#17 - JRL 9146 - JRL Home
Date: Wed, 11 May 2005
From: James Beadle <jamesdbeadle@yahoo.co.uk>
Subject: An opportunity to enter the 21st century
The western press has likened George Bush’s travel recent itinerary (Riga – Moscow – Tbilisi) to Putin stopping in Cuba on his way to Washington, then in North Korea on his way home. Fortunately, the Russian president has shown a greater level of sensitivity, and not taken the bait to spark what could have easily become a diplomatic crisis.
The circumstance is indicative of the international press’s success isolating Russia recently. Diligent reporters have almost gleefully grabbed every opportunity to question the country’s political, judicial and commercial actions. Such attentive policing is necessary, but should also be measured. It can no longer be questioned that the post-soviet world is turning a new page, and there are real signs that Russia is as keen to embrace the future as its neighbours.
Whether it manages to or not – and there are of course enormous obstacles to its doing so – the world’s largest nation deserves a chance to try. Going forward, it would be nice to see the press cut Putin a little slack and evaluate his behaviour relative to the situation in Russia, rather than to their own lofty ideals.
How, then, might the administration manage the enormous challenges of moving Russia forward, and convincing those around it – neighbours, intergovernmental organisations, businesses, investors and the press – of its intention.
Drawing a line on the past is a big start. Putin must swiftly drive through the legislative changes promised in his state of the nation speech. Clearly it will take some time for domestic and foreign players to believe that the tax police have been leashed, and that privatisation laws are water-tight, but the sooner the process starts the better.
The fates of Yukos and Khodorkovsky must also be determined, and here the Kremlin faces a great challenge. From the outset it has encouraged the investment community to let these prize assets go, but with limited success. Today both represent unfortunate tests of the Kremlin’s commitment to moving forward. An acquittal and decisive action to protect the remainder of Yukos as a going concern would be best.
Such outcomes are possible, given the recent indications that Putin understands that forward stability requires a degree of amnesty for legal but morally dubious historical practises. However, neither is likely. Khodorkovsky himself cannot harbour more than the faintest hope that he will be out before the 2008 election. Most likely, these interconnected issues represent upcoming downside shocks. True, the equity market is prepared for worst case results, but broader business confidence will still be hurt by such conclusions.
The EU-Russian treaty, approved yesterday, is another big positive step toward a modern Russia. Most importantly, it reflects Europe’s faith in the Putin administration and willingness to work through problematic issues. However, the treaty’s content simply outlines once more the hurdles that are by now well acknowledged. Its success, like that of Russia, depends on Putin’s ability to re-establish a legacy of progress in Russia.
Russia and the world need Putin to implement a decisive strategy over the remaining three years of his presidency. A prudent economic policy would further cut poverty, raising the average quality of life, while containing inflationary pressure and diversifying the economy away from oil and gas revenues.
Challenging as this may seem, not least with a Prime Minister whose grasp of basic economics is questionable, it is not impossible. The goal remains achievable if the Cabinet can be patient enough to clean its own image among the investment community. If the finance and economics ministries get the sufficient support, they have the ability to deliver.
Freeing Russia from corrupted, soviet and post-soviet power groups will be a greater challenge, but one at least as important as establishing a path of sustainable growth. Can the military be reigned in? Putin has long promised and equally long procrastinated over reforming Russia’s bloated, ill-disciplined army. The case for a smaller, better equipped and more flexible force is undeniable, the question as to how the military would respond to such a downsizing is less certain.
Accountability is an issue in the Russia’s army, but no more so than among its police force, politicians and civil service. Russia continues to operate a soviet-style big government, one that increasingly depends on oil revenues.
Putin has excellently positioned himself to take Russia into the future. The challenge of doing so is enormous, but he is showing increasing willingness to learn. In a rapidly changing region, this recently embattled president is being given a final chance to prove himself.
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