The putin interviews, p.12
The Putin Interviews, page 12
OS: So 18 trillion US and about 1 trillion Russia.90
VP: It’s important to remember the share of the GDP. In the United States, the debt’s share as compared to the GDP is 100 percent whereas in Russia it’s 12 to 13 percent—around—I don’t want to make a mistake but in Russia it’s for sure 12 to 13 percent.
OS: There’s no question about economics—we can go right there. The Russian economy. How is the Russian economy? It’s rough, I know—you want to talk about it a bit?
VP: Certainly, there are difficulties. There are difficulties which consist first and foremost of the fact that you need higher oil prices. It is very difficult to push economic actors towards investing into new industries which are less profitable than the oil and gas industry. And that is what the structure of our economy depended upon—our efforts aimed at changing the structure through administrative and financial means. We’re reaping some fruit, but not enough to change the structure itself. Right now the oil/gas price has fallen from more than 100 dollars to less than 30—and that is more than threefold. On the one hand it’s difficult to get the budget revenue. But on the other hand it creates stimuli to develop manufacturing and agriculture. And that’s what we’re doing. In terms of prices, the lower price of oil hurts the purchasing power of the population. And it also reflects on certain industries such as machine-building, car-building, construction and a number of other industries. But at the same time it drives economic players toward investing in other industries and that’s what we’re trying to support. And that’s why the first thing we’re doing is trying to secure investment. We support certain industries that are going through difficult times such as construction, car-building. But separately, we’re also trying to achieve the so-called import substitution.
OS: Import substitution—what’s that?
VP: This strategy doesn’t seek to eliminate imports. It seeks to create the manufacturing of high technology products inside the country. In the past we could buy anything using the oil money. But that was undermining the stimulus for internal development. And right now the government is trying to support high technology industries, to help both defense and civilian industries. And I have to say that we are achieving success in that regard. In agriculture, as a response to the actions of our partners, we have introduced certain restrictions and we have freed our internal market for Russian producers. But high technology industries, our partners have introduced restrictions on their exports. And thereby they stimulated us to create similar manufacturing processes within the country. I have to say that we are achieving success in this, despite a certain drop in the GDP. We have managed to achieve some good macro-economic indicators which are grounds for thinking that we are not just emerging from the crisis, but that we actually have good prospects for the future. Just have a look. Our budget deficit is just 2.4 percent. Even though we thought that it would be more than four percent. We have a surplus of trade and also a current account surplus. So we sell more than we purchase and the balance of payments of our budget is also very positive. At the same time, we have a considerably higher level of reserves than we did before. It’s $360 billion. These are the reserves of the central bank. The government also has at its disposal two more reserve funds—$80 billion and another $70 billion. We have this to fund the small budget deficit that we have. And that’s why we managed to maintain the very high quality of the Russian economy—its fundamentals are very good.91 And what’s more important, we now see some success and progress—the contribution of the agricultural sector of the economy is growing.
OS: You’re paying, what is it, 83 percent of the Chechnyan budget?92
VP: It’s not just about the Chechen Republic. Our financial and economic policy is aimed at evening out the standard of living and the income of all constituent entities of the Russian Federation and all the citizens of the Russian Federation wherever they live. Certainly we are not doing that to the fullest. There are certain regions where standards of living are higher, in other regions standards of living are lower. The level of manufacturing or of income is either higher or lower depending on the region, but from those regions that are capable of making a contribution to the federal budget, we’re trying to redistribute incomes to those regions that are lacking their own income. We’re trying to help them catch up, as far as their level of production is concerned.
OS: The food prices went up 20 percent in 2015. Inflation was running at 13 percent.
VP: 12.9 percent, to be more precise.
OS: [laughter] You’ve said that 2016 will be better, but what happened in January was that oil slumped below $30. It’s a hard promise to keep that 2016 was going to get better.
VP: That’s true, but there are two ways to go about it. One way is to fulfill all of the promises without thinking of the consequences, using the reserves that I’ve mentioned. But the second way is to seek the expansion of non-raw materials sectors of the economy and fulfill the social obligations we have using the generation capacity of our economy. I believe that we are following a balanced approach. We are trying to fulfil our social promises, our social obligations first and foremost. But in a manner that will not destroy the economy, should not undermine it. Meanwhile, we are trying to provide support to those industries that have been most affected by the crisis.
OS: Well, worker unrest is an issue. People haven’t been paid in some regions. A great amount has been written about it in the West. People have not been paid—sometimes for one, two, three months.
VP: Well, there are these technical issues related to the arrears in payment—paying the salary, but it’s minimum. There are no real problems with paying the salary. There are only issues related to irresponsibility, to negligence, to making decision too late, but economically and from the point of view of the budget, there are no problems whatsoever.93 And if someone writes about that, saying that is a serious problem, then they are simply doing what’s called wishful thinking.
OS: What is the Russian Central Bank about? What is that doing?
VP: The central bank is adhering to a very balanced monetary policy. And it meets the understanding of international financial organizations including the International Monetary Fund.
OS: How so? I was told there were no debts to the IMF.
VP: No debts—I’m not talking about our debt right now. I’m talking about our monetary policy. We are in contact with Madame Lagarde and our colleagues from the IMF. We inform them about what we’re doing. We listen to their recommendations. And I know full well that the leadership of the IMF gives a good assessment to the policy of the Central Bank of Russia. Yes, their assessment is positive.94 Also, because the central bank is taking balanced decisions on time related to the regulation of the national currency rate. And also related to the transition to a market approach to regulating the national currency exchange rate. As of now, the central bank has transitioned to a floating rate of ruble. It has led to depreciation of the ruble, which makes imports more expensive inside Russia. So that is not very good, not very comfortable for those who want to buy different products from abroad or China.
That’s not really good for those companies, for those enterprises that try to modernize thanks to products imported from abroad. So that is the negative side of the ruble depreciation. But there is also a positive side, which creates apparent benefits in the internal market for Russian producers. It also creates a better environment for Russian exports both in agriculture and also in manufacturing.
And if you compare these advantages and disadvantages, you will see there are more advantages than disadvantages. And in this sense, the policy the central bank is pursuing can be viewed as a balanced one and as justified. Furthermore the Central Bank is closely monitoring the situation in the banking sector. It is working coherently to improve the banking system in Russia. That is very important, to make this banking and financial system more viable, more competitive.
OS: Well, you still talk as if the IMF is a partner of Russia’s, and in some ways I know your struggles, but you act as if Wall Street wants Russia to succeed and I question that. And I would ask you: is Wall Street actively working to destroy the Russian economy in the interest of the United States?
VP: I’m not talking about Wall Street right now. But if we talk about the administration of the United States, then certainly the US administration has been viewing, especially recently, Russia as a rival. But we do hope nevertheless that such international institutions as the IMF, the World Bank, and a number of others are performing the functions they have been established to perform. And I refer to them having to have a positive influence on the world economy. Besides, we approach with some level of criticism all the recommendations that we receive. We do not have any obligation to these international organizations. And yet it is with respect that we view these recommendations and the ones that we believe are useful to us, we use.
OS: Who’s “we?” That’s a good question, because sometimes every government in the world, through history, the banks and the government can differ in their interpretation of events and what to do.
VP: When I say “we,” I mean the Russian leadership. I personally did have some difficult relations with the IMF when I became Chairman of the Russian government at the end of 1999.
OS: That was a different time.
VP: Yes. The hostilities in the Caucasus started once again back then. And that was because there was an attack from the Chechen Republic against Dagestan by international gangs of terrorists. And I have to draw attention to the fact that we didn’t attack anyone, that we suffered an attack.95 And hostilities started once again. And at that moment there was the question of whether to stop paying interest on our loans with the IMF. Back then I was Chairman of the Russian government and the IMF were very clear—they said: stop the hostilities in the Caucasus and we’ll accommodate you.96 If you don’t stop the hostilities, we’re not going to compromise. Our response back then was: how can you ask the question in this manner? We’ve always heard that the IMF was above politics. That was the first argument I made. Secondly, I was telling them that we were defending ourselves, we didn’t attack anyone—we suffered an attack. But my counterparts were intransigent because they had their instructions as far as I understand and they were simply formulating this. But it doesn’t exclude the fact that after we paid back all our debts to the IMF, we still managed to maintain business-like relations. And we highly value these expert assessments that the IMF provides us with.
Incidentally, Russia not only paid back its debt to the IMF, we also paid back the debts of all the former Soviet republics, including Ukraine’s debt, which was 16 billion US dollars.97 We’ve always had very good relations with the World Bank. Personally, I have very good business and personal relations with the predecessor of the current head of the World Bank, Mr. Wilson. The World Bank has implemented a great number of very good, very useful projects including in some regions of the Russian Federation. Regrettably, right now these relations have been suspended. I do not see that we are too much interested in that, nor do I see that we cannot live without them. We do hope that these relations are going to be rebuilt and that we will be able to work together as fruitfully as we used to.
OS: Well, that was a different time, in the sense that was way before the Munich speech in 2007. In 2007, you said something to the effect that, “They—the United States—bring us to the abyss of one conflict after another. Political solutions are becoming impossible.”98 Which raises the broader question of: What is the US policy? What is its strategy in the world as a whole?
VP: Certainly, I am going to reply to this question very candidly, in great detail—but only once I retire.
OS: Well, I can state it for you and you can argue with me. I could say I think, or many people think, many learned people think the US strategy right now is to destroy the Russian economy, bring it to its feet, back to 1990’s levels, and change the leadership of Russia—make a new ally out of Russia for the United States to basically dominate Russia as they once did. And perhaps they feel they did not go far enough and take your new arsenal away.
VP: This train of thought is quite possible. If that is the case, then I believe this is an erroneous policy. Exactly because such a view of relations with Russia is not oriented towards the future. People who believe like that, they do not see 25 to 50 years to the future. And if they had a look then they would probably go about building relations with Russia differently, in a different frame. And they wouldn’t try to make Russia their vassal. They would try to make Russia their ally—or at least a partner—to address common issues and to surmount threats in which everyone is interested. And probably that would be more efficient than fruitless attempts at turning Russia into a satellite of theirs.
OS: Yes, absolutely. That’s idealistic. But as you know, the United States needs enemies.
VP: Yes, maybe. I believe they need partners and allies more. Philosophy can be changed entirely. Certainly you can try to live and act in a different paradigm. Once a great compatriot of ours, Leo Tolstoy, said—I do not think I can reproduce the quote entirely—but, “There is the realm of possibility and the limit of what is unacceptable. Within this realm of possibilities, one has to build most secure relations—seek relations that are as little dangerous as possible. But that is the minimum of what is required.” I only wish we could act in this paradigm, but certainly it would be far better to search for domains in which combining our capacities, our efforts, would yield the best results for everyone who could participate in this process. Let us take the following example—efforts in fighting poverty, protecting the environment, and in fighting the spread of WMDs, in combating terrorism … Regrettably, so far we have failed to secure efficient joint initiatives in these fields—almost all of them.
OS: Which brings us back to the realities, which are much more difficult. We have the US elections this year and none of these issues—the environment, fixing our alliances—has even been discussed one time. Everything in the election … Rhetoric has been “get tough and tougher.” Build up our military again. And that goes for both sides, including Hillary Clinton, who’s most definitely become a neo-conservative—a hawk. Strong policies against Russia. She was against Obama’s nuclear deal in Iran, she was certainly for the Syrian intervention, and so forth. So there’s very little hope for change in that direction. In addition to that, the Pentagon has announced recently—this new general has announced that Russia is the number one threat to the United States. He’s been very forceful in those statements.99
VP: Yes, we know about that. And certainly we cannot welcome that. Contrariwise, we’re always open to dialogue in almost every field. Just an example—even amid these conditions right now, knowing about this rhetoric in the run up to the elections, I know that our women’s organizations have extended an invitation to Hillary Clinton to come to Russia. To pay a visit. I do not know whether she is going to accept this invitation or not. But during an election campaign, unfortunately it has become a fashion in the United States to speculate, to even abuse the Russian issue, so to speak. Afterwards, they tell us: “Please do not pay too much attention to that. You have to understand,” they say to us, “this is just election campaign rhetoric. Afterwards we are going to arrive at a deal with you.” But sacrificing intergovernmental, interstate relations in the name of current political processes is a great mistake, I believe.
OS: Yes I understand. And the administration of Obama may be reassuring you, but Obama himself, with the Pentagon, has escalated recklessly, recklessly, the NATO involvement on the borders of Russia. By the expenditure, they’re spending—four times more has been spent in Eastern Europe in this year than before.100 Not since Hitler’s days has there been such a build-up on the borders of Russia, which is very surprising with Obama in office.
VP: That is true and that is a source of concern to us. But that is what I was talking about in Munich in 2007. Just recently, I have been told about the discussions that were going on before the reunification of Germany, and a German politician Aaron Barr—one of the leaders of the Democratic Party in Germany—expatiated his view of what the future of Europe would look like, in his conversations with the then-Soviet leadership. And I thought his train of thought was very interesting, his ideas fascinating. He was saying that NATO should not be extended eastward. He was talking about the need to establish a new military block in Central and Eastern Europe, a military alliance which comprised both the United States and Russia. A new bloc. And within the framework of this alliance, all countries in Central Europe and Eastern Europe would feel safe. But that alliance would also include the Soviet Union and the United States. And he was saying that if that didn’t happen, that in the end Russia would be isolated. And that new dividing lines would appear in Europe. He was absolutely right, as history has demonstrated to us. The Soviet leadership have lost this historic chance, and that German politician once said a very interesting thing. He said, “It’s very strange for me that so late and so old, I protect more the interests of the Soviet Union than the Soviet leadership themselves. But I’m doing that consciously so that in the future, a stable environment would appear for the development of Europe—without dividing lines and without conflict. And, moreover, he said, “If you don’t listen to what I say, if you go on ceding your positions, then there is going to be no need for me to come to Moscow ever again. And I’m not going to come here ever again.”
OS: Well, that sounds idealistic again—that was 1991, 25 years ago, and here we are. We’re still in that position where the Pentagon, as I said, is putting something like $3.4 billion into NATO in Eastern Europe this year. Last year it was $789 million, so it’s four times as much.101 Which is going to force Russia to put heavy weapons and nuclear tactical weapons, again closer to the border of Poland and the Baltic states, and Ukraine I would imagine. So it’s escalation—whatever you call it, it’s escalation.
