Window on Eurasia: Russian Reform “Paradoxically” Depends on Rising Oil Prices, Moscow Paper Says

Staunton, April 5 -- Because Russia’s ruling elite views reform as a luxury rather than a necessity, declines in oil prices have a paradoxical impact on Moscow, the editors of “Nezavisimaya gazeta” say, pushing reform off the table rather than making it a matter of survival as is the case in other oil-exporting countries.

In a leading article today, the editors of this independent Moscow paper write, the dependence Russia’s rulers have on the price of oil is “abnormal and paradoxical” because a fall in oil revenues forces them to drop plans for reform while an increase in prices can give them a chance to take reformist steps (www.ng.ru/editorial/2011-04-05/2_red.html).

This Russian pattern, very different than in other such countries “in which a decline in prices for raw materials stimulates the transformation of a raw materials,” the editors say reflects the peculiarities of the Russian political system and in particular the calculations of the current Russian elite.

The editors begin by noting that according to the latest Levada Center poll, “51 percent of Russians consider that a growth in prices for oil harms the economy of the country,” although it appears that few of them understand precisely how “oil superprofits freeze reforms and the reconstruction of the economy.”

Moreover, the editors say, “in public” at least, Russian leaders from “the modernizer” Dmitry Medvedev to “the conservative” Vladimir Putin “recognize that the raw materials economy has exhausted its possibilities, that a favorable situationmust not be allowed to weaken us, and that modernization is necessary.”

Even as they say this, however, the paper continues, “the powers that be are sitting on two stools. On the one hand, they … recognize the need for change.” But “on the other, the mandate for the administration of the country has been given to the current ruling elite by a paternalist and not reformist electorate.”

That second stool, the “Nezavisimaya” editors emphasize, thus rests on “a voter who is accustomed to populism and the transfer of responsibility ‘upwards’ with the fulfillment of the social obligations of the state. Without [that voter], the existing powers would not be the powers.”

Thus, “when the Russian budget is not receiving oil superprofits,” the paper’s editors say, “the powers are forced to choose one of the two stools; and they choose populism rather than economic reforms” which are certain to be unpopular at least as concerns their short-term consequences.

“The nature and character of the preferences of the existing powers are such that the question of social obligations is for them a matter of self-preservation,” “Nezavisimaya”argues. And from this it follows, that “as soon as additional oil revenues again become to arrive in support of the budget, the powers have the chance” to take steps toward reform.

“In this way,” the paper continues, “an increase in the price of oil gives the Russian ruling elite the opportunity to realize the liberal order of the day,” a pattern just the reverse of what would be the case in most countries where “a fall in prices for raw materials stimulates the transformation of a raw materials economy.