Putin: Return of the Czar
The Scenario
Return of the Tsar...The Empire strikes back
The Myth
Energy Superpower / Return of the Czar
Russia wants to regain the power and influence it lost with the collapse of the Soviet Union. Putin’s vision of Russia is that of an influential state, supporting Slavs in the region, using oil revenue to increase influence and power in the region.
Timeline
Period of 2010 - 2015
2010-2015 Return of the 5 year plan
There has been speculation about the true nature of the relationship between Dimitry Medvedev and Vladimir Putin, and about where the balance of power lies between the two men. The speculation is laid to rest in 2012 when Putin returns to the presidency. With the support of a compliant media Putin and his United Russia Party easily win the election against a narrow field of weak opponents. The election was one before it began because there was no credible opposition to begin with. The only real contest was between Putin and Medvedev, however, this contest was not played out in public, leaving observers guessing as to how the competition was resolved. Putin’s return to office is marked by an extravagant ceremony in the Kremlin, which causes some commentators to observe that the Tsar has claimed his rightful place on the throne.
Shortly after his election, Putin orders and personally oversees another restructuring of the defense and security forces, including the army and the FSB. This restructuring enables him to consolidate power, much as he did in 2000, keeping any opposition to him highly fragmented and preventing any strong rivals from emerging. Through the intelligence services Putin keeps tight control on corruption which, although institutionalized, is carefully monitored so that it does not taint the Kremlin.
The 2008 financial crisis and the collapse of oil prices made it very difficult for Russian oil and gas majors to pay their debts, let alone invest in technology and management. However high prices in 2010 (oil is around $100) mean that the Russian government and the oil and gas enterprises are again in the red.
Putin believes that in order to fulfill his vision of a strong, united Russia there must be active investment in Russia’s strategic resources and infrastructures. In a throwback to Soviet-style central planning, the government implements a 5- year plan to upgrade energy infrastructure. Major new projects are announced to upgrade and expand refineries, pipelines, railways, ports, electricity grids and nuclear power plants. State enterprises and private companies in the energy sector are required to invest a large portion of their earnings in new technologies and facilities.
The oil and gas industry is the target of an anti-corruption initiative from the Kremlin. There is a realization that corruption in the sector is particularly damaging because it not only massively diverts revenues away from Moscow but impedes foreign investment and involvement; this limits the ability of the sector to attract foreign technologies and expertise and benefit from the consequent productivity gains.
The Nord Stream project, a pipeline under the Baltic Sea to Germany, is completed on time in 2011. By delivering gas directly from Russia to Germany the pipeline effectively extends Russian influence over Eastern European countries (primarily Poland, Ukraine and Belorussia) since it makes it possible for Russia to limit their gas supply without affecting Western Europe.
Over time better management practices are introduced as political appointees lacking either the requisite technical expertise or demonstrable performance track record are replaced by new talent. Although strict limits on foreign ownership remain in place and the sector remains subject to political interference from time to time, in general relationships with western oil and gas companies improve as they feel there is more predictability in the sector and they have more control over their investments.
The government’s focus on and considerable investment in this sector inevitably results in neglect and underinvestment in health, education and the environment. Although Russia has historically been recognized as having a highly skilled labor force, those Russians that can afford it travel abroad for education and medical treatment. The majority of them ultimately return to Russia.
The judiciary and other agencies, though still staffed by Kremlin appointees, come under closer scrutiny with respect to performance. Though still suffering from occasional political interference, fairness and competence can be said to have objectively improved. The penal system remains rife with corruption and human rights abuses.