It is often said that Russia cannot turn back, that reforms in the direction of market economics are irreversible, that Communism is dead in the land of the czars. For oil companies with business anywhere in the former Soviet Union (FSU), assurances like those should afford minimum comfort.
That Russia cannot return to its superpower past is true enough. It is broke. It can neither support a military capable of sustained, global operations nor rebuild its economy without help from abroad. It depreciated assets and depleted resources for 70 years to support imperialist ambitions and now is starved of capital.
REFORMERS OUT
If the old Russia is history,. however, the new Russia isn't immune from costly mistakes. Suddenly, reformers are out, and old-guard statists are making a comeback. Election of brash nationalist Vladimir Zhirinovsky to the lower house of Parliament last December attracted worldwide attention. But the January departures of dedicated reformists such as First Deputy Prime Minister Yegor Gaidar, Social Security Minister Ella Pamfilova, and Finance Minister Boris Fyodorov detract even more from prospects for constructive change.
With Communists enjoying resurgent political strength, President Boris Yeltsin accommodates hard-liners. There is talk of subsidies from a bankrupt government for noneconomic industries. Old bullying tendencies reemerge as Foreign Minister Andrei Kozyref calls for Russian military presence throughout the FSU and state-owned Lukoil seeks equity positions free of capital contributions in oil deals outside Russia.
These developments must be viewed in perspective. They are political events occurring while most Russians, according to many reports, have little time for politics. Nonreformist successes in the December elections are said to have reflected frustration over the pace and difficulty of economic change rather than opposition to reform itself. Indeed, Americans recently in Moscow say conditions are improving as Russians adapt to the freedoms and rigors of economic self-reliance.
But it is always a mistake to treat Russia's politics as a sideshow, whatever the preoccupations of its citizenry. Politics has just turned back toward centralized power. It's a development worthy of alarm. While Russia can never restore its past, it certainly can stumble into something just as bad.
That would be especially tragic in view of the transparently weak case antireformists make for slower economic change. Gennady Zyuganov, chairman of the Communist Party central committee, capsulized the argument in a recent statement quoted in the Wall Street Journal: "They tried to put an American suit on Russia, but it didn't fit."
NONCAPITALIST CLIMATE
Western oil companies active in Russia might see things differently. They have endured surprise taxes, bureaucratic delays, political jolts, and deal reversals that few would tolerate elsewhere. They have surmounted dialectic suspicions that if one side of a deal profits the other must lose. They have worked without a commercial code. They have, in other words, done business in a climate devoid of capitalist fundamentals.
Russians must understand that capitalism is more than the absence of Communism. What Russia has now is simply the absence of Communism plus policy incoherence. The political step backward hinges on propagandist dismissal of reform that never happened. Oil companies should seek ways to set the record straight. They, the Russian people, and probably Russia's neighbors have much to lose if the country gives up on reform before giving it a genuine chance.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
