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A Modernizing Czar

January 22, 2008 | "The Wall Street Journal"

Vladimir Putin can take great satisfaction with the legacy he will leave his successor this spring. In 2007, he achieved the goal he set out for himself eight years ago in a document, "Russia at the Turn of the Millennium," just before he took the presidency from ailing Boris Yeltsin: To rebuild Russia at home so that it could regain its status as a great power abroad. Last year saw this Russia on full view, playing a more vocal, visible and at times troublesome role on issues of great importance to Europe and the United States, such as Iran, the Middle East, missile defense, and energy.

Many may find President Putin's methods unsavory and Russia's new face disturbing. But we should give him his due, for the odds against success were formidable. Consider the Russia he inherited. Under President Yeltsin, Russia suffered a socio-economic and political collapse unprecedented for a major power not defeated in a major war. Between 1990-1998, the economy plunged by 40%. The state was dysfunctional, with significant parts privatized by corrupt oligarchs and with regional barons asserting their independence. Russia was humiliated as its finances were run out of Washington by the International Monetary Fund, and outside powers shamelessly interfered in Russia's domestic affairs in support of Yeltsin. Many Russians thought their country was on the path to becoming a failed state; many Westerners were contemplating a world without Russia.

Eight years later, the difference is stark. Mr. Putin has restored Russian pride and enhanced Russia's power. The economy has not only recovered all the ground it lost in the 1990s, but has also developed a robust service sector that was practically non-existent in the Soviet period. Russia has accumulated the third largest monetary reserves in the world after China and Japan. Mr. Putin has rebuilt an authoritative state along traditional Russian lines, highly centralized and personalized, by taming the oligarchs and regional barons and undermining alternative centers of power such as the Duma and the media. Russia is stable; living standards are soaring. It is once again feared and respected abroad. No wonder Mr. Putin is wildly popular among Russians, who now look to the future with greater optimism and confidence than ever over the past two decades.

To be sure, President Putin has been lucky -- lucky that he succeeded a decrepit Yeltsin, lucky that oil prices rose sharply on his watch, lucky that political disarray in Europe and the United States made him shine all the brighter on the world stage. But other leaders have failed to capitalize on such luck. One need look no further than to Leonid Brezhnev, who squandered a similar opportunity in the 1970's and instead prepared the ground for the Soviet Union's collapse in the 1980's. And there were many opportunities for Mr. Putin to falter. Without remarkable macroeconomic discipline, for example, the flood of petrodollars into Russia could have unleashed a devastating inflationary spiral and not the solid growth we have seen.

The time of restoration has now passed, however, and 2008 brings a new, more formidable challenge -- modernization -- that will require new approaches, particularly with the West. Russia needs to make massive investments -- perhaps a trillion dollars over the next decade -- to modernize infrastructure largely inherited from the Soviet Union and starved of funds over the past 15 years. It needs to diversify its economy away from an overlarge dependence on natural resources, particularly into high-tech, if it wants to remain a major power. It needs to rebuild its public health and education systems to produce a competitive workforce. This is all the more imperative because its population will decline sharply over the next decade because of poor health conditions in the past.

Mr. Putin and his entourage have spoken openly about these challenges. The question is whether they are prepared to take the steps needed to address them effectively.

Success is threatened by the traditional Russian blight of corruption. Critical to dealing with that threat is to open up the political system to encourage greater transparency and accountability by government officials. Relaxing the current supercentralization will help foster the flow of reliable information, flexibility and innovation that Russia needs to face the challenges and exploit the opportunities of the 21st century.

Success will also require Russia to repair its relations with the West -- to begin with by ratcheting down the vitriolic anti-Western rhetoric coming out of Moscow today. For Russia cannot modernize itself on its own, even if it must play the leading role. The money, know-how and technology it needs can only be found in the West. And Russia cannot guarantee its security at a time of great global upheaval without friends and allies. Only one country has the capability to work with Russia on the full range of its real security challenges, which do not lie in the West but to the South in the guise of a militant radical Islam, to the East in the guise of a rapidly changing geopolitical environment, and globally in the guise of nuclear proliferation and megaterrorism. That country is the United States.

So one big question for 2008 is whether Mr. Putin and his chosen successor, Dimitry Medvedev, can summon up the wisdom to meet the challenges of economic and political modernization and the courage and confidence to build a cooperative relationship with the West, for the sake of Russia's own future.

By Thomas Graham, senior director at Kissinger Associates Inc., senior director for Russia on the U.S. National Security Council staff in 2004-07.


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