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Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
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)

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Update No: 384 (26/02/13)

Summary: Russia is continuing its downward trajectory in terms of freedom of speech, political pluralism and tolerance. The Kremlin has made renewed attempts of late to tackle corruption, which has for many years tarnished its reputation as a business destination for international investors. Relations with the US are extremely frosty at the moment. The crisis in Syria also threatens to destabilize regional stability, a worry for Moscow which has struggled to manage terrorism from Caucasus-based separatists.

In his third term as President, Putin's Russia has become increasingly authoritarian. Human Rights Watch described 2012 as “the worst year for human rights in Russia in recent memory.” An independent rights group says that Moscow police have detained at least 5,156 people at rallies in the past 13 months. The opposition movement, which gained momentum after the Putin-Medvedev swap of 2011 and the presidential elections, has suffered immensely under Putin's regime, and its leaders, among them Alexei Navalny, Sergei Udaltsov, Ilya Kashin and Ksenia Sobchak have all been subjected to harassment and intimidation. The opposition, despite having formed a Coordinating Council in an effort to strategize best about ways of proceeding, appears to remain fragmented. The Kremlin has other concerns. In recent months relations with the US have taken a turn for the worse and allegations of corruption continue to cloud the regime.

To begin with the issue of corruption, the controversial posthumous trial of Sergei Magnitsky began on February 18, and is thought to be ‘the first time in Soviet or Russian history that a defendant has been tried posthumously.’ Sergei Magnitsky was a lawyer for Hermitage Capital who died in pre-trial detention back in 2009, after he uncovered a $230 million tax fraud case, in which members of the interior ministry were implicated. The case has, partly due to the ongoing efforts of Hermitage founder Bill Browder gained, notoriety as an example of legal nihilism.

In addition to the shocking revelations about how the lawyer died (he was kept in jail 'incommunicado,' tortured, and denied medical treatment), the international community has baulked at the fact that the lawyer is now on trial posthumously for tax evasion. The trial is being boycotted by the lawyer's mother and his supporters. The case itself, to quote the Washington Post, has become "a byword for Russian corruption".

The statistics to come out of Russia regarding graft are staggering and the number of cases which involve high profile figures in the political elite particularly worrying. Russia was ranked 133rd out of 174 countries in the latest Corruption Perception Index by Transparency International, published in December. According to Russian Prosecutor General Yuri Chaika, damages from corruption cost the state budget $690 million last year alone. In the month of January, United Russia deputy Vladimir Pekhtin was investigated for owning nearly £2 million worth of luxury property in Florida. He has now stepped down. Kremlin administration chief Sergei Ivanov quoted Bill Browder (who labelled those involved in the Magnitsky case "the untouchables") when throwing his weight behind a corruption crackdown. "I have to emphasize that we do not have untouchables,” Ivanov said at a meeting of Russia’s Investigative Committee Board. “We must act decisively and pay no regard to posts and ranks,” he said.

This is partly because systemic corruption is taking its toll on investment in Russia. Whilst the country's economy thrives, thanks to its colossal oil and gas resources, analysts have frequently argued that the economy needs to be diversified, and that it needs to move away from commodity-based resource nationalism. Of the BRIC nations, it was recently suggested by the FT that it is the least popular of the emerging market bloc for US investors. The Kremlin is clearly taking some steps to remedy this. In February it was reported that Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, had reached an agreement with Russia’s Economy Ministry and the Russian Direct Investment Fund on a three-year deal to help establish meetings with investors and improve the communication of government decisions. The primary goal is to polish Russia's image for foreign investors. Garry Kasparov has slammed Goldman Sachs’ cooperation in boosting Russia’s financial image, saying that it ‘ranks among the worst examples ever of a company seeking to bolster its profits by laundering the financial reputation of a country led by a corruptly elected despot’. The problem is that graft and Putinism are almost inseparable. When he was President, current Prime Minister Medvedev attempted to spearhead a campaign to tackle corruption. One of his attempts to improve Russia's business climate was to set up the Skolkovo innovation centre. It has recently been found that two of the main figures in Skolkovo, the Foundation's finance director, Kirill Lugovtsev, and the head of the Skolkovo Customs Finance Company Vladimir Khokhlov, are being investigated for fraud, undermining Medvedev's attempts to improve Russia's image as a reliable business operator. Some Kremlin watchers have suggested that the Skolkovo probe is Vladimir Putin's attempts to end Medvedev's political career by discrediting his endeavours. Corruption remains something that can be used as a weapon in political infighting and the clan wars which have characterized a great deal of Putin's rule.

The Magnitsky case, apart from shedding light on corruption and legal nihilism, has also had a major impact on bilateral relations between the US and Russia. On December 6 last year, the US senate voted to introduce a set of sanctions against Russian officials involved in the death of Sergei Magnitsky. Dubbed the Magnitsky Law, it will prevent dozens of Russian officials from travelling to the US or having assets there. “There are still many people who look at the Magnitsky Act as anti-Russia,” said Senator McCain, on the bill’s architects. “I disagree. I believe it is pro-Russia. I believe it is pro-Russia because this legislation is about the rule of law and human rights and accountability, which are values that Russians hold dear.”

Russia's response has been far from sanguine. At the end of December, the Kremlin, in pure tit-for-tat manoeuvring, passed its own Dima Yakovlev law, which bans American couples from adopting Russian children. The ostensible reason for the ban is long-standing outrage over negligence manifested by adoptive parents. The examples of the death of Chase Harrison, (né Dima Yakovlev) who died after his adoptive parents left him locked in their car for nine hours on a hot day; that of a woman from Tennessee who put a 7-year old on a flight to Russia alone with a note explaining that she did not wish to parent the child any longer; and most recently, Max Shatto, a 3 year old who died under mysterious circumstances in Texas have also provoked concern.

United Russia deputy Pavel A. Astakhov, one of the most vigorous champions of the bill has said, "“Don’t present me as an America-hater […] I am a fighter for the rights of Russian children. I am fighting with those who violate children’s rights.” Others would argue, entirely reasonably, that these cases represent a tiny minority of the adoption stories of Russians fostered by Americans. Nearly one third of the 3,400 Russian children adopted by foreign families in 2011 were adopted by Americans. The total over the past two decades is 60,000. As orphanages in Russia tends to be overcrowded and underfunded, offer little hope for their inhabitants, it seems unlikely that the ban will serve children's best interests.

The move does however have relatively considerable popular support. Apparently 56% of Russians support the ban. Putin has not hidden the fact that the act is a matter of national pride. He told journalists at a press conference that the issue was not about Russian orphans, (in response to a question asking Putin why he had made “the most destitute and helpless children into instruments of political battle.” )He made it clear that it was prompted by a sense of humiliation, presumably due to the Magnitsky bill. “You think that’s normal?” the President demanded. “What’s normal about being humiliated? You like that? What are you, a sadomasochist? The country will not be humiliated.”

Despite the efforts of “the Reset”, handled by Obama and then President Medvedev, it seems US-Russia relations have firmly reverted to type. Putin’s brand of nationalism in dependent on demonising attempts at "foreign meddling " or interfering and it would be unfair to say that this does not resonate with many of the country's citizens. In addition to the adoption scandal, Russia has also used trade ties to punish Washington. At the end of December it decided to ban imports of US meat, unless it is labeled "ractopamine free". Ractopamine is an animal feed considered safe by the US and widely used. Given that the US exports about $500 million worth of beef and pork to Russia, the barriers to trade will have a considerable economic effect on American exporters. Russia has as of yet showed few signs of relenting on the imports. Perhaps the replacement of Hillary Clinton with John Kerry as Secretary of State could institute some sort of change or at least refresh relations. Moscow had expressed its preference that Kerry take the role as opposed to the “aggressive " Susan Rice - whom they know from the UN, where she is the US ambassador. The upcoming months will show whether a thaw is an option.

It would not be an exaggeration to say that there is an increasing cleft between the political culture in Russia and that seen in Western countries. One piece of legislation in particular has caused outrage across Europe and the US. Back in May 2012, the city of St Petersburg passed a highly controversial "gay propaganda" ban. This would prevent same sex couples from manifesting in any way their relationships, as it could be constituted as "propaganda." All manifestations of gay rights would therefore be interdicted. This law provoked a great swell of international outrage and was flouted by pop star Madonna at her recent St Petersburg concert. The chorus of disapproval has been relentless. The city of Venice also proposed to halt cultural relations with St Petersburg over the news. This has not deterred the State Duma from attempting to see this law made nation-wide. The law has already been passed in the city of Astrakhan and also in the Kaliningrad region. On January 25, in a first reading, the duma voted in favour of a federal ban. Human Rights Watch has urged the legislature to abandon this legislation, as has EU Foreign Policy chief Catherine Ashton. State-sponsored homophobia is becoming increasingly normal. On January 30th, a schoolteacher was fired after attending a protest against the anti-gay legislation. At a protest “kiss in” outside the Duma on the day of first reading, protesters were assaulted by Orthodox believers. Whilst there have been some dissenting voices within the Russian political elite (Medvedev for example seems to have suggested that state control on interpersonal relationships should not be allowed), the consensus is broadly in favour of such a ban. One of the more disturbing aspects of the bill is that it resonates clearly with members of society. Apparently 75% of Russians support it.

All of this, analysts say, reflects the increasing interference of the Orthodox Church in Russian policy making. The ‘Pussy Riot’ scandal, the first anniversary of which took place on February 21st, has been the centrepiece of global concern about the intervention of the Orthodox Church in issues relating to freedom of expression. The trio, who performed a “punk prayer” in Moscow's 'Christ the Saviour' Orthodox cathedral last year, were subsequently tried and imprisoned for hooliganism. Whilst one of the women was then released, two remain in jail on a two-year sentence. One of them, Nadejda Tolokonnikova, was recently transferred to a prison hospital after she companied about persistent headaches. The girls have repeatedly made clear that the conditions of their incarceration are difficult to endure. The girls’ protest was not simply directed at the church, it was directed at Vladimir Putin, as the activists demanded that the Virgin Mary "chase out Putin". The result however has been an increasing tightening of state and church in the face of the protest. The girls' plight has been a cause celebre across the world. Amnesty International has declared the women to be prisoners of conscience. The case typifies how difficult, indeed dangerous, it can be to present any criticism of the Putin regime. It is no surprise that Russia holds the world’s ninth-worst record for combating crime against journalists, according to a new report by the New York-based Committee to Protect Journalists.

International scrutiny of this kind is not particularly appreciated by the Kremlin. Putin would doubtless rather have the international community marvel over the nation’s vanity projects. The next major high-profile project designed to impress global spectators is the Sochi Winter Olympics, which will lake place in October 2014. The preparation for the games have proved so far to be the costliest in history. There have been numerous stories about the seamy side of the preparations for the games. There have accusations that migrant labourers have gone unpaid, that the building works have seen local residents evicted from their houses with inadequate notice and confiscation and that local ecology has been severely affected by the building works. Another serious concern around the Games is its location. The games will take place among the mountains that have been known to host Islamic militants. One of the tactics Moscow has used to "tame the Caucasus” is that of investing money in the region in an attempt to reduce the appeal of extremists. Many have described the results of this as hapless "terror-tourism."

Many argue that it will take more than economic investment to calm this restive region. Attacks between insurgents and police happen on almost weekly basis in Dagestan and Ingushetia. In January, Russian President Vladimir Putin removed Mogomedsalam Magomedov as head of Dagestan province. The implication is that the President continues to take the issue of Islamist violence in the Caucasus seriously. “Dagestan is without question the most important security concern in the region and, with the Sochi Olympics approaching, the Kremlin needs to impose order,” said Achmed Yarlikapov, an expert on Dagestan with the Russian Academy of Sciences. The Olympics are not the only worry. The crisis in Syria is also problematic in terms of regional stability. Moscow is firmly backing the Assad regime. It has been reported that the Syrian opposition includes up to 6,000 Chechen Islamists. With the Syrian opposition gaining momentum, Moscow has reason to fear that this will galvanise Russia's homegrown Islamists. In addition, a large number of the Syrian refugees include Cherkessians who are now seeking refuge on Russian territory. Russia is resisting on the basis that the Cherkessian are a Muslim group and their resettlement could stimulate further Islamic solidarity.

This part of the world, which has proved so troublesome for Russia, will only continue to cause suffering as troubles in Syria rumble on. Additionally, the withdrawal of American trips from Afghanistan in 2014, whilst allowing Russia to reassert its power in the region, may also leave a power vacuum that could be exploited by jihadists. The Sochi Olympics, designed to showcase Russian might and wealth, could serve as a lightning rod for disenfranchised Muslim groups. The fact that the hallmarks of Putinism are attempts to create homogeneity and is intolerant of difference, means that it is only more likely that those belonging to ethnic groups in underprivileged regions feel increasingly marginalized.
 

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