By Martina Bozadzhieva, The PBN Company, Washington, DC

On September 10th President Medvedev surprised both Russian and international observers with an unexpectedly honest and critical article about Russia’s strategic challenges. Medvedev decried Russia’s “primitive raw materials economy, chronic corruption,” “inefficient economy…weak democracy,” and “negative demographic trends,” causing a flurry of comment and speculation. The fact that the article appeared in Gazeta.ru, an online news source often critical of the Russian government, only made it more unusual.

The initial reaction was one of skepticism, especially among Russians who were asking why he published such a scathing commentary now. Having been president of the country for a year and a half, critics charge that Medvedev hasn’t done anything to solve the problems he identified. A common criticism by both journalists and readers who posted comments on the Gazeta website was that Medvedev’s ambitious agenda for turning Russia into a high-tech, knowledge-based economy was impossible without true political liberalization. Very few seemed to buy Medvedev’s argument that “the more intelligent, smarter and efficient our economy is…[the more] our political system and society as a whole will also be freer, fairer and more humane.”

Many observers considered the article’s message to be yet another example of Medvedev’s tendency to speak eloquently about democracy and liberalism without doing enough to turn his words into reality. Others , however, have started to see “Go, Russia!” as a part of a larger attempt by Medvedev to separate himself politically from Prime Minister Putin. Medvedev’s statement before the Valdai forum that he might run for a second term has been interpreted as a part of an emerging pattern.

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By Amanda Lahan, Account Manager, The PBN Company, Washington DC

After a summer of uncertainty, Russia’s World Trade Organization (WTO) accession process seems to be back on track - but the Russian government seems also be looking to get the best of both worlds. While it is voicing support for a timely accession to the WTO, it still supports the creation of a Customs Union with Belarus and Kazakhstan and simultaneous WTO entry for all three countries, despite the fact that Kazakhstan and Belarus are far behind Russia in terms of their accession negotiations.

In mid-September Prime Minister Putin again voiced his support for the three countries joining the WTO as a group, while at the same time asking the US to drop restrictions on trade with Russia.  Several days later, First Deputy Prime Minister Igor Shuvalov stated that Russia aimed to finish its WTO negotiations in 2010, and that WTO negotiations for Kazakhstan and Belarus should be conducted simultaneously. However, he also cautioned that the leaders of the three countries could change their plans if Kazakhstan and Belarus slowed Russia’s accession process. Shuvalov then reiterated his support for the countries’ accession as a group at a meeting of Customs Union members in Almaty on September 25th.

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Last week Russia’s Cabinet approved the draft 2010 budget. Prime Minister Putin promised to cut spending by government departments while also stressing social provisions, including “maternity capital.” Galina Khatiashvili, Intern, The PBN Company, Moscow, examines how the scheme to boost Russia’s population is being received.

When Russian parents have a second child, they are eligible for what is know as “maternity capital” - a benefit currently worth 312,162.50 rubles, or just under $10,000. Prime Minister Putin recently said that an estimated 300,000 families will receive 102 billion rubles next year as part of the scheme. But although it looks good at face value, its actual usefulness is limited, making it difficult for families to take advantage of the income boost.

Maternity capital can be claimed for three different purposes: to improve living conditions, to pay for education and to supplement a mother’s pension. To draw the benefit, families must justify the purpose through a complex and lengthy administrative process designed to help prevent fraud. And it can only be claimed as a credit to pay, for example, a building contractor, rather than be withdrawn as cash to use directly.

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By Roman Kolosovskiy, Intern, The PBN Company, Moscow

President Obama’s trip to Moscow was billed as a milestone in US-Russia relations - there would be none of the Bush-era soul searching, but rather a chance to find pragmatic, common ground on pressing global issues like nuclear arms and Iran. Meetings were held and hands were shaken, but what is clear now that the dust has settled is that the US president has not aroused the same level of “Obamania” behind him in Moscow as he has elsewhere in the world.

As the Russian Foreign Ministry spokesman Andrei Nesterenko said in a television interview, the summit was “groundbreaking” in that the United States and Russia “managed to stop the degradation of our relations,” which is a subtle, but key distinction from a wholesale “reset.”

Nevertheless, Presidents Obama and Medvedev had a constructive meeting. The leaders seem to have hit it off in a way that bodes well for a positive working relationship, with Medvedev telling Interfax that he “like[s] talking with Barack.” The tone of the conversation was honest and went beyond exchanging pleasantries, which shows that the two leaders, who share a strong legal background, are serious about establishing a constructive bilateral relationship.

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By Blake Marshall, Senior Vice President & Managing Director - Government Relations, The PBN Company, Washington DC

Prime Minister Vladimir Putin’s June 9 announcement that Russia will discontinue its World Trade Organization (WTO) negotiations in favor of a new Customs Union with Belarus and Kazakhstan took many by surprise, including high-ranking officials in Russia and trade negotiators in Europe and the United States.

Despite the fact that Putin’s decision appears to many to have come out of the blue, the notion of a three-country Customs Union has been under discussion for several years. While the withdrawal from WTO negotiations in favor of reapplication as a bloc is unconventional, it is consistent with Russia’s political and economic strategies on both a geopolitical and a regional level.  Several objectives seem to emerge from this stance:

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By Amanda Lahan, Account Manager, The PBN Company, Washington, DC

Since our post yesterday on the apparent progress made in Russia’s WTO accession process, a wrench has been thrown into the works.  Prime Minister Putin announced on June 9 that Russia would withdraw its WTO application and instead reapply as a part of a trade bloc with Kazakhstan and Belarus.  In a joint statement by all three countries Putin said, “Our priority remains WTO entry, we confirm this, but already as a customs union and not as separate countries.”  Reapplication would require starting all WTO negotiations from scratch, meaning it could be years before the Customs Union entered the WTO.

The news came as a surprise to US and EU officials, who had just been speaking with Russian officials about their WTO bid several days ago.

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By Amanda Lahan, Account Manager, The PBN Company, Washington, DC

Russia’s accession bid to the World Trade Organization received quite a bit of attention during the St. Petersburg International Economic Forum on June 4-6. EU Trade Commissioner Catherine Ashton and US Trade Representative Ron Kirk met separately with Economic Development Minister Elvira Nabiullina to discuss Russia’s entry into the WTO.  While Ashton was optimistic that the accession process could be completed by the end of this year, Kirk stopped short of putting a date on when Russia would finally join.

These meetings follow on other, mostly positive, signals coming out of Russia regarding its desire and readiness to enter the WTO.  Since President Obama first met with President Medvedev on April 1 and discussed WTO accession, Prime Minister Putin and Foreign Minister Lavrov have expressed support for Russia’s WTO bid.  Minister Nabiullina has stated that she thinks that Russia could become a member of the WTO by early 2010.

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