When asked about the effects of the French revolution, Zhou Enlai is famously supposed to have said: “It is too early to tell.” After only 15 years, post-communist Russia is still near the start of a film which clearly has a long time to run. Official and editorial commentary from the west takes the form of criticism and exhortation—the attitude of an improving, sometimes despairing, schoolmaster. Recently Russia has had an exceptionally bad press. The expulsion of “illegal” Georgian and other trans-Caucasian, central Asian and Chinese immigrants, the unexplained murders of Anna Politkovskaya and Alexander Litvinenko, the interruption of oil supplies to Belarus, the forced sale to Gazprom of a controlling stake in Royal Dutch Shell’s Sakhalin-II project have all been pilloried. These incidents follow a long period of attrition of fledgling democratic institutions and civil society, and the brutal war in Chechnya. Like naughty schoolboys, Russians react to western sermons with a defensive truculence (”double standards”) or by changing the subject. Rather than continue this sterile tit for tat, it is more useful to try to understand the structural features of the Russian system that stop Russia doing what the west wants it to do. Two of these stand out: first, the domination of its economy by a monopolised energy sector; second, the fusion of power and property. These two features together have created Putin’s system. They are a product both of Russia’s history and geography and the way the transition to post-communism was handled in the 1990s. They shed light on the three questions of most interest about Russia today. How solid is its economy? How solid is its political system? And is it a “reliable partner”?
How solid is Russia’s economy?
As we know, the Russian economy suffered a severe collapse between 1990 and 1996. Official GDP fell by 50 per cent. The average standard of living probably fell by much less, but there was a big increase in inequality and in absolute poverty. Growth started in 1997, but there was another collapse following the rouble crisis of 1998. Since 1999, the economy has been growing at an annual average rate of 6.7 per cent. Russia is now the tenth largest economy in the world, and its income per head has doubled since 1999 to around $12,000, about the same as Chile’s. The stock market has been doing even better: 2006 was the fourth year in which it notched up returns of over 50 per cent. Russia runs big annual budget surpluses, it has almost no foreign debt, and has the largest foreign exchange reserves outside Asia. No wonder investors love Putin.
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