3rd podcast episode: Does Russia’s economy have a hope of modernization under Putin?


Why does Putin’s system prevent the sustainable development of the Russian economy? How can Russian capital become toxic? Why are the countries that Russia keeps under its influence unable to develop? In the 3rd episode of video podcast by the Center for East European Policy Studies (CEEPS) “FOREIGN POLICY. RUSSIA. COMMENTARIES. ” the economist JĀNIS HERMANIS and the politologist ANDIS KUDORS comments.

The Putin’s system as such does not allow for the sustainable development of the Russian economy. This is due to his so-called power vertical, which already limits the development of Russia as a federal state. Events in Khabarovsk show that people are dissatisfied with the functioning of Putin’s system. Dissatisfaction has increased in the regions. So many demonstrations for so many days. It could not emerge in a situation where people are happy about their well-being, – politologist Andis Kudors comments on the situation in Russia.

He points out, that Putin’s system does not work, in part, because it is a system of oligarchs – Putin’s friends, where national projects are often implemented through people close to him, and the innovative component of the economy also lags behind.

When Dmitry Medvedev announced in 2009, that the economy would now be modernized, he mostly talked about the economy, but after a short time it was clear that without political modernization, economic modernization would neither take place. Because Russia does not have an independent judiciary. There is the so-called ‘phone justice’, when higher officials can call judges and determine what the verdict should be. Foreign investors are not sure that they will be able to defend their justice in court, – politologist explains.

Economist Jānis Hermanis points out, – if the power of Russia claims the status of a superpower, then there is no such real precondition in economic terms. Because if you look at high-tech exports or investment in science, research and education, then according to these indicators, Russia lags far behind other OECD countries and does not stand out against other countries at all. Other indicators, such as the Corruption Perceptions Index, also show that Russia is actually at the level of underdeveloped countries.

In fact, the Russian elite is well aware that the energy sector is unsustainable, and things need to be done differently. They try to develop big projects to promote other industries, but in the end this effort is doomed to failure because it is carried out through affiliates rather than through promotion of general business culture. So it is misfortune that the authorities are afraid of losing their influence and are not making use of the country’s full potential. The standard of living of the population is not as high as one would wish in a resource-rich country, – J. Hermanis shares his views.

In addition, finances flow away, sometimes become toxic and do not always have a positive effect on the places where enter. This capital is in fact Russia’s policy instrument, which does not aim to promote the prosperity or economic development of the country, but rather benefits a narrow group of people. The goal is to destabilize or promote dependence on Russian influence. In fact, this capital is a continuation of Russia’s policy, with all its consequences, – Kudors and Hermanis explains.

Speaking about the forecasts for events during Putin’s 4th term, Hermanis draws attention to Belarus, which is “slipping out of Russia’s grip ” and Russia’s geopolitical ambitions to keep it as tight as possible.

It is very peculiar, these countries, which Russia holds in its sphere of influence, they have not made any progress over the years, because mutual cooperation is not aimed at promoting economic reforms, technological development. It is just about maintaining politically loyal satellites, – concludes Hermanis.