'Five Years of President Putin: An Assessment' - Foreign Policy Centre

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FPC EVENT REPORT
‘Five Years of President Putin: An Assessment’
Summary of speeches made at the Foreign Policy Centre’s oneday
international conference
Thursday 31 March 2005
University College London, Gower St
Disclaimer: The following are summaries only of the speeches given at the conference and not exact
transcripts of what was said.
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Keynote Speech
Carsten Søndergaard
Danish State Secretary
Conference Speakers
Who Pulls the Strings in the Putin Administration?
Dr. Alex Pravda, 3
Director of the Russian and Eurasian Studies Centre, University of Oxford
Winners & Losers: Has Putin Delivered a More Equitable Society?
Dr Anastasia Nesvetailova 4
Lecturer at the Department of International Relations and Politics, University of Sussex
Bridget Kendall 5
BBC Diplomatic Correspondent
Justice in the Legal Reforms?
Dr. Vadim Malkin 6
Director General of the Russian Axis
Paul Melling 7
Founding Partner at Baker and McKenzie, Moscow
Putin’s Foreign Policy Goals and Relations with Europe
Dr. Thomas Gomart, 8
Head of the Russian/CIS Programme at the French Institute of International Relations
Dr. Gabor Beszterczey, 9
Director of External Affairs for the New Eurasia Foundation
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Biographies of Conference Speakers 10
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Who Pulls the Strings in the Putin Administration? Top
Dr. Alex Pravda
It is widely accepted that Russia is run by a small number of people who are not democratically
elected. This poses the question of whether Russia is heading down the road to
authoritarianism. It is therefore necessary to examine (1) who in this small group pulls the
strings of power and (2) whether effective string-pulling impedes the formulation of good
policy.
There has been a marked shift between Putin’s first term in office and the beginning of his
second. In his first term, Putin cautiously dealt with the judiciary and the Duma; now he has
embarked on a consolidation of power. It seems to many observers that Putin believes that the
political system should be fashioned according to his beliefs and principles: Institutional
contest is messy, not to mention dangerous, and is entirely unsuitable for the modernisation of
Russia and its return to great power status.
It is difficult to know how much power actually lies at the centre of the Russian state and who
pulls the strings. The more power is concentrated the more opaque it becomes and
accordingly, there is less clarity now about who holds power than in the Yeltsin period.
Although the oligarchs have the resources to protest at the centralisation of power, the
investigation into Yukos and the trial of Mikhail Khodorkovsky has warned of the cost of
challenging Putin’s centralisation of power, thereby maintaining the modus vivendi.
Officials, aides, key ministers and much of the state bureaucracy share similar roots; most
either come form Putin’s home-town of St Petersburg, or have the required background in the
security services. Bureaucrats are chosen on the basis of reliability and loyalty, not who is best
for the job. The apparatus has now become self sustaining with decreasing competence and
much loyalty. This has subsequently led to poor analysis on foreign policy and domestic policy,
best illustrated by the popular protest at social benefit reforms last February.
Putin’s Presidency is weakening: authoritarian regimes are not very effective, but are good at
short-term damage limitation. This creates a climate of uncertainty, which allows Putin room
for manoeuvre on deciding policy. However, this approach undermines long term sustainability
because much needed reforms and policy initiatives that tackle social issues are not formulated
or implemented. Regardless of who pulls the strings, it seems the strings themselves are
becoming threadbare.
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Winners & Losers: Has Putin Delivered a More Equitable Society? Top
Dr. Anastasia Nesevtailova
The devaluation of the rouble in 1998 witnessed devastating social consequences. The savings
of the middle classes were wiped out in an instant, reducing the majority of Russians to
poverty. Compared to the USSR in 1989, Russia had fallen over a hundred places in the world
rankings of GDP by 1999. While Africa, Asia and South America actually reduced poverty,
European Russia was one of few regions where poverty actually during the 1990s.
The Putin administration has seen a drastic change from the misfortunes under Yeltsin and the
admittedly failed techniques of shock-therapy. The former KGB officer appeared as a
reformer, a populist and the solution to Russia’s problems, but it is likely that anyone following
Yeltsin would have appeared so. His popularity polls remained astronomical during most of
his time in the Kremlin, as high as 60-70 per cent, falling only recently to 40-60 per cent with
the unpopular monetisation of pensions. Yet this still compares favourably compared to
Yeltsin’s 9 per cent.
On the surface, Russia has come a long way since the troubles of the last decade. Reforms
have ranged from budget and tax to labour, pensions and social benefits. Structural reforms
have also been tackled with legislation on the land code, anti-monopoly and money
laundering. It seems to be working, with the budget looking healthy with growth, surplus and
large reserves. Russia has one of the lowest income taxes in the world, with the implicit
meaning that people should take care of themselves, thereby reducing the government’s social
responsibility.
On closer inspection, however, gains made do not seem so clear cut. The taxable fund is
structured so that 70 per cent comes from salaries and wages, 20 per cent from basic
revenues and 5-10 percent from natural rent. This system makes for uneconomical business
and should in fact be the reverse, with natural rent at a higher rate.
The statistics on poverty highlight two different trends. On the one hand, poverty decreased
from 26.5 per cent to 16.1 per cent during 2003, dropping still further to 14.6 per cent in
2004. Real incomes increased during 2004, with the poorest 10 per cent actually up 6 per
cent. On the other hand, however, 80 per cent of Russia’s poor are poorer compared to the
Yeltsin era.
In reality, the gulf between Russia’s rich and poor has widened since 1999. Before Putin
became president, the difference was fourteen-fold, while by 2004 this had risen to fifteenfold.
Even though Russia is ranked fourth in the world for the number of super-rich, its GDP
still resides at a lowly 78 th place, worse than the nadir of the USSR.
Bridget Kendall
In 1999, the wealth gap was already substantial, with notable geographical differences as
well. Many Russians suffered as savings were lost, wages held in arrears, pensions went
unpaid, jobs were lost and businesses closed after a decade of instability.
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To counter this, the last five years have seen big changes, with economic reform to increase
investment, create stability, reduce poverty and even have back-wages paid. Russia witnessed
impressive macroeconomic growth, the stabilisation of the rouble, the growth of the middle
class, wages doubling and a rise in the housing market. These created positive impacts on the
people, but has life become more equitable?
The wealth gap is of primary concern here. Eight per cent of Russians cannot afford food,
while a further 34 per cent cannot afford anything beyond food. Unemployment has not
fallen, and statistics do not include those unregistered to receive benefits.
Geographically there are only pockets of extreme wealth. Moscow is six times richer than the
countryside and there have been protests against local authorities. The maintenance of
infrastructure in remote regions has depended on the potential for economic development.
Those towns that cannot supply jobs remain without decent lines of communication. Roads
are so bad and travel so expensive that migration has become too difficult, even for the
sponsored.
There is also a new worry about stagnation. Kudrin has admitted that the economy is slowing
down. Capital flight, the Yukos affair and lack of foreign investment have all taken their toll.
Small businesses that are critical to the community are the only ones to regularly make a
profit. This can be seen by the bankrupt local authorities tapping their wealth to help improve
the area.
On a macro scale, long term prospects look good. Yet there is a mismatch with
microeconomic forecasts. There is concern that there is a certain complacency with the
optimism based on oil, where in fact Russia’s best reserves are in people. Yet educational
standards are eroding and urgent demographic trends show a falling birth rate and shortening
life spans for men. So the long term will in fact be too late.
Russia should be viewed, not as the new Chile, with its descent into dictatorship, but as the
new Nigeria.
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Justice in the Legal Reforms? Top
Dr. Vadim Malkin
The views on Russia’s rule of law and judiciary are both wrong and right. Legal reforms faced
great challenges to change from the Soviet style to the market economy. During the
Communist era, criminal courts convicted 99 per cent of those tried. Only after 1991 did they
start to become more independent. Civil courts also faced a big challenge to change and
corruption was rife since wages were so low. Instead of a system of law within the judiciary,
there was a system of bribes. With that branch of government so weak, Putin has managed
to consolidate power over it during his time in office.
Paul Melling
Great strides have been made in the last sixteen years in Russia, but do people realise that
change has taken place? Is there now a rule of law in Russia? This depends on whether or
not you are on the ‘radar screen’ of the Kremlin. If you are large, rich and important enough
to be noticed by the bureaucracy, such as BP, you find it much more difficult to do business.
The problem here is the lack of an idea of ‘conflict of interest’. The atmosphere is such that it
would be almost scandalous if you did not abuse you own position for personal gain. The
paradox is that if corruption did not exist, nothing would ever get done in Russia.
Putin’s tax reforms have brought a greater respect for the rule of law. The flat tax of 13 per
cent has made Russia a tax haven, shifting the economy from black to white. Before the
change, 80 per cent of business was run on the black market. Since then, only 20 per cent
remains undeclared.
Changes to the Russian commercial court system have made domestic litigation the fastest
growing business for Western firms in Russia. Unfortunately, if you are caught on the ‘radar
screen’ then all the problems with the rule of law come to the fore: your chances are less than
good if you litigate against the Russian government. The only thing that can be said of the
whole system is that it is always over remarkably quickly.
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Putin’s Foreign Policy Goals and Relations with Europe Top
Dr. Thomas Gomart
Last year can be seen as a turning point for Russian foreign policy. With EU enlargement and
the Orange Revolution in the Ukraine, the relationship between Russia and Europe has
changed. Crisis and misunderstanding has put Putin on the defensive. The results of Beslan,
the Ukraine, Moldova and Chechnya have created a negative image abroad.
Putin therefore wants to correct this perception while limiting changes. He knows that Europe
is the future, yet appears ambivalent to Brussels. True to Russian tradition, they will continue
to build diplomatic relations on a bilateral basis. It remains more comfortable for Russian
diplomats to avoid Brussels and the new member states. In this way it can create a balance of
power where Russia can speak as an equal, but an equal of one country to twenty-five.
Dr. Gabor Beszterczey
Russia’s foreign policy can be considered as its weakest link. With Russia’s concentration of
power has come increased isolationism. Yet Russia still has a dialogue with its counterparts in
Europe. Some in the Kremlin see an EU ‘encirclement’, which could explain why EU-Russia
relations do not exist: diplomatic exchanges are always done on bi- or tri-lateral bases.
When it comes to relations with Russia, influence on a state level is inefficient. With relations
with Europe at a low ebb, the EU should work with the US. However, those on the continent
are working on their own means to avoid Russian isolation. Chirac’s conception of a multipolar
world has facilitated relationships between Paris and Moscow; Moscow and Paris already
have agreements on security, involving strategy, defence and nuclear policies. A commercial
relationship has also been fostered. Berlin and Madrid are following suit, but disagreements
have arisen on how best to avoid isolationism.
Both sides must make efforts to clarify their positions, but it must be recognised that Eastern
Europe cannot form a bridge. Europe is rather intrusive compared to the US and EU
enlargement is seen by some as a threat. Yet Russia still suffers from an ideological hangover
from the Soviet era. Putin still plays by the old rules but is favourable compared to Yeltsin’s
dual nature foreign policy. Putin has a problem with the West, so in the end relations with
Europe will probably deteriorate.
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Biographies of Conference Speakers
Carsten Søndergaard has been the State Secretary for Foreign and Security Policy, EU Policy
and EU Coordination in the Danish Ministry of Foreign Affairs since 2001. During his
diplomatic career Mr Søndergaard has been Ambassador to Turkey (1999-2001), has served at
the Danish embasssies in London and Washington, and has held a number of high level offices
within the Ministry of Foreign Affairs in Copenhagen. He has a Masters degree in Political
Science from the University of Aarhus.
Dr. Alex Pravda is the Director of the Russian and Eurasian Studies Centre, St Antony’s
College, University of Oxford. Before coming to Oxford he was director of the Soviet foreign
policy programme at the Royal Institute of International Affairs (Chatham House). He has acted
as special adviser to the Foreign Affairs Committee of the House of Commons. He has taught
at the University of Reading and, on a visiting basis, at Stanford University and the University
of Michigan. His publications include Developments in Russian Politics (co-edited,
Macmillan, 2001) and Leading Russia: Putin in Perspective (edited, forthcoming Oxford
University Press, 2005).
Dr Anastasia Nesvetailova is a Lecturer in political economy at the Department of
International Relations and Politics, University of Sussex. Her research and teaching interests
include the globalisation of financial markets and aspects of capitalist transformations in the
CIS. Her recent publications include, “Coping in Global Financial System? The Political
Economy of Non-payment in Russia”, Review of International Political Economy, 2004,
5:11; “Asian Tigers, Russian Bear and… International Vets? An Excursion in the 1997-98
Financial Crises”, Competition and Change, 2002, 6:3; “Globalization and Post-Soviet
Capitalism: Internalising Neo-liberalism in Russia”, in S. Soederberg et al (eds.), Internalising
Globalization: The Rise of Neo-liberalism and the Decline of National Varieties of
Capitalism? Palgrave, 2005; “A Friend in Need or a Friend in Need? Russia and the Belarusian
Economy”, in A. Lewis (ed.), The EU and Belarus, London: Federal Rust for Education and
Research, 2003. She received her PhD degree from the University of Wales, Aberystwyth, in
2003
Bridget Kendall, MBE has been BBC diplomatic correspondent since 1998. She is based in
London and covers top foreign stories for radio and television news. In the last five years, she
has followed daily diplomatic and military developments from London in the run-up and
aftermath to the recent war in Iraq, the war in Afghanistan, and the NATO intervention in
Yugoslavia. She has reported from the ground during the military crises in Macedonia and
Chechnya and is a regular presenter for the BBC’s flagship interactive programme Talking
Point. Ms Kendall has made several long documentaries for BBC television, including profiles
of Vladimir Putin, Boris Yeltsin and Mikhail Gorbachev. She recently completed a five-part
radio series for the BBC about daily life today in Russian rural regions, the Far North and
Siberia. Ms Kendall has received many awards for journalism, including the James Cameron
Award for distinguished journalism and the Voice of the Listener and Viewer’s Radio Award.
In 2003, she was the Roskill Lecturer of Churchill College, Cambridge.
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Dr. Vadim Malkin was appointed Director General in 2003 when Russian Axis was founded.
Vadim was educated at the Russian state film-school and has a PhD degree in Sociology from
the Institute of Social Studies of the Russian Academy of Science.
Vadim has worked as a freelance writer for a variety of Russian newspapers and between
1996 and 1997 he worked as an analyst researching the Russian media-audience for Russian
Research, the first Russian media-measuring firm. In 1997 Vadim joined the Moscow office of
Burson-Marsteller, advising the World Bank as an information coordinator and, later, as a
project director on its World Bank funded public education campaigns aiming to promote the
rule-of-law and market economy in Russia.
Vadim was Editor-in-Chief of Federal News Agency in 1999 and the following year was
appointed Information Director of the National News Service "Strana.Ru", where he was
responsible for the news department and the national regional and international
correspondents’ network. He also managed Strana.ru’s special projects such as providing
international audiences with up-to-date information on the submarine “Kursk” lifting
operation. In 2001 Vadim organised and chaired the first on-line interview with Russia’s
President Putin, which has been held by Strana.ru, Gazeta.ru and the BBC.
In 2002 Vadim established JSC “Strategic Communications Agency” specialising in public
relations, media-management and political consulting. JSC acted as advisers to the Russian
liberal party “Yabloko” in the 2003 parliamentary elections in Russia.
Paul Melling is the founding partner of Baker & McKenzie's Moscow office, having opened
that office in January 1989 and having been resident in Moscow ever since. He is also currently
the Managing Partner of Baker & McKenzie Moscow and a member of his firm's CIS
Management Committee. He graduated from Oxford University in 1978 and joined Baker &
McKenzie in London in February 1980 as a member of the firm's East-West Trade department,
specialising in the COMECON countries of Eastern Europe and particularly the USSR. From
1982 until his move to Moscow in 1989 Mr. Melling was a Faculty Member of the Centre for
the Study of Socialist Legal Systems at University College London and a Visiting Scholar at the
Institute of State and Law in Moscow. Mr. Melling had made over 50 business visits to the
USSR before taking up residence in Moscow. Mr. Melling specialises in corporate and
commercial law, with particular emphasis on the pharmaceuticals/healthcare and information
technology industries. He has been the Honorary Legal Adviser to the British Ambassador in
Moscow since 1990 and is also legal adviser to ECGD, the British Council and the BBC (among
others). He is a member of the Advisory Council of the Russo-British Chamber of Commerce
and a member of the Steering Committee of the Russia Partnership, a joint venture of the
Prince of Wales International Business Leaders Forum dedicated to issues of corporate social
responsibility in the Russian Federation. He is also a Board member of and Honorary Legal
Adviser to the Association of International Pharmaceutical Manufacturers in Moscow, positions
he has held since the establishment of that Association over 10 years ago. Mr. Melling
features prominently in the Russia chapters of European Legal 500, Global Counsel 3000 and
Chambers Global Guide - World's Leading Lawyers. He speaks Russian fluently.
Dr. Thomas Gomart is the head of the Russian/CIS programme at The French Institute of
International Relations (IFRI). He has gathered diverse experience as the Lavoisier Fellow at the
State Institute for International Relations in Moscow, as a Visiting Fellow at the Institute for
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Security Studies in Paris and as the Marie Curie Fellow at the Department of War Studies at
King’s College, London. Dr. Gomart currently teaches at the Military School of Saint-Cyr and
has published such books as, "Enlargement Tests the Partnership Between The EU & Russia",
Defence Academy of the UK, CSRC, (2004); "Les trois enjeux du partenariat entre l’Union
européenne et la Russie", Politique étrangère, (2004); "Putin’s Russia : Towards A New
Combination Of Military And Foreign Policies", World Defence Systems, (2004) and
"Vladimir Poutine ou les avatars de la politique étrangère russe", Politique étrangère,
(2003).
Dr. Gabor Beszterczey is the Director of External Affairs of the Moscow-based New Eurasia
Foundation. Dr. Berscterczey was sent from the Eurasia Foundation’s Washington DC office to
help set up the first US-European-Russian joint initiative for developing civil society projects in
Russia and creating new channels of communications between Russian and the outside world.
Gabor has worked in the past ten years in South America, the US, UK and now in Russia.
Previously, he worked for Hungarian public television as a producer/director. His PhD centred
on the BBC and reinventing public television in Europe.
ENDS
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