RUSSIA BALANCE SHEET PROJECT: OUTLINE
Summary
The goal of the Russia Balance Sheet Project is threefold: 1) to provide a clear,
objective, and comprehensive assessment of the current situation in Russia, the country’s
near-term challenges, and their implications for US interests with Russia; 2) to identify
and analyze the key drivers for Russia’s future in a rigorous manner; and 3) to work for
the integration of Russia into the world community and economy.
Sound U.S. policy towards Russia must be based on a firm, fact-based and
objective understanding of the current Russian reality. Our capacity for effective policy
towards Russia in the future must be informed by a careful and open-minded calculation
of the more likely as well as the less likely future Russian realities and how they may
impact US interests. The CSIS-PIIE-NES Russia Balance Sheet Project aspires to look at
Russia with clarity and suggest how major factors may influence future developments to
the year 2020. More near-term, the project has focused on deliverables pegged around
the presidential elections first in Russia in March 2008 and then in the US in November
2008.
The Russia Balance Sheet intends to reproduce several successes of the CSISPeterson Institute’s The China Balance Sheet project. First, it should be a truly
collaborative effort between the CSIS and the Peterson Institute. Second, it should
establish the state of the Russian politics and economics as well as US-Russia relations in
a fashion that is relevant both to the Washington policy community and the U.S. business
community. Third, it should be attractive to private business financing. However, the
Russia Balance Sheet has also reached out to incorporate an outstanding Russian partner,
the New Economic School (NES) in Moscow, which is without doubt the best institution
of economic education and research in Russia, where President Barack Obama spoke
during his visit to Moscow in July 2009. The role of the NES was marginal in the first
year of the project, but will be palpable in the last two.
The first deliverable of the Russia Balance Sheet project was a short book along
the lines of CSIS-Peterson Institute’s The China Balance Sheet. The two institutions have
sought to provide a similarly comprehensive analysis of Russia with particular attention
focused on the impact of Vladimir Putin’s presidency over the past 8 years and the key
challenges his successor will face.
The second component of the Russia Balance Sheet Project will entail rigorous
analysis and projections of the key drivers of Russia’s future to the year 2020. We have
established a working group around a varied set of political, economic, and social drivers
that will shape Russia’s potential future trajectory. During the second year of the project
this working group meets monthly in Washington and once or twice in Moscow to review
working papers and discuss policy issues. These papers will be put into a second book,
Russia after the Global Economic Crisis, which will be edited by Anders Åslund,
Andrew Kuchins, and Sergei Guriev. It will be discussed at a work shop in Moscow on
November 17. The ensuing day the three project leaders will provide a dinner briefing to
project supporters.
The final product of the three-year project will be a third book tentatively entitled
Russia 2020 which will synthesize the findings of the working groups and present
alternative scenarios of Russia’s development to the year 2020.
The Russia Balance Sheet is also hosting major Russian officials for speeches in
Washington. On April 24, the PIIE and the CSIS hosted Deputy Prime Minister and
Minister of Finance Alexei Kudrin at the PIIE, and they also hosted First Deputy Prime
Minister Igor Shuvalov at the Russian Embassy on September 21. As agreed with the
Russian Embassy, these major events will continue approximately semi-annually.
The project has also gathered a substantial advisory committee that will be
convened as appears relevant. So far, it has met twice.
An Elusive Subject and Past Failures of Analysis
Historically, Russia has displayed a profound capacity to confound and confuse
everybody, partly by design, partly due to an opaque political culture. Various blinders
and biases among observers also contribute. Moreover, Russia has tended to develop in
highly non-linear and thus unpredictable nature. This quality is at the heart of the genius
and the frustration of the country; a quality that Russians themselves simultaneously
boast about and find vexing. Churchill’s famous comment about Russia as a “riddle
wrapped in a mystery inside an enigma,” or the 19th century Russian poet Tyutchev’s line
that “Russia cannot be understood by the mind, only felt by the soul” sound like clichés
but usually clichés are grounded in some reality. Is Russia a partner or an unpredictable
and unreliable troublemaker?
Looking back over the past 25 years, it is remarkable how non-linear and
unpredictable Russia’s development has been. More often than not, efforts to
prognosticate Russia’s future more recently have similarly been woefully off the mark.
Yet, in most cases sensible forecasts have also been at hand. In 1984, Richard Pipes
rightly pointed out that Russia had entered a revolutionary situation. One of the current
authors write in a book published in 1989:
The first [most likely] scenario is radicalized reform with far-reaching
democratization. As Soviet reformist economics are waking up from their
2
imposed lethargy, they are becoming ever more radical, because they realize that
the state of the economy was worse than they had imagined and that halfmeasures do not offer any results. Therefore, they want to go further towards a
market economy and independent forms of ownership than they themselves had
anticipated. The impressive resistance from the party and state bureaucracies is
convincing them that little can be achieved without a considerable
democratization… (Anders Åslund, Gorbachev’s Struggle for Economic Reform,
Cornell UP, 1989).
There were many warnings of an authoritarian backlash with the coming to power
of a former KGB agent to the Russian presidency. Daniel Yergin and Thane Gustafson in
1993 published the best book outlining alternative Russian scenarios to the year 2010
(Russia 2010 and What it Means for the World). Ironically, Yergin and Gustafson
outlined one very positive economic scenario called Chudo (miracle in Russian), which
sensibly reflects the splendid economic growth that has taken place. However, they got
the reasons for the actual economic miracle that has taken place since 1999 mainly
wrong. In their chudo scenario, the Russian recovery would most likely be driven by the
diversification of the Russian economy promoted especially by flourishing small and
medium sized enterprises. Economic reform is certainly part of the story of the Russian
recovery, but skyrocketing oil and other commodity prices have probably been far more
important drivers.
Since we know that Russia is prone to non-linear development, we should be very
wary about concluding that the sources of the current stability are sustainable. Russia is a
quasi-authoritarian state, and such states almost by definition are unstable. The recent
economic boom was driven to a great extent by the oil price, and it turned out to be as
cyclical as could be expected. It is difficult to predict the timing and the magnitude of its
rise and fall, but that it will rise and fall is almost axiomatic because of structural factors
in the oil business. The big question is whether Russia will undertake sufficient structural
reform to truly modernize its economy and society to be able to fully integrate into the
global community.
Project Context
Despite inherent difficulties in anticipating what will happen in Russia, the stakes
in getting it right remain extraordinarily high for US policy interests. This should be
fairly obvious on security challenges: Russia still maintains the largest stockpiles of
nuclear weapons and fissile materials; its military industrial complex is second only to
the United States, and its client list features many countries like China, Iran, Syria,
Venezuela, and others whose interests diverge from ours. Russia’s geography bordering
on the periphery of Europe, East Asia, and the Greater Middle East makes its role as
either a partner or troublemaker in theaters of greatest concern to US foreign policy very
significant. As the world’s largest producer of hydrocarbons, and a major producer of
civilian nuclear energy, coal, and electricity, Russia’s aspirations to being an energy
superpower are not without foundation. Whether those aspirations will be realized
remains, however, an open question.
3
Given Russia’s intrinsic importance, it is surprising that more effort is not devoted
to understanding its possible trajectories of development. This was striking, for example,
in the National Intelligence Council’s report Managing Global … to the Year 2020. The
main country focus was on China and India, and Russia’s prospects were nearly
dismissed as being really significant for U.S. security interests. The proposed Russia
Balance Sheet project will seek amends by addressing the key questions about possible
trajectories of Russia’s development through a focused, rigorous, multidisciplinary, and
comprehensive approach. Most importantly, we will endeavor to approach the subject
with an open mind to the hard to imagine but possible outcomes since so many times in
the past in looking at Russia ten years hence we have failed to imagine or anticipate what
could and did happen.
The timing is ripe for such an effort with new administrations scheduled to
assume power in Russia in spring 2008 and in the United States in January 2009. We
will be embarking on a third epoch in post-Soviet US-Russian relations following the
Yeltsin-Clinton 1990s and the soon concluding Putin-Bush period. The relative positions
of the two countries in the world have changed considerably in the last eight years with
Russia’s unexpected resurgence and the United States’ weakened by the draining war in
Iraq and an economic and financial weakening. In the near term Washington needs to
have a sense of how a new Russian president may consolidate power, the Kremlin ability
to drive policy, and the broad outlines of that policy. In the longer term we need to
consider a series of questions including: what kind of power is Russia likely to be in the
world; how will it define its interests; what capacities will it have to pursue those
interests; and how compatible will those interests be with US interests.
Organization
Fred Bergsten, John Hamre and Sergei Guriev co-chair the Russia Balance Sheet
Group. The project is directed by Anders Åslund, Senior Fellow at the Peterson Institute,
and Sergei Guriev, President of the New Economic School, and Andrew Kuchins,
Director and Senior Fellow in the Russia and Eurasia program. For the rest, the Russia
Balance Sheet Group will be comprised of the participants of the Working Group, some
senior staff at CSIS and the Peterson Institute, as well as additional outside experts. The
Russia Balance Sheet Group will serve as a steering committee throughout the duration
of the project. We have formed a large and prominent advisory committee comprised of
the foremost experts on Russia and interested parties.
We would also design a series of briefings for members of Congress and private
sector supporters of the project as well as briefings and workshops in Moscow and
possibly other interested capitals during the course of the project both for feedback of
work-in-progress and dissemination of findings. There should be considerable interest in
Europe and Asia as there is no other group in the world undertaking a project on Russia
of this scope and magnitude.
4
The CSIS and the Peterson Institute have strong comparative advantages to
undertake this project including strong regional and functional in-house programs
important for Russia’s future, an established “brand” for this kind of project with the
China Balance Sheet, a sterling reputation for independent and innovative analysis, and
strong boards with powerful name recognition, interest, and experience in Russia. We are
very happy to have extended this cooperation to the New Economic School.
Year One
During the first year of the project two well-attended meetings with the advisory
committee were held in Washington. They proved helpful to set the directors for further
work.
The first “deliverable” of the Russia Balance Sheet project was a short book by
the end of Year 1 along the lines of CSIS-Peterson Institute’s The China Balance Sheet:
What the World Needs to Know Now about the Emerging Superpower. The authors of
The China Balance Sheet articulate the goal of that publication in its preface as based on
the belief,
that constructive U.S. policies toward China must rest, first and foremost, on a
firm factual and analytical footing, [and] this study’s primary purpose is to
provide comprehensive, balanced, and accurate information on all key aspects of
China’s own development and its implications for other nations. (p. x)
The Russia Balance Sheet project has provided a similarly comprehensive
analysis of Russia with particular attention focused on the impact of Vladimir Putin’s
presidency over the past 8 years. The resulting book, authored by the two project
managers, Anders Åslund and Andrew Kuchins, comprised of essentially eight chapters
of substance with a large final chapter on policy advice for US-Russia Relations:
Introduction: Why Russia Matters and How
1. Russia’s Historical Roots
2. Political Development: From Disorder to Recentralization of power
3. Russia’s Economic Revival: past Recovery, Future Challenges
4. Policy on Oil and Gas
5. International Economic Integration: Trade Policy, and Investment
6. Challenges of Demography and Health
7. Russian Attitudes toward the West
8. Russia as a Post-Imperial Power
Pressing the “Reset Button” on US-Russia Relations
This study provides the baseline for the second component of the Russia Balance
Sheet project that will take place over three years beginning in the spring of 2008. This
work will be designed to result in a rigorous and comprehensive assessment of the key
drivers that will shape Russia’s future.
5
Year Two
During the second year of the project we are going into more intense and
profound work. We have established a working group around a varied set of political,
economic, and social drivers that will shape Russia’s potential future trajectory. This
working group meets monthly in Washington and once or twice in Moscow to review
working papers and discuss policy issues. These papers will be put into a second book,
Russia after the Global Economic Crisis, which will be edited by Anders Åslund,
Andrew Kuchins, and Sergei Guriev. It will be discussed at a work shop in Moscow on
November 17. The ensuing day the three project leaders will provide a dinner briefing to
project supporters. The tentative outline and structure of this second book is (the titles are
placeholders):
Russia after the Global Economic Crisis
Editors: Anders Åslund, Sergei Guriev, and Andrew Kuchins
Introduction. Anders Åslund, Sergei Guriev, and Andrew Kuchins
1. Economy. Sergei Guriev, NES, Aleh Tsyvinski, Yale University.
2. Foreign Economic Policy. Natalia Volchkova, Harvard, David Tarr, World Bank
3. Energy and Climate Change Policy, Samuel Charap, Center for American
Progress, Georgi Safonov, Higher Economic School
4. Federalism. Konstantin Sonin-Yekaterina Zhuravskaya, NES/CEFIR.
5. High Technology and Innovation Economy, Keith Crane, RAND
6. Domestic Politics. Daniel Treisman, UCLA.
7. Corruption: Timothy Frye, Columbia University
8. Military Reform. Pavel Baev, NUPI
9. Foreign Policy Doctrine. Dmitri Trenin, Carnegie Moscow Center.
10. Russia and Its Near Abroad. Anders Åslund.
11. The Role of Russia in the Emerging Global Order: Andrew Kuchins
Conclusions. Anders Åslund, Sergei Guriev, and Andrew Kuchins
Year Three
Considering the swift development of the world in the aftermath of the global
financial crisis and the apparent stalemate in Moscow politics, we are inclined to keep an
open mind for the main focus for year three.
We are tentatively planning big conferences in both Moscow and Washington to
present our books and findings and discuss how Russia’s integration into the global
community and economy can be furthered. We intend to continue with our monthly
working group meetings and host major Russian economic policymakers coming to
Washington.
We shall definitely produce a third book considering the positive reception of the
first one, but we are currently discussing what theme that will become most relevant for
the project.
6