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The non-parliamentary party enjoyed just occasional victories. Specifically, the Agrarian party passed the barrier in Kalmykiya and Yakutiya (while a very strong party list in Altay krai was dumped); the Patriots of Russia were equally relatively victorious in Yaroslavl oblast. As for democrats, Yabloko did not run anywhere, while URF lost in Ivanovo oblast by winning just 3% of the vote.

Overall, the parties performance at the regional elections in March are quite predictable - the parties with a certain background performed according to their nationwide dynamics, while the Fair Russia faced understandable challenges with self-identification, as well as resources and the right to run (as the last election cycle showed, Mr. Mironov is no longer capable or willing to protect his party fellows from criminal proceedings or dumping).

March 2008 largely was a month of rumors of forthcoming reshuffles or twists in ideology, but it failed to supply serious information worth analysis. In this regard, it is worth noting Mr. Putins remarkable comments at the press-conference following his meeting with M-me A. Merkel (who met both with the incumbent president and president-elect), Impression is that some partners cant wait my powers being over, to start dealing with another person I am used to being labeled hard-to-talk-to ex-KGB agent. Dmitry Medvedev will be free from the necessity to prove his liberal views. But he is no less a Russian nationalist - in a good sense - than I am. I dont think our partners will find it easier to deal with him. Definitely, he is very patriotic and will defend the interests of the Russian Federation at international level in a most active way.

It seems Mr. Putins first statement which highlights on his clear doubts of the successor. One can hear jealousy, as many expect Mr. Medvedev to launch some kind of Thaw, which, regardless of its volume, would mean a psychologically complex confession that something had gone wrong; there also is some kind of dubious commercial hue heard in the statement, as the Russian elite are not used to label themselves as Russian nationalists Mr. Putin had never tagged himself like this before, nor such terminology pleases his Western colleagues ears, which Mr. Putin cannot help guessing.

In the end of the month, Mr. Medvedev was interviewed by FT. Speaking of his policy priorities, he vowed to maintain economic stability, to develop economic freedoms, to promote social programs and to ensure that Russia sustains its position in the world. As concerns urgent economic issues, he focused on the state price regulation and claimed it was quite insignificant (one cannot help agreeing with the presidentelect). Once asked of establishment of new public corporations and expansion of old ones, he noted they were created for a certain period of time and consequently would be modified (they will be privatized or liquidated, he was quoted verbatim as saying) and referenced, albeit ambiguously, international experiences, because of the financial crisis, the US, UK and Switzerland undertook measures on nationalization per se a series of companies6. Problems of solidification of the judicial system and fighting corruption formed the core issues of the interview. Mr. Medvedev once again fell short of saying anything illuminative on the former issue, except for noting that it was because of the judicial systems independence of government and respect he paid to it, he could not interfere in M. Khodorkovskys case. The interviewers referred to the opinion by Mr. Cherkasov, the head of the State Anti-Narcotics Agency that representatives At the December 2007 election, his party got less than 100,000 votes, while in January he collected over 2m of signatures which makes him a perfectly legitimate presidential candidate Bashkortostan, Ingoiushetiya, Kalmykiya, Yakutiya, Altay krai, Amur, Ivanovo, Rostov, Sverdlovsk, Ulyanovsk, and Yaroslavl oblasts We are unaware of such cases of special forces fight each other to get access to the nations wealth, and Mr. Medvedev assured them that if such cases had taken place, dire consequences would befall on those to blame.

In conjunction with a possible dvoevlastiye, the provisional allocation of functions between the president and would-be prime-minister Putin and an alleged nationalism of both, president elect was asked a series of provocative questions about Mr. Putin. As concerns nationalism, Mr. Medvedev dodged the issue by noting that it is observance with the national interests that matters, and representatives of all ideologies should stand united in this regard. As concerns Mr. Putin, president-elect noted that, The incumbent president is an effective leader and hes ready and able to continue to work to advance the development of our country, to make sure our development continues in the way set out eight years ago. This is why this tandem, or this team of two, was formed between the presidential candidate and the Russian president as a possible future prime minister. On the other hand, he compared Mr. Putins future function with the role played by former heads of governments in a number of European countries subsequently holding posts of vice premiers or foreign ministers despite their considerable personal popularity, which, if understood literally, does not fully match Mr. Putins vision of his role.

In the political sphere, Mr. Medvedev de-facto fixed the current official doctrine, according to which Russia constitutes a European democratic country, avoiding, at the same time, the two extremes, that is, a blind replication of overseas experiences and an absolute refusal of democracy.

Interestingly, the next United Russias congress is scheduled for the late-April, and some Kremlin sources speculate in the media that Mr. Putin may become the party leader and even form a party government at the congress. It is hard to foretell how the outgoing country leader will operate, for it is well known that such initiatives would be announced before, but Mr. Putin never endorsed them If this time he accepts the proposal, given that United Russia is conceived of as an absolutely manageable by the executive power, this will look like a desire to solidify his own position, rather than the regime. Meanwhile, it would also appear a manifestation of his concern that after Mr. Medvedevs inauguration the power and Mr. Putin would not be identical. If there is no urgent need, politically, it would be most inappropriate for Mr. Putin to deliver such a signal.

In light of the situation with the political opposition and civic freedoms, March was a month of a dynamic equilibrium. Thus, on the election day, M. Reznik, a famous opposition leader, head of Yablokos branch in St. Petersburg was detained in the northern Russian capital. Accused of resisting police, he spent three weeks in custody, after which the court of law ruled to release him under recognisance not to leave. Meanwhile, the European University in St. Petersburg, which had trained observers for the upcoming elections and had been closed by fire inspectors in February, managed to renew its operations in March. Mr. O. Kozlovsky, the leader of the civic anti-conscription movement Oborona, who had been conscribed a few months ago, was released from the army. Meanwhile, Natalia Morar, who had become persona non grata in Russia, attempted to enter the country but failed once again. A few dozens of TNK-BP staff were refused to have their visas extended. This happened against the background of a public campaign against industrial espionage, of which one of them was accused. So, considering even secondary signs, it is too premature to assert whether the regime has become more liberal, or tighter.

On March 21, 2008, the State Duma passed in the second reading the bill On procedures of exercise of foreign investment in economic companies that have strategic importance for ensuring the countrys defense and security. The list of strategic kinds of operations became the epicenter of heated debates. At the end of the day, the list comprised 42 items (nuclear industry, coding and deciphering information and production of the respective equipment, design and production of military equipment, arms and ammunition, space activities and the aircraft industry, provision of communication services, mass media (over 1m copies), geological prospecting and/or prospecting and extraction of minerals at subsoil sites of the federal significance, production of water (biological) resources, provision of services to natural monopolists, to name a few. Now, seeking to acquire more than 50% of a company whose operations are subject to the future Act, a foreign investor should apply to an authorized agency for the respective permit. If the investor has already fallen under control of a foreign state, the respective procedure is employed for any application for acquisition of a 25%plus stake in a company. The controller is granted 3 to 6 months to consider the application, while the final decision is made by a commission led by prime minister (Mr. Putin should become Russias new prime minister as late as in May).

Particularly because in compliance with the Constitution in invariability of which both Mr. Putin and Mr. Medvedev vow, all the powers, including those on which the UR MPs behavior depends, are in Presidents hands.

March 2008 proved that the previous declarations on the need for a dramatic cut in VAT are not that simple to realize. The leadership of the RF Ministry of Economic Development and Trade quite aggressively proposed to cut the VAT rate to 12-13% as early as in 2009. Meanwhile, Mr. A. Kudrin publicly expressed his doubts about accuracy of his colleagues calculations and philosophically noted that he would envisage a long discussion.

Mr. A. Chekalin, who as the First Deputy Minister of Interior of RF was in charge of public security was released from his duties and replaced by Mr. M. Sukhodolsky who had earlier been a Deputy Minister of Interior of RF Real Sector: Trends and Factors O. Izryadnova, I. Kolosnitsyn, A. Surinov In January-February 2008 industrial production index was equal to 106.0%, investments in fixed assets to 120.2%, retail trade turnover - 16.3%. It should be noted that processing industries growth over the period was 107.7%, and of extractive industries 101.1%. Consumer prices index in February 2008 to December 2007 was 103.5% as compared with 102.8% in February 2007.

Macroeconomic situation at the beginning of the current year was formed under the influence of trends that evolved in 2007. Under exceptionally favorable situation at the world markets of minerals and raw materials, it was the dynamic growth of the internal demand that had a determining influence on the structure of the economic growth. In January-February 2008 industrial production index was equal to 106.0%, agriculture production to 104.3%, workload in construction to 130.2%.

Rates acceleration of the internal market development was accompanied with the change in proportions of investment and consumer demand. Increase in investments in fixed assets was 20.2% as compared with 24.2% in January-February 2007, retail trade turnover increasing by 16.3% as compared with 13.9%.

30,23,21,20 18,17,15,8 15,7 15,8 16,15,14,14,14,13,12,12,10,8,6,6 5,4,3,1,I II III IV I II III IV - January February 200 200 6 industrial production workload in construction retail trade turnover Figure 1 Changes in Production Rates by Kinds of Economic Activities in 2006-2008, as percentage to the corresponding period of the previous year Structural shifts in industry occurred against the background of anticipating growth of processing industries as compared with extractive ones, which has been characteristic for the Russian economy over the last three years. In January-February 2008 output growth of processing industries was 7.7%, extractive industries 1.1%, electricity, gas and water production and distribution 7.4%.

7,7,January-February 8 1,4,7,IV 0,4,3,7,III 0,200 4,9,II 6,-5,14,I 4,8,1,IV 2,3 3 3,4,III 2,9 3,4,II 6,2,I 1,% -10 -5 0 5 10 15 Industrial production indices: Minerals extraction Processing industries Electricity, gas and water production Figure 2 Changes in Industrial Production Growth Rates by Kinds of Industries in 2006-2008, as percentage to the corresponding period of the previous year In the environment of investment demand growth positions of machine building have bright prospects in the Russian economy in near-term outlook. In January-February 2008 growth rates acceleration up to 17.2% was registered in machinery and equipment production, and 9.7% - in transport vehicles and equipment production.

The trend for the increase in the output of the railway equipment, for instance, in mainline electric locomotives (by 131.8%), shunting diesel locomotives (141.4%), passenger cars (106.5%) was connected with the growth of demand for rolling and drag-out stock from the joint-stock company Russian Railways and private companies.

As compared with January-February 2007 in January-February 2008 passenger cars production increased by 14.2% and is mainly accounted for by dynamic expansion of production assemblage enterprises. Motorvehicles clusters being created in Kaluga and St Petersburg regions, domestic motor-vehicles production is in the phase of active restoration.

Among the enterprises of machine-building complex reduction in electric, electronic and optic equipment production by 4.7% is a worrying factor, taking into account high demand for this production at connected machine-building enterprises. Analyzing the trends for machine-building development acceleration of machinery and equipment import growth rates as compared with the dynamics of the domestic machinebuilding is also noticeable. According to the data of the Ministry for Economic Development and Trade, the proportion of machine-building in import has increased by 3.7 p.p. as compared with January-February 2007.

Dynamics of production of goods of intermediate demand was positive. The nature of metallurgy, chemistry, wood processing productions operation was defined by the level of external and internal demand.

Metallurgy production and production of finished metal goods in January-February 2008 increased by 6.0%, growth of metallurgy production being 3.4%, and of finished metallurgy goods production 16.7%.

Demand for metal at the internal market was supported by high growth rates of machine-building and construction complexes.

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