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Russia Report: August 6, 2003

6 August 2003, Volume 3, Number 31
By Robert Coalson

In his state-of-the-nation address to the Federal Assembly on 16 May, President Vladimir Putin laid out three ambitious goals as the country's top development priorities. "I believe that doubling the gross domestic product, overcoming poverty, and modernizing the armed forces are among our most important objectives," Putin said. He called on political leaders and the entire country "to mobilize intellectually, to draw up common approaches, and to coordinate specific plans."

"I am convinced that Russia will definitely rise to a height worthy of its potential," Putin concluded his address. "Consolidation of all our intellectual resources, resources of authority, and moral resources will enable Russia to attain the biggest goals, great goals worthy of a great people." But serious doubts remain as to whether the Russian public can be mobilized for an effort to double the country's GDP in a decade or even whether the political will to make that effort can be mustered in the government and the Duma.

In the section of his speech specifically about doubling GDP in 10 years, Putin took note of the fact that such a plan smacks of Soviet-era five-year plans. However, he stated directly that he considers it realistic, if daunting. "It is possible really to engage in the large-scale construction of a modern and strong economy and, ultimately, in the formation of a state that would be competitive in every sense of the word."

Perhaps equally importantly, Putin briefly but directly acknowledged that such an undertaking is far more than merely an economic task. "The most important thing we need to do here, the thing we shall need, is once again the consolidation of political forces, of society, the consolidation of all the authorities, of the best intellectual resources, support from sociopolitical structures, cooperation between parliament and the government, and a joint search for the best ways to achieve what is a strategic, a most vitally important, and an historic objective for Russia," Putin said.

Just as Putin warned against interpreting the goal of doubling GDP in 10 years in a Soviet way, it would also be a mistake -- perhaps a catastrophic one -- to interpret the president's call for "consolidation" in Soviet or totalitarian terms, as in a de facto return to a single-party state, the stifling of dissenting ideas, the domination of a single ideology, etc. Seemingly, Putin understands that doing so is a recipe for stagnation rather than growth, but it remains to be seen whether other political players are as astute.

The initial responses from some of Russia's regional barons seem to indicate a continued Soviet mindset. Krasnoyarsk Krai Governor Aleksandr Khloponin said that his region will have no problem doubling its GDP even faster -- by 2010, FK-Novosti reported on 18 July. Khloponin's neighbor, Republic of Khakasia President Aleksei Lebed, avoided specific predictions but eagerly said that Khakasia can reach the target "in even less time" than Putin's 10 years, "Gazeta" reported on 21 July. Not to be outdone, Sverdlovsk Oblast Governor Eduard Rossel said his region can triple its GDP by 2015, RBK reported on 22 July. In all of these interviews, however, the regional leaders offered widely varying recipes for achieving these goals.

Behind the seemingly straightforward goal of doubling the country's GDP in a decade lie myriad related issues that most likely would need simultaneous attention -- issues such as transparency of government and business, establishing an independent judiciary and mass-media system, increasing labor mobility, reforming the agricultural sector, reducing state spending, fighting alcoholism, and improving social stability and environmental protection. In an interview with "Rossiiskaya gazeta" on 1 August, presidential Human Rights Commission Chairwoman Ella Pamfilova said: "If the people are weak-willed and without rights, it will be impossible to double the GDP. A society that does not respect itself is not capable of making any breakthrough."

Over the short term at least, the conditions for undertaking such an effort seem, to put it mildly, less than optimal. "We will have to double the GDP against the background of pre-election fuss, the initiatives of the prosecutors, the caprices of the oligarchs, friendly conversations within the government, and the passivity and profound dissatisfaction of the public," "Profil," No. 28, summarized. However, even over the longer term the government foresees slow going. Economic Development and Trade Minister German Gref told the weekly that "it will still be a number of years before we create an absolutely stable and reliable economic climate in the country."

In a comment published in "The Moscow Times" on 30 July, presidential economic adviser Andrei Illarionov argued that GDP growth is contingent upon the economy being internationally competitive and competitiveness is contingent upon reducing the state sector of the economy. In his piece, Illarionov argues that reducing state spending from the current 37 percent of GDP to just 20 percent would, over the period between now and 2015, actually result in an increase in real government spending as the economy grows. However, Illarionov admits that even such a sharp reduction in state spending is merely "the first step" and "a necessary though insufficient basis for bringing about an economic miracle in Russia."

Former Yeltsin-era Economy Minister Yevgenii Yasin made a similar argument in "Rossiiskaya gazeta" on 30 July, writing that the "non-market sector is leading to deeper social inequalities." Moreover, the same day that Illarionov's and Yasin's articles appeared, Deputy Prime Minister and Finance Minister Aleksei Kudrin announced that state expenditures will be frozen at current levels for at least three years, Regnum reported.

While such an apparently paradoxical argument -- that reducing state spending will actually lead to a real increase in state spending over the medium term -- might persuade Illarionov's fellow economists, it will take a tremendous communications effort to persuade the weary Russian public to buy into it. Leftist politicians, most notably economist and Duma Deputy Sergei Glazev, have argued in favor of increasing state spending to around 40 percent of GDP.

Likewise, the recent controversy around oil giant Yukos has also put economists such as Illarionov on the defensive. Rightist leaders such as Union of Rightist Forces head Boris Nemtsov, writing in "Nezavisimaya gazeta" on 30 July, have been reduced to arguing that offering state guarantees that privatization will not be revisited and reducing the tax burden on business are now in Russia's "strategic interests" and that by following the reformists' plans, "millions of pensioners, military personnel, doctors, and teachers will get increases in their pensions and salaries." Whatever their virtues, such arguments lack the emotional clarity of calls to "expropriate the expropriators" and will be hard to incorporate into campaign platforms for the Duma and presidential elections.

A recent poll by the All-Russia Center for the Study of Public Opinion (VTsIOM) shows just how far the public's views on these questions are from the government's. Forty-seven percent of those responding said that controlling inflation should be the government's top priority, with 36 percent urging price controls to do so and 34 percent calling for state-sector wages to be indexed. Just 9 percent called on the government to improve conditions for business. Russians seem to understand that, as "Moskovskie novosti" business journalist Boris Vishnevskii notes, "doubling GDP does not guarantee citizens that their incomes will double."

In his "The Moscow Times" piece, Illarionov says that countries have doubled their GDPs in the span of a decade 68 times in the last 50 years. To do so, Russia -- which has had average annual GDP growth of 6.2 percent in the oil-price-boom years of 1999-2003 -- must average 7.2 percent per year for the next 10 years.

In 1999, Yasin issued an economic report that concluded: "It isn't necessary that everything immediately becomes great. All that is necessary is that today is better than yesterday and that tomorrow is better than today." It is difficult to imagine that the government will be able to come up with a plan to double GDP that passes this easily understood test.

Robert Coalson is an editor for "RFE/RL Newsline."

In a meeting with President Putin during the 100th anniversary celebrations of the canonization of St. Serafim in Sarov last week, presidential envoy to the Volga Federal District Sergei Kirienko described Kirov and Ulyanovsk oblasts as regions in crisis, Regnum reported on 4 August. Kirienko said his office is working on a system of control, under which it will check the balancing of regional budgets, the volumes of fuel reserves, and the timeliness of payments to state-sector workers. "If the parameters are not being met, then we will control the timeliness of payments of salaries to state-sector workers," he said. JAC

"Nezavisimaya gazeta" reported on 31 July without reference to sourcing that presidential administration head Aleksandr Voloshin upbraided the presidential envoys to the seven federal districts during their regularly scheduled monthly meeting for their inadequate efforts promoting the Unified Russia party during the run-up to the 7 December State Duma elections. According to the daily, Gleb Pavlovskii, political consultant and head of the Foundation for Effective Politics, and pollster Aleksandr Oslon were also present at the meeting. Presidential envoy to the Southern Federal District Viktor Kazantsev argued that public relations and land mines do not go together and some of the party's attempts to promote itself have backfired in his conflict-ridden territory, which includes Chechnya. The newspaper, which is controlled by self-exiled tycoon Boris Berezovskii, made a similar report about the envoys two weeks ago (see "RFE/RL Newsline," 21 July 2003). JAC

In an interview with TV-Tsentr on 2 August, Moscow Mayor Yurii Luzhkov said that he is concerned that some functions and powers are being needlessly redistributed in favor of the federal center. He noted that while former President Boris Yeltsin's appeal to regional leaders, "Take as much sovereignty as you can swallow," was dangerous, the opposite trend is also causing him concern. "Sitting in Moscow, one cannot exercise control over issues of labor resources, employment, pensions, and the environmental situation in all remote parts of the Russian Federation," Luzhkov said. JAC

In an interview with "Moskovskii komsomolets" on 30 July, former Yeltsin-era presidential administration head Sergei Filatov criticized recent efforts to reform center-regional relations. According to Filatov, the law on local self-government that was drafted by a presidential commission on demarcating responsibilities among various levels of government is flawed. The Russian Constitution already establishes citizens' right to choose which form of self-government they favor, he said. Filatov also characterized the Federation Council as "featureless." Providing an example of the body's "professionalism," Filatov said he asked Federation Council Chairman Sergei Mironov why the upper legislative chamber rejected a draft law on the minimum monthly wage. According to Filatov, Mironov responded that the draft they voted on gave local legislators the right to establish the minimum wage, and that was why it was rejected. "This isn't normal," Filatov concluded. "In a country as huge as Russia there cannot be a single minimum consumer basket. And the minimum wage should be established not by the center but in the regions." JAC

The Kaliningrad Oblast prosecutor's office has launched criminal proceedings against former oblast Governor Leonid Gorbenko, Russian media reported on 1 August. Gorbenko is suspected of abuse of office and illegal receipt of a $10 million Dresdner Bank credit, RosBalt reported. The German bank lent the money to a Kaliningrad bank in February 1998 for a period of five years against a guarantee from the oblast administration. The money was intended mainly for the modernization of a Baltptitsprom poultry-processing plant. The oblast now owes $15.5 million, but the current administration is refusing to repay the loan, saying the money was misdirected illegally, according to RosBalt. Baltptitsprom has since gone bankrupt and been transferred to private hands, while the Kaliningrad bank that received the credit is also not considered a solvent debtor. JAC

A raion-level court in Krasnoyarsk Krai on 29 July accepted for consideration a lawsuit filed by a former raion-administration head, Nikolai Supryag, and a former police major, Yevgenii Lakeev, against Evenk Autonomous Okrug Governor Boris Zolotarev, "Kommersant-Daily" reported on 30 July. Before becoming governor in 2001, Zolotarev was an executive with Yukos. Zolotarev is being accused of slander for a statement he made at a press conference nine months ago. Discussing a series of arson cases that destroyed 24 residential buildings in the okrug capital of Tura, Zolotarev said the arson could have organized by people "who are dissatisfied by the positive changes in the okrug's territory." When asked by the journalists present to name the people he believed to be dissatisfied, he named a series of persons by their last names -- including Supryag and Lakeev -- which led the to men to file the lawsuit nearly two weeks ago. The daily noted that the complaint was filed just as a broader assault by law enforcement officials is being waged against Yukos and its affiliates. JAC

A raion-level court in Kazan rejected on 4 August a lawsuit filed by Volzhsk Mayor Nikolai Svistunov against the regional bureau of "Rossiiskaya gazeta," Regnum reported. Last year, the newspaper published two articles that described the poor state of the public-housing and communal-services sectors in that city and the local authorities' -- and particularly the mayor's -- failure to address the problems. Svistunov was recently arrested on suspicion of embezzlement (see "RFE/RL Newsline," 31 July 2003). JAC

A federal arrest warrant for Nenets Autonomous Okrug Governor Vladimir Butov remains outstanding, Interfax reported on 31 July. Yelena Ordynskaya, senior assistant to the St. Petersburg prosecutor, told the agency that she will not comment on media reports that the traffic cop whom Butov is accused of striking has changed his testimony and has declared that no one hit him (see "RFE/RL Newsline," 25 July 2003). She did say that "nothing has changed," the warrant remains in effect, and the evidence gathered is sufficient for an arrest. In an interview with "Kommersant-Daily" on 25 July, Butov said he has never hit anyone, and the entire story was invented by his enemies. He explained that there are companies, such as LUKoil, that do not want the "governor to deal with the region's problems, such as the environment." JAC

The St. Petersburg election commission announced on 5 August that 11 candidates have either submitted the required number of signatures to register as candidates for the 21 September gubernatorial election or have paid the required election fee, RosBalt reported. Presidential envoy to the Northwest Federal District Valentina Matvienko was the first candidate registered. Also appearing on the ballot will be Deputy Governor Anna Markova; State Duma Deputy Petr Shelishch (Fatherland-All Russia); pornographic film director Sergei Pryanishnikov; city legislators Mikhail Amosov, Konstantin Sukhenko, Vadim Voitanovskii, and Aleksei Timofeev; Regional Programs President Sergei Belyaev; First Pasta Factory Director Viktor Yefimov; and Pulkovo Airlines steward Oleg Titov. The commission rejected the registration of entrepreneur Rashid Dzhabarov because 44 percent of the signatures checked were determined to be false. Petrolakt General Director Gennadii Vasilenko withdrew his candidacy on 4 August. Municipal deputy Aleksandr Gabitov withdrew his candidacy on 2 August and on 5 August urged his supporters to vote for Matvienko, Regnum reported. Originally, some 33 candidates had expressed their desire to compete. JAC

Seven candidates have submitted documents for registration in the 7 September gubernatorial campaign in Sverdlovsk Oblast, Russian media reported on 29 July. The candidates include incumbent Governor Eduard Rossel, Federation Council representative (Kurgan Oblast) Andrei Vikharev, Yabloko party local branch leader Yurii Kuznetsov, Yekaterinburg businessman Anatolii Sukhov, Russian Communist Workers Party-Russian Communist Party First Secretary Nyazip Servarov, oblast legislator Anton Bakov, and Afghan War Veterans Union branch leader Yevgenii Petrov. According to "Gazeta," while seven men might run, local observers believe only Rossel and Vikharev have real chances of winning. Vikharev, however, might face troubles with his registration, according to "Vremya novostei." An oblast prosecutor recently presented in court evidence connecting Vikharev with a charitable fund named after him that began operating in the region before the official starting date for electioneering. "Kommersant-Daily" reported earlier that posters advertising the charity can be seen on all the major streets of the oblast capital (see "RFE/RL Newsline," 10 July 2003). The local election commission might rule that charity's posters violate the Election Code and therefore refuse to register Vikharev. JAC

Tomsk Oblast Governor Viktor Kress told reporters on 1 August that criminal investigations into oil giant Yukos could negatively affect his current campaign for re-election on 21 September, Regnum reported. Kress predicted that his leftist opponents will try to use the Yukos affair against him in the political struggle. He said he has kept copies of every document that involves his dealings with Yukos and is willing to share these with the media and courts. Kress added that Yukos has not contributed any funds to his re-election effort. JAC

Voronezh Mayor Aleksandr Kovalev has filed a suit against Voronezh Oblast Governor Vladimir Kulakov for defamation, reported on 4 August. He is seeking 3 million rubles ($99,000) in damages. Kovalev objected in particular to an interview that the governor gave to "Molodoi kommunar," in which Kulakov accused him of having spent vast sums of money artificially fuelling an information war between oblast and city authorities. Kovalev is demanding that Kulakov provide evidence to substantiate that allegation. On 10 July, reported that Kovalev has announced that he will run in the 2004 gubernatorial election. JAC

IN: Prime Minister Mikhail Kasyanov has named Gennadii Alekseev as head of the administration for personnel and government service in the government apparatus, "Kommersant-Daily" reported on 5 August. Alekseev had previously served in this position until his dismissal in March 1999. Kasyanov also named Vsevolod Vukolov as head of the administration for administrative-reform issues within the government apparatus. Vukolov previously served in the government's control department, and is a former vice president of Rossiiskii Kredit. In addition, Kasyanov confirmed the leadership of the government commission for conducting administrative reform. Deputy Prime Minister Boris Aleshin will serve as the commission's chairman (see "RFE/RL Newsline," 25 July 2003), and he will have three deputies: Economic Development and Trade Minister German Gref, deputy head of the presidential administration Dmitrii Kozak, and Konstantin Merzlikin, director of the government apparatus.

8 August: Prime Minister Kasyanov will return from his summer vacation

8 August: Cabinet of ministers will consider the results of socioeconomic programs during the first half of 2003

8 August: Campaign for gubernatorial election in Sverdlovsk Oblast begins

11 August: Defense Minister Sergei Ivanov will return from vacation

12 August: Third anniversary of the sinking of the "Kursk" nuclear submarine

13 August: Air-traffic controllers will hold a national protest

14 August: Unified Russia's regional party list for St. Petersburg will be formed, according to secretary of the party's branch in that city, Andrei Beglov, on 24 July

15 August: Date by which Duma should approve new map of single-mandate districts. If it fails to do so, the Central Election Commission will have the right to confirm the map

17 August: Karachaevo-Cherkessia will hold presidential elections

26 August: Russian government due to present draft 2004 budget

29 August: Auction will take place for the 23.35 percent stake in Peterburg television now owned by Leningrad Oblast, RosBalt reported on 5 August

Late August: Campaign for 7 December State Duma elections officially begins

September: President Putin will visit the presidential retreat Camp David in the United States for talks with U.S. President George W. Bush

September: Second Russian-U.S. Energy Summit will take place in Moscow

1 September: State Duma's fall session opens

6 September: State Duma Speaker Gennadii Seleznev's Party of Russia's Rebirth will hold a congress in Moscow

7 September: Sverdlovsk, Novgorod, and Omsk oblasts will hold gubernatorial elections

7 September: Murmansk will hold mayoral election

7 September: Moscow-based exhibition of Federal Security Service archival materials relating to the 1922 expulsion of the intelligentsia will close

9 September: First plenary session in State Duma

10 September: Special party congress for Communist Party of Russia

14 September: Volgograd will hold mayoral elections

21 September: St. Petersburg and Leningrad and Tomsk oblasts will hold gubernatorial elections

23 September: The first European-Pacific Ocean Conference will take place in Vladivostok devoted to improving dialogue among intellectuals in European countries and the Pacific region, reported on 6 March

24 September: Federation Council will hold its opening session after summer recess

29 September-3 October: The Third World Conference on Climate Change will take place in Moscow

30 September-2 October: The Second All-Russian Sociological Congress will take place at Moscow State University

October: Second Civic Forum will be held, according to presidential Human Rights Commission Chairwoman Ella Pamfilova

1 October: Thirty-three percent salary hike for budget-sector workers will go into effect, pending the passage of legislation being revised by a conciliation commission

October: President Putin and German Chancellor Gerhard Schroeder will meet in Yekaterinburg, Novyi region reported on 14 April

5 October: Presidential election to be held in Chechnya

6 October: British court to consider Russia's request to extradite tycoon Boris Berezovskii

23-26 October: First anniversary of the Moscow-theater hostage crisis

25-26 October: Russian Forum on the development of civil society will be held in Nizhnii Novgorod

29 October: 85th anniversary of the founding of the Komsomol

November: President Putin will visit Italy

7 December: Bashkortostan will hold presidential elections

7 December: State Duma elections will be held.