uring the Cold War years I perceived Russia through a Cold War prism—as a land of vast, frozen twilight realms of steppe and forest where a drama was being acted out that involved players of satanic evil or saintly good and doctrines that promised either mankind's salvation or its ruin. I developed a passion for the country, a passion that derived in part from a weighty postulate: that what happened there concerned not only Russians but the rest of the world. In its Soviet incarnation Russia had nuclear weapons and a powerful military, a threatening and subversive ideology, a tendency to invade its neighbors or meddle in their affairs, and the might to wreak havoc on other continents. Russians I came to know spoke of the future of their country as if it would be the fate of humanity, and I agreed with them.

Intrigued by this drama, I set out in 1993, after the Cold War had ended, to cross Russia, journeying more than 8,000 miles from Magadan, a former gulag settlement on the Sea of Okhotsk, to Europe. I wrote a book about the trip. I made Moscow my home. I married a Russian. My life—as much as it can be, given that I carry an American passport—is Russian. But having devoted half my life to this country, and having lived through most of its "transition," I have arrived at a conclusion at odds with what I thought before: Internal contradictions in Russia's thousand-year history have destined it to shrink demographically, weaken economically, and, possibly, disintegrate territorially. The drama is coming to a close, and within a few decades Russia will concern the rest of the world no more than any Third World country with abundant resources, an impoverished people, and a corrupt government. In short, as a Great Power, Russia is finished.

Why this should be so will become apparent during a look back at the past decade and how its events stemmed from Russia's Eastern Orthodox civilization and a decimating, isolating, long-ago invasion whose consequences determine the relation between citizen and state to this day.

I, too, thought this way when I arrived in Moscow. In 1993 I was an optimist. How could one not be, after six years of perestroika, the defeat of the Communist coup-plotters in 1991, and the innumerable positive assessments by prominent Westerners, from Presidents to journalists to economists and investors? The image of Boris Yeltsin mounting a tank in front of the Supreme Soviet during the attempted coup and announcing, in his kingly baritone, that Russia would remain free of tyranny retained perfect clarity in my mind's eye. Moreover, in 1993 Yeltsin had just prevailed in a national referendum that granted him a mandate to continue his free-market and democratization reforms. History in Russia was beginning anew. What needed to be changed would be changed; problems that needed solving were going to be solved.

One warm afternoon in early October of 1993 I was strolling through the Kitai-Gorod neighborhood of central Moscow with a young woman by the name of Lena. An accountant, Lena had cropped flaxen hair and hazel eyes that radiated purpose; she was well spoken and curious. We talked about Pushkin's poetry, about the Michael Jackson concert that had just taken place in Moscow, about which designers were chic in the West, about how she liked to spend her days off at her parents' dacha. But when our conversation turned to Russia, a hardness invaded her eyes. I took the position that Yeltsin would keep the country on the reformist path; she countered with declarations that "nothing good will ever come of Russia," that the truth about what was going on here would never be known, that one who thought otherwise was naive, and that Russians were, above all, an unpredictable people, given to wild swings and dangerous extremes, lacking the patience and adherence to principle that democracy demanded. She scoffed at forecasts of prosperity and laughed at Westerners, with their belief in progress, the rule of law, and the goodness of men. I answered that this would all change, and we argued. But it was a beautiful day, the poplars stood red and gold in the fresh autumn air, and we soon dropped the subject. Suddenly we realized that we were almost alone on the streets, although it was a weekend afternoon. Only the distant sound of sirens broke the silence.

That evening I arrived home and turned on the television to scenes of mayhem and carnage in central Moscow. A couple of weeks earlier Yeltsin had ordered the Supreme Soviet, which opposed him, to disband. The deputies had refused; they had proclaimed a new government and appointed their own President. They had locked themselves inside the Soviet; soldiers and demonstrators had surrounded it; and a standoff had ensued. While Lena and I were out strolling, some of the demonstrators had broken through the line of soldiers and set off on a rampage through town, shooting their way to the main television station, which they attempted without success to take by force. The next morning Yeltsin ordered tanks into the streets, and I watched from the bank of the Moscow River as they blasted the white-marble citadel of the Supreme Soviet into a flaming, blackened shell, as snipers fired on passersby from rooftops, as crowds ran screaming along the embankment.

The deputies surrendered that evening, but for the next two weeks the Kremlin imposed a curfew. From the moment the nightly curfew began, cries to halt, bursts of gunfire, and screams would echo outside my apartment and last until dawn. My neighbors and I assumed that the shooting and screaming had something to do with Ministry of Internal Affairs troops apprehending curfew violators or hunting down the Chechen guerrillas whom, it was said, the Chechen speaker of the Supreme Soviet had installed in Moscow, but we never learned exactly what was going on. There were rumors and more rumors; the media were biased in Yeltsin's favor and could not be fully trusted. During the day troops rounded up Chechen and Azerbaijani street traders, often beating them, seizing their goods and money, and bulldozing their kiosks before expelling them from Moscow. This they did with the approval of the mobs that gathered to watch: many saw the dark-skinned Caucasians as outsiders who stirred up trouble, or as mafiozy.

Reformer or no, Yeltsin had the guns, and he used them. As under the czars and Stalin, so under Yeltsin—might would prevail in Russia, dialogue would be drowned out in the rattle of gunfire and blasts of artillery, violence would be used by the state against those who opposed reforms that were at least ostensibly for the good of the country. But there was something new this time: the violence received accolades from Western politicians whom most Russians had until then viewed as honorable and above the tumult of Russian politics. Because the West supported the bombardment and sided so openly with Yeltsin afterward, many saw the West as colluding with Yeltsin to weaken Russia. From then on Russians began deriding Yeltsin as the stavlennik ("protégé") or marionetka ("puppet") of the West. Russians' view of their country, as Lena had expressed it to me, was imbued with pessimism (which turned out to be justified), fatalism, and an awareness of irreconcilable traits and historical contradictions. If reform depended on democracy, and democracy required dialogue and trust, what did it mean that when faced with one of his first major crises, Yeltsin started shooting at his adversaries? In short, what had really changed?

In 1994, in order to stay in Moscow, I took a job as the co-manager of a Russian-American company that provided physical-protection services to Western businesses opening up in Russia. (My partner was Russian, a former deputy chief of the Moscow militia.) If in politics some sort of order had been restored, in other areas of national life, specifically business and the economy, a war was being waged—a war that, more than the uprising of 1993, would poison Russia and pervert its course, and of which I would acquire personal, nerve-shattering knowledge.

One September evening in 1994 I was driving home from work across central Moscow. The sky was a soup of gray drizzle and black cloud. Traffic was light; cars drifted past me or I passed them in a swooshing slush of rain and flying mud. I turned off the Garden Ring Road onto Vtoraya Tverskaya-Yamskaya Street and pulled up to a traffic light. It was red. I waited.

About halfway up the next block a man entered a Mercedes parked at the curb. A few seconds later an explosion tore the car apart and blew out the windows in the surrounding buildings, and the shock wave hurled pedestrians to the ground. A column of flame erupted from the vehicle; glass and scraps of metal tinkled and clanked as they fell to the ground. I jumped out of my car to look, and then a second, lesser explosion—the Mercedes's gas tank—scattered shreds of metal within a twenty-yard radius.

A couple of minutes later a militia car arrived, but the officers did little more than gawk at the burning vehicle. By the time a fire engine had pulled up, black smoke overhung the street, and the flames shooting from the wreckage reached into the branches of a tree above. The firemen brought out a hose and managed to extinguish the blaze with a torrent of white foam, which spread over the street like dirty snow. Steam resembling winter fog arose from the burnt car. The blaze out, the firemen threw aside their hose and pried open the door with a crowbar. The inside of the vehicle was a skeleton of charred, twisted metal. A few chunks of singed flesh were all that remained of the man inside.

The radio first reported this as the murder of a prominent actor; then reports said a banker. It turned out to be the contract killing of a mafiya boss whose alias was Sylvester.

A great gangland war was on in Russia, and I again heard gunfire in the night around my apartment. Bankers, businessmen, and innocent bystanders were being murdered in shootouts, contract hits, and car and apartment bombings—sometimes at the rate of several a day in Moscow alone. Competing territorial criminal gangs, many of which operate under the protection of police and state officials, were establishing their turf, taking over businesses across Russia, eliminating those who resisted. Government security services, so powerful under the Soviets, now found themselves outgunned; they were also vulnerable to corruption, because most officers and soldiers earned less than $150 a month.

There was nothing subtle, hidden, or surreptitious about the mafiya.Mafiozy often drove armored Mercedes and BMWs equipped with sirens and flashing lights and used them to force other cars to the side of the road; to avoid traffic jams they turned onto the sidewalk, honked, and shot ahead, sending pedestrians diving out of the way. They gathered at nightclubs where the cover charges alone could exceed $400; they ordered cognac at $200 a shot and hookers at $1,000 a session; they dressed in Versace and Hugo Boss suits; they maintained diamond-clad concubines of mesmerizing, icy beauty. Outside Moscow they built grand dachas for themselves, their wives, and their mistresses; they vacationed on the Riviera and in the Swiss Alps. In a land where honesty was a fault and the good were always the losers, always the poor, mafiozy became role models for many of the young, who in at least one survey named "contract killer" and "hard-currency prostitute" as the professions to which they most aspired. Money (and guns) made kings—understandably, in view of both Russia's poverty and the revulsion the young felt for the Soviet dogma of self-abnegation for the sake of a bright future, which never came. A free and fair market was an abstract concept; driving a $200,000 armored Mercedes 600 that could survive a bomb explosion under its chassis was fun.

The mafiozy were richer, cleverer, more lavish, and more aggressive than the expatriate businessmen arriving in Moscow, lured by Western journalists' portrayal of Russia as the "Wild East"—a tantalizing but deceptive catchphrase that implied frontierlike opportunity for all in a munificent wilderness. When the expatriates discovered that the odds had been stacked against them, they came to our security firm for protection; they were frightened, insomniac, at times trembling, and always stunned. Where was the reforming Russia that would let them get rich while preaching the gospel of the free market to reverent native subordinates?

The Byzantine nature of Russia's legal environment provides organized crime with an entrée into businesses by making violations of the law—matters for blackmail—inevitable, and by leaving entrepreneurs at the mercy of corrupt bureaucrats and state agencies. It is impossible to operate a business successfully in Russia and also observe all the laws, because there are too many contradictory laws. The approximately twenty different levies on the books would tax a company as much as 105 percent if they were paid; businesses must evade taxes to at least some extent or go bankrupt. Most enterprises maintain a secret chornaya kassa (a "black accounting book" that accurately shows profits and losses) but submit to auditors from the Tax Inspectorate the belaya bukhgalteriya ("white accounts"—false records of low profits and high expenses). The auditors themselves are barely getting by: they work for a commission (a percentage of the taxes they collect), and may be receptive to bribes, gifts, rented women, and so on.

State agencies other than the Tax Inspectorate suffocate businesses and add to the mess. Registration, re-registration, and certification with municipal departments cost enterprises hundreds of employee hours. Bureaucrats may expedite paperwork for bribes. Unbribed, they may "forget" or "misplace" one's papers, deny requests, delay decisions, fail to show up for meetings, or send one back to a lower-level bureaucrat for this or that document or stamp or signature. Fire, sanitary, and labor inspectors make frequent and unexpected calls on businesses. If something is not in order, or the inspectors are not adequately bribed or fêted, they may order the company closed, seize assets, or arrange for arrests. Legal redress most often fails: the government rarely loses in court against the accused, and judges are known to be on the take.

Enter the mafiya. It has been estimated that 80 percent of Russian businesses pay dan' ("tribute,"or protection money) to a krysha ("roof," or racket), but the real number is probably higher; one may assume that any business operating openly has a krysha. (Entrepreneurs providing clandestine services are less likely to run into trouble.) Mafiozy approach businesses directly, visiting in groups of three or four; one of them speaks in a friendly manner, warning directors that they must pay dan'—15 to 20 percent of their company's gross earnings—or suffer violence at the hands of unnamed gangs. If the mafiozy operate under the guise of a security agency, they may insist that the director sign a contract—a ruse that has deceived some businesses into relinquishing control of their bank accounts. Once a business has acquired a krysha, it must resist the advances of rival gangs or risk falling prey to razborki—a settling of scores over territory. If businesses refuse to pay, which is rare now, the thugs mount an escalating campaign of pressure, starting with verbal threats, moving on to beating and kidnapping, and ending with well-placed bullets or the torture of loved ones or a bomb placed by the door of the businessman's apartment.

If businessmen attempt to conceal revenues from the krysha victimizing them, they may be exposed by moles the mafiya has placed within their companies. Often, in return for payment, accountants or secretaries provide the mob with information about their employers' violations of tax laws. In any case, a businessman may simply be unable to cope with the mobsters' demands, which can increase at any time: in addition to regular dan', thugs may demand "gifts" in the form of SUVs, rented women, or bags of cash. However, the mafiya can play a useful role in business development: if competitors with lower prices or better goods appear on the scene, fires, theft, murder, and other bedlam can be arranged.

In most countries organized crime affects principally illegal trade (narcotics, prostitution, gambling), but in Russia the mob can take over any business—not only because most businesses have to break the law to stay afloat, and thus leave themselves vulnerable to extortion, but also because so much economic activity takes place in untraceable cash. Although Russian law requires that a business open a bank account, Russian banks are notoriously unreliable—failing frequently, closing unexpectedly, disappearing with their depositors' money, or charging high fees for irregular services. A business may thus be forced to conduct most of its transactions in cash. Other Russian financial institutions have proved no more reliable: investment houses have turned out to be pyramid schemes, and millions of private investors have lost their life savings when the schemes collapsed.

A country with a $340 billion economy and no reliable banking system or financial sector makes a poor investment, to say the least, and capital flight has become a necessity for many businesses. It is estimated that for most of the nine years since the fall of the Soviet Union some $2 billion a month has fled the country for banks in the Caribbean, Switzerland, and elsewhere. Aid from international lending agencies totaled $66 billion through 1998; in the mid-1990s roughly $10 billion a year in aid poured into Russia while at least double that flowed out.

Faced with such danger, disarray, corruption, and deceit (most of which is well publicized by the Russian media: news shows frequently amount to chronicles of bribery, death, and dismemberment), Russians have stopped feeling outrage and have resigned themselves. The murder of an entrepreneur "as a result of his business activity" (to quote a phrase beloved by militia press centers) arouses no surprise, only a shrug. The excesses of mobsters on a Moscow street provoke no indignation, only envy. It is accepted that the chaos and contradictory laws benefit those in power—that the state has abandoned its people to the thugs because it is in league with them. In any case, those in power, be they mafiozy or the government, have the guns; thoughts of overt resistance are rare.

Those—including Boris Berezovsky, Vladimir Potanin, and Mikhail Khodorkovsky—with ties to the ministries that control natural resources took advantage of price irregularities to make export deals at astronomical profits. Thus it was their connections, rather than entrepreneurial initiative, that made these men wealthy; they used their wealth to buy influence in the media and the government. Wealth begat wealth and influence spawned influence. The oligarchs also established banks and arranged to have them designated conduits of state money, much of which—including hundreds of millions of dollars that Moscow later allocated for the rebuilding of Chechnya after the first Chechen war—simply disappeared. Some oligarchs won tax exemptions from the government (spelled out in presidential decrees) which allowed them to import alcohol, cigarettes, and luxury cars duty-free. Tax exemption was eventually extended to others with ostensibly noble motives: by the mid-1990s the Russian Orthodox Church and the National Sports Fund were importing hundreds of millions of dollars' worth of alcohol and cigarettes a year. This aroused little public anger: people accepted as a given that those in power would use their positions for aggrandizement.

While the oligarchs were amassing their wealth, most press attention, both in Russia and abroad, was on the state privatization scheme conceived and implemented by Anatoly Chubais, the State Property Committee Chairman, and blessed by Western governments. In 1992 and 1993 the government doled out vouchers (vauchery) that Russians could use to invest in state enterprises that were to be put on public auction blocks. Although 41 million Russians acquired shares in 17,000 enterprises, the scheme amounted to a sham—little more than a way for the government to divest itself of moribund enterprises that the Soviet Union had gone bankrupt supporting. The state's most profitable assets—the oil and precious-metals industries—did not come under the purview of the initial scheme. Russians quickly understood that they had been deceived, and vauchery came to mean worthless chits of paper; privatizatsiya was popularly punned into prikhvatizatsiya (from the verb prikhvatit'—"to seize or grab").

Although Russia's largest and most valuable company, the natural-gas enterprise Gazprom (its exact worth is unknown, but estimates have reached as high as $950 billion), was divided secretly among the state, management, and unknown investors in the early 1990s, the rest of Russia's energy and precious-metals industries hit the auction block in late 1995. The auctions, organized by Anatoly Chubais and hailed as "competitive," were rigged by those oligarch-owned banks and companies to which Chubais entrusted them. Large stakes in oil, nickel, and telecommunications companies were sold at a fraction of their real value to the oligarchs and their affiliates; significantly higher bids were disqualified on technicalities. As a result the oligarchs found themselves in control of Russia's most profitable strategic resource: oil. After Saudi Arabia, Russia contains the largest oil reserves on earth; it is the third largest oil producer in the world.

Having acquired these companies for next to nothing, the oligarchs set about looting them, stripping them of assets for the quickest possible gain and shipping the profits abroad. Through an elaborate scheme known as transfer, or corporate pricing, by which a Russia-based subsidiary of an oil company sells oil to the parent company or to another subsidiary abroad at an artificially low price (so that the latter can resell a large portion of the oil at Western-market prices), the oligarchs have since cheated the state out of billions of dollars of tax revenues a year (roughly $9 billion last year alone). They have also transferred shares to offshore holding companies, arranged for the theft of equipment, and embezzled funds. Russian judges, law-enforcement agents, and state officials who objected to the looting were intimidated into acquiescence or bought off.

The oil industry, plagued by obsolete and decrepit equipment and deprived of needed investment, has over the past ten years cut production by 50 percent. To protect their "investments" the oligarchs have been the staunchest advocates of the status quo: in 1996 they financed Yeltsin's re-election to the presidency, giving the ailing, boozing leader campaign funds (thirty times more than election law permitted) and media coverage that took him from single-digit approval ratings to victory over the Communist Party candidate Gennady Zyuganov.

As bad as all that sounds, throughout the 1990s in Moscow the standard of living rose. (Moscow is where most of the oligarchs live; where the banks, restaurants, shops, medical centers, and travel and service industries that cater to them are located; and where the greatest share—perhaps 80 percent—of Russia's capital is parked.) The city underwent a glitzy transformation, in part owing to preparations for its 850th anniversary—an occasion that might have gone uncelebrated if the mayor, Yuri Luzhkov, had not been pursuing presidential ambitions. Muscovites working for finance, oil, and investment companies and earning $5,000 to $20,000 or more a month constituted the upper class. Many of my well-off friends were spending their entire salaries on clothes, new apartments, restaurant meals, and travel abroad. (Profligate spending made sense, because there was no safe place to save money.) Designer boutiques opened across the city; the already high numbers of Mercedes, BMWs, and SUVs on the streets increased further. As the rest of the country slipped into medieval poverty, Moscow was becoming, at least by superficial measures, a world-class capital.

But the country was nearing collapse. The government and state enterprises were failing to pay salaries to millions of Russians in the hinterland, often for months on end—while the directors of those enterprises received hundreds of millions of dollars in state support, which they presumably funneled to accounts abroad. International banks and Western economists ignored evidence of corruption and identified Russia's main problem as insufficient tax collection. They made loans (totaling roughly $10 billion) contingent on improved levies. They urged the Russian government to do all it could to increase its take, and the government complied. Yeltsin's administration floated the idea of setting up a CheKa (an acronym that stands for "emergency committee," harking back to Lenin's bloodthirsty secret-police organ of the same name) to oversee tax collection; it formed tax-police SWAT teams that began raiding entrepreneurs, often acting on tips from informers. In cities across the country giant posters appeared carrying citations from the constitution set against the Russian tricolor, adjuring citizens to pay taxes or else. For those unmoved by the call to patriotism or by fear of the tax police, other posters showed teary-eyed grandmothers pleading with arms outstretched for citizens to pay taxes so that the old women could receive their pensions.

It didn't work. Most businessmen were (quietly) outraged. They knew that the payment of taxes by oligarchs and those close to the state was a matter of negotiation, and that many tax exemptions, though declared annulled in 1995 at the request of the IMF, still functioned. Indeed, the state paid compensation to certain companies for income lost in the abolition of exemptions. If they were not operating secretly out of unmarked offices, or changing locations and names to evade taxes, private enterprises (and even government agencies, including the Tax Ministry itself) made use of loopholes in the law which allowed certain kinds of expenses—for insurance, meals, and so on—to go untaxed, while only income that fell under the rubric "salary" was taxed. The result, to this day, is that companies pay perhaps a tenth of their employees' compensation as taxable salary and nine tenths under various other categories, often in chornyi nal ("black cash"). This proves profitable for employees and employers both. Only the state loses. But then, no one gives a damn about the state. Why?

"Those government thieves aren't getting any of my money!" summarizes the feelings of Russians toward taxes and their state. When Russians talk of their politicians, they frequently speak of "thieves," "bandits," and "swindlers"—and not hyperbolically: the presence of criminals in the Duma is a well-publicized fact. (To acquire immunity from prosecution, some of Russia's most notorious scofflaws have gotten themselves elected to seats in the legislature.) Russians refer to the state itself as the kormushka, or "trough." The notion that a politician could be serving his constituents while dipping his morda ("snout") in the kormushka (whether stealing state funds or IMF dollars), or that laws written by "bandits" and "swindlers" could be just or justly applied, or that pigs at the trough and people coerced into parting with their earnings to fill that trough have anything in common, is laughable. . . .

As the former head of the FSB, Putin may well have had damaging information on all his rivals in the presidential election that was to take place three months after his appointment. The media reported a groundswell of support for Putin among the electorate—impossible to measure in real terms, given the media's obvious bias in his favor, although his stated intent to restore order in Russia did resonate with many. Most of the other candidates gave up the race without a fight, and Putin won the election in the first round. Given that he had come to power on a wave of hysteria about the war in Chechnya (a war he had launched, albeit in response to the Chechen invasion of Dagestan) and panic generated by terrorist explosions that destroyed apartment buildings in several Russian cities (for which, it was rumored, his associates were responsible), it is tempting to conclude that his election resulted from a scenario contrived to dupe the Russian public into choosing a ruler their hated former President had chosen. Even this scenario, however, failed to arouse much interest or anger: Russians expect skulduggery from their politicians.

In his addresses to the public, Putin showed that he understood the parlous condition of his country. Russians, he said, had built only "the carcass of a civic society"; they failed to obey laws; they were demographically moving toward becoming a "senile nation." Most tellingly, he praised the state security organs, including the FSB, for "guard[ing] Russia's national interests," said Russians were "not ready to abandon traditional dependence on the state and become self-reliant individuals," and declared that they wanted "a restoration of a guiding and regulatory role of the state"—words that left no doubt about his plans.

Since taking office Putin has moved to restore the state. He has set about strengthening the vertikal' vlasti, the "vertical line of power"—an oblique way of saying his own authority. Though the President's power was already czarlike, owing to Yeltsin's constitution, it was not enough for Putin. He has redrawn Russia's administrative boundaries along the lines of those of imperial Russia, and in five out of seven of the "new" federal regions he has put former military or intelligence officers in charge. He has launched a campaign to oust governors on corruption charges—governors opposed to the Kremlin, that is. (Corruption serves as a convenient brush with which to tar opponents. Some estimates say that seven in ten government officials are corrupt; the real number may be higher. No matter—when it suits the state, guilt can be manufactured on demand.) He has prosecuted the war in Chechnya to the point of obliterating that republic.

Putin needs pliant and adoring media to ensure an absolutist rule. He has stood behind a proposed "informational security doctrine" that would ban any foreign ownership of media in Russia as a "threat to national security." Some in the State Security Council have opposed the bill, because they believe that Russian journalists are "just as dangerous"; so now there is talk of imposing restrictions on Russian reporters, too. Putin has referred to those who write news unfavorable to the state as "traitors." He has put a KGB veteran in charge of the telecommunications industry. Journalists in the provinces continue to suffer the intimidation and beatings (or worse) that they knew in Yeltsin's years, and similar repression has begun to reach the capital. Last summer the prosecutor general's office moved to indict the oligarch Vladimir Gusinsky, the head of Media-Most, which owns Russia's last independent television network, on charges of fraud. The charges may prove true, but given the widespread theft practiced by other oligarchs, pursuing Gusinsky, whose network has voiced strong opposition to Putin's war in Chechnya, amounts to selective prosecution.

For the first time since Soviet days slavishly adoring chronicles of the country's leader have hit the stands in some cities. Putin supported the reinstatement of a slightly modified version of Stalin's national anthem, which had been discarded by Yeltsin. Although Putin is a leader with an "unclear" commitment to democracy in the eyes of many in Western political and media circles, his KGB past speaks volumes to Russians. The sole national-level politician who still advocates Western ideals and democracy, Grigory Yavlinsky, has called the situation with respect to the media and freedom "the worst period in the last ten years." The Soviet atmosphere of suspicion and fear is returning to Russia. The very knowledge that a former KGB agent is running the country sends chills down the spine.

Or down some spines. As with Yeltsin, so with Putin: tax collection is state priority No. 1. To fear or not to fear is a question that hinges on whether a Russian has made enough money to dread Putin's tax pillagers or is poor and dispossessed enough to feel spiteful glee when masked tax men break down a wealthy neighbor's door, kick him and his wife to the floor, ransack their belongings, and make off with their passports and financial documents. Yet Russians still steadfastly refuse to file personal tax returns, and businesses continue to flout tax laws (though now perhaps with newfound fear and plans to legalize their affairs in the future). There is talk of granting the tax police ministerial status. Their deeds are glorified in TV police dramas modeled after Cops, and a special academy has been set up to train youngsters for a future in tax collecting—a profession that may be edging out contract killer in popularity among teenagers, with its scope for material gain and license to employ violence against "enemies of the people." And as if the new role of the tax police weren't glorious enough, the Orthodox Church has assigned them a patron saint, thereby investing them with a divine right to plunder. Those who have made money, including the oligarchs, understand that in still largely communalist Russia, property rights are not only not inviolate but could be reversed with cheers from the masses. Gusinsky and Boris Berezovsky grasped this and have fled abroad rather than risk litigation and imprisonment; many others who have made fortunes have done the same or are plotting to do so. Oligarchs who suffer dispossession will likely see their property either divided among members of Putin's court or renationalized. The notion that any redistribution of wealth will be fair and just is nonsensical in light of recent history: if redistribution takes place, it will favor those in power.

Average Russians continue to suffer abuse daily at the hands of the militia, the traffic police, and corrupt bureaucrats. The state may try them more than once for a crime. They may be detained without charges for seventy-two hours or held in a tuberculosis-ridden pre-trial detention center for years. Opening a business involves as much paperwork and bribery as ever. The mafiya still extracts dan' from entrepreneurs. The countrywide decay that began during the Yeltsin years continues, with television towers catching fire, nuclear submarines sinking, military aircraft crashing to earth, apartment buildings exploding from leaks in decrepit gas pipes, and entire regions of the country going without heat and electricity in winter months. Thirty-six percent of the population, or 52 million people, live below the subsistence level, set at a dollar a day. (Putin's promised increase in the minimum monthly wage has added $1.79, for a total of $4.74.) The military, despite Putin's pledges to reform it, remains one of the most impoverished segments of society: more than 49 percent of military families live below the poverty line; two thirds of junior officers have no housing; and officers' salaries have declined in real terms by more than 50 percent over the past five years. Putin's actions show his failure to understand that it is the dying economy, not the deteriorated state, that threatens stability and the future of the country. Economic distress and doctrinaire intransigence brought about the fall of the Soviet Union, and they may bring about the fall of Russia: Putin has pledged to restore a "comprehensive system of state regulation of the economy."

Adequate financing of the state sector of the economy would, it appears, require renationalization of the energy industries that were given away at the rigged auctions of 1995. But at least for now Putin has forsworn confrontation and has reached an agreement with most of the oligarchs that will allow them to keep their spoils—a compromise that shows where his interests lie. Buoyed by high world oil prices, the oil industry is still the engine of the economy: it provides a third of all state revenues (despite persistent tax arrears). This lends a shine to Russia's fiscal visage that has prompted some Western observers to irrational exuberance and predictions of a new boom. (Russians, however, now more than ever, prefer to send their capital abroad; since Putin took office, capital flight has increased by 30 percent.) Westerners are right about the energy sector, at least: the Russian government is negotiating a deal with the European Union that would double fuel exports to Europe and assure Western investment in leaking pipelines and decrepit rigs.

To understand the present condition of the Russian military, and the problems facing the Russian state as a whole, we must examine what lies behind the war in Chechnya. Although it has generated much criticism in human-rights circles (particularly in Western Europe), the war has given rise to relatively little public discontent in Russia, where the conflict is seen as a battle for the Russian Federation. Should the Chechens win independence, they would acquire a segment of the oil pipeline that runs from the Caspian Sea across their territory to Novorossiysk, on the Black Sea. Furthermore, other restive, partly Muslim regions of the federation, from republics in the Caucasus to oil-rich Tatarstan and Bashkortostan, might be tempted to secede.

Getting the lion's share of Caspian oil reserves ranks as one of the Kremlin's principal domestic and foreign-policy objectives. When Chechen guerrillas invaded the neighboring republic of Dagestan, in 1999, they threatened not only Russia's position on the Caspian Sea but also its alliance with and military bases in Georgia and Armenia—bases Russia needs in order to stymie efforts by Turkey and the West to erode its hegemony in the region. In view of these international implications, it makes sense that Moscow has chosen to emphasize the role played by foreign (mostly Muslim) governments and mercenaries in the Chechen conflict.

Since federal forces reinvaded Chechnya and established a measure of control over its northern lowlands, capital, and main cities, Putin has asserted that the military is conducting not a war but a (largely successful) "anti-terrorist operation" against band-formirovaniya ("bandit units"). The result, he maintains, will be a political solution involving the reincorporation of Chechnya into Russia. Media coverage has for the most part been restricted to positive accounts of battles won and children saved, but state television also reports much that does not suggest a sunny return of Kremlin rule: frequent Chechen attacks on Russian forces all over the republic, some of them causing dozens of casualties; Chechen guerrillas' murdering with impunity compatriots who collaborate with Russian authorities; and savage incidents of banditry and kidnapping—not only by the rebels. Russian troops have kidnapped Chechens for ransom; Russian soldiers have sold their weapons to guerrillas in return for cash or narcotics; and the torture of detainees in federal detention centers is routine. All of this has prompted Putin to visit Chechnya and to scold military commanders, including the Minister of Defense, for their incompetence and unprofessionalism. But the war goes on, with no end in sight, and atrocities on both sides continue.

Putin has promised to improve the military through much publicized reforms. Last September the Ministry of Defense announced plans to cut its forces by almost a third, from 1.2 million men to 850,000—a measure that would purportedly allow for a leaner, meaner, and better-paid fighting force and would free up funds for the building of ten new Topol-M ICBMs, Russia's most lethal nuclear missiles. Yet within two weeks an official of the State Security Council announced that troop numbers were in fact still at Soviet-era levels, totaling more than two million servicemen, with another 966,000 in civilian support staff. This declaration exposed the sham of Russia's demilitarization during the Yeltsin years and made a cut of 350,000 men seem insignificant.

Thus it is unclear where the issue of military reform stands. But the blood, gore, and corruption in Chechnya are a reminder that no matter what the numbers are, a band of rebels has managed to tie down the army of what was once the world's second superpower.

Russia's superpower ambitions contrast with its abysmal domestic failures, both military and economic; Putin's promise to fulfill those ambitions bespeaks the same sort of crippling policy confusion that characterized the Yeltsin era. But no matter how much its army deteriorates, Russia is likely to maintain a nuclear arsenal sufficiently strong to keep nato from ever launching a "humanitarian" war on its soil. And the ruin that Russian forces have wrought on Chechnya has shown what Moscow is willing to do to keep Russia intact.

Meanwhile, much of Moscow's political elite still views Russia as having a Great Power role to play vis-à-vis the United States—a role that, more than economic reform, seems to captivate the Kremlin. (Under both Yeltsin and Putin, Russia has striven to counter the United States by courting alliances with China and India, selling arms and nuclear technology to Iran, and supporting or at least dealing with Iraq, Serbia, North Korea, and Cuba.) Superpower ambitions are inevitable, because Russian civilization and identity are buttressed by a vast and isolating territory, abundant natural resources, and scientific and military capabilities that include nuclear weapons. In view of the ailing economy—Russia's gross national product today amounts to just four percent of the United States' GNP—these pretensions are fraught with danger, and Putin would do well to recall that high defense spending helped to bring about the demise of the Soviet Union. Nevertheless, Putin has declared that he will increase the military budget to "respond to new geopolitical realities, both external and internal threats." (The budget for last year included a seven percent increase, and Putin has pledged to raise it by 57 percent eventually.) As the state grows stronger, it will once again rob the people to pay the bills. Thus policies aimed at the revival of the state and the pursuance of Great Power ambitions promise only further suffering, exploitation, and decay.

For those who remain. Over the past decade Russia's population has been shrinking by almost a million a year, owing to a plummeting birth rate and a rising number of deaths from alcoholism and violence. Predictions are astonishingly grave: the country could lose a third of its population (now 146 million) by the middle of the century. This does not factor in new scourges—tuberculosis and HIV, in particular, which have been spreading exponentially since 1998. As its population shrinks, Russia will find itself less and less able to face demographic challenges from China. Overpopulation is pushing the Chinese into the Russian Far East—a trend that at present benefits Russia by bringing it trade and small-scale investment but that could someday lead to ethnically based separatism.

Although the Kremlin's superpower pretensions may preclude it from becoming a loyal partner of the West, the country's economic failings, to say nothing of its shrinking population, will eventually prevent Russia from posing a significant threat abroad. Given that Russia is surviving on human, material, and military reserves accrued during the Soviet years, and that Putin has put forward plans that will only worsen his country's plight, we can draw but one conclusion: Russia is following the path of Mobutu's Zaire, becoming a sparsely populated yet gigantic land of natural resources exploited by an authoritarian elite as the citizenry sinks into poverty, disease, and despair.

What does this mean for the West? It is difficult to imagine the birth of an ideological conflict between Russia and the West similar to that which led to the Cold War—though Russian nationalist sentiments are likely to increase, and to find expression in ever-more-bellicose pronouncements from the Kremlin, especially if the West and NATO persist in humiliating Moscow with military adventures in its former spheres of influence. Otherwise, to the benefit of the Russian elite, Western businesses will continue to operate in the havens of Moscow and St. Petersburg, where investment, both Russian and foreign, will ensure a well-maintained infrastructure. As regions deteriorate, these two cities are likely to continue developing and growing: Moscow's population officially stands at nine million but may actually be as high as 12 million. Western governments will continue to buy cheap Russian oil and gas, and will quite possibly invest heavily in the upkeep of those industries. And as for superpower status, in contrast to the Turks under Kemal Atatürk, who voluntarily relinquished their empire in favor of an Anatolian homeland, or the Byzantine Greeks, who fell in battle defending their empire against the Turks, the Russians are likely to face a long, slow, relatively peaceful decline into obscurity—a process that is well under way.