Growing pains

Matthew Jones

Matthew Jones considers the potential of the BRIC formation, and how Russia might have a large part to play

The classification of Russia as a BRIC economy is due to its GDP growth, growing middle class and large urban population. However, as the recent elections in Russia demonstrate, these similarities mask a changing political landscape within Russia, in which political stability is being achieved at the expense of democratic freedom.
The growth of the BRIC economies has been characterised by growing levels of FDI, a burgeoning middle class and consumer markets, and strong GDP growth. With the exception of Brazil, Russia, China, and India all increased their share of global GDP between 2000 and 2005. The growing power of these economies has seen some commentators suggest that they could provide a buffer to the current credit crisis which is spreading globally.

The route to this growth differs widely between these economies however; India’s educated workforce has been the driving force behind a services boom, whilst China’s strong manufacturing capabilities and large workforce have provided a strong impetus to growth. Despite a slowdown in economic growth in the 1990’s, Brazil has experienced a rare period of economic and political stability, and its rich natural resources have provided the impetus for its increasing presence on the world stage. Russia’s growth has been driven by political stability and a revival driven by natural resources.

It is politics where Russia differs most from the other three economies however. Whilst Brazil is governed by a working class socialist, and India’s growth has been fuelled partly by its liberal economic regime, China continues to be governed in an authoritarian manner by the Chinese Communist Party. However, due to its rapid economic growth and the increasing number of foreign companies setting up business there, in order to be capitalist, China has, albeit reluctantly, been forced to open itself up to global scrutiny. Russia’s politics in contrast have been characterised by increased centralization at the expense of democracy and political freedom.

Russia’s growth has been fuelled by the fact that it has the largest known natural gas reserves in the world, and oil and gas accounted for 60 percent of Russia’s exports in 2005. According to the preliminary data, Russia’s economic growth in 2007 exceeded eight percent in comparison with 7.4 percent in 2006; the country’s big businesses are flourishing and the country’s stock exchange is booming. This new economic power has meant that the country has begun to exert tremendous influence on the world’s economic and political stage. Vladimir Putin’s term as President brought accusations of using Russia’s energy to exercise political control over some former Soviet republics such as Ukraine, Georgia, Belarus and Moldova. Indeed earlier this year, Georgia accused Russia of trying to annex Abkhazia and South Ossetia after moves by the Russian Foreign Ministry to build closer ties with the breakaway regions.

But it is the similarities with the Soviet system that are most troubling for foreign observers. The election of Dmitriy Medvedev in elections held in March 2008 with over 70 percent of the vote, and Putin’s invitation to become leader of the United Russian party, a political movement created by the Kremlin, have raised doubts about how fair Russia’s political system actually is. Indeed, Sergei Shpilkin, a physicist and computer programmer, suggested electoral fraud with 14.8 million of the 52.5 million votes cast for Medvedev being ‘unclear’. Whatever the truth in the allegations, it is Putin’s role as Prime Minister that is to be the most controversial. As prime minister and party leader, he will have a tight grip on the country’s finances and its regional elites, and has managed to keep himself in the driving seat of Russian politics until he is legally allowed to be President again.

Whilst the position of prime minister in Russia, has in recent years not held considerable weight, Putin may be trying to revive something akin to the Soviet system, relegating Mr. Medvedev’s to the role of the Supreme Soviet and promoting himself to the more powerful general secretary of the Communist Party. During his time in power, Mr. Putin’s actions reflected those of a dictatorial regime, in that the state took charge of national television networks, journalists faced stringent censorship, and many of his colleagues from the Kremlin were placed in control of state-run energy conglomerates.

In 2002 the US and Europe designated Russia a market economy, but the state still exerts considerable control over business, whilst Gazprom, is often accused of being little more than an economic and political tool of the Kremlin. Despite Medvedev’s different background to Putin (he is a former chairman of the Board of Gazprom), and his calling for less state intervention in the economy and greater focus on education and social welfare, he has said repeatedly that he will follow the same path as his predecessor. With Putin having secured a prominent position in the new regime, it is likely that he won’t have to look far for guidance.