ISSN 2330-717X

Impacts Of Russia’s New Amendment: Putin The Iron Man Who Reformed The Constitution – OpEd

By

Vladimir Putin served as President of Russia since 2012, previously holding the position from 1999 until 2008. He was also the Prime Minister of Russia from 1999 to 2000 and again from 2008 to 2012. Currently, he is serving his second series of two terms as president after his 2012 election. 

According to point 3 of article 81 of the Constitution of Russia, the same person cannot hold the position of the President of the Russian Federation more than two terms in a row. Putin noted that Russia’s parliament is legally capable of changing the Constitution, but he argued that a national vote is necessary to make the amendments legitimate, hence a constitutional referendum was held in Russia. The new 2020 amendments to the Constitution of Russia would not count any presidential terms already served, hence this has reset the clock and Mr Putin can continue in office after 2024, which may potentially allow him to lead Russia until 2036. This reform would further strengthen the presidency and give the president more powers, such as the nomination of top judges and prosecutors by Russia’s upper house of parliament, safeguard the country’s heritage, give priority to Russian law over international models, provide a mechanism to handle the Kremlin’s crossness with the European Court of Human Rights and other international bodies’ findings against Russia and much more.

As I published in my article, dated 18 March 2018, Putin’s Russian elections: Geopolitical impacts, economic and foreign policy, and international business the Russian system is not yet capable of running on its own, without Putin. Too many of his policies, international relations and political manoeuvres are not viable or certainly not viable without him. He has established economic reforms, concentrated on foreign policy and security. With a keen eye on engaging young democratic countries in emerging markets and Arab Spring geopolitical uncertainty, Putin restructured the Military-Industrial Complex, and it ranks second in the world in the export of weapons.

Scenario – If there is a succession model or a hidden prodigy? 

If Yes, then what powers will be vested among them? Is it the right time for the transfer of full power? Is there any special defence strategy or mechanism already being executed? 

As per my aforementioned article from March 18, 2018, “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. The Russian system is not yet capable of running on its own, without Putin’’.

Some of Putin’s strong fellow candidates and confidants’ names cannot be missed, such as Medvedev, Former Prime Minister of Russia; a lawyer by training, and one of Putin’s closest allies since they worked together in the St. Petersburg city government in the 1990s. He served as chairman of the natural gas giant Gazprom and later, presidential chief of staff, and the president himself in a “tandemocracy” with Putin. However, both Putin’s and Medvedev’s popularity has been going down and his recent resignation may have been due to public pressure and the need for Putin to place him in a lower-profile role.

Putin is ex-KGB, he may surprise the world, or he could be preparing another strong candidate for new terms and future power, this may be hidden or may take some years; until then, Russia has to maintain its image through Putin-controlled policies on the world stage.

Scenario – Now Putin Stays in Power 2024 Onwards

Putin is in power for 20 years, which makes him Russia’s longest-serving leader since Stalin and, if he surpasses 2024, that will make him the longest serving sovereign. This means, consideration needs to be made to the risks and impacts on business, including deep economic, political and cultural categories. As I mentioned in my article, dated 7 July 2015 ‘Greece Debt Crisis: Scenario Planning For Future Global Impacts, What is Risk? Risk = Probability x Impact or the total risk a business faces = Business Risk or “the possibility that human actions or events lead to consequences that have an impact on what humans value.”

Vladimir Putin is known for his sturdy power and alertness around the world, which have positioned Russia as a global power. His soft power plays, like an emphasis on religion and culture have played a major part in his popularity, such as the foundation of the (RCSC) Russian Centre for Science and Culture in Jordan, Catholic Church in Jerusalem and his focus on sports. He has already worked on social reforms and reinforced them further with a focus on health care, minimum wage, and state pension adjustments for inflation. He was awarded the Confucius Peace Prize in November 2011, which is a Chinese alternative to the Nobel Prize. He is enthusiastic to promote military imperialism and well recognised for the smart application of power as well, like in his foreign policy brinkmanship and involvement in Georgia, Moldova, Ukraine, and Syria. As another recent illustration, Russia is prominent in the emerging markets; globally markets felt pressure due to the oil price war between Russia and Saudi Arabia in the first quarter of 2020. 

While Russia suffered from price pressures near-term, he sought to impose a balance with other major players, staking out a continued key role for Russia’s energy sector. He is well aware of the right move at the right time.

This fact cannot be disregarded, that Putin is a man of iron; with all the political pressures and sanctions, he conducted successful diplomacy and delivered an environment to continue to attract foreign businesses, while navigating the challenge of sanctions and derived steady FDI in Russia. These sanctions were dealt with by boosting Russian domestic production. Despite sanctions from the USA and EU, the five top trade partners increased their import purchases from Russia from 2018 to 2019: United Kingdom (up by 358%), Kazakhstan (up by 8.7%), United States (up by 5.2%), Netherlands (up by 3%) and China (up by 1.3%).

Under his reforms, Russia has low public debt, comfortable foreign exchange reserves and a current account surplus, which opens doors to foreign investors and attracts foreign companies. Example, Shell Companies Account for 60% of Russia’s Foreign Investment. 

With geopolitical scenarios heating up and their impact on business in the region, the attention should be on emerging Pakistan, as China has also invested billions of pounds in Pakistan. Pakistan can be beneficial in many aspects covering geopolitical, economic and foreign policy, especially with the Arab world. Russia’s involvement in BRICS is significant as a crucial player, alongside the USA which is also heading for their presidential and legislative elections. 

Putin Improved the Russian Economy 

In the 1990s, Putin inherited a rough period of its economy, with a devastated industrial and agricultural sector. Over time, the economy contracted and then rebounded with growth. In his regime, currently, Russia with a US $ 1,689.5 billion GDP holds the 11th position in the richest economies of the world. According to the World Bank, Russia’s gross domestic product (GDP) is expected to grow by 1.8% in 2020, with more modest growth forecasted for 2021. Perceptibly, with COVID 19 the upcoming years are uncertain globally.

Russian GDP is mainly made up of three segments agriculture, industrial and services. It is an exporter of diamonds, nickel and platinum and owns 10% of the world’s agricultural land. In the Doing Business 2020 ranking, established by the World Bank, Russia ranks 28th out of 190 countries, which is an increase of three places compared to the previous year. This can provide enhanced confidence to foreign investors considering an investment in Putin’s Russia. 

Foreign Direct Investment in Russia is expected to be 5000.00 USD Million by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations. Looking forward, we estimate Foreign Direct Investment in Russia to stand at 9800.00 in 12 months time. In the long-term, the Russia Foreign Direct Investment – Net Flows is projected to trend around 9800.00 USD Million in 2021 and 10000.00 USD Million in 2022, according to econometric models.

With no clear successor in sight and many of Putin’s policies and geopolitical moves still being implemented, the new amendment will potentially bring stability with more support and assurance of current models continuing, therefore the following companies will potentially benefit further, along with many others.

Mechel Steel MTL Metals & Mining, Mobile Telesystems MBT Mobile Telecom, QIWI QIWI Financial Services, Aeroflot Russian Airlines AERZY Industrial Transport, Gazprom Neft PJSC GZPFY Oil & Gas Producers, Mosenergo AOMOY Electricity, PJSC Gazprom OGZPY Oil & Gas Producers, PJSC Lukoil LUKOYOil & Gas Producers, Norilsk Nickel NILSY Metals & Mining, PJSC Polyus OPYGY Metals & Mining, PJSC Tatneft OAOFY Oil & Gas Producers, Polymetal International AUCOY Mining, Primorsk Shipping Corporation APSKY Industrial Transport, Rostelecom ROSYY Fixed Line Telecom, Rus Hydro RSHYY Electricity, PJSC Sberbank SBRCY Banking, Surgutneftegas PJSC SGTPY Oil & Gas Producers, Surgutneftegas PJSC SGTZY Oil & Gas Producers, TMK TMKXY Metals & Mining, Total, FM Logistics, Rockwool, Barilla, Anas, Doppelmayr, SBI Group, Cadbury RosneftShell, General MotorsRenaultPhillip MorrisAuchanNestlé, , Carlsberg.

In terms of export sales, countries imported the most Russian shipments by dollar and import country’s percentage consumption of total Russian exports.

  1. China: US$56.8 billion (13.4% of Russia’s total exports)
  2. Netherlands: $44.8 billion (10.6%)
  3. Germany: $28 billion (6.6%)
  4. Turkey: $21.1 billion (5s%)
  5. Belarus: $20.5 billion (4.9%)
  6. South Korea: $16.4 billion (3.9%)
  7. Italy: $14.3 billion (3.4%)
  8. Kazakhstan: $14.1 billion (3.3%)
  9. United Kingdom: $13.3 billion (3.1%)
  10. United States: $13.2 billion (3.1%)
  11. Poland: $12.4 billion (2.9%)
  12. Japan: $11.4 billion (2.7%)
  13. Finland: $10.1 billion (2.4%)
  14. India: $7.3 billion (1.7%)
  15. Belgium: $6.8 billion (1.6%)

Recommendations: 

The following suggestions may be valuable, while interacting with establishments in these regions.

  • Putin is a sharp leader who knows the tricks of the trade and when to play and pull the strings. As I mentioned in my article dated July 14, 2015, Prussia to Russia business strategy and foreign policy – Economic war in Europe, ‘’Vladimir Putin could use energy as a “new nuclear weapon”, and he did that in 2020, and may use it again, as and when required.
  • With USA and India relations, and in the current geopolitical condition, India and China have tension on several fronts. Russia may focus on step by step strategic relations or potential partnership with Pakistan to minimise US control in Asia. Especially, with China creating their own alliances such as CEPAC – China Pakistan Economic Corridor and Gwadar port.
  • With his success, Putin will project on building international relations in other regions, to stabilise Russia’s economy and further growth.
  • Putin is a vital player for BRICS (Brazil, Russia, India, China and South Asia), he can influence the strategic partnership for global stability, collective security, peace initiatives, and progression. 
  • Russia has potential for investments because it has an economic base and is rich in natural resources like oil, gas and metals. It is accessible to Western Europe and Asia due to its geographical location and culture. 
  • Foreign investors can benefit from Russia’s free zones, economic areas, skilled labour, tax and customs reforms, along with its expertise in innovation, nuclear technology, new information technologies and petroleum chemistry.
  • Russia will focus on and will profit from evolving new bilateral agreements, further improving tax and legal regimes, and a more business-friendly regulatory climate, which are crucial to investors for transparency and globalization.
  • The new 2020 amendments to the Constitution of Russia provide more stability which will allow the investors to form long term strategies, in their best interests and those of the investing countries and Russia.
  • Stocks investments can be made in the manufacturing and services sectors as Russia is focusing on industrial diversity for a balanced economy. For long -term growth, it doesn’t want to be wholly dependent on its oil exports, otherwise, it can make the entire economy vulnerable to price swings.
  • Putin’s stunts in riding, fishing, swimming, pottery, hunting, livestock, and farming serve to give a message focused on promoting the agricultural expansion trend further, as the agriculture sector contributes the least in GDP, among the key components.
  • Putin has unrivalled power, charisma, wit, a sporty image, military and defence intelligence, diplomatic tactics and the ability to attract investors. While he has had a very forward foreign policy, world leaders can benefit from these qualities and stability in leadership can, in this case, provide peace and steadiness.

*About the author: Bina ul Haq is London based International Business Expansion Consultant. She holds an MBA, and a Masters Level in Global Business from the University of Oxford.

References:

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.