What lies in store for Russia?

Shivangi Singh

Amidst three days of festivity that would climax into a Soviet-style Red Square military parade, Dmitry Medvedev would take on the mantle from his mentor Vladimir Putin and become the new President of Russia. But this would not mean the end, rather a new beginning for Putin. Interestingly, soon after Medvedev’s coronation, Vladimir Putin would resurrect himself as the next Prime Minister of Russia. The ongoing Russian political drama is evidently based on a carefully contrived script, authored by none other than Putin. Everything went according to the script – heeding to the requirements of the Russian constitution, President Putin stepped down after his two consecutive terms in office but ensured that the real power stays in his hand through Dmitry Medvedev. The hugely-popular Putin projected his 42-year-old protégé Dmitry Medvedev as the Presidential candidate. His party, United Russia won a landslide in March elections; Medvedev won and said he would make Putin the Prime Minister. "If I am entrusted with leading the state I will simply be obliged to continue the policies ... of President Vladimir Vladimirovich Putin," Medvedev said. "I hope if we continue to work in this format, as a pair, it will benefit our country." To cut a long story short, Vladimir Putin is the ‘main guy’ in Russian political scenario. The contrived political process, state controlled media and propaganda have ensured that Putin via Medvedev holds the reign. Political observers say that the centre of power is all set to shift from the Kremlin to Putin`s new office. The process has already started. In his last days as President, Putin, prepared to bring federal representatives under control of the cabinet, so that he could influence policy after he takes over as Prime Minister. Putin is taking measures to safeguard his position, lest Medvedev becomes too ambitious. Although under Putin’s leadership, Russia enjoyed its longest economic boom in a generation and most people see the double act of Putin and Medvedev as the best hope of prolonging their newfound prosperity, yet, speculations are ripe on the question of power sharing equation between the duo. Putin has said repeatedly that there will be no power-sharing disputes with the new President, but not everyone is convinced. Moreover, there are colossal problems facing Russia: Soaring Inflation The government is at pains to keep inflation under control. Last year it was 11.9 percent, against an official target of 8 percent. "If inflation were to accelerate much more beyond current levels then that would lead to a loss of public faith and that could back-end into a stability crisis inside the Kremlin," said Chris Weafer, chief strategist with Uralsib bank. To combat it, the government has allowed the rouble to appreciate but this has not proved fully effective. It also hurts domestic industry because it makes their exports less competitive. The government and the opposition are still undecided over how to tackle inflation. Oil Dependency Since, Russia`s budget depends on revenues from oil and gas exports, it leaves the country susceptible to a fall in energy prices that may result from a global economic slowdown. "If it (the oil price) were to fall back to the same price as last year ... then the budget is looking at a deficit of USD60 billion," says Chris Weafer, chief strategist with Uralsib bank. Increasing Domestic Energy Prices Although, the government announced a plan for substantial rise in domestic prices for gas and electricity, there has been slow implementation of the same. Domestic energy prices are artificially low, in effect a state subsidy. The target is for power and gas prices that are expected to rise to world levels by 2011. But, these increases are likely to be unpopular with voters. Ageing Population and Pension Deficit Russia is dealing with pension deficit. Unlike India’s young population, Russia`s population is ageing. And unless state pension provision is reformed, there will not be enough tax-payers to fund the pensions of the people who will be retiring over the next few years. The government has no clear-cut policy on how to tackle the problem. Infra-Structural Plans The state of infra-structure is pathetic in the country due to years of neglect. Russia has allocated USD1 trillion to invest in roads, railways and power networks in over 10 years. Russians expect the program to be effectively implemented. The onus to curb the widespread corruption and proper utilization of state funds would be on the next President. But in case the new President fails to deliver results, he will antagonize his supporters. One can see that there are huge problems looming over the horizon of Russia: Inflation is going out of control; the budget is vulnerable to a drop in oil prices, which, according to Kremlin-observers may sow the seed of dissent between Putin and Medvedev. Another crucial issue is the reallocation of power between the duo. Sadly, the political script of Putin has little to say on what lies in store for Russia.