Russian President Vladimir Putin

How Much Do We Really Know About Vladimir Putin?

President Vladimir Putin hosted the G20 summit on September 6, 2013 in St. Petersburg, Russia.. Photo by Iliya Pitalev/Getty Images

Who Is Vladimir Putin?

Vladimir Putin has been either the President or Prime Minister of Russia since 1999. He started out as Prime Minister in 1999. Boris Yeltsin appointed him President in 2000, and he won election in 2004. He could not run for President in 2008, so his colleague Dmitry Medvedev became President. Putin took the office of Prime Minister. Putin was re-elected President in 2012.

When Putin took over, Russia's economy was growing at 7% a year.

That was a rebound from Russia's 1998 debt default. For more, see the LTCM crisis.

The growth was also a result of Russia's transformation from a command economy to a mixed economy. That was begun by Yeltsin in 1991. Putin received the credit for this success.

That's despite the downturn the economy took when Putin invaded Ukraine's port of Crimea. That was to defend Russia's only warm-water port. It occurred after the overthrown of Ukraine's President and his ally, Viktor Yanukovych. Putin then positioned troops on Ukraine's eastern border. He supported pro-Russian insurgents who attempted to take over that section of the country. 

The United States and the  European Union imposed sanctions. As a result, Russia's economy contracted 3.9% in 2015.  But Putin's popularity with Russians soared for defending his country against the West. For more, see 3 Ways Ukraine's Crisis Affects You.

Attack on ISIS

On September 30, 2015, Putin launched airstrikes against ISIS in Syria.

But U.S. officials said the Russian strikes were nowhere near known ISIS locations. The attacks put Russia in conflict with the United States. It supports local Syrians who are fighting ISIS and Syrian President Bashar al-Assad.Putin supports the Assad regime. (Source: "Russia Launches First Airstrikes in Syria," CNN, September 30, 2015.)

Putin's Economic Policies

When Putin became President, Russia was bankrupt. It owed more to the International Monetary Fund (IMF) than it owned in foreign currency reserves. 

In 2001, Putin pushed through many reforms. He instituted a 13% flat income tax. He reduced the corporate tax from 35% to 24%. He cut Social Security contributions from 39.5% to 26%, and allowed deductions for business costs. He unified tax collection into one agency, and decriminalized small tax violations. In 2002, he deregulated small business licensing. He also and allowed privatization of farmland (they had been collectives before.) This reform boosted entrepreneurship in Russia, furthering growth.

Putin felt threatened by the power of some of the corporations and reversed course in 2003. He nationalized the Yukos oil company. He sent its owner, Mikhail Khodorkovsky, to jail for tax evasion and fraud. He combined Yukos with the national oil company Rosneft. Putin then sold shares of Rosneft to private foreign investors in 2006.

In 2007, he did the same with the bank VTB. 

The Secret of Putin's Power

Companies like Rosneft are managed by an oligarchy of Putin's allies and supporters. As a result, they have become wealthy. They are also the secret to Putin's power.

According to the New York Times, Russia has been ruled by an oligarchy in one way or another since the 1400s. This impediment to a true free market economy is the biggest drag on Russia's growth. As a result, the nationalized industries of oil, gas, banking, and machine building have stagnated. Foreign direct investment has dropped, also slowing Russia's economy.

The only saving grace is privately-held industries. These growing industries include retail, construction, and metals industries. (Source: Peterson Institute, An Assessment of Putin's Economic Policy, July 2008)

Putin remains popular in Russia because he restored national pride. In 2007, Time Magazine named him its Man of the Year. Putin successfully applied for Russian membership in the World Trade Organization (WTO) in 2012. That sent a message to the world that Russia adheres to international trade rules. It also has eradicated socialism and is a legitimate global world power.

Putin's Pipeline Politics

Thanks to Putin's pipeline politics, Russia became the world's leading oil producer in 2011. It even surpassed Saudi Arabia. Russia is also the second-largest producer of natural gas, since it holds the world's largest reserves. It also holds the second-largest coal reserves, and the eighth-largest crude oil reserves. Russia also exports steel and aluminum.

Russia was hard-hit during the 2008 financial crisis, but high oil prices helped it recover quickly. In 2012, it's economic output (GDP) rebounded to $2.6 trillion. But its growth rate slowed since the 1990s to 3.4% in 2012.(Source: CIA World Factbook, Russia's Economy)

The resurgence of U.S. shale oil and gas production threatens Russia's economy. Gazprom, the state-owned gas company, supplies a quarter of Europe's needs. As U.S. production rose, oil and gas prices fell. That combined with the sanctions further slowed Russia's economy.

Russia's reserves will only supply another 20 years at current levels. It requires expensive investments to access further reserves in the frozen tundra. Putin needs to expand reliance on other industries, such as information technology, airplanes, and engines, where Russia has a competitive advantage. Whether Putin can step up to the challenge remains to be seen. (Source: Businessweek, Can Putin Survive America's Energy Boom?, August 29, 2013)

Putin's Drive to Make Russia a World Leader

In 2013, Putin hosted the G-20 meeting in St. Petersburg. The discussion centered around whether the U.S. should send in missile strikes to warn Syria against any further use of chemical weapons, which were banned after their use in WWI. Putin opposed any military intervention against its ally Syria, which Russia supports with arms and trade. 

In 2006, he hosted the G-8 summit, using it to strengthen his role as world leader and to take significant steps to advance Russia’s economy. Before the event, Putin:

  • Liberalized the ruble, allowing the currency to be transferred in and out of Russia.
  • Allowed Rosneft, the state-owned oil firm, to sell shares on the London Stock Exchange.
  • Established trade agreements with Canada regarding Liquified Natural Gas and uranium.
  • Announced with the U.S. the Global Initiative to Combat Nuclear Terrorism, reiterating Russia’s offer to sell enriched uranium to Iran. 

Continue Reading...