Democracy. Russia. CIS.

Encouraging Liberalization in Russia.

Posted by democratist on July 27, 2010

27th July 2010

Democratist has been reading  Samuel Charap’s article in the Washington Post (“U.S. needs to carefully plot engagement with Russia” – 23rd July 2010) with interest.

Charap suggests a number of potential benefits that might stem from enhancing US foreign policy engagement, as part of a gradualist strategy aimed at fostering the development of a more open political system in Russia, while also counteracting more regressive political forces. He sees three main benefits of improved ties;
  • They increase the chances that the US can express concerns about what is happening in Russia without the discussion devolving into a “shouting match.”
  • Such engagement deprives the Kremlin of the specter used to justify its turn away from open politics (the “West as the enemy at the gates”) and the removal of this should improve the position of western-backed NGO’s and increase Russian citizens’ exposure to the US and its political system.
  • Successful governmental engagement will, over time, raise the cost to the Kremlin of actions that would undermine ties.

Democratist is broadly in agreement with the notion of enhanced engagement with Russia, but remains sceptical of the likelihood of success in terms of fostering a more open Russian political system (sections of the nomenklatura have little interest in reform, and remain all to happy to return to a “shouting match” at the earliest opportunity).  We therefore offer the following suggested analysis and approach;

Democratist sees contemporary Russia as suffering from two relevant, and related problems driving the country towards some degree of liberalization; one minor and probably of only medium term relevance, and the second more significant and deeper, but both of which have the same common fundamental cause;

The first problem is the  sharp reduction in world market price for hydrocarbons since 2008 (e.g from around $100 per barrel, to about $75 now). The Russian economy suffers from a lack of diversification and is therefore remains reliant on oil, gas and minerals for 70% of exports. The recent fall in prices for these as a result of the financial crisis has resulted in some additional fiscal pressure, which will have some impact on spending over the next few years. However, this problem should be at least superficially alleviated as hydrocarbon prices recover.

The more significant longer-term problem is a pronounced and increasing national inability in the sphere of technological innovation: Russia is falling behind in terms of its industrial, technological and scientific capabilities. This has serious implications for her continued status as even a regional political, economic and military player, and has manifested itself (for example) in an inability to produce and deploy an effective  reconnaissance UAV (as demonstrated during the August 2008 war with Georgia). Genetics, space, IT, energy, and telecommunications are all other areas of concern.

It is apparently this second problem (especially in relation to the loss of military prowess) which is of greater concern for the nomenklatura, and which therefore provides greater impetus for the current reform drive.

Democratist believes that both of these problems; lack of economic diversification and technological innovation have the same fundamental cause; Russia’s truly extraordinary levels of corruption (worse than many sub-saharan African countries according to Transparency International) which extends throughout all sections of society, but which stem from the top –  because the distribution of rents on the basis of loyalty has been a central component of how the Russian government has done business, especially since 2000, as part of a corporatist economic model.

So, as we have argued, while until recently the government may have been initially hoping to resolve Russia’s lack of diversification and innovation simply by encouraging investment from the West through tax breaks and technology parks, this tactic is unlikely to have any significant effect on its own in as far as it refuses to countenance the kind of deep political reforms required to seriously address Russia’s “hypercorruption”, and thereby make the country a place where innovative Western firms would actually want to invest, and where Russia might develop its own innovative companies.

However, evidence is starting to emerge that for Medvedev at least, this stance may be changing; as George Bovt from the EU-Russia center notes; in a speech given to the Russian diplomatic corps last week, the President stated that the foreign ministry should engage in three tasks as part of his modernization agenda; the fight against organised crime, modernising the economy and most significantly, strengthening the institutions of Russian democracy and civil society.

But even if Medvedev is personally committed, the obstacles to meaningful reform remain enormous and include most prominently an authoritarian concept of the State that flourished precisely as a reaction to the supposed shortcomings of the liberalization of the 1990’s.

So, what can Western countries do to encourage potential liberalization?

We have two initial suggestions:

Firstly, Democratist urges a little restraint. We should begin by highlighting what we can’t do. Preaching at the Russians is likely to be counterproductive given the mindset of many in the nomenklatura. However, in relation to foreign investment, the main position to take is to reinforce the point that, whereas Russia may currently have a corporatist system with a high degree of political control and support for ostensibly private firms, this is generally far less the case in the West, and therefore while the tax breaks, techo-hubs and other initiatives we have seen so far are to be welcomed, it is essentially up to the Russians themselves to make their country a place where innovative Western firms will want to invest.

Secondly, if the Russians do show signs that they are starting to take such an approach seriously, the US and EU might also quietly suggest that, as an initial step they could do far worse than ensuring that the OSCE ODIHR is allowed to observe the forthcoming parliamentary and presidential elections in late 2011/ early 2012. These polls could potentially provide Russia with the opportunity to  demonstrate how things are beginning to change (especially in contrast to the polls in 2007/8 where the Russians deliberately sabotaged the OSCE missions). It would be easy enough to allow some limited media liberalization and reform of the electoral law, and thereby potentially allow some genuine opposition voices into the Duma, while either Medvedev or Putin would almost certainly win the presidency without need for too much recourse to the abuse of “administrative resources” or other forms of fraud. Indeed, this line of thinking may already beginning to emerge; the issue of “winning without the use of administrative clout” was mooted at a special meeting of the United Russia general council (Kommersant, 16th June 2010). However, it will take clear guidance from the top to ensure that such aspirations are observed in practice – and at the moment Democratist still fully anticipates widespread fraud in the local elections due this October (as was the case last year).

If Russia really wants to move from its current position as a raw materials supplier at the periphery of the world economy towards becoming the sort of diverse economy where innovation flourishes, it will have to develop the institutional structures required to make this a reality, and these imply democratic reform because, as Russia is now discovering, accountable institutions provide the sine qua non that supports technological innovation.

One Response to “Encouraging Liberalization in Russia.”

  1. […] Meanwhile, President Medvedev is described as a “Robin hood” to Putin’s “Batman” – a hesitant sidekick who has to have his decisions approved by the real boss, and who (according to no less an authority on the Russian political scene (and committed democrat) than Azeri President Ilham Aliyev) “is surrounded by people he does not control.” […]

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