* Exodus of talent and money from Russia
* Political thaw under Medvedev reversed
* Rosneft deal sign of the times
* Muscovites talk of "zastoy" (stagnation
* Pussy Riot punishment splits Kremlin and West
By Michael Stott
MOSCOW, Nov 2 When Vladimir Putin celebrated his
60th birthday last month, a group of patriotic mountaineers
unfurled a portrait of the Russian leader on a 4,150-metre
Hailing him as a guarantor of happiness and stability, the
climbers' leader explained: "We have stuck Putin's portrait on a
rock wall we see as unbreakable and eternal as Putin".
But as Putin nears the end of his 13th year ruling this vast
country, Russians feel increasingly unhappy and worries over
long-term political and economic stability are growing.
Russia is exporting three things in great quantity, says a
leading Moscow banker: natural resources, capital and people.
Only the first could be regarded as healthy and sustainable;
the other two imply that oligarchs and ordinary citizens alike
are turning their back on Putin's Russia.
Almost a third of city-dwellers would like to emigrate from
Russia, according to a poll in September. Among young people the
proportion rose to nearly half. The most favoured destinations
were Europe, the United States, Australia and New Zealand.
The reasons for this exodus of talent and money? A growing
sense among educated Russians that their country is heading in
the wrong direction, and that no change is likely.
It all began very differently. Putin replaced Boris Yeltsin
in the Kremlin on December 31, 1999. His early years generated
hope as the chaos of the Yeltsin era was replaced by order, the
economy grew strongly - Russia's GDP has grown nearly 10-fold
under Putin - and a consumer boom created a new middle class.
A group of reform-minded ministers led by Alexei Kudrin at
Finance and German Gref at Economy raised hopes of real change
to increase private investment, modernise industry and
infrastructure and reduce dependence on raw material exports.
Fast forward to 2012. Putin began a fresh six-year
presidential term this March, with his supporters calling for
him to stay in power until a constitutional term limit of 2024 -
by which time the former KGB spy would have ruled longer than
any Kremlin leader since Stalin.
Outwardly Putin's reform agenda continues. The president and
his government repeat the mantra of modernisation - a concept
beloved of tsars for centuries.
Putin told Russia's main economic forum this summer that his
government would implement a programme of major transformation
to build a new economy, create or modernise 25 million jobs and
become an exporter of innovative goods and services.
But the facts on the ground point in a different direction.
POLITICAL THAW REVERSED
A brief and shallow political thaw under Dmitry Medvedev's
2008-12 presidency (in which Putin continued to wield ultimate
power from the prime minister's office) is being reversed.
Opposition leaders have been arrested on charges which human
rights organisations say are trumped-up, new controls have been
clamped on the Internet and a Medvedev repeal of slander laws
has been reversed.
Gref and Kudrin are both long gone from the government and
unconfirmed rumours swirl in Moscow that Medvedev himself will
be fired by Putin before the end of the year.
Growth presses on but at the same time Moscow has the
world's biggest population of billionaires, corruption is
rampant and the country's huge wealth is very unevenly spread.
Kudrin helped to fund a startling study from the Centre of
Strategic Research think-tank, published last week. It concluded
from interviews with focus groups in Moscow and regional cities
that Russians saw little chance of changing their "predatory"
ruling elite through the ballot box.
Most thought a revolution was possible and even desirable.
Medvedev cuts an increasingly lonely figure in Moscow, his
credibility with voters gone after stepping aside without a
murmur to make way for Putin's return to the Kremlin this year.
His supporters privately despair of any chance for real change
in an economy that looks increasingly Kremlin-controlled.
One recent mega-deal shows the trend. Last month,
state-controlled oil giant Rosneft said it would take over the
number three oil producer, TNK-BP. Rosneft will buy out the
current owners - four Soviet-born oligarchs and Britain's BP -
to create the world's biggest publicly listed oil company.
At a time when Russian oil production is falling and
large-scale investment is badly needed to open up new fields,
the Kremlin is instead spending $55 billion in cash and shares
to acquire control of a major oil company from the private
As the government splurges, Russia's oligarchs are shifting
more money abroad because of the poor investment climate. Deputy
Economy Minister Andrei Klepach estimates that $50-60 billion of
private capital will flow out of Russia this year. Moscow bank
Uralsib predicts the figure could hit $80 billion.
Putin told a group of visiting academics and journalists
last week over dinner at his residence that he had "mixed
feelings" about the Rosneft takeover of TNK-BP because it
increased state participation in the economy.
Russia-watchers, however, had little doubt that the takeover
was scripted inside the Kremlin. Rosneft is run by Igor Sechin,
a long-time close Putin ally and Kremlin hard-liner who has
always favoured extending state control over key assets.
The two-hour, seven-course dinner with the Valdai Group of
Russia experts was held at Putin's Novo-Ogaryovo residence in an
exclusive wooded suburb outside Moscow.
The occasion was billed as a chance to gain insight into the
latest Kremlin thinking and learn Putin's ideas for his new
term. But at dinner, the Kremlin chief surprised some attendees
with an uncharacteristically flat performance, devoid of the
quips and bravado for which he is renowned and lacking in new
Corruption is one of the biggest problems in Russia for
ordinary citizens, businessmen and foreign investors. The
country has slid to 143rd place out of 182 on Transparency
International's Corruption Perceptions Index, tied with Nigeria.
Yet Putin shrugged off a question about corruption with a
tired sigh, asking his audience what they expected him to say
that was new about such a perennial topic.
Intimations of Putin's mortality have surfaced. The
president's press secretary last week denied a Reuters report
that the Kremlin leader needed surgery to correct a back injury,
then days later squelched fresh rumours about Putin's health,
saying he was working from home to avoid traffic congestion.
Such issues are no minor matter in a country where so much
power is concentrated in the hands of one man, a man with no
President Barack Obama memorably described Putin before
their first meeting in 2009 as a leader with one foot stuck in
the Soviet past, and signs of a drift backwards are visible in
The Kremlin administration is now headed by 59-year-old
former KGB spy Sergei Ivanov, who likes to describe himself as
"rather conservative on national security but quite liberal on
economics". Ivanov previously headed the Defence Ministry and
the military-industrial complex.
ZASTOY AND PUTIN
On the lips of many educated Muscovites today is the word
"zastoy" (stagnation) - an epithet which came to define the
lacklustre latter years of Soviet leader Leonid Brezhnev in the
1970s and early 1980s, but is now increasingly used of Putin.
Despite years of government promises, Russia has yet to
build a modern pensions saving system, improve regulation to
create a viable financial market trading centre to compete with
Dubai or invest in its crumbling infrastructure.
Already weighed down by the cost of hefty public sector pay
rises ahead of this year's presidential election, the Russian
government's latest budget envisages spending $620 billion by
2020 re-equipping the country's military, while cutting spending
on infrastructure and education.
These priorities have upset business leaders, who are
desperate for improvements to the creaking road network.
And despite repeated Putin's pledges to cut the economy's
dependence on oil and gas exports, the oil price required by the
Kremlin to make its budget sums add up has more than doubled
over the pasts five years to $110.
In foreign policy, Medvedev's much-vaunted plan to reset
relations with the United States on a more constructive track
has stalled. Instead Moscow has confronted the West over Syria
and given priority to pursuing a free trade area with former
Soviet neighbours Belarus and Kazakhstan.
Alexei Pushkov, chairman of the Duma's Foreign Affairs
Committee, says Russia wants to be an "independent centre of
attraction" for nations in its neighbourhood and adds:
"The West made a major mistake wanting Russia to be like the
West - Russia wants to be Russia".
PUNISHING PUSSY RIOT
One of the clearest signs of divergence between Russia and
the West is the treatment of Pussy Riot - a punk feminist band
who staged a protest song in Moscow's main cathedral this year
imploring the Virgin Mary to rid Russia of Putin.
Three of its members were jailed for two years - one later
released on a suspended sentence - for "hooliganism motivated by
Putin said the women had "got what they deserved" because
their performance amounted to a vulgar act of group sex and
threatened the moral foundations of Russia. Western governments
and human rights groups were outraged at what they saw as a
grossly disproportionate punishment.
Yet the harsh treatment meted out to Pussy Riot may signify
something deeper than moral indignation.
Many analysts see the jail terms as a sign of something
deeper - Kremlin insecurity amid rising popular discontent.
While the street protests which swept Moscow last winter
have now abated, political analysts say the urban, educated
population is increasingly unhappy with Putin's leadership.
Far from the grandeur of Putin's Novo-Ogaryovo residence,
its wrought-iron gates topped with the double-headed Russian
eagle, to the north of Moscow lies the featureless dormitory
town of Krasnogorsk.
Inside a small, noisy McDonald's restaurant there, a
diminutive 30-year-old woman energetically explained her
prediction for Russia's future under Putin, as a snowstorm
"The system itself is crumbling," said Yekaterina
Samutsevich, the released Pussy Riot member. "It's becoming more
repressive ... those in power have very strong fears and their
behaviour is more and more wild. We could end with a total
collapse like the Soviet Union."
Whether the vision of the strong, stable, great power
projected by Putin or the apocalyptic prediction of the young
punk rocker come to pass remains to be seen.
But in the meantime Russia's people and its business elite
are voting with their feet and their wallets. And Putin is not