Russia: Other Points of View

RUSSIAN FEDERATION WEEKLY SITREP

by Patrick Armstrong

The next phase. Medvedev laid out to the government budget policy for the next three years. The key words are: modernise, competitive, growth, private initiative, innovation, effective, high quality, privatising, transparency, decentralisation. A working group on decentralising power has been set up. Read the speech, don’t read about it. I saw this coming four years ago (Sitrep 20061109: “Putin can name his successor and, one assumes, that if he names only one, that one will be as much in his mould as he can ensure. But that successor will have to confront the task of lifting growth to the next level, making it self-sustaining and not dependent on the world price of oil. The only way to do this is to allow it to happen: the government can encourage, it can create conditions, but it cannot do the lifting itself; only individual Russians can push economic growth to the next level. And here he will run into one of Putin’s legacies, which is Putin’s tendency, when there is a problem, to centralise control into an office next to his. But Russia is too big, too diverse and too untidy to be neatly run from the big corner office in the Kremlin. Putin’s successor will have to start to decentralise or watch Russia’s economic takeoff sag back onto the runway”). All this, Phase II of The Plan, was delayed a year or so by two unexpected events: the war in Ossetia and the international financial crisis.

RUSSIA WEEK: WAITING FOR THE GREEKS

FINANCIAL ANALYSIS

by Chris Weafer

In the US, the Dow and the S&P closed near the session highs with respective gains of 1.2% and 1.3%. Across Asia this morning, most markets have followed that lead with gains in the Nikkei (+1.2%), in Korea (+1.3%) and India (+0.8%). China markets are the odd ones out as investors worry about further tightening. The CSI 300 is down 0.8% at mid session.
 
Commodities are also holding onto gains made in yesterday’s broadly based rally. Copper rose 1.2% yesterday and is up another 0.2% today so far. One-month Brent climbed $2.6 p/bbl by the close yesterday and is holding that with a price of $108.81 p/bbl this morning. WWTI is at $92.79 p/bbl. The US Dept of Energy will release inventory numbers later today and traders hope that this will provide evidence of improving demand as the summer driving season kicks in. The oil price was also boosted at the close on Nymex yesterday after the National Hurricane Center said a weather system in Mexico’s Bay of Campeche might become a tropical depression within 48 hours.

RENAISSANCE CAPITAL CEO ON EMERGING MARKETS, INCLUDING RUSSIA

REPRINTS

Opening Address by  Stephen Jennings

CEO, Renaissance Capital 

Introduction

There are many familiar faces in the audience today and since we saw each other in this hall one year ago the global economic outlook is unfolding largely according to our predictions and, not inconsequentially, according to the business model we at Renaissance have built.

I am referring to the transformation taking place which is global in scale and scope, whereby the traditional financial centers and Western economic model are losing their preeminence, and there is a gravitational shift of business, capital and ideas toward emerging market economies, including Russia.

Economics, politics and geopolitics are being transformed by accelerating global change. Fast-growing economies including Russia are becoming the leaders of the new economic order. Russia is also one of the bridges linking these new super economies.

Look no further than the IMF's recent economic outlook, which predicts that the world economy will grow at about 4½ percent a year in both 2011 and 2012, but with advanced economies growing at only 2½ percent while emerging and developing economies grow at a much higher 6½ percent.

ISLAM, ISLAMISM AND POLITICS IN EURASIA REPORT NO.42, JUNE 2011

By Gordon M Hahn

CONTENTS:

RUSSIA

• ESTIMATE OF THE NUMBER OF JIHADI ATTACKS, JIHADI-RELATED INCIDENTS, AND ATTENDANT CASUALTIES IN THE FIRST QUARTER OF 2011
• U.S. STATE DEPARTMENT OFFER $5 MILLION REWARD FOR INFORMATION LEADING TO CE AMIR UMAROV’S LOCATION
• UMAROV COMMENTS ON BIN LADEN
• UMAROV SETTLES HIS AFFAIRS: ARE HIS DAYS NUMBERED?
• CE QADI ISSUES STATEMENT TO THE MUJAHEDIN
• SELECTED GLOBAL JIHAD TRACTS RECENTLY POSTED BY CE WEBSITES: QUTB, AWLAKI, BIN LADEN, ZAWAHIRI
• CHECHNYA NATIVE LORS DUKAEV (DOUKAEV) SENTENCED IN DENMARK FOR TERRORISM
• TAJIK ISLAMIST DETAINED IN MOSCOW

CENTRAL ASIA by Elena Altman

• TWO SUICIDE BLASTS IN KAZAKHSTAN
• NEW VIDEOS FROM THE ISLAMIC MOVEMENT OF UZBEKISTAN
• HIZB UT-TAHRIR RECRUITS THE POOR AND UNSTABLE IN UZBEKISTAN
• TABLISGH JAMAAT RECRUITER SENTENCED IN TAJIKISTAN

To access the full report, click here Download KAVKAZJIHAD_MonTREP_IIPER_42_June_2011

OIL: US-Saudi-IEA Coordination Can Create Optimum Market Conditions

FINANCIAL ANALYSIS

by Chris Weafer

IEA action hit oil. The main event in the oil market last week was the surprise announcement from the International Energy Agency that member countries would release 60 million barrels from strategic reserves in order to alleviate supply concerns. The net result was a sharp reversal of the oil price with one-month Brent closing Friday at $105.12 p/bbl and WTI ending at $91.16 p/bbl. The sudden oil price drop resulted in a drop of 2.6% for the RTS Index on Thursday and while the equity market did rally with the global trend in emerging markets on Friday (+1.5%) the over $2 p/bbl loss for Brent by Friday’s close will keep investor sentiment at least cautious as the new week starts.
 
The oil and Russia relationship remains close. Given how closely linked, i.e. over the short-term, is investor sentiment towards Russia and the price of crude, where oil trades next week will again be one of the major factors determining where Moscow’s bourses, and the ruble, over the short-term.

U.S. MAINSTREAM MEDIA RESPONSE TO RUSSIA'S ST.PETERSBURG SPEECH

Some waking up, others in denial

By Gordon M. Hahn

Russian President Dmitrii Medvedev’s speech to the St. Petersburg International Economic Forum on June 17^th raised some eyebrows that are normally frowned, since they usually condemn Russia more than other more authoritarian countries such as China, Saudi Arabia, etc.   

Medvedev announced explicitly for the first time that Russia is abandoning “state capitalism” and that he has chosen a system in which “private entrepreneurship and private investment should dominate.”  Noting that Putin’s nationalization of property and centralization of power may have been necessary in response to the chaos caused by perestroika and the post-perestroika years of anarchic and then oligarchic power. Then he added: “Yes, old mistakes were removed, but new ones were added” (“Dmitrii Medvedev vystupil na zasedanii Peterburgskogo mezhdunarodnogo ekonomicheskogo foruma,” 17 June 2011). 

RUSSIAN FEDERATION WEEKLY SITREP

by Patrick Armstrong

Modernisation.  On Friday Medvedev made a speech about modernisation to the St Petersburg Economic Forum. Those who believe that this program has already failed, or that the only question in Russia is the imaginary Medvedev-Putin feud/power struggle won’t be interested but it’s worth reading. Generalities for the most part, but he is the President and he was giving a strategic message. A message we are now familiar with: “Modernisation is the only way to address the many issues before us”; that progress is real but still small: “They are small fruits, but they are there.” As to state control of certain sectors: “I want to state loud and clear here that we are not building state capitalism. Yes, there was a point in our development when we increased the state’s share in the economy, but this was an unavoidable step and in many ways necessary in order to stabilise the situation after the chaos of the 1990s, and re-establish basic order. That avenue has exhausted its potential now… [he describes problems with state control: state interests always dominate, the greater possibility of corruption and poor management] … This economic model jeopardises the country’s future. It is not my choice. My choice is different. Private business and private investment should dominate in the Russian economy. The state must protect the choice and assets of those who consciously decide to risk their money and reputation. We need to give them the right to make mistakes, and opportunities for drive and development.” As to specifics he spoke of more judicial independence and, as ever, corruption. He does understand what must be done as well as how difficult it will be. But he is right – as Belarus is showing – that there is no alternative. And, I again stress that this is the “Putin program” too: there was much use of “modern” in his 2005 and 2007 Federal Assembly addresses; “it’s no longer possible to survive and be competitive without modernisation” (2010). And so on. All part of The Plan.

US-RUSSIA DETENTE?

by Vlad Sobell

When my son was a toddler, he believed that the wind was caused by trees moving their “arms” (that is, branches) and that the wind would stop once the trees kept their “arms” still. The proposition that the recent attempt at US-Russia détente – unnecessarily given the fashionable term “reset” – is driven by the will of President Obama, or even by the “pragmatism” of such minor officials/academics as Michael McFaul, Washington’s next ambassador to Russia, is surely just as childish.

Any adult with an ounce of understanding of history and the basic laws of economics knows that America’s post-war empire has fatally overextended itself and that it needs urgently to adjust its global ambitions in line with the brutal reality of its economic bankruptcy. A state which has managed to run up unsustainable fiscal deficits and sovereign debt and whose political system, moreover, is so dysfunctional that it does not yet understand the seriousness of its condition (never mind being able to begin to deliver a credible way out of the crisis) is not equipped to embark on another Cold War with Russia.

RUSSIAN FEDERATION WEEKLY SITREP

by Patrick Armstrong

Police Reform. According to the Minister, one third of the top police officers did not survive the screening and have been dismissed – 119 of 335. That is not a trivial percentage and to my mind shows the effort is real. The idea was that the senior officers would be vetted by the Presidential Administration and juniors by the seniors – perhaps it would have been smarter to wait until the seniors’ vetting was over before beginning the juniors. But the effort isn’t over yet.

Corruption. It is almost a cliché in certain circles that Medvedev’s struggle against corruption has failed. Readers are invited, however, to consider this account of a successful effort to stop (corrupt) markups in medical equipment prices. That’s not been a failure. And, by the way, as to the other cliché that anti-corruption is Medvedev’s thing (and by implication not Putin’s), here’s Putin three years ago: asked “Which of Russia’s problems have you found the most wearying and difficult to resolve over these last eight years?”, he answered “Corruption”. Same program, different phase.

RUSSIA CORRUPTION WATCH

REPRINTS

Business New Europe

June 14, 2011

CORRUPTION WATCH: President Medvedev replaces three deputy ministers at the Interior Ministry (MVD) -- a strong sign of the substantive nature of much-doubted reform

VTB Capital

News: On Saturday, President Dmitry Medvedev issued a decree replacing three deputy MVD ministers. Former First Deputy Minister Mikhail Sukhodolsky was demoted to the Head of the St Petersburg regional division (former Head Vladislav Piotrovsky was dismissed into retirement), while Deputy Ministers Evgeny Shkolov (Head of Criminal Police) and Alexey Anichin (Head of the MVD Investigations Division) were relieved of their duties with no new appointments announced. 

Their replacements are, respectively, Alexander Gorovoi (First Deputy Minister of the MVD, most recently the Head of Stavropol Krai MVD Division, before which he spent five years heading the Krasnoyarsk Krai Division), Igor Aleshin (Head of the Criminal Police, and most recently Head of Bashkortostan Division) and Valery Kozhokar (Head of the MVD Investigations Division, most recently the Head of the MVD Division for the Central Federal District).

Our View: These are arguably the most significant appointments in the course of the MVD reform which has been underway since it was first initiated by President Medvedev in February 2010, but is still viewed with a certain amount of scepticism by the majority of observers. Today, Vedomosti has referred to Gorovoi and Aleshin as "the two most highly commended regional heads without corruption connections in the Centre [Moscow]," while Kozhokar is a former classmate of President Medvedev and has been rumoured for the job since as long ago as in 2008. Together with Sergey Bulavin and Sergey Gerasimov (appointed to the MVD in February 2010 to lead the charge on the MVD reform) and Viktor Kiryanov (Head of the Transport Police, appointed in January 2011), Saturday's move means that President Medvedev has selected six out of eight deputy MVD ministers; according to our count, around 100 of the 450 top MVD officers subject to confirmation by the President in the process of attestatsiya (certification) have already been replaced.

To us, this looks like visible proof that the MVD reform is going well beyond the renaming of 'militsia' into 'politsia'. As we have written on numerous occasions, Medvedev's attempt to rejuvenate the police force, while being an uphill battle (and therefore taking a long time to implement in full), is likely to be seen as the most telling litmus test of the President's commitment to anti-corruption rhetoric and his effots to contain the abuses of power by the law enforcement agencies. So far, we adjudge the progress to have been more than satisfactory.