The following post is my response to an article published by the author the Russia & CIS blog, Democratist. The original piece is titled “Encouraging Liberalization in Russia.”
Oil dependency and crippling corruption. Yes, these are certainly problems facing Russia’s economic development. (Though I do find it curious that you use military tech as an example of innovation struggles, as surely a revamped weapons R&D infrastructure would involve more state intervention, not less.)
I agree with you that Western businesses would be vastly more comfortable investing their money and energy in Russia if they felt more confident about “the institutions of Russian democracy and civil society.” But profit returns remain the bottom line. The 2007 Sakhlin-2 scandal was perhaps the nadir in the modern history of Russian FDI, but even that venture is starting to finally post profits — profits that accrue to both the federal government and a team of private investors, largest among whom is still Dutch Shell oil.
That being said, Russia has, is, and will continue to be able to attract a great deal of direct foreign investment (even if it slumped during the financial crisis) thanks to the enduring truth that investing in Russia is extremely profitable. Finance Minister Alexei Kudrin estimated earlier this year that FDI would be back to pre-crisis levels in less than three years.
Cases like Magnitsky and Khodorkovsky (whose political and economic significance is exaggerated by publicity machines paid for by Bill Browder and Mikhail Borisovich) are hugely embarrassing and undoubtedly damaging to Russia’s image, but Western money is going to keep flowing in, regardless of any new FSB ‘warning’ powers or any further harassment of the political peripherals among the liberal opposition. Business interests have made a habit of publicly demanding greater freedoms, bemoaning Khodorkovsky’s treatment, and generally criticizing the entrepreneurial environment in Russia — but that hasn’t stopped organizations like the U.S.-Russia Business Council from literally conducting economic “Road Shows” for visiting Russian politicians to showcase eager American business partners.
Regarding the latter half of your post: I myself don’t entirely understand the current hysteria surrounding “innovation.” The Skolkovo experiment is supposedly modeled on Silicon Valley, though it makes far greater sense for Russia to copycat its Chinese neighbors, who are masters themselves at copying foreign technology and reproducing it cheaply. Russia ought to set its sights on this: a state-led reequipping of its universities and research centers. Harley Balzer put out a piece on this very subject last month (“Medvedev Should Look at China’s Silicon Valley“), though I confess he describes China’s “incentives” program in strangely Western-innovative terms (i.e., pooh-poohing university tenure and playing up “evaluation” processes). Innovation, it’s my understanding, hasn’t been the engine of Chinese resurgence; the real fuel has been a coordinated campaign to efficiently distribute rents and import Western technology. Russia could certainly do this better without needing an explosion of native startups.
“Preaching at the Russians is likely to be counterproductive given the mindset of many in the nomenklatura.”
I fully agree that such preaching has, would be, and always is a terrible policy — for Russia, and for any other country, for that matter. Americans tend to think of themselves as shielded by teflon when it comes to domestic democratic practices, but if Vladimir Putin were to visit the United States and start lecturing the American people about the anachronistic design of the Electoral College, the media would likely go into a frenzy of hurt feelings and shock that a foreign leader would dare to tell us how to run our country.
Unfortunately, this makes OSCE ODIHR election monitoring a definite nonstarter. Everyone from the president, to the siloviki, to the grassroots hired goons of United Russia understands that turning out election results is a reflection of party loyalty. The results are “fixed,” if by “fixed” we mean that an anarchic system of overzealous underlings does what it can to pull off a dizzying success. When this finally changes, which it will eventually (if by design or by collapse), it will be thanks to internal power brokering between figures in the Kremlin and cooperating members of the really-existing opposition (i.e., the parties with parliamentary seats and an actual audience with Russia’s leaders).
The most Western nations can do — indeed the only policy sure not to backfire — is to engage Russia internationally as an equal partner in relevant affairs. Many U.S. policy-makers scoff at the idea of granting Russia any measure of parity — but in the same breath they’ll often criticize Moscow for resorting to base 19th century realpolitik. Surely their revulsion to the concept of parity is founded largely on the perception that America is far stronger than Russia — that Washington should not allow a much weaker, much poorer nation like the Russian Federation to interact with the United States of America as an equal member of the world community. ‘America is powerful!’ ‘America is free!’ This, it seems to me, is the poisonous lifeblood animating the emerging opposition to the New START treaty.
When the U.S. decides to assert its superiority over Russia — which it’s certainly entitled and able to do — Americans should not be surprised that this undercuts efforts to export Western institutions. The most any ‘democratizer’ can hope for is a calm and unthreatened-feeling Russian leadership. The rest is up to the Russians.