The Magazine

The Case for Putin

Don't write off Russia's president.

Dec 22, 2003, Vol. 9, No. 15 • By LEWIS E. LEHRMAN
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MEANWHILE, consider only a few of Putin's achievements since the total collapse of Russia's economy in 1998 and 1999. Today, Russia is in the early stages of building a civil society after 1,000 years of tyranny at the hands of Mongols, czars, boyars, and Communists. Perestroika, then Boris Yeltsin, in the late 1980s and early 1990s, opened the way for a decade of colossal corruption characterized by incompetence and official self-dealing. Putin has led a vital, four-year drive, first as prime minister, then as president, to contain these corrosive forces. As he said in September, "If by democracy one means the dissolution of the state, then we do not need such democracy."

A reading of Russia's financial performance will show that central bank reserves are over $70 billion, up from national bankruptcy in 1998--with an extraordinary rise in reserves of over 25 percent since January 2003. The flight of capital predicted at the time of Khodorkovsky's arrest has not materialized. The fiscal budget is in surplus. The current account surplus continues to add to these resources; some government debt has been repaid, some refunded. Russia's credit rating has risen from bankruptcy to Moody's investment grade. Reports on manufacturing growth are exceptional. President Putin's first term has been, in a word, a financial triumph.

The Yeltsin model of selling out the Russian people's assets, for almost nothing, to the "family" and the oligarchs will forever be deeply regretted in Russia. But privatization will persist, despite warnings to the contrary from Khodorkovsky's apologists. True, some Yukos shares will remain frozen until the criminal trial is over (a not uncommon practice under both U.S. and Russian law), but this period will be associated with continued growth and stability in the Russian economy, to the increasing benefit of middle-income and working people. Over the next five years, the European Union, China, and other countries will vigorously compete to invest in Russia.

The fact is, the positive economic trends set in motion during the presidency of Vladimir Putin are every bit as significant as those in China, India, and Brazil. Russia's private sector already accounts for almost 80 percent of national output, up from below 10 percent in 1990. Ordinary Russians own land and apartments and operate farms that 10 years ago they could only dream of, and that 20 years ago were possible only for members of the nomenklatura. Income tax rates have been reduced to 13 percent. Military spending has shrunk to a percentage of GDP comparable to that in the United States. Russia is now among the top eight recipients of foreign investment. Russians with good technical educations are being recruited and paid well, in Russia, by companies as diverse as Samsung, Intel, and Boeing. In a recent Financial Times piece, the Russian economy was projected to surpass that of the United Kingdom in just over two decades. The Russian economy should continue to grow at 6 percent to 7 percent for the rest of the decade. Wages, now rising as much as 20 percent a year, will grow further with improvements in productivity.

Then there are the foreign policy issues. Chechnya is, unfortunately, all too typical of history's bloody ethnic and civil wars. There is much to mourn in its excesses. Still, both recent wars in Chechnya began under Yeltsin, while President Putin is trying to end the conflict. And al Qaeda's collaborators in Chechnya are being confronted, just as the Chechen Islamist terrorists who seized a Moscow theater in October 2002 were destroyed, albeit at the tragic cost of 129 innocent lives.

Washington's request that Russian troops leave Georgia, as previously agreed, has been correctly reemphasized by Secretary of Defense Donald Rumsfeld. Still, one must be aware of Russia's historic interests in Georgia. But agreeing to disagree with President Putin on Georgia, and cautioning him about his intensifying diplomacy on behalf of Russia's commercial and security links to Eastern Europe, Moldova, the Caspian, and the Baltic states, need not ignite a new Cold War. Our country, after all, fairly disputes Russian foreign policy on matters of American national interest and principle--such as Iran, Iraq, and North Korea. President Bush sees this clearly, and his recent Camp David summit with Putin suggests that American-Russian entente will prevail. The consolidation of entente with Russia, if we can keep it, will be seen as a historic accomplishment by Bush and Putin, one for which our grandchildren will be grateful--not least because Russia and America must prepare to contain Chinese hegemony and expansionism in Asia.