MOSCOW – The June 4-6 St. Petersburg International Economic Forum shed a spotlight on Russia’s economic situation, clearly indicating that the Russian leadership is uncertain about the scope of the economic downturn and how to deal with it.
President Dmitry Medvedev’s much anticipated keynote address was a great disappointment. He did the best he could to avoid offering precise assessments of the present and future state of Russia’s economy, instead reiterating the Kremlin’s ambitious old ideas.Medvedev wants Moscow to become an international financial center and make the ruble a world reserve currency. However, despite the fact that these goals further removed from implementation than they were a year ago, the Kremlin is pretending things are just fine.
In contrast to First Deputy Prime Minister Igor Shuvalov, who talked about the need to liberalize the economy at the same forum last year, President Medvedev steered clear of any ideological positioning of his economic policy. Instead the statist trend implicitly prevailed in his presentation.
The St. Petersburg Forum also revealed a dissonance in assessments, if not a cacophony of government voices, regarding the economy’s status and prospects. Unlike such high-placed government officials as Economic Development Minister Elvira Nabiullina and the President’s economic adviser Arkady Dvorkovich, who gave largely optimistic forecasts, Finance Minister Alexei Kudrin – to the contrary – was quite skeptical in his assessments of the current economic crisis and painless ways to sail out of it.
These differences keep breaking through, though, becoming a broad public discussion topic. Recently Kudrin chided Dvorkovich and Nabiullina for suggesting that the state could afford to reduce value-added tax as early as 2011, warning that it might be decades before Russia witnesses economic growth on par with recent years.
The government is clearly concerned over the problems piling up in the country and suggests risky moves to address them, setting dangerous precedents. Thus, when 400 jobless workers blocked the main highway to protest wage arrears in a small town of Pikalyovo, the Leningrad Region, Prime Minister Vladimir Putin rushed there, punished the negligent managers, and ordered the situation rectified. This populist move may augment his popularity, but could encourage further spontaneous protest, fraught with serious law violations. Suffice it to say that there are over 700 such company towns as Pikalyovo in Russia. Putin’s convulsive gesture has in fact demonstrated both Russia’s ineffective legal and judicial system and the government’s profound mistrust of market mechanisms in the economy.
In the meantime, there are those who have benefited from the economic downturn. Prominent oligarch Gennady Timchenko, CEO of Gunvor oil trader and a close associate of Putin, is solidifying his positions. Following a multi-stage deal, he has doubled his share in a large gas company, NOVATEK, and co-owns one of Russia’s largest oil fields – Yuzhnotambeiskoye. According to the expert assessment, “the asset’s price is opaque.” In addition, Timchenko, while remaining a leader among oil and gas traders, is establishing his own industrial holding. He has consolidated nearly 80 percent of the shares of Stroitransgas, an oil and gas pipeline construction market leader.
A new round of property redistribution is expected in Russia’s electric power industry. On the grounds that the present owners of energy companies are ineffective, the Power Ministry is seeking “more affluent investors” for them. The chief player on this field is well-known. It is the government-run Inter RAO Unified Energy Systems, whose board of directors’ head is Deputy Prime Minister Igor Sechin. The money to acquire private power companies is also expected to come from the government. In fact, a new statism of Russia’s power industry and a radical review of the results of its reform initiated in the early 2000s by Anatoly Chubais is the case in point.