Russian-American Relations Symposium: Session One: Russia's Economic and Political Outlook

This session was part of the CFR Symposium on Russian-American Relations, which was made possible through the generous support of BP.

RICHARD N. HAASS: (In progress) -- looking at U.S. toward Russia. And obviously, it will include such questions as the pace and scope of NATO enlargement, Russia's relationship with NATO, missile defense, nuclear dialogue restarting and then Russia's role in trying to address regional challenges, including but not limited to Iran.

Obviously, it is a rich intellectual agenda with all sorts of policy consequences.

Let me just quickly thank BP for its generous support that really did make today's program possible and, more generally, for its supporting the Council across the board, helping us with our Russian program.

Let me single out Rich Harold (sp) -- I saw Rich this morning, and he's somewhere in this midst, in the back of the midst -- for his personal involvement in what the council does.

Let me also thank our panelists and presiders. Many of you have traveled a long distance to be here. We also have an extraordinary group and, obviously, we'll look forward to the participation and the questions that will be part of every panel but also in the breaks. It really is a remarkable assemblage of talent.

Last but not least, it's now pleasure to turn things over to a remarkable journalist and a good friend of council David Remnick who edits a magazine that you may have heard of called The New Yorker. David joined The New Yorker in 1998, more than a decade ago, after a decade at The Washington Post where he served as Moscow correspondent for four years. The time there in Moscow led to a book that many of you, I expect, have read, "Lenin's Tomb," which won the Pulitzer Prize. What you probably don't know about David is that he spent his formative months and he would not have been the person he is today without those months at the Council on Foreign Relations where he was the Edward R. Murrow fellow here.

So David, thank you for presiding this morning. And thank you for turning out one of the best weekly and indeed one of the invaluable reads in this country.

DAVID J. REMNICK: Thank you very much, Richard.

It's a great pleasure for me to do anything at the council but especially to be on a panel with Masha Lipman whom I'm known for almost all my life, it seems. We began our relationship when she worked at The Washington Post bureau in Moscow. And she grew out of that in about 15 minutes and became the editor of a much beloved and one of the freest publications in the history really of Russia, a magazine called Itogi, during the hay day of a, if not free then close to it, free Russian press. Those days are long gone.

Since then, she has been at the -- at Carnegie in Moscow. She is quoted more often on Russia than de Tocqueville has been quoted on the United States. She is on the speed dial, it seems, of every reporter in Moscow and anybody with an interest in Russia. She edits a magazine called Pro et Contra. And also, her columns appear quite frequently in The Washington Post.

Timothy Colton, who is at Harvard, is the author of many papers and books. Of particular interest to me are two remarkable books, an extremely recent biography of Boris Yeltsin, an extraordinarily hard book to do, and he accomplished it with great scholarly penetration and style, and many years ago, the author of a book that just knocked me out, a book on Moscow, an extraordinarily wide-ranging, scholarly study of that city and its strange and wonderful and scary political history.

Our conversation will be split in half, my conversation with our two panelists and then your questions which I hope will be pointed and swift so that we can include as many people as we possibly can.

Let's begin with the dead-obvious, Masha. It wasn't so long ago that Russia was riding pretty high, that Russian leadership and the Russian elites were riding even higher with soaring oil prices. Those oil prices have plunged now from $140 a barrel to $40, an enormous plunge. Economic crisis on many fronts faces Russia as it does the rest of us. What has been the upshot of this? Give us a sort of overview of what's taken place in this very brief period of time since we've seen this plunge, this economic transformation.

MARIA LIPMAN: Thank you. And I want to thank the Council on Foreign Relations for inviting me. And it's an honor to be here.

Well, a very obvious question indeed but not one that's easy to be answered. Russia, of course, has been very badly hit by the crisis, but so have other countries. But as the famous line from "Anna Karenina" reads, "Unhappy families are unhappy in different ways." And it's interesting what's specific, what's special about the Russian crisis as opposed to how the crisis hits other countries.

The one obvious thing is, of course, the price of oil. As we see it, the Russian economy depends on commodity exports to a tremendous extent -- oil being the most important one. And of course, it has plunged down to -- well, one-third or one-fourth of what it used to be deals a tremendous blow to the Russian economy. It leads to a production slump, it has already led. It's led to people losing their jobs, to the ruble devaluation. And there's a long list of economic woes that the crisis caused.

Another problem related to the price of oil and the drop of the price of oil is that Putin's regime that may be designed as an oil-greased autorcracy relies on the price of oil as a means of holding the political scene and policymaking under tight control. This is not an autocracy based on hard repression or mass-scale oppression. It is mostly based on deals and contracts and buying out loyalties. And of course, it is one thing to buy loyalties when the price of oil is 140 (dollars), and it's quite another matter how you do it when the price of oil has gone down and the price of metals has gone down. And the price of gas, regardless of the state -- the sort of Russian strength is bound to go down, too.

So this would be another aspect of --

REMNICK: How would illustrate that change? Could you give us an example of it.

LIPMAN: Well, the dominant mindset of the Russian people that may be described as a tacit compliance or describe it as a non-participation pact with the government, which is we deliver improved and growing living standards. And actually, Putin's government delivered like never before in Russian history. No government was as generous to the people as Putin's government was.

But given the exchange in odd metal and politics and the contract works. And up to a point, the same contract has worked between the government and the elites. We allow -- we create or we deliver good opportunities for you to enrich yourselves and to have lucrative business opportunities but you do not meddle in our affairs. This worked, too.

Now, the question is whether the same kind of arrangement will continue working as smoothly with the oil price down to one-fourth, one-third of what it used to be.

Another aspect of the crisis that's special that makes Russian unhappiness different from others is the government anti-aggressive policies. Of course there's criticism in any country that the policies are not adequate or efficient or timely. And this is also true of Russia.

However, the priorities in Russia are not just questionable but also opaque. Just like policymaking in Russia in general is opaque, what drives the measures undertaken by the government remains the domain of a few chosen people and just as during the -- (inaudible) -- years. Recently, the decision-taking has been as close as it used to be, which raises suspicion, which raises probably challenges the loyalty of the elites because they suffer. And they do not know how the government is taking the decisions when it allocates rescue packages and allocates the bailouts.

There is reasonable ground to believe that it is being distributed in favor of cronies. And there is reasonable doubt that the government is indeed guided by a vision of how Russia would evolve from this crisis because however bad the crisis is, this is not the end of the world. Sooner or later, the crisis will be over, and Russia as a country is interested in that it becomes more viable and the more viable industries and businesses evolve from the crisis.

REMNICK: Tim, do you want to address the same question, how you see it?

TIMOTHY J. COLTON: Well, I agree with really everything Masha has said. What I would add is something about the assumptions in the ruling group and in the Russian political elite. But while this is necessary -- I mean, this compact or pact with society is near the heart of the whole matter. But I think there's something which is even closer, which I think justifies in the minds of the rulers, call them that, their own position. And that is, this is a developmental autocracy, if you want to use the word "autocracy," which may be a slight overstatement, but let's take it as shorthand. It's developmental.

And Putin has several times --

REMNICK: But what's a developmental autocracy on that question.

COLTON: Well, they justify having all of those controls over everything and everyone in the name of modernizing the country, not forever but for a certain period of time. And Putin actually at one point, before he stepped down as president, was challenged by I think it was a British journalist to explain how long that was going to be. And he threw out -- I'm sure you saw that -- the phrase of roughly 15 or 20 years more.

REMNICK: It's like a prison term.

COLTON: Well, kind of. And he said, at the end of that, though, Russia will move from this manual, hands-on control over everything to something more normal for a developed country.

So therefore, I think the political succession that took place last year was hooked up with that. That's how they, I think, talked themselves into it. It was a sort of understanding about continuing these policies through the next decade. And of course, it was premised on growth. And so one question would be, is this going to be turned upside down if there is no growth?

Just a year or so -- and I'm sure they'll ride it out -- but what if it turns out to be a very extended period of time?

Let me throw out one other element as well, that as far as the top layers are concerned, Kremlinology is kind of coming back in style here. But we don't really know. I don't think any of us really knows what was agreed upon at the highest level in winter of '07, '08. We know that Putin stepped down as president and his protege became president. But what was their understanding about what would come next? They, of course, haven't told us.

My guess is that Putin didn't even -- (inaudible) -- partly because he may not know himself. So in terms of the (mechanism ?) of rule, who's going to be at the helm and for how long, whether Putin is indeed going to return as president in order to get the same policy but the very same face on the television every night, this, I think, is very much an open question.

And that provides, I think, a possible opening for change. Because I think it is a potential source of very big political trouble. You have a diumvirate in which the senior person holds the junior office. This is not a natural arrangement. And as long as its there, I think the possibility of cracks appearing is there, and they may even be starting to appear now.

REMNICK: Masha, that's certainly the structural fact. But in practice, as Russians understand who the leader of their country is, you might begin with saying who the Russians understand to be their leader, superior power. And number two, where do you see this relationship going? We've seen little appearances of rhetoric from Medvedev that slightly criticized Putin. Does it matter much? What is the upshot of this entire arrangement which is pretty confusing from a long distance?

LIPMAN: So the question of what -- of who people regard as the senior partner -- you know, tandem as the supreme leader. According to the polls, there is not very different, three-thirds -- one believing that the power, the authority is divided equally, a higher number that believes that Putin is senior, and there is still a fraction of the population who believes Medvedev is.

REMNICK: But didn't Georgia end this discussion? Georgia -- you had the prime minister clearly leading the foreign policy and military discussion.

LIPMAN: I think there is a desire on the part of the members of the tandem themselves as well as a desire of the public to see the tandem as a peaceful arrangement, as two men who have loyalty for each other, respect for each other and who rule the country according to the same concepts and the same ideas and the same priorities. This sense is projected.

It is interesting, by the way, that Russian federal television channels which serve as the main tool to shape the public opinion invariably, for very, very, very rare exceptions, invariably gives more time to Medvedev than to Putin according to how these jobs are arranged. However, Putin invariably remains more popular in the Russian public opinion.

REMNICK: And that breaks down by 80 percent for Putin, 70 percent for Medvedev.

LIPMAN: The most recent I saw, which was December, signaled a slight drop in popularity for Putin from 88 (percent) in September to 83 (percent) in December. For Medvedev, I think, from 82 or (8)3 (percent) in September to 76 or (7)7 (percent) in December. So pretty high.

REMNICK: Barack Obama has something to shoot for. (Laughter.)

LIPMAN: Pretty, pretty high indeed. As to their relations between the two, of course, we don't know what the arrangement was. I don't think we will ever learn. I think this is probably the most secret thing of the overall secret arrangement of power of the Russian policies and Russian politics are played.

However, one thing it definitely did. It did give a lot to Putin, to his presidency, his popularity his projection to presidency. Sometime before the election, according to the polls, a vast part of the Russian population, I think over 40 percent, said they were ready to vote for whoever Putin recommends without even knowing the gender, the age, the appearance or the name of that person.

And sure enough, when Putin made his choice, Medvedev's popularity immediately went up. With the help of the federal television news channels, he won the election with about 70 percent of the vote.

REMNICK: Tim, did you want to add to that?

COLTON: No. I think you've covered it.

REMNICK: Okay. So what difference does it make? In other words, you have this arrangement. More or less, everything seems to be in agreement. Is there any appearance of popular public discontent with this radical shift in the economic situation in Russia? It has been the case in the last few years that it's said that any side the Russian leadership, the darkest imagining, is a Ukrainian scenario, some kind of popular unrest, it begins to snowball. And it's not just isolated to a demonstration in Vladivostok, which we saw in December, but something all the more threatening, not only to local or municipal governments but something national at the gates of the Kremlin.

Tim, do you want to address this?

COLTON: Well, we do have a lot of polling data which is made available regularly. And it shows quite unambiguously that people have gone from no concern to extreme concern in just a few weeks really. Between September and December, you went from complacency which more or less mirrored the government's attitude to something close to panic, I think.

And an interesting side piece of this is that Russians are increasingly saying to survey researchers that they don't trust what they read about the economy in the mass media, in the state-controlled media, of course. And that can't be a welcome development. As far as TV is concerned, you know, they're not fed really any other radical different information.

But the fact that they're now saying that they trust it less and less -- one particular survey I recall scanning within the last week was, I think, from the Lavada (ph) Center. But it doesn't matter. And it asked the question, do you think that the mass media are accurately reporting our economic situation? And there was a range of possible responses. But I think just shy of 50 percent said they didn't trust it anymore.

And then there was a follow-up question which said, so why are the media not speaking the truth? Is it because it's so complicated nobody could possibly understand it? Is it because the journalists don't understand it themselves? Or is it because the journalists do understand it but they're not allowed to speak the truth? And two-thirds of the respondents gave the last of the three responses. That is, the journalists do know, just like we in a sense know, but they're not allowed to be frank about it.

So this is, you know, part of the environment in which these hard decisions at the top have to be made. And it's clearly spun in a dangerous direction and it's constrained.

I think what the government can do further -- just to go back to this diumvirate business. It's not really a trivial point. Think back to the great crisis of a decade ago, 1998, '99. And what did Yeltsin and the others do? Well, they immediately started changing prime ministers. Between the spring of 1998 and the end of 1999, you had, what was it, five different prime ministers. And of course, Medvedev can't do that. In fact, he can't even criticize Putin by name. That's definitely out. And that again is not natural in terms of how Russian politics works.

One of the few virtues, I think, of having this dual executive is that you can get a certain amount of dynamism and change through a change of prime minister. The president stays because he's popularly elected. But this president can't do that unless he thinks the unthinkable which is to depose his patron.

But I can tell you, I think this is something we should be thinking about, because many Russians are starting to think that it's conceivable -- not tomorrow, but before the 2012 election.

REMNICK: In the Russian media, Masha, how are Russians made to understand, from their leadership, how this economic crisis began? Is blame directed at bankers and -- on Wall Street and Washington policy? Is it centered on an American critique and, therefore, deflecting a more general sense of it?

Or how does an average Russian, or an average intelligent Russian, come away from Russian television and radio and the small-circulation newspapers understanding what's going on? Why -- what is their sense of why they've seen this bastion of Russian wells, oil and gas, be degraded in terms of price?

LIPMAN: Well, you mentioned the lower-circulation Russian press, and they would give an entirely different story of the crisis, and quite a lot of sensible analysis and, I would say, constructive critique.

Just a very short while ago, the leading Russian daily, Vedomosti, ran a piece signed by five names, two of them being Mikhail Gorbachev and Alexander Lededev, who co-owns one of the most, I would say, anti-government newspapers in Russia --

REMNICK: He's the one that's buying the Evening Standard in England, as well.

LIPMAN: Yes, indeed.

REMNICK: Former KGB -- a former KGB agent.

COLTON: It's noted.

LIPMAN: Right, and a successful banker after that.

Now, that piece was a criticism of the government policies, not just anti-crisis measures, but of the government economic policies nearly all along, and a long plan -- it offered a long plan, some 15 points, of how the crisis should be dealt with and what should be done for Russia to evolve as a more robust economy after the crisis is over.

And actually, this piece is notable only because of the authors. However, every day on the op-ed page of the paper, there appears a piece explaining and coming up with advice and possible recommendations for the government.

Now, television is a different story, of course. Television began with saying the crisis is elsewhere and Russia's a safe haven. Then we went to Russia is affected too, but we may even benefit from the crisis. And then, eventually, we're in a crisis and the crisis is serious.

However, admitting that the crisis is here and never forgetting to emphasize that we got it -- that we got it like a bad disease, from the promiscuous West (scattered laughter) the coverage of the crisis, just like the coverage of the Russian politics and policymaking in general, focuses on the leaders who are in charge, who take all the right and good decisions and take good care of the public.

This has been the main message and the main line guiding the coverage of policymaking in Russia for several years now, and the crisis has not changed that. And this actually works.

I've also seen the polling results that indicate that people are concerned and people no longer feel secure and they're worried. But at the same time, the approval rating of the two leaders has not dropped, or dropped very insignificantly.

REMNICK: How do you account for that?

LIPMAN: And this is -- I think there is -- things may be hard, but there is a general acceptance of the political arrangement in the country. There are interesting polling results, and I think polling results are especially interesting when they show the dynamics, how the attitudes change or not change.

And a question has been asked by Levada Center, the best independent Russian polling center -- has been there for many years. Which political system do you like more -- the one that we had under Communism, the Western -- however understood, or the current Russian?

And just in recent years, and especially over the past two or three years, there's been a shift with a preference and a growing preference for the current.

And the way Levada pollsters themselves explain it, interpret it, is the system is established, and it's established in the public mind. What's very important here, there is no alternative. The Kremlin minders, the Kremlin spinmeisters, have seen to it that there be no reasonable, relevant political alternative in sight.

There is the apprehension of change, and I think there is a general readiness, not for acting, maybe more effectively, maybe more actively, in order to handle the crisis -- I'm talking about the public -- but adjusting.

Maybe things are not so good today. Maybe they will even get worse, but eventually, because the system is more or less acceptable and we kind of like it more than others, things will somehow -- gradually will take care of themselves.

REMNICK: But aren't they afraid the pact that you've memorably described, the nonparticipation pact -- aren't they afraid that this will break down? In other words, under the previous arrangement of the pact, there was growing prosperity, as it -- buttressing it.

And a growing prosperity meant that a growing middle class, upper middle class, mostly urban in its nature, people who are getting on airplanes and having vacations in Cyprus and Europe and studying aboard, if they were wealthier, and having fresh -- all kinds of things were happening in their lives that were worth saying okay, I will ignore politics, because this is coming through the door, through my efforts and even through the social system. Conditions were better; things worked a little bit better.

When that starts to break down, and I address this to both of you, when that starts to break down, I would imagine the nonparticipation pact of staying out of politics and disinterest in politics comes under threat. Seems only natural.

COLTON: I think that's quite reasonable. Now, whether it actually works out that way we'll have to see. But it would follow from what's already been said. That's right.

So, given Putin's popularity ratings, there's nowhere for them to go but down. Basically, you can't get any more popular than he was. Therefore, I think it's quite safe to expect that this will happen.

But it's one thing to go from 80 percent to 69 percent, and another from 80 percent to 49 percent. That would undermine the whole arrangement.

Could I mention one other thing here, which is that -- we know, because we've done election studies in Russia going back to the early 1990s, that Russians, like most other people, are very sensitive to their economic well-being and to economic questions. Though it often is, largely, about the economy, stupid, to use our cliche.

But these studies also show clearly one thing, which is that Russians are much more attuned to the condition of the country as a whole. They're more inclined to link this to their political preferences than they are to link their personal and family well-being to their political preferences.

So therefore, I think management of the news is going to be extremely important here. People will put up with hard times for them for a year or two, if that's all it is. That doesn't necessarily have revolutionary consequences.

But if they get the impression that the situation as a whole is slipping out of control, then you could imagine this kind of cascading rather quickly, which is what happened in Ukraine. And I would remind you there a lot of it was about transparency and the government not lying to the people.

And it was not really about economic catastrophe, because the Ukrainian economy was going quite nicely in Kuchma's -- towards the end of his reign.

So I think it would --

REMNICK: Are you suggesting that armed revolution is possible in Russian -- in the Russian political context?

COLTON: Well, it's possible. I don't think that's a very likely outcome anytime soon. There are lots of other things that are not present in Russia, including a private television network with editorial autonomy, which Russia used to have but it doesn't have anymore.

But no, I don't think it would take the form of that particular --

REMNICK: And same question, Masha. Is that possible? Is the Ukrainian example just far too distant and localized?

LIPMAN: I think the simple answer is no, and I think there is an inherent difference between Russia and Ukraine. Ukraine is naturally split. Ukraine cannot be one. And there is no way --

REMNICK: You're saying Russian Ukraine, within ---

COLTON: Ukraine and West.

REMNICK: -- within east and west.

LIPMAN: Yeah. I was talking about Ukraine that is split, that has not evolved as one nation yet. The question is whether it will, with time.

But in Ukraine there is no way for the government to say those who are against us are the enemies of the people, or exaggerate it a great deal. This is not a message that the Russian government is sending.

But this is the implication, that loyalty is the order of the day and everyone is supposed to support the government, and the government is there forever.

In Ukraine, there is no way to say those who disagree are the enemies of the people, because they are the people. And Ukraine, being between Russia and the West in many different ways, has this potential of a political difference and of a political conflict.

And because the conflict is inherent and will always be there, at least for the conceivable future, the need for a compromise is imminent, and the politicians there need to come to terms.

They do feel badly, but they do so as an ongoing simmering conflict, not as a civil war; not in terms of one totally dominating over the other and declaring the other the enemy of the people.

Now, if I can go back a little bit to the question of people are discontent; there is this difference, as you mentioned, between what life used to be and what it is now.

And by the way, the number of people who travel abroad, I wonder if the audience would guess here what is the percentage. I will not ask for your guesses. It is under 10 percent; it's a tiny fraction of the -- as in any big country -- I think in this country as well -- not too many people travel abroad.

REMNICK: That's our Congress who doesn't travel abroad. (Laughter.)

LIPMAN: I think it may come to the coverage of the federal television is so dramatically at variance with the everyday lives of the people that it might create a problem. And federal television channels will no longer be the tool of reliably ensuring stability.

But we're not there yet. We definitely are not. And the cushion that the government accumulated thanks to a reasonable policy of the minister of the finance is still squandered. Part of it has been squandered and, critics say, in a quite inefficient way. But there is still a lot there. And if the government plays it wisely, I think it can still rely on this -- if not loyal, then compliant mindset and the readiness for adjustment.

Where the problem arises, or is more likely to arise, is not from the grassroots, is not from the public discontent that will channel itself into politics. Because Putin's policy, over the years, ensured that this would not happen. There are no channels; there are no institutions.

But the elites themselves at the top that are not one, that are notoriously torn by conflict, and that have preferred to regard Putin as the ultimate arbiter and the ultimate authority over the years, may actually be getting different ideas if Putin's popularity goes down.

Then this loyalty as the order of the day may not be paying off the way it did. And the mindset of being risk-averse that's dominating -- dominated the Russian elites for many years, may actually change for something else, for considering that maybe political risk, coming together and offering and trying to probably shape the Russian development in a different way may be worth it.

REMNICK: You've made your scholarly -- at least part of your scholarly work about political struggle and democratization and political diversity in Russia, particularly after 1989-1991.

And yet, in 2008 we get a poll in which the most popular Russians are -- the Russian populace was asked who are your favorite Russians of all time, historically? And coming in third is Josef Stalin -- and it's not as if he was exceeded by Andrei Sakharov. I think in first place was Alexander Nevsky, and I don't know who came in --

LIPMAN: Stolypin.

REMNICK: Stolypin. Well, that's -- the business class speaks.

So what does it represent to you that Stalin persists as such a popular marker in Russian psychology, and how does this affect the discussion that we've been having for a little while --

And by the way, after this little go-around, we'll get your questions, please.

COLTON: Well, it's a very good question. This poll, you have to realize, was not scientific, so it's not as if they polled the population in a rigorous way. It was a kind of little Web site or -- it was done very -- people selected themselves into the reference group.

So whether a rigorous sociological survey of Russians would show Stalin at so high a level, I wouldn't be entirely sure.

But it's impossible to deny that many Russians do admire him, and that perhaps the trend is towards greater appreciation of what Stalin did.

And I -- I guess I would try to link this up with what's happened in the last decade, the return of the state, rebuilding the state, the sort of premise being that Russia cannot be governed any way other than with quite a strong hand.

Stalin also not only kept the empire together, but he enlarged it. The Ukrainians should be grateful to him for that, actually, because they benefited greatly. And I think this also plays into it.

REMNICK: Masha, same question.

LIPMAN: Yeah, I generally agree. I think this is the main point. I think it is very important -- by the way, in the polls, Stalin figures as high or higher, as number one, two, or three, depending on the time and --

REMNICK: That comes as an enormous relief. (Laughter.)

LIPMAN: I didn't mean it as a relief.

Anyhow, I think it is important -- this important reservation should be made: when Stalin is worshipped or, should I say, admired by a majority of the Russian people, he's not admired as a tyrant.

He is admired as a symbol, as a symbol of exactly what Tim mentioned.

COLTON: For the -- (Russian phrase), a state-builder.

LIPMAN: Absolutely. As he is the embodiment of the Russian statehood, which should not be questioned. And the Russian statehood under Stalin was that of a state that was victorious in World War II, and obviously that held sway of over half the world afterwards.

It is -- it may be hard to figure for people outside of Russia, but if people are asking the polls about the year '37 -- and lots of polls were taken during -- on the year of the anniversary, 2007, the year, of course, of the peak of mass repressions in the USSR -- people abhor these events.

And so does Putin, and he doesn't mind saying, as he did, taking part in a funeral service and the mourning of the victims, that that year was the year of horror; was the year of lunacy, was the year when the Russian state was exterminating its own citizens.

Now, how do the two come together? How do the two converge? This is what -- this is because Stalin is the embodiment of the state, not of the repression. And so he is to Putin.

The state should not be question -- questioned. This is the foundation of Putin's regime, and this is what actually is in common between his regime and Stalin.

REMNICK: Great. Let's start with a question here. Please give us your name and any affiliation that you might like to share or advertise.

QUESTIONER: Carter Page, Global Energy Capital. My question relates to sort of the tone and the focus of your remarks, which was a little bit of a glass-is-half-empty view of the current situation.

You know, there are a lot of other perspectives in terms of potential ways where growth is possible and further development is possible in Russia. A lot of the points you made, the cracks in the regime, potential things the Kremlin spinmeisters are doing --

What do you see as some of the potential opportunities for driving the process forward? And I just think there's a bit of a strange juxtaposition between this conversation and the last presentation at the Council on Russia where President Medvedev actually talked about several of those points. So I'm just curious to get your thoughts on that.

REMNICK: Tim?

COLTON: Well, we are in a very open-ended situation right now. And certainly the idea that growth will resume in Russia is not an outrageous one.

But the question is really when, and can it be sustained in the form that it took during the Putin decade? And I think what many Russians now fear is that the when is going to be quite some time from now, and also that it may not be sustainable any longer in the form that it took during the Putin decade, which is extreme reliance on hydrocarbons, among other things with enormous price volatility.

Now, Putin here has always talked the right game. He has been in favor of diversification from the very beginning. This word crosses his lips regularly.

He is also in favor of fighting corruption, but when asked on the way out the door what was the greatest failing of his regime, he said we didn't do anything about corruption.

So it is a state-directed, sort of deformed market economy, but with certain features of a market economy. And it's extremely corrupt.

And so my guess is that in order to get back to those higher growth rates, certainly if attracting foreign capital is part of the picture, that some features of the model are going to have to be modified and modernized and opened up.

REMNICK: Bill Drozdiak.

QUESTIONER: Bill Drozdiak, with the American Council on Germany.

If Putin and Medvedev have managed to escape responsibility as you suggest, do you see among the public a rising nationalist fervor to look abroad for scapegoats that could then be exploited by the leadership in terms of a more aggressive foreign policy as a way of turning the public attention from problems at home and directing their wrath abroad?

REMNICK: Masha?

LIPMAN: Well to begin with I want to emphasize also that it's open-ending and was ended a period of insecurity. So growth is possible -- I'm sorry I'm addressing the previous question a little bit. And one of the progressive ministers in Putin's government, Medvedev's government, is his cabinet, said not a long time ago that the current model of development of growth has exhausted itself. Now the question is what next? And is the current government able to actually scrap the current model and start a new one. And this is -- this looks that way to me.

Now nationalism has been exploited and regarding the West as the source of woe for Russia is a force, very broadly speaking, West as a force that seeks to harm Russia, I think has been part of the Russian foreign policy for a while. I wouldn't say Russia is solely to blame --

REMNICK: In this case, not without justification.

LIPMAN: Exactly, I was going to say in this case Russia is not solely responsible for it. I think the relations between Russia and the West has developed in a fairly unfortunate way over the past years. But I will leave this to the foreign policy panel.

Is it possible to capitalize on it more? Of course. I think it's gone up and down, depending on the relations, depending on the developments in the world. And if for example you look at a projection of the Russian foreign policy and the public opinion, you can see negative peaks, I mean bottom peaks of the negative attitude toward the West in time for the bombing of Yugoslavia, in time for the launch of the war in Iraq, on those moments when Russia regarded that it was being ignored, it's opinion being waived off, and the West was acting on itself. This is not to say that something like this is about to happen. I hope not. I hope for more reasonable and rational policies with regard to Russia on the part of the new administration.

But what I'm saying here is this, the relations are not stable and the policy of scape-goating the West and of vilifying the West also has gone up and down. The down phase has lasted longer this time than it did on previous occasions.

REMNICK: Okay. This woman here and then Igor Malashenko and then here.

QUESTIONER: My name is Margaret Kellerman, I'm with the Harvard-Kennedy School. My question really is also a little bit about your presentation which was very much old school in that it talked about traditional media and the Kremlin way of controlling what's happening in Russia. But those days are, at least to a modest degree even in Russia, passed. And I wondered if you'd comment both on demographic changes, particularly the youth, and also technology. This not the old media, this is the age of the internet, the cell phone, email and all those other obvious technologies. And I wonder if you would comment on the impact, both of demographic changes, cultural changes, and also --

REMNICK: Okay. I think --

QUESTIONER: -- technological.

REMNICK: Masha, who's very involved with the press and has been for years is going to answer that, because I think, let's stick to the --

LIPMAN: Sure.

REMNICK: -- question of the internet.

LIPMAN: Thank you for the question. Indeed, this is an age of technology and digital television and the web and the rest. However, the Russian media scene is arranged in a fairly sophisticated way -- sophisticated way, I mean politically from the point of view of the Russian government.

All these one media do offer an entirely different picture of the Russian life -- print, web, radio, even small audience television to some extent. The fact of the matter is that politically, it has zero relevance. And if you look at how people vote, the predominant vote for the pro-Kremlin -- (inaudible) -- United Russia Party is a good example but in fact however you look, if you look at the attitude and Levada Center pollsters have shown this in a very graphic way, the Russian attitudes are a projection of the message of federal television. This is a factor of the audience, the audience of federal television is almost 100 percent of the Russian households, whether all the rest of course fade compared to that.

But it's not just that. It's a matter of how the political scene is organized. It's a matter of (down ?) institutions and if these elements of free media operate in an unfree political environment, there is no way for a political news reported to become a political event. There is no Parliament, there is no opposition in the parliament to raise an issue that is reported in all those media.

There is no independent court to examine a case in a legal sensitive case. There is overall this mindset of passive compliance which results in that there is low demand for alternative sources of information. It's not that people do not have sources -- this is not the Soviet Union, there is plenty of sources; however if you look at the evidence and the reactions, they are guided by the federal coverage, not by all those more media.

REMNICK: Tim, you want to add something quick and then we'll go to Igor and then --

COLTON: Sure. These are reasonable points, Masaha, but, you know, I think we should not forget some of the lessons of history here. After all, the Soviet regime had ironclad control over information flow of the times that we're talking about here. Eventually it loosens its grip -- loosened its grip and then lost control. But it loosened its grip partly because people had started to disbelieve the official media. So I think United States --

REMNICK: It lost its grip by -- partly by edict after the death of Stalin and the rise of Khrushchev and an edict from the Kremlin?

COLTON: Well, leaders are always going to be involved in making changes in any kind country, but certainly in Russia.

REMNICK: Would there have been a thaw without Khrushchev?

COLTON: Well, who knows.

REMNICK: Yeah.

COLTON: I think there probably would have had to be but it might have taken a different form of course.

REMNICK: Okay. Yes, right there.

QUESTIONER: My name is Igor Malashenko and I would identify myself as a Ukrainian with Russian passport living in the United States, if I may. (Laughter.) I have an old school question mostly for Masha, I believe.

You mentioned Russian elite number of times. Don't you have a feeling that there is no elite in Russia in Western sense, but Russian elite is basically a contradiction in terms and it probably tells volumes about Russia's past, present and future? Thank you.

LIPMAN: This is grand question, thank you. I wonder what is there in Russia that has the same name as a Western institution but is different in substance. I think whatever you take --

REMNICK: Coffee. (Laughter.)

LIPMAN: Starbuck's has come to Moscow by the way, and I think it's still the same coffee. Actually consumption standards have come to Russia and they've taken a -- (inaudible) -- which is not true of institutions, and which is not true. I think this is a very profound question indeed.

Yes, the elite is different in a sense that the elite, even the most advanced, the most enlightened, the wealthiest, the most entrepreneurial have reconciled to the political configuration offered by the current regime. They don't mind being unrepresented and they don't mind living in a situation when they are at the mercy of the government. No matter how many millions of billions of dollars or rubles or whatever they've made. And the example of Mikhail Khodorkovskii shows how it is achieved. Only one of the methods but actually not a minor one.

However, I think that -- and we always come down to the same question, is it going to be like this forever? And we don't know. I think we both agree that this is -- Russia has ended a period of special uncertainty. Russia has been unpredictable or very hard to predict for a long time and now I think this time is especially uncertain.

But, however, when you live in a situation of this imposed stability or oil-greased stability for over eight years now, it is very hard to envision where change might come from. It might. I don't rule it out, I think it is possible and I think the elite, however defined, however different from the Western concept, is the likeliest source of this change.

REMNICK: Sir?

QUESTIONER: (Off mike.)

REMNICK: Wait, wait, there's a microphone.

QUESTIONER: I own a lot of BP shares and NTL, and I'm particularly interested in that aspect. But the key is, you know, to our discussion, we were supposed to look at economic outlook and so far have not really had that -- we just touched it a little bit by -- (inaudible).

There's a profound change in this country in the nationalized bank, we might call it something else, yeah, maybe expense in general -- (background noise) -- capitalism. We are not calling it yet like that, but I do -- I fear the worse. In Russia, it's of course much worse because of the two factors which you have written about in your writing. One is of course that the country has been petroleum industry oriented, it doesn't have the multiple industrial complex like here; and secondly the way how is it run with the oligarchs, there's no shareholders meetings, it's decided still in that Leninist way from the center with coalition of former KGB agents and of course the oligarchs.

Therefore, Russia is facing much worse even a deeper economic crisis, and it already shows in our behavior. You know, they send all these hardware and naval ships through Panama and send some all to --

(Cross talk)

QUESTIONER: -- the thing is that we are not going to see any more intervention of Georgia. What we are seeing is a profound --

REMNICK: Sir, your question?

QUESTIONER: -- the question is do you agree with me? (Laughter.) That the crisis is such that there will be rarely any more expansion. They are much more careful, they are much skillful, they're manipulating Ukraine in a very --

REMNICK: Okay.

QUESTIONER: Okay. Is that what is in the cards; in other words, this article is irrelevant.

COLTON: Well we'll be discussing this more fully later this morning, but I mean certainly resources are going to be scarce for the forseeable future. So some of the wilder schemes that we heard about a year ago, six aircraft carrier groups within 20 years and all this stuff, are going to be put in a very deep freeze at the back of the safe somewhere.

On the other hand, I would not myself infer from economic stringency that Russian behavior in its immediate neighborhood on issues that its leaders feel are vital to Russia's security, and even they say to its existence as a state; in the case of Ukraine, that its behavior will necessarily be all that restrained. I mean, I think of the Georgia crisis that occurred this winter with the recession underway, the Russians would have behaved in exactly the same way.

REMNICK: Sir? Could you wait for the microphone? There you go.

QUESTIONER: Roswell Perkins (sp), a retired lawyer. My question relates to the middle class. Back in 1998, the middle class was very small, relatively speaking, and now it has grown. And can you comment on the difference in the two economic crises as relates to the growth of the middle class during this period and how much the effect on the middle class is affecting --

REMNICK: Between 1998 and 2008?

QUESTIONER: Exactly.

REMNICK: Good question. Masha?

LIPMAN: Thank you. I want to go back to Igor Malashenko for a second.

When we say middle class we need to figure out what we actually imply. And we shouldn't actually imbue the Russian middle class with the sort of attitudes that the Western middle class has. Most importantly, what the Russian middle class, which I would prefer to call medium income group -- people with relatively decent consumption and living standards, consumption more than living. But what they lack is the pschology of taxpayers, which assume ideally that they vote for the government, the government spends their taxpayer dollar or euro or whatever and if the government doesn't do this in the right way they will vote it out. This is what is missing from the Russian scene.

This being said, people in modern industries -- let's put it this way -- who had very good opportunities in the year '97 and still in early '98 and then lost a lot were mostly -- were, A, small groups; and, B, they were mostly very young people. And actually this was not a very hard blow. It lasted for maybe, well, dippedfor several years, two for some and then they found new jobs and those industries began to develop anew.

Today we're talking about a bigger group, people who enjoy those living and consumption standards, which does not mean that their mindset and their attitude is so different from the rest of the population.

REMNICK: Okay. Did we --

LIPMAN: i think they too would actually, unless something that unforeseeable is in store for Russia, they too will be tuned to adjustment.

REMNICK: We have time for one more question, and I -- there was somebody over here. Right, yes.

QUESTIONER: Thank you. Tim Snyder, Yale University. I wanted to ask a question about a very traditional state-controlled medium, namely the school textbook. It's prompted by Ukraine. Many of the Orange Revolutionaries had read as their main school history textbook something that was originally written and published in Canada. I wanted to ask what the degree of control the central Russian state is over school textbooks, especially history, if this frames public opinion, and has anything to do with continued veneration of Stalin?

REMNICK: I think both of you -- if you want to take a short crack at that, and then we'll conclude. Masha?

LIPMAN: This is a big issue in Russia. There is especially one textbook that you probably have now and you probably know what you're talking about, a textbook for high schoolers about 20th Century Russian history, which draws -- especially draws the portrait of Stalin as exactly what I was saying earlier, the embodiment of statehood, a good government manager, et cetera.

This has caused a lot of scandal. This is deplorable that such a textbook should appear. However one minor consolation is that it ended up not as a school textbook, whether or not because of the public scandal is hard to say. However it ended up as a manual for teachers which doesn't make it as mandatory as it would be as a book.

Also, a few years ago, there was an idea to impose a single textbook for history for the whole country the way it was in the USSR so that there would be no choice. This has not happened. This initiative has never come through. What drove it -- whether the leaders are reasonable, whether the public outrage worked is hard to say. However it's not as bad as probably your question implied that it is.

REMNICK: Tim, a final word on this question of history?

COLTON: Well I've not read these textbooks myself, so I can't say too much about their content.

REMNICK: But you were saying -- before we came on I asked you if your Yeltsin biography had been translated. And in fact that you were both saying that there really is no scholarly political writing as such.

COLTON: Well, I think if we're talking about post-Soviet history, the history of post-Soviet two decades, that there's very little that Russians have done other than memoirs that's worth reading. I mean, it's just -- there's not been a lot of serious work done, certainly on political trends.

But on the other hand, if a foreigner has a book that -- for which there would be a Russian audience, there's really no political entitlement that I'm aware of to it being published there. In my own case, the problem with the Yeltsin book is that it's rather long and -- (laughter) --

REMNICK: I read it all.

COLTON: -- and it's more a financial question -- the political side hasn't even come up in conversation.

REMNICK: Tim Colton, Masha Lipman, thanks very much and thank you. (Applause.)

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