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Russia Post March 2012: A Prognosis

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Ending years of speculation, Prime Minister Vladimir Putin announced in September that he intends to run for the Presidency of Russia in the elections scheduled for March 2012. During the last three years Putin and President Medvedev have ruled together in what has been described as a ‘tandem’ with few policy disagreements between them, although there has been an occasional divergence of views, with Medvedev perceived to be more committed to modernisation. Putin’s unilateral proposal to allow Medvedev to lead the United Russia Party candidate list for Parliamentary elections in December and the decision to swap places with Medvedev indicates Putin’s enduring power throughout this period. It is also a reward for Medvedev for his allegiance and ability to function in the team.

The road ahead for Medvedev will be a difficult one since the Prime Minister is responsible for implementing economic reforms which may include unpopular budget cuts in the public sector and long delayed pension and tax reforms. Contenders for the post of the Prime Minister are many and already discontentment has risen within the Siloviki or the elite with Russia’s best performing Finance Minister Kudrin having put in his papers.

The big question is what are the implications of Putin re-occupying the Kremlin not just for Russia but also for the world? With his 2012 election victory a foregone conclusion, Putin may go on to serve two consecutive six year terms, which will take his total years in the presidential office to 20 years; two more than Brezhnev and next only to Stalin.1

In the run up to this decision many analysts had deliberated upon the viability of Medvedev continuing for another term as President in the hope that civil society reforms and the modernization agenda will be given a boost and that the West will continue its rapprochement with Russia. However, Putin’s statement that the swap deal was agreed upon years ago would imply that most of Medvedev’s action agenda had Putin’s blessings and therefore there should not be a major deviation in the new government’s policies.

As has been the case in the past, maintaining security and stability should continue to be the main driving forces behind Putin’s policies. The global financial uncertainty has not spared Russia and putting the economy back on track is an important goal. Russia cannot continue with its over-dependence on hydrocarbon exports. Moreover, rising unemployment and the ever increasing pension bill, high inflation, lack of technological competitiveness of Russian industries, depreciating rouble, growing aspirations of a sizeable middle class, widespread corruption and an underperforming stock market are some of the major problems that need to be tackled.2 In recent times, Putin has called for improving the business climate, providing conditions for fair competition and raising taxes on the rich.3 All of this indicates a continuation of the present modernization policy which is corroborated in Putin’s keynote address at the United Russia Party conference in September 2011.4 Medvedev’s programme now appears distinctively similar to Putin’s Economic Revival of Russia-2020 plan formulated in 2008.5 In fact, Putin’s decision will help in removing any uncertainty about the stability of the political structure and this bodes well for the investment climate, especially when Russia is poised to undertake a massive infrastructure development programme against the backdrop of the Sochi Olympics in 2014 and the soccer World Cup in 2018.

However, civil society and political reforms like the establishment of an independent judiciary and greater press freedom may take a back-seat at a time when the popularity of the ruling United Russia party has taken a hit. At the same time one should not expect a Yukos type redistribution of assets either.

The most interesting part will be Putin’s foreign policy. Global developments may force Russia’s foreign policy to be more accommodative in the future and it will be in its interest to continue with the modernization agenda with Europe and the ‘Reset’ with the US. The impending Euro debt crisis is an opportunity for Russia to establish a pragmatic relationship with the European Union.

One of the key areas of focus in Russia’s foreign policy has been its relationship with the USA. President Obama’s ‘Reset’ programme has brought about a degree of rapprochement especially over issues like granting transit rights for US troops in Afghanistan, WTO negotiations, arms reduction talks and cooperation over Iran. Although a major irritant in the form of the missile defence shield remains, the Reset has had some degree of success. One of the most significant Russia-US corporate deals in recent times, signed in the presence of Putin, has been the Exxon-Rosneft agreement on extracting hydrocarbons from Russia’s Arctic.6 Although Putin has been suspicious of the West in the past, the fact remains that the Reset with the US and rapprochement with Europe could not have gone ahead without his tacit support. However, it is highly unlikely that Russia will pay any heed to western advice on freeing up the media or ensuring more transparency in domestic affairs.

Similarly, one should expect Russia to selectively develop its relationship with key NATO members like France and Germany. The recent Mistral deal with France and defence contract negotiations with Germany and Italy are an indication in this regard.7 However, there could be major roadblocks over missile defence talks in which Russia is not expected to yield an inch from its stated position8 as well as over Europe’s new energy de-regulation policy which many believe is designed specifically against Gazprom’s monopolistic interests.9

Simultaneously, one can expect Russia to build on and consolidate its ties with China. The recent opening of the ESPO pipeline10 has added a new dimension to the relationship. We may see a convergence of interests between the two especially in areas where Russia perceives that it is being bullied by the West.

Russia has in recent times sought to project itself as a major Asia Pacific power. One of Putin’s major foreign policy initiatives has been a push for the expansion of the Customs Union and creation of a new integrated Eurasian Union comprising of the erstwhile Soviet republics.11 This project is aimed at coordinating the economic and currency policies of its members. Russia may in the future attempt to further increase its influence in the post Soviet space. We may see more Russian forays into Asia, including support for India’s membership in the SCO12, developing relationships with the ASEAN and APEC13, holding quadrilateral framework talks with Afghanistan, Pakistan, Tajikistan and drawing in Mongolia, a state apprehensive of China.

Russia may also take a more hard-line approach on international issues. It has opposed any kind of military action against Syria, Libya and now Iran. And one can look forward to more of Putinesque statements like the “US being a parasite on the world’s economy”.14

Moving on to what it means for India, Russia-India relationship is too institutionalized to be determined by the person in power. Even then, the foundation of their strong partnership in this century can be attributed to Putin who has for long been an advocate of strengthening ties with India. Indeed, India should look forward to developing key military, economic, energy and high technology links with Russia at a time when Russia is looking for partners in all key strategic sectors of its economy. Moreover, Russia’s initiatives in Asia provide an opportunity for India to seek fresh synergies with it in order to balance China’s growing power. However, we should not take our relationship for granted since unlike in the past Russia has now started to frequently engage Pakistan and weapons sales to it are a distinct possibility, more so when India has not selected Russian weapons systems in mega arms deals like the MMRCA tender.

Keywords: Russia
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