Russia 2008. Report on Transformation

Collective work edited by Konstantin Simonov,
Director General of the National Energy Security Fund (Moscow)

V EUROPE – RUSSIA FORUM
Bucharest, May 25–27, 2009

Introduction ↓	2
Part 1. Russian Political System - “Duumvirate Epoch” ( 379 KB)	4
Part 2. Economic Situation. “Russian Rollercoaster” - From Vigorous Growth to Sharp Decline of Prodaction ( 281 KB)	44
Part 3. State Finances ( 249 KB)	64
Part 4. Russian Foreign Policy ( 532 KB)	80
Part 5. Regions and Regional Development ( 381 KB)	106
Part 6. Science. Culture. Education ( 81 KB)	124
Part 7.Armed Forces and Defense Industry ( 82 KB)	133
Conclusion ↓	144

Introduction

In 2008, Russia passed several serious tests, and that was just the first stage of testing for “survival” of the political system created in the recent years. Despite the forecasts predicting that after power structures “reformatting” and the election of Dmitri Medvedev as the President of Russia, the country will experience political “thaw”, regime liberalization and will return to “western-oriented” course like it used to be in Yeltsin’s time – nothing of that has eventually become the truth. To a considerable extent, this stems from the fact that both “internal” and “external” opponents of the existing political system underestimated several circumstances, which fostered the “continuity” of the political course. These include:

• “Compromising” character of the existing model of political and economic management, which is convenient for the leading apparatus “players”.

• Pragmatism of Russian elites, which currently do not think in “ideological” categories and rather act “according to situation”. Skilfully alternating liberal, social and patriotic ideas, depending on political situation, Russian elites prefer flexible course, which allows them to react adequately to external and internal challenges.

• The absence of social demand for “the return to Yeltsin”. Both population and establishment do not want to “reincarnate” 1990s, while the latter highly values the situation of “Putin’s stability”, especially the presence of the clear and distinct “rules of the game”.

• The relative stability of the economic system of RF and also the expertise of those who determine the economic course (which was especially obvious in the current situation of the economic crisis).

• The political “spirit”, which Russian elites acquired during the last years, helping them to resolve the most complicated problems. It is also important that Russian leaders have political will for making tough decisions in both domestic and foreign policy.

As a result, the problems of 2008 were in general successfully resolved and the authorities have demonstrated their significant robustness. The arguments in support of this conclusion are the following: for the first time in post-Soviet Russia’s history the elections were conducted in time and in “non-agitated” atmosphere. The resigning head of the state has clearly denoted his place in the power structure and in whole the transition of presidential powers from Vladimir Putin to Dmitri Medvedev was smooth. Other noteworthy facts include the “harmonic” in many respects operation of the “tandem”; well-coordinated operation of the state and social institutions according to their functions; quick victory over Georgia and the recognition of Abkhazia’s and South Ossetia’s independence; dedicated (although not always efficient) struggle against the negative consequences of global financial and economic crisis. Also, the top authorities assisted in establishing several “stabilizing” political and economic “non-aggression” pacts. It is especially worth noting that in “big politics” the role of the “personal factor” has declined, the apparatus functions distribution has become more logical and the role of power institutions has dramatically increased.

Consequently, in 2008 (at least before the crisis) Russia played as equal with “heavy-weight” opponents (the West) and some “lighter” opponents (Georgia, irreconcilable opposition) were defeated with overwhelming advantage.

2008 financial and economic crisis did not shake the foundation of the established political system. The authorities have demonstrated courageous and original responses to emerging problems. As far as the Russian historical background is considered, the obvious conclusion is that in “emergency” situations the leadership of the country used to make choice in favour of the “mobilization scenario” with “the crackdown” on freedoms and the “iron hand” regime. Nonetheless, Putin-Medvedev “tandem”, relying on the stability and steadfastness of the system and also on the high degree of trust of population to the governmental institutions, made choice in favour of the “agreement scenario”. So, at the end of the year (in the Presidential Address, in Vladimir Putin’s “hot line” on TV, in some initiatives of the “United Russia”) the strategy of “balanced trust” was presented, which suggests abandoning the rigid monologue style of authorities communication in favour of multilateral dialogue and mutual trust with the purpose to consolidate internal and external forces for successful overcoming of local and global challenges of the 21st century.

Russian leaders identify the following most important global challenges:

• The struggle against terrorism and other destructive forms of political and social activism, requiring more efficient coordination of the efforts of the leading states in the sphere of security and defence.

• Overcoming financial crisis by means of developing international cooperation and defining new rules of the game in the global economy for the new century, when the USA has lost the “moral right” to dominate single-handedly in this sphere.

• The confrontation for resources, which could be alleviated by means of equal partners’ dialogue with the participation of both leading powers and the “third world” countries.

• Unipolarity, which could be overcome by means of improvement and diversification of international institutions, UN reforming and expansion of the range of participants with the full voting status in global problems discussions.

The strategy of balanced trust in Russia was assumed to help to respond to following challenges:

• The problem of social inequality and suboptimal social hierarchy – by means of active implementation of the principle of “equal opportunities” and the development of the entrepreneurial system of recruitment to elites.

• The problem of state and civil society opposition – by means of development of social participation and encouragement of constructive initiatives (under certain governmental “supervision”), i.e. the idea of interaction with a person, who is not treated as a “cog in a machine”, not as an absolutely “autonomous entity”, but as the responsible and socially integrated citizen.

• The problem of the hypertrophied personification of power – by means of development of governmental and social institutions.

• The problem of territorial integrity and separatism – by means of enacting the principle of supranational state on the national foundation, development of the “all-Russian” patriotism and the promotion of the idea of the necessity of the internal consolidation of the country for its efficient participation in global competition in the 21st century. Nonetheless, this policy does not mean the transition to the “liberal-pluralistic” course of the “reckless 1990s”. It rather demonstrates that RF authorities want to attain nation-wide compromise with “minoritarians” and on a consensus basis to overcome the problems of the country. That is why the authorities decided to make “a good will gesture” for “small parties”, non-governmental organizations, regions and business circles.

Nevertheless, aggravation of financial and economic crisis, which has started in the first part of 2008, can compromise this strategy, either adding to it some elements of “mobilization scenario” or leading to the system disintegration.

Conclusion

The outcome of 2008 events could become decisive on account of the “Putin’s period” statehood transformation, which was based on the ideas of national consensus, “purchasing” of political and social loyalty and accomplishment of the large-scale and expensive political and business projects.

While financial and economic crisis is unfolding, two differently directed vectors in Russian authorities’ activity are envisioned.

On the one hand, in the situation characterized by increasing “centrifugal” tendencies, growing protest activities and elite’s fragmentation, the ruling “tandem” will be tempted to “turn of the screw” one more time and to introduce “mobilization regime” by means of tough power policy and strict governmental regulation of economic processes. On the other hand, the probability of enacting of this scenario is low, as according to psychological and managerial characteristics of both members of the “tandem”, they are not the advocates of the rigid political, social and all the more so – economic mobilization. Moreover, they understand that tough authorities’ actions could provoke radical popular attitudes, which could undermine the legitimacy of their regime. The “mobilization scenario” would also require breaking up sharply Russia’s relations with the West and lead to the autarchy. However, the overwhelming majority of members of the Russian elites are the strong supporters of the Russian Federation’s participation in the “global joint-stock corporation”, so they do not even consider resignation from the “global board of directors” and creation of “completely independent business”.

The opposite tendency is related to the “decentralization” policy and getting over the crisis by means of liberalization, of course, more limited than in 1990s, but still assuming less strict governmental control in the “adjacent spheres” (including business), imitation of competition, political discussions on possible development trajectories for the country, and consolidation of “West-oriented” tendencies in foreign policy.

Nevertheless, from the point of view of RF elites, this scenario is extremely risky. The majority of the members of “ruling team” used to be CPSU member and they remember very well how quickly that party, which used to be the “directing and ruling force of Soviet society”, “deflated” in the end of 1980s and the beginning of 1990s, because it proved to be impossible to manage the process of the “top-down liberalization” in the crisis situation. Staking on the expansion of collaboration with the West seems to be a doubtful strategy for Russian establishment, especially for top officials. As it was demonstrated in reality, the USA and their allies prefer supporting only those regimes, which are unconditionally loyal to them, but the “duumvirate” members, who are too infatuated by the idea of “sovereign democracy”, are not perceived by European and American elites as “unambiguously loyal allies”.

That is why Russian authorities will most probably choose in 2009 “wait-and-see tactic” based on the desire to “survive” the crisis with minimal losses, manoeuvring between “mobilization” and “liberal” scenarios. This approach could be relatively efficient if the crisis turns to be short-term and not too severe. Nonetheless, if it is deep and long-term, the ruling “tandem” will face the cardinal problem of choosing new “historical meaning” and new development strategy for the Russian Federation.