The Medvedev Presidency – a Wasted Effort

October 2011

THE EU-RUSSIA CENTRE REVIEW

The Medvedev Presidency – A Wasted Effort

Issue Nineteen

CONTENTS

Introduction 3 Fraser Cameron, Director, EU-Russia Centre

Medvedev‟s Presidency: Russia Marks Time 5 Sir Tony Brenton, Former British ambassador to Russia

Managing Russian Business through the Criminal Code 9 Yana Yakovleva, Once-Jailed Russian Executive

The realities of the Russian judicial system 14

The Media in Russia – Freedom of Expression 22 under Conditions of Political Monopoly Maria Lipman, Moscow Carnegie Centre

Russia‟s „Partnerships for Modernisation‟: 31 Origins, Content and Prospects Hannes Adomeit, Professor, College of Europe

Map of Russian Media Business 52

Introduction

Dmitri Medvedev assumed the Presidency in May 2008 with high hopes resting on his youthful shoulders. He began by challenging the absence of the rule of law and an independent judiciary in Russia. It was vital, he argued, to move away from „legal nihilism‟ and tackle the all-pervading corruption that was having such a negative impact on Russia. It was also important, he argued, that Russia should diversify its economy away from its over-reliance on mineral exports. Nearly four years later how should we assess the Medvedev Presidency? The articles in this Review will not make pleasant reading for President Medvedev or all those hoping for a more liberal, democratic, less corrupt Russia.

Tony Brenton reviews Medvedev period in office and suggests his core failure was an inability to deliver on the correct analysis of what was undermining Russia from becoming a successful modern state and society. Medvedev came to office ready to try and tackle some of the major problems facing Russia but he was soon blown off course by the Georgian conflict and the impact of the global financial crisis. He never managed to secure an independent power base and was always beholden to his master, Mr Putin.

Brenton correctly assumed that Putin would return to the Kremlin. But his conclusion is that while personalities matter the question of who precisely becomes President is a great deal less important than the capacity of whoever it is to deal more effectively with the country‟s very visible problems than the regime has managed so far.

Yana Yakovleva, a once-jailed Russian business woman, recounts how the state and its various agencies use the criminal code for their own purposes. While giving Medvedev credit for introducing some changes, she argues that the entire judicial hierarchy needs reform. It is „a monolithic structure closely entwined with the offices for investigation and prosecution. That was the situation in the Soviet period and it remains the case today.‟ In the total absence of independent judicial examination falsified evidence is widely and successfully used by the prosecution. As a rule, judges at all levels take the side of the State representative (prosecution) and it is most often advantageous for defence attorneys to only make a pretence of defending their clients. Running an independent business in Russia, she concludes, is a dangerous and never predictable activity.

Three distinguished legal experts (Tamara Morshchakova, Mara Polyakova and Olga Kudeshkina) then analyse the realities of the Russian judicial system. They talk of a „crisis of confidence‟ in the judicial system with no one believing in the independence of the courts. Judges routinely side with the prosecution. Evidence is often obtained by dubious means, including torture. There is often no proper appeals procedure, and sentencing is unduly harsh. The experts suggest that a fundamental change in the judicial system to promote real independence requires more than nice speeches or even legislation. It demands a change in personnel. The success in implementing the latest stage of judicial reform therefore depends on what practical measures the regime is ready to take, to enforce in deed not just in word the independence of the judiciary.

Maria Lipman casts her eye over the media landscape in Russia She notes that the Kremlin does not aim to keep everyone quiet and force the entire population to adopt a single view on all issues. The present regime perceives its task more as „the preservation of its monopoly over the running of the State.‟ The state controlled TV channels create the image of a regime to which there is no alternative. No one criticises the country‟s leadership, and no one casts doubts on its decisions. Lipman says her own fellow citizens are partly to blame for this state of affairs. The relationship between the regime and Russia‟s citizens is akin to a „no-participation pact‟. The State does not want citizens to intervene in State affairs and citizens do not intervene, having learned that nothing depends on them. In return the State does not interfere in the private life of its citizens, so long as their personal goals do not come into conflict with the interests of the powers that be.

Hannes Adomeit reviews the prospects for the new EU-Russia Partnership for Modernisation. He asks whether this project constitutes something new which could revive the stagnating relationship between the two actors or whether it is just another piece of paper high on vision and symbolism but devoid of practical significance? Adomeit notes that it was Putin who first spoke of the need for modernisation but it was only when Medvedev took office that it gained a new urgency. But Medvedev has failed to deliver and Adomeit lists the numerous barriers to modernisation. These include excessive centralisation and administrative pressure; the constant interference of corrupt bureaucrats; the increased role of the siloviki in political and economic decision-making; and collusion of the courts, prosecutors and the police with organised crime for mutual benefit. For comprehensive modernisation to become a successful endeavour, many of the features of the existing system would have to be dismantled. But for this to occur, hard political decisions would be necessary and too many vested interests would be affected. Thus, given the current domestic political constellations, these tough decisions are unlikely to be taken.

These articles provide an important contribution to the on-going debate about the future of Russia and the future of the EU-Russia relationship.

Fraser Cameron Director, EU-Russia Centre

Medvedev‟s Presidency: Russia Marks Time

Sir Tony Brenton

Former British ambassador to Russia

We are in the closing months of Dmitri Medvedev‟s first, and perhaps only, Presidential term. This week he announced December 4 as the date for Duma elections, which will be followed by Presidential elections next March. As we enter the political season which will set the shape of Russia‟s government for the next six years it is worth looking back at how the country has done with Medvedev in the President‟s chair.

Crucial to understanding the last three and a half years is the situation that Medvedev inherited and how he inherited it. His predecessor as President was of course Vladimir Putin who became President in 2000 and was reelected in 2004. In the eyes of the vast majority of Russians Putin‟s rule was spectacularly successful. Aided by high oil and gas prices the economy more than doubled in size. Personal prosperity improved almost everywhere. Putin brought order where Yeltsinian chaos had prevailed before. He imposed discipline (often by dubiously democratic or legal means) on wayward oligarchs, self willed governors, the obstructive Duma, an unhelpful press, and insurrectionary Chechnya. He stood up for Russian interests against a “unipolar” US in a way Yeltsin had never been in a position to do. The blots on Putin‟s record – fast rising corruption, official (and particularly security sector) impunity, increasingly manipulated electoral and legal processes – seemed small to the ordinary Russian by comparison with his successes. He could easily have altered the two term Presidential limit in the Constitution to stay on for a third if he had chosen to do so.

To his credit he made it clear he would not do this. As a result Russian politics were transfixed, and riven, from about 2005 by the question of whom he would nominate as his successor (his personal popularity and grip on the electoral system virtually guaranteeing that his nominee would in fact succeed). Via a sort of “beauty contest” with another senior official the thitherto obscure Dmitri Medvedev, a long serving and loyal subordinate of Putin‟s, emerged as the chosen name, and was duly elected President in March. But the circumstances surrounding the election made it very clear that Putin had decided, even while laying down the Presidency, to maintain a lock on most of the key sources of power. He graciously accepted Medvedev‟s invitation to become Prime Minister. He also took over as Head of the ruling party, with a huge majority in the Duma (and thus the power to impeach the President). Most of Medvedev‟s aides and ministers (in particular his Chief of Staff) were Putin‟s placemen. And Putin‟s crucial network of “Siloviki” (former Security Agency officers, including of course Putin himself) remained intact and the backbone of Government. In the new administration, rapidly dubbed the “Tandem”, Medvedev may have held the title of President, but all the key decisions were plainly subject to Putin‟s views.

Nevertheless there was reason to hope that Medvedev‟s arrival might, after the authoritarian drift of Putin‟s last years in office, mark the resumption of Russian progress towards European “normality”. In a way that Putin had not, Medvedev inherited a functioning, governable state with a booming economy. Medvedev himself spoke the language of modernity and reform. In the electoral campaign and his early months in office he made clear his determination to take on the stifling combination of an untouchable and unresponsive elite, corrupt bureaucracy and subservient legal system which were doing so much to hold Russia back. He would, he said, boost personal and political freedom, tackle corruption and stamp out “legal nihilism”. It is hard to believe he would have given these issues such emphasis without being sure of Putin‟s at least tacit support.

But his Presidency was immediately hit by two major crises which between them underlined the constraints on Medvedev‟s authority and also limited his scope for subsequent manoeuvre. The first of these was the Russia/Georgia war of August 2008. All the signs are that this war, which came at the end of a long series of Russo-Georgian provocations, was launched by Georgia in the belief that, in extremis, they would have US support. Mercifully they were wrong. The upshot was total Russian military victory and a distinct boost to the popularity of the Medvedev/Putin government. But, although Russia‟s foreign policy is in theory the exclusive responsibility of the President, it was in fact Prime Minister Putin who flew back to take charge as the crisis broke (both he and Medvedev had been away) and who made the key Russian policy decisions in the subsequent ceasefire and disengagement negotiations. To some extent this no doubt reflected the fact that Medvedev had been President for just three months and had no experience at all of international issues. And Medvedev did take credit for authorising the original Russian military reaction, and was the Russian signatory of the eventual peace agreement. Nevertheless the whole affair firmly underlined Putin‟s vastly superior experience in this (and other) fields and his will to act well outside his nominal job description as Prime Minister.

The Georgia war marked a low point in US/Russia relations which in any case had been on a sharp downward trend since Putin‟s uncompromising Munich speech of February 2007. Ironically however it also cleared the way for a significant improvement. Medvedev – already seen as a substantially more pro-Western figure than Putin – had signalled his wish for this both through his June 2008 proposal for an “All Europe Security Pact” and through his interactions with Western leaders at the G8 Summit in Hokkaido later that month. The war had now at a stroke removed the nightmare (in Russian eyes) of NATO expansion to include Georgia and, conceivably, Ukraine. It undoubtedly also played a part in persuading the incoming US President Obama to “reset” US/Russia relations, back off installing interceptor missiles in Poland (a source of profound hostility in Russia), and negotiate with Russia deep cuts in holdings of strategic nuclear weapons. And under Medvedev‟s Presidency Russia, driven by its own concerns about Islamic fundamentalism, became increasingly helpful to the NATO action in Afghanistan. But, whether or not under pressure from Putin, Medvedev has also been ready to distance himself from the West when necessary. In particular he has maintained Russia‟s informal cooperation with China in the UN Security Council in opposition to what both countries see as a Western agenda of unjustified interference (often on human rights grounds) in the internal affairs of other states. Thus Russia and China have stood together to inhibit or delay Security Council action on Iran, Sudan, Zimbabwe and 6

(most recently) Syria. It looks as if it was only by an oversight (swiftly criticised by Putin) that Medvedev acquiesced in the Security Council resolution authorising the successful NATO action in Libya. Overall, Medvedev‟s foreign policy has remained true to Putin‟s aversion to Western (and particularly NATO) international activism, while finding ways to cooperate pragmatically with the West where that is seen as being in Russia‟s interest.

The second great crisis early in Medvedev‟s Presidency was the global financial collapse of summer 2008. The Russians were initially confident that, given the strength of their economy, they could ride this out comfortably; they had vast foreign currency reserves, no significant debt, and no subprime securities market. They were wrong, and learnt the hard way about the real fragilities underlying the apparently strong economic situation Medvedev had inherited. First there was the direct blow of a sharp fall in oil prices which severely damaged Russia‟s external and Government accounts, led to sharp pressure on the rouble, and underlined how heavily dependent Russia remained on hydrocarbon revenues (amounting to some 60% of exports). And, second, the crisis provoked a huge movement of global capital to safe havens, including the resumption (after two blissful years when Russia‟s economic managers thought the problem at last was solved) of massive capital flight from Russia to less corrupt and more legally secure destinations. As a result, after a decade when 8% annual growth had been the norm, the Russian economy shrank in 2009 by close to 9% (the worst performance by far of the big emerging economies). The single biggest success of the Putin/ Medvedev administration has without doubt been (via a huge expenditure of accumulated reserves) to prevent the fall turning into a replay of the 1998 rouble collapse and default. But the excessive hydrocarbon dependency and insecure property rights of Russia‟s economic arrangements now stand exposed as the deep weaknesses they are. And expected annual growth rates have roughly halved to about 4% per annum.

These developments have glaringly underlined the rightness of Medvedev‟s announced policy priorities; modernisation (ie economic diversification away from oil), anticorruption, freedom and rule of law. The core failure of his Presidency has been his inability to deliver progress on these priorities. On modernisation, there has been a lot of talk but the most visible concrete project has been a, so far embryonic, effort (following a 2010 visit by Medvedev to California) to replicate Silicon Valley on a site outside Moscow. This has required the local suspension of 50 Federal Laws, which raises the obvious question of why those laws cannot be more generally repealed. On corruption, there have been a series of drastic looking measures (notably requiring officials to publish all their sources of income) which seem at least so far to have made very little difference in practice (one wit noted that Russia now seems to be ruled by “poor men with rich wives”). On freedom and electoral malpractice the 2009 regional elections seem to have been at least as flawed as similar elections conducted under Putin; TV coverage of politics remains as one sided as it always has been; and Medvedev‟s chief achievement (an important but negative one) has been to prevent censorship being extended to the internet. On rule of law, the state under Medvedev has actually strengthened its grip on the judicial system (by taking over certain judicial appointments and excluding juries from some kinds of trials). And Medvedev‟s regime has presided over two appalling scandals. The first was the death in custody of the lawyer Sergei Magnitsky which, incredibly, was followed (despite Medvedev‟s call for an investigation) by the promotion of the 7

Interior Ministry officials responsible both for the death itself and for the huge fraud Magnitsky had exposed. The second was the bringing of a new set of trumped up charges against opposition oligarch Mikhail Khodorkovsky followed by his inevitable conviction and the (unsurprising) revelation by a court official that the judge had taken instructions from the Government on what verdict to deliver. On the assumption that Medvedev really means his many brave words about Russia‟s need for reform, he is plainly up against forces within the system which make real progress extraordinarily difficult.

Medvedev himself has occasionally come close to public frustration over the impasse in which his Russia finds itself. He has spoken of the present stifling political pattern as threatening “stagnation” (a strong word in Russian, explicitly recalling Brezhnev‟s authoritarian and beggarly USSR). And on this he speaks for an increasingly disenchanted Russian populace. The economic boom, which compensated for a lot of political indignities, is not what it was. Through the internet, and in other ways, Russians are increasingly aware of, and angry about, official impunity and incompetence. The bright and mobile are leaving the country; about a million and a half Russians are estimated to have emigrated in the last three years. Recent months have seen a series of protests about particular acts of official malfeasance. Probably Russia‟s best known and most popular non official political figure is an anticorruption blogger (who, with depressing predictability, now finds himself under police investigation). While Putin‟s and Medvedev‟s personal levels of popularity remain reasonably firm, the ruling party is now generally known as the “party of thieves and swindlers” and has seen its popularity unprecedentedly slide below 50% - to the point where Putin has created a “Popular Front” to boost its standing, and a farcical effort at party primaries has simply reproduced the ballot fixing which was part of the original malaise.

It is against this background that the ruling clique have to select their candidate for next year‟s Presidential election. Medvedev has more or less admitted that the choice lies in Putin‟s hands, but has also in effect advertised that he wants the nomination , and that, if chosen, he would pursue the same modernising, democratising and cleansing agenda with which he has made such strikingly little progress in his first term. The smart money in Moscow, however, is on Putin, having taken his constitutionally required term out, coming back himself as President. The announcement of who it will be will probably come after, and in the light of, the 4 December Duma elections which are turning into such a headache for the Government (these elections are manipulable, but only up to a point). But for Russia the question of who precisely becomes President is a great deal less important than the capacity of whoever it is to deal more effectively with the country‟s very visible problems than the regime has managed so far.

Managing Russian Business through the Criminal Code

Yana Yakovleva

Once-Jailed Russian Executive

Over the past ten years the State in Russia has increasingly exercised its managerial functions through the Criminal Code. Any problem can be solved, the regime presumes, by imposing harsher sentences and finding a criminal offence to fit each incident.

A boat sinks and many people die. Instead of a serious examination of the way safety regulations for shipping are applied, the authorities instruct the prosecutor‟s office to identify and punish those to blame. Minor officials are prosecuted but the problems in shipping are not resolved; the more time passes, the worse they become. Another example. Problems have arisen with the Russian educational system. Instead of a deep analysis of the situation the authorities decide it is sufficient for prosecutors to find and punish those “responsible”.

The habit of using the Criminal Code to solve all problems expands its influence to the point where all activities in society may constitute a crime. A person who takes up any form of commercial activity, for instance, whether in manufacturing or a service industry, cannot do so without violating the Criminal Code. As a consequence, prosecutors and investigators have become the most significant people in Russian society. They effectively administer everything and, above all, the economy. In turn, this brings them a lucrative income.

President Dmitry Medvedev has declared that the Criminal Code in Russia is an excessively repressive body of law and must be amended. “I am trying to achieve this,” he has stated, “and can say with confidence that I am doing more about it than Gorbachev, Yeltsin and Putin put together.” This is true. The President has done a great deal. Mass arrests of businessmen have been prohibited. The concept of precedent has been introduced in the taking of arbitration decisions. The article of the Criminal Code concerning legalisation of funds has been amended: now it concerns only those who have truly attempted to legalise unlawful funds – not every person accused of an economic crime. The sentences imposed for many offences have been reduced and the threshold of responsibility has been raised. Earlier businessmen were taken to court for sums of 20,000 dollars and more. Now that threshold has been increased to 80,000 dollars. The autumn session of the Duma will examine a proposal to introduce fines in place of imprisonment.

When Putin was president he indeed made no changes to the Criminal Code. On the contrary, it was used more intensively and its repressive character led to the imprisonment of increasing numbers of Russia‟s economically active citizens, those that had something to lose and from whom assets could be seized. From 2003 onwards it became standard practice to involve the security services in the seizure of assets through the instigation of phoney criminal charges. This has become a problem that amendments to the criminal or criminal-procedural codes cannot solve. It

is not possible to overcome a corruption that has become universal by making the legislation yet harsher - the only result will be to raise the price demanded for seizing a business or taking control of its profits.

Like any law the Criminal Code must meet the demands of the present day. In Russia it requires complete modernisation and adaptation to contemporary life and today‟s economy. At present the Criminal Code rests on the assumption that the possession of property and receipt of profit are already a crime or the premise on which crime is based. The Soviet Union is gone but the criminal law has hardly changed since that time. The approach of the regime to business has remained the same. A businessman is someone acting in pursuit of his own advantage and, therefore, by definition a criminal. To alter this approach, which derives from a presumption of guilt, the entire judicial hierarchy needs reform. It is a monolithic structure closely entwined with the offices for investigation and prosecution. That was the situation in the Soviet period and it remains the case today.

This has proved to the advantage of every type of corporate raider in Russia. The seizure of assets has been taking place throughout the country. The individual value of the assets is of no particular significance. Even small buildings or plots of land can become the target of such attacks. These raids are organised on behalf of various categories of organisation and individual:

1. Major monopoly enterprises want to seize the assets of independent businessmen in order to boost their own holdings and to neutralise any embryonic forms of competition. As a rule, they gain information about their targets from employees at a bank to which the businessmen have applied for loans. It is also possible to obtain information about owners at State auctions if the businessman acquires a plot of land or a building from the State.

2. Powerful State officials wish to gain assets virtually free of charge. They subsequently become the property of their wives and relatives or individuals whom they trust.

3. A businessman‟s former partners. The civilised division of property by lawful means is absent in today‟s Russia, prompting former partners to “eliminate their opponent” with the help of corrupt members of law-enforcement agencies. A phoney criminal case is opened and the “problem” is solved.

4. The security services wish to use a criminal case to confiscate a businessman‟s output and sell it themselves on the market.

The prosecution of a businessman may not just be directed towards the seizure of his assets. It can also be used to increase the reported success rate of law enforcement agencies. A businessman‟s refusal to take part in a corrupt deal has recently become quite a common motive for his prosecution. If he refuses to pay a bribe he not only faces the possibility that his company will go out of business: he may be subjected to criminal charges because of his unwillingness to “cooperate”.

In the total absence of independent judicial examination falsified evidence is widely and successfully used by the prosecution. As a rule, judges at all levels take the side of the State representative (prosecution) and it is most often advantageous for defence attorneys to only make a pretence of defending their clients.

All seizures of assets are carried out with the effective participation of

1. Arbitration courts. The decisions of arbitration courts are bought and serve as the basis and underpinning of the criminal case.

2. Law enforcement agencies. They are paid to open criminal investigations which then permit searches to be conducted. The results are falsified and serve as a basis for pursuing criminal investigations. Agents use blackmail and threats as they interrogate their businessman-victim. They threaten to bring criminal charges against him. If he signs the testimony they require they withdraw these demands.

3. The prosecutor‟s office. Part of the payment made to open a criminal case goes towards ensuring the support of the prosecutor‟s office at every level.

4. Criminal courts. The courts are not directly linked with such corruption but are wholly subordinate to the law-enforcement agencies. They support the prosecution because they are afraid of taking a decision on their own and incapable of doing so. Their decision must first be agreed with the court chairperson; in turn, court chairmen and women must agree their position with their superiors, and so on. The general trend in Russian courts is to avoid an acquittal at all costs. Possible evidence of innocence and petitions by defence lawyers, as a consequence, are not accepted during the trial and not added to the case materials: witnesses for the defence are either not examined or their testimony is ignored. As a rule, the verdict does not take account of the defence position but is an exact copy of the indictment which was written by the investigator when the criminal case was opened.

5. The systems of response to complaints. The system of bureaucratic reaction to complaints about the actions of State officials is so organised that any complaint presenting facts of unlawful prosecution will automatically be redirected to the person against whom the complaint is being made. An appeal to the Prosecutor General, for instance, will be redirected to the district prosecutor who, in turn, will redirect it to the prosecutor who asserted the individual‟s guilt. The latter responds that all his actions are lawful and well-founded and this reply is then sent to the citizen in question and to the Prosecutor General.

Running an independent business in Russia is a dangerous and never predictable activity. The only kind of business that succeeds is that which is either closely linked with oligarchic capital or has direct ties with major State officials. Contacts at a high level can protect a businessman‟s assets for some time but cannot serve as a guarantee of their security.

From the many examples of the prosecution of businessmen we can trace the patterns of harassment and the falsification of criminal charges. Take the tragic story of the Roshchin brothers.

For the last four years Oleg and Igor Roshchin have been in prison, convicted of smuggling (Article 188 of the Criminal Code). The first to be arrested was Oleg. The police accused him of smuggling polystyrene into Russia. According to Russian law smuggling does not mean the clandestine transfer of prohibited goods across the border but a mistake in filling out customs forms. There is an article in the Criminal Code which permits officials to imprison individuals for up to 12 years if they consider that a document contains a mistake. In the Roshchin case the customs officers found no violations but as their truck left the customs department with its load of polystyrene it was stopped by police who considered that the brothers‟ firm, Third Rome, was importing not polystyrene but rubber. Rubber was cheaper than polystyrene, the policemen decided, and the price indicated in the customs documents did not correspond to its market value.

Oleg was arrested and accused of having imported polystyrene in this fashion 526 times. This was physically impossible. Oleg‟s firm was small and had not handled such volumes. The court could not have cared less. Oleg and his accountant, 40-year-old Inna Bazhibina, were described as an organised gang of particularly dangerous criminals and each given an 8-year sentence. Not a single customs officer was involved in the case, we may note. On the day the verdict was announced Oleg‟s brother Igor was arrested.

The police had decided to put together a new criminal case against the Roshchins. Igor had worked as a driver for his brother. The police still had customs declarations for polystyrene that had been imported by various Moscow companies and decided, once again, to accuse Oleg of smuggling. For the sake of novelty they now decided to include his brother in the charges. At present a new trial is under way and, as before, the court prefers not to notice that the case has been falsified.

President Medvedev, we should add, has already brought Article 188 (Smuggling) to the attention of the Duma, with the purpose of excluding it from the Criminal Code. He understands that people cannot be sent to prison for years because of mistakes in customs forms. If those mistakes have led to under-payment of duties then there exists Article 194, “Under-payment of customs duties”. The security services do not invoke that article, however, preferring to make use of the harsher punishment. This autumn the Duma should pass a bill to abolish Article 188. For the court and the investigators this is of no importance. They want to condemn the Roshchin family before the Article is abolished.

Oleg has three small children who hardly remember their father. Igor has four children. There are thousands of similar stories all over Russia and those already in penal colonies have no hope that someone will look into the fabricated charges that sent them there.

I made the acquaintance of Olga Romanova, wife of Alexei Kozlov, when the court had already sentenced him to seven years imprisonment. She only gradually understood what had happened to them. The investigation was led by Natalya V. Vinogradova, a lieutenant colonel with the 12

Investigative Committee of the Ministry of Internal Affairs, who is among those on the “Kardin list” (Kardin was the investigator on the Magnitsky case). During the investigation and the trial Kozlov presented documents showing that he had honestly purchased shares for which he had paid the market rate and he accused Senator Slutsker of being behind the seizure of his factory. Slutsker‟s representatives could provide the court with no evidence confirming their right to the disputed shares. At present the shares have been confiscated and the arbitration process continues. Nevertheless, Alexei Kozlov was found guilty and he has been repeatedly denied a re-examination of his case.

Only after this swift verdict did it become apparent what an enormous business such fake criminal cases have become. Everything costs money. From vast sums to change the measure of restraint to relatively modest payments to be able to feed a prisoner (people do not survive long on prison food) and send him food parcels. All face constant humiliation, whether they are in prison or on the outside.

Today all experts and political analysts who describe contemporary Russia recall the Communist Party which, for 70 years, kept people in poverty and under constant supervision. No one had any money apart from the leaders of the Party and the government. Putin‟s government has in many respects restored that ossified structure and the stagnation of its last years. The difference lies in the vast extent of corruption which has afflicted all levels of society.

Three presidential terms could be spent amending the country‟s laws. Unless Russia takes a firm decision to become part of the modern world, however, and to adopt democratic principles of administration it will not be an attractive country, first and foremost for its own citizens.

The realities of the Russian judicial system

Almost immediately after his election, President Dmitry Medvedev began saying that a genuinely independent judicial system was essential if Russia‟s political and economic development were to pursue a normal course. On 20 May 2008, two weeks after he assumed office, he declared that a new stage of judicial reform had begun, with the aim of attaining “the reality of an independent court”1.

Constantly stressing the importance of judicial independence for the modernisation of Russia, he presented a series of draft laws to the Duma in late 2009 and early 2010. These envisaged, among other changes, amendments to the laws on “Courts of general jurisdiction”, “The status of judges”, “On organisations of the judicial profession” and “On disciplinary judicial board” in the Russian Federation.

On 19 June 2010 President Medvedev met with officials and representatives of the judiciary at the Constitutional Court building in St Petersburg. He spoke positively in his speech about the course of judicial reform, emphasising in particular that modern Russian courts should be open to public oversight and accessible to ordinary citizens2.

Below three well-known experts, who constantly study the daily operation of the Russian courts and the consequences of the decisions they take, discuss the present state of the Russia‟s judicial system3.

Professor Tamara Morshchakova was a judge at the Constitutional Court of the Russian Federation from 1991 to 2002. She participated in the drafting of the Constitution, adopted in 1993, and the “Outline for Judicial Reform in Russia”; she also took part in drawing up the laws “On the RF Constitutional Court”, “On complaints to courts about actions and decisions that violate the rights and liberties of citizens”, and the law “On the status of judges in the Russian Federation”. Since 2002 she has retired as a judge but continues to serve as an adviser to the Constitutional Court.

Mara Polyakova holds the rank of judicial counsellor, heads the board of the Independent Expert Legal Centre NGO, and is a member of the presidential Council for Civil Society and Human Rights. She was one of the authors of the report on the detention of lawyer Sergei Magnitsky in the pre-trial detention centre.

Olga Kudeshkina was formerly a judge at the Moscow City Court. She was deprived of her status as a judge after publicly criticising the Court chairwoman Olga Yegorova for pressurising her to take a decision about the infamous “Three Whales” case that suited Yegorova and the prosecutor‟s office.

1 http://www.rg.ru/2008/05/20/medvedev-sud-anons.html 2 http://news.kremlin.ru/news/8376 3 These texts were first presented at the joint conference “Justice in Russia”, organised by the EU-Russia Centre and CERI/Science Po in Paris on 30 May 2011.

The Predicament of Russian Judges by Tamara Morshakova Member of the presidential Council on Civil Society and Human Rights, Former Judge at the Constitutional Court The past two decades in the development of Russian justice has aimed to bring it into line with international standards for the judicial defence of rights and liberties. This found expression in a constitutional recognition that the Russian Federation is obliged to abide by universally recognised principles and norms of international law: these confirm the rights and liberties of the individual in judicial procedures which must be implemented by an independent judicial system. However, these standards have neither been sufficiently understood in Russia nor correctly implemented there.

It is widely recognised that Russian courts have not been transformed into bodies of a judicial system that can independently dispense justice. The reasons are linked not only to the content of national regulation but also to the unchanged position of the courts in their relations with other State institutions – the executive, the prosecutor‟s office, the security services, the police, and so on.

In practice, the vertical hierarchy of the judicial system in Russia does not represent the totality of procedural instances that ensure judicial acts are checked and corrected. Instead it is used to manage and direct the courts and judges in their resolution of particular cases. In following the instructions of the judicial bureaucracy judges have abandoned their monopoly right to establish the legal meaning of any adopted decision, yet this is the only real foundation for the constitutional and legal principle underlying the division of powers.

As a result we may say that the judicial transformation in Russia after 2000 became a counter- reform, aimed at limiting the right of every individual, proclaimed in the Constitution, to judicial defence before a lawful and impartial court on the basis of equality of the parties in a competitive and public judicial hearing.

If justice in Russia is to meet international and constitutional standards it must adopt a number of measures. It is essential to make improvements in the status of judges, the procedures whereby they become judges and are subjected to disciplinary responsibility, and to remove the administrative powers of court chairmen and women in relation to ordinary judges. The judicial system must be restructured to ensure the right of each individual to an effective verification of the decision taken in his case by an independent appeals court. Judicial procedures should become open and fair, excluding intervention by the executive, denial of the presumption of innocence and of equal procedural opportunities for defence, and so on.

For the time being significant signs of a crisis in the judicial system may be noted. There is a lack of confidence in court decisions and they are not implemented. There are no chances in practice to correct judicial errors. Acquittals have disappeared. The number of complaints about judicial

decisions that are upheld by the courts is falling. The sphere of competence of trial by jury has been reduced and they have almost been made subject to lawful manipulation. The court‟s supervision of detention is ineffective and judges may be deprived of their powers without any legal justification. This has led, on the one hand, to the crisis in popular confidence in the justice system and, on the other, to the total disbelief by judges that the State recognises their independent legal status. As a result their activities are guided not by legal principles and ideals but by fear of taking independent decisions and a loss of status.

The Fragility of Defence in Criminal Justice by Mara Polyakova Member of the presidential Council on Civil Society and Human Rights If a judicial system is to function normally it is of enormous importance that the rights of the individual are respected in criminal cases. The harshest forms of State coercion, including life imprisonment, are applied to those tried on criminal charges. In no other sphere of human activity, perhaps, is the defence from arbitrary intervention and injustice so important. The history of liberty is the history of procedural guarantees.

The analysis of contemporary judicial practice and legislative policy in Russia bears witness to extremely contradictory tendencies. I would like to focus, first and foremost, on the most alarming issues. In particular, such negative tendencies as the traditional readiness to take the side of the prosecution - the bias towards conviction - remain in courts of general jurisdiction.

It is clear from the data gathered by the judicial department of the RF Supreme Court that the negative attitude of judges to issuing verdicts to acquit has been preserved and encouraged. This tendency also finds expression in the policy of the courts when selecting detention as the measure of restraint and in extending detention in custody. Judges close their eyes to the defects in the preliminary investigation and do not consider issues of proof and qualification when agreeing to detention. The 5th and 6th Articles of the European Convention on Human Rights and Basic Freedoms are thereby violated.

Equality of the parties in court is established by law in Russia. Yet in many cases there is not simply a failure to observe the principle: no attempts are made to hide, or make less obvious, the advantage that is granted to the State prosecutor. Attempts by defence attorneys to present evidence are ignored. We conducted a survey of almost 1400 defence lawyers from 24 regions within Russia. Only 42 said that all their petitions for the presentation of proof of their client‟s innocence were upheld; about half of those asked said that the greater part of their petitions were not upheld. Complaints to a higher instance about the refusal to uphold petitions were also frequently ignored. Only 50 of the 1400 lawyers confirmed that their complaints had received a positive response. Moreover, in one out of six cases the courts did not even offer a justification for declining to uphold such complaints; in one out of three cases they considered only certain arguments, and those not the most important. Even if certain of the petitions of those we have 16

quoted were not well-founded, which seems doubtful, the scale is very serious. This is a major problem facing our courts.

Of course, we cannot assert that all Russian judges and courts are like this. Such a flouting of the rights of the accused and their lawyers, however, leads on a massive scale to tragedies that frequently cannot be undone. Often we observe such negative phenomena as judges‟ failure to apply the most important institution of procedural law, the standards of acceptability of evidence There is also the widespread practice of bringing non-specific charges, a flagrant violation of the accused‟s right to defence because he does not know what he is being accused of.

As in the past, confessions obtained as the result of torture are used as the main evidence of guilt. Medical examination in response to complaints of torture is not always carried out, or else it is entrusted to medics who answer to those in charge of places of detention. The Supreme Court has ruled that juries should not be told about torture and has forbidden disputes about the reliability of evidence. The minutes of judicial hearings are compiled by secretaries, edited by judges and cannot be guaranteed free of distortion. There are cases when these minutes have been altered to fit the verdict. Together these problems transform the defence, and the opportunity for the individual to defend himself at a trial, into a decorative function and render it procedurally meaningless. Whether one can pursue one‟s profession in such circumstances is a matter for doubt.

At the same time we cannot ignore certain positive trends in legislative policy and judicial practice. These are the introduction of appeal courts and the abolition of the three year probationary appointment of judges which in the past served as a filter whereby the chair of the courts could select those who best suited them.

Reforming the Courts by Olga Kudeshkina Law expert, Former Judge, Moscow City Court The main aim of judicial reform in Russia, under way for more than 20 years, was to create independent, impartial and just courts that would be able not just to defend the interests of the State but also the rights and liberties of the individual from any unlawful encroachment, including abuse by the authorities. After two decades of reform, however, the courts in Russia have not become a guarantee of respect for the law and of justice for the majority of the country‟s inhabitants.

Despite official announcements about the successful implementation of the reforms the level of confidence in the courts remains very low. Public opinion polls show that Russian citizens consider the country‟s courts to be ineffective, unjust or generally corrupt. In recent years the frequency with which people have been applying to the courts has increased markedly, so too has the dissatisfaction of the population with the way the court system works. This applies above all to courts of general jurisdiction.

Opinion polls carried out by the Levada Centre in 2010 asked, “To what extent do you trust the Russian judicial system as a whole?” A mere 8% replied that they trusted it “entirely”4. The majority of respondents believed that Russian courts are significantly corrupt. In this respect, 45% of those surveyed said that if they were given the chance to resolve their problem in court by unlawful means they were prepared to break the law while a further 15% said they would consider the possibility. The main reasons citizens give for not trusting the judicial system are: the lack of independence of Russian courts or, to be more precise, their dependence on the authorities; their “management” from above; and their freedom from popular opinion and the lack of popular oversight over the courts.

During a recent survey of businessmen, commissioned by the Russian Union for Industrialists and Entrepreneurs5 as part of a study of the business climate, 45% of respondents said they had encountered violations of their rights by the authorities and the courts during recent years while only 8% said they had encountered similar problems from criminal groups.

A world survey of economic crime in 2009, conducted by PricewaterhouseCoopers6, indicated that around 71% of all companies in Russia had suffered, directly or indirectly, from such crimes during the year. This was a 12% increase on 2008. Russia continues to strike fear in the hearts of foreign investors, concerned that they will be unlawfully deprived of their assets. Almost two thirds (64%) of respondents voice this fear, while 48% were apprehensive about corruption.

We can mention various reasons why the courts in Russia, despite all the apparently revolutionary changes in the legislation, including the past 20 years of judicial reform, have not acquired real power or become a guarantor of respect for the law and justice in the country.

Obviously it was insufficient to pass even the best drafted and most progressive laws. Mechanisms for their implementation also needed to be created, so that they would work and be put into practice. That did not happen. The legislation merely declared the most important, general principles that the courts must be independent, just and impartial. What needed to be done for the courts to fulfil these principles was nowhere spelled out or laid down in black and white. That required political will on behalf of the country‟s top officials, something that was not to be observed throughout these years in Russia.

The Constitution of the Russian Federation assumes that the judicial system will be ordered in such a way that every judge should have a real opportunity to deliver justice independently and without outside interference from any quarter. The independence of judges is not their personal privilege but an essential condition for delivering justice, the main task of which is to defend the rights and liberties of the individual.

4 http://www.beafnd.org/common/img/uploaded/files/Otchet_po_sudebnoiy_reforme_naselenie_saiyt_1volna.pdf 5 http://рспп.рф/library/section/5 6 http://www.pwc.com/gx/en/index.jhtml?ld=no

In law Russian judges may be described law as the independent exponents of judicial authority. In practise they have found themselves in the position of an ordinary official, subordinate to the chair of the court. Amendments made to the “Law on the Status of Judges” in December 2001 significantly limited the constitutional standards of permanent office and immunity for judges, while strengthening their vertical subordination. At present the chairmen and women of the courts have exceptionally wide powers over the judges who work with them. These begin with their appointment, their career advancement and the award of different class of classification; they concern the provision of accommodation and material incentives; and they extend as far as their disciplining and the removal of their powers.

At the same time such chairmen and women are in turn dependent by law on the chairmen and women of higher courts, on the Russian President and, effectively, on his administration. Approval of their appointment to a post, and the renewal of that appointment for a further period, depends on the presidential administration. The judges themselves become directly dependent through the chair of the courts. As in Soviet times, the chairmen and women of courts of general jurisdiction, or their deputies, decide for themselves which judge should take which case, without the guidance of rules or instructions that could allow for their predictable allocation.

Such a state of affairs offers wide scope to court chairmen and women for the abuse of their official powers. They may give a case to a particular judge in order to achieve a certain desired result. They may remove it from the case-load of one judge and give it to another if the first refuses to provide the “needed” decision or displays “excessive independence” in examining the case. I experienced the violation of my independence as a judge when I was put in charge, by the Moscow City Court, of a criminal case concerning corruption.

The chairwoman of the Court, Olga Yegorova, openly interfered in examination of the case. She kicked up a fuss and demanded that I explain to her who was giving what questions, and why, during the trial, and why the court was taking certain decisions and not others. In my presence she rang the deputy Prosecutor General who had drawn up the indictment in the case, and reported that the judge had been called in to explain how the case was going. After this Yegorova began to give me unlawful instructions.

From what she said I understood that she and the deputy Prosecutor General were acting together and had a common interest in the court reaching a guilty verdict. She went so far as to demand that the minutes of the trial be falsified and the lay assessors henceforth excluded from the hearings. I did not carry out these unlawful demands. In violation of the requirements of the law, the chairwoman of the Moscow City Court then removed the case from my jurisdiction and transferred it to another judge.

In order to secure “the independence of the courts” in deed and not just in word, President Dmitry Medvedev declared three years ago that a new stage in judicial reform would now begin. Although the current legislation guarantees the independence of judges and the judiciary, the president recognised that the independence of the judiciary in Russia has quite clearly not been secured, and judges encounter direct pressure when examining particular cases. 19

Yet the key question is how these good intentions can be turned into reality. It was such a striving to secure independence for judges in reality that guided me when I tried, as a judge at the Moscow City Court, to let the Russian public and President Vladimir Putin know about the problems judges faced in carrying out their professional duties. I had to speak out publicly. It was impossible to discuss these issues within the judicial profession because of its hierarchical dependence on the chairwoman of the Moscow City Court. I wanted to get rid of practices that were unacceptable and incompatible with an independent judiciary.

It was a moment when the public interest outweighed the corporate interests of the judicial profession. The situation concerning the independence of judges and public trust in the courts had exceeded permissible limits and reached a critical point. During the first four years that Olga Yegorova served as chairwoman of the Moscow City Court dozens of judges resigned, refusing to tolerate her style and methods of management. Those who dared to criticise her were relieved of their posts under a variety of invented pretexts. The chair of the judges‟ credentials board for Moscow, Irina Kupriyanova, stood up for the lawful rights and interests of her fellow judges. Not only was she removed from her post, she also became an invalid and was forced to retire. A critical situation with the independence of judges also developed in other Russian cities: in Yekaterinburg, Novosibirsk, Volgograd and St Petersburg, in the Caucasus region, in the Maritime Region, and in Tula. The media have written about this in some detail.

I wrote to the Supreme Credentials Board for Judges in Russia, calling for the chairwoman of the Moscow City Court to be brought to account for interfering in the examination of a specific criminal case and obstructing the course of justice. Her entourage immediately reacted. One of her deputies, who heads the Moscow Judges‟ Council, applied to the Credentials Board of Moscow Judges (which is also headed by a Moscow City Court judge, i.e. someone dependent on Yegorova) for me to be dismissed as a judge before my term had ended. This indeed happened and all because I called things by their true names and described the real situation as concerns the independence of judges in Russia. The Council of Judges, the Moscow City Credentials Board and, subsequently, the Moscow City Court and the RF Supreme Court, declared, without checking the accuracy of the facts I cited, that everything I said was untrue and that I had “knowingly demeaned the authority of the judiciary and broadcast fabricated and offensive untruths about judges”.

A variety of investigations into the state of Russia‟s judicial system have since exposed all the flaws of which I was speaking in 2003. A complex analysis of the judicial system was carried out in 2005 by the presidential Council on Civil Society and Human Rights. A large-scale sociological investigation in 2009 of the state of the Russian judicial system was commissioned from the Centre for Political Technologies by the Institute for Contemporary Development, of which President Medvedev heads the board of trustees. These studies have confirmed the truth of what I was saying.

The main problem of our national system of justice is not corruption, says the report by the Centre for Political Technologies. This does not exceed the level of corruption affecting society as a whole. The key issue is the high level of dependence of judges on State officials. In the most important

cases the Russian courts defend the interests of officials and not the rights of those who have the law on their side. That study exposed an entire system of levers that operate within the judicial system to maintain its dependence.

The judge, says the 2009 report, is dependent on the court chairperson and afraid of his or her powers. That is the most important aspect of a judge‟s work. Frequently, the chairperson takes a unilateral decision about a particular case, deciding who will examine it and then transferring it to another more loyal judge. This in turn gives State officials a court that can be managed, both as a punitive mechanism and as a means for advancing the interests of various economic groups.

Today there is frequently, and justifiably, talk about the “external” dependence of the court. President Medvedev has said a great deal about what must be done to make the courts truly independent. So far, however, the Russian authorities have not been heard to acknowledge that the independence of judges is violated most of all within the judicial system. It is the combination, on the one hand, of the court chairperson‟s ability to influence, for good or bad, the career of subordinate judges and his or her efforts, on the other, to please judicial superiors and influential local, regional and federal politicians that creates such serious problems when rooting out attempts to influence the decisions judges take.

A fundamental change in the judicial system to redress the dependence of judges requires more than laws. It demands a change in personnel. The success in implementing the latest stage of judicial reform therefore depends on what practical measures the regime is ready to take, to enforce in deed not just in word the independence of the judiciary.

The Media in Russia – Freedom of Expression under Conditions of Political Monopoly

Maria Lipman

Moscow Carnegie Centre

Every Monday since spring 2011 the Echo Moskvy radio station has broadcast a programme entitled “Citizen Poet”. Verse from the dazzling pen of Dmitry Bykov, superbly performed by actor Mikhail Yefremov, offers biting satire on the latest political events. In verse as in politics, the leading characters are Putin and Medvedev, and neither the author nor the performer treat them or other powerful figures with the slightest reverence7.

In the 1990s topical satire of this kind reached tens of millions. Each week the “Puppets” (Kukly) programme was broadcast on NTV, a nationwide TV channel. Apart from making fun of current politics the two programmes also draw on Russia‟s traditional literary heritage, offering parodies of well known works of fiction. To the delight of mocking the political leader is added the pleasure of recognising a familiar scene or piece of poetry. It is impossible to imagine “Citizen Poet” being broadcast on national TV today. The most important distinguishing feature of the last decade, however, is not a restriction on freedom of speech as such but the radical reduction in the arena of public politics. State control only affects a part of the media and an extremely limited number of genres and subjects.

It is commonly asserted that “the State controls the press in Russia” but that is a simplification and does not fully reflect reality. The Kremlin does not aim to keep everyone quiet and force the entire population to adopt a single view on all issues. The present regime perceives its task as the preservation of its monopoly over the running of the State.

CONTROL OVER NATIONWIDE TV

The main political resource the regime possesses in the media are the television channels which broadcast news to Russia‟s vast nationwide audience. Above all this concerns the most widely- viewed channels, Channel One, the Rossiya channel and NTV, and their news programmes, which are actively and effectively used to shape public opinion.

The three major channels offer what is, essentially, one and the same account of the news, showing the same news-makers and providing the same assessments and interpretations. The most important element in this picture of the world is the image of the infallible leader (since 2008, two leaders) who has a firm grasp on the reins of government. He is the only one who can be relied on in emergencies. For Russian citizens, who constantly encounter abuses by officials,

7 http://www.echo.msk.ru/programs/citizen/ 22

corruption, the inefficiency of the regime and lack of respect for the law, the leader is their last hope. If you are fortunate enough to attract his attention then a miracle can occur and you will achieve what you desire8.

Day after day these three TV channels create the image of a regime to which there is no alternative: no one criticises the country‟s leadership, and no one casts doubts on its decisions. Before 2008 Putin appeared almost every day in the news; since the beginning of Medvedev‟s presidency both leaders have maintained a constant presence there. As a rule, they are shown at the beginning of the broadcast whether or not such prominence is justified9. Each has his own role. Medvedev listens to his subordinates, seated formally in his office; or he is shown, less formally, meeting with ordinary citizens. Putin prefers a more manly image. He has appeared before the nation, stripped to the waist on horseback, driving a vehicle or behind the wheel of a boat. At other times he has been shown in the company of wild animals – tigers, snow leopards and polar bears. In summer 2011 he once again displayed his naked torso. Inspecting a hospital during an official visit to Smolensk he unexpectedly suggested that the doctor examine a recent sporting injury. TV viewers were presented with a muscular body in excellent athletic condition10.

The national TV channels are an invaluable weapon during election campaigns. Since they operate in unison, moreover, they can create the desired political attitudes among their audience, inflating or reducing the significance of an event, an individual or a party. When necessary they are used systematically to discredit someone like Mikhail Khodorkovsky, the presidents of Georgia or Belarus, or the former Mayor of Moscow Yury Luzhkov. Other individuals, such as figures from the “extra-systemic” opposition (i.e. those excluded from the formal political process), are totally ignored.

Anyone can see that the State exercises control over television in Russia. Yet this is not generally acknowledged at an official level. In early 2011 Vladimir Putin met with journalists from Channel One. During their meeting11 Vladimir Pozner, a leading figure in Russian television, asked the prime minister a question.

Pozner: “In general, how would you regard the appearance on Channel One of members of the opposition? […] They very rarely appear on any of the national TV channels. It strikes me that, at times, it would be useful. I‟d be interested to know your opinion.”

8 During Putin’s annual live phone-in with the people, which is broadcast on TV, “miracles” have from time to time occurred. Some of those whose phone calls get through find their wishes rapidly fulfilled: a little girl is invited to the New Year children’s party at the Kremlin and given a “dress just like Cinderella’s”; the inhabitants of a small town are at long last connected to the gas grid; a farmer receives a subsidy to produce grain; milk shops for young mothers are restored to a large city. 9 Kommersant Daily keeps a scrupulous check on the number of minutes Russia’s two main politicians are each allotted daily on the three nationwide TV channels. 10 http://www.vesti.ru/doc.html?id=549593&cid=7. 11 For the transcript of the 3 February 2011 exchange between Putin and Channel One journalists see http://premier.gov.ru/events/news/14024/ . 23

Putin‟s reply was rather evasive and the journalist repeated his question.

Pozner: “So this does not evoke a negative attitude on your part? In principle, you consider it possible?”

Putin: “Absolutely. There are certain radio stations, it seems to me, which do nothing else.”

Again the reply was evasive: Pozner asked about TV and Putin replied about radio.

Pozner: “On radio, yes. Echo Moskvy.”

The following day Pozner provided a commentary12 on his exchange with Putin on the very same Echo Moskvy radio station where uncompromising opposition figures often do appear.

“In response to my question Putin publicly stated that he does not object to the appearance of the opposition. This enables me to tell those in charge of Channel One … that in this case I have received the permission of the authorities. … Unfortunately without such permission such things are impossible in Russia today.”

Subsequent events showed that the policy towards the national TV channels remains unchanged. No representatives of the “extra-systemic” opposition appeared thereafter on Pozner‟s programme. It would seem that the necessary permission from above had not been received.

THE RESTORATION OF STATE PATERNALISM UNDER PUTIN

The three nationwide TV channels are the most important element of State paternalism in contemporary Russia. Under Boris Yeltsin in the 1990s the country diverged for a brief period from the accustomed model whereby the State dominates a weak and atomised society. When Vladimir Putin came to power the traditional Russian system was restored.

The sources of power and influence that had competed with and opposed the executive branch in the 1990s all had to be neutralised and emasculated. In particular, this meant the restoration of control over nationwide TV channels13. Throughout the decade of Putin‟s presidency and premiership the preceding epoch of “oligarchical media”, when the nation‟s TV was owned or controlled by business magnates, was subject to sharp criticism by the Kremlin and pro-Kremlin forces. Their main argument was that the concentration of powerful media resources in private hands enabled big business to use them for their own purposes. However, the interests of the “oligarchs” differed and were often directly opposed one to another. This, at least, ensured a pluralism in the way their media resources covered the political process.

12 See the transcript of the “Razvorot (utrenny)” broadcast on Echo Moskvy, 4 February 2011, at http://www.echo.msk.ru/programs/razvorot-morning/747207-echo/#element-text) 13 For more detail about the restoration of control over national TV channels see Maria Lipman and Michael McFaul, “The media and political developments”, in Stephen K. Wegren & Dale R. Herspring (eds), After Putin’s Russia. Past Imperfect, Future Uncertain, 2010. 24

By the end of Putin‟s first term of office in 2004 the media assets of national TV were either in the hands of the State or those of “reliable”, i.e. wholly loyal, businessmen. From now on the Russian leadership was able to regulate the content of TV programmes as it wished. Furthermore, the media assets concentrated in the hands of loyal businessmen were at times enormous and substantially exceeded those held by the oligarchs of the 1990s. Among the media magnates who came to the fore under Putin the banker Yury Kovalchuk is particularly noteworthy. Numerous press reports indicate that he and Putin have long been personally acquainted. Until recently Kovalchuk‟s National Media Group included two national TV channels (REN TV and Channel Five) and an entire range of print and internet resources. In early 2011 he vastly increased his holdings by buying a 25% share in Channel One14, the country‟s most important TV channel that can be viewed by up to 90% of Russian citizens.

This concentration of media assets is not merely linked to the regime‟s political needs. Media with a mass audience are a successful and profitable business and can provide substantial incomes15. If news broadcasting on the nationwide TV channels at times recalls Soviet propaganda in other respects Russian television meets contemporary international standards, both in its professional and commercial aspects16. Apart from news programmes pressure from the State is not that strongly felt and various points of view may find expression on national TV (though neither criticism of the Russian leadership, naturally, nor appearances by the “extra-systemic” opposition are permitted)17.

While the trusted news programmes exclude competition between channels in presenting the news, the competition between their soap operas and other forms of entertainment is intense. Such programmes attract enormous audiences and valuable advertising18. We may note that apart from acquiring media resources Yury Kovalchuk has taken an active interest in the advertising

14 In early 2011 the Russian edition of Forbes asserted: “Yury Kovalchuk is the only private owner to possess three nationwide TV channels,” (http://www.forbes.ru/ekonomika-opinion/vlast/63087-otdelno-vzyatyi-telekanal) 15 The purchase of the Comedy Club Production company in August 2011 offers an illustration of the profitability of TV business in Russia. According to press reports it was bought for 200 million dollars. See Ksenia Boletskaya, “Gazprom komedia”, Vedomosti, 22 August 2011. (http://www.vedomosti.ru/newspaper/article/265982/gazpromkomediya) 16 See Masha Lipman, “The Russian Media Scene: Industrial Rise and Institutional Decline”, in Media, Democracy and Freedom: The Post-Communist Experience (Marta Dyczok & Oxana Gaman-Golutvina, eds), Bern, 2009. 17 Just before the 2011-2012 election cycle was set in motion there were reports of plans to liven up broadcasting on Channel One (http://www.kommersant.ru/doc/1760237). A certain variety of opinions would appear during news programmes and events would be discussed from differing viewpoints. We can be confident, however, that this freedom will not violate the main political constraint. Nationwide TV will continue to assert there is no alternative to the //current regime. 18 TV’s share of the advertising market in 2010 was worth 130.7 billion roubles. This was 15% higher than in 2009 and the figures for pre-crisis 2008 were higher still (http://www.akarussia.ru/knowledge/market_size/id457). 25

world. In 2010 his affiliated business interests19 became 100% owners of Video International, a major company which sells advertising on TV and, in particular, on Channel One.

The viewer‟s loyalty to a favourite programmes means he or she will stay on the same channel during the news. A mass audience is thus both a political and a commercial asset. The State and the owners of a channel are both interested in its successful development: the latter provide an important service to the country‟s leadership while earning a considerable profit. Naturally, this is also true of those running the TV channels. Their position assures them a high status, a good income and the opportunity to carry out their creative plans.

Nationwide TV channels remain the principal and often the only source of information for a significant majority of Russia‟s citizens, despite the vigorous expansion of the Internet. Surveys have found that more than 90% of the country‟s inhabitants “most often learn the news, at home and from abroad” from television. Barely more than 20% named the Internet as such a source20.

Internet penetration has chiefly affected Russia‟s largest cities, those with a million and more inhabitants, yet they only represent 20% of the country‟s population. More than 60% of Russian citizens live in small and medium-sized towns (up to 250,000 pop.) and in the rural areas. This provincial majority forms the electoral base of the present regime. It is the poorer, less enterprising, less advanced and educated part of the population, and it shares the outlook habitual in Russia of those who are dependents on the State. They form the regular audience of the nationwide TV channels and are consumers of the regulated “correct” TV news they provide. Today the task of TV propaganda is not to convince citizens that they live in the best of all possible worlds – that was the aim in the Soviet era when problems, misfortunes and disasters were all supposedly restricted to the capitalist world. The desired picture now is one of a regime without an alternative, thereby ensuring it retains a monopoly over the political process and decision-making.

The outlook successfully formed through State control over the nationwide TV channels can be described as follows. Even if there are many problems in Russia - misfortunes, bad officials, criminal policemen, corruption and so on - the status quo with a strong leader at the helm is preferable to any changes. If anyone can improve the situation, he can. Great hopes are not placed on him, however, and as a society we certainly can‟t do anything, there‟s no point in trying. Those changes supported by “extra-systemic” politicians, disloyal to the present regime, threaten to destroy our stability and, therefore, are harmful and dangerous.

19 These were the Rossiya Bank of which Kovalchuk was both chairman and main shareholder, and its various affiliates, Severstal and Surgutneftegaz. All three are current shareholders of the National Media Group. See Ksenia Boletskaya, “Who owns Video International”, Vedomosti, 29 June 2010; also http://lenta.ru/articles/2011/02/10/first/. 20 http://www.novayagazeta.ru/data/2011/023/09.html?print=201120070959

ALTERNATIVE SOURCES OF INFORMATION

To Russian citizens with a more advanced and modern outlook national television is crude State propaganda and it is beneath their dignity to watch it. Surveys show that they may still at times watch television (see fn. 15) but they consume information from a variety of sources.

In the Soviet period alternative information and critical views of the political system and the country‟s leadership were derived either from underground (samizdat) or contraband (tamizdat, foreign radio stations) sources. Today non-State sources of information exist quite legally and their editorial policy is not governed by a striving to demonstrate their loyalty to the regime. For simplicity they will be referred to henceforth as “non-State media”. Non-State media have other priorities. They choose different newsmakers than the State media, naturally they offer different assessments of events, and the overall picture they draw of the news, and of Russian life as a whole, is different. This justifies defining them as “alternative” sources of information.

Print, radio and, of course, the Internet, offer critically-minded Russians an abundance of uncontrolled information. In today‟s Russia, moreover, as in other countries, differing means of conveying information (print, sound and live images) co-exist within the framework of a single brand. Echo Moskvy radio station, for instance, broadcasts many exposures of wrongdoing, provides daily discussions of acute political problems, and constantly voices extremely critical assessments of the present regime. At the same time it is also a popular Internet resource. Apart from news and full transcripts of all its broadcasts the Echo Moskvy website publishes many bloggers and also audio and video material. Among the sources to have recently appeared is the Kommersant FM radio station, which is devoted to covering the news. It began broadcasting in 2010 and works closely with the other news resources of the Kommersant holding company21: professional journalists are available to provide the radio station with reports on almost any subject.

The alternative media provide the consumer with an enormous volume of commentary that is critical and even offensive to the regime. “Citizen Poet”, the programme mentioned at the outset, is merely one example. Reports about the abuses of the regime, particular violations by officials, the misuse of State institutions for personal gain, political manipulation and so on, appear almost daily in the non-State media.

Let me name a few such reports, just by way of example.

The blogger and activist Alexei Navalny collects and regularly publishes material on the Internet providing evidence of corruption in State procurement. He invites his readers and supporters to do the same and quite a few have responded to his call, adding to the information on his site about

21 The Kommersant publishing house was the first private independent enterprise in the new Russia to number high-quality political publications among its output. (The first was the Kommersant newspaper which began publication in 1990.) In addition to its daily newspaper the holding also issues several news weeklies and of course is also represented on the Internet. 27

dubious deals by those placing orders on behalf of the State22. It was Navalny who, in a radio interview23, called United Russia “the party of cheats and thieves”, and this insulting nickname for the main pro-Kremlin force, which has the majority of seats in the Duma, has since become firmly embedded in the popular mind24.

From the very beginning, the case of Mikhail Khodorkovsky was given detailed coverage in the non- State media25. A victim of the State‟s disregard for the law, and of the shameless manipulation of justice in the interests of high-ranking officials, Khodorkovsky has a site on the Internet (Khodorkovsky.ru) that was specially created to provide information about his case. Relevant documents, statements by his lawyers, and commentary harshly criticising the regime for his unlawful persecution and that of his colleague Platon Lebedev, are published there by their supporters. In 2011 an interview appeared with the press secretary of the court where Khodorkovsky was convicted. The judge, she claimed, had been under constant political pressure and even the verdict was written in accordance with instructions from above.26

From time to time Khodorkovsky himself has given and published interviews in the Russian (and, naturally, the foreign) press. In August 2011 The New Times, a Russian weekly, published material that Khodorkovsky had sent from the penal colony in Karelia where he is presently serving his sentence. He had agreed to become a regular columnist for the weekly, The New Times told its readers. Khodorkovsky‟s correspondence with noted Russian author Ludmila Ulitskaya was not only published in a prestigious literary magazine – it was also awarded a literary prize.

For almost two years another appalling case, the death in pre-trial detention of the lawyer Sergei Magnitsky, has been receiving wide coverage in the non-State media27. Several newspapers carried items about a palace built on the Black Sea. Investigation by journalists convincingly showed it was intended for Vladimir Putin28. The Ogonyok weekly published a blood-chilling account of police violence. Those in pre-trial detention were tortured in order to extort their money and other assets.

22 http://rospil.info/; Julia Ioffe, “Net Impact”, The New Yorker, 4 April 2011. 23 http://www.youtube.com/watch?v=leHWbcmd74E&feature=player_embedded 24 According to the Levada Centre’s June 2011 poll 33% of those surveyed agreed with such a description of the pro-Kremlin legislators (http://www.levada.ru/press/2011071902.html). 25 Mikhail Khodorkovsky and his business partner Platon Lebedev were arrested in 2003. Numerous other employees of the Yukos oil company belonging to Khodorkovsky have also been subject to unlawful harassment. 26 R. Badanin and S. Bocharova, “The verdict was drawn up at the Moscow City Court, I know that for a fact”, Gazeta.ru, 14 February 2011 (http://www.gazeta.ru/politics/2011/02/14_a_3524202.shtml). 27 Magnitsky attempted to bring to justice law enforcement agents who were guilty of large-scale and barely concealed abuses by the regime. His arrest and the inhuman conditions of his detention were intended to break him and force him to change his testimony. Magnitsky died in prison on 16 November 2009. 28 http://corruptionfreerussia.com/ An open letter to President Medvedev from Dr. Sergey Kolesnikov. Also see Roman Shleinov, “The dirt on the palace,” Vedomosti, 29 December 2010. (http://www.vedomosti.ru/newspaper/article/252708/sor_iz_dvorca). Natalya Radulova, “A wonderful guy came to us in Gelendjik”, Ogonyok, 28 February 2011 (http://www.kommersant.ru/Doc/1589767). 28

Scenes of torture were recorded on video and then shown to their relatives, accompanied by demands for money or for the transfer to the police of property belonging to the family29.

One interesting and comparatively recent phenomenon is the politicisation of the glossy magazines. Such publications as GQ, Esquire and Snob are large-format monthlies and carry a great many advertisements. They now often invite journalists from the serious political media to publish highly critical material on their pages. In part this is linked to the background of those managing the magazines. Some are headed by people with a broad education and liberal views. Evidently they also assume that their readers, people who appreciate such lavish publications, are also very critical of the way the State is run.

CRITICAL BUT NOT INFLUENTIAL

In some sense the freedom of expression actively practiced by the non-State media benefits the regime. It permits critically-minded citizens, both authors and their readers, to let off steam. To ensure this goes no further, the regime deploys a range of political, legal and police methods to reduce the risk of organised action to a minimum. Legislation has been used to cut back the political rights of citizens. The arena for political discussion is firmly under control. Civil liberties are limited, in particular, freedom of assembly. The preference is given to manipulation rather than force.

Over the past decade those in control of the executive branch have subordinated all remaining State institutions to themselves and almost totally eliminated political competition. In such conditions non-State media cannot serve as an instrument of accountability. This is not because they are unable to expose the self-serving and unlawful actions of State officials. As we have shown, any number of shocking exposures and scandalous publications find their way into the press and onto the Internet. Yet these do not have serious consequences because there is no political opposition that might use them as a part of its struggle. Neither parliament nor the courts are independent. In such an atmosphere the non-State media are deprived of political influence and are incapable of breaking the monopoly of the ruling group30.

It would be incorrect, however, to lay all blame for media lack of influence on the country‟s leadership. For the most part the political regime in Russia is not repressive. It does not keep its citizens in a state of constant fear. They are themselves partly responsible for a lack of participation in politics, it is something they have readily and easily abandoned. The relationship between the regime and Russia‟s citizens might be described as a no-participation pact31. The State does not want citizens to intervene in State affairs and citizens do not intervene, having

29 Vladimir Ovchinsky with Natalya Shergina, “Shock-workers on the torture front”, Ogonyok, 18 January 2011 (http://www.kommersant.ru/Doc/1589767). 30 Masha Lipman, “Constrained or Irrelevant: The Media in Putin’s Russia”, Current History, Vol. 104, No 684, October 2005. Valery Panyushkin, “Was It Something I Wrote?” New York Times, 21 May 2011. (http://www.nytimes.com/2011/05/22/opinion/22panyushkin.html?pagewanted=all) 31 Masha Lipman, “Russia’s No-Participation Pact”, Project Syndicate, 30 March 2011. (http://www.project- syndicate.org/commentary/lipman5/English). 29

learned that nothing depends on them. In return the State does not interfere in the private life of its citizens, so long as their personal goals do not come into conflict with the interests of the powers that be.

At the same time more than two thirds of the population are convinced that State officials routinely flout the law and that the police do not defend ordinary people but, on the contrary, represent a threat to their security. Russian citizens habitually believe that election results are falsified while the courts rule in favour of those with power and money. They are no less convinced that the situation cannot be changed and it is better to adapt than to try and alter anything32. They may avidly read and share media reports about the latest abuses by State officials but, with invariable cynicism, they shrug their shoulders: It‟s the same old story, what else could you expect of them?

32 See interesting analysis of Russian society Sam Greene, "Russian society”, Pro et Contra. № 1–2. January —April 2011. 30

Russia‟s „Partnerships for Modernisation‟: Origins, Content and Prospects

Hannes Adomeit

Professor, College of Europe

‘We have to draw lessons from recent events. So long as oil prices were growing many, almost all of us, to be honest, harboured the illusion that structural reforms could wait … But we can tarry no longer. We must begin the modernisation and technological upgrading of our entire industrial sector. I see this as a question of our country’s survival in the modern world.’ (Dmitry Medvedev)33

‘If we were to continue treading on the current path we will not make the necessary progress for an increase in the standard of living. We also will not be in a position to safeguard the security of our country or its normal development. We would even jeopardise its existence. I say this without any exaggeration’ (Vladimir Putin)34

‘Let's be frank. It [the EU-Russia Partnership for Modernisation] is a bit of a one-way transfer in the end. Of course, it's they who will be the recipients. We're not naive. But it is in our interest that Russia modernises.’ (EU diplomat)35

INTRODUCTION

In the difficult and crisis-ridden EU-Russia relationship, officially nevertheless defined as a „strategic partnership‟, a new buzzword has emerged: At their summit on 31 May-1 June 2010 in Rostov-on- Don, the EU and Russia, „as long standing strategic partners‟, agreed upon the creation of a „Partnership for Modernisation‟.36 The new construct is to „serve as a flexible framework for promoting reform, enhancing growth and raising competitiveness‟. It will build on „results achieved so far in the context of the four EU-Russia Common Spaces‟ and complementing existing and future partnerships between EU Member States and Russia. The, in EU parlance, „sectoral dialogues‟ (sort

33 President Medvedev in his annual ‘state of the nation’ address to the federal assembly, ‘Послание Федеральному Собранию Российской Федерации’, Kremlin.ru, 12.11.2009, http://kremlin.ru/transcripts/5979 (accessed 2.8.2011). 34 Putin, then still president, in his speech at the enlarged session of the state council where he introduced his ‘2020 Development Strategy’; В. Путин, ‘Выступление на расширенном заседании Государственного совета “О стратегии развития России до 2020 года”’, Kremlin.ru, February 8, 2008, http://archive.kremlin.ru/appears/2008/02/08/1542_type63374type63378type82634_159528.shtml (accessed 8.9.2011). 35 Andrew Rettman, ‘EU to Help Russia Modernise Its Economy’, Euobserver.com, 14.5.2010, http://euobserver.com/9/30076 (accessed 10.5.2011). 36 ‘EU-Russia Summit, Rostov-on-Don, 31 May-1 June 2010, Joint Statement on the Partnership for Modernisation’, http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/er/114747.pdf (accessed 10.9.2011). 31

of working groups established in the Common Spaces framework with a view to fill the „common spaces‟) will be the main instrument for the implementation of the Partnership for Modernisation.37

The new EU-Russia Partnership raises the question as to whether this project constitutes something new and will most likely provide tangible impetus to the stagnating relationship between the two actors or whether the Rostov document is yet again a piece of paper high on vision and symbolism but devoid of practical significance. Similar questions arise concerning the by now sixteen modernisation partnerships in existence between Russia and individual EU member states. Answers to the question will be placed into the context of the discussion and efforts made in Russia for the modernisation of the economy and, as may be the case, politics and the society.

The analysis is to proceed in three parts. The first is to examine the reasons for the Kremlin‟s perceived existential necessity of Russia‟s modernisation and the desirability of partnerships to be forged with the European Union and EU member states. It also portrays the main directions of discussion in Russia and some of the most important measures in place or planned thus far. The second part focuses on the modernisation partnerships, first and foremost on the projects envisaged under that label between Russia and Germany as the first and foremost of the partnerships and then, subsequently, the partnership agreed upon between Russia and the EU. The third part deals with the issue of effectiveness and likely realisation of the modernisation objectives in Russia itself and, by implication and extension, of the modernisation partnerships with foreign institutions.

ORIGINS: THE GLOBAL ECONOMIC AND FINANCIAL CRISIS

Contrary to conventional wisdom outside Russia, it was not „liberal‟ and „progressive‟ president Medvedev who first pointed to the necessity of fundamental change but Putin in his capacity as president. In his speech at an enlarged session of the state council in February 2008, he introduced a Development Strategy until the Year 2020.38 The main content of the speech was a review of his two terms in office as president and, predictably, a very favourable assessment of his achievements: Over the last eight years, total investment in the Russian economy had risen seven- fold. Stock market capitalisation had undergone a 22-fold increase compared to 1999. The stock market was worth $60 billion at the end of 1999 but by the end of 2007 it had risen to $1.330 trillion. In 2007, Putin continued, capital inflow amounted to a record $82.3 billion. In that year, Russia achieved its best GDP growth result yet – 8.1 percent. As a result, Russia had moved ahead of G8 countries such as Italy and France in terms of GDP as calculated on a purchasing parity basis and had become one of the world‟s seven biggest economies. Unemployment and the level of poverty had decreased and demographic problems had been alleviated as the falling birth rate and rising death rate had been checked.

Putin, however, was – in his own words – willing to take „an objective and realistic look at the situation and adopt a resolutely self-critical approach‟. Russia, he acknowledged, had not

37 Ibid. 38 Путин, ‘О стратегии развития России до 2020 года’, op. cit. (fn. 2). 32

succeeded in breaking away from the inertia of development based on energy resources and commodities. Only fragmentary attempts had been made to modernise the economy. As a result, Russia‟s dependence on imported goods and technology was increasing and its role as a commodities base for the world economy was being reinforced. „In the future, this could lead to us lagging behind the world‟s big economic powers and could push us out from among the world leaders. If we continue on this road we will not make the necessary progress in raising living standards. Moreover, we will not be able to ensure our country‟s security or its normal development. We would be placing its very existence under threat. I say this without any exaggeration.‟39 The country had to choose „between the opportunity to become a leader in economic and social development, a leader in ensuring our national security, and the threat of losing our economic standing, losing our security and ultimately even losing our sovereignty‟.40

What was to be done? Deep changes had to be made in all dimensions of society, the economy and state management. To take just a few examples: Russia, according to Putin, had to:

. achieve the transition to a new generation of education standards that would meet the needs of the modern innovative economy;

. improve interaction between scientific and educational organisations, the state and the business community;

. encourage the business community to invest in research and development;

. make more effective use of state resources invested in science and concentrate them on fundamental and cutting-edge areas of research;

. change the healthcare system and modernise healthcare facilities;

. create a national innovative system based on all of the different state and private institutions supporting innovation;

. embark on the large-scale modernisation of production facilities in all economic sectors;

. develop new sectors able to compete globally, above all in the high technology sectors that are leaders in the „knowledge economy‟, including aircraft manufacturing, shipbuilding, energy, information technology and medicine;

. build new and modernise existing roads, railway stations, ports, airports, electricity stations and communications systems;

. develop market institutions and competitive environment that would motivate companies to cut costs, modernise production and respond flexibly to consumer demand;

39 Ibid. (italics not in the original). 40 Ibid. (italics not in the original). 33

. eradicate the „excessive administrative pressure‟ on the economy that had become one of the biggest brakes on development;

. establish competitive conditions for attracting the best and the brightest into the civil service, and make them more accountable to society;

. since the government took months and even years to take even the most elementary decisions, do away with the „excessive centralisation of state management‟;

. make use of the possibilities that exist for bringing private capital into the state sector, whether in industry or in the social sector;

. continue the work to „establish an independent and effective judiciary that unquestionably guarantees entrepreneurs‟ rights, including the right to protection from arbitrary action by bureaucrats‟;

Only the political sphere was exempted from the demands for major change. Putin merely spoke of the need to transform the (presumably existing) „democratic state into an effective instrument for civil society‟s self-organisation‟; „raise the role of non-governmental organisations, human rights ombudsmen and public councils‟; and further „develop the multiparty system‟. But in the same breath and almost violent outburst, he warned the political parties that they „must not forget their immense responsibility for Russia‟s future‟. No matter how fierce the political battles and no matter how irreconcilable the differences between parties might be, they should „not bring the country to the brink of chaos‟, and they should avoid „immoral and illegal, irresponsible demagogy and attempts to divide society and use foreign help or intervention in domestic political struggles‟.

Putin‟s outline of a development strategy for Russia until 2020 is noteworthy for two major reasons: It precedes, to repeat, president Medvedev‟s modernisation campaign but contains many of the same elements of diagnosis and cure that were to be made part of it. This applies even to the political dimension where Medvedev (directly at least) has not been prepared to criticize what academic specialists have appropriately called the „Putin system‟ of government but willing or able only to suggest placebos. Second, his predecessor‟s dramatic advocacy of far-reaching change occurred at a point in time when only distant rumblings of an impending global financial and economic crisis were audible. Putin, therefore, did not consider any connections between the financial turmoil abroad and the Russian economy. In fact, the Russian government initially assumed that any possible thunderstorm abroad would have a positive impact on Russia. Thus, at the World Economic Forum in Davos on 23 January 2008, Russian finance minister Aleksey Kudrin stated that the U.S. economy was at the verge of a recession and that global economic growth was slowing down. In such a situation, he thought, interest in Russia would be growing because the country was „an island of stability in the ocean of a global crisis‟ and that, therefore, „investors will continue to invest billions of dollars into the rising Russian economy‟.41 Such assessments conformed to the dream expressed by Igor Shuvalov, one of the deputy chiefs of the presidential

41 Speech by Russian finance minister Alexey Kudrin in Davos on 23.1.2008, ‘Russia Is an “Island of Stability”’, Youtube.com, http://www.youtube.com/watch?v=haNGcSVVWbA (accessed 8.9.2011). 34

administration under Putin, to the effect that „at the end of the year [2008] Russia will occupy sixth place among the world‟s national economies‟.42

One year later, such optimistic perspectives had radically changed. At the World Economic Forum in Davos on 28 January 2009, in his then capacity as prime minister, Putin described the world economic and financial crisis as a „perfect storm‟ that had caught Russia in its epicentre along with other countries.43 In fact, as it turned out, the impact of that storm on the country was by far greater than on any of the other member of the BRIC club (China, India and Brazil) and also greater than on many industrialised countries.44

. The first rumblings of a financial crisis occurred in the wake of the Russian war with Georgia when the capitalisation of Russian stock market (RTS) in August and September of 2008 declined substantially, the sharp drops causing the suspension of trading for two days. Overall, in the period from 1 January 2008 to 21 January 2009 the RTS fell by about 75%. That slump was the biggest among other developed as well as developing countries.

. GDP growth rates in the last quarter of 2008 amounted to a mere 1.1%, with the total for the year falling to 5.6%. During the first half of 2009, Russia experienced an average plunge of its GDP by as much as 10.4%, with 9.8% in the first quarter and 10.9% in the second. Russia's aggregate decline of GDP in 2009 amounted to 8.7%.

. Industrial output was hit particularly hard. In the last quarter of 2008 it fell by 2.1% but then precipitously – 14.3%, 15.4% and 11% in the first, second and third quarters of 2009 respectively. The manufacturing industry was down by 20.8% in the first quarter of 2009, with automotive production alone falling by 55.9%. Even the gas industry experienced contractions in 2009 that had not been seen for years, with the year-on-year decline in output amounting to 12.4%.

. Russian currency reserves plummeted by more than one third: from $597 billion on 1 August 2008 to $376 billion on 13 March 2009, the lowest level noted during the crisis. The Central Bank of the Russian Federation spent over $200 billion in order to halt the abrupt devaluation of rouble, while allowing frequent small step depreciation. As a result of those adjustments, the rouble lost 40% of its value compared to U.S. dollar.

42 И. Шувалов, К концу года Россия станет шестой экономикой мира, RosBusinessConsulting, 8.6.2008, http://top.rbc.ru/economics/08/06/2008/180593.shtml (accessed 8.9.2011) (italics not in the original). 43 ‘Давос: Владимир Путин сравнил глобальный кризис с “идеальным штормом”’, Российская газета, 28.01.2009, http://www.rg.ru/2009/01/28/putin-davos-anons.html (accessed 9.9.2001). The ‘perfect storm’ metaphor refers to a meteorological phenomenon where several conditions converge to make a storm very severe, i.e. in that sense ‘perfect’. The term gained wide currency by a movie with the same name based on a best-selling book. 44 The subsequent portrayal of the effects of the world economic and financial crisis on Russia draws on Danuta Rydlewska, ‘The 2008-2009 Global Economic and Financial Crisis and Russia: Repercussions, Reactions and Possible Implications for the Negotiations of the New EU-Russia Agreement’, M.A. thesis (unpublished), College of Europe, Natolin (Warsaw), May 2010. 35

. Sharp reductions in the volume of Russia‟s foreign trade set in starting from the last quarter of 2008. In the first half of 2009, the volume of exports declined by 47% and those of imports by 40%. In all of 2009, Russia's foreign trade compared to the previous year decreased by 36.2%, the value of exports by 35.5% and that of imports by 37.3%.

. In the decade until 2008, Russia had enjoyed a stable budget surplus, which in 2007 amounted to 5% of GDP. In 2009, this situation was reversed. On the basis of a revised federal budget based on a low oil price of $41 per barrel and a planned 30% increase of expenditure, the budget moved into a deficit amounting to 7.4% of GDP.

The most important reason for the radically different impact of the global economic and financial crisis on Russia as compared to the fellow BRIC countries and other „emerging‟ economies was the country‟s extraordinary dependence on raw materials, notably oil and gas. Prior to the crisis, the oil and gas sector of the economy accounted for almost one third of GDP; economic growth was almost directly correlated with the oil price; the share of oil and gas amounted to almost two thirds of Russian exports; and corresponding receipts covered almost one half of the national budget. It was, for that reason, inevitable that the fall of the oil price from $150 per barrel in July 2008 to about $50 in January 2009 ($53 on overage in 2009) would produce extraordinary shock effects on the Russian financial system and the economy. The downward spiral of the oil and other raw material prices, however, was not the only reason for the Russian crisis. Western creditors withdrew large amounts of money from the massively indebted Russian corporate sector – more than $140 billion in 2008 and $150 billion in the following year – so as to improve their own liquidity, and they desisted from extending new credit which had fed the Russian economic engine. Not only did foreign creditors collect debt and fail to provide new money, Russian economic agents, too, massively transferred funds abroad.

The impact of the global crisis was not limited to Russian economic and financial affairs. It also produced shocks on Russia‟s political class and became a matter of top priority for the president. One of the forms it took was the elevation of the necessity for comprehensive change to a campaign reminiscent of such Soviet initiatives as Stalin‟s industrialisation drive in the 1930s, Khrushchev‟s „catching up with and overtaking‟ the United States in the 1950s, Brezhnev‟s five-year plans „from quantity to quality‟ in the 1970s and Gorbachev‟s campaigns against alcoholism and for perestroika, glasnost’ and demokratizatsiya in the 1980s.

Two major exposés have provided the basis for Medvedev‟s modernizatsiya campaign, an article titled „Go Russia!‟, published online in September 2009,45 and his annual state of the nation speech in November of the same year.46 The article was couched in the form of an appeal to Russian citizens to participate in a discussion for the modernisation of the country. It contained a devastating characterisation of the state of Russian society and the economy. He chastised Russia‟s centuries-old backwardness, its „archaic society‟, where a few leaders „think and decide for

45 ‘Россия, вперёд! Статья Дмитрия Медведева’, Kremlin.ru, 10.9.2009; http://www.kremlin.ru/news/5413 (accessed 10.9.2011); originally, Medvedev’s article originally appeared online in Gazeta.ru. 46 ‘Послание Федеральному Собранию’ 2009, op. cit. (fn. 1). 36

everyone‟ but whose actions were „chaotic and dictated by nostalgia and prejudice‟.47 He also criticised the country‟s „chronic corruption‟, its „inefficient economy‟, „semi-Soviet social system‟ and „demographic decline‟. Most importantly, like Putin similarly before him but in stronger terms, he decried Russia‟s „primitive raw materials economy‟ and „humiliating dependency on raw materials‟. His central message: „We have to draw lessons from recent events. So long as oil prices were growing many, almost all of us, to be honest, harboured the illusion that structural reforms could wait … But we can tarry no longer. We must begin the modernisation and technological upgrading of our entire industrial sector. I see this as a question of our country‟s survival in the modern world.‟48 Russia had to aim at the creation of a modern, diversified economy based on high technology and innovation. In contrast to previous such efforts, this time modernisation had to be achieved not through coercion but via the development of the creative potential of every individual, through private entrepreneurship and initiative.

The changes which Medvedev has identified as being urgently required so as to ensure Russia‟s survival in the modern world by and large replicate the demands outlined by Putin in his 2020 Strategy. In the economic sphere, he pinpointed five priority areas for modernisation: (1) energy efficiency and new fuels; (2) medical technologies and pharmaceuticals; (3) nuclear power engineering; (4) information technologies; and (5) space and telecommunications. More specifically, breakthroughs had to be achieved in the facilitation of internet broadband and fourth- generation wireless communications, a new cluster of orbital satellites, space technologies, new- generation nuclear reactors and sophisticated medicine. The United States as a world leader in technological change is obviously central to his frame of reference. This is obvious in such proposals as the transformation of universities into „business incubators‟ to provide graduates from science and engineering departments with the possibility to apply research results in commercial enterprises. Another such example is what is probably the most well-known project of the president‟s modernisation campaign, the „foundation of an advanced research and development centre concentrated on the support of all priority spheres, … a modern technology centre modelled, if you like, after Silicon Valley and other foreign centres. The conditions would be created there, to offer an attractive environment for leading scientists, engineers, designers, programming specialists, managers and financial experts; new technologies would be developed there, which would be able to compete successfully on the world market.‟49 In March 2010, Medvedev announced that the research and development „innovation centre‟ was to established in Skolkovo, soon to be referred to as „innovation city‟ (inograd), not far from the capital.50 Foreign research institutes and the most modern and advanced corporations most well known scientists, including

47 Ibid. Further eleborations of that year were provided in a in a televised speech in December 2009; Итоги года с Президентом России, Kremlin.ru, 24.12.2009, http://kremlin.ru/news/6450 (accessed 8.9.2011). 48 ‘Послание Федеральному Собранию’ 2009, op. cit. (fn. 1). 49 Ibid. 50 On the history and the most most recent information on the ‘innovation centre’s’ foundation and projects in Russian see Skolkovomedia.ru, http://skolkovomedia.ru/ (accessed 6.9.2011); for corresponding information in English see I-gorod.com, http://www.i-gorod.com/en/about/ (accessed 6.9.2011). 37

at least „two, three, four Nobel prize winners‟,51 were to be invited to take part in the research and development project.

In fact, the foreign policy and international dimension has loomed large in the president‟s modernisation campaign. „We are interested in capital, new technologies and modern ideas flowing into the country‟, he stated early on.52 Foreign policy had to be put to the service of the country‟s modernisation. The aim of the new approach was „not only to provide practical assistance to Russian enterprises abroad and that efforts be made for the introduction of indigenous [Russian] quality brands of products and services [abroad] but also to attract foreign investment and modern technologies to Russia‟. For that very purpose, he called on the foreign ministry „to develop a programme for the effective utilisation of foreign policy factors for the purpose of [accelerating] Russia‟s long-term development‟.53 This is precisely what the ministry did in a voluminous and detailed document leaked to the press.54

CONTENT OF THE MODERNISATION PARTNERSHIPS

The document, in essence, outlines the ministry‟s views and the contribution that it can make to the transformation of a new, innovative and dynamic Russia by means of modernisation partnerships or, as foreign minister Sergey Lavrov called them in an accompanying letter to the president, „modernisation alliances‟.55 These were to be constructed „with our most important partners [in Europe] und the European Union‟. The „technological potential of the United States‟ was another of the relevant „external factors‟ to be used. One of the reasons why Europe is meant to play an important, perhaps the most important, role in Russia‟s modernisation is conceptual, and it conforms to prevalent Russian elite perceptions. The global crisis had demonstrated, Lavrov avers, that „the state is the most important instrument for the defence and the adjudication of the interests of the individual and society‟ and that „the socially oriented model of economic development of Western Europe has proven its resilience‟. Why, however, should Europe (and the United States) be interested in helping Russia with its modernisation effort – particularly in view of the fact, convincingly and at length explained by the president and the premier, that it was Russia

51 According to Vladislav Surkov, one of the deputy heads of the presidential administration; ‘Milliardär Wekselberg koordiniert russisches Silicon Valley’, Aktuell.ru, 23.3.2010, http://www.aktuell.ru/russland/news/milliardaer_wekselberg_koordiniert_russ_silicon_valley_26565.html (accessed 2.8.2011). 52 ‘Послание Федеральному Собранию’ 2009, op. cit. (fn. 1). 53 Ibid. That programme for the effective utilisation of foreign policy factors was to be performed ‘on a systemic basis’ (на системной основе; see verbatim below, the next footnote, the title of the foreign ministry’s document). It is unclear, however, what that ‘system’ is all about. 54 ‘Программа эффективного исползования на системной основе внешнеполитических факторов в целях долгосрочного развития Российской Федерации’, 11. 5. 2010. Homepage of Russky Newsweek http://www.runewsweek.ru/country/34184/ (accessed 10.10.2010). The website, however, is not longer available since Russky Newsweek ceased publication. The document, however, can be accessed under http://perevodika.ru/articles/13590.html. The foreign ministry itself, as far as this author is aware, never published the document but also did not deny its existence. 55 Ibid. 38

that had tremendous deficits? Why should it regard that country as an equal partner rather than a recipient? This remains largely unexplained in Lavrov‟s letter and the „programme‟ except for the assertion that the crisis had produced a „modernisation imperative for all countries, without exception‟.

The document itself clearly defines Russian interests and requirements, as well as existing and future projects, in more than sixty countries on five continents in the economic and, above all, the technological sphere. Concerning Europe, in the context of the modernisation partnerships, Russia‟s diplomats should take aim at attracting investments and highly qualified personnel, fostering scientific and educational exchanges and facilitating the participation of Russian scientists in EU research projects. In their activity in the EU member states, they should cooperate and coordinate efforts „with big Russian corporations and with participation of the state to acquire assets of banks, financial institutions and industrial firms‟, „to develop beneficial cooperative patterns of relations‟ and „to transfer innovative and high-technology products to Russia‟.

The foreign ministry confirms the validity of Moscow‟s approach of giving preference in its interaction with Europe to particular EU member states rather than the EU per se. „Priority attention‟, the programme states, shall be devoted to „cooperation with such countries of the EU as are favourably disposed towards Russia, above all, Germany, France, Italy and Spain‟. Two of the special group of four are regarded as even more special, Germany and France, referred to in the document as the „French-German “tandem”‟. This vehicle should be „utilised to strengthen balanced and constructive approaches in Europe‟s relations with Russia‟. Germany, finally, for the obvious reason that it is the biggest economic power in Europe and entertains special relations with Russia, is singled out even further. „Central attention‟ had to be given to that country. The foreign ministry correspondingly provided a list of cooperative projects to which the Russian government should lend its support, among others to:

. the growing Russian-German cooperation on natural gas, notably the completion and extension of Nord Stream and attempt to tap EU financial resources for that purpose. It also should foster cooperation between Gazprom and German partners, mainly with Wintershall and its parent firm BASF; participation in the construction of gas pipelines; and the creation of joint ventures for marketing Russian gas in Germany.

. cooperation with Germany in nuclear energy, notably in the framework of the agreement concluded between Rosatom, the Russian Nuclear Energy State Corporation, and Siemens AG on the foundation of a joint venture to modernise nuclear power plants on the basis of Russian and German technology and to pool efforts in marketing.

. the broadening cooperation between the two countries in the development of energy saving and energy efficient technology and the activities of the Russian-German Energy Agency

(RUDEA),56 first and foremost the realisation of a project planned with Siemens in Yekaterinburg and another for the construction of a wind park in Krasnodar.

. the participation of Russia as the main partner in the development of x-ray laser technology on the basis of free electrons (XFEL) in Hamburg and the creation of a European Centre for the Acceleration of Heavy Ions (FAIR) in Darmstadt.

. cooperation concerning the design and construction of aircraft, notably the construction of the Airbus A-350 transport aircraft on the basis of the Airbus A-320.

. projects envisaging the production of German automobiles in Russia, mainly with Volkswagen, Daimler and BMW, and the development and production of components for automobiles of these firms.

. cooperation in railway transport. This applied to projects under discussion between the Russian Railways, the Deutsche Bahn and Siemens such as the construction of high-speed trains and the improvement of railway connections between Europe and Russia‟s Asian-Pacific region.

Impressive as this list may be, with the exception of the XFEL and FAIR the existing and planned projects as enumerated employ fairly standard and conventional technology that simply needed to be improved. Furthermore, concerning Nord Stream, that project certainly may turn out to be profitable for both the German private companies involved and Gazprom but it is entirely unclear how it could contribute to the modernisation of Russia.

The German dimension is important nevertheless also for the reason that Berlin was not only instrumental in conceptualising the German-Russian modernisation partnership but in the construction of the EU-Russia equivalent. In the second half of 2007, i.e. even before president Putin put forward his 2020 Strategy, Russian experts at a German think tank and the foreign ministry elaborated scenarios of Russia‟s development which were presented to foreign minister Frank-Walter Steinmeier.57 The preferred scenario was called „Russian Davos‟, which meant „effective modernisation‟ of the country; Russia‟s „integration in the world economy‟; and the „step- by-step approximation to European norms, such as law-based governance‟. German and European policies ought to be constructed and conducted in such a way as to create favourable conditions for the realisation of such a scenario. This could be achieved by the creation of a „modernisation partnership‟ with Russia.

The German foreign minister propagated the essence of this idea to the Russian government during his visit to Moscow in May 2008, that is, even prior to the full evolution of the economic and

56 In German: Russisch-Deutsche Energieagentur. 57 The think tank in question is the German Institute on International Politics and Security (SWP) in Berlin. Details of the scenarios were correctly rendered by the German news magazine Der Spiegel; see ‘Kalter Krieg. Der Krieg um die georgischen Gebiete Abchasien und Südossetien hat die westliche Staatengemeinschaft in eine Krise gestürzt: Wie soll man dem neuen russischen Selbstbewusstsein begegnen?’, Der Spiegel, No. 36 (2008), pp. 20- 28. 40

financial crisis and the outbreak of the Russo-Georgian war.58 The new president in Moscow reacted favourably to this idea in the following year – and so did the European Union at its summit in Stockholm in November 2009. In February 2010, the EU Commission through diplomatic channels confidentially conveyed to Moscow a draft agreement for the formation of a „partnership for modernisation‟.59 In contrast to the main thrust of the discussion in the Kremlin and the White House, values such as democratisation, the creation of a law-based state and an active civil society received first place among the priorities for the realisation of such a partnership. Next on the list came the offer of assistance for the improvement of the investment climate, the struggle against corruption and Russian approximation to European norms and technical standards.60 Thus, whereas Moscow had assumed that the partnership would be a project for the execution of common interests, it turned out yet again mainly to be a EU initiative for the realisation of common values. The first (unofficial) reaction by the Russian government correspondingly was negative. With a touch of sarcasm, the EU proposal was lauded as having the character of a „positive intellectual input‟, but cold water was thrown at the „values‟ approach. Vladimir Chizov, Russia‟s EU representative, clarified Moscow‟s viewpoint: The Partnership for Modernisation „should direct attention to practical questions rather than to benefits of European values‟.61 His superior in the foreign ministry correspondingly announced: „We intend to give precedence to the most concrete and significant questions, including the economy, social problems, education, science, technology, innovation and …‟. Lavrov did mention cooperation in the legal sphere but only at the very end of his priority listing.62 Moscow‟s insistence that primarily economic purposes should be incorporated into the EU-Russia modernisation partnership also manifested itself in the fact that responsibility in Russia for designing and implementing the partnership was given to the ministry of economics.

The joint statement on the foundation of a EU-Russia Partnership for Modernisation that was finally adopted at the Rostov-on-Don summit on 1 June 2010 (as mentioned in the Introduction), refers to the EU and Russia as „long-standing strategic partners‟ who were committed to working together to address common challenges „based on democracy and the rule of law‟. The new partnership agreed upon for that purpose was to „serve as a flexible framework for promoting reform, enhancing growth and raising competitiveness‟ (in Russia, unstated but obviously meant here).63 As it turns out, by and large existing frameworks and fora, as well as on-going projects, of the EU and

58 ‘Speech Given by Foreign Minister Frank-Walter Steinmeier at the Russian Academy of Sciences’, German Foreign Office, Auswaertiges-amt.de, http://www.auswaertiges- amt.de/diplo/en/Infoservice/Presse/Reden/2009/090610-BM-Moskau.html (accessed 4.9.2011); see also ‘German Foreign Minister Upbeat About Russia Partnership’, Deutsche Welle, Dw-world.de, 16.5.2008, http://www.dw-world.de/dw/article/0,,3341632,00.html (accessed 4.9.2011). 59 Владимир Соловьев, ‘Законность, вперед! Эксперты еврокомиссии написали свой план модернизации России по сценарию Дмитрия Медведева’, Kommersant’, No. 24 (4324), 11.02.2010, http://www.kommersant.ru/doc.aspx?DocsID=1319877 (accessed 10.05.2011). 60 Ibid. 61 Ibid. (emphasis not in the original). 62 Sergey Lavrov, ‘The Next Russia-EU Summit Will Take Place in Rostov-on-Don on May 31 and June 1’, RIA Novosti, 24.2.2010, http://en.rian.ru/russia/20100224/157989227.html (accessed 10.9.2011). 63 ‘Joint Statement on the Partnership for Modernisation’, op. cit. (fn. 4). 41

its member states have simply been repackaged. This is reflected in the enumeration of the „instruments‟ that are to be used in order to implement the project.64 These are to be mainly:

. the ‘sectoral dialogues’, working groups of sorts acting in the framework of the EU-Russia four Common Spaces, first and foremost, concerning implementation of the PfM, the „dialogues‟ that are charged with working for the creation of the Common Economic Space;65

. the EU-Russia Roundtable of Industrialists (IRT), which is to „coordinate‟ the contribution of the private business to the PfM;

. international finance organisations, e.g. the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD);

. the modernisation partnerships agreed upon and still to be forged between Russia and individual EU member states.

Structurally and conceptually, the Partnership for Modernisation is not to replace the (whatever that may mean in practice) Strategic Partnership but to be subordinated to it. The „value‟ content of both, however, has progressively been watered down as a result of the Russian insistence for the EU to concentrate on „practical‟ issues and „mutual interests‟. The joint statement on the PfM conforms to such notions. It enumerates so-called „priority areas‟ for cooperation which are to include:

. expanding opportunities for investment in key sectors driving growth and innovation;

. enhancing and deepening bilateral trade and economic relations;

. promoting small and medium sized enterprises;

. promoting alignment of technical regulations and standards, as well as a high level of enforcement of intellectual property rights;

64 Not all of these frameworks and fora were listed in the PfM joint statement. They have been supplemented in the Progress Reports of December 2010 und June 2011; see ‘Progress Report Agreed by the Coordinators of the EU-Russia Partnership for Modernisation for Information to the EU-Russia Summit of 7 December 2010 [in Brussels+’, EU External Action Service, 7.12.2010, http://eeas.europa.eu/russia/docs/eu_russia_progress_report_2010_en.pdf, and ‘Progress Report Agreed by the Coordinators of the EU-Russia Partnership for Modernisation for Information to the EU-Russia Summit [11- 12 July 2011 in Hanover+’, EU External Action Service, 9-10.6.2011, http://www.eeas.europa.eu/delegations/russia/documents/news/20110610_01_en.pdf (accessed 14.8.2011). 65 At their summit in Moscow in May 2005, the EU and Russia agreed upon the creation of four Common Spaces and associated Road Maps. The ‘sectoral dialogues’ are defined as ‘instruments’ for filling the Common Spaces with life. Personnel for the ‘dialogues’ is to be drawn from Directorates-General of the European Commission and corresponding ministries of the Russian Federation. At present, there are twelve such ‘dialogues’ in the fields of energy, transport, norms and standards, industrial policy, information society, cooperation in space, agriculture, environment, financial and macro-economic policy, regional policy, fisheries, and health; see EU Representation of the Russian Federation, Russianmission.eu, http://www.russianmission.eu/en/sectoral- dialogues> (accessed 13.8.2011). 42

. improving transport;

. promoting a sustainable low-carbon economy and energy efficiency, as well as international negotiations on fighting climate change;

. enhancing co-operation in innovation, research and development, and space;

. ensuring balanced development by addressing the regional and social consequences of economic restructuring;

. and promoting people-to-people links.

Only two of the „priority areas‟ listed in the PfM document can be said to have a more direct political and „value‟ content. These are:

. ensuring the effective functioning of the judiciary and strengthening the fight against corruption;

. and enhancing dialogue with civil society to foster participation of individuals and business.

The deficiency of this enumeration is typical for many EU-Russia documents, including the four Common Spaces: Any indication as to what really does or should have priority on the extensive list of „priorities‟ is missing. Just about anything that has to do with economic affairs is listed as a „priority‟. This applies in equal measure to the detailed Work Plan agreed upon in December 2010.66 The Work Plan also confirms that merely a new label has been given to all sorts of EU- Russia programmes, projects, roundtables and dialogues already in existence. All unfinished business, too, has been packed into it. Thus, „Russia‟s early WTO accession‟ has been included in the „priority area‟ of the „liberalization of trade‟. Similarly, Russia‟s „preliminary proposals‟ pertain to the „continuation of the visa-free dialogue‟ and „further liberalization of the visa regime‟.

On the basis of the Work Plan, (brief) progress reports were issued in December 2010 and June 2011.67 In order to gain a realistic picture of what progress really has been made in the implementation of projects within the PfM framework, in-depth studies of specific measures would be necessary – also more transparency as to what really is happening. However, there is reason for caution in assessments concerning the progress achieved thus far. For instance, the June 2011 „progress‟ report on WTO reads that, „in the priority area of facilitating and liberalizing trade in the global economy and enhancing and deepening bilateral trade and economic relations, both sides underline their desire for Russia‟s accession‟. Such underlined expression of mutual desire has been expressed for almost two decades. The target year of 2011 is now mentioned for the completion of the accession talks. If this came to pass, however, it would not be because of the

66 ‘Work Plan for Activities within the EU-Russia Partnership for Modernisation: Working Document’, EU External Action Serivice, 7.12.2010, http://eeas.europa.eu/delegations/russia/documents/news/work_plan_en.pdf (accessed 13.8.2010). On some issues, where there is no agreement, separate ‘preliminary proposals’ by the EU and Russia have been listed. 67 See ‘Progress Report … 2010’ and ‘Progress Report … 2011’, op. cit. (fn. 32). 43

new impetus provided by the PfM framework but by Moscow‟s realisation that modernisation of its industry without exposing it to international competition would be a hopeless endeavour.

One of the problems of providing substance to the EU-Russia Partnership for Modernisation is what in the corridors of Brussels is clearly recognisable as „Russia fatigue‟. To some extent, that sentiment manifests itself in the reduced readiness to provide money for the financing of joint projects. Such reluctance is also based on the realisation that the effectiveness of „technical assistance‟ to Russia extended under the TACIS programme left much to be desired. In one of the few assessments of the results of EU programmes and projects in that country conducted in 2006, the Court of Auditors concluded that the effectiveness of programmes had been „low‟. It could not assess the performance of TACIS projects in the Russian Federation positively‟.68 In its reaction to the report, the EU Council noted in untypically blunt language „with concern the main conclusion of the audit‟ and it „regrets the lack of a real dialogue between the Commission and the Russian authorities and the consequent lack of a sense of ownership on the Russian side.‟69

The lack of a real dialogue is still one of the problems that continue to affect EU-Russia relations. This too, in addition of course to the fact that Russia, as a result of its significant receipts from oil and gas exports is theoretically in a better position to pay for joint projects, has contributed to a lessened willingness in the EU to engage itself financially. Thus, in the fifteen years of implementation of TACIS (1992- 2007), €2.8 billion were allocated to Russian projects, which amounts to an annual average of €187 million.70 The replacement of TACIS by the European Neighbourhood Partnership Instrument (ENPI) starting from January 2007 has led to a reduction in financial commitments: For the Russian „country‟ programmes for the period 2007-2013 only €30 million per year have been budgeted, and another €30 million for „regional‟ and „cross-border‟ programmes.71 Additionally, the EU and Russia have agreed on five ENPI multi-country „regional‟ programmes, with the EU making available in the ENPI financial framework a total of €120 million

68 Court of Auditors, ‘Special Report No. 2/2006 Concerning Projects Financed under TACIS in the Russian Federation Together with the Commission’s Replies, 2006/C 119/01’, Europa.eu, http://europa.eu.int/eur- lex/lex/JOHtml.do?uri=OJ:C:2006:119:SOM:EN:HTML (accessed 13.9.2011). 69 ‘Relations with Russia – Special Report No 2/2006 of the Court of Auditors Concerning the Performance of Projects Financed under TACIS in the Russian Federation – Council Conclusions, 10 July 2006’, http://register.consilium.europa.eu/pdf/en/06/st11/st11428.en06.pdf (accessed 13.9.2011). 70 Data according to European External Action Service (EEAS), ‘*EU-Russia] Financial Co-operation’, http://eeas.europa.eu/russia/financial_cooperation_en.htm (accessed 4.9.2011). 71 Details concerning the financial dimension of the EU-Russia relationship are either sparse or non-existent and, if available, out of date. This is painfully apparent when comparing the relevant documents such as European Commission, ‘EU-Russia Financial Cooperation, Factsheet’, http://eeas.europa.eu/russia/sum11_06/finance.pdf; http://eeas.europa.eu/delegations/russia/eu_russia/tech_financial_cooperation/index_en.htm; http://eeas.europa.eu/russia/financial_cooperation_en.htm; and the Cross-Border Cooperation Strategy Paper 2007-2013 and Indicative Programme 2007-2010’,

over a four-year period (2010-2013).72 Although further financial resources are available through other sources programmes, e.g. the Democracy and Human Rights Instrument, the Nuclear Safety Instrument, several thematic programmes and the European Investment Bank (EIB), the fact remains of a reduced propensity for the financing of Russia related programmes. In line with this, no fresh EU money has been allocated to the Partnership for Modernisation.

In the final analysis, both the success of modernisation in Russia and of the corresponding modernisation partnerships depend on indigenous Russian efforts. To this end, Medvedev has spelled out several reasons why foreign investors should engage themselves more fully in Russia‟s modernisation. The Russian government, he stated at the World Economic Forum in Davos in January 2011, would:

. slash the number of its strategic companies even further beyond the fivefold reduction implemented until then (which would open up even more opportunities for investment in enterprises that were once restricted to private – and especially foreign – investors).

. embark on a large-scale sell-off of state assets (which could see assets of such potentially attractive companies as the Aeroflot airline, television company Channel One, telecoms operator Svyazinvest, oil producer Zarubezhneft and oil pipeline monopoly Transneft in private hands).

. create a special sovereign fund to attract foreign capital that would combine state assets and cash with private money.

. refrain from imposing a special tax on banks and the financial sector in an effort to attract additional capital into the country (which could give Russia some competitive advantages over other countries which are planning to impose regulatory restrictions on banks in the wake of the global financial crisis).

. press ahead with efforts to transform Moscow into one of the top-ten global financial centres as part of a drive to diversify the economy away from energy exports (which would benefit Russian largely undervalued blue-chip companies, such as Gazprom and Rosneft in the form of higher market capitalization).

. continue the implementation of energy efficiency programs, stressing that the state would also encourage more partnerships in the energy sector, such as the recent $16 billion asset swap and Arctic development deal between Britain's BP and state oil firm Rosneft.73

72 Russia will contribute €105 million over the four-year period; see the notification on financing agreements by the EU Commission and Russian Ministry of Regional Development of 21.9.2010, Minregion.ru, http://www.minregion.ru/upload/15_dms/100921_lette.pdf (accessed 13.9.2011). 73 In April 2011, however, the deal collapsed because (non-transparent) Russian domestic politics interfered: Four of the main ‘oligarchs’ allied in the Alpha-Group and Access Renova Group (AAR), which owns 50% of the Joint Venture TNK-BP, vehemently opposed the BP-Rosneft contract because AAR was to be excluded from it. Incongruously in view of the president’s ‘modernisation’ objective and his pinpointing in Davos the deal as 45

. adopt new rules and regulations that would permit Russia help it share technology – especially military technology – with other nations, as exemplified in a recent deal which saw France selling advanced military technology to Russia.

. and open up new possibilities for innovative business and venture capital, as exemplified in the creation of the Skolkovo innovation centre.74

There are, however, severe barriers that would need to be overcome for the realisation of the objectives as outlined by the Russian leadership.

OBSTACLES TO RUSSIA‟S MODERNISATION AND THE PARTNERSHIPS FOR MODERNISATION

The majority of Russian economic specialists, let alone sociologists, has argued that narrow „technocratic‟ approaches to modernisation may be able to improve matters at the margins but will not lead to the kind of fundamental changes demanded by the political leadership to safeguard Russia‟s future existence, survival and sovereignty. Comprehensive reform efforts were required not only in the economic realm but also in the political and social dimensions. The most recent and analytically most convincing example to that effect is the voluminous report of more than 500 pages by the Group of Experts charged by Putin further to develop his 2020 Strategy for the modernisation of Russia.75 The core of the Group consists of leading members of the Academy of National Economy and Public Service and the National Research University „Higher School of Economics‟ who are working with other specialists from Russian universities and research institutes, representatives from concerned ministries and agencies, and officials of the presidential administration and government apparatus of the Russian Federation, heads of regional executive bodies and foreign experts in 21 working groups.76 Their report, cautiously termed „preliminary‟,

exemplary, the Medvedev-confidant, Skolkovo-implementation-chief and multi-billionaire Viktor Wekselberg happened to be one of the four AAR ‘oligarchs’ responsible the failure of the joint venture. On 30 August 2011, Exxon replaced BP in a significantly revised contract, with Putin attending the signing of the deal in the Black Sea resort of Sochi. ‘Exxon, Rosneft Tie up in Russian Arctic’, Reuters, 30.8.2011, http://www.reuters.com/article/2011/08/30/us-rosneft-exxon-idUSTRE77T2OM20110830 (accessed 8.9.2011). 74 Medvedev’s speech in Davos contained incentives to would-be foreign investors summarized in ten points; see ‘Президент России выступил на открытии Всемирного экономического форума’, Kremlin.ru, 26.1.2011, http://kremlin.ru/news/10163 (accessed 25.8.2011). The list compiled above is not exhaustive. The presentation of data and additional information in brackets draws on Tai Adelaja, ‘Ten Reasons to Love Russia’, Russia Profile, 27.1.2011, http://www.russiaprofile.org/page.php?pageid=International&articleid=a1296154997 (accessed 9.9.2011). 75 ‘Промежуточный доклад о результатах экспертной работы по актуальным проблемам социально- экономической стратегии России на период до 2020 года’, Vedemosti.ru, 19.8.2011, www.vedomosti.ru/cgi- bin/get.../vedomosti_19-08-2011.doc?file=2011/; see also Kommersant.ru, http://kommersant.ru/content/pics/doc/doc1753934.pdf; for the results of the 21 working groups see http://2020strategy.ru/ (all the above websites accessed on 10.9.2011). The report was issued on 19.8.2011. 76 ‘Experts by August Will Present Alternative Plans for the “Strategy 2020”’, World News, Russia, 23.4.2011, http://mysouth.su/2011/04/experts-by-august-will-present-alternative-plans-for-the-quot-strategy-2020-quot/ (accessed 10.9.2011); see also the home pages of the Academy for National Economy (Академия народного хозяйства при Правительстве РФ), http://w3.ane.ru/ and the Higher School of Economics (Националный исследовательский университет. ‘Высшая школа экономики’), http://www.hse.ru/ (accessed 10.9.2011). 46

contains extensive consideration of various scenarios of which the (implicitly) most likely to occur is called „scenario of inertia‟. This probability obtained because of political reasons, which are „to ensure tactical balance, the balance of interests of the most important [domestic political] groups. Conversely, it would take hard political decisions to transgress the [existing system] and chart new policy directions that would succeed in overcoming the current [negative] tendencies.‟77 Such decisions, the (again implicit) conclusion of the academic specialists, were unlikely to be adopted.

There are many other reasons which make scenarios of inertia most likely to occur, and several of them have been stated also by the president and the premier. These include the following:

. „The state apparatus in great measure constitutes a bureaucratised and corrupt system that is incapable of [contributing to] positive change let alone provide motivation for dynamic development. … Excessive pressure by the administrative bodies has turned in one of the greatest brakes on [economic] development … and excessive centralisation one of the biggest problems of state management.‟78

. Self-government of the subjects (entities) of the federation and the municipalities has progressively been whittled down and „centralisation of the financial system has reached critical levels‟.79

. ‘The state sector comprises about 25 million people – more than one third of the whole work force. This sector receives trillions of roubles of state investments and current allocations. … It is evident that the state is not in a position to maintain such a huge public sector, and it also doesn‟t need it.‟80

. The number of civil servants has progressively increased, rising by 143,500 in 2005 to 1.46 million in 2006 and to 1.6 million in 2010.81 Civil servants in Russia are inadequately prepared and ill disposed towards modernisation. They typically lack any Weberian ethos and possess all the attributes of a rentier class. They do not produce anything, they do not manage enterprises, and they are averse to innovation and risk taking.82

. In its quest for innovation and modernisation the state also cannot count on the siloviki, the high-ranking representatives of the power ministries and agencies, including the armed forces and „special services‟. Their influence in the „Putin system‟ of government has risen

77 ‘Промежуточный доклад о результатах экспертной работы’, op. cit. (fn. 42). 78 Putin in his presentation of of the 2020 Strategy, ‘О стратегии развития России до 2020 года’, op. cit. (fn. 2). The question, of course, arises as under whose leadership as president ‘excessive centralisation’ and ‘administrative pressure’ were able to raise their ugly heads. 79 ‘Промежуточный доклад о результатах экспертной работы’, op. cit. (fn. 42). The report by the Group of Experts provides specific data to that effect. 80 Putin in his presentation of of the 2020 Strategy, ‘О стратегии развития России до 2020 года’, op. cit. (fn. 2). 81 Data according to the Russian Statistical Service Rosstat; see Николай Гульбидинский, ‘Mодернизация или “отстой”’, Свобдная мысль, No. 3/2009, pp. 73-84; see also Владимир Гельман, ‘Тупик авторитарной модернизации’, Pro et Contra, Vol. 3, No. 5-6 (September-December 2009), pp. 51-57. 82 Гульбидинский, ‘Mодернизация или “отстой”’, op. cit. (fn. 43). 47

considerably. They not only wield political influence but economic power as well. For the main part, they are interested in maintaining their privileged position, i.e. the status quo, not in comprehensive change.83

. The introduction of competition as a motive force of innovation is not a matter of bureaucratic management, ‘not a technical problem but a political problem’.84 Every time, when attempts were made in Russia „to lessen the pressure exerted by the state bureaucracy on the business community “from above”, they failed‟. The rules and regulations introduced in the course of such „reforms‟ do not change the legal and practical position of the enterprises in the market place. What would be necessary for success would be the drastic curtailment of the power of the bureaucracy itself.85

. Contrary to all the rhetoric during Putin‟s and Medvedev‟s tenure of office, the problem of corruption has significantly increased, rather than lessened. This, too, is a barrier to modernisation because corruption is anathema to fair competition and it removes potential investment funds from the economy. According to Transparency International, Russia in the past years has fallen to place 154 (out of a total of 178) on the organisation‟s corruption index, ranging it with countries such as Tadzhikistan and Papua New Guinea.86 The amount of bribes annually paid in Russia is estimated to be about $650 billion per year87 and the black market sector of the economy to constitute up to 30% of GDP.88

. Contrary to the „modernisation‟ and „raising competitiveness‟ pressures generated since the global economic and financial crisis, Russia yet again experienced a deterioration in its competitiveness. In the latest annual Global Competitiveness Index rankings released by the World Economic Forum in September 2011 it slid three positions to 66th place. Despite seeing an improvement in macroeconomic stability, the report pinned Russia‟s fall in competitiveness on a deterioration in other areas, „notably the quality of institutions, labour market efficiency, business sophistication, and innovation‟.89

. Another important factor that limits the chances of comprehensive modernisation is the demographic problem, considered to be even a „grave threat‟ to Russian society and the economy.90 In the next fifteen years, Russia will suffer from the low birth rates of the 1980s so that, according to a UN report, Russia‟s population could fall from the current 142.9 million to

83 Гельман, ‘Тупик авторитарной модернизации’, op. cit. (fn. 43). 84 ‘Промежуточный доклад о результатах экспертной работы’, op. cit. (fn. 42). 85 Ibid. 86 For the Transparency International data see Transparency.org, http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results (accessed 14.9.2011). 87 ‘Average Bribe Grows to About $10,000 in Russia – Police’, Interfax, 10.8.2011. 88 Vladimir Kuzmishchev, ‘Grey Shadows Have Merged Together’, Grani.ru, 25.3.2010. 89 Nathan Toohey, ‘Russia Drops in Global Competitiveness Rankings’, Moscownews.com, 7.9.2011, http://themoscownews.com/business/20110907/189021138.html (accessed 11.9.2011). 90 According to Medvedev in his annual speech to the federeal assembly in 2010, ‘Послание Федеральному Собранию Российской Федерации 30 ноября 2010 года’, Kremlin.ru, http://kremlin.ru/news/9637 (accessed 13.9.2011). 48

116 million in 2050.91 The main problem, however, is not the expected reduction in the population per se but the – despite some recent improvement – low life expectancy of Russian men, officially 63 years at present.92 This for an industrialized country highly unusual figure does not result from abnormally high child mortality, as in many developing countries, but from a combination of excessive alcohol consumption, drugs and cigarettes, AIDS, psychological stress, an unhealthy diet and a decrepit health system.93 Russian men are removed from the workforce at all levels of the economy in their best years of life. Inward migration cannot compensate for the losses, not least because of the fact that the vast majority of the arrivals are „muscles, not brains‟.94

. Research and development efforts continue to suffer from significant ‘brain drain’. Russian talent prefers to go abroad rather than stay at home – not only or not primarily because of money but because of the freedom, opportunities and better life style they are able to enjoy in Europe and the Ujnited States. Data provided by the Russian Court of Auditors show that in the past three years the country has lost one and a half million people to migration,95 many of them academic specialists and highly skilled professionals. Other data suggest that about four million Russians possess permanent residence permits in Europe or the United States. Many of these „green card‟ holders are unlikely to return.96

. The creation of special conditions for scientific research and development along the lines of the Skolkovo ‘innovation city’ is nothing new. Such phenomena have a long tradition in the Soviet era, notably applied in the then huge military-industrial complex. In the end, notwithstanding some innovations that were made in these „golden cages‟, much know-how was gained and introduced in Russia by means of espionage. Today in Russia, moreover, about 350 technology parks already exist, even more than in Japan – a fact that has prompted Russian critics to ask why it should be necessary to spend enormous sums of money on Skolkovo rather than build on the existing scientific centres.97 Concerning the possible

91 The figure of 142.9 million inhabitants according to the Russian Statistical Service Rosstat on the basis of preliminary results for the 2010 census: ‘Предварительная годовая оценка ожидаемой продолжительности жизни при рождении’, Gks.ru, http://www.gks.ru/wps/wcm/connect/rosstat/rosstatsite/main/ (accessed 13.9.2011). Both Russian and Western expert opinion considers this figure to be too high. 92 Ibid. 93 As summarized by the Russian demographer Andrey Polunin, Что нужно, чтобы Россия перестала вымирать, Svpressa.ru, http://svpressa.ru/society/article/32430/ (accessed 13.9.2011). 94 ‘Промежуточный доклад о результатах экспертной работы’, op. cit. (fn. 42). 95 According to Sergey Stepashin of the Court of Auditors, as quoted in: ‘Russia – Dislike’, Novayagazeta.ru, 30.5.2011, http://en.novayagazeta.ru/data/2011/057/00.html (accessed 13.9.2011). 96 ‘”Be innovative!”, Orders the Kremlin’, Opendemocracy.net, 16.7.2010, http://www.opendemocracy.net/andrei- kolesnikov/be-innovative-orders-kremlin (accessed 12.9.2011). 97 The deficiencies of the ‘golden cage’ type of innovation have been pointed out by Ирина Самахова, Скольково? — Стольково! И еще полстольково, Novayagazeta.ru, 25.1.2011, http://www.novayagazeta.ru/data/2011/008/15.html?print=201127080900 (accessed 14.9.2011) and in: Почему ‘Сколково? Эксперты The New Times о перспективах российской Кремниевой долины’, Newtimes.ru, 5.4.2011, http://newtimes.ru/articles/detail/18896?sphrase_id=298929 (accessed 14.9.2011). 49

modernisation partnerships, Medvedev has complained that, unfortunately, thus far „no legally binding documents on cooperation and participation by [foreign] partners in specific projects‟ have yet been seen, in spite of „various agreements and memorandums [of intent] with big foreign corporations, research and development centres, and educational institutions‟.98

. Contrary to all appeals and exhortations, including those (as quoted) by the president in Davos, and in contrast to the country‟s BRIC partners, potential investors have continued to pull billions of dollars from Russia. An estimated $31.2 billion left the country in the first half of 2011, according to the Central Bank. The economics ministry expects the country's capital outflow to hit $30 to $40 billion this year instead of the earlier forecast zero capital outflow.99

. In comparison with the high growth rates of GDP during Putin‟s two tenures of office as president and since the crisis of 2008-2009, conditions have changed. These concern slower GDP growth, budget deficits and lower rates of investment. GDP growth in 2010 amounted to only 3.8%. Rather than, as in the decade before the crisis, showing a budget surplus, Russia (as mentioned above) has since 2009 been struggling with a budget deficit, which is likely to last because of rising expenditures for an aging population.100

. Finally, as opposed to the urgent requirement of overcoming the „humiliating dependency‟ on raw materials, according to the official projections for 2012-2014, the dependency of the budget on the oil and gas sector has significantly grown rather than lessened.101

CONCLUSIONS

Modernisation and the construction of „modernisation partnerships‟ with international institutions as well as foreign governments, research centres and corporations are to end Russia‟s „humiliating dependence‟ on raw materials and their export, and the creation of a new economic and social system based on innovation, initiative and competitiveness, have been declared by the „tandem‟ of Russian president and premier to be an existential matter and a question of the survival of the country. However, as enumerated above, there are numerous barriers for the comprehensive „modernisation‟ drive to be successful. Reviewing these obstacles demonstrates that many of them have been put in place during Putin‟s eight years in office as president, including excessive

98 President Medvedev on 25 April 2011 in Moscow attending the presentation of the first annual report of the Skolkovo Foundation; ‘President Medvedev Calls to “Work, not Sleep” on the Skolkovo Project’, East-West Digital News, 26.4.2011, Ewdn.com, 26.4.2011, http://www.ewdn.com/2011/04/26/president-medvedev-calls- to-work-not-sleep-on-the-skolkovo-project/ (accessed 9.9.2011). 99 Tai Adelaja, ‘Despite Higher Oil Revenues, Russia’s Economy Continues to Stagnate’, Russia Profile, 2.9.2011, available as a reprint at: Barentsnova.com, http://barentsnova.com/node/1233 (accessed on 9.9.2011). 100 Gerald Hosp, ‘Zwei Wege für Russland. Rahmenbedingungen sind wichtiger als die Etablierung von Modernisierungsinseln’, Neue Zürcher Zeitung, 27.1.2011, p. 25. 101 ‘The budget framework *2012-2014] envisages a contraction of the non-oil budget deficit from 11.7% of GDP planned for 2011 to around 10% of GDP in 2014. Despite the small contraction of the non-oil deficit, the plans mean that the federal budget will remain significantly more dependent on oil and gas revenue than before the crisis.’ ‘Russia Economy: Budget Framework for 2012-2014 Agreed’, Global Economic Library, 7Economy, 10.8.2011, http://7economy.com/archives/15089 (accessed 14.9.2011). 50

centralisation and administrative pressure; negation of fair competition by constant interference of corrupt bureaucrats; the increased role of the siloviki in political and economic decision-making; in the political sphere, manipulation of elections and electoral fraud, non-registration of democratic political parties; in the judicial sphere, collusion of the courts, prosecutors and the police with organised crime for mutually benefit; and in the social sphere, control of the national television and curtailment of the activities of non-governmental organisations, notably those with foreign connections. Confronted with this state of affairs, Russian critics have pointed out that innovation and initiative typically do not arise in authoritarian political systems but in free societies – as shown by the success of Silicon Valley in United States; computers and the internet world had originated there without government pressure. For comprehensive modernisation to become a successful endeavour, many of the features of the existing system would have to be dismantled. For this to occur, as the Group of Experts in their comprehensive report agree, hard political decisions would be necessary which, however, given the current domestic political constellations, are unlikely to be taken.

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