By James Arnold
BBC News Online business reporter
Still plenty of work to do here
Most Russians have trouble articulating just what it is they love about their president, Vladimir Putin.
He looks smart, certainly, and is neither obviously corrupt nor publicly drunken. He evokes warm patriotic feelings without being a nationalist tub-thumper. He gives the impression of being sceptical of headlong free-market reform, without ever threatening to be a communist.
But the real reason that Russians re-elected Mr Putin in such embarrassing numbers is the economy, which seems to be in sparkling health.
Rightly or wrongly, Mr Putin gets the credit for this upturn. The question is whether he can hold on to the kudos.
Reasons to be cheerful...
Now seems a good time to take a look at Mr Putin's economic record.
Many things have improved on his watch:
- The economy has stabilised remarkably since the catastrophic situation of 1998. The rouble has been rock-solid, barely budging from 31 in the dollar since 2001. Inflation, which was in three figures in the mid-1990s, is now a modest 12%. Interest rates, which hit 150% in the struggle to control the rouble in 1998, have been cut to 14% this year.
- Confidence, that rarest of commodities, seems to be returning. During the 1990s, about $20bn a year was spirited out of Russia, mainly to safe havens in London, Zurich or Vienna. Last year, just $2.9bn left the country. Russian companies, too, seem to be investing more sensibly.
- Foreign investors share the mood. Russia has been slow to attract serious amounts of corporate cash, but the flow seems to be increasing, especially from resource-hungry oil companies. BP, one of the keenest, now has 13% of its capital employed in Russia. In October, rating agency Moody's graded Russia as a low-risk investment.
- Tax, legal and public-sector reform, much talked-about but wholly ignored during the presidency of Boris Yeltsin, is getting into gear. Taxes have been simplified, for example, and broadly lowered, especially for companies. And while the tax-loving Yeltsin government consistently ran heavy budget deficits, Mr Putin's finances are in surplus.
... and to chastise
All well and good. But there is plenty to put on the debit side of the ledger:
- Those reforms are far from complete. Tax policy remains arbitrary and opaque, with officials seemingly free to threaten or favour whom they wish. Oil companies, the most prominent beneficiaries of the current boom, face an unfairly low tax burden, and their expert use of transfer pricing - a slippery method of tax-efficient accounting - means they avoid even that.
"Our president is Putin" for the foreseeable future
- Russia's bureaucracy is still inefficient, overbearing and corrupt. Setting up in business, for example, requires fulfilment of 16 separate regulatory procedures, compared with three or four in Western Europe. Civil servants' salaries are low, making bribe-seeking more attractive. And little has been done to simplify the confusing layers of bureaucracy, with officials at federal, regional and municipal levels all keen to interfere.
- Investors may be more chipper, but that is not saying much. Poland still gets far more foreign investment in a year than Russia has in its entire post-soviet history. Russia's stock markets are still casinos, its money markets are hopeless as a tool of state finance, and its banks are unreformed since their 1998 meltdown.
- Russia has become more, not less dependent on energy exports in recent years. Now, energy accounts for one-quarter of economic output, according to the World Bank. This poses two dangers. First, that a downturn in oil prices will hit the economy hard. And second, that non-oil industries - which Russia must develop if it is to mature as an economy - are becoming ever more brutally crowded out.
- Most troubling of all, the surge in wealth is distributed lumpily. Moscow and - to some extent - St Petersburg look like boom cities, with infrastructure developing quickly. Outside the twin capitals, conditions are decidedly grim, even in the dozen or so other cities of more than a million people. Unemployment, at an official 6%, looks low, but disguises chronic underemployment and wage arrears. Worst-hit of all is the public sector, where wages have not kept pace with inflation.
The improvements, such as they are, are real. But it's worth asking how much credit Mr Putin can take for them.
The main factor in the economy since the economic crisis of 1998 has been the cheap rouble, which has made Russia a real player on the export market. Total exports last year were $135bn, up from $87bn in 1997 - and every dollar earned now is worth six times as many roubles as in the mid-1990s.
To be fair, Mr Putin, who is no economist, has been a sensibly hands-off manager. He appointed capable market-minded ministers - notably German Gref, the reformist economics chief - and left them to it.
Who says Mr Fradkov is faceless?
In his latest cabinet reshuffle, he has bolstered the reformist element in the government; liberal economist Alexander Zhukov, for example, has been brought in as deputy prime minister.
Less obviously laudable is his apparent intention of gathering more power in his own hands - the only possible explanation for the appointment of Mikhail Fradkov, an unknown functionary, as prime minister.
Mr Putin says he is girding himself for the big reform push of his second term, a structural shake-up of Russia's economy. He aims to eliminate yet more red tape, encourage entrepreneurs - which Russia signally lacks - and reduce the country's dependence on oil exports.
Love wears thin
His chances of achieving some or all of this look fair.
He may not have achieved everything that he wanted in his first term, but he has been successful in neutralising some of the warring elites - notably the notorious "oligarch" tycoons - that made President Yeltsin's reign such as a disaster.
But he will have to move fast.
Vova broods on his destiny
Mr Putin has been helped by the primitive state of Russian democracy: even in a society with as much cause for discontent as Russia, no rival candidate has emerged with any hope of getting more than 5% of the vote.
This incumbent advantage has been helped by Kremlin influence over the media, and by the oddly fatalistic, undemanding attitude of the electorate, but it cannot last.
Opposition to him will grow, as it does against every incumbent, and it will grow all the faster if nothing is done to improve the abject living conditions in the provinces.
The voters may love their Vova now, but even the most patient lovers will stray if neglected.