Vladimir Putin’s Economic Plan Spooks Russian Entrepreneurs
Business owners and foreign investors are expressing doubts about Vladimir Putin’s plan to fix Russia’s economy even as the Kremlin celebrates a big oil deal.
MOSCOW—A young entrepreneur named Vladimir Khrykov listened attentively to every word President Vladimir Putin said last week in his address to Russia’s Federal Assembly. And the 30-year-old was hugely disappointed by what he heard.
For Khrykov, who runs a diaper company on Sakhalin Island in Russia’s Far East, foreign investors are key to his business. And his clients are eager to know just one thing before they invest: Will Russia see more profits in the next few years? And so Khrykov tuned in to hear Putin’s economic plan, so he could divine the future for his firm.
“Putin has no strategy,” Khrykov told The Daily Beast on Wednesday, as he despaired over the contents of the president’s speech, which seemed fragmented at best. “It is impossible for us to convince our foreign investors to spend money on technologies here, as nobody can be sure that the population will be able to afford the product in the future.”
Recently, Khrykov’s Japanese partners asked him whether Russia’s economy would improve in the next 50 years. He didn’t know what to tell them.
Foreign investors are indeed suspicious about sinking money into the country without some firm guarantees. As one academic, Alexander Abramov of the National Research University Higher School of Economics, explained to The Daily Beast, “It looks suspicious to foreign investors, to see that up to $200 billion stays in Russian banks. They wonder why local investors do not invest in businesses here.
“The answer is simple,” Abramov added. “Most Russian investors feel uncertain about their country’s future.”
Under economic sanctions, in place since 2014, it’s been difficult for Russia to find foreign buyers even for the country’s biggest company, the oil giant Rosneft. Then, earlier this week, the Swiss commodity trading firm Glencore and Qatar’s sovereign wealth fund announced they were buying a 19.5 percent stake in Rosneft, to the tune of $11.3 billion. The Kremlin and Rosneft celebrated the successful deal—but experts told The Daily Beast that Russia could have sold Rosneft for a 30 percent or 40 percent stake or more, were it not for the sanctions.
“It was the lowest price,” Abramov said before conceding, “but something is better than nothing. For a long time there was no hope that Rosneft would be able to sell even that.”
Even as the government celebrated the sale of Rosneft, bad domestic news kept trickling out last week. First, the Education and Science Ministry fired the entire science department without any explanation. Then, the government informed Russians it would be running background checks on all college and university students to screen for extremism. “By law, students cannot be forced to fill out these questionnaires,” said Tanya Lokshina, the Russia program director and a senior researcher for Human Rights Watch. “But then it’s easy to imagine students being pressured by faculty members to give their consent.”
She added that no one had any idea “how [the questionnaires] will be processed and what will be done with the findings.”
The stifling atmosphere for civil rights is among the factors contributing to a record number of Russians applying for political asylum in the U.S.—1,912 people this year, a 31 percent increase over 2015 and the largest number of asylum seekers since 1994. “I cannot stand the atmosphere of no freedom, no oxygen here,” Vitaly Mansky, the founder of the documentary film festival Artdokfest, told The Daily Beast. “Only a few countries, including Syria and North Korea, have recognized that Crimea is Russia’s. Now the authorities are cuddling up to them while the rest of the country is left without any hope of a better future.”
Mansky had just finished a film, Under the Sun, about life in North Korea’s totalitarian state. There, teachers brainwash North Korean children with the bogeymen of Japan and America. The film was very successful among Russian intellectuals, who see certain similarities with their own society.
Meanwhile, Putin continues to blame the West for Russia’s troubles. “We found ourselves facing sanctions that were an attempt to get us to dance to another’s tune and ignore our own fundamental national interests,” the president announced in his speech to the Federal Assembly. He then acknowledged that the country’s serious economic challenges had domestic roots, including “the lack of investment resources, modern technology, professional human resources, insufficient competition, and shortcomings in our business climate.”
When it came to Russia’s values, the presidential address sounded confusing even to pro-Kremlin officials. “I understand why, for young people, it is difficult to figure out where we are going—there is no ideology, our values are blurry, one day we talk about the ‘Russian World’ [the ideology in rebel-controlled Donbas and Crimea], Orthodox Christianity, and the next day about Stalinism, because the world has become unpredictable, things are changing so fast, we do not have enough time to react,” a member of Russia’s Public Chamber and an adviser to the presidential administration, Sergei Markov, told The Daily Beast.
Still, Markov was optimistic. “The center of power is already moving to Russia, our society has consolidated, there is 86 percent support for the president, and Russia is becoming a powerful factor. The NATO summit this week talked about Russia, the U.N. Security Council talked about Russia, even coverage of presidential elections in the United States had Russia in their headlines. Everybody is talking about Russia.”
Markov also dismissed concerns that foreign investors would be skittish. “There is great potential for Russia in terms of cooperation with the Asia-Pacific region, as we saw at this year’s Eastern Economic Forum,” he said, before adding that “Putin still prefers to have a partnership with the West, rather than with Asia—we are closer to Europe historically and by our mentality.”
Yet to businessmen like Vladmir Khrykov, Putin’s economic address laid bare the mismanagement of his country and made them doubt Russia’s future. Even Russian bloggers were busy comparing Putin’s address to Soviet leader Leonid Brezhnev’s speeches during the era of stagnation between 1965 and 1982. “There is no ideology,” Khrykov said again. “Russia lives by the rules of capitalism but pretends to be a center of power when its economy is weak—and all we have are nuclear bombs.”