Valdai Conference Insights on Russia’s Political and Economic Development


2016-11-16 By Richard Weitz

Although the Valdai Conference’s major panels focused on globalization and its discontents, in the closed sessions the Russian officials mainly addressed Russia’s political and economic situation.

Valdai Discussion Club

They were generally optimistic about the country’s political stability, but were divided over its whether Russia could overcome its major domestic and foreign economic challenges.

According to the official line, under President Vladimir Putin’s guidance, the Russian political system has become more competitive, representative, transparent, fair, and effective. In contrast, critics described the recent parliamentary elections as flawed as previous ballots and attributed the lack of popular protests to political apathy rather than mass approval.

Although one legislative leader said that the Russian Duma has become more important, he reaffirmed the slogan, “No Putin, no Russia,” stressing that Russia has a presidential system with an indispensable political leader who has successful surmounted past economic and political challenges and was expected to do likewise in the future.

At Valdai, Putin turned aside the opportunity to discuss his future plans at the final public session, declining to comment on his retirement plans or his place in Russian history. Most experts at the conference expected him to run for reelection in March 2018.

Russian officials who spoke in the closed sessions believed the Russian economy could thrive without the political system’s transformation, citing the examples of Singapore and China.

A former Russian official, however, argued that the Russian government’s constraints on civil society were seriously constraining the country’s economic and political development.

In response to a question from the audience, a current Russian political leader denied that Russia now had a “Kamikaze Duma”—one that would have to take unpopular steps like pension reform, increasing the retirement age, cutting education and health, increasing taxes, and redistributing money from the regions in order to maintain the president’s popularity when he runs for reelection in 2018.

Russian officials insisted that even potentially controversial decisions, such as the planned rise in the age eligibility of pensions, would not have any negative social consequences—an implicit reference to mass public protests in 2011 and 2012.

In another session, Russian speakers spoke optimistically of the Skolkovo Innovation Center; a $3-billion science and technology entrepreneurial center near Moscow.

The government’s aim has been to use administrative and regulatory reforms as well as targeted financial assistance to promote high-tech startups. The projects would then ideally commercialize Russian applied technological and scientific achievements in the information, energy, nuclear, biotechnology, and outer space sectors.

The Massachusetts Institute of Technology has been helping develop research, education, and entrepreneurship programs at the Center’s new graduate training organization, the Skolkovo Institute of Science and Technology (“Skoltech”).

Yet, various impediments have kept Russia from emulating California’s “Silicon Valley,” despite the earnest engagement of Russian and foreign scientists.

These have included reduced government funding, the annulment of some regulatory waivers, the failure to enact the base law on technological parks for existing universities, the departure of some startups from Russia, and anti-corruption concerns that have disrupted various initiatives.

Skoltech has become operational but still lacks a university campus at the site, whose opening is now scheduled for September 2017.

Valdai Conference Panel. Credit Valdai Discussion Club
Valdai Conference Panel. Credit Russia Today

Russian officials disputed contentions that insufficient government support had limited the planned growth of the small and medium-sized businesses in the economy.

However, they confirmed that some small businesses believe they have to partner with larger state-owned corporations to access certain government resources.

As one observed, “businesses feel like they should depend on the administrative connections rather than the quality of the products.”

However, one Russian speaker recognized that for innovation to prosper, his country needed a stronger private sector and more opportunities for the “creative sector.” He calculated that the Russian state was investing more in its technological development than many foreign governments, including Japan and Canada, but that these countries private sectors generated many more technological advances than Russia.

The senior Russian officials who spoke at Valdai downplayed Russian corruption concerns, arguing that government policies had reduced corruption over time.

They claimed that, “Our anti-corruption legislature and practices are far more advanced” than before and in other former Soviet republics like Ukraine. For example, they stated that new regulations and legislation made it easier to start a business without having to pay bribes to government officials and provides better safeguards against conflicts of interests.

The officials said no government plans exist to make major changes in the Russian tax system before 2018, except for some possible increases in excise taxes on tobacco and alcohol (partly for health reasons) as well as additional taxes on the oil and gas sector. They are currently debating whether to adopt a more progressive tax system in the future.

They said they wanted to avoid making major cuts in government spending and hoped that the privatization of state corporations such as Rosneft, anti-monopoly legislation, and further deregulation of private industry would generate enough economic resources to sustain high employment, restore national economic growth, and avoid depleting the government’s major reserve funds.

In practice, the privatization process has proven controversial. Some observers question its wisdom or, conversely, claim that large corporations will still be subjected to substantial indirect Russian state control. Even if successful, this privatization would lead to only short-term debt relief as the state assets are sold off; the country needs long-term growth to boost public revenue and private income.

A return to high oil prices would also solve this problem, but most Russian officials cautioned against relying on being too optimistic, saying it was prudent to plan on low oil and gas prices for the indefinite future.

As for the international economy, the Russian officials said that they were being proactive in seeking foreign markets and remained open to participation in principle in regional trade agreements. They also planned to continue allowing the ruble to float freely on international exchange markets, with the Central Bank prepared to intervene in an emergency if required.

Some Russians implied that the government hoped that its deeper integration into Eurasia and East Asia would compensate for Moscow’s constrained economic ties with the West.

Still, they insisted that Russia wanted “to reach a balance” and saw “no real obstacles to our collaboration apart from current sanctions.” Although the sanctions “violated…cooperation and mutual understanding,” Russians remain open to future economic collaboration with the West based on mutual interest and reciprocity.

One Russian speaker correctly observed that continued progress in diversifying Russian exports beyond energy commodities would help reduce the ruble’s volatility.

He also cautioned that Russia’s demographic challenges could become more serious in some areas due to the incoming migration of Russians from other countries that had helped compensate for the declining number of working age people in Russia.

Editor’s Note: About the Valdai Conference

The Valdai Discussion Club was established in 2004. It is named after Lake Valdai, which is located close to Veliky Novgorod, where the Club’s first meeting took place.

The Club aims to promote dialogue of Russian and international intellectual elites and to deliver independent objective scholarly analysis of political, economic, and social developments in Russia and the world.

The intellectual potential of the Valdai Discussion Club is highly regarded both in Russia and abroad. More than 1,000 representatives of the international scholarly community from 63 countries have taken part in the Club’s work. They include professors from major world universities and think tanks, including Harvard, Columbia, Georgetown, Stanford, Carleton Universities, the University of London, Cairo University, the University of Tehran, East China University, the University of Tokyo, Tel Aviv University, the University of Messina, Johns Hopkins University, the London School of Economics, King’s College London, Sciences Po and the Sorbonne.

The Valdai Club’s regional programmes, the Asian, Mid-Eastern and Euro-Atlantic Dialogues, have drawn considerable attention from the international expert community. The Club holds a special session at the St. Petersburg International Economic Forum.

The Club’s meetings have been attended by many leading politicians, experts, public figures and cultural figures from Russia and other countries. Russian participants have included Sergei Ivanov, Chief of Staff of the Presidential Executive Office (2011-2016); Vyacheslav Volodin, First Deputy Chief of Staff of the Presidential Executive Office; Dmitry Medvedev, Prime Minister (attended as President of Russia in 2008–2012); Igor Shuvalov, First Deputy Prime Minister; Sergei Lavrov, Minister of Foreign Affairs; Sergei Shoigu, Defence Minister; Sergei Sobyanin, Mayor of Moscow, and others. Foreign guests have included Wolfgang Schьssel, Chancellor of Austria (2000–2007); Romano Prodi, Prime Minister of Italy (1996–1998, 2006–2008); Dominique de Villepin, Prime Minister of France (2005–2007); Mustafa Barghouti, General Secretary of the Palestine National Initiative; Volker Rьhe, German Defence Minister (1992–1998); Franзois Fillon, Prime Minister of France (2007–2012); Krzysztof Zanussi, Polish film and theatre director and producer; Shlomo Ben Ami, Israeli Foreign Minister (2000–2001) and Security Minister (1999–2001); Franco Frattini, Italian Foreign Minister (2008–2011); Robert Skidelsky, Member of the British House of Lords; Jбn Čarnogurskэ, Prime Minister of Slovakia (1991–1992); Vбclav Klaus, President of the Czech Republic (2003–2013) and many others.

Russian President Vladimir Putin has met with the participants of the Valdai Club’s annual meetings every year since its founding.

In 2014 the Club moved away from the format of “telling the world about Russia” to practical work aimed at forming the global agenda and delivering a qualified and objective assessment of global political and economic issues. One of its main objectives is to promote dialogue within the global intellectual elite in order to find solutions to overcome the current global crisis.

The Club actively collaborates with opinion makers across various fields, including international relations, global politics, economics, security, energy, sociology, communications, and so on.

The non-profit Foundation for Development and Support of the Valdai Discussion Club was established in 2011 with a view to expanding its activities to new areas, including research and outreach work, regional and thematic programmes. In 2014 the Foundation assumed all responsibility for management of the Club’s projects. 

The Foundation’s founders are the Council on Foreign and Defence Policy (CFDP), non-profit partnership Russian International Affairs Council, the Moscow State Institute of International Relations (University) of the Russian Ministry of Foreign Affairs (MGIMO), and the National Research University Higher School of Economics (HSE).

The Board of the Foundation is responsible for the Foundation’s affairs. The Board is chaired by Andrey Bystritskiy, renowned Russian media manager, author of articles and publications, and media and communications researcher. Fyodor Lukyanov, well-known Russian international relations and foreign affairs expert and editor-in-chief of the “Russia in Global Affairs” journal, is the Academic Director of the Foundation. The Foundation’s day-to-day operations are managed by Executive Director Nadezhda Lavrentieva, Honoured Economist of the Russian Federation, and former top manager at major Russian media outlets.