Putinâs Economic Strategy and U.S. Interests (CRS Report for Congress)
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| Release Date |
June 19, 2001 |
| Report Number |
RL31023 |
| Report Type |
Report |
| Authors |
John P. Hardt, Foreign Affairs, Defense, and Trade Division |
| Source Agency |
Congressional Research Service |
Summary:
President Putin has set as a goal the conversion of Russia to a functioning market system in this
decade. Without successful reform to develop a functioning market system with sustained growth,
the Russian economy is likely to recede in performance toward the level of a developing country.
Putin's strategy calls for rapid and comprehensive changes in the structure of the Russian economy,
including radical changes in fiscal, financial, enterprise and administrative systems. Whether Putin
is able and willing to implement the difficult decisions to bring about successful market reform in
Russia may become evident in 2001 to 2002.
Several American and Russian empirical studies support Putin's reform strategy. Putin's
reforms are designed to convert the Russian economy from a disinvestment and disincentive to a
functioning market system. Elements of successful reform center on changes deemed necessary to
increase productivity and attract investors.
Reform prospects have been improved by the action program in Putin's State of the Nation
address of April 2001. Putin is building on the blueprints and programs established in the year 2000
to move toward rapid legislation and implementation of these structural reforms. Unparalleled
current economic growth may, if continued, provide a window of opportunity for gaining political
support for reform and funding to facilitate reform implementation.
Authoritarian trends in governance would tend to deter the development of a rule of law regime
central to successful market reform. Possible economic crises in debt management, demographic
and infrastructure problem areas may pose difficult budgetary choices and draw future political and
economic support away from reform. Resistance to reform and increased defense spending, which
have been especially favored by some oligarchs, may be tempered and reversed. Acceptance of
international market rules and corporate governance would facilitate an increase in productivity and
generate larger inflows of investment. Support in place of previous strong opposition by Gazprom,
the world's largest energy company, may be the single most important factor in the success or failure
in initiating Putin's comprehensive structural reforms.
A functioning market system in Russia might benefit U.S. interests by providing profitable
investment opportunities and a less threatening and more cooperative Russia. Successful reform
could open opportunities for Russia and its creditor nations to better manage official Paris Club debt
and for Russia to accede to the World Trade Organization (WTO). The dangers of a failed Russian
reform to U.S. interests might come from the revival of a security threat with potential confrontations
in foreign, security, and domestic policies averse to U.S. national interests.
