Our Life Will Be Poor and Quiet. Without Electricity

Russia no longer land of extremes?

On the New Year’s eve, experts and largest international investors are considering Russia’s fate. It turns out that against the background of the world’s unfavorable economic decline, Russia’s economy looks rather good. Even the World Bank declares that it believes in Russia’s paying capacity, in its decreasing dependence upon the oil price conjuncture and even plans to give money to Russia. But in fact, Russia is asking for no money so far. Standard & Poor's reports with confidence that paying capacity of Russian debtors has considerably strengthened. It is not clear yet what is to come next, as the whole of the world is plunged into the New Year preparations. In any case, the Big World seems to be ready to admit that Russia is no longer the country of white bears and economic extremes.

Russian shares are obviously on the rise. For instance, the international rating agency Moody’s raised the limit of Russia’s currency rating and the eurobond rating from Ba3 to Ba2. The forecast for all ratings remains stable. Experts of the agency explain this optimism with several years of Russia’s considerable economic growth and with the corresponding improvement of the basic economic showings; such as increase of the gold and currency reserves, reduction (sometimes even ahead of schedule) of foreign short-term obligations. Besides, the Russian government very reasonably reserved money for peak payments of the foreign debt in 2003 and 2005. Experts say, this reveals that policy of the state concerning economy has become reasonable and predictable.

A bit earlier, agency Standard & Poor's also raised Russia’s long-term sovereign rating. The long-term rating in the national currency was raised from BB to BB+; the long-term rating in foreign currency – from BB- to BB. The forecast is also stable. At the same time, Standard & Poor's confirmed Russia’s short-term rating at the “B” level in the national and foreign currencies.

To wide extent, foreign experts are inclined to think that the state of Russia’s economy can be defined as stabilization; the term so widely used by governmental officials, but still rather vague for majority of Russians. Analysts say that against the background of stabilization, the stock market in Russia and economy will be gradually developing, and economy’s dependence upon oil prices will reduce. It is not clear yet whether these measures will increase the well-being of the society. However, it’s perfectly evident that majority of Russian population won’t agree to “stabilize” the present-day situation even more; we mean the extensive poverty, obvious unemployment of the most part of the population and shameless enrichment of some layers of the society. To tell the truth, experts say that the situation will develop optimistically only in case if nothing extraordinary happens. What do they mean?

Analysts say that it will be a political will of the Russian leadership that will define the “stabilization.” It is believed that Russian authorities will try to avoid a crisis and slow down implementation of reforms on the eve of parliamentary and presidential elections. Moody’s analysts say that the planned structural reforms in Russia’s natural monopolies, in the bank sector and in the government service sector will meet with resistance and get stuck under conditions of the general political situation and reluctance of the state bureaucracy to change anything. The experts have drawn a conclusion: Russians will live poorly, but without any upheavals.

Opinion of the experts concerning the previously planned reforms proved to be true. Duma deputies unanimously demonstrate the desire to abstain from any reforms until a new composition of the parliament is successfully elected.

Yesterday the State Duma Council decided to postpone the second reading of legislation on power engineering reforms for a later period. The centrist factions of the parliament that violently combated against reforms in power engineering suggested by Anatoly Chubais, the chairman of RAO UES of Russia, the energy monopolist, decided to gain revenge. Shares of RAO UES of Russia, in their turn, dropped in response to this provocation.

Representatives of RAO UES of Russia are sure that negative consequences of the postponement of the power engineering reform will be tremendous for Russia’s economy. Russia’ s newspaper Vedomosti reports that the power engineering reform is unlikely to be adopted in the year when a new staff of the State Duma will be elected. So, Russia’s life will be poor, stable and highly likely without electricity.

Concerns of international experts are far from these social and economic issues. They consider columns of figures, diagrams and economies of different countries on a global scale. That is why they still mention the level of the world oil prices as the basic risk for Russia’s economy. And this is despite the fact that everybody admits reduction of Russia’s dependence upon the world oil prices. Russian industries that are not connected with the fuel and energy complex are currently obviously on the rise. However, experts still say that it will take a long period before investors will stop considering Russia as a “bottomless barrel” which leaks hydrocarbons here and there. And prices on this hydrocarbon depend upon the quickness with which Americans will settle their problems with Saddam Hussein.

Kira Poznakhirko

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Author`s name Michael Simpson