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Putin’s Russian elections: Geopolitical impacts, economic and foreign policy, and international business

By Bina ul Haq

  • The Russian system is not yet capable of running on its own, without Putin amid internal and external challenges and threats.
  • Russian youth sees him as a hero; photos, participating in skiing, fishing, hunting, judo, hockey, ice dip in sub zero freezing water to mark Epiphany, and horse riding are a trademark of his physical strengths and connection to them.
  • Putin established economic reforms; concentrated on foreign policy and security. Keen eyes on young democratic countries in emerging markets and Arab Spring geopolitical uncertainty, to capture opportunities in energy.
  • Putin’s feuds with Western powers, has characterized him a villain, but a hero at home. He is criticised for centralized political and economic power in his own hands; he did what was required in the best interest of Russia.
  • The future of the companies established businesses and secured, tenders, projects and public procurement in Putin’s regime.

Following the collapse of the Soviet Union, Russia had undergone a radical transformation, moving from a centrally planned economy to a globally integrated market economy. Russians economy is a key issue, it began emerging from recession last year and inflation has come under control. Russian lawmakers passed legislation to raise the minimum wage, some nine months ahead of schedule. It’s a meager increase of 2,000 rubles ($35) a month, bringing the minimum monthly wage to a “subsistent” 11,163 rubles ($197).

Putin has become synonymous with the system, and polls regularly show him with incredibly high rates of popularity. Putin’s feuds with Western powers has characterized him a villain in the West, but a hero at home. Russia’s occupation of Crimea from Ukraine triggered crippling international sanctions on the country and has been at the center of Russia-Europe tensions. Yet the Kremlin used a murky interpretation of the law to delay the election date to March 18 — the same date Russia took Crimea four years ago.

Putin’s role in preserving the unity of Russian Federation is primary, a salvation of Russia from disintegration. Boris Yeltsin timely sensed it and Vladimir Putin in time identified existing threats and took a number of preventive measures.

Putin has played a huge role in that the first Chechen campaign, the key factor was not only the army decisive role and effectiveness but that the leadership of the country expressed a political will under Putin to the end of the war in Chechnya.

Putin strengthens the role of Russia in the international arena by moving into the top three, along with the US and China by the degree of influence on world politics. He created a socially oriented budget and a good example is the joy of the inhabitants of Crimea after becoming a part of Russia because the level of pensions and social benefits there instantly rose to nationwide levels. Under Vladimir Putin, Russia has managed to significantly reduce the arrears to international financial institutions and early payment of state debts.

Putin took over a country whose population was falling at an alarming rate. In 2010 the population started growing again. The top-secret to this reversal was principally economic: as their financial situation improved during Putin’s reign, Russians began having more children.

In 2014 winter Olympics in Sochi, the world discovered a new Russia: strong, modern and victorious. Perception changed from suspicion to amazement. •  Russian youth sees him as a hero; photos, participating in skiing, fishing, hunting, judo, hockey, ice dip in sub-zero freezing water to mark Epiphany, and horse riding are a trademark of his physical strengths and connection to the youth.

Putin reformed Russian Businesses, Economy and attracted FDI:

When Putin arrived in office, Russia was just emerging from the disastrous market reforms of the 1990s and the 1998 financial crisis. The new president had to work on a grand economic vision. He slashed taxes to benefit business, renationalized key sectors, starting with the oil company in 2003. Nevertheless, unused manufacturing capacity and rising prices for oil, Russia’s main export, helped usher in an era of unprecedented prosperity that Putin is reminisced for, with real disposable income doubling between 1999 and 2006.

Putin established economic reforms to progress Russia on international forums. He exclusively concentrated on foreign policy and security.

Putin made reforms of restructuring the Military-Industrial Complex, on his initiative powerful vertically integrated holding companies were created, each of which brings together the entire chain of developers and manufacturers. As a result, Russia ranks second in the world in the export of weapons.

Putin an advocate of a multipolar has shifted in recent years toward grander economic and military cooperation with Asian countries, their growing economies are driven for Russia’s energy and the governments are less judgmental of its record. He accomplished two huge deals to supply China with gas, one worth $400bn. First, he has to build a pipeline through 2,500 miles of mountains, swamps, and seismic hotspots. The two countries will hold joint naval exercises in the Mediterranean Sea. He’s also exporting Russian railroad technology to North Korea.

However, worsening relations with the European Union forced Russia to cancel a pipeline to Bulgaria that was already being built, has only sped up its pivot to Asia. Putin’s factual awareness and a keen eye to watch of the young democratic countries in emerging markets and Arab Spring’s surface geopolitical uncertainty. Russia is on the watch to capture these opportunities in the energy sector.

The international companies/business established during this time benefited from the administrations’ relationship and business policies. This enabled them to secure tenders, projects, and public procurement. Consequently, enlarge and magnify businesses in Putin’s regime, and profiting the business and Russia. As a result, the standard of living made gains, and the stability returned to the job market.

Russia Foreign Direct Investment – Net Flows  1994-2018 | Data | Chart

Foreign Direct Investment in Russia increased by 7333 USD Million in the third quarter of 2017. Foreign Direct Investment in Russia averaged 6039.63 USD Million from 1994 until 2017, reaching an all-time high of 40140 USD Million in the first quarter of 2013 and a record low of -3922 USD Million in the fourth quarter of 2005.

Russia is ranked 40th (out of 190 countries) of the 2017 Doing Business ranking established by the World Bank. Main foreign companies are Rosneft, Shell, Total, General Motors, Renault, Phillip Morris, Auchan, Nestlé, Cadbury, Carlsberg and others.

Investors choose to Invest in Russia due to significant natural resources, investment potential largely under-utilized and a qualified workforce.  There are arrangements of Protection of Foreign Investment by bilateral investment conventions signed by Russia

Russia inherited 14 bilateral treaties with most of the European countries, China and Canada. Russia has signed 34 treaties of which 20 have been ratified (especially with Central European countries, Japan, India, Egypt and South Africa). There are organizations offering assistance in Case of Disagreement.

Country Comparison For the Protection of Investors

Russia has special Economic Areas and nearly all the products imported in these areas are exempt from Customs duties. These are some companies established in Russia and flourishing their operations by providing business assistance. Such as; Investment Aid Agency, National Agency for Direct Investment, Deloitte International Tax and Business and The European Bank for Reconstruction and Development finances investments in Russia, especially in the form of loans.

This cannot be disregarded, that Putin is a man of iron; based on with all political pressures and sanctions, yet Putin delivered better policies and environment to attract foreign business and drive FDI in Russia.

To many his policies, international relations and political maneuvers are not viable. Putin’s feuds with Western powers, has characterized him a villain in the West, but a hero at home. Therefore, he is criticised for centralized political and economic power in his own hands but he did what was required in those circumstances in the best interest of Russia.

Russia is exposed to several internal and external challenges and threats. To tackle them currently, there is no replacement available or prepared with all rounded skills, shrewdness, security background and robust economic plan. Russian system is not yet capable of running on its own, without Putin.

References:

  1. https://tradingeconomics.com/russia/gdp-growth
  2. https://atlas.media.mit.edu/en/profile/country/rus/
  3. https://www.ft.com/content/1fb872b8-26b0-11e8-b27e-cc62a39d57a0
  4. https://www.nationalgeographic.com/magazine/2016/12/putin-generation-russia-soviet-union/

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Bina ul Haq

Bina ul Haq, MBA, is a London-based banker with extensive international financial experience. She has expertise in Business Management, Portfolio Management, Risk and Controls. Bina is continuing her studies in a Strategic Program in Global Business from the University of Oxford - Said Business School.

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