The other parameters of Putin’s speeches were rather similar to his classic style – lengthy discourse as to how bad everything used to be before Putin himself came to power, and equally lengthy discourse of how good everything became afterwards. It is symbolic that Putin offered no answer to the question concerning the main failures (alongside the successes) of his governance, thus implying that failures were nonexistent.
A considerable part of his speech consisted of a rather vague discussion of the growing independence of courts of justice and ‘the end of the people’s deprivation of political rights”. Some fairy-tale promises were also present (productivity of labor’s fourfold increase by 2020). When speaking of the national economy, Putin voiced his trademark idea of Russia’s innovational development and overcoming its dependency on the raw materials sector. Putin promised that “we are not going to transit toward state capitalism – no way”, and said that the authorities’ strategy was, after several years of their operations, to bring government corporations to IPO on fair conditions, after they became competitive on international markets and increase the degree of their capitalization.
As for D. Medvedev’s speeches, he formulated four main directions and seven goals for Russia, to be focused upon in the next four years. “We must focus our attention on the four “i”s - institutions, infrastructure, innovations, and investments”, he declared. The seven goals to be achieved in these four spheres would be the overcoming of legal nihilism, radical lowering of administrative barriers, diminishing the tax burden, the ruble’s transformation into one of regional reserve currencies, modernization of the transport and power supply infrastructures, creation of the foundation for the national innovative system, and implementation of a program for this country’s social development.
Medvedev’s speech in Krasnoyarsk began with a quotation from Catherine the Great. He said that state policy should build upon the principle of freedom being better than the lack of freedom, and then referred to the Empress’ words: “Freedom – the soul of all – all is dead without you. I want the laws to be abided by, but not the laws of slaves”. It is a curious example of a correlation between a neat quotation and its author – an absolute monarch of more than two centuries ago.
Nevertheless, we are still going to take a more detailed look at some of the promises made by the “successor”. When speaking of law, Medvedev noted that the priority for the next few years will be to ensure the judicial system’s independence of the other branches of authority, humanization of justice, and improved conditions for those kept in the penitentiary system.
In respect of administrative barriers, he suggested that the highest possible number of the existing authorizing procedures should be replaced by advisory ones. Besides, he believed it feasible to eliminate the practice of government officials being members of companies’ boards of directors. Medvedev declared that administrative procedures should be consolidated in the regulations issued for bodies of state authority, and a substantial number of the State’s functions should be transferred to the non-government sector, while the state apparatus itself should be diminished. Corruption was termed “the most severe of the diseases plaguing our society”.
Medvedev spoke against excessive taxation (‘it should collect exactly the amount of taxes to provide for the cost of its functioning”). He promised “a switchover to a single lowered rate of VAT”, as well as to consider “the feasibility of another step – the replacement of VAT by sales tax”, referring to the complexity of the problem of VAT deductions.
When speaking of power engineering, Medvedev promised that in the next two years technical regulations would be adopted, in order to create appropriate incentives for innovations and energy saving; besides, a public company would be established, whose goal would be to ensure road construction “even in a very small village”, as well as citizens’ access to digital technologies and information.
Besides, Medvedev spoke in favor of creating tax incentives for social expenditures – “a part of the taxes on education, health care and pensions must be charged to costs for purposes of levying the profits tax, as well as to be exempt from the single social tax and the personal income tax to a highest possible degree that should also be socially reasonable”, and also a system of continuing education accessible to all. He once again called for single minimum medical care standards to be ensured, and for differentiating the remuneration for the work of physicians and medical organizations. The housing problem, according to Medvedev, could be solved through introducing large-scale individual housing construction (“the share of citizens capa ble of purchasing on the market the housing they need, by using their own savings, mortgage models and with due regard for state support measures, must constitute, by the year 2012, no less than 35 % against the 20 % existing today, and in a longer perspective - to become as high as 60 % - 70 %, that is, equal to the size of a middle class we are aspiring to achieve.”).
When assessing the “successor”’s speech in Krasnoyarsk, one should point to its insufficiently exact character, especially in its legal part, which was considered by many as demonstrative of liberalism. This can be easily illustrated by the discussion of the judicial authority and the penitentiary system. The judicial system presently performs a clearly determined political function. It is not accidental that the judicial vertical, staffed by former procurators, where each judge can be dismissed from his or her post by a group of three judges from a superior – level court, in a vast majority of cases render a judgment of guilt, entailing deprivation of freedom. In this connection, the very wide range of possible degree of punishment create ample opportunities for corruption. Such a system, naturally, cannot be changes only by declarations urging judges not to submit to order given on the telephone when issuing their verdicts. Within the currently existing system any judge displaying this “lack of proper understanding” will at once re removed from his post. Of course, it is not a wrong thing to speak of the need to lower taxes and lift administrative barriers (as it was being done by Putin throughout the whole of his period in power); but the principal problems faced by businesses are associated not with the level of formal taxes but with the informal ones, levied by the oligarchy in power.
Besides, the genre of publicly delivered speeches and program addresses by Russian leaders has been greatly depreciated in recent years, for it is becoming increasingly difficult to understand anything at all about the content of real politics. Thus, at the time when Medvedev is talking of the humanization of justice, a criminal suit is brought against the leader of Movement for Human Rights, L. Ponomarev, who is charged with slander against the director of the Federal Service for the Execution of Punishments1. And when Medvedev was asked a very specific question about the closing-down of the British Council’s office in Russia, it being a purely educational organization, far from getting involved in politics, elections or even human rights movement, he started to talk, quite Putin-style, about spies and how difficult it was to register a not-forprofit organization in the UK. Of course, it can be argued that it would be premature to expect from Medvedev any decisive declarations prior to his entering the office. But it would be even more wrong to interpret in his favor any generalizations or even intonation patterns, seeing in them signs of forthcoming liberalization.
In February Russia found itself at the center of several international incidents. Firstly, the old conflict between Russia and Ukraine in connection with gas transit was exacerbated (until February, no new annual agreement concerning gas supplies to Ukraine and the payment for transit had been signed; besides, Gazprom declared that Ukraine had failed to redeem its last year’s arrears, whose size was being disputed by both parties). There was even an exchange of threats, but in the end V. Putin and Ukrainian President V.
Yushchenko succeeded in negotiating a new schedule of gas supplies, under which Gazprom and Naftogaz were to create two new traders to replace the current supplier of the Central Asian gas to the Ukrainian border, Rosukrenergo (RUE, 50 % of shares held by Gazprom, and 50 % - by nominal holders), as well as the Ukrainian trader – Ukrgazenergo (a joint venture of RUE and Naftogaz). The price of gas for Ukraine remained at the same level of $179.,5, while Gazprom will gain access to the sale of gas to Ukraine’s domestic consumers. Such a scheme could indeed become a reasonable compromise, but its actual implementation is still under threat, because Ukraine and Gazprom have so far failed to agree upon the actual sum of debt settlement.
In February, Kosovo unilaterally declared its independence, which was rtecognized by the USA and the majority of European countries. After the events of 1999, the territory populated by ethnic Albanians had been an international protectorate, while no compromise was achieved with Serbia concerning its status.
Russia, together with some other countries, opposed Kosovo’s independence. As a result, the Kosovo issue once again demonstrated the UNO system’s weakness and the loss of its former function of the world’s arbiter. The issue of Kosovo’s independence was linked by many in Russia to that of recognizing the independence of Abkhazia, Southern Osetia and Transdniestria - the former territories of the USSR that remained loyal to Kremlin. Russia abstained from taking this step, which has to do with a complex set of problems, since nowhere in those territories the ethnic majority is so great as in Kosovo, and it would also be physically difficult to defend these territories in an event of a conflict’s escalation (especially in Transdniestria).
And finally, the currently controversial status of Abkhazia, Southern Osetia and Transdniestria is probably Its director, Yu. Kalinin, was accused by the human rights activist of having created a “system for torture” at his department.
more profitable to many in terms of opportunities for various economic transactions than a status clearly defined in legal terms.
Real Sector: Trends and Factors O. Izryadnova In January 2008 the Federal State Statistics Service made the first estimation for GDP in 2007 and the figures for 2004-2006 were specified. The volume of the GDP was equal to RUR 32998.6 bln and increased in real terms by 8.1% against 7.4% in the previous year. In January 2008 industrial growth index was equal to 104.8%, for the processing industries – to 104.6% and for the minerals extraction – to 100.6%. A certain slow-down of the growth rates in the January of the current year as compared with the corresponding period of the previous year was accounted for by exceptionally high basis of 2007. The beginning of the year is characterized by the sustention of the trends for the dynamic growth of the investments in the fixed assets (119.0%) and retail trade turnover (114.1%).
In January 2008 Federal State Statistics Service made the first estimation of the GDP over 2007 and specified figures for 2004-2006 thanks to the expansion of the information base. GDP growth index in 2006 was equal to 107.4%, exceeding by 0.7 p.p. the figure published earlier.
Favorable combination of the factors of the domestic business activity and the situation at the world market of the raw materials accounted for the high proportion of the gross savings in the GDP. Last seven years the share of the gross savings was in the range of 31.1-34.5% of the GDP against 24.0% in pre-crisis and 38.7% in 2000 (table 1). In 2007 under the influence of the decrease of export share in the GDP, on the one hand, and the increase of the share of households’ expenditures, on the other, the gross national savings was 34.2%.
Òàáëèöà Structure of the GDP Use for Gross Savings and Accumulation in 2000–2007, as percentage to the total 2000 2001 2002 2003 2004 2005 2006 GDP 100 100 100 100 100 100 100 Including:
Gross accumulation 18.7 21.9 20.1 20.8 20.9 20.1 21.3 24.Gross accumulation of the fixed assets 16.9 18.9 17.9 18.4 18.4 17.7 18.4 21.Changes in the stocks of tangible circulating assets 1.8 3.1 2.1 2.4 2.5 2.3 2.9 3.For reference:
Share of investments in the fixed assets in the GDP 15.9 16.8 16.3 16.5 16.8 16.7 17.0 19.* Preliminary data Source: Federal State Statistics Service Strengthening of the influence of the investment component on the dynamics of the economic growth defined specific features of structure of gross national saving use. In 2007 investments in fixed assets growth rates reached the maximum values over the last ten years of 121.1%, figures being 113.7% in 2006 and 109.5% - on average in 2000-2005.
Anticipating growth of the investments in the fixed assets was supported with the intensification of savings to investments in the fixed assets and stocks of tangible circulating assets transformation processes. The share of investments in the fixed assets in the GDP in 2007 was equal to 19.5%, exceeding by 2.5 p.p. the figure of 2006. Whereas in 2000-2001 about 40% of the gross savings was used for the investments in the fixed assets, in 2004-2006 the figure was about 50%, and in 2007 – 57%.
Export earnings growing and investment and credit attractiveness increasing state’s financial strategic reserves expanded. The total volume of the Stabilization Fund’s means was RUR 3849 bln by 01.01.2008 as compared with RUR 2346.9 bln in 2006 and RUR 1237 bln in 2005. In the environment of the steady economic growth the formation of the Stabilization Fund was one of the reasons to make decision to invest a part of incomes earned by export. In 2006 the procedure of Investment Fund formation from the incomes forming Stabilization Fund was defined. The volume of the Investment Fund was RUR 110 bln in 2006 and it increased by RUR 166 bln in 2007. It is planned to allocate RUR 450.0 bln from the Investment Fund for co-financing of investment projects.
Positive dynamics of the final consumption was one of the main factors of internal market development.