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Russia 2012: Mr. Kudrin takes a (semi) stand.

Posted by democratist on April 23, 2011

23rd April 2011,

Some fascinating statements from Russian Finance Minister, Aleksey Kudrin at a meeting of the Board of the Russian Union of Industrialists and Entrepreneurs on 21st April. These have so far received limited coverage in the Russian press, but we have pieced them together from reports in Izvestia and elsewhere.

Kudrin said he considers any GDP growth below 3% as tantamount to stagnation, and 3% -4.5% as “minor, unsteady” growth, because at less than 4.5% growth companies would have no time to update their fixed assets.

He stated the Russian economy is currently growing at about 3% and that investment growth is currently 8% - compared with the 30% annual increase he believes is required for modernization.

While the price of oil has climbed about 30% so far this year to $124 per barrel (auguring a dramatic improvement of Russia’s fiscal situation) Kudrin believes that a further increase in oil prices will have a negative effect on the Russian economy through inflation, and that petrostate model of development “has failed.”

He explained that the government has prepared several hypothetical scenarios for the economy, which include various possible price levels for oil, but in all the scenarios, the growth rate remains the same. He stated,”This is confirmation of the unfortunate fact that the price of oil, which before the crisis was an impetus for growth, is no longer such.”

Kudrin’s position is rather telling when compared with Putin’s statement to the Duma the previous day. Putin stated growth would be 4.2% this year, and much of his speech seemed to consist of assurances to various sectors of society that the state would soon lavish spending on them.

The model reflected in Putin’s speech then could be characterised as “back to 2008.” It is dependent on a continued growth in oil prices (or at least a continuation of the current price), and the distribution of the resultant wealth throughout Russian society in a nation-wide divvying up of the spoils. Despite some lip-service to technocratic modernization, there is little prospect that this is going to take place, leading to both stagnation and a continued withering of Russian industry, not least the high-tech sector, including military innovation.

In this light Putin’s position appears shortsighted – and Kudrin is strongly aligning himself with a liberalising agenda, without (as yet) openly backing Medvedev.

Will he go that far? Or is this just political manoeuvring designed to have a moderating influence on Putin? Either way Kudrin is levering himself into a more influential position which will become more evident and important as we move towards Parliamentary and Presidential elections over the next few months.

Posted in Autocracy and Innovation, Democratization, Hydrocarbons, Liberalism, Russia 2012 Elections, Russian Economy, Russian Liberalization, Russian Politics | 3 Comments »

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.

Posted in Democratization, Elections, FDI, Hydrocarbons, Jasmine Revolution, Russia 2012 Elections, Russian Economy, Russian Politics | 3 Comments »

Azerbaijani Democracy and Europe’s Gas Supplies

Posted by democratist on November 10, 2010

10th November 2010,

Democratist has been disappointed, but not surprised by the conduct of Azerbaijan’s parliamentary elections last Sunday, 7th November.

The results, and the way in which they were obtained, reflect a long, and now deepening tradition of post-Soviet authoritarian rule there. 

As far as we can gauge, all the standard dirty tricks were applied in abundance (media manipulation, voter intimidation, ballot-box stuffing etc.) in what was basically a textbook case of widespread and methodical electoral fraud, with an added dash of nepotism to underscore  just how little the Aliyev clan, buoyant on both the financial and geopolitical advantages of Azerbaijan’s vast oil and gas wealth, is concerned to maintain the facade of democracy for either domestic or international purposes. 

Opposition parties, predictably, took only two of the 125 legislative seats on offer, while the president’s wife, uncle, and indeed his cousin’s husband were all elected easily.

The main message of these polls therefore, was that the regime feels that its current position is so secure that is no longer answerable to anyone; neither its own citizens, nor foreigners. 

But if there are redeeming aspects to this sorry business, they are:

Firstly that, having learned from the fallout from the Azerbaijani Presidential elections in 2008, and despite expectations from many that western organizations such as the OSCE would go easy on the regime, the OSCE Election Observation Mission (EOM) did in fact stand up for the principles it embodies, spoke truth to power, and criticised these elections for the sham they were. 

In the words of the head of mission, Audrey Glover at the 8th November press conference, “Regrettably, our observation of the overall process shows that the conditions necessary for a meaningful democratic election were not established. We are particularly concerned about restrictions of fundamental freedoms, media bias, the dominance of public life by one party, and serious violations on election day.”

This is good news for the West’s somewhat tattered reputation among the Azerbaijani opposition, and for the OSCE’s reputation throughout the region.

Secondly, that both the EU (in the form of an admittedly rather weedy statement from Catherine Ashton) and the US, in a separate comment by U.S. Assistant Secretary of State Philip Crowley, have fully backed the OSCE’s findings.

And therefore it would seem that the EU and US are less willing to put up with the regime’s shenanigans than might have been the case before the 2008 economic crisis.

But perhaps we should not be so surprised, since lower hydrocarbon prices, and the rapidly increasing diversity of Europe’s gas supplies, which are now staring to include the re-export of formerly US-bound Liquid Natural Gas (LNG) cargoes, may well be mean that the Aliyev regime’s international position is no longer as strong as it was.

Posted in Azerbaijan, Democratization, Elections, Electoral Fraud, European Union, Hydrocarbons, OSCE | 1 Comment »

 
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