and Chechen rebels had occurred well before August 1999. In January 2000 former prime minister Sergei Stepashin said that a plan had been discussed in March 1999 to invade Chechnya, with the aim of establishing a buffer zone along the Terek river north of Grozny. The second war is also generally seen as an act of revenge by Russian generals humiliated by the first one.