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Putin’s State of the Nation address: charting a course for a modern Russia

Alexander Mercouris

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Information about President Putin’s State of the Nation address is still coming through as I write this.

Most world attention has been on the various military developments which President Putin outlined.  Though these are dramatic enough the main focus of the address was on the domestic economy.  That is the part of the address I will discuss in this article.

(1) Increase in economic growth rates in the 2020s

President Putin has charted a very ambitious project of increasing per capita incomes in Russia by 50% by the mid 2020s ie. by roughly the end of his next term as President (assuming he is re-elected), which will be in 2024.

Since the government and the Central Bank forecast economic growth to continue to be low (less than 2% per year) up to 2020, that implies a very rapid increase in economic growth rates after 2020.

This is in fact consistent with the recent discussions of the state of the economy published by the Central Bank.

Briefly, the story of Putin’s third term with respect to the economy has been one of the Russian government sorting out various accumulated problems in the economy in order to prepare for a marked but sustained acceleration in the 2020s.

This has required:

(i) a very tight monetary policy to bring inflation down from its historic double digit annual level to the 2-4% annual range which it has achieved now;

(ii) hard work to improve the business climate, with the World Bank assessing that Russia’s ‘Ease of Doing Business’ rating has improved from 120th in the world in 2010 to 35th in the world now;

(iii) the introduction of a floating exchange rate for the rouble (achieved in 2014);

(iv) a steady clear up of the banking system, with a policy of closing down bad banks and consolidating the banking sector into a smaller number of strong banks; and

(v) a programme of fiscal consolidation, whereby the national budget is first balanced and then brought into surplus, with the share of oil and gas revenues further reduced, so that the deficit in the budget once oil and gas revenues are take out of account has already fallen from 15% of GDP in 2015 to 7% now, with plans to reduce it further, with the eventual intention of eliminating it entirely.

The Russian government and the Central Bank have explained that the primary reason for reducing and then eventually eliminating the ‘non-energy revenue’ deficit in the budget is so as to make the national budget invulnerable to falls in energy price movements..

These measures have been accompanied with further technical steps to strengthen the financial system, for example by introducing a Russian alternative to the SWIFT interbank payment system (which Russian officials have confirmed over the last few weeks is not merely ready but is actually operating), a Russian debit and credit card independent of Mastercard and Visa (the Mir card) and by the redirection of the Russian state’s borrowing from foreign to domestic sources (ie. towards ‘rouble bonds’ in place of eurobonds), with Russia however taking control of its own eurobond placements.

This period of sorting out the accumulated problems in the economy – some of which extend back to the late Brezhnev era of the mid to late 1970s – is now practically over, with the Russian government and the Central Bank expecting that the process will be concluded by 2020.

Thereafter, it is hoped that the hard work carried out over the period of Putin’s third term will finally bear fruit, with economic growth rates rising sharply, and doing so in a sustainable way.

Needless to say Putin touched on all of this in his speech, stressing that it is the achievement of macroeconomic stability in Russia that makes the very ambitious economic plans he outlined in his address possible

In the last few years, we have enhanced the sustainability of our economy. The dependence of the economy on hydrocarbon prices has been substantially reduced. We have increased our gold and currency reserves. Inflation has dropped to a record low level – just over two percent. Of course, we all understand that the growth of prices for many basic necessities is much higher. This should be strictly monitored by different agencies, including the Anti-Monopoly Service. But on the whole, this low inflation level creates additional opportunities for development. Let me remind you that quite recently, in 2015, inflation was almost 13 percent – 12.9 percent to be exact.

In effect, Russia has formed a new macroeconomic reality with low inflation and general economic sustainability. For the people this is a condition for real income growth and cheaper mortgage loans. For entrepreneurs it means predictability in business and cheaper loans. Business should also adapt to these new macroeconomic conditions. Finally, it makes it possible to attract long-term loans and private investment into large-scale infrastructure projects.

Now we have an opportunity, without speeding up inflation, and maintaining a careful and responsible approach, to gradually cut interest rates and make loans more affordable. I count on the support of the Bank of Russia in that, while making its decisions, implementing monetary policy measures and developing financial markets, it will work in contact with the Government in the interests of the common goal of creating a proper environment for increasing the economic growth rates.

The major driver of faster economic development will be higher investment and increased productivity, with the stable macroeconomic conditions making it possible to achieve at a sustained level a rate of investment in the economy the like of which it has never experienced in the post-Soviet period

Increased investment is the second source of growth. We have already set the task of bringing it up to 25 percent of the GDP, and then to 27 percent. Unfortunately, this goal has not been achieved yet. To ensure sustainable growth, we need to do so at all costs. I hope that the new Government in conjunction with the Bank of Russia will present a concrete plan of action in this area.

A recent study by the Russian Academy of Sciences has suggested that growth rates in the 2020s could be as high as 4-6% annually, which would certainly be necessary if the increase in per capita income by 50% that Putin is talking about by the mid 2020s is to be achieved.

In his State of the Nation address President Putin spoke of achieving this objective as a difficult one but as an attainable one, and spoke of his confidence in achieving it.

Russia must firmly assert itself among the five largest global economies, and its per-capita GDP must increase by 50 percent by the middle of the next decade. This is a very difficult task. I am confident that we are ready to accomplish it.

I would add that if Russia is able to achieve a growth rate of 4-6% in the 2020s then by the mid 2020s its GDP in purchasing power parity terms its economy will be substantially bigger than Germany’s (thus Putin’s comment about Russia “firmly asserting among the five largest global economies”) and by 2030 it could be close to overtaking – and might have actually overtaken – Japan’s.

At that point Russian living standards would also be at least comparable and possibly higher than living standards in most of Western Europe, with all the huge geopolitical implications that flow from that.

(2) Embrace of the Fourth Industrial Revolution

I have previously written about how Russia’s leaders believe that Russia is strategically exceptionally well placed to exploit the ‘Fourth Industrial Revolution’ and how they believe that it plays to Russia’s strengths.

President Putin has spoken about this repeatedly, and in his State of the Nation address he returned to it and discussed it at length

As I said in the past, the state’s role and positions in the modern world are not determined only or predominantly by natural resources or production capacities; the decisive role is played by the people, as well as conditions for every individual’s development, self-assertion and creativity. Therefore, everything hinges on efforts to preserve the people of Russia and to guarantee the prosperity of our citizens We must achieve a decisive breakthrough in this area.

I repeat, a solid foundation has been created for this. Therefore, we can now set and accomplish new tasks. We already have substantial experience in implementing ambitious programmes and social projects. The Russian economy has proved its resilience, and the current stable macro-economic situation opens up new opportunities for surging ahead and maintaining long-term growth.

Finally, the world is now accumulating a tremendous technological potential making it possible to achieve a real breakthrough in improving the people’s quality of life and modernising the economy, the infrastructure and state governance and administration. How effectively we will able to use the colossal potentialities of the technological revolution, and how we will respond to its challenges depends on us alone. In this sense, the next few years will prove decisive for the country’s future. I reiterate, these years will be decisive……

……today knowledge, technology and expertise make the most important competitive advantages. They are the key to a real breakthrough and improved quality of life.

As soon as possible, we need to develop a progressive legal framework and eliminate all barriers for the development and wide use of robotic equipment, artificial intelligence, unmanned vehicles, e-commerce and Big Data processing technology. And this legal framework must be continuously reviewed and be based on a flexible approach to each area and technology.

We have all the resources to promptly implement 5G and Internet of Things technologies.

We need to build our own digital platforms. It goes without saying that they should be compatible with the global information space. This would pave the way to reorganising manufacturing processes, financial services and logistics, including using blockchain technology, which is very important when it comes to financial transactions, property rights, etc. These initiatives have real-world application.

We need to start making or localising key technologies and solutions, including those used in developing the Arctic and the sea shelf, and building new energy, transport and urban infrastructure systems. This is also important in areas related to improving the quality of life, such as cutting-edge rehabilitation tools for people with disabilities.

It is our duty to support high-technology companies, offer start-ups a favourable environment and introduce new industrial solutions. I am talking about a user-friendly infrastructure, taxation systems, technical regulations and venture financing.

Technological development should be firmly rooted in fundamental research. Over the recent years, we have been able to expand research, and are now leading in a number of areas. The Russian Academy of Sciences and Russia’s leading research institutions made a major contribution to achieving this.

Building on the advances made in the preceding years, including in developing the research infrastructure, we need to take our research to a new level. Projects to build cutting-edge mega science research facilities are already underway in Gatchina and Dubna. The Council for Science and Education has adopted a decision recently to build a powerful synchrotron collider at the Novosibirsk Akademgorodok and a new generation collider in Protvino, Moscow Region.

With these facilities, Russia will become one of the world’s leading countries in terms of the capability and performance of its research infrastructure. These units will give a serious competitive edge to Russian research teams and high-technology companies, for example for developing new medications, materials and microelectronics.

Of course, this infrastructure and ambitious research projects will not fail to attract our compatriots and researchers from abroad. In this regard, we need to create a legal framework that would enable international research teams to operate in Russia.

Large research and education centres should begin working to full capacity. They will integrate the possibilities of universities, academic institutions, and high-tech companies. Such centres are already being set up in Kazan and Samara, Tomsk and Novosibirsk, Yekaterinburg and Tyumen, Vladivostok and Kaliningrad, and other cities.

It is important to focus them on the implementation of major interdisciplinary projects, including in such a promising field as genome research. A cardinal breakthrough in this area will pave the way to developing new methods for diagnosing, preventing and treating many diseases, and will expand the selection possibilities in agriculture.

We need to reinforce the superiority of the national mathematics school. It gives Russia a strong competitive edge in the age of digital economy. International mathematics centres will also provide platforms for such work. These are already operating in Kazan and Novosibirsk. Following the adopted decisions, we will open more in St Petersburg, Moscow and Sochi.

(bold italics added)

However this enthusiastic embrace of the Fourth Industrial Revolution comes with a sharp warning of what will happen if Russia fails to embrace it

What I will say now has no connection to the domestic political cycle or even the presidential election. No matter who is elected President, each Russian citizen and all of us together must be able to see what is going on in the world, what is happening around us, and what challenges we are facing.

The speed of technological progress is accelerating sharply. It is rising dramatically. Those who manage to ride this technological wave will surge far ahead. Those who fail to do this will be submerged and drown in this wave.

Technological lag and dependence translate into reduced security and economic opportunities of the country and, ultimately, the loss of its sovereignty. This is the way things stand now. The lag inevitably weakens and erodes the human potential. Because new jobs, modern companies and an attractive life will develop in other, more successful countries where educated and talented young people will go, thereby draining the society’s vital powers and development energy.

As I have said, changes concern the entire civilization, and the sheer scale of these changes calls for an equally powerful response. We are ready to provide it. We are ready for a genuine breakthrough.

My confidence is based on the results we have achieved together, even though they may seem modest at first glance, as well as on the unity of Russian society and, most importantly, on the huge potential of Russia and our talented and ingenious people.

In order to move forward and to develop dynamically, we must expand freedom in all spheres, strengthen democratic institutions, local governments, civil society institutions and courts, and also open the country to the world and to new ideas and initiatives.

It is high time we take a number of tough decisions that are long overdue. We need to get rid of anything that stands in the way of our development and prevents people from fully unleashing their potential. It is our obligation to focus all resources and summon all our strength and willpower in this daring effort that must yield results.

Otherwise, there will be no future for us, our children or our country. It is not a question of someone conquering or devastating our land. No, that is not the danger. The main threat and our main enemy is the fact that we are falling behind. If we are unable to reverse this trend, we will fall even further behind. This is like a serious chronic disease that steadily saps the energy from the body and destroys it from within step by step. Quite often, this destructive process goes unnoticed by the body.

We need to master creative power and boost development so that no obstacles prevent us from moving forward with confidence and independently. We must take ownership of our destiny

In other words, a failure by Russia to embrace the Fourth Industrial Revolution would put the whole future of the country and its independence at risk.

As Putin says, Russia has all the resources and potential it needs in order to embrace it successfully.  It would be an unforgivable disaster if it failed to do so.

At a more practical level, what embracing the Fourth Industrial Revolution requires is a sharp increase in funding for education and science, and this was indeed an important part of Putin’s address.

(3) Higher education and science spending

One of the most frequent criticisms of Putin which I hear from Russians is that education and science during his time in power have been neglected, with some Russians making unfavourable comparisons with the high priority education and science were accorded during the Soviet era.

There is some force to this argument, though in my opinion it underestimates the pressure on Putin’s government in determining priorities.

Now that macroeconomic stability is close to being achieved Putin clearly recognises the need to accord more budget spending to education and science and his comments about this were lengthy and detailed

International experts agree that Russia has one of the best primary school systems in the world. We will keep up our proactive efforts to develop general education at all levels. Let me emphasise that every child should have access to a quality education. Equal educational opportunities are a powerful driver in terms of promoting national development and social justice.

We need to shift to completely new education methods, including personalised learning, in order to cultivate in our children a readiness for change and creative curiosity, and teach them to work in teams, which is very important in the modern world, and other life skills applicable to the digital era. We will absolutely support talented teachers who are motivated to pursue continuous professional growth. And, of course, we need to build an open and modern system for school management selection and training. School administrators are the ones in charge of building a strong faculty and productive morale.

We will continue to enhance the comprehensive system to support and develop our children’s creative skills and talents. This system must extend to the entire country and incorporate the resources of such projects as Sirius and Quantorium, as well as extracurricular education centres and children’s creative centres all over Russia.

We need to build a modern career guidance system where schools partner with universities, research groups and successful companies. I propose starting a new early career guidance programme for schoolchildren, Ticket to the Future, from the next academic year. The programme will allow kids to try out real jobs in major Russian companies. We will allocate 1 billion rubles for this project this year alone…..

Technological development should be firmly rooted in fundamental research. Over the recent years, we have been able to expand research, and are now leading in a number of areas. The Russian Academy of Sciences and Russia’s leading research institutions made a major contribution to achieving this.

Building on the advances made in the preceding years, including in developing the research infrastructure, we need to take our research to a new level. Projects to build cutting-edge mega science research facilities are already underway in Gatchina and Dubna. The Council for Science and Education has adopted a decision recently to build a powerful synchrotron collider at the Novosibirsk Akademgorodok and a new generation collider in Protvino, Moscow Region.

With these facilities, Russia will become one of the world’s leading countries in terms of the capability and performance of its research infrastructure. These units will give a serious competitive edge to Russian research teams and high-technology companies, for example for developing new medications, materials and microelectronics.

Of course, this infrastructure and ambitious research projects will not fail to attract our compatriots and researchers from abroad. In this regard, we need to create a legal framework that would enable international research teams to operate in Russia.

Large research and education centres should begin working to full capacity. They will integrate the possibilities of universities, academic institutions, and high-tech companies. Such centres are already being set up in Kazan and Samara, Tomsk and Novosibirsk, Yekaterinburg and Tyumen, Vladivostok and Kaliningrad, and other cities.

It is important to focus them on the implementation of major interdisciplinary projects, including in such a promising field as genome research. A cardinal breakthrough in this area will pave the way to developing new methods for diagnosing, preventing and treating many diseases, and will expand the selection possibilities in agriculture.

We need to reinforce the superiority of the national mathematics school. It gives Russia a strong competitive edge in the age of digital economy. International mathematics centres will also provide platforms for such work. These are already operating in Kazan and Novosibirsk. Following the adopted decisions, we will open more in St Petersburg, Moscow and Sochi.

The one point I would make about these plans for higher education and science spending is that they do appear very narrowly focused on turning out more technically qualified workers for the economy.  There is nothing said at all about the humanities, and very little about culture.

I have commented in the past about how the one important constituency in Russia that Putin fails to reach is its large, very articulate and at times absurdly self-important cultural intelligentsia.  This despite the fact that his government provides heavy subsidies to Russian cinema and theatre, and – as he touched on in his address – is actively engaged in museum building.

In my opinion this resentment of the cultural intelligentsia towards Putin is in part the result of his lack of engagement with them, of which his failure to speak about them in his State of the Nation address is another example.

(4) Faster house building

Before discussing this topic, I should say that in my opinion one of the greatest causes of the underestimation of Russia’s GDP relative to those of other developed economies is the undervaluation of Russia’s large and rapidly growing housing stock.

The average price of a home in London is now $680,000, and $300,000 in the Britain as a whole.  Though comparisons with Russia are difficult, with Russians tending to value properties by the cost per metre rather than by the cost per unit, during a recent trip to Moscow I heard that the price of what I suspect was a higher end property in a suburb of Moscow – Russia’s capital and richest city – was below $200,000.

I suspect that high prices in Russia outside Moscow are significantly lower, save in St. Petersburg where a market in luxury homes is apparently emerging, driven it seems mainly by foreign buyers.

Anyway Putin had much to say about the need to increase Russia’s housing stock, with the emphasis in his address being on affordable ie. low end housing

In 2017, three million families in Russia improved their living conditions. Now we need to reach a stable level (I emphasise this: it is the first time in the history of modern Russia) – to a level where at least five million families improve their housing conditions annually. This is a difficult task – to jump from three million to five. We reached 3.1 million last year, but we need to make it five. Yet, it is an attainable goal.

I see three key factors for increasing the affordability of housing. The first is the growth of people’s incomes. I have spoken about this in the past, and we must ensure this. Next, a decrease in mortgage interest rates and, of course, an increased supply in the housing market.

I would like to remind you of something that few people remember, which is that only 4,000 mortgage loans were issued in 2001. Only 4,000. The interest rate was as high as 30 percent, including on foreign currency loans. By the way, half of the mortgage loans were issued in foreign currency. Few people could afford to take out mortgage loans then. Last year, the number of mortgage loans almost reached one million. In December, the average interest rate on ruble loans for the first time decreased to below 10 percent.

We know, of course, that loan terms are individual and may differ from one borrower to another. But we must continue to lower the average interest rate to 7–8 percent. We held long discussions on the figure I should say here. I am sure that the target figure should be 7 percent. In the next six years, mortgage loans must become accessible to the majority of Russian families, working people and young professionals.

Here are some more figures. In the 1950s through 1970s, we annually built approximately 60 million square metres of housing a year. The figure rose to 70 million by the late 1990s. Now we annually build around 80 million square metres of housing every year. We built even more housing in some years, but the average figure is 80 million. We must move forward and reach new heights in this sphere, that is, increase the volume of housing built every year from 80 million to 120 million square metres. This is an ambitious but realistic goal, given new technologies, the experience our construction companies have accumulated, as well as new materials. The rise from 80 to 120 million square metres is what we need and can achieve. I will tell you why: if we want 5 million families to receive new housing every year, we must reach the figure of 120 million square metres.

Those who invest their money in housing projects must be securely protected. We should gradually proceed from unit construction to project financing, when developers and banks, but not people, shoulder the risks.

This is a hugely ambitious housing programme, setting out to improve the housing conditions of five million Russian families each year.

To someone who lives in Britain, where just 184,000 homes were built in England last year (around half the peak levels achieved in the mid 1930s and the mid 1960s) these are staggering figures.

In my experience there is no single more important measure for most people – especially middle and lower income people – when they assess their standard of living than the state of their housing.  If Putin can achieve his target of improving the housing conditions of five million Russian families each year, then he will have made more Russians feel better off each year than any set of statistics can show.

I would add – though Putin did not mention the fact – that the rapid and continuing growth of mortgage lending since 2000 which Putin is referring to in these comments not only shows the immeasurably greater sophistication of the financial system since 2000.  It also greatly strengthens the financial system by providing it with a bedrock of secure mortgage assets which it can leverage in order to make possible higher investment lending.

Obviously this has to be watched closely to avoid the situation which has repeatedly arisen in the US and Britain, where mortgage borrowers repeatedly become over-borrowed, and where excessively low interest rates cause banks to lend to mortgage borrowers in preference to the more productive side of the economy.

However Putin’s comments show that he is aware of this danger, and I would add that the Russian government and the Central Bank’s policy of keeping interest rates positive (ie. higher than the rate of inflation) should allay it anyway.

(5) An infrastructure programme for Russia

In my opinion the single biggest constraint on economic growth in Russia are not the often mentioned ones of corruption, excessive state involvement in the economy, and opacity of laws.  Other economies where these problems arise (and for the record I question whether state involvement in the economy is necessarily a “problem”) have thrived economically despite them.

The single biggest constraint on economic growth in Russia is rather in my opinion the country’s underdeveloped transport and communications infrastructure, which is simply inadequate for such a huge country.

By contrast a visit to China last summer impressed on me the enormous spur to economic growth that China’s massive investment in infrastructure has provided to the Chinese economy.

It would be untrue to say that there have been no improvements to Russia’s communications and transport infrastructure during the Putin era.

The single biggest change – and one whose social importance quite simply cannot be overstated – is that for the first time in Russia’s history the entire population is connected by telephone, with almost 50% of the population now having continuous access to the internet and with more than 70% saying they use the internet regularly, as compared with only 25% who used the internet regularly in 2008.

This in a country where in the 1980s only 20% of the population had personal telephones (though the percentage was much higher in Leningrad and Moscow).

Russia has also witnessed a significant increase in road building and railway construction during the Putin era, and as Putin commented on in his State of the Union address, there has also been a drastic upgrade in the cargo handling capacity of Russia’s port

In 1990, the ports of the Soviet Union had an aggregate capacity of 600 million tonnes, but after the country broke apart, we lost almost half. In the early 2000s, Russian ports could handle only 300 million tonnes. Over the last 17 years, this figure has tripled. In early 2017, the aggregate port capacity in Russia exceeded 1 billion tonnes for the first time in history. As you can see from the charts, this exceeds the level reached by the Soviet Union by more than two thirds. By the way, these are the figures for early 2017, and the capacity currently stands at 1,025 billion tonnes.

Even before today’s State of the Union address the sums allocated for infrastructure development in Russia are staggering

The government is pumping vast amounts of cash into upgrading Russia’s existing ports, railways and roads, or building new sites. By 2030, it is estimated Russia will have spent a monumental $969 billion on infrastructure projects. Over 325 such developments are in the pipeline, helping provide a stronger environment for transport and logistics……

In 2017, Russian Railways (RZA), Russia’s national rail operator, plans to take supply of roughly one million tons of new track. This goes to show the titanic scale of Russia’s rail construction ambitions. By 2030, some $464.2 billion will have been pumped into building fresh railways or existing facility enhancement….

Roads are something of a priority for Russia. Due to its sheer size, the nation needs rugged highways and roads to keep people and goods flowing freely. Over $548 billion has been allocated towards for construction of roads in rural areas, whereas Moscow’s ring road is looking at $1.5 billion in reconstruction investment.

Over 1,000 kilometres of new roads are planned for 2020. 36 individual construction projects, featuring new bridges, are to be implemented before 2030 too, suggesting Russia’s road network will be greatly expanded making road transport an easier, cheaper prospect.

It seems from what Putin said today that the tempo of infrastructure spending is to be increased still further

Overall, in the next six years, we must almost double the spending on road construction and repairs in Russia and to allocate more than 11 trillion roubles for this from all sources. This is a lot; keep in mind that we have allocated 6.4 trillion rubles in 2012–2017, but we need 11 trillion (ie. $193 billion for further road building and repairs over six years – AM)…….

The volume of transit shipments on our railways must grow almost fourfold. This means that Russia will become a global leader in transit shipping between Europe and Asia…..

The Northern Sea Route will be the key to developing the Russian Arctic and Far East. By 2025, cargo traffic along this route will surge tenfold to 80 million tonnes. Our goal is to make it a truly global and competitive transport route. Let me remind you that the Northern Sea Route was used more actively in Soviet times compared to how we have been using it so far. We will definitely develop this route and reach new horizons. I have no doubt about it……

We will renovate and expand the network of regional airports across Russia. In six years, half of the regions will be connected between each other by direct flights. The situation where you had to make a connection in Moscow when flying to a neighbouring region will become a thing of the past. We are already working on this. This includes efforts to develop aviation and airports.

…….we must introduce new technologies for the generation, storage and relay of energy. In the next six years, we plan to attract some 1.5 trillion rubles in private investment for modernising our power generation sector. All power systems throughout the country must convert to digital technology. We must use the so-called distributed generation method to supply electricity to remote areas.

By 2024, high-speed internet will be available throughout the country. We will complete the construction of fibre optic lines in the majority of populated areas with a population of more than 250 people. Small remote towns in the Extreme North, Siberia and the Russian Far East will access internet via a network of Russian satellites.

We will use advanced telecommunications to give our people access to the digital world. As we know, this is more than just modern services, online education and telemedicine, although all this is very important. More than that, people will be able to use digital space to conduct research, organise volunteer and project groups or run companies. In our vast country, this combination of talent, competencies and ideas amounts to a huge ground-breaking resource…..

Though Putin did not specifically mention the fact, it is clear that this huge infrastructure programme dovetails closely with Xi Jinping’s One Belt, One Road programme

Large Eurasian transport corridors will also be developing. An automobile road that will become part of the Europe – Asia-Pacific corridor is already under construction. Our Chinese and Kazakhstani partners involved in this project together with us have already completed their part. Their sections have already been opened, so we need to speed up our work…..

The volume of transit shipments on our railways must grow almost fourfold. This means that Russia will become a global leader in transit shipping between Europe and Asia…..

Russia must not just become the world’s key logistics and transport hub, but also, which is very important, a global centre for the storage, processing, transfer and reliable protection of large volumes of information, so-called big data.

Overall, infrastructure development must take into account global technological changes. In other words, the projects we are now considering must include practical solutions for combining infrastructure with drones and digital marine and air navigation, as well as use AI to streamline logistics.

There has been much criticism in the Western media not just of Putin’s decision to stand again as Russia’s President but of China’s pending decision to end term limits for its President, enabling Xi Jinping to continue as China’s President beyond his second term.

In my opinion these are not vanity decisions by two insecure and power crazed autocrats as the Western media represents them.

Rather they are joint decisions agreed by the two men and their respective leadership in order to guarantee that the massively ambitious ‘Greater Eurasia’ project which they have jointly sponsored – linking together China and Europe by a gigantic series of road, rail and maritime links constructed across mainly Russia – will be brought into effect.

As to the scale of Russia’s infrastructure programme, its scale of $1 trillion can be compared with $1.5 trillion allocated to President Trump’s infrastructure plan.

There is much talk in the US of how President Trump’s infrastructure plan is utopian.  Unlike President Trump’s plan President Putin’s plan is already being carried out, and already has results to show.  Yet in a much smaller economy it is two thirds the size of President Trump’s supposedly utopian plan.

Will it all happen?

These are very ambitious plans, and there is no guarantee of their fulfilment.  Much could go wrong.

However a starting point is President Putin’s record.  In the 18 years he has been Russia’s leader Russia has transformed.  To assume that it cannot continue to make progress is – depending on one’s perspective – unduly pessimistic or unduly complacent.

As President Putin pointed out in his speech, Russia now possesses the macroeconomic stability and the resources to make change happen.  Provided political stability is maintained, there is no reason why it should not.

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Trump Demands Tribute from NATO Vassals

The one thing that we should all understand, and which Trump perfectly and clearly understands, is that the members of NATO are a captive audience.

Strategic Culture Foundation

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Authored by Tim Kirby via The Strategic Culture Foundation:


Regardless of whether one loves or hates President Trump at least we can say that his presidency has a unique flavor and is full of surprises. Bush and Obama were horribly dull by comparison. Trump as a non-politician from the world of big (real estate) business and media has a different take on many issues including NATO.

Many, especially in Russia were hoping that “The Donald’s” campaign criticism of NATO would move towards finally putting an end to this anti-Russian alliance, which, after the fall of Communism really has no purpose, as any real traditional military threats to Europe have faded into history. However, Trump as President of the United States has to engage in the “realpolitik” of 21st century America and try to survive and since Trump seems rather willing to lie to get what he wants, who can really say which promises from his campaign were a shoot and which were a work.

So as it stands now Trump’s recent decision to maintain and build US/NATO bases across the world “and make country X pay for it” could mean anything from him trying to keep his campaign promises in some sort of skewed way, to an utter abandonment of them and submission to the swamp. Perhaps it could simply be his business instincts taking over in the face of “wasteful spending”. Making allies have to pay to have US/NATO forces on their territory is a massive policy shift that one could only predict coming from the unpredictable 45th President.

The one thing that we should all understand, and which Trump perfectly and clearly understands, is that the members of NATO (and other “allies”) are a captive audience, especially Germany, Japan and South Korea, which “coincidentally” are the first set of countries that will have to pay the “cost + 50%” to keep bases and US soldiers on their soil. Japan’s constitution, written primarily by American occupation forces forbids them from having a real military which is convenient for Trump’s plan. South Korea, although a very advanced and wealthy nation has no choice but to hide behind the US might because if it were to disappear overnight, then Gangnam would be filled with pictures of the Kim family within a few weeks.

In the past with regard to these three countries NATO has had to keep up the illusion of wanting to “help” them and work as “partners” for common defense as if nuclear and economic titan America needs countries like them to protect itself. Trump whether consciously or not is changing the dynamic of US/NATO occupation of these territories to be much more honest. His attitude seems to be that the US has the possibility to earn a lot of money from a worldwide mafia-style protection scam. Vassals have no choice but to pay the lord so Trump wants to drop the illusions and make the military industrial complex profitable again and God bless him for it. This level of honesty in politics is refreshing and it reflects the Orange Man’s pro-business and “America will never be a socialist country” attitude. It is blunt and ideologically consistent with his worldview.

On the other hand, one could look at this development as a possible move not to turn NATO into a profitable protection scam but as a means to covertly destroy it. Lies and illusion in politics are very important, people who believe they are free will not rebel even if they have no freedom whatsoever. If people are sure their local leaders are responsible for their nation they will blame them for its failings rather than any foreign influence that may actually be pulling the real strings.

Even if everyone in Germany, Japan and South Korea in their subconscious knows they are basically occupied by US forces it is much harder to take action, than if the “lord” directly demands yearly tribute. The fact that up to this point US maintains its bases on its own dime sure adds to the illusion of help and friendship. This illusion is strong enough for local politicians to just let the status quo slide on further and further into the future. Nothing is burning at their feet to make them act… having to pay cost + 50% could light that fire.

Forcing the locals to pay for these bases changes the dynamic in the subconscious and may force people’s brains to contemplate why after multiple-generations the former Axis nations still have to be occupied. Once occupation becomes expensive and uncomfortable, this drops the illusion of friendship and cooperation making said occupation much harder to maintain.

South Korea knows it needs the US to keep out the North but when being forced to pay for it this may push them towards developing the ability to actually defend themselves. Trump’s intellectual “honesty” in regards to NATO could very well plant the necessary intellectual seeds to not just change public opinion but make public action against US/NATO bases in foreign countries. Japan has had many protests over the years against US bases surging into the tens of thousands. This new open vassal status for the proud Japanese could be the straw to break the camel’s back.

Predicting the future is impossible. But it is clear that, changing the fundamental dynamic by which the US maintains foreign bases in a way that will make locals financially motivated to have them removed, shall significantly affect the operations of US forces outside the borders of the 50 States and make maintaining a global presence even more difficult, but perhaps this is exactly what the Orange Man wants or is just too blind to see.

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High-ranking Ukrainian official reports on US interference in Ukraine

It is not usually the case that an American media outlet tells the truth about Ukraine, but it appears to have happened here.

Seraphim Hanisch

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The Hill committed what may well have been a random act of journalism when it reported that Ukrainian Prosecutor General, Yuriy Lutsenko, told Hill.tv’s reporter John Solomon that the American ambassador to that country, Marie Yovanovitch, gave him a “do not prosecute” list at their first meeting.

Normally, all things Russia are covered by the American press as “bad”, and all things Ukraine are covered by the same as “good.” Yet this report reveals quite a bit about the nature of the deeply embedded US interests that are involved in Ukraine, and which also attempt to control and manipulate policy in the former Soviet republic.

The Hill’s piece continues (with our added emphases):

“Unfortunately, from the first meeting with the U.S. ambassador in Kiev, [Yovanovitch] gave me a list of people whom we should not prosecute,” Lutsenko, who took his post in 2016, told Hill.TV last week.

“My response of that is it is inadmissible. Nobody in this country, neither our president nor our parliament nor our ambassador, will stop me from prosecuting whether there is a crime,” he continued.

Indeed, the Prosecutor General appears to be a man of some principles. When this report was brought to the attention of the US State Department, the response was predictable:

The State Department called Lutsenko’s claim of receiving a do not prosecute list, “an outright fabrication.” 

“We have seen reports of the allegations,” a department spokesperson told Hill.TV. “The United States is not currently providing any assistance to the Prosecutor General’s Office (PGO), but did previously attempt to support fundamental justice sector reform, including in the PGO, in the aftermath of the 2014 Revolution of Dignity. When the political will for genuine reform by successive Prosecutors General proved lacking, we exercised our fiduciary responsibility to the American taxpayer and redirected assistance to more productive projects.”

This is an amazing statement in itself. “Our fiduciary responsibility to the American taxpayer”? Are Americans even aware that their country is spending their tax dollars in an effort to manipulate a foreign government in what can probably well be called a low-grade proxy war with the Russian Federation? Again, this appears to be a slip, as most American media do a fair job of maintaining the narrative that Ukraine is completely independent and that its actions regarding the United States and Russia are taken in complete freedom.

Hill.TV has reached out to the U.S. Embassy in Ukraine for comment.

Lutsenko also said that he has not received funds amounting to nearly $4 million that the U.S. Embassy in Ukraine was supposed to allocate to his office, saying that “the situation was actually rather strange” and pointing to the fact that the funds were designated, but “never received.”

“At that time we had a case for the embezzlement of the U.S. government technical assistance worth 4 million U.S. dollars, and in that regard, we had this dialogue,” he said. “At that time, [Yovanovitch] thought that our interviews of Ukrainian citizens, of Ukrainian civil servants, who were frequent visitors of the U.S. Embassy put a shadow on that anti-corruption policy.”

“Actually, we got the letter from the U.S. Embassy, from the ambassador, that the money that we are speaking about [was] under full control of the U.S. Embassy, and that the U.S. Embassy did not require our legal assessment of these facts,” he said. “The situation was actually rather strange because the funds we are talking about were designated for the prosecutor general’s office also and we told [them] we have never seen those, and the U.S. Embassy replied there was no problem.”

“The portion of the funds, namely 4.4 million U.S. dollars were designated and were foreseen for the recipient Prosecutor General’s office. But we have never received it,” he said.

Yovanovitch previously served as the U.S. ambassador to Armenia under former presidents Obama and George W. Bush, as well as ambassador to Kyrgyzstan under Bush. She also served as ambassador to Ukraine under Obama.

Former Rep. Pete Sessions (R-Texas), who was at the time House Rules Committee chairman, voiced concerns about Yovanovitch in a letter to the State Department last year in which he said he had proof the ambassador had spoken of her “disdain” for the Trump administration.

This last sentence may be a way to try to narrow the scope of American interference in Ukraine down to the shenanigans of just a single person with a personal agenda. However, many who have followed the story of Ukraine and its surge in anti-Russian rhetoric, neo-Naziism, ultra-nationalism, and the most recent events surrounding the creation of a pseudo-Orthodox “church” full of Ukrainian nationalists and atheists as a vehicle to import “Western values” into a still extremely traditional and Christian land, know that there are fingerprints of the United States “deep state” embeds all over this situation.

It is somewhat surprising that so much that reveals the problem showed up in just one report. It will be interesting to see if this gets any follow-up in the US press.

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President Putin’s anti-fake news law is brilliant, but the West makes more

Western media slams President Putin and his fake news law, accusing him of censorship, but an actual look at the law reveals some wisdom.

Seraphim Hanisch

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The TASS Russian News Agency reported on March 18th that Russian President Vladimir Putin signed off on a new law intended to block distorted or untrue information being reported as news. Promptly after he did so, Western news organizations began their attempt to “spin” this event as some sort of proof of “state censorship” in the oppressive sense of the old Soviet Union. In other words, a law designed to prevent fake news was used to create more fake news.

One of the lead publications is a news site that is itself ostensibly a “fake news” site. The Moscow Times tries to portray itself as a Russian publication that is conducted from within Russian borders. However, this site and paper is really a Western publication, run by a Dutch foundation located in the Netherlands. As such, the paper and the website associated have a distinctly pro-West slant in their reporting. Even Wikipedia noted this with this comment from their entry about the publication:

In the aftermath of the Ukrainian crisis, The Moscow Times was criticized by a number of journalists including Izvestia columnist Israel Shamir, who in December 2014 called it a “militant anti-Putin paper, a digest of the Western press with extreme bias in covering events in Russia”.[3] In October 2014 The Moscow Times made the decision to suspend online comments after an increase in offensive comments. The paper said it disabled comments for two reasons—it was an inconvenience for its readers as well as being a legal liability, because under Russian law websites are liable for all content, including user-generated content like comments.[14]

This bias is still notably present in what is left of the publication, which is now an online-only news source. This is some of what The Moscow Times had to say about the new fake news legislation:

The bills amending existing information laws overwhelmingly passed both chambers of Russian parliament in less than two months. Observers and some lawmakers have criticized the legislation for its vague language and potential to stifle free speech.

The legislation will establish punishments for spreading information that “exhibits blatant disrespect for the society, government, official government symbols, constitution or governmental bodies of Russia.”

Insulting state symbols and the authorities, including Putin, will carry a fine of up to 300,000 rubles and 15 days in jail for repeat offenses.

As is the case with other Russian laws, the fines are calculated based on whether the offender is a citizen, an official or a legal entity.

More than 100 journalists and public figures, including human rights activist Zoya Svetova and popular writer Lyudmila Ulitskaya, signed a petition opposing the laws, which they labeled “direct censorship.”

This piece does give a bit of explanation from Dmitry Peskov, showing that European countries also have strict laws governing fake news distribution. However, the Times made the point of pointing out the idea of “insulting governmental bodies of Russia… including Putin” to bolster their claim that this law amounts to real censorship of the press. It developed its point of view based on a very short article from Reuters which says even less about the legislation and how it works.

However, TASS goes into rather exhaustive detail about this law, and it also gives rather precise wording on the reason for the law’s passage, as well as how it is to be enforced. This law is brilliant, for it hits the would-be slanderer right where it counts – in the pocketbook.

We include most of this text here, with emphases added:

Russian President Vladimir Putin has signed a law on blocking untrue and distorting information (fake news). The document was posted on the government’s legal information web portal.

The document supplements the list of information, the access to which may be restricted on the demand by Russia’s Prosecutor General or his deputies. In particular, it imposes a ban on “untrue publicly significant information disseminated in the media and in the Internet under the guise of true reports, which creates a threat to the life and (or) the health of citizens, property, a threat of the mass violation of public order and (or) public security, or the threat of impeding or halting the functioning of vital infrastructural facilities, transport or social infrastructure, credit institutions, energy, industrial or communications facilities.”

Pursuant to the document, in case of finding such materials in Internet resources registered in accordance with the Russian law on the mass media as an online media resource, Russia’s Prosecutor General or his deputies will request the media watchdog Roskomnadzor to restrict access to the corresponding websites.

Based on this request, Roskomnadzor will immediately notify the editorial board of the online media resource, which is in violation of the legislation, about the need to remove untrue information and the media resource will be required to delete such materials immediately. If the editorial board fails to take the necessary measures, Roskomnadzor will send communications operators “a demand to take measures to restrict access to the online resource.”

In case of deleting such untrue information, the website owner will notify Roskomnadzor thereof, following which the media watchdog will “hold a check into the authenticity of this notice” and immediately inform the communications operator about the resumption of the access to the information resource.
The conditions for the law are very specific, as are the penalties for breaking it. TASS continued:

Liability for breaching the law

Simultaneously, the Federation Council approved the associated law with amendments to Russia’s Code of Administrative Offences, which stipulates liability in the form of penalties of up to 1.5 million rubles (around $23,000) for the spread of untrue and distorting information.

The Code’s new article, “The Abuse of the Freedom of Mass Information,” stipulates liability for disseminating “deliberately untrue publicly significant information” in the media or in the Internet. The penalty will range from 30,000 rubles ($450) to 100,000 rubles ($1,520) for citizens, from 60,000 rubles ($915) to 200,000 rubles ($3,040) for officials and from 200,000 rubles to 500,000 rubles ($7,620) for corporate entities with the possible confiscation of the subject of the administrative offence.

Another element of offence imposes tighter liability for the cases when the publication of false publicly significant information has resulted in the deaths of people, has caused damage to the health or property, prompted the mass violation of public order and security or has caused disruption to the functioning of transport or social infrastructure facilities, communications, energy and industrial facilities and banks. In such instances, the fines will range from 300,000 rubles to 400,000 rubles ($6,090) for citizens, from 600,000 rubles to 900,000 rubles ($13,720) for officials, and from 1 million rubles to 1.5 million rubles for corporate entities.

While this legislation can be spun (and is) in the West as anti-free speech, one may also consider the damage that has taken place in the American government through a relentless attack of fake news from most US news outlets against President Trump. One of the most notable effects of this barrage has been to further degrade and destroy the US’ relationship with the Russian Federation, because even the Helsinki Summit was attacked so badly that the two leaders have not been able to get a second summit together.

While it is certainly a valued right of the American press to be unfettered by Congress, and while it is also certainly vital to criticize improper practices by government officials, the American news agencies have gone far past that, to deliberately dishonest attacks, based in innuendo and everything possible that was formerly only the province of gossip tabloid publications. The effort has been to defame the President, not to give proper or due criticism to his policies, nor credit. It can be properly stated that the American press has abused its freedom of late.

This level of abuse drew a very unusual comment from the US president, who wondered on Twitter about the possibility of creating a state-run media center in the US to counter fake news:

Politically correct for US audiences? No. But an astute point?

Definitely.

Freedom in anything also presumes that those with that freedom respect it, and further, that they respect and apply the principle that slandering people and institutions for one’s own personal, business or political gain is wrong. Implied in the US Constitution’s protection of the press is the notion that the press itself, as the rest of the country, is accountable to a much Higher Authority than the State. But when that Authority is rejected, as so much present evidence suggests, then freedom becomes the freedom to misbehave and to agitate. It appears largely within this context that the Russian law exists, based on the text given.

Further, by hitting dishonest media outlets in their pocketbook, rather than prison sentences, the law appears to be very smart in its message: “Do not lie. If you do, you will suffer where it counts most.”

Considering that news media’s purpose is to make money, this may actually be a very smart piece of legislation.

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