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December 02, 2012


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Alexander Mercouris

Dear Gordon,

I have to say that for once I think your comment is way over the top.

There has been a certain softening of economic growth in the fourth quarter, but as I have previously said this is largely explained by the poor harvest and the Central Bank's decision to raise interest rates and limit bank lending. That has happened because as the Central Bank has been at pains to explain, at the present time reducing inflation has the priority over economic growth. I notice that your article makes no reference to inflation, which I find surprising given the Central Bank's repeated statements that it is being given priority. In fact the overall trend in inflation is steadily downwards, though largely because of the poor harvest it will be slightly higher this year than last. For the rest the budget looks like being in surplus when a deficit was expected, manufacturing growth is steady and running at an annualised rate of around 4%, housing construction is strong and the banking system seems to be stronger than before the 2008 crisis from which the economy has recovered well. To talk of a pre crisis situation is fanciful. The very difficult conditions in the international economy pose many problems for the country (as they do for every country) but overall it is coping with them well.

Nor do I see much sign of a government riven by infighting and chaos. There are the usual disputes and disagreements but that is no more than is to be expected We must be careful about treating the occasional crack of the whip by Putin and Medvedev as evidence of crisis. More often than not it is simply the normal conduct of government - in Russia and in every country.

One thing I should say is that I fundamentally disagree that what the country is major structural reform. Firstly such demands overlook the fact that no country has experienced more reform than Russia has done in the last 30 years. Secondly it is never clear to me what these reforms are supposed to be. Thirdly advocates of reform always seem to me to wildly over exaggerate their benefits, which are never instantaneous. What the country needs is hard and focused work on its problems not more disruptive reforms. Talk of reforms simply detracts from this.

As for the corruption scandals, my view is that they have all broken out when they have largely due to coincidence. The fact that action is being taken against corruption is a sign not of crisis but of health. It seems to me that we must again be careful not to let the cliches and stereotypes run away with us. The fact that corruption scandals have come to light and certain important people have been arrested or are being questioned or have been forced to resign is surely a sign that the authorities take corruption seriously as of course they say. Quite apart from anything else it makes no sense to demand of the Russian authorities that they crack down on corruption and then talk luridly of power struggles and crisis when they do.

Lastly I agree that the white ribbon opposition is going nowhere but if you remember I never thought it would be otherwise.

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