Anyone who has been to Russia a decade earlier would be able to measure the magnitude of its achievements today. Russia ten years back was a country in midst of a socio-economic collapse, a country reeling from the impact of the disintegration of the once powerful Soviet Union, a nation humiliated as its finances were run out of Washington by the IMF and a country racked by political instability. Russia in 1999 was ailing, just like its President, Boris Yeltsin.
It had been struck by the Constitutional crisis of 1993 and the Rouble crisis of 1998. Russia was seen as a failed state, even by some Russians, and Europe and America had all but written off any prospects of her acquiring the formidable position that she had once held, as the Soviet Union.
Many reasons can be attributed to the failure of reforms. A prominent Chinese Banker said that Russia had followed a Big Bang approach towards reforms; China, by contrast, had followed a gradual approach of implementation over a number of years. The deplorable situation of Russia is generally attributed to the “chaos created by Yeltsin” in the name of reforms in contrast to the “statist Putin” who brought about “a measure of order”. Hamish McRae “suspects that both Putin and Yeltsin should get equal blame and credit.” It was Yeltsin, after all, who retained Gazprom as a state monopoly.
However, no matter what the nature of transition might have been, it is an unavoidable fact that Russia is now clearly on the upward path. Certain facts will show how drastically the situation has changed. Since the turn of the century, high oil prices, foreign investment, increasing domestic consumption and political stability have bolstered economic growth. Russia ended 2006 with its eighth straight year of growth, averaging 6.7% annually since the financial crisis. Russia‘s 2006 GDP was $1.723 trillion, the 8th highest in the world, with GDP growth of 6.8%. Growth was driven by non-traded services and goods for the domestic market, as opposed to oil or mineral extraction and export. The World Bank had forecasted that Russia‘s GDP will grow by at least 7% in 2007. Approximately 12.5% of Russians were below the federally designated poverty line in 2007, down from 33.5% in 1992.The average salary was $540 (about $920 PPP) per month in August 2007, up from $65 per month in August 1999.
The economy has not only recovered all the ground it lost in the 1990s, but has also developed a robust service sector that was practically non-existent in the Soviet period. Russia has become resurgent and revisionist. The power in Russia has become highly centralized and personalized, crushing the regional barons and corrupt oligarchs who had undermined the structure and stability of Russia. Russia, has embraced the word “stability” and “strength” after a hiatus of more than a decade.
This rise seems astonishing because of certain wrong assumptions by the West. Firstly, most of Moscow‘s elite rejected the view that the loss of empire was irreversible. Second, Washington‘s unilateralism shattered the belief that the United States would continue to provide the world with “multilateral” leadership; indeed, U.S. unilateralism was a cue for the Kremlin to pursue its own unilateral policy. Thirdly, Russia has not yet become economically integrated with the West, especially Europe, as was expected. It is a fact that Russia is a nuclear power and also possesses vast amounts of resources like natural gas and petroleum, which Europe craves so much.
As Hamish McRae as said, Russia is returning to the role that it used to perform in the early twentieth century, which is that of a resource provider to the Europe in return for which it gets finished goods. At this point, it is imperative to show the extent of Europe’s chronic dependence on Russia’s resources. By the end of 2004 Gazprom was the sole gas supplier to at least Bosnia-Herzegovina, Estonia, Finland, Macedonia, Latvia, Lithuania, Moldova and Slovakia, and provided 97 percent of Bulgaria’s gas, 89 percent of Hungary’s, 86 percent of Poland’s, nearly three-quarters of the Czech Republic’s, 67 percent of Turkey’s, 65 percent of Austria’s, about 40 percent of Romania’s, 36 percent of Germany’s, 27 percent of Italy’s, and 25 percent of France’s. The European Union as a whole gets about 25 percent of its gas supplies from this company.
Russia’s economy is growing in a unique way; there is its vast natural resource base on one hand and the expanding service sector on the other. Analysts believe that in the 21st century, Russian economy’s integration with the rest of the world is as important as the role foreseen to be played by India and China. McRae believes that the coming years will see Russia gaining more success because it possesses the natural resources “desperately needed by Europe” and moreover, “the energy and raw material prices will remain high due to the demand from China and India. Skeptics are saying that this growth is “uneven and rough”, but even though this success may be a flawed one, it is, nevertheless, a success. It can be gauged from the fact that the Russian economy is proposed to grow at 7% which is higher than the growth rate of any member of the European Union. Russia has arrived; it is a reality, which the West will have to face up to soon.
It seems that it is the West, which is at a receiving end, when it comes too dealing with this new, revitalized Russia. It is imperative for the EU and the United States to develop cordial economic relations with the fast growing giant. Russia has a pivotal role to play in the world economy for decades to come, and the West has no choice but to give space. Russia, despite having a long history of constitutional, economical and political hiccups has in a sense, reincarnated itself, rising from the flames, and this new Russia is here to stay.
The Architect of Russia’s Success by Hamish McRae Shrunken, Proud and Awkward by Robert SkidelskyGazprom, Wikipedia Economy of Russia, Wikipedia The modern czar, ohio.com(editorial)