CRISIS IMPACT: Russian recession raises hope for reform
* Russian reform agenda forgotten in good times
* Courts, deregulation, pensions, infrastructure at stake
* State intervention in companies increasing
* Price of oil, commodities key
MOSCOW, June 9 (Reuters) - Russia's economy is mired in a deep recession, unemployment is soaring and industrial production is collapsing -- but some policymakers and economists fret that the Eurasian giant may recover too quickly.
They fear long-delayed reforms to make business more competitive and the state more efficient will not happen if Russia bounces back rapidly, burying its problems once again under a gusher of oil money.
The global financial crisis hit Russia with unexpected ferocity last year, knocking it from growth of 7 or 8 percent a year into a contraction of 9.5 percent in the first quarter of 2009 -- a bigger shock than in any other major world economy.
In most countries, such a dramatic downturn would trigger social unrest and threaten political stability.
Some commentators abroad rushed to make dire predictions about new revolutions in Russia, or claimed to detect splits in the country's dual power system between President Dmitry Medvedev and his powerful patron, Prime Minister Vladimir Putin.
But such speculation is largely unfounded. Inside Russia, where the mainstream media is state-controlled, civil society barely exists and the Kremlin dominates politics. So discussion of politics is focusing not on the risk of mass unrest, but on the danger of missing an historic chance for change.
Liberal business groups and some officials close to Medvedev are using the crisis to argue the need for sweeping reforms: a crackdown on corruption, stronger guarantees for property rights, a more independent judiciary, reform of the pensions system to create domestic pools of savings, better transport infrastructure to lower companies' costs, and a reduction in costly regulation and bureacracy.
Ultimately, such reforms could help to wean Russia off its dependence on natural resources and lead to a more diversified, and more stable, economy. (for a factbox on major issues for investors in Russia, click [ID:nL9307194])
"The fear is that the oil price will go back up, there will be no reforms and this will expose Russia to a continuation of the same boost and bust cycle of the last 20 years," said Roland Nash, head of research at Moscow's biggest investment bank, Renaissance Capital. "Right now is a perfect time to do a reform programme."
