Publication: Eurasia Daily Monitor Volume: 4 Issue: 25

Russian President Vladimir Putin obviously enjoyed this year’s installment of his annual press conference. Held on February 1, the 2007 session set a new record of three and a half hours and included 69 questions. The crowd of 1,232 journalists was eager to play along, so Putin had few problems responding to their “improvised” questions (Kommersant, February 2).

He treated foreign policy matters very carefully, supplying no more than a few newsworthy points: one was the promise of an “asymmetric answer” to the U.S. deployment of anti-missile systems in the Czech Republic, and the other was describing the recent Iranian initiative for creating a “gas OPEC” as “interesting” (Newsru, February 1). Putin had greater enthusiasm for questions on economic matters, instantly supplying amazing amounts of detail. Most of his 14-minute introductory speech focused on economic achievements.

The only theme where a persistent “attack” from several journalists cast a shadow over Putin’s glowing performance was the succession of power scheduled for spring 2008. For all intents and purposes this annual press conference was Putin’s last. Putin ordered the media to cut the commotion around the event, since “Everyone who should be is already working as high state officials” (Vremya novostei, February 2). He emphasized that there would not be one designated successor, but instead candidates who would compete in elections, and that he, as a citizen, could express his preference but only during the election campaign. That ambiguity may indicate that he intends to preserve the power of choice for as long as possible, accepting the risk of escalating infighting between competing bureaucratic clans (Ezhednevny zhurnal, February 2).

Putin’s primary message was that the country was on the right track. Thus, after the cycle of parliamentary-presidential elections, “All the branches of power will recognize their responsibilities to the Russian people” and consolidate on the basis of the pre-set course. Putin strongly implied that there is no need for any significant economic corrections, since the model of a market-driven but state-controlled economy has proven its efficiency. Most economists agree that in 2007 economic growth will continue at the impressive rate of 6.0-6.2% (Russia had 6.7% growth in 2006 and 6.5% in 2005), but there are serious doubts about whether the “good times” would keep rolling through the second half of the decade. As Yevgeny Yasin points out, the entirely predicable shortage of qualified labor will undercut the promised “economic miracle” (Ekho Moskvy, January 30).

The gradual drop of oil prices from the peak of $75 per barrel to the plateau of $50-55 will also affect Russia’s growth. While the most impressive boom in 2006 was registered in trade and construction, these sectors are clearly driven by the re-distribution of the colossal “oil rent” and will be the first to shrink on that price plateau, which is a full 25% lower that the level of oil prices used as the basis of the 2007 state budget (Expert, February 5). While the investments in the economy in 2006 expanded by a record 13.5% (compared with 10.7% in 2005), they did not come close to the level of 20% considered necessary for stable growth and remained entirely inadequate for the badly overdue modernization of major assets, especially basic infrastructure (Kommersant, January 30). Russia is entering a period of declining growth, and that is a reality Putin refuses to acknowledge, as he continues to reiterate the guidelines for “doubling the GDP.”

This declining growth is not problematic in itself, and the Russian economy has accumulated sufficient reserves to withstand the effect of flat oil prices, but politics is a different matter. The political class has quickly adjusted to the bonanza of abundant “petro-rubles” and popular demands are rising for more generous financial disbursements. Putin himself has had to acknowledge that the widening gap between rich and poor was one of the shortcomings of his presidency, implicitly admitting that cutting social support programs when energy prices fall was not an option. His “national projects” amount only to a package of palliative measures, while the postponed reforms of the pension system, communal housing, and the energy sector set a perfect trap for a new leader who will not be able to buy his way out of these problems.

To all appearances, First Deputy Prime Minister Dmitry Medvedev is eager to step into this trap and to pin his presidential bid on the same topic of economic boom, which he exploited to the maximum at the recent World Economic Forum in Davos (Nezavisimaya gazeta, January 29, see EDM, January 28). As a seasoned apparatchik he should know, however, that the presidential elections will involve two rounds; first the “heavyweights” in Putin’s court cast their votes, only then will everybody else be allowed to confirm that choice. They are not going to be impressed with the “facts” that inflation has dropped to single digits, particularly since the everyday experiences of Russian households reveal the much faster growth of prices. Their main criterion is the attitude to the “enemies of the state,” and it is exactly this question that Putin found difficult to answer. He mumbled something about the “runaway oligarchs,” reproached the journalists who sought to diminish Russia’s achievements, and asserted that former spy Alexander Litvinenko was too insignificant to be targeted in a serious “special operation” (Gazeta.ru, February 2). The real answer is certainly different, and the “enemies” will soon be identified among those who make wrong choices in the first round. Putin may fancy a graceful exit from the Kremlin gates, but if a split decision would necessitate a continuation of his “reign,” he would have to accept the verdict. No reporter dared to ask the question about a third term — but it is still open.