(Eurasia Daily Monitor) Discussions about Russia’s future at the World Economic Forum (WEF) are traditionally prompted by the interests of potential investors rather than ambitions of its leaders. And this year, investor attention toward Russia was awakened by the demonstrated infirmity of its political order. President Vladimir Putin had opted not to travel to Davos. But Prime Minister Dmitry Medvedev was so eager to prove his relevance that several plane-loads of Russian bureaucrats, entrepreneurs and commentators were delivered to the Swiss Alps (Vedomosti, January 23). What made Medvedev’s task of selling himself yet again as a champion of “modernization” tougher than ever was the theme of his session where he had to evaluate three scenarios, none of which envisaged steady growth driven by state-directed investment in “innovations” (Kommersant, January 24). The prime minister tried to find an easy way out by inventing his own scenario of a breakthrough in the high-tech sector and a blossoming of Russia’s agricultural business, but he was so pedestrian in his fantasies that more than a few from the audience escaped for refreshments (RBC Daily, January 24).
A major part of Medvedev’s problem is that the official plans for 2013 and beyond, which he was obliged to defend, depart further and further from reality as economic growth slackens and Russia’s “locomotive” industries decelerate to stagnation (Nezavisimaya Gazeta, January 25). Many in his government are ready to acknowledge the need to correct the target figures and even to advance the stalled reforms—first of all by privatizing state corporations, but also reducing “red tape” that ties up all spheres of economic activity. Putin also feels that his instructions on ensuring steady growth are not coming true, but he is less and less inclined to listen to liberal economists and turns to traditionalists who advocate all-penetrating state control while praising his “manual management” (Gazeta.ru, January 23). These “anti-capitalist” prescriptions fit better with the ambition to revive Russia’s defense-industrial complex by executing a colossal rearmament program, which Putin has made the central enterprise of his third presidential term.
This priority inevitably clashes with the interests of energy business stake-holders, who are increasingly irritated with the demands to boost their contribution to financing the wasteful defense programs. Putin used to hold their preferences close to heart, but now he is disappointed in Gazprom’s poor performance in the crucial European market and anxious about using the petro-profits for rescuing his presidency. The bosses of oil and gas companies are reluctantly aware of the shifts in the energy market that were examined in depth in one of the Davos scenarios envisaging the shrinking of revenues inflow, and seek to maximize their cash stocks and asset holdings before the profit margins disappear. This divergence of overly far-fetched goals makes Russia more vulnerable to the volatility of the energy markets than simple price oscillation would suggest. Moreover, it justifies George Soros’ dry verdict on Russia’s “sinking economy,” which is being “taken in the wrong direction by Putin” (Forbes.ru, January 25).
One particular goal of coming to Davos in great numbers was to demonstrate the “unshakeable” unity of Putin’s elites, so Medvedev spoke on the same panel with former Finance Minister Alexei Kudrin, whom he angrily dismissed from the government in September 2011, and Arkady Dvorkovich, who presently leads the liberals in the government—and they debated with German Gref, who [...]