Long list of challenges awaits Medvedev in Russia

Posted in Russia | 07-May-08 | Author: C.J. Chivers| Source: International Herald Tribune

A worker cleans a monument to World War II participants Tuesday in Stavropol, Russia.

MOSCOW: When Dmitri Medvedev, the president-elect, utters the oath of office Wednesday in the czarist splendor of St. Andrew's Hall, the event will be broadcast throughout the Russian-speaking world as an implicit triumph of the leadership of President Vladimir Putin.

Putin, the KGB officer turned head of state who has governed Russia as it regained its footing after a decade of post-Soviet disorder, will have voluntarily left office at the heights of popularity. And Medvedev, his personally selected successor, will be cast as a modernizing figure assuming the presidency of a proud nation freshly saved from poverty and disgrace.

The Kremlin then plans to mark the occasion on Friday with a military parade in Red Square of a sort not seen since the Cold War, complete with flyovers of strategic bombers and rumbling columns of tanks.

Medvedev will be Russia's third post-Soviet president, and newest source of speculation. He has presented a puzzling self-portrait, at times suggesting that major changes are necessary - including attacking the country's manifest corruption and reducing the bloat of its bureaucracy - and other times insisting he will broadly follow the path chosen by his sponsor.

"I fully agree with our president, who said that the quota for revolutions and civil strife in Russia was used up in the last century," he said earlier this year, one of many remarks suggesting that he will not challenge Putin's legacy.

And so as the ceremonies this week will mix Soviet nostalgia, czarist symbols and new Russian strut, Medvedev, 42, will be taking charge of a portfolio and a position more difficult than any celebration will suggest.

The policy challenges are unenviable, even if Russia has recovered from its severely weakened state. Medvedev faces steeply rising inflation, an outsized bureaucracy, pervasive corruption, a weak judicial system and a population decline fueled by low birth rates, substandard health care and poor public health.

The country's economy is narrow and many sectors - including agriculture and high-technology - are underdeveloped. Its ruling cliques of bureaucrats, businessmen and former security-service officers, whose loyalties to Medvedev are untested, have been divided by infighting.

Medvedev also faces tensions in the Caucasus, along Russia's mountainous southwestern border, where Georgia, a former Kremlin satellite, has accused Russia of beginning to annex the separatist enclave of Abkhazia, and of risking war.

Moreover, Medvedev, who will appoint Putin as prime minister as soon as Thursday, will rule through a new governing model and with an uncertain power base. His stature has been undermined even before his inauguration office by reports that Putin intends to continue wielding power from the prime minister's suite.

One Russian newspaper reported this week that Putin planned to increase the number of deputy prime ministers almost twofold, providing jobs for his entourage and institutionalizing the notion of a strong prime minister who controls most of the affairs of state.

Stephen Sestanovich, a senior fellow at the Council on Foreign Relations, a policy research organization based in New York, said that whatever policy choices Medvedev will ultimately make, the degree to which he will be able to pursue his own vision for Russia's future, as opposed to being confined by Putin, is not yet clear.

"Does he have any power?" he said. "Is he a decorative figure?"

He added, "Of course we just don't know about any of that yet."

By many measures, Putin's years of rule were accompanied by a range of accomplishments, all unforeseen when he stepped from spymaster obscurity eight years ago.

In spite of his sometimes spectacular setbacks and missteps, personal incomes for many Russians rose sharply, Russian troops and their proxies defeated and marginalized the bulk of separatist forces in Chechnya, and Russia paid down foreign debts ahead of schedule.

The value of the Russian stock market skyrocketed. The country's main cities entered construction booms. Urban shops filled with goods. Consumer lifestyles and foreign vacations became available to a large segment of the population for the first time.

Putin simultaneously played foil to the United States, playing host to or meeting national leaders at odds with Washington: Aleksandr Lukashenko of Belarus, Hugo Chávez of Venezuela, Islam Karimov of Uzbekistan, Mahmoud Ahmadinejad of Iran.

He reminded his audiences that he had consistently opposed the invasion of Iraq and what he called American interference in the domestic affairs of former Soviet states.

After the economic collapse and public embarrassments that accompanied the administration of President Boris Yeltsin, national pride was significantly restored. Many Russians now plan for their futures in ways they could not a decade ago.

But fresh problems have emerged, and problems that thus far have eluded Kremlin solutions remain. Medvedev, who favors yoga over Putin's sport of judo, faces several problems that continue to darken projections about Russia's future.

Chief among them, according to Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington, are inflation, the poor state of public infrastructure and endemic corruption.

During Putin's first year office, oil prices were between $20 and $30 a barrel. Today oil prices hover around $120. Russia is the world's largest energy exporter, and the oil price spike accounted for part of Russia's economic turn-around.

But the hot economy has created new pressures. The cost of living has soared, pushed upward by a real estate bubble and climbing prices for utilities, gasoline and food.

Inflation has topped 13 percent, spreading dissatisfaction and worry among many Russians, especially pensioners, who remember the inflation of the 1990s. The middle class is pinched, too. This month, gasoline prices reached nearly $1 a liter, or $3.75 a gallon - a considerable expense for a nation where typical household incomes are still a fraction of those in the West.

Several Russian officials have hinted that Russia will soon allow the ruble to strengthen as a means of cooling the economy down.

"A main concern is to bring down inflation, and the only way to do it is to let the ruble float upwards," Aslund said. "I think that Medvedev will get on the strong ruble bandwagon."

Long-term solutions are more challenging. Russia's infrastructure largely dates to Soviet times. The huge investments required to restore it would create more inflationary pressures.

Aslund said that efforts at capital investment risk being squandered by corruption, which is so pervasive that kickbacks on public works and energy projects can reach 50 percent.

"You can't build infrastructure if half the invested money has to go to kickbacks," he said.

Medvedev, who has made social issues and social stability centerpieces of his public remarks, also assumes the presidency of a nation at risk of a sharp population decline.

Russian public health is poor enough, and birth rates low enough, that even as Russia has transformed itself, its population has shrunk.

Putin introduced incentives two years ago to encourage women to have more children. In 2007 there was an increase in the birth rate and a small decrease in the death rate.

But Murray Feshbach, a demographer who studies Russian public health, said the demographics still looked bleak, in part because the number of women from 20 to 29 years old - those who in Russia account for most births - will begin to decline in 2012.

The population is also infected with tuberculosis at more than twice the rate considered an epidemic by the World Health Organization. Deaths from AIDS are rising. An outbreak of Hepatitis C, which has a long gestation period, is anticipated within five years.

Without comprehensive programs to contain these diseases and reduce the death rate, Feshbach said, Russia risks a dwindling labor pool and further declines in the size of its armed forces in the decades ahead.

"You have to attack all of these problems simultaneously," he said. Otherwise, he added, "the basic thrust is downward and downward."

Sestanovich said that there have been signs in Medvedev's speeches that he sees the world differently than his predecessor did. He has called for outside experts to challenge the government's thinking, emphasized the need to shrink the government's size and powers, and challenged the assumption, integral to centralized planners, that the state must produce prosperity.

"He's not just running against the 90s, as Putin did," he said. "There is a kind of awareness in Medvedev that he has to deal with things that went a little wrong under Putin."

He added that some of the tasks he set for himself might be beyond his immediate reach, and will provide a means over time to measure his power.

"Reeling in the power of the state bureaucracy?" he said. "That's a pretty tall order."

Michael Schwirtz contributed reporting.