Democratist

Democracy. Russia. CIS.

Russia: FDI and the forthcoming elections.

Posted by democratist on February 18, 2011

18th February 2011,

Democratist was fascinated by Russian Finance Minister Alexei Kudrin’s speech in Krasnoyarsk yesterday.

According to Kudrin FDI into Russia fell to  $12-14 billion last year, the third successive year of decline since 2008.

“Direct foreign investment was one and a half times lower,” Kudrin said, “This is not much. In the best years it reached $27 billion.”

And he also stated that this has had a negative impact on President Medvedev’s “modernization” effort, and is holding back economic growth. “We will see in the coming years a stable growth of around 4% and above. However for Russia this – the level of a mid-ranking economy – is insufficient,” he said. “We need a significantly higher growth rate of 6-7%.”

For Democratist’s perspective, what is most interesting about these figures is that they cover the period before last December’s release of embarrassing Wikileaks cables which described Russia as “a virtual mafia state.”

Given the near-continuous (and frankly mostly warranted) bad press the Russians have been suffering over the past several months, it seems very unlikely that the much hoped-for Western FDI flows into Russia will recover any time soon.

So, what are the most likely effects of  continually declining FDI on Russian politics? Will Russia, as Kudrin (rather unexpectedly) suggested, decide to hold free and fair elections later this year, and in 2012 as part of a strategy for future liberalization?

Alas, this is unlikely. The nomenklatura has an intrenched fear of “instability.” Giving power away in any meaningful sense is largely anathema for Putin and his former KGB pals, regardless of the lessons that recent developments in Tunisia and Egypt may imply. Their main medium-term hope remains a (continued) rise in raw materials prices.

So while there may be some measured liberalization in the parliamentary polls set to take place in December, Democratist continues to maintain that the regime will probably try to leverage the Presidential elections due in 2012 as method for winning increased international legitimacy by enhancing the (not so far especially successful) illusion of Russia’s “democratic development” through a poll that apparently offers more political competition than was the case in recent years, but in reality whose parameters have been carefully determined in advance.

While the exact form this contest will take may be beyond even our predictive powers, Democratist continues to feel that the obvious choice will be a superficial competition between an emphasis on ”stability” or “modernization”; between Putin or Medvedev.

3 Responses to “Russia: FDI and the forthcoming elections.”

  1. [...] Russia: FDI and the forthcoming elections. « Democratist [...]

  2. [...] an ongoing lack of FDI and reluctance to the introduction of the political and economic reforms required for a more [...]

  3. [...] an ongoing lack of FDI and reluctance to the introduction of the political and economic reforms required for a more [...]

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