Russia is Experiencing Stabilizing Stagnation

The recent struggle surrounding one of Russia's major oil companies Yukos has energized an ongoing debate as how best to define political and economic change during the presidency of Vladimir Putin.

At the risk of oversimplifying things, the parties in this debate tend to fall into two different camps: Those who say that today's Russia is in a state of 'stability," and those who assert that it is instead characterized by "stagnation.' Both positions have a wealth of empirical data and well-thought-out theories at their disposal concerning the economic and political development of post-communist countries. However, both approaches unfortunately tend to speak to the converted - one can find what one wants to find in Russia. Russia observers should instead consider a matrix of both stabilization and stagnation - or what could be called 'stabilizing stagnation.'

The argument that Russia is stabilizing, or has stabilized, during the Putin presidency is accepted among many of those, at least in the West, who 'got Russia wrong' during the Yeltsin years. These same Russia-watchers, in many ways, continue to get Russia wrong in the present. They point to an encouraging development of political parties and see the legislation signed every year as a sign that rule of law is slowly becoming a reality. Taxes are being paid, pension reform is on the agenda, military reform is hotly debated, regulation of the country's natural monopolies is contentiously fought over, and, very importantly, a Russian middle class has finally taken root and is feeling its social importance. There are many more issues to which the 'stabilizers' point in order to convince us that Russia is on the path to become a new and different country and more Western. Many of the arguments the 'stabilizers' cite are hard to argue with, at least on the face of it.

The 'stagnators' are equally vigorous in their view that much of what has been accomplished during the Putin presidency only hides what has really not changed. Russian political parties only represent themselves, with the exception of the Communist Party of the Russian Federation. (The Communist Party is the only real political party in Russia, though it is quite pleased with its status of loyal opposition and with making a lot of patriotic noise against the Kremlin - without having any actual interest in ruling the country again.) The 'stagnators' also have a point when they note that passing laws has almost nothing to do with enforcing them. Most new laws are ignored, and a new and stabilized form of corruption has become the way the country is run on a daily basis. One can reform the military, but it seems to have little effect on how the war in Chechnya is being fought. The division of wealth in Russia continues to disenfranchise and alienate the vast majority of the population. There has been progress with reforming the country's natural monopolies -consider the changes at Anatoly Chubais' United Energy Systems, for example - but the strategy concerning Alexey Miller's Gazprom appears to be more appreciated by the Kremlin, which intends to retain the company as a personal cash-cow. Russia's middle class, for the most part, remains dependent on the 'oligarch's' business adventures. At face value, it is also hard to refute these points.

Who is right? Who is wrong? The answer is that the 'stabilizers' and the 'stagnators' are both right - as well as misguided. Change in Russia happens on many levels that can easily be found to be contradictory. Russia is not experiencing the stabilization the 'stabilizers' claim nor the stagnation the 'stagnators' would have us believe prevails. Russia is never as weak or strong as it appears. At present, there are a number of contradictory and unclear processes in play. Describing change - or lack thereof - in Russia under the rubric of 'stabilizing stagnation' may be a compelling alternative. It combines the strong and discards the weak points of both sides of the debate and attempts to break away from the paradigm within which they operate.

There is no denying that Russia is changing. In fact, from the perspective of Moscow at least, things appear to be changing daily. But how to interpret this is the question at the heart of whether we understand Putin's Russia or not. (As an aside, this state of affairs seems to be something well-crafted by the Kremlin, which most likely very much enjoys supplying a wealth of "information" that contributes to the purposes of both the 'stabilizers' and 'stagnators' as a diversion from the true state of affairs.)

Russia is certainly a different place than it was three years ago. Russia's impressive macroeconomic performance of late interests both the 'stabilizer' and 'stagnator' camps. For the former, it is proof that Russia trajectory toward "modernity" is on track, all the hiccups aside. For the latter, much of what Putin's Russia has achieved is just an epiphenomenon created by favorable international commodity prices - Putin, in this view, has had an easy time in office because there are few external economic threats forcing him to truly reform the economy.

'Stabilizing stagnation' can accommodate both positions: Putin, the Kremlin, and the bureaucracy cannot afford to allow Russia either to stagnate or stabilize - at least not too much. To allow stagnation would create both international and domestic security risks undermining the present 'correlation of forces.' To allow stabilization would mean that the state would be confined to regulating an oligarchic order that really does not benefit the state in the medium and long term, and the state is always on the losing side when it makes deals with those that generate enormous incomes. This is why the Khodorkovsky affair has appeared, in fact.

The lack of the rule of law has served the interests of both the state and oligarchs for years. The oligarchs have used the lack of meaningful law to make fortunes, and the state has used it to fleece those who know how to make many - from the lofty oligarchs to humble 'mom-and-pop' operations. Who is going to make money off of whom is Russia's most burning dilemma - a question that is hard to solve due the financial interests concerned.

"Stabilizing stagnation" is a very dynamic, conflict-driven and unsolved algorithm. The attack on Yukos has given this problem a lot of air time because the nature of contemporary Russia is again in question among those in the world of business, who have tired of paying off the state, and those representing the government, who have decided that deals can only be negotiated under conditions they demand.

Russia can be said to be neither stable nor stagnating without a fixed point of reference, which is the law. Both the 'stabilizers' and the 'stagnators' will keep debating what change means in Russia until calling a lawyer or appealing to the authorities becomes something more than just 'arranging' things.

Peter Lavelle.