Perspectives on Russia

With President Putin’s announcement this Monday that he intends to be the first name on the United Russia party list in this autumn’s parliamentary elections and that he does not exclude the possibility of becoming prime minister after he steps down as head of state, confusion about what is going to happen now is everywhere. To sort out this mess and perform anything more than qualified guesswork with regards to the coming months of Russian domestic politics would demand more insight on what goes on in the long corridors of the Kremlin than most analysts have been able to come by. But while we are at it, it is, however, tempting to take a closer look on the longer perspective of Russian democracy; what will the situation be ten, twenty or even forty years from now?

When looking at Russia one is always reminded of the fact that evolution is not taking place on merely one level. When asked about how Russia is evolving, it is sometimes tempting to slip into the ordinary mood of pessimism, which is always present whenever the fate of this fascinating country is debated. Merely leaving it at that, which is often the case, is a mistake. There is a democratic, or political, evolution that admittedly leaves much to be desired. But there is also an economic evolution that is, I dare to say, astonishing. We must keep that in mind.

According to a report by the Research Institute of the Finnish Economy (ETLA), income levels in Russia will exceed 90% (up from some 37% today) of the levels in EU15 member countries by 2050. (The report can be found at http://domino.sampo.fi/external/sbd/ks.nsf/liitteet/ETLAtutkimus.pdf/$file/ETLAtutkimus.pdf.) Already, the desire for consumption goods among the members of the middle class is enormous. That is not too surprising, considering history. After some seventy years of communism when there was nothing to buy and nearly ten years of economic chaos when there was no money about, the desire to buy stuff will not go away easily. The same goes for the wish to travel and see the world, something that was denied these people during communist reign. There might be setbacks along the road, but there is no doubt about Russians getting richer and their middle class growing bigger.

These improvements are not distributed evenly across the country. There is also a serious demographic issue that has to be dealt with, either through higher birth rates or immigration. Nevertheless, the future looks very bright from an economic point of view and this will have consequences also for the evolution of Russian democracy. We are looking at decades of impressive economic growth and it will simply not go unnoticed.

Up until things started to go their way at about the turn of the century, Russia was in chaos and despair, also known as democracy. While people in the West consider democracy to be a prerequisite for stability, among Russians these expressions are often thought of as opposites. While this is understandable, history has proven to us many times that memory is short. Increasing wealth and a growing middle class should eventually lead to people starting to question their lack of genuine influence, when they can no longer remember the turmoil of Chapter One of A Democratic Russia. Some fifteen years from now, we will see a generation that was not even born then and did not have to live through the pain. Many of these people will be in universities and they will have opinions, take economic well-being for granted and not be satisfied by it. Far from everyone will agree with them, but that is the whole point of democracy.

And yes, there might not be nation-wide support for democratic change. Many people will likely resort to the often expressed opinion that such a vast country cannot be ruled by anyone but a strong, autocratic leader. But then again, such a luxury might not be needed. Power sits in Moscow, where most of the money is and where income levels are the highest. In the Ukraine, things were changed thanks to protests in Kiev, the capital, and against the wishes of the entire eastern part of the country. It is not by coincidence that the Russian authorities are closely watching everything that could turn into a popular movement like the one that stopped Viktor Yanukovitch from obtaining the presidency. They know. Real change might not happen in 2020, perhaps not even in 2030. But eventually, protests will arise and, given the speed of economic growth, it is very likely this will happen sooner rather than later. How the government will react then might provide us with new opportunities to slip into that old pessimism for a while, but we will see. Change has come in even more unexpected countries, such as the Soviet Union.

While we wait, I would not run for office anywhere in Russia. Risks are too high and the chances of succeeding are slim. I would, however, invest some of my money there. 

Last Friday, after an unusually long pause for thinking, the members of the new Russian cabinet were announced. The only thing is, to refer to it as “new” is rather exaggerated. In total three ministers were replaced: German Gref left the chair for economic development, Mikhail Zurabov had to quit as minister for health and social affairs and Vladimir Yakovlev is no longer handling the regional development portfolio. Now, will this in any way have an affect on policies? Let’s have a look at these cases one by one.

Everybody is pretty relieved that Mikhail Zurabov is gone. He was in general believed to be a total disaster at his post and most people are surprised he was even able to remain for so long. His successor is Tatiana Golikova (who is actually married to Viktor Khristenko, the minister for industry and energy), a former deputy finance minister and a skilled economist. Even though most analysts are unsure about how much influence she will be able to exercise, she could not possible be any worse than her predecessor.

The replacement of Vladimir Yakovlev with Dmitri Kozak is interesting. Kozak and Putin go back quite some time and he is the President’s must trusted doer. As the presidential envoy to the Southern Federal District (which includes, among other troublesome places, Chechnya) he is believed to have eased tensions somewhat and helped the federal leadership get rid of some of the worst local leaders (people that were bad even by Russian standards). His appointment is therefore an indication of the president putting more emphasis on regional development. Another sign of this is the fact that his ministry has recently received several billion dollars from the state Investment Fund to spend. 

German Gref, then, was widely acknowledged as being an economic reformist and fiscal conservative. He has been receiving a lot of credit for the ambition to reform Russia’s business life, but did not manage to get it into the World Trade Organization. Trying to do any reforming of Russian business should be tiring to anyone and rumour has it that Gref has been eager to leave for some time. His replacement, Elvira Naibullina, is believed to share his liberal views, but the amount of influence she will be able to exercise is yet to be seen.

With Gref gone, the only one of the three fiscal hawks that have served to preserve the Russian economic wonder through fiscal sanity (the third one being Putin’s former economic advisor Andrei Illarionov, who had to resign a few years ago due to being too outspoken on the Yukos affair) that remains is Aleksei Kudrin, who’s position was strengthened as he was named deputy prime minister in this last reshuffle. However, all alone perhaps, will he be able to withstand the pressure emanating from a new president that, eager to create for himself his own popularity base, might want to spend some of the money these gentlemen have been saving for a rainy day? Let’s keep a lookout.