Happy New Year, Russia!

Vladimir Ryzhkov, writing in the Moscow Times:

Russia will finish out 2009 sadder and a slightly more sober than usual but hardly any wiser. Russia’s economy fared worse than all other Group of 20 countries during the crisis, and the excessive number of catastrophes it suffered underscored how woefully ineffective, incompetent and corrupt the government is. Nonetheless, the government hasn’t budged one centimeter from the status quo course that has driven the country into a political and economic dead end.

The State Duma’s reaction to Yegor Gaidar’s death is highly symbolic and is a fitting way for President Dmitry Medvedev and Prime Minister Vladimir Putin to conclude their disastrous year as leaders of the nation. Led by Oleg Morozov, first deputy speaker of the Duma and a United Russia member, the lower house of parliament refused the motion to observe a moment of silence for Gaidar, a Duma deputy of six years, an acting prime minister and one of the most influential economists and reformers in Russian history. Not a single high-ranking member of United Russia or the presidential administration came to pay their last respects at Gaidar’s funeral.

For the past eight years, Gaidar warned the country’s top politicians and economists in the Kremlin and White House about the danger of building an authoritarian police state, of increasing the government’s role in the economy, of closing markets to foreign competition and of increasing protectionist barriers. His final book, “Power and Property,” released this year, serves as Gaidar’s political will and testament. In the book, Gaidar warns that giving the government so much control in the economy will mean that Russia will never be able to catch up with the developed world. Furthermore, Gaidar wrote, Putin’s state-capitalism model will lead to the demise of the state itself. Gaidar never tired of telling Putin supporters that Russia’s so-called “special path” would take the country to only one destination — the Third World.

More than 10,000 people stood for hours in minus 20 degree Celsius weather to attend Gaidar’s funeral. This once again demonstrates that the number of Russians who share the reformer’s liberal and democratic views is much larger than the Kremlin admits. According to several Levada Center polls taken this year and last, the number of Russians who share Gaidar’s

liberal-democratic views ranges from 15 percent to 20 percent of the adult population, or from 21 million to 28 million people. These supporters of liberal reform have not been represented in the Duma since 2003, when the Union of Right Forces and Yabloko, according to official election results, received just under the minimum threshold of 5 percent of the vote. In addition, other liberal parties such as my Republican Party of Russia were not even allowed to compete in the 2007 Duma elections after being disqualified on trumped-up “technical violations.” The liberal political and economic programs of these parties have been systemically defamed by the Kremlin in state-controlled national media outlets. With reformers absent from the ranks of the political and economic elite, there is no chance that Medvedev’s modernization program can succeed.

2009 highlighted several stylistic differences between Medvedev and Putin. Medvedev likes to make harsh criticisms of Russia’s state of affairs while calling for rapid modernization and softening Moscow’s foreign policy course. Putin, however, insists that the existing political and economic models work well. He remains in favor of heavy state control of much of the economy and an aggressive foreign policy.

Medvedev has not backed up his idealistic rhetoric regarding the need for liberal reforms and modernization with any concrete actions. Moreover, nothing in 2009 indicated that Medvedev has finally become an independent political figure. The government and presidential administration remain completely loyal to Putin. Moreover, United Russia has strengthened its position as the country’s single political force. The nationwide elections in October set a new record for their level of falsification. At the same time, United Russia is trying to extend the vertical power structure even further by pushing to end the direct elections of mayors.

Throughout 2009, Putin undermined most of Medvedev’s positions, which were already weak to begin with. During Putin’s December call-in program, in answer to a question of whether he would consider retiring, Putin snapped, “Don’t hold your breath!” This doesn’t leave much room for Medvedev, who for his part said he doesn’t want to “lock elbows” with Putin in running for president in 2012. In regard to Medvedev’s criticism of state corporations, Putin replied that they are “necessary.”

Throughout the year, Medvedev was incapable of managing the country’s numerous political and economic crises. In March, Moscow’s Khamovichesky District Court started a new criminal case against former Yukos CEO Mikhail Khodorkovsky and his former business partner Platon Lebedev that is even more absurd than the first conviction. There was a trial against several minor accomplices in the killing of journalist Anna Politkovskaya, but the mastermind has yet to be charged.

In April, drunken Moscow police Major Denis Yevsyukov went on a shooting spree in a supermarket, using a gun that had been sought in connection with a previous crime. Not long ago, police Major Alexei Dymovsky made a YouTube appeal to Putin complaining of abuses in the police force. Amazingly, Interior Minister Rashid Nurgaliyev, a close associate of Putin, has managed to hold onto his job. Nor have there been any shakeups in the secret services, despite a repeat bombing of the Nevsky Express train and a wave of terrorist acts in the North Caucasus.

2009 was also a sad year for journalists and human rights activists. Human rights lawyer Stanislav Markelov and journalist Anastasia Baburov were murdered in Moscow in broad daylight. In Chechnya, unknown assailants abducted and killed rights advocate Natalya Estemirova.

The level of corruption became markedly worse in 2009. What’s more, this year showed that corruption kills, as illustrated by the Perm fire that killed 150 people and the Sayano-Shushensky disaster, in which 75 people died. Medvedev continues to battle corruption with empty words.

As we approach the end of the year, there is not much to celebrate on the political and economic fronts. In Russia, 2009 will be remembered for its increase in corruption and bloody catastrophes and for the country’s overall deterioration. Happy New Year, Russia!

3 responses to “Happy New Year, Russia!

  1. Look at this recent article at Financial Times.

    Can you imagine what will happen to Russia soon? Please write your opinion what will happen to Russia when oil prices will be around 35 dollars per barrel for a decade.

    Insight: Prepare for lower oil prices

    By Chris Watling

    Published: December 29 2009 16:18 | Last updated: December 29 2009 16:18

    The outlook for the oil price remains mired in much confusion. Peak oil theorists see production in terminal decline. Others, who expect the oil price to revisit its 2008 highs, argue that rapid demand growth from emerging markets, most notably China, will underpin a long and aggressive rally in the price.

    Some even argue that as the world runs out of oil we shall slip back into pre-industrial ways as energy is rationed and human behaviour has to change as a result – an argument that has been regularly trotted out over the last five centuries. First, in Britain in the 16th century as the country was perceived to be running out of wood, its primary energy source at that time. Then 300 years later by economist William Jevons who believed that Britain’s coal supply, and therefore primary energy supply, was in terminal decline.

    Market price signals, however, have an uncanny ability to change long term supply and demand dynamics. Indeed the high and rising price of oil from 2004/05 onwards, but most particularly in 2008, would appear to have delivered a very clear and identifiable supply response. Using conservative assumptions we expect that the future supply of oil will increase by approximately 9-10m barrels per day by 2017. That equates to a 10-12 per cent increase in global production capacity. Importantly it will more than absorb our estimated 5m bpd increase in Chinese demand, the biggest single driver of demand growth, over that time frame.

    That increase in supply reflects four key trends that are playing out at a country level. First there are those countries where politics, ageing fields and a poor investment environment have resulted in and are likely to continue to result in falling or, at best, stable production, despite often plentiful oil reserves.

    This group includes Venezuela, Mexico, Russia, Nigeria and Iran (representing 26 per cent of the world’s reserves). Second is a group of countries, mostly western, where production peaked a number of years ago and where that trend seems likely to persist. This group typically fits the peak oil theorist’s prescriptions and includes the UK (peaked in 1999), the US (1970 peak) and Norway (2001 peak).

    Those losses are amply offset, however, by the third and fourth groups. In category three, large incumbent reserve owners (Saudi Arabia, Iraq, Kuwait among others) representing 38 per cent of global reserves, have been steadily increasing and plan to continue to increase capacity and production levels over coming years. In Iraq, with the signing of a number of agreements with international oil companies in recent weeks, and assuming continued improving security, production capacity is set to increase from 2.5m bpd today to 6.2m bpd by 2017.

    In Kuwait the trend is the same, while Saudi Arabia, having increased capacity from 9.5 to 11.5m bpd in the past 5 years, has expressed its intention to increase it further up to 15m bpd, if necessary.

    Finally there are a number of new entrants into the top league of global oil producers. Canada, because of technological advance and a higher oil price, is recognised as having the world’s second largest oil reserves. Brazil, with its recent discoveries, is looking to double production by 2020 (to close to 4m bpd) while Angola – which has doubled production in the last 6 years – is expected to add another 50 per cent by 2015. Kazakhstan has also rapidly ramped up production (from 0.5 to 1.5m bpd in the last decade) in response to China’s growing oil appetite.

    Over and above those four key trends, the increasing push for environmental change coupled with the high price of oil energy, is delivering new, and in some cases the re-use of old, technologies. China is targeting 15 per cent of its total energy use from alternative sources by 2020 (including wind and solar). Most European countries now offer subsidies for a variety of green energies. The US has also legislated recently to raise mileage per gallon on new vehicles.

    Post the last major US effort to cut energy intensity in response to the oil price spikes in the 1970s (with late 1970s conservation legislation under Jimmy Carter), US oil demand fell 18 per cent in four years (between 1978 and 1982). Moreover, despite this year’s 115 per cent rally in the oil price, inventories are above long run average levels while Opec spare capacity is around 6m bpd, ie, back at 2002 levels (when the oil price averaged $26 per barrel).

    While geopolitics, continued security threats and unstable political regimes increase the challenges associated with long range oil price forecasting, it seems clear that the price signal has been effective. Dramatic increases in the oil supply over coming years coupled with significant current spare capacity suggest that the recent technical breakdown in the oil price is signalling something significant – possibly a coming oil supply glut and a revisit of end 2008 oil price lows.

  2. I think your right Michael there will be an oil glut in the next few years. For example the UK, as you stated we reached a peak in 1999 .

    Since then BP/Shell have developed some remarkable technologies which now allow us to exploit oil reserves that we knew about but could not reach. For example the Clare oil field in the deep waters of the Scottish hybridise this field holds 5 billion barrels we can now get to this oil plus a further 20 billion barrels still held in small wells throughout the north sea,
    Also there are massive reserves around the deep waters off the Falkland Islands this could be as much as 60 billion barrels. So potentially Britain’s oil production could soon see an upturn. And with new technology others will start producing more oil.

    The net effect will be long term lower prices. A disaster for Russia who’s over production is leading to a rapid decline in its known reserves. Russia needs $75 per barrel to meet its budget requirements the $35 stated would bring Russia to its knees.

  3. Maksym not Maxim

    Russia’s future is bleak indeed , what with oil
    clearly reaching record production and lower prices and China to invade the ” russian ” Far
    East . Only such obstinately backward people
    as the russians could dream of an empire at a
    time like this .

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