Time magazine journalist Michael Schuman has written a decent description of Russia´s dependence on oil. However, there is something clearly missing in Schuman´s conclusions:
The only way out of the trap is to decrease Russia’s dependence on oil. That will require a much higher rate of investment, and especially private sector investment, to develop new industries and create better jobs. Improving the poor investment climate, however, will take a long list of reforms, which include fixing inefficient state enterprises, allowing greater competition, stopping the state from crowding out the private sector, and fighting widespread corruption. Putin himself has repeatedly advocated for just such reforms, as he did in a speech at the St Petersburg International Economic Forum in June:
“We are well aware of serious long-term and medium-term challenges for our economy. The economy is still not properly diversified. Much of the added value is created in commodities sectors. There is a high proportion of non-competitive old plants and the level of Russia’s dependence on oil prices remains high. We must reduce the dangerously high [budget] deficit if oil revenues are not taken into account. This…is the Achilles’ heel of our economy…We understand very well that we must offer investors exclusive conditions to compete for these investments, so that the investors ultimately choose Russia. This is why we feel creating an investment climate that is not just favorable, but truly better and more competitive, is a key issue in state policy…Today I want to reaffirm our principled position: the state will gradually withdraw from a variety of industries and assets…Unfortunately corruption is without exaggeration the biggest threat to our development. The risks are even worse than the fluctuation of oil prices.”
Yet Putin and his political allies have said all this stuff before, and little has changed. Achieving Putin’s stated goals will require drastic changes in the Putin state, changes he has so far shown little willingness to make.
He may have to, though. In a June 21 report, Capital Economics forecast growth would slow sharply, to 3.8% in 2012 and as low as 2.5% in 2013, from the 4.3% achieved in 2011. Without reform, the fate of Putin’s economy — and his legacy — will rest on the unpredictable swings in commodities markets.
Schuman is of course right when saying that Putin has said "all this stuff before, and little has changed". But he seems to believe that Putin somehow still might be able to make the necessary changes in order to safeguard his "legacy".
Schuman also takes Putin´s words "unfortunately corruption is without exaggeration the biggest threat to our development" at face value. Obviously he does not understand that the entire system Putin has created is based on corruption and theft. That is why all Putin´s "reforms" will remain nothing but worthless words. The only way to save Russia from an economic collapse is to get rid of Putin. Fortunately there are signs that more and more Russians agree ....
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