“Not Unique” - 24 December, 2002

Is it possible that Putin’s image scares investors away?
The week before Christmas is a convenient moment for paying back: people are relaxed in anticipation of the forthcoming holiday, and it’s a good opportunity for delivering a blow. And several of them have been already delivered.

The Russian Government had to admit that the economic growth, caused by the inflation effect of the 1998 crisis, is over. There will be no more economic growth, only stagnation and decline. Moreover, despite the still optimistic declarations that there is enough money for peak payments of the foreign debt next year, the government admitted that it would resume borrowing on the foreign markets next year and plans to borrow 3 billion dollars. Foreign investors, and the World Bank particularly, welcomed the surrender of Russia’s authorities. Forecasts of western economists have come true: Russia pulled in the belt to pay the previous debts and immediately got into new ones. Bravo!

Russian President Vladimir Putin took the hint: it is alleged that the initiative to put forward Mikhail Kasyanov as a candidate to the presidential post highlighted the key points of the forthcoming political season. A response to the hint was issued immediately. Yesterday President Vladimir Putin stated that the government worked poor: the life of people in Russia hasn’t improved. But the standard of living is the main criterion of activity of the government, especially its economic activity. Did Prime Minister Mikhail Kasyanov take the hint? Until recently, he simply ignored all hints made by the president. Will he be able to keep his calm smile this time?

Another blow was delivered against Russia from abroad. Today’s issue of American Wall Street Journal predicts failure of economic reforms carried out by President Putin. At that, the newspaper mentions that considerable success was registered in development of the national economy within the three years of his office. The taxes were reduced, legislation on land private property was adopted; new Labor Code was passed, that gave much freedom to employers and turned employees into real slaves, which is very progressive by the way from the point of view of the private capitalist economy. Why is it said that this progressive economic policy is on the verge of collapse then? As it turned out, President Putin hesitated to restructure the energy monopoly at an appropriate moment. The State Duma postponed the reform for an uncertain period; instead of being sold in separate parts, the energy monopolist RAO UES of Russia is still under the governmental control. And reformer Anatoly Chubais, the favorite of the West, is out of job. Certainly, western analysts treat the present-day situation in Russia as an evidence of a non-progressive way of thinking of the Russian president. At that, they immediately recollect Putin’s previous work at the KGB.

Anatoly Cubais complaints that shares of RAO UES of Russia, which are currently rather cheap, are bought up by Russian oligarchs closely connected with the “throne”, such as owner of the Russian Aluminum and Basic Element companies, Oleg Deripaska. Foreign analysts understand that the oligarchs want to gain control over the Russian energy monopoly with the only intention to control the tariffs. Indeed, electric energy tariffs are the key component of the oligarchs’ competitive strength on the world markets. Foreign analysts say, this is a latent form of investing the industry which amounts to about 6 billion dollars per year. 

Any American or European capitalists would do the same in this situation, as the essence of the market economy isn’t free competition at all, but securing privileges for oneself and prohibition of the privileges for the others. Certainly, Wall Street Journal analysts would be happy if Anatoly Chubais managed to sell RAO UES of Russia so that the energy tariffs increased several times, which in its turn would ruin the hopes of Russia’s industrial and financial groups to occupy an adequate position in the world. But as long as it didn’t happen yet, it means that President Putin hates liberal reforms, the reforms widely used for bursting economies of once independent countries.

However, it’s hard to judge upon the essence of the current events from far away. In fact, Oleg Deripaska is closely connected with the same “throne” as Anatoly Chubais himself: with the “Family” of former Russian President Boris Yeltsin. People belonging to the “Family” and working in RAO UES of Russia closely observe the restructuring process so that it satisfied economic and political interests of the “Family”. So, Deripaska and Chubais, like any other outstanding people in the country, are doing the same work: they create a new Russia. But each of them does it as he sees it. And President Putin isn’t an exception here as well. 

It is rumored that the “Family” isn’t satisfied with Putin’s increasing ambitions. Some members of Gleb Pavlovsky’s Foundation for Effective Politics told APN.Ru (the Agency of Political Information) that the Foundation got a new promising order: development of a new image concept for President Putin. According to APN.Ru, this time the “Family” wants to adjust Putin’s political ambitions. “Vladimir Putin is not the only and a unique politician, but just the first among the equal. There are many outstanding politicians in Russia who can handle the situation not worse than Putin, if necessary.

Even a pretext for the changing of Putin’s image is already at hand. They say, it’s very important to refute the statements circulated by the western mass media declaring that Putin’s KGB background helps him to create only an authoritarian society “of a gentle Stalin mode.” Wall Street Journal reports that sayings of this kind scare foreign investors away from Russia.

Dmitry Slobodanuk

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Author`s name Michael Simpson