Irish Times: Russia’s resurgence

EXTRACT: This question of resources has been central to the recent rows between Russia and its neighbours, which could leave western Europe literally shivering if the pipelines are turned off for too long. Firms such as Shell have also seen the government use environmental controls selectively to pressurise them to give up dominant control of energy projects, such as those on Sakhalin island off the Pacific coast.

THE ARTICLE

Published: Feb 17, 2007

As Vladimir Putin’s presidency draws to a close, Russians feel more confident, prosperous and secure, despite weatern unease over the country’s direction, writes Conor Sweeney , in Moscow

The US may fear a new cold war from a resurgent Russia but, in Moscow last week, one of the most revered US presidents, Franklin D Roosevelt (FDR), was invoked as a role model for President Vladimir Putin. This was the unexpected assertion from one of the brightest minds at the heart of Russia’s government, Vladimir Surkov.

The initial western relief that Putin had brought some order to the vast country when he took office at the start of the decade has gradually turned to dismay at the mixed signals over the country’s general direction. Whether it was energy rows with neighbouring countries or the recent mysterious murders of critics of the regime, unease over Russia’s future has grown substantially in the past year.

But Putin’s legacy has a long-term perspective, which does not rest solely on external approval. He sees his presidency as an opportunity to restore Russia’s pre-eminence. In his view, the Soviet era was a broadly positive experience and the chaos after the collapse of communism and the break-up of the USSR was a shameful episode, best forgotten. Putin and most Russians want the country to be respected abroad, but not patronised or despised.

Stepping out from his anonymity behind the Kremlin walls, Surkov, the deputy chief of the presidential staff, explained that Russia is not trying to beat the US, but to emulate it.

“In the 20th century, Roosevelt was our military ally; in the 21st he is our ideological ally,” Surkov told a seminar to celebrate the 125th anniversary of the birth of FDR, an icon in Russia because of US assistance during the second World War against Germany.

Just as Roosevelt battled to overcome the powerful bankers controlling Wall Street, so Putin has vanquished the once meddling oligarchs, claimed Surkov. America’s 32nd president took office when the Depression blighted his country, much like Russia’s squalid conditions after Boris Yeltsin’s two terms during the 1990s. FDR stretched democratic powers to their constitutional breaking point, as must Putin if he wants to shake up Russia.

Yet, to the outside world, Putin was cast in a very different image last weekend, after he berated the US in front of the country’s new secretary of state for defence, Robert Gates.

“The process of Nato expansion has nothing to do with modernisation of the alliance,” Putin told a security conference in Munich. The US, he complained, was becoming “one single centre of power. One single centre of force. One single centre of decision-making. This is the world of one master, one sovereign.” Gates brushed off the attack, suggesting that old spy habits die hard, a reference to Putin’s long career in the KGB. In a casual illustration of how the Russian president operates, he went up to Gates after his speech to give him a friendly slap on the back and ask him when he was coming to Moscow.

DAYS LATER, THE Russian foreign ministry made a formal complaint to Washington, not about Gates’s reaction to Putin, but, crucially, to what he’d said a few days earlier, when it believed he had categorised Russia as one element in a new axis of evil: “We don’t know what’s going to develop in places like Russia and China, in North Korea, in Iran and elsewhere,” Gates had commented.

So was Putin’s speech a reaction to that comment, an aggressive attack on the US, or merely a statement of the reality, as understood by many Europeans that, under President Bush, the US had gone too far when it invaded Iraq?

Certainly, the Kremlin is highly aggrieved at new US plans for a missile shield to protect Europe and has repeatedly asked which enemy it believes might be capable of attacking Nato countries with advanced missiles. The truth is, no one knows precisely what motivated Putin to say what he did, just as no foreigner, or at least none willing to reveal it, seems to know what really happens inside the Kremlin walls, the only place that matters for decision-making in Russia. The rumours of rivalry and factionalism amongst the various “clans” there make Russia’s internal politics sound like the intrigues of a medieval court.

Some Russian commentators compare it more benignly with a football game, portraying Putin as referee rather than captain, and claim his greatest skill has been to balance the competing factions, be they economic liberals or KGB nationalists.

This is how democracy works in a country of more than 140 million people, with the second-largest nuclear arsenal in the world. The voters will get to decide who becomes the next president, but the way contenders are selected bears no resemblance to western European parliamentary democracy. Putin himself has stated there will be no anointed successor, but the winner will almost certainly be one of the candidates endorsed by him once electioneering gets under way later this year.

The Russian political system has many critics, both at home and abroad. In fact, the attempts to manage this transition are making the country less, not more, stable, warns Lilia Shevtsova of the Carnegie Moscow Center.

“The more the authorities control society, the more insecure they feel. This insecurity manifests itself at every step: in the new repressive election laws; in the Kremlin’s overreaction to the opposition movement Drugaya Rossaya (Another Russia); in the ban on criticism of opponents in election campaigns; in the broad interpretation of ‘extremism’; and in the rush to seize control over economic assets.” She argues that the growing reliance on Russia’s energy resources for its power base could trigger conflict: “The Great Power Petrostate transforms market relations into affairs of state, and economic resources into political tools. This makes new ‘resource wars’ between Moscow and its neighbours inevitable.”

This question of resources has been central to the recent rows between Russia and its neighbours, which could leave western Europe literally shivering if the pipelines are turned off for too long. Firms such as Shell have also seen the government use environmental controls selectively to pressurise them to give up dominant control of energy projects, such as those on Sakhalin island off the Pacific coast.

Due to the revenue from energy exports, Russia also has the financial strength to reassert its political status and start spending on its military, though the growing defence budget remains a fraction of the Pentagon’s expenditure. According to independent polls by Levada, 80 per cent of Russians broadly support Putin. They also despise the former Soviet satellite states far more than they do the US, with Poland and Lithuania named as the top enemies of Russia.

This chimes with comments from former Russian prime minister Yegor Gaidar, who warned that the real threat to Russia’s future comes from the extreme right, not the left. “I lived part of my life in the Soviet Union and now some in the west say it’s a return, but it’s not. It’s true there may be some dangers, but some are even more dangerous,” he says. “Radical nationalism is the most important danger, while the post-imperial syndrome is also important.”

There is little pluralism in the Russian media. Although there may be space in some newspapers and on websites for critics, such as the chess player Gary Kasparov, to vent their opposition, the vision of the world on most Russian TV channels strongly conforms to the Kremlin line. Kasparov complains that he’s often edited on news reports to make him look bad. Putin, he claims, is not a democrat but “an exemplary Stalinist” who speaks with the old Soviet language and knocked the country off the democratic path. “When you are so corrupt and used to living beyond the law, you are used to getting what you want,” claims Kasparov, who has quit chess to concentrate on leading opposition to Putin.

KASPAROV HAS BEEN hounded by supporters of the Kremlin, such as the youth organisation Nashi, which staged a six-month protest against the British ambassador to Russia, Anthony Brenton, after he met Kasparov and other Kremlin critics last summer on the margins of the G8 summit in St Petersburg. Nashi claims that for the diplomat to meet these critics was akin to endorsing fascism.

Instead of focusing on a new cold war based on defence matters, Russia seems to be viewing the world through the prism of hard market economics. This has propelled India close to Russia, while it has pushed away the former Soviet republics. Putin and his ministers have concluded that the superficial loyalty of countries such as Belarus receiving cheap oil and gas was worth a lot less than the hard cash generated by selling the fuel to them at international levels – around four times higher.

Ideologically, there’s no broad desire in Russia for a return to communism. Although the Kremlin wants to control strategic industries in the defence and energy sectors, it is proceeding with privatisation plans for both electricity operators and state-owned banks.

Most people avoid politics, which is generally seen as a pursuit of the elite. On the streets of Moscow, there is little talk of human rights abuses, or concerns about the quality of the country’s democracy, although the signs of institutional corruption sicken those people not benefiting from it. Instead, people complain about the dreadful traffic and the rocketing property prices. But culturally, Russians look to Europe, whether it’s for skiing holidays or for clothes. There is money in cities such as Moscow and St Petersburg, and not just for oligarchs – a coffee in the main chain costs about 5, for example, and the cafes are always busy. 1998 is remembered as the bleakest year, when so many people lost everything in a financial crash. The capital has been transformed in the past few years, though most of the confidence has gelled only since 2000, when Putin took office. Now, there are no complaints in Russia about starving pensioners, or wages being paid months in arrears – though most people in public sector jobs feel they have been slow to benefit from the boom.

ACCORDING TO SOME estimates, the spending power of many Muscovites now comes close to western Europeans – they receive lower salaries, but since most live rent-free, they have cash in their pockets to spend. Certainly, the number of new shopping centres in and around the capital, including three vast Ikea branches, wouldn’t expand if there was no demand. The most recent addition, the Europa Centre, claims to be the largest mall in the heart of any European city, with familiar shops like Marks & Spencer and Zara based there and elsewhere in the city.

Even if some of Russia’s foreign policies may confront the West, there’s a very broad acceptance that the economic controls have been prudently controlled, for a country in transition. But Russia’s wealth is unevenly distributed, with oligarchs at one end and high poverty in the remote regions. The population of Siberia is dropping by 300 every day.

Putin has acknowledged that his failure to reverse this income disparity remains the greatest failure of his term in office, with the most recent rich list revealing that the wealthiest man in Russia, Oleg Deripaska, is now worth more than 16 billion.

At the other extreme, many public servants, such as teachers and doctors, are struggling to get by on a few hundred euro a month, still waiting for their share of the resurgent Russia.

Bursting with energy: the spoils of oil

Russia’s economic boom has been underpinned by energy exports and this year it will overtake Saudi Arabia to become the world’s number one supplier. The high price of gas and oil has been a large driver of the growth of the past decade, helping Putin’s regime restore order after a decade of post-communist boom and bust.

Last year, Russia leaped four places to become the 10th largest economy in the world and hopes to climb to sixth position in two years, ahead of Britain, France and Italy.

Russia and Europe are totally interdependent through energy. More than 30 per cent of all European energy comes from Russia, but it’s even more vital for Moscow, accounting for 60 per cent of all energy export revenues.

Although many countries, such as Ireland, do not directly import gas from Russia, these supplies play a crucial role in dictating the final price paid by business and consumers everywhere.

One of the most well-known energy analysts in Russia comes from Mullingar, Co Westmeath. Chris Weafer, the chief strategist with AlfaBank in Moscow, believes Russia’s government is determined to integrate into the global economy and move away from its reliance on oil and metals.

“Russia doesn’t want to fall into the category of a raw material energy producer, but instead wants to use this to leverage its role into the global economy,” he explains.

This year, Russia hopes to formally join the World Trade Organisation. At the same time, speculation that Russia might form an Opec-style gas cartel with Iran and other Middle East suppliers has concerned western Europe.

“From Russia’s point of view, it’s not an unhelpful backdrop to discussions with Europe. If those negotiations are tough, it’s a reminder that Russia could sell gas to China or India. It’s a reminder that if Russia was to co-operate with these countries, then Europe would have very few options,” he says.

Overall GDP per capita remains well below western Europe at 4,100, compared with 31,500 in Ireland, for 2005. With growth continuing at around 7 per cent per year, its momentum continues to drive up overall wealth, despite high inflation. Like Norway, the Russian government has established a fund to manage its windfall revenues from energy exports. It is hoped the disbursement of this will bring transport infrastructure and health and education facilities up to western standards.

But a sudden drop in oil prices could have a dramatic effect both on revenues and on consumer confidence.

Economy: bear to tiger

One Irishman who has felt the highs and lows in Russia since the fall of communism is businessman Patrick O’Dolan, who arrived in 1993. “It was like Ireland in the early 1950s. When I arrived in Moscow, there wasn’t a single neon light on Tverskaya, there wasn’t one shop window,” he recalls, referring to Moscow’s main shopping street.

He had just sold his telecoms company when the Russian economy collapsed in 1998. But the US-based buyer pulled out, leaving his dreams of a big payout in tatters. His company, the Moscom group, which had more than 200 staff at the time, survived, after some ruthless cost-cutting, such as dismissing all the highly paid expat staff and moving to cash accounting – literally not spending any more than was brought in.

Since then, the business has refocused on new technology and gradually developed, with most of the major hotels and upmarket coffee shops in Moscow now offering Wi-Fi internet serviced by Moscom. He feels the image of the country in the West doesn’t do justice to the energy of the people or his positive experiences of life in a fast-changing environment. “Only three weeks ago we had an Irish advertising firm out here and they were totally taken aback by the booming economy and the vibrancy. Everybody who comes out feels they have a wrong image,” he says.

“You can talk about corruption, but you had corruption in Ireland too. Legislation has changed dramatically and it’s going to improve,” he says. “Remember, Russia is only 20 years old, because under communism it was locked up for 70 years. We cannot compare Russia with the Ireland of today. It took us 70 years to have a tiger economy and it has taken Russia only 15 years.”