Sincerely yours at your expense

Dmitry Medvedev / Photo by nnm.me
Dmitry Medvedev / Photo by nnm.me

Russian officials’ increasingly frequent statements about the lack of funds in the country’s budget to cover even the bare necessities of life make one almost believe their sincerity. It is not that officials themselves experience money problems. The most recent examples with Medvedev’s 35-billion-ruble country house or 8 billion rubles in cash discovered in the possession of the temporary acting head of Russia’s anti-corruption agency, colonel Zakharchenko, do not leave any doubts regarding  Russian officials’ success in siphoning off the national wealth. However, besides a few million of ministers, lawmakers, policemen and prison officers who are comfortably settled in life, there are some 140 million citizens in Russia, whose living standards directly depend on budget funds left over after officials’ rent-seeking activities.

In late 2015 and early 2016, the country’s budget was adopted with a deficit and later subject to sequestration. According to the most recent official figures, in the first half of 2016, Russia’s budget deficit has reached 1.52 trillion rubles. Over this period, Russian tax and customs services have collected around 5.24 trillion rubles, and, all other revenues included, the country’s gross national income reached the lower-than-expected 5.87 trillion rubles, since the 2016 draft budget envisaged 13.74 trillion rubles in revenues. It is obvious that at the end of the year, this figure will prove to be unattainable, as Medvedev sincerely admits.

The government traditionally rejects the option of increasing taxes and thus suggests balancing the budget for the next three years by cutting spending by 3.5 trillion rubles. Read More “Sincerely yours at your expense”

Putin’s Regime Thumbs its Nose

Russian Prime Minister Dmitri Medvedev during a visit to Crimea. Photo by A. Pupysheva / kafanews.ru
Russian Prime Minister Dmitri Medvedev during a visit to Crimea. Photo by A. Pupysheva / kafanews.com

On May 23, during a visit to Crimea, Russian Prime Minister Dmitri Medvedev made a fool of himself with a cynical and provocative phrase that quickly became one of the most popular hits on Russian Internet. Answering the question from an elderly lady about why pensions are not being raised, Medvedev, without so much as a thought, retorted: “There’s simply no money. If we find the money, we will raise pensions. You hold on here, I wish you all the best, good spirits and good health.” But the money is lacking not only for pensioners: all those who had for years depended on the needle of “Putinomics” are experiencing problems.

Russia’s largest car manufacturer, AvtoVAZ, is once again finding itself in a difficult situation: beginning on June 6, its workers were transferred from a four-day to a three-day week; layoffs of between 5,000 and 8,000 people are expected. According to AvtoVAZ’s report, the company’s debt arrears of more than 45 days after the first quarter of 2016 has reached 25.3 billion rubles—3.8 times greater than during the same period of 2015. The company’s total debt to suppliers and contractors during the same period amounted to 66.5 billion rubles (including arrears of 25.3 billion.) After the first quarter of 2016, the company’s net loss has increased 48 times, reaching 8.6 billion rubles. To cover its losses, AvtoVAZ will ask its French partner, Renault-Nissan, for a loan of 20 billion rubles. If it is unable to pay that loan back, AvtoVAZ will have to pay with its shares and assets. Read More “Putin’s Regime Thumbs its Nose”

Kremlin Imitators: Putin, Medvedev, and Kudrin Who Joined Them

Alexey Kudrin and Dmitry Medvedev / Photo by postsovet.ru
Alexey Kudrin and Dmitry Medvedev / Photo by postsovet.ru

It appears that the Russian authorities have once again turned to their favorite pastime of successfully imitating reforms. After two years of fighting first in Ukraine and then in Syria, Vladimir Putin decided to address the crisis in the country. The elections are close at hand, while the economic situation in the country has been steadily deteriorating for the last two years, and the population is being increasingly affected by it. The quasi-patriotic rhetoric and the “Krym nash” (Crimea is ours) slogan cannot save the government’s poll standings from slumping anymore. Putin decided he needed a program and appointed his loyal colleague and former Finance Minister Kudrin his main “reformer”. However, in 16 years in power, Putin has never successfully implemented any major structural reform. Thus, this new seemingly liberal initiative will be nothing more than yet another step in the process of appropriation of state resources and unsystematic campaigning.

It is obvious that there can be no successful structural reforms in Russian under the Putin regime if only because reformers have no real authority regardless of the informal status granted to them by Putin. Created in 2012, the Economic Council under the Russian President has until now stayed dormant. Putin’s St Petersburg friend, Alexei Kudrin Read More “Kremlin Imitators: Putin, Medvedev, and Kudrin Who Joined Them”

Endangered Species of Business

Vladimir Putin. Photo by Alexey Druzhinin / "RIA Novosti"
Vladimir Putin. Photo by Alexey Druzhinin / “RIA Novosti”

During a recent meeting on the improvement of the government procurement system, Prime Minister Medvedev declared that it was imperative to involve small and medium-size businesses in this process. One month later, the Ministry of Economic Development came up with draft legislative amendments that are supposed to facilitate the conditions for participation in the process of government procurement for small-size enterprises by dispensing them from the required provision of collateral. It is as yet unclear whether this measure will be effective, since specialists already point to the insufficient and inaccurate character of the proposed changes.

Concern for small and medium-size businesses is one of the favorite topics for both Medvedev and Putin. However, despite the annoyingly regular promises of support, small companies continue to experience difficulties.

The share of small and medium-size enterprises in the country’s GDP is a key indicator of Russia’s economic health. According to official estimates, in Russia it amounts to 20 percent.  According to entrepreneurs themselves, however, it only reaches 3 percent. In comparison, in the United States, the share of small businesses in the country’s GDP amounts to around 60 percent, and in some European countries it reaches 80 percent.

In 2014, more than half of all small enterprises recorded a decrease in financial stability, and more than half of entrepreneurs declared that business conditions had deteriorated. Over the past year the tendency has not changed, Read More “Endangered Species of Business”