16-year rule of Vladimir Putin: the key findings

Author : Volodymyr Inozemtsev

09:57, 13 January 2016

16-year rule of Vladimir Putin: the key findings

Author : Volodymyr Inozemtsev

Russia had all chances to become new China or new Emirates, but it did not happen

09:57, 13 January 2016

Volodymyr Inozemtsev, Center for Post-Industrial Studies, summed up his vision of the 16-year rule of Russian President, RBC.

In the first working days in 2016 the attention of Russians was focused on the dollar rate exchange and oil prices – 77 rubles for 1 USD dollar, and $ 31 per barrel of Brent crude, as for the morning of January 12. These numbers bring more and more despair and disappointment.

You should not assume that this nervousness had no relation to national celebrations. Quite the opposite, it is directly related to one event, which is not a nationwide holiday, - the move of Vladimir Putin to the Kremlin. It had happened 16 years ago, on the New Year eve. Owing to Russian leader’s policy, we became witnesses of oil prices misbalance. His policy has led to the fact that Russia has nothing, except energy.

It is the beginning of the 17th year of Putin’s rule. What does it look like? An average salary, if changed into dollars, corresponds the level of October 2005. GDP in 2016 is close to the figures of 2006 year. In addition, $ 280 bln – this is the outflow of capital during the last three years. The military budget has increased at par value of 7.5 over the years, and in US dollars equivalent - 4.4 times. Bureaucracy has finally turned into the ruling class, and hundreds of new heraldic symbols has appeared. Two wars has been started in recent years. Former countries of the Soviet Union are trying to run away from Russia, which has spoiled the relations with key economic partners.

Standing up?

Do you think that being a head of a state, Vladimir Putin is a fortunate man? He was in luck with the conditions that propelled oil quotations from 28.5 USD. / Bbl. in 2000 to 102 dollars. / bbl. on average for the years 2010-2014 (according to the BP Statistical Review of World Energy 2015). He as a leader has got a rule over people who only wanted to earn money, consume and "get up off their knees". In such circumstances, Russia could turn in the new China or the new Emirates, laying the ground for economic recovery for the next several decades. But what has happened in reality?

Related: Putin: Western sanctions against Russia are “foolish and harmful decision”

Let's start with the simplest, with Putin's "movers of the Russian economy", close to the state corporations. "Gazprom", the big monopoly of the country, led by one of the closest friends of the president for all these years. The company has built (and build) some “impressive” pipes, but at the same time in 2015 it has produced less gas than in 1999: 414 billion against 545 bln cu. m. It is believed that its power is much larger and it is growing now. The only problem is the demand for Russian gas.

During these years "Rosneft" has collected all the possible oil assets - from Yukos to "Itera". It has bought, TNK-BP for $ 55 bln in 2013, but it is now estimated only about $ 34 bln. After many years of hard work Vnesheconombank (VEB) might announce a potential insolvency, and state will have to allocate almost $ 13 bln to save it. "Russian Technologies" is nothing without military orders, depleting the budget.

If you look at the history of the Russian economy in the Putin’s era, it is clear that exclusively non-state sectors has developed: wholesale and retail trade, communications and telecommunications, private banks, construction, commercial services. The state was an economic obstacle.

Infrastructure and superstructure

The next point is infrastructure. The country, which is experiencing a boom (no matter what has caused this boom, even random petrodollars), as a rule, begins to construct highways, high-speed railway lines, bridges, it develops the energy networks. Let us look at China, for example.

It happens everywhere, except Russia. Over 16 years not a single kilometer of a modern railway track was constructed or adapted for high-speed traffic. Roads, which were built in 2014-2015, amounted to some 1.2 thousand km per year, what is 4 times less than in 2000. Highway between Moscow and St. Petersburg is still under construction, as in the late 1990s. According to the data of "Gazprom", the level of gasification of Russian settlements in the past year increased by 0.1% to 65.4%. At this rate, the full gasification will be performed at the beginning of XXII century.

For 16 years, the increase of Russian ports was twice less than the increase in transshipment in the port of Shanghai. Postings transit cargo along the Northern Sea Route in 2014 were lower than in 1999 (130 thousand against 460 thousand tones).

Related: Lithuania urges not to buy energy from Russia and Belarus

Where is the unity of the Russian territory and its convenience to stay? It is a miracle. There are only beautiful promises, every year, similar to the ones that were given earlier. Throughout the years of his stay in power, Putin has promised the country to “double the GDP" and "get rid of the oil needle". It is ridiculous that the first slogan voiced in 2003, and in 2018 we have all the chances to have the same dollar terms of GDP, which have been in the country at the time.

Overcoming the dependence on oil production is illustrated by simple figures: in 1999 the share of oil and gas exports amounted to 39.7%, in 2014 - 69.5%. However, no industrial transformation in Russia has happened: during all the years of Putin’s rule, it remains the only one of the emerging markets, where the growth rate of industrial production lagged behind GDP growth.

Where are those promised refineries, such as "Rosneft" factory in Primorye? Why doesn’t it produce the advanced equipment, medical equipment, medicines, computers or mobile phones? In the majority of these positions, country depends on imports by 70-100%. If our "partners" want to achieve complete collapse of the Russian economy, it is sufficient to prohibit the import of supplies.

High hopes

The results of the "reform" in the social sphere and the work of state agencies responsible for ensuring the normal life of citizens seem to be terrible. A country whose budget is bursting with petrodollars, free health care is almost eliminated. All ratings record landslide decline in the quality of secondary education, and higher education institutions have become factories for the production of people with meaningless diplomas. Even the "calling card" of Putin's Russia - the powerful Ministry of Emergency Situations – is not able save dozens of people caught in snow drifts far from the city of Orsk. Bureaucracy comes together with crime, it is even worth remembering.

Related: Top 10 fakes of the Russian propaganda about Ukraine in 2015
Even in foreign policy, Russia has not anything to boast. I'm not going to talk about Ukraine, which has been turned into an enemy, but it is obvious that Russia’s allies in Central Asia are closer to China, which recently became the main investor in the region. Russia is trying to fence off from the world by sanctions imposed on all sorts of penance, but it does not frighten anyone. Russia began a military operation in Syria, but it has not enough power and money to succeed in this “project”. But do these micromilitarisme theâtrale type of operations like in South Ossetia, are something for which Russia has spent $960 bln or 80% of its nominal GDP in 2015 during the years of Putin's rule?

The most impressive is how rapidly and inevitably begins to fall of imaginary well-being as the contraction of the oil bubble. The Government can not do anything, which led to its slowdown. Three years in a row it freezes the private pension savings, but in fact it is conducting forced borrowing from its own citizens. The Reserve Fund, which the authorities were so proud of, would be wasted in the next year and a half. The first signs of fall in oil prices caused the termination of pension indexation, and, apparently, is not far off drastic cuts in social spending.

Related: Google: Russians are invaders

The country is under control of a person who talks a lot, but is not willing to do anything concrete, and it lasts more than 10 years. Authorities are able only to waste as money, but cannot really deal with the numerous challenges. Watching constantly declining oil futures, the Russian authorities are in a daze of their dreams and hopes.

Related: Ukraine is not the main enemy to Russia… anymore

Related: Peak of economic problems in Russia not over yet, - ex-Finance Minister

Related: There are about 8 thousand Russians in ATO – Ukrainian Intelligence

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