Russia has no development strategy - experts
Prominent Russian political scientists speak about the outgoing year and make forecasts for 2006.
Andrei Ryabov, Scholar-in-Residence, Moscow Carnegie Center : "It was a year of success for Putin's foreign policy aimed at strengthening other states' dependence on Russian energy resources. But this trend cannot last.
"The domestic policy is noted for a growing gap between the exhausted stabilization agenda and the need for a development strategy. The country does not have a development strategy in the social area ; nothing practical has been offered except for a plan to increase investment and solve the problems of health care and education in a way that some countries have discarded. In a word, the ongoing reforms are not adjusted to modernization tasks.
"Next year's main irritants may be unwise government decisions in the area of social reforms. The administration's striving to minimize risks and control everything may be a potentially destabilizing factor."
Maxim Dianov, director of the Regional Problems Institute: "Putin is man of the year 2005 and 2006. There is nobody else. In controlling the political and economic situation, the president has to tackle all problems. Mikhail Prusak, the governor of the Novgorod region, once said he had to telephone the federal authorities to get permission to cut grass in his region.
"Since Putin has assumed responsibility for absolutely everything in the country, the blame will gradually shift from the "bad court" to the "bad tsar."
Igor Bunin, head of the Center for Political Technologies: "The president's successor will be determined and the government will be changed next year. Dmitry Medvedev will be the new prime minister and the designated successor of the president."
Vyacheslav Nikonov, president of the Policy foundation : "Russia looked quite good in comparison to a flooded New Orleans, burning suburbs of French cities, and clashes with Arabs on Australian beaches."
Kremlin set to implement new industrial policy
At long last, the Russian business community has received a coherent industrial policy from the state this year. The government is moving to overhaul the economy in line with administrative reform patterns. Each sector has established large state-run holding companies. And it looks like the country's oil, gas and machine-building sectors will be subjected to all-out nationalization next year.
Yuganskneftegaz, the main Yukos production unit, was auctioned off in late December 2004. At that time, experts believed this to be a mere coincidence. In their opinion, that auction was an inevitable consequence of the Kremlin's war against disgraced oligarch Mikhail Khodorkovsky. They were wrong because it heralded the beginning of the most ambitious industrial nationalization program since the October 1917 Bolshevik revolution. Two state-controlled holding companies were set up on the basis of Rosneft and Gazprom.
Interros tried to sell Silovye Mashiny (Power Machines), a major sectoral entity, to Siemens of Germany. However, the Russian government established a .......
..... machine-building holding company in just a few months in order to prevent this from happening.
Rosoboronexport, a state-owned corporation responsible for promoting Russian military and dual-purpose products on the global market, now controls the AvtoVAZ auto factory. This was the last major enterprise to pass into state hands in 2005.
The state has failed miserably in its efforts to manage new assets. Yuganskneftegaz has experienced a 2% recession in 2005, after expanding production for several years, said former presidential economic adviser Andrei Illarionov. Sales volumes have increased by less than 27%, with corporate outlays soaring by 58%.
"Russia's auto industry must receive about $5 billion worth of federal appropriations in order to stay afloat," Boris Aleshin, director of the Federal Agency for Industry and a member of the AvtoVAZ board, recently noted. It appears as though the national industrial policy is being called on to distribute commercial areas of influence between all the main official and unofficial power structures and to ensure national security by ousting any allegedly "undesirable" investor from the market.
Europe cannot help Ukraine in its gas dispute with Russia, expert says
Gazprom is threatening to suspend gas supplies to Ukraine on January 1. In reply, some Ukrainian politicians are threatening to sue Russia in the Stockholm arbitration court. Ulf Franke, Secretary General of the Arbitration Institute of the Stockholm Chamber of Commerce, says that hearing a large-scale and complicated case like this may take at least two years.
Iosif Diskin, Co-Chairman of the National Strategy Council : "The conflict will be resolved by signing a contract between Gazprom and Naftogaz on terms that are favorable for Russia.
"Europe's rhetoric has changed drastically over the last two weeks. Earlier, the issue was seen as purely political, it was about the evil Russia oppressing the most democratic Ukraine ; but now they are simply worried about their own gas supplies.
"In this war of nerves Europe is a poor ally for Ukraine. It has begun to dawn on Kiev that at 10 a.m. on January 1 Russia will start sending only as much gas as has been bought by, say, Slovakia, Austria, Germany, etc. And if one of the addressees does not receive all or part of its order, we can easily prove that it has been stolen."
Boris Nemtsov, Russian ex-Deputy Prime Minister and Aide to the Ukrainian President : "President Yushchenko is ready to pay global prices, but the transition should be gradual. The Kremlin, however, wants it here, now, and as much as possible. Ahead of the parliamentary election, pro-Moscow candidate (Viktor) Yanukovich and his party will be seen exclusively as the Kremlin's agent who together with Putin wants to freeze half of the country."
Vladimir Saprykin, expert of the Alexander Razumkov Center, Ukraine : "There are three possible scenarios : Gazprom will totally suspend gas supplies to Ukraine, preserving exports to Europe ; Gazprom will reduce gas supplies to Ukraine, but provide enough for its social sphere, defense enterprises and non-stop manufacturing ; or the gas supply will be insignificantly reduced. Under every scenario, European countries will sue Gazprom in international and national courts, and Gazprom will call in Ukraine as a third party."
Estonia ceases broadcasting Russian TV channels on January 1
The permanent crisis in Estonian-Russian relations has spread to television. As many as 25 television channels, including the First Baltic Channel, RTR Planet, NTV World, Ren TV, TV Tsentr, etc. may disappear from the two cable networks viewed by over half of the Russian speakers in Tallinn and other regions of the country. So far Russian TV channels have failed to reach an agreement with other networks.
Most probably, the move was caused by the recent crisis in bilateral relations. Russia refused to ratify the border agreement after Estonia had included a clause on its occupation by the Soviet Union. Afterwards the Baltic republic began discussing the possibility of appropriating the neutral waters of the Estonian-Finnish part of the Gulf of Finland so as not to allow Russia to lay the North European gas pipeline through this area.
Estonia is not the first country to refuse Russian TV broadcasting. One of the first to notice the pernicious influence of everything Russian was Saparmurat Niyazov, "father of all Turkmens." He shut down all TV channels and even prohibited people to read Russian newspapers. Then, one after another, almost all CIS member states dropped Russian TV programs. Recently, First Channel stopped broadcasting in Moldova. Even the originally Russian Crimea ceased airing Russian programs this fall, angering the local population.
Some time ago, Baku also began talking of shutting down Russian television. Debates around Russian channels that "interfere with Azerbaijan's domestic affairs" broke out as local opposition was becoming more active ahead of the parliamentary election in November. However, after the ruling party's victory, the talks subsided.
Gazprom's top managers as state capitalism workaholics - Ekspert
"Man of the Year" is a perfect reflection of the period. The past year was noted for the infiltration of state capitalism into political and economic life in Russia. No wonder that the Ekspert business weekly has granted the title "Man of the Year 2005" to two top figures in Gazprom, CEO Alexei Miller and board chairman Dmitry Medvedev.
Two years ago, Roman Abramovich and Mikhail Khodorkovsky shared the honor. It was a time when the results of the 1990s were analyzed and bright individuals dominated Russian business and politics. Today many people say it was a period of decline and plunder in the national economy. If so, why are the assets of the "Men of the Year 2003" becoming the foundation of new strategic state companies in 2005 ? The answer does not matter now, as that time is long past.
Happily, the trend that Prime Minister Mikhail Fradkov symbolized in 2004 has withered away quietly and without much ado, as befits an ineffective project. But it is easy to imagine historians writing in 2015 that "Fradkov's wise pause" laid the foundation for an unprecedented rise in the Russian economy.
Medvedev and Miller signify a new trend in Russia, which will most probably be around for the next five years. It means big projects and investment with huge participation and influence by the state. The administration has at long last decided to make major investments and its domination of the economy is a positive factor. One must admit that the implementation of strategic projects would be impossible without it.
A broad involvement in the economy by the state will have a positive effect on it in the short term, but long-term returns will be ensured only if a representative of the innovative sectors is proclaimed "Man of the Year 2006" (or at least 2009) and if a rabid nationalist does not get the title in 2007.
Unsafe Russian aircraft to be grounded in 2006
In a move that some experts say could ground more than half of the Russian aircraft fleet and thereby kick many small carriers out of the market, the Transportation Ministry is banning all flights not equipped with emergency locator beacons. The ban will start next year.
Minister Igor Levitin said, "This is the last deadline, and we do not want to postpone it, despite pleas from some Russian and Western carriers."
Each aircraft requires two $20,000-to-$30,000 radio beacons to comply with safety requirements, which are probably too expensive for many carriers as only 100 aircraft had been equipped with Cospas-Sarsat systems by 2005. At that point, the Transportation Ministry delayed the deadline for a year but many companies did not comply anyway, equipping only 965 aircraft, or 39% of the 2,477 fleet - mainly the most widely used Tu-154s (Careless), Tu-134s (Crusty), Il-86s (Camber), and An-24s (Coke), ministry officials said.
Lev Koshlyakov, deputy CEO of national flagship carrier Aeroflot, reported full compliance recently.
While things do not look too bad for airliners, operators of rotary-wing aircraft are going to have problems early next year as only 96 of 673 operational Mi-8 (Hip) utility helicopters are duly equipped, and of 27 operational Mi-26T (Halo) heavy-lifters (the Halo is the workhorse of energy and pipeline industry) only seven have the necessary beacons.
While Gazpromavia, a member of the Russian Top 10 list of air carriers, said their rotary-wing fleet (which includes 44 Mi-8s) was ready to comply - the only non-compliant Ka-26 (Hoodlum), the company said, was pending relevant documents from the producer. No 1 Russian helicopter operator UTAir refused to comment. UTAir operates 142 Mi-8s and 19 Mi-26Ts.