Recent Events in Washington, DC

Russia : Today, Tomorrow and in 2008

October 14, 2005
American Enterprise Institute

Yuri Levada , founder and president of the Levada Center and one of the leading sociologists in Russia , gave a broad outline of domestic and foreign policy problems in Russia . Noting the pressing domestic issues, Dr. Levada said that Putin’s policies toward the North Caucasus completely failed, while the security situation remains tenuous. The truth about the Beslan events hasn’t been established. Meanwhile, relations with the countries of near abroad and the West have worsened. Russia increasingly relies on its energy sources to affect the policies of its neighbors. Dr. Levada noted that if Moscow had more or less reasonable leadership, it could be a progressive influence to its neighbors. In light of this situation, Putin remains surprisingly popular inside the country. Russian public opinion of Putin showed 70% approval this fall. At the same time, there is no other better alternative than Putin. There is no political podium for the opposition. Even then, Putin has no real allies and friends in the country. Succession of Putin would be problematic because there is no certainty who will come and how; catastrophic results would be likely.

Lilia Shevtsova’s* presentation was interesting because she gave a good description and analysis of Russia ’s power structure and its functions (dysfunctions). She began with noting that there is no politics to talk about in Russia because it’s a one-man show. There are no strong political groups and individuals to make a breakthrough. Russian system is a bureaucratic authoritarian regime with an undivided personified power, which relies on a pact with the business sector. Putin is a captive of this system. Russia reminds a petro-state model similar to Venezuela , Nigeria and Indonesia because of heavy rent seeking, reliance on oil exports and a rampant Dutch disease. It’s a petro-state with nuclear weapons.

Russian attempts to survive without strategic allies. Kremlin’s strategic agenda is following: preserving the state and preventing the ruling class from disintegrating; self-perpetuation of power; redistribution of resources and an attempt of the ruling gang to legitimize this redistribution by attracting foreign investors. The current system may last for three or so years, which will depend on: 1) a lack of viable political alternative, 2) people continuing to survive without taking to streets; 3) businessmen and the middle class remaining happy with the status quo; 4) West wanting a stable Russia under any regime; 5) high oil prices to keep the economy going. Sources of instability stem from: 1) an inherent self-destructive mechanism - personified rule which may undermine itself; 2) law of unintended consequences – as a Russian saying goes: “one wanted the better, but got the usual” (Chernomyrdin’s rule); 3) law of failure – an attempt to reform the system resulting in the inability to reform.

Nikolai Zlobin , a former professor at Moscow State University and a senior fellow at the World Security Institute, began his presentation noting that Putin is somewhere between a weak and a strong president. He has all formal powers but at the same time he cannot do anything to change things. His team is weak because of internal divisions – people in his team do not like each other and they have varying strategic visions and goals. Putin said he would not run for presidency in 2008, in which case his team will collapse without him. Currently, Russia is in stagnation and there is an acute lack of strategic vision (indecision which Korea to follow as a model). It looks like there will be an increased political tension and crisis in near future. There will be no democratic breakthrough in 2008 due to the lack of liberal democratic structure, which will not be formed before the 2008 elections.

Speaking about Russia’s foreign policy, Andrey Kortunov , president of the New Eurasia Foundation, said that anti-Americanism (anti-Western sentiments in general) is on the rise. There is an increased sense of arrogance in Russia (siege mentality). It is difficult to gauge where Putin stands on these issues. Russia cannot decide what its attitude ought to be towards the West, and even towards the CIS. Russia is not ready to pay a needed price to forge special relations with strategic, economic and political international structures. Mr. Kortunov described the Russian political system as schizophrenic because it cannot face the realities of the XXI century while keeping the traditions of the XX century.

Russia ’s economic ties with the outside world boil down to the export of energy resources. The technological gap between the West and Russia is enormous. Big businesses do not wish to invest in Russia ’s energy sector after the Khodorkovsky affair. Thus, there are no conditions for Russia to integrate to the world community. Things will get worse before they get better. Foreign policy will be opportunistic rather than strategic, personalistic than strategic, reactive than proactive.

Russia , however, will remain dependent on the West because of the latter offers technology and experience. Transformation will mostly depend on stakeholders as well as a generational change.

Angela Stent, who is a national intelligence officer for Russia and Eurasia at the National Intelligence Council, noted that the U.S. has very limited ability to change Russia ’s domestic policies (which often affect its foreign policy). Both countries cooperate on a number of mutually beneficial issues: counternarcotics, counterintelligence, and counterterrorism (although the definition of terrorism may not be shared). Dialogue on common threats need to be fostered and both countries should ensure longer-term commitments. The U.S. policy toward Russia will not be overhauled in the next few years, while the pragmatic partnership between the two will continue. Both countries are not ready/willing to reach the “plunge” point, that is, making a breakthrough on foreign and domestic policies issues sought by each one.

Clifford Gaddy’s** presentation was about Russia ’s economy. He had an interesting argument noting that oil is, has been and will be good for the Russian economy and that the oil curse (resource curse) is a myth. Believing in this myth leads to bad policy. The post-1999 boom in Russia was oil-driven, which in a way was necessary. If oil prices remain high, Russia will do well, with 7% GDP growth. However, the rate of corruption and rent seeking remain high. It’s worth noting that rent seeking was rampant during the Soviet Union as well. Collection of informal taxes (bribes paid to officials and payments by companies to the state) is growing. Punitive tax rates leave no incentive for businesses to function, compelling them to withdraw their activities. These problems, in turn, inhibit investment. Long-term outlook is very pessimistic (because the system is not likely to change).

* She is a senior associate at the Carnegie Endowment for International Peace both in Moscow and Washington D.C.

** A senior fellow at the Brookings Institution