Russia, you need to become more sexy

June 3, 2007


Upon taking power, Vladimir Putin had one important ambition: bring back Russia into the fold of what he dubbed the “legal relationships of the civilized world” (a quote I have from a booklet on Russia’s WTO accession published by the Center for European Reform).

More generally, Putin wants to bring Russia back into the circle of the world’s leading powers. He took power in 1999, after the collapse of Russia’s economy in the tragic 1998 financial crisis. He thereafter concentrated on bringing the economy back on track, understanding that if you want a great country, you need a great economy. Now that the country’s economy is booming – 6-7% annual GDP growth since 1999, GDP per capita levels that more than doubled in a few years, a growing middle class that goes shopping and travels – the Kremlin seems to be thinking that Russia has made it and that it can do whatever it wants on the world stage; and also at home, as rising authoritarianism attests.

Russia’s great economy is as yet not great at all. For Russian standards, of course, the recent turnaround is quasi-miraculous, and the authorities’ successful management of the economy so far needs to be applauded. What many critics in the West do not realize is that Russian’s are only now learning to “manage” an economy. The transition from crisis management to actual forward-looking policy-orientation has only begun. For example, an ongoing debate on what to do with the “future generations fund” to come derived from the stabilisation fund set up in 2004 to catch the oil-windfall reveals that finally Russians have started engaging in actual policy debates. This is a radical change from attempts at crisis management that passed for policies like in the 1990s. Also, Russia is adopting “industrial policies” which displease purist economic liberals. But the details of these (strategic liberalisation moves, public investment, some protectionism here and there) could please non-conventional yet widely respected economists such as Dani Rodrik or Robert Wade. Overall, it is certainly much more comfortable to be a Russian today than at any time in the past. Current russophiles emphasize these achievements, and are right.

But all this is only the beginning. Russia’s economy is too dependent on oil and gas. Oil& gas represent 65% of Russia’s exports. Elements of “dutch disease” [basic definition here] start to be detected. Its politics too, is too dependent on oil & gas. Dimitry Medvedev, First Deputy Prime Minister, and one of the likely successors to Vladimir Putin next year, is also chair of Gazprom, that big monopolistic and inefficient gas company that seems to be behind many frictions Russia has with its neighbours – either as bully in the former Soviet Union, or in the West as investor and cutter of gas supplies. And Gazprom is benefiting from the recent seizing of oil-assets initially granted to international companies in the Sakhalin islands. Gazprom as it is now (government controlled, or in control of the government, depending on the perspective) is an obstacle to Russia’s political and economic progress. In the meantime, Russia’s infrastructure is depleted, and the three quarters or so of Russians who are not part of the so-called middle class are still scandalously poor. Mr Medvedev oversees currently a vast plan called the Four National Priority Projects, which aim at injecting this year about US$ 8 bn into education, infrastructure, health and agriculture. Is this “electoral” politics or genuine policy-commitment to the crucial areas which are indeed in dire need of investment after decades of neglect and on which future development of Russia depends? We shall see.

To counter often expressed simplistic visions about “the Kremlin”, “Gazprom”, etc., it is important to note that the Russian government is not a monolith. The Ministry of Finance and the Ministry of Economic Development and Trade are one thing, the Ministry of Agriculture another, the Deputy Prime Ministers Medvedev and Ivanov another, as are the secret services, the various “oligarchs” from the world of metals, the automotive industry, and finance. They all have different agendas, different policy ideas, and various degrees of influence on the President. Conventional wisdom is that whilst in the beginning of Putin’s term, the more “liberal” camp from the economics and finace corner had greater influence, now the “siloviki”, St-Petersburg connected friends of Putin from the secret services and all forces with a more nationalist stance (agriculture, car industry, oil&gas, etc.) are gaining ground.

Anyway: Russia is increasingly uncomfortable to deal with. Legitimately, it claims more to say in the international arena and does not wish to be lectured and patronised like when it was weak, impoverished and indebted to Western lenders and their international institutions back in the 1990s. But thinking it can bully its way up will not serve its cause. Clearly, imperial instincts and very crude power politics in former Soviet Union countries, and playing foul with Poland, Estonia and Lithuania, now EU members, will only trigger what Russia does not want: all united against her. It even achieved unity among Europeans at the last EU-Russian summit in Samara in May (wow!) [Please read this recent post by an Armenian scholar Vasili Rukhadze on Russia’s Eurasian schemes at the moment and their realities on the ground, and this excellent blog by Robert Amsterdam on all the nasty things Russia is doing].

The Kremlin’s thinking on power is archaic. It thinks that “lots of cash” + “tough government” + “sabre rattling” = “greatness”. Uhuh.

If Russia really wants to gain back its imperial might and really be one of the “poles” of a “multipolar” world, it will have to follow the path of, guess whom? The United States and Europe. Both have, what International Relations scholar Joseph Nye coined, “soft power”:

“[Soft power] is the ability to get what you want through attraction rather than coercion or payments. It arises from the attractiveness of a country’s culture, political ideals, and policies. When our policies are seen as legitimate in the eyes of others, our soft power is enhanced.”

Certainly the US’ hard and soft power have suffered a lot from the Iraq war. And this is probably one of the reasons for Russia’s current boldness. It is filling a vacuum, and testing its way forward. The EU prides itself on its “soft power” (democracy, prosperity, culture), but tends to outsource hard power to the US, when it comes to it. Here too, Russia seems to be testing its way forward and seeing what happens when the “Poland”, “Lithuania” or “Ukraine” buttons are pressed. Bur Russia might in the end be the cause for some harder power coming out of Europe if it continues.

The Russian government hasn’t understood one basic thing: it needs to be attractive too, and not only powerful. Geeks like me who like Dostoyevsky, Mussorgsky and are great fans of Russian chocolate, manage to find attractions to Russia, but this is not enough to foster the allegiance of Georgia. Most CIS countries would like to run away from Russia, far away from it, be protected by NATO, some even join the EU. They want to enjoy the joys of security, prosperity, consumerism, political freedom and a rich cultural life based on individual freedom guaranteed by the rule of law. All items generally offered by the EU. Well, Russia, that’s what you will need to offer if you want Azerbaidjan, Georgia, Uzbekistan, Ukraine, etc to be your allies. That’s what you have to offer if you want to be invited to the parties of those you consider your peers in the G7(G8). It’s as simple as that. And in this area, there’s still a long way to go….


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