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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: 365  (26/05/11)

BP for more than a century one of the worlds largest and most successful corporations has recently been experiencing massive bodyblows, principally for its runaway gusher in the Gulf of Mexico already costing in the area of $130 billion in compensation. It is a world-wide company largely British owned, with interests and investments all over the globe. It was an early investor in post-communist Russia with a company now called TNK-BP whose primary activity is in Siberia to the south of Lake Baikal. It has become used to dealing with the then newly capitalist Russia, particularly since it was required to have a number of Russian partners in the TNK business. As one would expect these were favoured oligarchs of the new system. Those partners, the AAR group long ago had required BP to agree in the shareholder agreement that effectively they would share in any new oil/gas opportunities within Russia, (a decision in their favour on this was granted by the adjudication body, in this instance located in London). BP carried on with its assessing potential opportunities and entered into an agreement with the Russian state-owned oil company, Rosneft.

BP were attractive partners for the Kremlin not only because of their financial and market status, but because they had the very experience Rosneft lacked in drilling and exploiting new fields in the very tough conditions within the Artic circle. So far so good, and both partners were ready and willing to sign when the Russian oligarch TNK partners, the AAR group, intervened legally, requiring that BP make good on their contract to include them in, in other words that it should be TNK-BP as the party to the Rosneft deal. BP tried offering various deals, buy-outs and others, but they were not acceptable. Time was running out on the Rosneft deal - they had extended the completion date by a month, but to no avail. The deal died in mid-May, leaving Rosneft free to pick another international partner –Shell, ExxonMobil or Total are considered possible at this stage, even as an outsider Petrochina . A sad blow for BP but they must have known that their TNK partners had the contractual rights to involvement in Russian–BP investment opportunities that they finally pressed. BP seemed to have assumed that since the Kremlin wanted the Rosneft deal that they would ‘fix it’.

The fact that these oligarchs led by Mikhal Fridman appear no better off, as a result of the collapse of BP’s artic drilling partnership with Rosneft, inevitably causes speculation as to whether the Russian government was behind this, or one faction of government, as no oligarch operating in Russia could afford to flat-out oppose the Kremlin, but if it were a case where Putin and Medvedev were backing separate horses then that would be subsumed in any rivalry between the two leaders.

From critical comments made by President Medvedev it seems clear that the Kremlin very much had a position in this and apparently it was they who would not have the existing partnership involving the oligarchs of AAR becoming partners in the state-owned Rosneft, whose chairman was a vice premier of Putin’s which opens up this question, were Putin and Medvedev on separate sides in this?

The BP contract with Rosneft has fallen, which is not to say that ‘fixers’ from either side or both, won’t be trying 24/24 to restructure before Rosneft gets into bed with another international oil major. Perhaps more will emerge, but meanwhile BP still have the profitable TNK-BP operation, if with a caustic relationship with AAR.

Meanwhile the world looks on and saw in the same week Medvedev refuse to say whether he would be standing for re-election, leading to obvious political uncertainty, at a time when a mammoth hit of FDI from BP would have entered the country. This has now fallen away, when there are already worries that more capital is exiting Russia than is entering ,and with the high current oil prices that Russia is currently enjoying, any fall in world prices might mean Russia, overly dependent on oil, being revisited by the ’oil curse’ of evil memory.

Putin the pundit
Prime Minister Vladimir Putin was in a reflective mood on April 20, as he delivered his last annual report to parliament before the parliamentary elections in December and the presidential election in March 2012. Putin said that Russia was emerging powerfully from the global financial crisis, but must reduce its reliance on energy and raw materials to see off external threats to its economy.
Inflation would not exceed 6.5 to 7.5 percent in 2011 and gross domestic product grew by 4.4 per cent on an annual basis in the first quarter of the year. But he said that Russia also faced unspecified external threats to its $1.5 trillion economy and the country of 142 million people could not afford to rest on its laurels after overcoming the worst of the financial crisis.

"Based on GDP, Russia should enter the ranks of the five leading countries," he told lower house deputies, adding that GDP per capita should reach $35,000 by 2020. "The current beneficial environment in the raw materials and hydrocarbons (markets) should not make us relax. The oil boom we are witnessing only underlines the need to move quickly to a new model of economic development," Putin added.

High oil prices helped fuel Russia's economic resurgence during Putin's 2000-2008 presidency and the price of oil, Russia's main export commodity, is up 28 per cent this year.

But Russia's economy is over-reliant on raw materials and any fall in the oil price will have a big impact on its overall economic performance unless it diversifies. "Economic weakness and sensitivity to external shocks result in threats to national sovereignty," Putin said. "Let's be frank. In the modern world, if you are weak, there is always someone who will come in and unequivocally recommend which way to go, what policy to conduct, what path to choose."

Presidential election looms
Putin said Russia also faced a danger of wildfires in Siberia and its Far East following blazes that ravaged thousands of hectares of land and killed dozens of people last year during a historic drought. "Now we are closely watching Siberia and the Far East, where a difficult situation with fires is unfolding. One must do everything to minimize the possibility of a repetition of full-scale catastrophes," he said.

Putin, 58, is still seen as Russia's most powerful man after steering his successor Dmitry Medvedev into the Kremlin in 2008, and has hinted he may use the March election either to return to the presidency or endorse his protégé, if that is what Medvedev remains, for a second term. Putin said that it was too early to name a favoured presidential candidate and he did not immediately comment on the presidency in his speech to the State Duma. This abnormal shyness is commonly supposed to be based on the fact that the two may be rivals, but as Putin has said, it’s too early to commit, one way or the other. However the outside world reads this as political uncertainty, when finance sometimes runs for cover.

Boosting population
But Putin made some eye-catching promises in his speech to Parliament on April 20. A possible increase in pensions in August, for example, conveniently timed in advance of next year’s presidential elections. And the promise to double annual GDP per head by 2020 to $35,000.

But most startling of all was his plan to boost life expectancy and raise the birth rate by 25-30 per cent by 2015. Putin is worried about population decline – and clearly wants to do something about it. But, as other European states have discovered, controlling demography is difficult.

Putin said Rs1,500bn ($53.3bn) would be put into “demographic projects”. If past experience is any guide, this could mean child allowances, healthcare and social support for families and pensioners.

Russia’s population has finally stabilised at141.9m in the past three years, after a persistent decline from its 1991 peak of 148.6m. Emigration has slowed, immigration (from the former Soviet Union) has increased, life expectancy recovered from a low of 64.5 and birth rates have increased.

Birth rates now – 12.6 per thousand – are comparable with developed country levels. But Russia’s major challenge here is the high death rate among young people – often linked to accident and disease caused by alcohol. Not only does this contribute to death rates, it robs Russia of future births.

Medvedev or Putin for presidency?
Putin, who spoke for two hours as we have seen, said nothing about whether he and President Dmitry Medvedev had agreed which of them would run in next year’s presidential election. But he spoke like a potential candidate – setting out the authorities’ economic achievements. Putin does not want to be cast as the economic conservative in contrast to a reform-minded Medvedev.

Perhaps Putin hasn’t yet decided whether to run in the election or allow Medvedev a clear way to a second term. Perhaps, he has, but wants to give the impression that there still a real tussle at the top. Either way, the issue will be decided in the next few months. Putin said a premature announcement would usher in a lame-duck period that would extend to March's election many months away. Either would win easily in a political system nearly devoid of competition.

“If we give any wrong signals today, half of the administration and more than half of the government will stop working in the expectation of change,” Mr. Putin said in televised remarks. He also said, a little crankily, “All this fuss around elections does not promote normal organisational work.”

Answering journalists’ questions, Mr. Putin said neither he nor Mr. Medvedev had ruled out running next spring — an answer even more ambiguous than the one he had given in the past, that the two of them would make the decision together. Officials have said privately that the plan will be announced in September or October, but anxiety has been building in the corridors of power, as officials strive to secure their standing beyond the spring elections.

The comments came a day after Mr. Medvedev told Chinese television that “the decision will be taken very shortly.” Medvedev said it would hinge on public opinion, as well as political and economic conditions. “One has to weigh the possibilities, avoid acting mechanically and, instead, act with a clear understanding of the situation,” he said. “I expect such an understanding to form within a relatively short time.”

In passing the presidency to Medvedev, his longtime protégé, and taking the post of prime minister, Putin ushered in a new form of government, which balanced the president’s constitutional powers against his own enormous political clout as PM. The two men have perfected a kind of team play, in which Medvedev gives voice to the aspirations of urban elites, and Putin delivers red-meat politics that appeal to average Russians.

But it is not clear how long that system will continue — or whether, if Medvedev serves a second term, he will accrue more power than he did in his first. In the meantime, political observers are seizing on any hint of conflict between the men, despite constant official reassurances that they are not competing with each other.

Among those urging the leaders to cut short the uncertainty is Igor Y. Yurgens, the chairman of the liberal-leaning Institute of Contempory Development in Moscow and an occasional adviser to Mr. Medvedev. “It is time to dispense with the mantra ‘We will get together at some point, consult with one another and decide in the interests of the Russian people,' ” Yurgens told Komsomolskaya Pravda, a daily newspaper. “This worked well for the first year and passably for the second, but by the third, it had stopped working.”

He continued: “The indecision about who will run for the presidency makes the elite nervous. Those who have the money will simply go overseas — just in case.”

Medvedev is asserting himself
Medvedev has already begun to assert himself in preparation it would seem for a renewed presidential bid. He put down a marker In September last year, when he chose to sack the powerful Mayor of Moscow, Yuri Luzhkov, mayor since 1992 and reputed to be Russia's richest man. This certainly took Muscovites aback; Luzhkov had become part of the landscape, as it were. It is difficult not to see this as a political statement of some sort, related to the coming presidential election.

The mayor of Moscow is actually simultaneously a governor of one of Russia's 89 regions and provinces, appointed by the President of the Russian Federation. Medvedev was entirely within his rights to sack Luzhkov, a disreputable figure.

Luzhkov is widely suspected of accruing his massive fortune, over $50bn, by corrupt means, rife of course throughout Russia. It would have been an exceptional Moscow mayor who would have been able to resist the temptation to amass riches in this way. There is no reason to attribute saintly qualities to Luzhkov - or his wife, in whose name much of his vast wealth is held.

But it is as if Medvedev is saying to the country; 'I am Mr Clean.' But then one virtue that can be attributed to Putin is that he is clean and quite free of the besetting vice of lining his own pockets that afflicted so many figures in public life in the Yeltsin era, including the president himself. Putin is more interested in power than wealth and knows, anyway, that on retirement from the political scene he could command huge returns in an advisory capacity in many a boardroom.

Putin still looks to be the man in charge. He is indisputably a smart operator on the political stage. It looks as if it is up to him if he wants to be president again next year or bide his time until 2016.

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