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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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Foreign Banks Are Embracing Russia’s Alternative To SWIFT, Moscow Says

Given its status as a major energy exporter, Russia has leverage that could help attract partners to its new SWIFT alternative.

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Via Zerohedge


On Friday, one day after Russia and China pledged to reduce their reliance on the dollar by increasing the amount of bilateral trade conducted in rubles and yuan (a goal toward which much progress has already been made over the past three years), Russia’s Central Bank provided the latest update on Moscow’s alternative to US-dominated international payments network SWIFT.

Moscow started working on the project back in 2014, when international sanctions over Russia’s annexation of Crimea inspired fears that the country’s largest banks would soon be cut off from SWIFT which, though it’s based in Belgium and claims to be politically neutral, is effectively controlled by the US Treasury.

Today, the Russian alternative, known as the System for Transfer of Financial Messages, has attracted a modest amount of support within the Russian business community, with 416 Russian companies having joined as of September, including the Russian Federal Treasury and large state corporations likeGazprom Neft and Rosneft.

And now, eight months after a senior Russian official advised that “our banks are ready to turn off SWIFT,” it appears the system has reached another milestone in its development: It’s ready to take on international partners in the quest to de-dollarize and end the US’s leverage over the international financial system. A Russian official advised that non-residents will begin joining the system “this year,” according to RT.

“Non-residents will start connecting to us this year. People are already turning to us,”said First Deputy Governor of the Central Bank of Russia Olga Skorobogatova. Earlier, the official said that by using the alternative payment system foreign firms would be able to do business with sanctioned Russian companies.

Turkey, China, India and others are among the countries that might be interested in a SWIFT alternative, as Russian President Vladimir Putin pointed out in a speech earlier this month, the US’s willingness to blithely sanction countries from Iran to Venezuela and beyond will eventually rebound on the US economy by undermining the dollar’s status as the world’s reserve currency.

To be sure, the Russians aren’t the only ones building a SWIFT alternative to help avoid US sanctions. Russia and China, along with the European Union are launching an interbank payments network known as the Special Purpose Vehicle to help companies pursue “legitimate business with Iran” in defiance of US sanctions.

Given its status as a major energy exporter, Russia has leverage that could help attract partners to its new SWIFT alternative. For one, much of Europe is dependent on Russian natural gas and oil.

And as Russian trade with other US rivals increases, Moscow’s payments network will look increasingly attractive,particularly if buyers of Russian crude have no other alternatives to pay for their goods.

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US leaving INF will put nuclear non-proliferation at risk & may lead to ‘complete chaos’

The US is pulling out of a nuclear missile pact with Russia. The Intermediate-Range Nuclear Forces Treaty requires both countries to eliminate their short and medium-range atomic missiles.

The Duran

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Via RT


If the US ditches the Intermediate-Range Nuclear Forces Treaty (INF), it could collapse the entire nuclear non-proliferation system, and bring nuclear war even closer, Russian officials warn.

By ending the INF, Washington risks creating a domino effect which could endanger other landmark deals like the Strategic Arms Reduction Treaty (START) and collapse the existing non-proliferation mechanism as we know it, senior lawmaker Konstantin Kosachev said on Sunday.

The current iteration of the START treaty, which limits the deployment of all types of nuclear weapons, is due to expire in 2021. Kosachev, who chairs the Parliament’s Upper House Foreign Affairs Committee, warned that such an outcome pits mankind against “complete chaos in terms of nuclear weapons.”

“Now the US Western allies face a choice: either embarking on the same path, possibly leading to new war, or siding with common sense, at least for the sake of their self-preservation instinct.”

His remarks came after US President Donald Trump announced his intentions to “terminate” the INF, citing alleged violations of the deal by Russia.

Moscow has repeatedly denied undermining the treaty, pointing out that Trump has failed to produce any evidence of violations. Moreover, Russian officials insist that the deployment of US-made Mk 41 ground-based universal launching systems in Europe actually violates the agreement since the launchers are capable of firing mid-range cruise missiles.

Leonid Slutsky, who leads the Foreign Affairs Committee in parliament’s lower chamber, argued that Trump’s words are akin to placing “a huge mine under the whole disarmament process on the planet.”

The INF Treaty was signed in 1987 by then-President Ronald Reagan and Soviet leader Mikhail Gorbachev. The deal effectively bans the parties from having and developing short- and mid-range missiles of all types. According to the provisions, the US was obliged to destroy Pershing I and II launcher systems and BGM-109G Gryphon ground-launched cruise missiles. Moscow, meanwhile, pledged to remove the SS-20 and several other types of missiles from its nuclear arsenal.

Pershing missiles stationed in the US Army arsenal. © Hulton Archive / Getty Images ©

By scrapping the historic accord, Washington is trying to fulfill its “dream of a unipolar world,” a source within the Russian Foreign Ministry said.

“This decision fits into the US policy of ditching the international agreements which impose equal obligations on it and its partners, and render the ‘exceptionalism’ concept vulnerable.”

Deputy Foreign Minister Sergey Ryabkov denounced Trump’s threats as “blackmail” and said that Washington wants to dismantle the INF because it views the deal as a “problem” on its course for “total domination” in the military sphere.

The issue of nuclear arms treaties is too vital for national and global security to rush into hastily-made “emotional” decisions, the official explained. Russia is expecting to hear more on the US’ plans from Trump’s top security adviser, John Bolton, who is set to hold talks in Moscow tomorrow.

President Trump has been open about unilaterally pulling the US out of various international agreements if he deems them to be damaging to national interests. Earlier this year, Washington withdrew from the Joint Comprehensive Plan of Action (JCPOA) on the Iranian nuclear program. All other signatories to the landmark agreement, including Russia, China, and the EU, decided to stick to the deal, while blasting Trump for leaving.

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Kiev ‘Patriarch’ prepares to seize Moscow properties in Ukraine

Although Constantinople besought the Kiev church to stop property seizures, they were ignored and used, or perhaps, complicit.

Seraphim Hanisch

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The attack on the Eastern Orthodox Church, brought about by the US State Department and its proxies in Constantinople and Ukraine, is continuing. On October 20, 2018, the illegitimate “Kyiv (Kiev) Patriarchate”, led by Filaret Denisenko who is calling himself “Patriarch Filaret”, had a synodal meeting in which it changed the commemoration title of the leader of the church to include the Kyiv Caves and Pochaev Lavras.

This is a problem because Metropolitan Onuphry of the Ukrainian Orthodox Church which is canonically accepted and acts as a very autonomous church under the Moscow Patriarchate has these places under his pastoral care.

This move takes place only one week after Patriarch Bartholomew I of Constantinople unilaterally (and illegally) lifted the excommunications, depositions (removal from priestly ranks as punishment) and anathemas against Filaret and Makary that were imposed on them by the hierarchy of the Moscow Patriarchate.

These two censures are very serious matters in the Orthodox Church. Excommunication means that the person or church so considered cannot receive Holy Communion or any of the other Mysteries (called Sacraments in the West) in a neighboring local Orthodox Church. Anathema is even more serious, for this happens when a cleric disregards his excommunication and deposition (removal from the priesthood), and acts as a priest or a bishop anyway.

Filaret Denisenko received all these censures in 1992, and Patriarch Bartholomew accepted this decision at the time, as stated in a letter he sent to Moscow shortly after the censures. However, three years later, Patriarch Bartholomew received a group of Ukrainian autocephalist bishops called the Ukrainian Orthodox Church in the USA, who had been in communion with Filaret’s group. While this move may have been motivated by the factor of Bartholomew’s almost total isolation within Istanbul, Turkey, it is nonetheless non-canonical.

This year’s moves have far exceeded previous ones, though, and now the possibility for a real clash that could cost lives is raised. With Filaret’s “church” – really an agglomeration of Ukrainian ultranationalists and Neo-Nazis in the mix, plus millions of no doubt innocent Ukrainian faithful who are deluded about the problems of their church, challenging an existing arrangement regarding Ukraine and Russia’s two most holy sites, the results are not likely to be good at all.

Here is the report about today’s developments, reprinted in part from OrthoChristian.com:

Meeting today in Kiev, the Synod of the schismatic “Kiev Patriarchate” (KP) has officially changed the title of its primate, “Patriarch” Philaret, to include the Kiev Caves and Pochaev Lavras under his jurisdiction.

The primate’s new official title, as given on the site of the KP, is “His Holiness and Beatitude (name), Archbishop and Metropolitan of Kiev—Mother of the cities of Rus’, and Galicia, Patriarch of All Rus’-Ukraine, Svyaschenno-Archimandrite of the Holy Dormition Kiev Caves and Pochaev Lavras.”

…Thus, the KP Synod is declaring that “Patriarch” Philaret has jurisdiction over the Kiev Caves and Pochaev Lavras, although they are canonically under the omophorion of His Beatitude Metropolitan Onuphry of Kiev and All Ukraine, the primate of the canonical Ukrainian Orthodox Church.

Philaret and his followers and nationalistic radicals have continually proclaimed that they will take the Lavras for themselves.

This claim to the ancient and venerable monasteries comes after the Holy Synod of the Ecumenical Patriarchate announced that it had removed the anathema placed upon Philaret by the Russian Orthodox Church and had restored him to his hierarchical office. Philaret was a metropolitan of the canonical Church, becoming patriarch in his schismatic organization.

Representatives of the Ecumenical Patriarchate have clarified that they consider Philaret to be the “former Metropolitan of Kiev,” but he and his organization continue to consider him an active patriarch, with jurisdiction in Ukraine.

Constantinople’s statement also appealed to all in Ukraine to “avoid appropriation of churches, monasteries, and other properties,” which the Synod of the KP ignored in today’s decision.

The KP primate’s abbreviated title will be, “His Holiness (name), Patriarch of Kiev and All Rus’-Ukraine,” and the acceptable form for relations with other Local Churches is “His Beatitude Archbishop (name), Metropolitan of Kiev and All Rus’-Ukraine.”

The Russian Orthodox Church broke eucharistic communion and all relations with the Ecumenical Patriarchate over this matter earlier this week. Of the fourteen local Orthodox Churches recognized the world over, twelve have expressed the viewpoint that Constantinople’s move was in violation of the canons of the Holy Orthodox Church. Only one local Church supported Constantinople wholeheartedly, and all jurisdictions except Constantinople have appealed for an interOrthodox Synod to address and solve the Ukrainian matter in a legitimate manner.

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