It is no surprise that the Russian state is digging deep into its coffers to bail out debt-laden banks and businesses.
In principle, the rescue is similar to those in the US and European Union. Only with $560bn in reserves, Moscow is in a better financial position than western states, as Russian officials are happy to point out. In fact, Russia’s $180bn-plus intervention in liquidity and capital injections is proportionately even bigger than the $700bn US package, as the US economy is seven times larger than Russia’s.
But more money means more risk. The immediate danger is that the funds, which are largely being channelled through big banks, will not reach far into the economy so smaller companies will be left stranded. Next, the rules under which the funds are distributed are unclear, creating a yawning gap for favouritism. Among the oligarchs, the well-connected will benefit at the expense of the political rejects. Given that Vladimir Putin, the prime minister, has often expressed concern at the way state assets were sold at rock-bottom prices in the 1990s, there is a huge opportunity for a new round of property redistribution. The current bureaucratic elite, which already runs state-controlled companies such as Gazprom and Rosneft, will have every chance to extend their economic empires.
The current aid round will almost certainly not be enough. Some $50bn has been set aside for refinancing foreign loans. But $150bn in debt falls due by the end of 2009. So the policy arguments and the struggles for cash and assets are likely to go on for months.
An increase in the state’s economic power is necessary and inevitable, as it is the west. But unless Mr Putin and the president, Dmitry Medvedev, take care, Russia’s intervention will be riddled with turf wars and corruption. Oligarchs and bureaucrats could be divided, even more deeply than today, into hostile factions, riding roughshod over the interests of ordinary citizens. The market’s fragile grip on the economy could be undermined.
Russia’s leaders must guard against these dangers by ensuring that the funds are distributed fairly under the eyes of independent supervisors. The aim should be to safeguard the banking sector to ensure that the financial crisis does not turn into an economic depression. The personal ambitions of businessmen and bureaucrats must be subordinated to the interests of the country as a whole. Otherwise, even with all of its oil, gas and metals reserves, Russia will face a difficult economic future.