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Whispers of change in Tiraspol.

Posted by democratist on May 31, 2011

May 31st 2011,

Rumours are circulating in Tirsapol, capital of the unrecognized breakaway Pridnestrovian Moldavian Republic (PMR) of a change in political leadership at the next Presidential elections, due in December.

The PMR has been run by former Communist appartchik, Igor Smirnov, since the conflict which led to its succession from the rest of Moldova in 1992, and, since that time, has developed an international reputation as a hotbed of smuggling, corruption and authoritarianism.

But while any meaningful attempt to address these problems is unlikely in a place where a handful of people own almost the entire economy, and there is no real history of free or fair elections, at least some superficial alteration among the current leadership may be in the offing.

The reason behind this trend is a newly heightened pressure from Russia, which retains 1200 peacekeepers in the PMR, and (so it is said) wants the intransigent Smirnov out of the way so they can move forward with a plan to bring the frozen Transnistria conflict closer to resolution.

This, in turn, is seen as a first step as part of a controversial broader proposed deal with the German government, contained in the “Meseberg Memorandum” (signed by Chancellor Merkel and President Medvedev last June) which could potentially give Russia an enhanced voice in the EU’s security decision-making bodies.

A possible liberalization of visa restrictions for Russians entering the Schengen zone may be an additional incentive.

Apart from the rumours, another, more concrete indication of Russian intentions is that formal internationally brokered negotiations on a settlement of the PMR’s status are expected to reconvene at a meeting in Moscow on 21st June, after a break of some five years.

But while the formal resumption of negotiations would certainly be a step in the right direction,  Smirnov’s ouster, if and when it comes, is likely to be a more significant indicator of Russian seriousness in relation to moving the process forward, and it will be interesting to see how things progress following the selection and announcement of Presidential candidates in September.

Democratist remains sceptical about the extent to which other EU members will be willing to accept any Russian influence over their foreign policies in the coming years. But we hope that some tentative peaceful move towards a resolution of the current stalemate, combined with a change at the top (even a stage-managed one) will nudge the long-suffering Transnistrian people (unemployment is 49%, and 80% in the villages) a little closer towards considering the possibility of eventually taking their destiny into their own hands.

Posted in European Union, Moldova, Russia and the EU, Russia Foreign Policy, Transnistria, Western Foreign Policy | Leave a Comment »

Russia Today: No Alternative.

Posted by democratist on February 9, 2011

9th February 2011,

Democratist doesn’t like to be seen as constantly harping on about Russia Today; there is more to far criticise about the current Russian government than the Kremlin’s English language mouth-piece.

But the truth of the matter is that we enjoy explaining how they skew so many of their stories at the behest of their Kremlin paymasters because;

i) Taking RT’s own advice, Democratist likes to “Question More,” (a lot more).

ii) Since RT is funded by the Russian state to the tune of at least $50 million dollars per year (whereas we are run on a “budget” currently mainly composed of cups of tea and chocolate biscuits), it is clear we enjoy a challenge. 

iii) RT provides an easy target for us, because with a little effort it is usually possible to work out the interests and logic that lie behind their output on any given day, with the added bonus that, because RT reproduces the government line so faithfully, and is generally devoid of editorial independence, it unwittingly sheds considerable light on Russian domestic or (more often) foreign policy: You can usually work out what the Russian government is thinking by working back from an RT story.

And despite its posturing as an “alternative” to the mainstream western media, and related anti-Americanism, Russia Today not a sincere “alternative” to anything, but rather a vehicle for expressing propaganda on behalf of an authoritarian state, which has little concern for democracy or human rights beyond what is politically expedient at the time.

Examples of this hypocrisy are legion; Democratist especially enjoys the way RT’s wall-to-wall condemnations of western militarism (documentaries about US war crimes in Korea, Vietnam etc) are regularly interspersed advertisements for is own military hardware. An example (from this morning) has the excited presenter expounding the virtues of a new Russian attack helicopter; (“They say this 30mm cannon can pierce through armour, but obviously it’s not the only weapon this aircraft can be equipped with; anti tank missiles, anti-aircraft missiles, bombs – all of them installed on the wings here, make this aircraft a real predator in the skies!”).

Very alternative.

Posted in Russia Foreign Policy, Russia Propaganda, Russia Today | 1 Comment »

Moldova 2011: A Renewed Opportunity for EU Diplomacy.

Posted by democratist on January 7, 2011

7th January 2010,

Democratist has continued to take a keen interest in Russia and the EU’s geopolitical manoeuverings following the November 27th elections in Moldova. While several polls in the CIS in 2010 have been broadly perceived as “successes” in terms of Russian foreign policy (Ukraine, Kyrgyzstan, Belarus) Democratist sees the current situation in Moldova as holding out at least a little hope for European influence in the former Soviet space.

In the first half of December both Russia and the EU offered alternative trade deals,designed to sway the formation of potential coalitions to their own advantage during the period of negotiation that followed the inconclusive poll: Russian presidential chief of staff Nariskin, hoping for a deal between the traditionally pro-Moscow Communists (PCRM) and Marian Lupu’s Democrats offered inclusion in Russia’s proposed customs union, as well as cheaper gas and a resumption of banned Moldovan wine imports. Meanwhile, attempting to encourage a continuation of the Alliance for European Integration (AIE) which had run the country since September 2009, the EU pushed its association agreement as a path towards more comprehensive free trade, and a proposed visa liberalization plan, while leaving the prospect of eventual Moldovan accession to hover in the background.

On 30th December, having failed to come to an arrangement with the Communists, the Democratic Party agreed to the re-establishment of the AIE; Lupu was elected speaker of Parliament and, in the absence of two of the 61 votes required by the constitution for election to the substantive post, appointed to replace Liberal leader Mihai Ghimpu as acting President. The AIE has not yet attempted to have Lupu formally elected to the presidency, since under the constitution a new parliamentary vote would have to take place if this is not a success. Instead, Prime Minister designate Vlad Filat has suggested the coalition may offer the Communists a ministerial post in the new cabinet in exchange for the two additional votes required.

It remains to be seen if the PCRM will take Filat up on his offer. They have not been willing to do so in the past and complained that the November elections were rigged (despite a thumbs up from the OSCE). If they decide against, another election seems inevitable by the end of 2011 unless a loophole can be found. However, since the electorate is unlikely to thank the Communists for having put them to the trouble of voting four times in under three years, such a strategy would not be without some risk.

As for the Russians, from what Democratist can gather from a recent article in RIA Novosti’s Russia Profile, their mood seems to have shifted over the past few weeks to a mixture of disappointment at the Communists’ waning popularity and inability to form a coalition (implying some loss of influence), a belief that Russia’s continued position as a source of remittances for Moldova will act as a counterweight to that trend, and the hope that Marian Lupu will be someone they could work with. There is also an unwillingness to allow relations with Moldova to sour the more important relationship with the EU.

And so the ball is now back in the EU’s court: Moldova may have to return to the polls at the end of 2011 or, with the support of the PCRM Lupu may be elected to a five-year term as President, but either way an opportunity now exists to show other CIS countries such as Ukraine and Belarus, what it is possible for an impoverished country like Moldova to accomplish through an improved relationship with the EU.

It is time to see whether those free-trade and visa liberalization plans are all just talk – or not.

Posted in Elections, European Union, Moldova, OSCE, Russia Foreign Policy | 1 Comment »

Belarus 2010: Another view.

Posted by democratist on December 3, 2010

3rd December 2010,

Democratist has been discussing the prospect of Lukashenko being overthrown by the Russians in the  upcoming 19th December 2010 Presidential elections in detail with one of our many very clever, anonymous friends.

He writes;

“I suspect it [overthrow] is not as easy as some would like to hope. The information war has produced a lot of noise but has limited impact in Belarus itself. There is no clear Kremlin candidate in the administration who could mount an internal Russia-backed palace coup – the siloviki are pretty much linked to Lukashenko junior (Viktor) now and the technocrats are allegedly more and more ‘economic nationalists’ who liked subsidised energy but fear an influx of Russian business interests. The Kremlin lobby in the elites was pretty much purged in the mid-naughties. Tacitly fostering a violent overthrow, as some claim was the case in Kyrgyzstan earlier in the year is pretty much a non-starter (despite some of the cries from the national democratic opposition ranks). So far Russia has not particularly reached out to the opposition, although the leading candidates like Nekliaev, Sannikov and Romanchuk are the least anti-Russian (compared to the likes of the Popular Front and Christian Democrat candidates who seem to have rather low poll ratings so far).

Maybe if there are some big (by Belarusian standards) public protests after the election they might seek to help ferment them somehow. Despite all the talk of Russia not recognising the election results, I get the feeling they are not actually going to go that far. Obviously there is economic pressure, but it might require a step change from just charging market rates for energy to actively blockading or introducing sanctions against Belarus. Also Russia is entering her own election cycle in 2011-2012 – what are the risks in destabilising a ‘fraternal’ neighbour? I don’t think there will be a quick fix which sees Russia able to get rid of Lukashenko within a year or so, they probably need to nurture ties with potential forces/allies in the longer term or towards the next election cycle.

There is lots of chatter that the economic situation over the next 18-24 months as Russian tightens the screws will precipitate the endgame for Lukashenko – but similar predictions were being made in 2007 and 2004. However, Lukashenko’s room for manoeuvre is narrowing and the traditional game of muddling through is getting increasingly difficult to play. He has always been a consummate politician when it came to exploiting the little leverage he had over Russia – e.g. threats to withdraw from regional bodies such as the CSTO or SES could be embarrassing for the Kremlin (Russia’s closest ally turns against her?). The end of socio-economic stability was supposed to see the collapse of support for Lukashenko within the ruling elites and society at large, but although the economic situation has deteriorated over the past 3 years or so he has managed to avoid getting most of the blame. With more ad hoc western loans, limited liberalisation to appeal to the EU and others as well as ties to the likes of China and Venezuela, the regime might stagger on for longer than expected. However filling the gap left by Russia withdrawing generous economic support will be very difficult. The EU has limited influence in Belarus but does offer a potential (though risky) alternative – if Russia is seen as too aggressive/coercive could propping up Lukashenko be seen as a least bad option – ‘better the devil you know’?. Could Lukashenko step down early on his own terms, rather than be ousted – he is cunning enough that he might actually pull it off!

As always, lots of maybes! I think the usual balancing act (over a minefield)/tango of convenience (on a tightrope)/chess game (with ever-changing rules/players) is going to get more difficult, and Lukashenko may well be off the scene in a couple of years, but if anyone can pull off holding on somehow for a bit longer despite all the commentary on his inevitable fall, Lukashenko maybe the man who can get away with it! Having said that, I’ll no doubt be proved wrong and it will now turn out he will be voted out in the first round by such a margin that no amount of vote rigging and fraud can cover it up!”

Posted in Belarus, Electoral Fraud, Revolutions, Russia Foreign Policy | 1 Comment »

Belarus: The Geopolitics of the “Black Revolution.”

Posted by democratist on November 23, 2010

23rd November 2010.

More evidence is beginning to emerge of the Russian government’s all-but-openly-declared plotting to oust President Alexandr Lukashenko during, or shortly after the Belarussian Presidential elections due on 19th December.

In this regard, last Sunday Russia’s Channel One (also widely available in Belarus) ran a propaganda piece relating to the pre-election situation.

This declared that Lukashenko was “weaker today than he has ever been before” due to Belarus’ economic and other problems, and predicted that the country will likely face a currency crisis early in the new year.

More significantly, the programme (Vremya) also attempted to pull off what we can only describe as an impressive attempt at doublethink, as it tried to paint the EU as having been supportive of Lukashenko (employing a recent ill-judged quote by Lithuanian President Dalia Grybauskaite) while Russia was recast as a stalwart defender of the Belarussian opposition (or at least of two pro-Russian opposition presidential candidates; Andrei Sannikov and Stanislau Shushkevich).

Thus, Sannikov was quoted as saying (in a line presumably scripted in Moscow),“We should proceed from the real situation. If Europe speaks about supporting Lukashenko, while Russia speaks about the opposition, we should take this into account and welcome it.”

And Shushkevich was permitted to chip-in with a spot of rabble-rousing anti-Lukashenko xenophobia; “You know, I have only Belarusians among my ancestors. [Lukashenko’s] nationality is unknown: maybe he is of Roma origin, or of Jewish origin. In any case, he is definitely not a Belarusian.”

So, a fascinating scenario is emerging: The Belarusian electoral administration is massively dominated at all levels by Lukashenko loyalists. It is no exaggeration to say that the Territorial Electoral Commissions (TECs), which oversee the key organizational aspects of the process have been specifically designed to allow them to co-operate with local authorities (since they are largely composed of the same people) to allow them to use their influence in universities, hospitals and Belarus’ many state-enterprises (who employ 51.2% of the workforce) so as to both “get out the vote”, and pressure individuals to vote for the incumbent.

As long as this system remains functioning, there is no chance of any opposition figure being declared winner of the Presidential elections. Even if it does break down to some degree, the most popular Belarusian opposition politician (according to the independent IISEPS research centre) Russian-backed Vladimir Neklyaev, currently has only 16.8% of support in the opinion polls, while Lukashenko remains the most popular with support from about 48% of the electorate, regardless of recent external media pressure. Additionally, Sannikov himself is currently polling about 8.6%, with Romanchuk’s taking about 6.1% and Mikhalevich’s on 6.4%.

Thus, the most likely outcome is still a Lukashenko victory in the first round. While a second round run-off remains a possibility, we suspect that the key move (if it comes) will have to be during the days immediately after the first round poll, presumably in the shape of a coup dressed-up as some kind of popular revolution (a “Black” revolution), with one of the opposition candidates as a figurehead.

For the most part, the West, which (as the history of much of the last two decades has demonstrated) has limited political or economic  influence in Belarus, will be forced to watch from the sidelines as the drama unfolds; their main strategy (apart from calling for a transparent vote) is likely to be to act as quickly as possible to build up an enhanced relationship with the most likely future “candidates” (although these may be somewhat reluctant to play along, because they know Russia remains the only serious player).

If they do decide to go ahead with such a scheme, the Russians will be gambling that the US and EU are unwilling to risk the recent political and strategic advantages they have secured from the “reset,” to a lengthy spat over a coup in a country over which they have never had any significant control.

Posted in Belarus, European Union, Russia Foreign Policy, US - Russia | Leave a Comment »

Russia 2012: Towards an “all new and improved” simulacrum of democracy.

Posted by democratist on September 23, 2010

23rd September 2010,
As Democratist’s teacher and mentor, Fred Halliday (1946-2010) was very fond of pointing out, the limits of the predictive abilities of the social sciences ought by now to be better recognized than they are;
What political scientist or “policy specialist” predicted the Lebanese Civil war (1975), the Iranian Revolution (1978-79) or the collapse of Soviet Communism (1989-91) with any kind of serious foresight?
Answer: Not a single one. No one managed to predict any of these critically important events with any kind of meaningful foresight or accuracy.
But this should hardly come as a surprise. Even in the natural sciences prediction is not as precise as commonly assumed; just ask a meteorologist, seismologist or demographer. The world of human affairs and politics, is by its very nature necessarily uncertain; and will doubtless so remain. 
Since this is the case, Fred very wisely recommended that the task of social science was essentially to concentrate on explanation of what had already occurred, rather than predictions of the future: The best we can hope for is the identification of significant contemporary trends; the rest is “speculation.”
But the problem is (for Democratist at least) that while the identification of trends is jolly good fun, the temptation to additional “speculation” (especially when it comes to the “dogs under the carpet” world of Russian politics) is even greater.
So, it is therefore with Professor Halliday’s eminently sage words ringing in our ears, that Democratist will now ignore (at least some of) his advice, stick our collective neck out, and gaze into our crystal ball so as to outline, on the basis of observed social trends and speculation alike, how we see things shaping up for the 2012 Russian Presidential elections. 
Social Trends.
As mentioned in previous posts, Democratist sees contemporary Russia as a product of a number of identifiable political, economic, social and international forces, most of which find their historical roots in the Soviet period, and in the collapse of the USSR in 1991:
The “transition” as it has taken place in Russia since 2000 has clearly not been to democracy or liberal capitalism, but to a repressive political system based on a “corporatist” economic model; a regime essentially composed of, and subsequently molded by a reconfigured Soviet nomenklatura, itself dominated by former members of the KGB centred around Vladimir Putin. This regime has consciously sought to move away from the “western” template of market economics and political freedom introduced in the 1990’s,  because it considered that these reforms had failed (culminating in the national humiliation of 1998).
Instead, the new system introduced since 2000 has promoted and maintained an authoritarian concept of the state, in which the elite maintains a decisive and guiding, albeit sometimes informal, control over key aspects of the economy. Despite the rhetoric of “modernization”, there has been very little meaningful economic diversification since 1998, despite repeated promises that it would take place, and the period since 2003 has seen the re-nationalization of much of the raw materials and other “strategic” sectors (only superficially altered by recent “reforms”). Similarly, much of the limited flow of FDI that has found its way to Russia since 2008 has been channeled into joint ventures with cossetted “state corporations”, therefore keeping these within the corporatist system whilst avoiding any requirement for wider economic reform. 
Politically, the media has been largely co-opted; parliamentary political parties such as the Communists and LDPR tamed or inventions of the regime; elections progressively rigged, and genuine opposition repressed and sidelined. The Duma has long been a rubber-stamp; many MPs little more than regime appointees. This has been accompanied by a culture of nearly all-pervading corruption and rent-seeking; a problem that has expanded to include almost all sections of society, and which has become an integral feature of how the country is governed.
The regime is equally the inheritor of the KGB’s instrumental “end justifies the means” attitude towards ethics, as exemplified most prominently by the FSB’s probable involvement in the September 1999 apartment bombings, which were used, in conjunction with the resumption of hostilities in Chechnya, as a platform to generate support for the (previously largely unknown) Putin in the March 2000 Presidential elections. Since then the regime has also been complicit in the development of a  culture of impunity, and in the encouragement of violence towards those who are prepared to criticise it (as exemplified by the Klebnikov, Politkovskaya and Litvinenko cases).
Another political inheritance of the Soviet period, and especially the collapse of the USSR in 1991, is that the nomenklatura is distinguished by its strong nationalism and desire for national resurgence. This contemporary revanchism also reflects and magnifies an enduring and often overriding historical preoccupation with the importance of military competition against comparatively advanced western nations, which runs throughout modern Russian and Soviet history at least as far back as Peter the Great, and finds its contemporary expression in the “modernization” drive which began during the late Putin presidency, but has come to the fore under Medvedev.
The current situation, and predictions.
On the basis the above trends, and of Russian and international press reports over the last few months, Democratist suggests the following analysis of the current situation, and (doubtless highly speculative) predictions for the 2012 elections; 
The “modernization” promoted by President Medvedev, to the very limited extent that it has had an effect on the Russian political system or economy at all, has put a very large degree of emphasis on technocratic/institutional, as opposed to broader political change. Thus in Yaroslavl on 10th September 2010, while rather unconvincingly suggesting that Russia has already achieved some limited form of “democracy”, Medvedev repeated implied that meaningful political change is a long-term aspiration that will broadly follow technological modernization, rather than accompany it.
Unsurprisingly, given that the different paths to “modernization” were already laid out while he was still in power, Putin’s position has remained very similar to that of his protégé; both stress the need for technological modernization and foreign investment; both push political reform to the side. The main difference is one of presentation; where Putin is blunt and confrontational, and puts greater rhetorical emphasis on “stability”, Medvedev is more diplomatic and prone to talk up “modernization” and “innovation”. While, as The Economist noted on September 9th, this is an essentially stylistic distinction, it is also, rather tellingly, one that both President and Prime Minister have recently been seeking to play up.
It is logical to suggest that many in the nomenklatura identify themselves far more readily with Putin (since he shares their background), than with the academic Medvedev. Additionally, the overriding emphasis placed on maintaining “domestic stability” by the elite (and FSB) over the last decade, the usefulness of hydrocarbons as a tool of foreign policy, and the corporatist nature of the contemporary Russian state itself tend to imply a preference for an “energy and raw materials” path of development, with the “innovation” path remaining under tight state control. Therefore, in as far as there is a difference between the two main potential candidates, this key constituency would probably broadly prefer Putin’s return to the Presidency, as an additional insurance that things will not “get out of hand”.
From Putin’s perspective then, given that he has the domestic situation pretty much wrapped up, the challenge is to leverage the forthcoming elections in order to achieve the somewhat contradictory goals of maintaining internal stability, encouraging growth, innovation and foreign investment (in what has become a tougher international climate), and improving Russia’s international position and military capabilities.
Now we come to the speculative part: One way of moving towards achieving at least some of these disparate and contradictory goals (as well as preparing a future path for the longer-term achievement of the others) would be to use the 2012 elections to gain the regime increased international legitimacy by enhancing the ongoing illusion of Russia’s “democratic development” through a poll that apparently offers more genuine political competition than was the case in recent times (although one in reality whose parameters have been carefully determined in advance).
How could this be achieved? The answer is slowly emerging: In line with the image of a “limited” democracy that Russia is now promoting for itself internationally,  Democratist suspects that the 2012 elections will present a superficial electoral choice between an emphasis on “stability” or “modernization”; which is to say a choice between Putin or Medvedev.
If Medvedev wins, then things will remain broadly as they are; Putin will stay as Prime Minister with the ongoing support of the nomenklatura. If Putin wins then Medvedev will take on some lesser role such as Prime Minister and continue to tout the virtues of modernization from the sidelines (or Putin will find someone similar).
Either way stability is to be maintained while fostering a greater illusion of political pluralism. To aid this process, opportunists from every field will doubtless soon be mobilized; MPs from the Duma will form or manage parties to support one candidate or another, the state-controlled media will enjoy giving equal coverage and support to both main candidates – thereby proving their “impartiality,” (while ignoring or bad-mouthing all the others), the many foreigners and their PR men who want better relations with Russia to serve their own commercial interests (as well the crooked politicians on the Kremlin’s payroll) will talk up Russia’s new “democratic turn”. Even the OSCE will be forced to admit that the elections “marked a significant improvement on previous polls…” in their preliminary statement, as direct electoral fraud is limited in favour of subtler techniques.
In this regard the artificial political lines are already starting to be drawn up; both Putin and Medvedev are acting as if they intend to stand; both are already “campaigning” in their own differing styles.
Many commentators are already linking the recent media campaign against Moscow Mayor Yuri Luzhkov as an early offensive by Medvedev related to the 2012 elections. Yet, in this regard it is interesting to note that Putin has chosen not to come to Luzhkov’s aid – even though Luzhkov  has been loyal to him for years.
Putin in fact appears quite happy to have the Moscow vote go to the supposed “young reformer” in 2012, further suggesting that he is essentially unconcerned at the prospect that Medvedev might beat him. 
But then again, given that he appointed Medvedev in the first place, why would he be?  

Posted in Russia - US Relations, Russia 2012 Elections, Russia Foreign Policy, Russia Propaganda, Russian Politics | Leave a Comment »

Planning for the “inertia scenario.”

Posted by democratist on September 8, 2010

September 8th 2010,


As stated in previous posts, Democratist sees Russia’s pronounced and increasing national inability in the sphere of technological innovation as one of the key motivating factors behind the apparent current “modernization” drive.

As Dimitry Trenin has noted, Russia continues to fall behind in terms of its industrial, technological and scientific capabilities, and this is already starting to have serious implications for her continued status as an international political, economic and (especially) military player.

As an example, these technological limitations have already manifested themselves in Russia’s inability to produce and deploy an effective reconnaissance Unmanned Ariel Vehicle (UAV) during the 2008 war with Georgia: Related areas of concern (mentioned in a speech given by Medvedev to Russian diplomats earlier this summer) include genetics, space, IT, energy, telecommunications and nuclear power.

While superficially novel, this contemporary desire for modernization among a section of the elite reflects and echos an enduring and often overriding historical preoccupation with the importance of military competition against comparatively advanced western nations, that runs throughout modern Russian and Soviet history at least as far back as Peter the Great, and which has provided the impetus for various spurts of Russian and Soviet technological modernization.

Twentieth-century examples include Stalin’s preoccupations about the impact of economic and technological backwardness on the USSR’s military capacities as a central motivation for Soviet industrialization in the 1930’s, as well as for the development of the Soviet nuclear arsenal in the 1940’s. Military competition with the west was also a central early motivation behind the economic reforms of perestroika (“restructuring”) in the 1980’s.

Three Scenarios

With regard to the contemporary case, in The Russia Balance Sheet (2009) Anders Aslund and Andrew Kuchins note that, far from being the brainchild of Dimitry Medvedev, the Kremlin had already formulated all the main goals and strategies currently being considered in relation to medium-term Russian economic growth and modernization during the final months of the Putin Presidency.

This programme, called “Russia 2020, was outlined in a speech given by Putin in February 2008, with the Ministry of Economic Development and Trade presenting a more detailed version a month later.

Russia 2020 outlines three alternative scenarios, in terms of the potential trajectories of economic development;

  • The first is the “innovation” scenario. This presupposes the development of a national innovation system, competitive human capital, and regional development centers, and requires a comprehensive reform and investment programme.  It foresees a subsequent average annual GDP growth of 6.5%.
  • The second is the “energy and raw materials” scenario, which is based on faster development and modernization of the extractive sector, and projects a subsequent average annual growth of 5.3%.
  • The third is the “inertia” scenario,” which assumes no significant improvement, and therefore forecasts an average growth rate of 3.9% per year.

In Democratist’s opinion, while over the last two years Medvedev has genuinely attempted to put some flesh on the bones of the proposed “innovation” scenario (introducing tax breaks, promoting technology parks, abolishing import duties on high technology equipment and encouraging foreign investment), over the past few months the “innovation” strategy has started to show signs that it is encountering increasing resistance from within the elite.

The reason for this emerging impasse is that many in the nomenklatura, grown rich under Putin on the proceeds of  corruption, are implacably opposed both to reform itself (which threatens their privileged position) and even more so to the implied political reforms which would be the backbone of an innovative economy, and which Medvedev tentatively began to promulgate over the summer.

In this regard, we consider Putin’s hints at the Valdai club meeting in Sochi on September 6th that he intends to make a return to the Presidency in 2012 as indicative of a broader reassertion of power by these interests, and an indication that the nomenklatura remains eager to avoid the potentially “destabilizing” effects of the political reform required to both attract increased western investment, and achieve the “innovation” scenario.

Instead, the elite appears to be hoping that a recovery in hydrocarbon prices over the next few years will allow them to return to a greater emphasis on the second, “energy and raw materials” development path, with its promise of a (still robust) 5.3% average annual growth.

This does not necessarily imply that the “innovation” scenario or its rhetoric is to be abandoned wholesale, or that Russia will instantly return to an openly confrontational and anti-Western foreign policy stance, but rather it seems more plausible that, over the next few years, where the needs of meaningful innovation come into conflict with intrenched elite interests (including in relation to  encouraging foreign investment), innovation will have to give way.

However, Democratist suspects, in contrast to the nomenklatura’s apparently rosy expectations, that Russia’s extraordinary and increasing corruption (which stems from the top, has become an integral part of how the country has been ruled especially since 2000, and which has been almost completely unaffected by supposed recent clean-up campaigns) will, in addition to putting firm limits on the “innovation” scenario, also put a considerable brake on  the development of the extractive sector.

Indeed, it does not seem implausible to suggest that, in the absence of serious political reform, within a few years Russia may be looking at growth rates closer to those of the “inertia” scenario than of the other two, as the system slowly begins to seize up.

Additionally, a second (and more certain) effect of this reassertion of power by the nomenklatura over the next few years is that, in the absence of innovation from within the domestic Russian public or private sectors, or from foreign investors (and with a continuing “brain-drain,” as many of Russia’s most talented people leave to pursue careers abroad) the corporatist Russian State will seek the innovation it has historically seen as essential in order for it to remain militarily competitive, and additionally for many other industrial sectors (including hydrocarbons and arms), through a greatly enhanced reliance on a tried and tested method employed extensively during the Soviet period, namely espionage.

Conclusion – Planning for the “inertia scenario.”

Whereas the conviction and subsequent swap of 10 Russia Foreign Intelligence Service (SVR) officers on July 9th in Vienna will doubtless have caused acute embarrassment to many in the nomenklatura, given the likely continued lack of domestic sources of innovation, and of foreign investment, while Russian foreign policy in general may remain less confrontational than that witnessed over the last few years for some time to come, Russian intelligence operations in the west are very likely to become considerably more extensive and aggressive over the next few years, with a greatly increased focus from both SVR and GRU on industrial and military espionage.

With this in mind, it is imperative that those same western companies that Medvedev and his backers have been trying to entice into committing to invest in Russia, as well as many others in the areas mentioned above, understand this increasingly virulent threat to their commercial interests, and therefore redouble their efforts with regard to both personnel and IT security.

Additionally, those western agencies tasked with dealing with this problem, might well wish to reconsider whether counter-espionage is not deserving of more than, say 3% of their budgets (as is apparently currently the case for the British Security Service – MI5).   

Indeed, in as far as the effects of a return to relative economic stagnation, coupled with an increasingly obviously technologically inferior military over the next few years are likely to strengthen eventual calls for a return to the “innovation” path, and for political reform, both from within concerned sections of the nomenklatura and the Russian public, western governments might start to consider counter-espionage activities, in relation to Russia at least, as an important aspect of their foreign, as much as security policies, and therefore provide them with a commensurate increase in funding.

Posted in Russia Foreign Policy, Russian Corruption, Russian Economy, Russian Espionage, Russian Liberalization, Russian Politics, Russian Science, US - Russia | 16 Comments »

Springtime for Dima?

Posted by democratist on May 22, 2010

22nd May 2010

Rumours abound that a new, pro-western foreign policy shift is underway in Moscow. But if Russia really wants to attract European investment and American technology for the long-term it will need to implement root and branch political and economic reforms. Are the Russians really ready to play ball?

A report on two supposedly “leaked” internal foreign ministry documents which appeared in Russkiy Newsweek on May 10th has sparked off a wave of speculation about the possible future orientation of Russian foreign policy in the local press and diplomatic circles.

These documents: “A List of Criteria for the Effectiveness of Foreign Policy” and “A Program for the Effective Exploitation of Foreign Policy Factors for the Purposes of Long-term Development” – both written over the past six months, together imply a rethinking and potential realignment of Russia’s external relations.

In line with the much-discussed (but so far largely rhetorical) trend evident since Medvedev took on Presidency in 2008, the focus of both papers is the need to modernize the Russian economy, and the use of foreign policy to achieve this goal. As such, both underline the need to attract external financial investment, as well as the technological and scientific resources required for Russia’s modernization – especially from the United States and European Union.

This renewed concern with foreign relations as a path to domestic modernisation, while clearly still a matter of internal dispute within the ruling elite (indeed the “leaking” of these documents are almost certainly a symptom of these internal discussions) nonetheless reflects two serious problems that Russia needs to address with some urgency; firstly the impact of the ongoing global financial crisis on the Russian economy, especially through the effect that this has had on global hydrocarbon and raw materials prices; and secondly, a recognition that Russia is falling behind in terms of technological innovation.

With regard to raw materials, oil, gas and mineral exports currently account for 70% of Russia’s exports, making the economy hostage to price fluctuations. Finance Minister Alexei Kudrin stated on May 14th that Russia’s 2010 federal budget, including reserve fund spending, will only be balanced if oil reaches $95 per barrel (considerably above the current price of about $71). Given recent market developments, oil prices seem likely to stall or decline over at least the short-term, and perhaps for longer. As a result, The Russian government expects its budget deficit to rise to 5% of GDP by the end of the year and external sources of funds will therefore be required. Given that overall debt stands at only 50-60% of GDP (compared with 115% for Greece), Russia had little difficulty raising $5.5 Bn from its sovereign debt sale in April (the first since 1998). Nonetheless, this pattern of borrowing looks set to grow significantly as reserve funds are drawn down.

As for technological innovation, as Dimitry Trenin, director of the Carnegie Moscow Centre noted in an article in the Moscow times on 14th May, in addition to diminishing the hubris that Russia displayed in the years of high energy prices, the current crisis has awakened the leadership to the reality that Russia is losing ground in the global pecking order by falling behind in terms of its industrial, technological and scientific capabilities.

As Trenin observes “…Russia is sorely lacking what it takes to be a major global economic and political force in the 21st century. Relative energy abundance and nuclear arsenals are simply not enough. The Kremlin …[has been]… forced to come to terms with the fact that Russia cannot modernize on its own and that it needs Western investment and strong business partnerships with the West.”

But how will this need for investment and scientific know-how be translated into policy? Is Russia really willing to make the deep domestic political and economic changes necessary to make itself an attractive place for sceptical Western companies to invest, as Trenin suggests? Western markets cannot be bargained with or cajoled in the same way that Russia strong-arms other States – they will have to want to come.

However, there are a number of compelling reasons why serious reform is unlikely:

The main argument against the probability of anything more than superficial political an economic reform in Russia over the next few years is the nature of the current regime. This is essentially a reconfigured Soviet nomeklatura – more homo Sovieticus than homo economicus. The nomenklatura sees itself as having a quasi-divine right to rule and shape the country, and sought in the early 2000’s to move precisely away the “Western” template of market economics and political freedom introduced in the 1990’s – because it considered that these reforms had failed (culminating in the national humiliation of 1998) and that additionally, as many siloviki believed, that these reforms had in any case been little more than an elaborate Western “conspiracy” aimed at weakening Russia right from the start.

This nomeklatura is distinguished by its strong nationalism and desire for Russian national resurgence (as a regional power, if no longer perhaps a “superpower”) but also additionally by three significant traits [1] inherited from the late Soviet period that make economic liberalization and diversification extremely difficult.

These are;

  • A culture of nearly all-pervading corruption and rent-seeking.
  • An authoritarian concept of the State (in which the elite maintains a decisive and guiding – albeit sometimes informal – control over key aspects of the economy).
  • An instrumental “end justifies the means” attitude towards ethics.

In terms of corruption and the authoritarian concept of the state, the “transition” as it has taken place in Russia since 2000 has clearly not been to democracy or liberal capitalism but to a repressive political system based on a “corporatist” economic model – with the state retaining decisive influence over key companies as a lever of both economic and political power. This includes, as the most prominent example, Russia’s largest company, Gazprom, which supplies about 17% of the world’s gas and on its own, and has at times accounted for 10% of Russia’s GDP. Gazprom has at least four cabinet ministers on its board of directors, and was chaired from 2002 until 2008 by none other than Dimitry Medvedev – who owed that position (much as he now owes the Presidency) to his relationship with Vladimir Putin. Any statements from the “liberal” Medvedev (or those surrounding him) regarding economic diversification or political reform need to be considered in this light. The recently “leaked” foreign policy documents also need to be considered in this context.

The “corporatist” or “petro-state” model, with its heavy reliance on hydrocarbons and raw materials, fits this authoritarian conception of the State neatly because it allows for an easy source of rents, which can be distributed on the basis of loyalty, and equally because it provides the State with the tools of the energy-based foreign policy we have seen deployed on numerous occasions in Eastern and Central Europe, especially since the Orange revolution in Ukraine in late 2004. While the need for reform is likely to be invoked in order to attempt to drum up foreign investment, any resurgence in the oil price above (say) $100 per barrel will initiate a fairly rapid return “business as usual” so long as the current nomenklatura remains in power.

And it is very likely to remain in th driving seat for many years to come, because the Putin regime is additionally the inheritor of the KGB’s “ethical instrumentalism” and is unlikely to cede power to anyone else anytime soon: Despite a sophisticated propaganda offensive of denial (suggesting such claims are little more than conspiracy theory, comparable to those surrounding the 9/11 attacks in the US), there is little doubt that the current regime achieved power through the mass-murder of hundreds of its own citizens by the FSB in September 1999, as well as through the subsequent resumption of hostilities in Chechnya as a platform to generate support for Putin in the 2000 Presidential elections. Such a regime is unlikely to encourage its own marginalization by the introduction of genuine democratic reforms.

Indeed, over the last ten years, progressive presidential, parliamentary and (most recently) local elections have been marked by a worsening tendency towards fraud. As a result, the key political institutions required for meaningful economic liberalization and the attraction of Foreign Direct Investment – free elections and a free press (to fight Russia’s truly monstrous corruption), the rule of law, and the guarantee of property rights – are largely absent in the contemporary Russian case. The Kremlin has instead assumed (despite the apparent lessons of the Soviet experience) that it is able to manage the social and economic development of the country from above without any requirement for these constraints. So far, the economic crisis has only resulted in a tightening of already severe domestic restrictions – as was evident from the extraordinary level of outright falsification in the 10th October 2009 local elections.

Instead, the instincts of the siloviki are almost always to maintain and extend power and control as far as possible in both political and economic spheres. The history of the regime since 2000 has been one of continual centralization of both polity and economy. In fact, there has been no meaningful diversification of the economy since 1998, despite repeated promises that it would take place, and the period since 2003 has seen the re-nationalization of much of the raw materials and other “strategic” sectors.

While recently the Kremlin may have appeared to be considering the possibility of a fresh round of (vaguely defined) “reform” – with a diplomatic charm offensive (purporting to show how Russia has “changed”) due to take place over the summer, allowing genuine liberalization would potentially allow the development of alternative centers of power to the corporatist state. This raises the specter of, (for example) a revival of independent-minded oligarchs operating outside of the current structures (the “Yukos” effect), or the growth of a critical mass media, or of genuinely reformist political parties gaining seats in the Duma in an un-rigged parlaimentary election in late 2011. Therefore, real reform is most unlikely. Instead, the nomenklatura, is more likely to decide that the best available current strategy is the superficial invocation of the need for change through the offices of the “liberal” President. This will hopefully drum up some additional investment from the more gullible sections of an overly eager West while they wait for a resurgence in commodity prices.

[1] This section draws on work by the late Professor Fred Halliday of the LSE

Posted in Autocracy and Innovation, Democratization, Freedom of the Press, Human Rights, Russia - US Relations, Russia Foreign Policy, Russian Corruption, Russian Economy, Russian Espionage, Russian Liberalization, Russian Military, Russian Politics, UK Foreign Policy, US - Russia | 12 Comments »