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Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 433,491 346,520 310,000 16
GNI per capita
 US $ 2,610 2,140 1,750 97
Ranking is given out of 208 nations - (data from the World Bank)

Books on Russia


Update No: 358  (26/10/10)

Luzhkov’s legacy
Experts disagree whether Yuri Luzhkov's departure from the Moscow mayor's office will improve things, above all, the investment climate in Moscow.

At the end of September, Russia’s three state-controlled national TV channels began to run compromising documentaries on Moscow mayor Yuri Luzhkov, the first time state-owned media had attempted to discredit a national political figure on air since the end of the 1990s. What was behind it?

Luzhkov, who has run Moscow since 1992, was accused of everything from illegally demolishing historical buildings to awarding favourable contracts to his construction magnate wife, who also happens to be Russia's only female billionaire, Elena Baturina. The last straw was apparently his poor handling of the summer wildfires crisis, which he had spent vacationing in Austria.

Man of the 90s
He has his enemies; but he has his supporters. "He paid the nation's highest pensions when we lived on the verge of starvation, he kept the streets clean and the heat on in winter," reminisces Sergei Danilov, a small business owner and lifetime resident of Moscow, about Luzhkov in the 1990s.

"For some reason in the early 90s, they stopped collecting garbage in the city. I don't know if it was criminal squabbles over turf or striking workers, but those bags piled up. Luzhkov set that straight right away," adds Nikolai Grigoriev, also a lifetime resident. At one time, now long ago, Moscow's babushkas carried Luzhkov's photo, together with that of then-President Boris Yeltsin, in their wallets.

Monuments to Luzhkov's tenure can be seen across Russia's capital. The Christ the Saviour Cathedral just outside the Kremlin walls (restored 69 years after the Bolsheviks had dynamited the original structure to make way for, originally, a skyscraper, and then, a swimming pool, but really to remove the offensive reactionary sight from Stalin’s Kremlin apartment). The latter rebuilding had been a project to symbolize Russia's rebirth from the Communist yoke, and donations to restore the original structure poured in from the country's vast corners. Unofficially, some Christians bemoan how much of that money was stolen in the process of restoring the lavish cathedral.

Luzhkov's popularity (he won mayoral elections in 1996, 1999 and 2003) was backed by a record of both socially-oriented and pro-business policies as Moscow turned from a grey, Communistic city to a booming construction site and financial centre.

Yet his reputation became tainted as Moscow's historical centre was razed to make way for dubious construction projects, the city's traffic grinded to a snail's pace amid rapidly rising car ownership rates and accusations of clan-like control over the business environment surfaced – and Luzkhov became personally rich .

Luzhkov has his champions
While the anti-Luzhkov campaign damaged the mayor's reputation, it has not devastated it, reported RIA Novosti. About 42.2 percent of Russians polled think that the leadership in other Russian regions is more corrupt than Moscow, while 49.8 percent said they believed federal power bodies were just as corrupt as the Moscow authorities.

"Replacing Luzhkov with a radical reformer would be a mistake," explained Andrei Ryabov of the Carnegie Moscow Centre. "I'm not an apologist for the mayor at all, but I acknowledge that he is a strong politician. He knows how to balance competing forces. I don't see anyone else on the political landscape who would be able to accomplish that," he said.

"A new mayor could push through important, yet unpopular policies. He could try to bring more competition and order to the city's pension fund and municipal services. God forbid social benefits would be reduced. Then we'd have pensioners on the streets, and this instability would be bad for business. You can't have so-called liberal reforms only in Moscow. They have to be done at the national level, and the Kremlin realizes this," continued Ryabov.

Moscow is now going to open up
Not everyone agrees. An independent analyst who refused to be identified argued that while "in the short term, there could be some minor uncertainty under a new mayor, Luzhkov's departure would eventually open up major opportunities for business, especially in construction. Foreign investors should welcome this as a very positive long-term step against clan-like control of the economy and in favour of more competition."

Chris Weafer of Uralsib Bank agreed. "Whenever you have change after a long-standing administration, opportunities open up for investors. This applies to any major city in the world. When a new team arrives, new players are able to bid and win contracts,” he said.

According to Mark Rubenstein, a bank analyst with the finance company Metropol, "There are many ways in which the business and investment climate can be improved in Moscow. But this applies to the country as a whole. I think we’re going there, but this change will come gradually, over many years. I don’t expect any major changes in the investment climate in the short term regardless of who the new mayor would be,” he said.

"The problem is that Russia's institutions are weak. A lot in business currently depends on personal connections and favours. If you remove a figure like Luzhkov without a concentrated effort to reform the entire system at the national level, you simply introduce more chaos. And investors don't like chaos," concluded Ryabov.

The new move
If and when Prime Minister Vladimir Putin’s chief of staff, Sergei Sobyanin, replaces Yury Luzhkov as mayor of the Russian capital (he is the likeliest choice, a Putin man to his bones), Moscow may sell stakes in companies from banks and others onto the market. “Privatization will be pursued very actively under the new mayor,” said Olga Kryshtanovskaya, a sociologist who studies Russia’s elites. “All profitable assets will go on the block, such as airlines, real estate companies and possibly Vnukovo Airport.”

The federal government plans to raise $10 billion annually for the next five years from asset sales to help close a budget deficit estimated at 5.3 percent of economic output. While Moscow’s government is running a shortfall of 120 billion rubles ($3.9 billion) on spending of 1.1 trillion rubles, Luzhkov hadn’t joined the privatization drive before President Dmitry Medvedev, acting of course on the orders of Putin, fired him on September 28, citing a “loss of confidence.”

In the context of using municipal assets and resources Putin appears to have worked up a new way out of the economic crisis. One could call it provisionally - it is a tawdry term – ‘Geo-Municipal Keynesianism’. He has realised that macro-Keynesianism is a spent force. The need is to be discriminatory with geo projects, financed by the municipalities, to regenerate the environment. They are sitting on top of fabulous assets, recuperable by the million, asset-wise.

Russia to co-operate with NATO
German Chancellor Angela Merkel and NATO Secretary General Anders Fogh Rasmussen have reiterated their support for a planned European anti-missile defense shield and have expressed hope that Russia will drop its objections to the plan.

Moscow has in the past been the major stumbling block for the missile defence shield. Russia sees the shield as being at least partly directed against its own military might whereas Washington says its sole purpose is to protect Europe from possible attack by rogue states such as Iran or North Korea. Anti-missile missiles are always going to be suspect, because if only one nuclear power has them and the other one doesn’t, then that is a quantum leap in change and the balance of power. Thus far the success rate of US trials has not caused a real rift on the subject and no doubt Russia too is testing anti-missile missiles.

At the NATO summit in November, the Western alliance is hoping to reach agreement on a new strategic plan aimed at giving NATO a new focus two decades after the end of the Cold War.

Medvedev in talks with Sarkozy and Merkel agreed to attend the upcoming NATO summit
What is going to make this a historic summit is the presence of Russian President Dimitry Medvedev. Sarkozy and Merkel are very pleased.

The whole issue of nuclear defences, and indeed of nuclear warfare, could be given a new focus with Russia on board. Medvedev is likely to make the obvious point that, if rogue states are the real danger to NATO, not Russia, then the missile shield needs to be situated inside Russia along the Caucasus and Central Asia.

Medvedev is making it plain the Russia does not want to join NATO – a bridge too far given the history, but it likes the idea of a special relationship with it, even though it has for half a century past been heavily promoted as a menace and an object of virulent dislike- ‘the enemy’ to its citizenry.

Russia and India in special forces training in the Himalayas
One power by whom Russia does not feel in the least threatened, unlike NATO and China, or rogue states, is India, once a sort of an ally, certainly a customer for weaponry, in Asia. They are separated after all by the vastest mountain range in the world, the Himalayas and have few quarrels.

It is there that the two powers conducted joint military exercises in October, with their special mountain troops.
World politics is in a fluid situation all right.

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