Putin’s “Long Decade” Continues Despite Medvedev’s “Modernization”

Last weekend marked the tenth anniversary of Vladimir Putin’s election as Russian president on March 26, 2000, while strictly speaking his “era” started with Boris Yeltsin’s surprise departure from the Kremlin three months earlier –and it certainly did not come to an end with his carefully orchestrated transition to the post of prime minister in May 2008. President, Dmitry Medvedev, is striving to establish his leadership, but mainstream Russian observers are certain that Putin will not release or even share control over executive or political power (Moskovsky Komsomolets, March 25).

Broad support for Putin’s rule –and his approval ratings are still above 70 percent– is secured by trickling down the oil rent that sharply contracted in the second half of 2008, but has stabilized since mid-2009 (www.levada.ru, March 25). There is no reason to expect another surge in oil prices, but the World Bank now predicts a 5.5 percent growth in the Russian economy in 2010, so Putin has taken the risk of insisting on significant increases to pensions, and pushing the federal budget into the red (www.newsru.com, March 25; The New Times, March 22). The need to secure maximum returns from oil and gas export has become acute. Consequently, Putin focuses his attention on the energy business, effectively keeping Medvedev out of this crucial money and power-maker.

The key issue in this business was the gas bargaining with Ukraine last week, as Prime Minister, Nikolai Azarov, traveled to Moscow in order to negotiate a cut in prices, which are high for its struggling economy. He offered, as a major concession, to re-launch the old plan to organize an international consortium for managing and modernizing the Ukrainian gas infrastructure, which would protect Gazprom from any transit troubles (Vedomosti, March 25). Putin confirmed his readiness to reduce prices, but insisted on full payments on the current contract; simultaneously, he enforced a price increase for Belarus, which still pays significantly less for its gas than Ukraine (Kommersant, March 26). Belarus has opted in an unprecedented measure, to take Russia to the economic court of the CIS (RBC Daily, March 26). Ukraine pins its hopes on Medvedev’s visit to Kyiv in May, arguing that rehabilitation of political dialogue cannot be achieved without correcting “unfair” prices (Vremya Novostei, March 26).

Distracting as this maneuvering proves, more serious problems are looming for the Russian gas business in its key European market, and Putin has to tread carefully, knowing that his reputation is not unblemished. Falling demand for Gazprom’s gas makes it imperative to try to reach a market-sharing deal with Qatar, the leading supplier of the cheaper liquidities gas (LNG). Prime Minister, Sheikh Hamad bin Jassim bin Jaber bin Muhammad Al Thani, paid a visit to Moscow last week, but his talks with Putin brought only vague promises to increase mutual ties and energize the gas-exporting countries forum (Kommersant, March 25).

Medvedev wants to correct this heavy emphasis on boosting the oil and gas sector by advocating the idea of encouraging technical innovations, which are not, in his words, “toys for eggheads.” Last week, he visited Khanty-Mansiisk, the capital of the Russian oil industry, and criticized “the conservative nature of the fuel and energy sector, which is supposedly stuck in its role, or is even seen as being part of, or personifying, a paternalistic mindset.” He appointed Deputy Prime Minister, Igor Sechin, a staunch Putin loyalist but not a known friend of Gazprom, to preside over the program for improving energy efficiency, which is a rather ungrateful task (Nezavisimaya Gazeta, March 24).

One part of the problem is the low demand for innovations in the industry, including the energy sector, where cost-efficiency is a marginal concern –and presidential instructions cannot create sufficient stimuli for investing in new technologies (www.newsru.com, March 24). A greater part of the problem, however, is the non-transparent system of awarding contracts to well-connected intermediaries, which are flourishing in Gazprom –and not even Sechin would dare to touch them (Novaya Gazeta, March 22). This structural corruption drives the steady growth of operational costs, and Gazprom insists on increasing domestic prices on gas and electricity. This leads to shocking rises in housing and utility costs, and while Medvedev is demonstrating concern about this “sensitive theme,” his promises to dismiss local officials responsible for setting communal tariffs do not have the desired disciplining effect (Vedomosti, March 25).

Putin’s system of bureaucratic control, based on rent distribution and media-induced social passivity, appears to be solidly resistant to any “modernization,” and the timid intimations for combining technical innovation with political reform seems destined to fall into the category of wishful thinking. Therefore, more surprising is the strong resonance of the open appeal “Putin must go,” which has gathered via the internet some 20,000 signatures in two weeks (http://putinavotstavku.ru/). Debates by respected experts over this unthinkable proposition publicize such “radical” views such as Putin is not so much a decision-maker, but rather an organizational myth of the bureaucratic system of power, so his departure would bring “ugly features of political decay” (The New Times, March 22).

There are already too many features of this within the deeply corrupt ruling class, and each week Russian Internet or Runet, which now has 42 million users and has become a substitute for the suppressed civil society, explodes with a new scandal (Ogonyok, March 22). There is, as always, every kind of opinion in this virtual space, but when the liberal Ekho Moskvy held an interactive opinion poll on the question about Putin’s return to power in 2012, some 90 percent of respondents said “No” (Ekho Moskvy, March 26). This would not impress the supremely confident boss of the United Russia party and the benefactor of Russian geographers, who pays scant attention to the internet. His junior partner is, on the contrary, an ardent surfer, but his readiness to lead the conversation, when the two co-rulers “sit together and decide,” as they have promised, remains in doubt.