RIA Novosti
April 30, 2007
Putin’s state of the nation: inconsistencies hinder Russia’s development
MOSCOW. (Ian Pryde for RIA Novosti) – President Putin’s last state of the nation address to the Federal Assembly and various representatives from Russia’s regions, religious faiths and other organizations, contained little new. This year’s address was largely a catalogue of what Russia needed domestically. Predictably, however, initial international assessments focused on the foreign policy aspects of the speech.
Moratorium – a long time in the making
Western officials and media immediately latched on to Putin’s statements that Russia was re-emerging as a major power and is now among the ten biggest economies in the world, his warning that foreign powers should not meddle in the country’s internal affairs and that Russia was to declare a moratorium on the 1990 Conventional Forces in Europe (CFE) Treaty between NATO and the Warsaw Pact until all NATO members ratify and begin implementing the Treaty.
The moratorium made the headlines, but it should never have caught the West off guard – significantly, it was precisely this announcement that elicited the loudest and longest applause from his audience.
As I noted recently in this column, Russia has felt aggrieved by Western and NATO policy in eastern Europe since the early 1990s – if not earlier – and believes that its unilateral concessions have not been matched by the West.
In fact, there is a greater element of truth in Russia’s claims than generally recognized, and various statements by Western politicians are hardly conducive to confidence building.
In the 1990s, Madeleine Albright said frequently that Moscow had no veto over NATO’s eastward expansion, and this week Czech President Vaclav Klaus stated that the proposed anti-missile defense system in eastern Europe was not up for discussion. Poland is also keen on the new system.
Several countries in the Baltic Sea region and eastern Europe which are now members of the European Union and NATO seem bent on an anti-Russia course, as this weeks protests in Estonia over a Soviet war memorial testify.
In the light of history, these attitudes are hardly surprising, but they are based on an outdated view of a historical Russia and the Soviet Union which no longer exist.
On the other hand, it has been clear for some time that Moscow would reassert itself as its economy recovered.
I noted this in 2002-3, yet four years on, the West is still far behind the curve in its understanding of “the new Russia” and has yet to adjust to this new reality.
The hardening of positions and mutual recriminations are depressing and counter-productive in a world of increasing interdependence.
Interdependence
Russia, like many in government in Washington and London, has failed to understand interdependence – one of the buzz words in international relations theory since the 1970s.
Russia is now very confident due to its eight years of economic growth and new-found wealth, but of course the bulk of this is due to its exports of oil, gas and commodities to the West.
No wonder then, that many in the West and Russia itself feel that Putin’s claims of Russia’s resurgence contain a strong element of hubris.
But beyond the rhetoric lie more serious risks, and Russia is in danger of making the same kind of mistakes that the Arab world made decades ago.
When oil prices rocketed in 1973, Arab countries failed signally to develop alternative industries.
Saudi Arabia still faces major structural and social problems despite the inflow of petrodollars, and it is only relatively recently that Qatar, for instance, began to develop as a warehouse and financial center.
Russia’s use of energy in politics could lead to another mistake – that of overestimating its own strength and believing that the position of an energy super-power is a one-way street.
Arab attempts to use oil as a political weapon backfired massively when it turned out that higher oil prices led to higher global inflation, a global recession and falling demand for their main, if not only export.
As a result, the Arab countries were caught in a tight squeeze of falling demand and oil prices, while the imports they wanted from the developed West started rising in price due to inflation.
Russia knows full well that Europe is heavily dependent on its oil and gas, but it seems to forget that the much needed foreign loans and direct foreign investment will for the most part come from the Western camp – as will most of its imports.
The difference this time round is that low-cost manufacturing and service countries such as India and China have kept global inflation low.
But again Russia’s recent claims that it could switch oil and gas exports to Asia, and especially China, are unrealistic until the infrastructure is in place.
Russia has also failed to realize that China and India are also intimately connected with the West.
Economic problems in Europe and the United States will therefore inevitably have knock-on effects in India and China, and thus on Russian exports.
Even more important is Russia’s food security.
The failure to develop agriculture – a centuries-old Russian problem – means that Russia is still heavily dependent on foreign – especially Western – food imports.
Squeezing Europe – as part of a very powerful camp with the United States behind it despite all the disagreements over Iraq and Afghanistan – is therefore hardly a sensible idea.
Putin often makes much of Russia’s contribution to European and world culture, and this is undeniable.
In his address, however, he also made much of Russia’s improving democracy.
And yet, like that other huge economy China, Russia’s per capita GDP and legal, political and civil institutions remain far behind those of the West.
Senior Russian politicians have failed to grasp that while Russia is indeed light years removed from the Soviet Union, any sign of backsliding to authoritarianism and the suppression of dissent, the arrest of businessmen and the murders of journalists will automatically be seen as confirming the bad stereotypes.
First Deputy Prime Minister Sergei Ivanov’s recent call for Russian citizens to boycott goods from Estonia is a case in point.
This is strange and seems to display a feeling of weakness combined with a failure to understand “where the West is coming from.”
In fact, Russia is big and strong enough not to have to worry about dissident journalists and exiled businessmen allegedly fomenting a coup d’etat from London, and it is hard to see that Russians would buy into the kind of instability that would bring.
So while Putin and many Russians see increasing wealth after decades of economic problems and decline, Westerners still tend to focus on Russia’s more authoritarian tendencies and reversal of democracy.
Implementation
Putin’s upbeat assessment of Russia meant that he failed to address some of the country’s major problems.
This year’s address was largely a catalogue of what Russia needed – better transport infrastructure, education, more money on research and development, health, better housing and health care.
He also stressed agriculture and the need for more devolution of political power to the regional and local levels.
Much of this is also connected with Russia’s four national projects initiated in late 2005, and much of the money for these programs will come from Russia’s revenues from oil, gas and other commodities.
Putin also asked the Federal Assembly to pass quickly the necessary laws to encourage the development of these areas and attract investors.
At first sight, this looks very positive and has much to commend it, but Russia’s federal and regional governments remain weak and lack capacity, making implementation of all laws and decrees difficult.
And yet the measures outlined in the address will require major government involvement – even though Putin claimed they would encourage democracy and entrepreneurship, and release the energy of the people.
The risk is that these measures could have the opposite effect by increasing bureaucracy.
Top-down reform
Most businessmen here – whether from Russia itself or the West – would probably agree that the growing level of bureaucracy and corruption is one of the country’s main, if not its biggest problem.
The number of bureaucrats in Russia has been increasing since President Yeltsin was in office, and with every new bureaucrat there is a greater chance that a corrupt official will cause problems for business.
While large oil, gas and other companies have the time and money to solve the problem of “government relations” and deal with high level officials, small and medium-sized enterprises do not.
One thing that many say has become more rational in Russia is that instead of paying various “mafia” groups – criminals, the police and local officials – businesses now just pay one group, which then takes care of everything.
The way forward?
Numerous observers have related this generous social problem to the forthcoming State Duma and presidential elections.
The incumbents, however, have little to fear from a fragmented and largely unpopular opposition with few fresh ideas.
In fact, much of the impetus in Putin’s political philosophy comes from patriotism rather than democracy. This, combined with his own security background, doubtless explains some parts of his State of the Nation address.
Ian Pryde is CEO of Eurasia Strategy & Communications, Moscow.