Window on Eurasia: Putin’s Pursuit of ‘Energy Empire’ Accelerating Russia’s De-industrialization

Paul Goble

Vienna, December 8 – Industrial production in Central Russia fell by 20 percent during the first nine months of 2009 as compared to the same period a year earlier, the result, one analyst says, not so much of the international financial crisis than of Vladimir Putin’s pursuit of “an energy empire” and his attacks on businessmen who might invest in industrial development.
Yesterday, “Novyye izvestiya” reported that industrial production had fallen in Russia as a whole by 14.5 percent, with the central region being among the hardest it, with automobile and machine-building there down 30 to 60 percent, construction down 20 percent, and the number of businesses down 30 percent (www.newizv.ru/news/2009-12-07/118560/).
Commenting on that report, Kasparov.ru observer Yury Gladysh says that it was important to go beyond saying that “we warned you” this would happen to a close analyst of why the situation is so dire and why it is unlikely to change unless there is a fundamental shift in state policy (www.sobkorr.ru/news/4B1CBFBB82329.html).
A major reason for the unprecedented decline in industrial production in Central Russia, he suggests, is the concentration of machine-building plants there and their inability to compete, the result of policies going back to Soviet times that have been exacerbated by Vladimir Putin’s focus on gas and oil development.
Forty years ago, Gladysh points out, Soviet planners focused on heavy machine building plants rather than its lighter forms, thus limiting the ability of these firms to adapt. And more recently, the Russian government has failed to invest in industry and worse has created conditions in which few industrialists are willing to take the risk of doing so.
Given the government’s incarceration of Mikhail Khodorkhovsky, Gladysh continues, “not a single normal businessman will begin to invest money in production when he knows that in the case of success, he can be deprived not only of these funds but also of freedom and even life itself.”
But there is an even bigger problem for Russia, he adds, if it is to prevent the de-industrialization of the economy and hence the degradation of the society. That is “the Putin plan” which “unfortunately is being successfully introduced into life,” as the recent statistics show.
While production in the industrial centers of Russia continues to fall, the regions where natural resources are extracted continue to show “stormy economic growth,” because of the export of gas and oil. If that pattern continues, Gladysh suggests, Russia will be reduced to a raw materials supplier to “the industrially developed powers.”
“Stopping that course of development can occur only if there is a change in the existing administrative system, which [since Putin came to power] is oriented toward the creation of a mythical ‘energy empire,’” Gladysh concludes. “But that task,” as he points out, “already goes far beyond the limits of pure economics.