The project includes programmes already under way like the Health Priority National Project and the Federal Programme ‘Children of Russia’. Post-Soviet Russia is far behind in health care in general and pre-natal care in particular. No fewer than twenty-three special clinics are to be set up, working more or less on the same lines as the British National Health Service.
It has always been said that it is the women who keep Russia afloat, and Putin would subscribe to this time-honoured view. So it is small wonder that in May 2006 he took the initiative and promised young mothers the equivalent of USD 9,500 for the birth of their second child. In addition, new subsidies were introduced for mothers looking after their babies. The Duma has increased, pressured by the President, the monthly maternity allowance to 23,400 roubles (equivalent to around USD 1000). What Putin wants to push through the jungle of bureaucracy is an all-embracing concept for a new welfare state, focused on turning around long-established trends.
Putin and his people know that a vast country like Russia cannot, as the Americans say, turn on a dime. The four great ‘national projects’ will take time, money and enormous effort to push through, but they are integral to the strategy to turn decline into growth. Those programmes are popular, and the more money comes in from oil and gas the less they look like pie in the sky. Administrative control of these programmes destined to reverse the long-term ebb of the Russian population was in the hands of Dmitri Medvedev, in fact his core responsibility in the Kremlin. After he was named by Putin as future president, within less than a month his popularity rose to a staggering 80 per cent. In retrospect it looks as if he was groomed by his mentor from St Petersburg days to be the man who brings the good news to Russians and, as president, will be able to deliver.
Four avenues are proposed by the Kremlin to lead the Russian people to the promised land of higher living standards and a better and healthier life: fair-priced living, modern health care, professional training, effective agriculture.
So far, this land of milk and honey is still in the future, and doubts have not been dispelled as to whether it will ever turn into reality. An initial budget of 180 billion roubles (USD 7.2 billion) has been increased to 430 billion roubles (USD 17.2 billion) at the end of 2007. But costs have risen too, and organization is inefficient.
The national projects
To start with the housing market. The idea was that the state would subsidize mortgages and give money directly to families. This resulted in a rapid rise in prices while nothing was done to liberalize the market for land to build on or to control the corrupt practices of municipalities assigning apartments to tenants. The result was an increase in housing prices in the major cities, especially Moscow and St Petersburg, of between 85 and 100 per cent. When this national project started in 2005, it took 4.3 years of the savings of an average family to afford the down payment for a flat of, on average, 54 square metres. Meanwhile, the time of waiting and saving has increased to more than five years. The legal system has been strengthened to provide for mortgage banks, but building societies are slow in coming to Russia. There is not sufficient trust in the legal and judicial system.
By the end of 2006 failure threatened the project. To bring more apartments to the housing market, pilot projects were developed in eleven regions of Russia. Again, unexpected consequences followed. Building material was in short supply, and the price of cement rose by 140 per cent. Meanwhile, inflation had driven the price of mortgages to a staggering 12.5 per cent (instead of the 11 per cent planned). The principle was a discomforting learning-by-doing.
The reform of the national health system was bedevilled by incompetence and waste. Corruption was endemic both in the procurement of medical equipment and in the administration, where pharmaceutical companies were asked for ‘compensation’ in return for major orders. In 2006 a major health insurance company was taken to court because of kickbacks. Education, even under Soviet rule a strong component of Russian culture, suffered from underfinancing and the mass exodus of capable teachers throughout the 1990s and is recovering only slowly. Everywhere computers are being introduced to schools. The problem, though, lies in the software. There is not enough money to purchase licensed systems. So pirated ones are installed, more often than not unworkable.
There is little state money going into the agricultural national project. While the big holdings are booming, cooperating with commercial banks, for the small-scale suppliers market access remains the big problem. All this goes back to the inefficiency of Russian infrastructure, the absence of market-oriented distribution, and the endless entanglements of bureaucratic red tape.
The demographic nightmare haunting Kremlin leaders as much as ordinary Russians will not soon go away. In fact it is here to stay and get worse. In the Kremlin today, strategic theory is far ahead of administrative practice. It all comes back to strengthening the home base, to giving ordinary Russians a better deal, to encouraging and sustaining more trust in the future, to reversing the decline of population and to save ethnic Russians from being outnumbered, in the not too distant future, by the Muslim population.
Putin and his people know one thing. All the oil money in the world, if it does not ultimately translate into a better life for the millions of ordinary Russians, will not benefit the future of Russia. They know about the ‘oil curse’ – the corrupting influence of too much money in too few hands – and they understand, in theory if not in practice, the dangers looming if the national projects fail, if the majority of Russians lose faith in Putin and his regime, and if cynicism defines the future.
8
Gazprom: the new currencies of power
‘So much gold, so many diamonds… and so much dust.’
What is good for Gazprom is good for Russia – the words that used to be said about General Motors and the United States of America are not entirely out of place for a most unusual company. Gazprom is a state within a state, the owner of most of Russia’s gas fields and all the gas pipelines from Siberia to European Russia and on to Western Europe. Gazprom, which is also acquiring and controlling pipelines from Central Asia, is reconstructing the more efficient aspects of the lost empire. By using the new LNG (Liquefied Natural Gas) technologies Gazprom also sees the potential of going global.
Gazprom strategy is Russian strategy. Or is it the other way round? Only two days after the G8 meeting in St Petersburg in July 2006, where all the heads of state and of government signed a document calling for more honesty, transparency and competition, President Putin enshrined into law Gazprom’s monopoly position as the sole exporter of gas from Russia. By the end of 2007, Gazprom’s market capitalization was well over USD 230 billion – second to none in the world of energy or, for that matter, any other world. Analysts advised a ‘strong buy’ and pointed to the fact that Gazprom shares in the recent past had usually outperformed forecasts. Only a severe recession in the US or China could stand in the way of further growth, driving the price of oil downwards. The fact that Gazprom has underinvested throughout the last decade did not deter market optimism, especially after Putin had named Dmitri Medvedev, the Kremlin’s man at the helm of Gazprom, to be his successor.