Pavel Felgenhauer, Eurasia Daily Monitor Volume: 11 Issue: 216 December 4, 2014
On December 4, President Vladimir Putin addressed a joint session of Russia’s houses of parliament in the Kremlin. This annual address is the Russian equivalent of the State of the Union speech delivered annually by the President of the United States, and it is mandated by the Russian constitution. The speech was scheduled for noon, but Putin, known for being notoriously tardy to almost every event, sprinted into the gilded Kremlin hall and up to the podium six minutes late. According to presidential press secretary Dmitry Peskov, Putin was editing and rewriting the text of his address into the night before the speech but, in the end, “produced a flawless document” (Rossiyskaya Gazeta, December 4).
The Russian economy is currently in tatters, with inflation apparently growing to double digits in the beginning of 2015. The price of oil—Russia’s main money-making export commodity—is falling, and the ruble is also dropping against major world currencies, additionally fueling domestic inflation and eating away at savings. Western economic sanctions are adding further trouble, while investment is down and capital flees out of Russia at a pace of over $100 billion per annum. Some of Putin’s high-placed pro-market economic advisors have been arguing that the only way to overcome Russia’s economic doldrums is a radical economic liberalization—a deregulation that would free private initiative and capital (Argumenty i Fakty, November 13).
There were high expectations in Moscow that Putin’s address would signal a radical change in economic policies. This did not happen: According to Peskov, Russia’s ills are induced from abroad, and Putin does not have “some big pill” to cure all of Russia’s economic troubles. Peskov insisted that the measures Putin promised in support of small- and medium-sized private businesses “are not some new economic policy, but a summary of measures that have been already enacted.” Putin’s main point, insisted Peskov, is that “Russia is strong and self-confident.” Peskov summarized Putin’s message: “Russia is becoming stronger, and our so-called ‘friends’ [Europe and the US] see this as absolutely unacceptable and are hell-bent on preventing Russia from becoming a prosperous nation, standing on its own feet, ready to defend its sovereign rights” (Rossiyskaya Gazeta, December 4).
In his speech, Putin, visibly agitated, strongly defended the occupation and annexation of Crimea as “just and absolutely legal.” The president declared Crimea and Sevastopol “not only strategically important, [but] the spiritual source of the Russian nation.” According to legend, in the 10th century CE, Vladimir, the Grand Prince of Kyiv, was baptized in Chersonesus—a Greek colony in the outskirts of present-day Sevastopol, under Byzantine rule at the time. Putin declared “Crimea, ancient Cherson and Sevastopol sacred to Russia” and compared them to the Temple Mount in Jerusalem. “[T]hat is our position now and forever,” he asserted (kremlin.ru, December 4).
Putin angrily denounced the West, the US, as well as the Ukrainian authorities, whom he accused of killing their own citizens and destroying the country. The Russian leader called the Ukrainian people “brotherly” and expressed hope that they would eventually force a judgment on their present rulers. He accused the West and the US of plotting to destroy Russia: “Sanctions would have been imposed under some other pretext, without Crimea or Ukraine to undermine Russia and its sovereignty.” According to Putin, for centuries, the West enacted a policy “to contain Russia” as soon as the latter gained strength and influence. Moreover, Putin accused the West of “openly supporting murderers, terrorists and separatists” in the North Caucasus in an attempt to tear Russia apart, “like Yugoslavia in the 1990s.” But Russia defeated its foes, declared Putin, the same way “as [the Soviet Union defeated Adolf] Hitler, who wanted to push us out [of Europe] beyond the Urals; and all must remember how that one ended.” Putin dismissed European nations that “have forgotten national pride and sovereignty,” while declaring that Russia is different: strong, its armed forces formidable, its freedom and sovereignty sacrosanct (kremlin.ru, December 4).
Putin’s anti-Western bluster lasted for almost half an hour before moving on to the announcement of economic deregulation: a promise not to increase taxes for four years, as well as to decrease inspections of businesses and make them more transparent. In an apparent attempt to reverse capital flight, Putin offered a “full amnesty for repatriated capital,” promising to accept any money without questioning its origin. According to Peskov, “This is a very rare, but very good possibility to legalize illegal capital; those who do not take it will be punished” (Interfax, December 4). Putin also promised to make Vladivostok, Sevastopol and other Crimean ports free ports (porto franco).
It seems as if different parts of Putin’s address may have been prepared by different departments or advisors: Limited deregulation proposals were balanced by the announcement of more regulations. Putin declared the creation of an all-Russia central authority on building and another one for procurement. Moreover, he equated alleged misappropriation of defense procurement allocations to terrorism sponsorship and demanded that Russia’s formidable law enforcement apparatus control all levels of defense spending (kremlin.ru, December 4).
Despite previous rhetoric about “freedom to do business,” Putin did not announce any intent to dismantle or seriously reform the elaborate state law enforcement and security apparatus that enriches itself through rent seeking and is the backbone of endemic corruption. Furthermore, Putin’s demands for economic growth and to turn “savings into investments”—up to an annual investment level of 25 percent of GNP and “wise import-replacement”—sounded more like wishful thinking in present-day Russia. Putin attributed the falling ruble to the activity of “speculators,” saying that “we know who these speculators are” and threatened that it is “time to clamp down.” In addition, Putin demanded strict regulation of spending by state-controlled corporations by creating special control centers or “internal exchequers” (Rossiyskaya Gazeta, December 4). Apparently, after creating numerous state-controlled corporations by nationalizing practically any major profit-generating company in Russia, Putin has discovered that these state corporations are wasteful and now demands the creation of special additional “internal exchequers” to control the waste.
Putin’s Russia has become a despotic, police-run, corrupt bureaucracy. The annexation of Crimea and the intervention in Ukraine put this unruly structure into a stress situation that it is poorly equipped to manage. The Russian president’s assumption that Western sanctions were coming anyway is clearly an attempt to dodge the blame for the high-risk Crimea/Ukraine endeavor, which has destabilized the system. And lacking any “big pill” to cure Russia’s ills, he ended his address by calling for national unity in the face of a presumed universal, anti-Russian conspiracy.
Putin Calls for National Unity to Defeat US-Led Foes