Stunned by Protests, Putin Talks Reform

A Russian presidential candidate addressed investors last week deploring the “shameful” state of his country’s business environment. He promised if elected to slash red tape and get the law off job creators’ backs, marching Russia from 120th place in the World Bank’s annual Ease of Doing Business index ranking to 20th. He ended with a clarion call for a “culture of entrepreneurialism” and “civil society.”

The candidate’s name: Vladimir Putin.

Having ruled Russia for eight years already as president and four more as prime minister, Putin kicked off his latest campaign last November promising, as well he might, to maintain the status quo. He would return as head of state after elections March 4, he blithely informed the public. Current President Dmitry Medvedev would shift over to the premier’s post. And by the way, the two leaders had decided this all between themselves years ago.

But the street protests that erupted after tampered-with parliamentary elections December 4 forced Putin to consider that Russians are not really so happy with the way things are. After some early hesitancy, he has gotten back in touch with his inner Margaret Thatcher, trying to coopt the largely middle-class marchers who are desperate to pry the dead hand of bureaucracy off the nation’s collective windpipe.

At a lush investment conference hosted by Moscow bank Troika Dialog, sharing a dais with junk bond aficionado Michael Milken among others, Putin promised a new cabinet level officer to defend entrepreneurs’ rights. He made specific and radical pledges on reducing paperwork — cutting the time necessary to turn on electricity by a factor of four, the hours spent clearing customs by seven.

This was the Russian leader’s third economic address since the protests started two months ago. Other rhetorical initiatives have included public transparency for any state tender bigger than 1 billion rubles ($33 million), dismantling state conglomerates like military-industrial producer Russian Technologies, and decriminalizing many of the economic offenses that officially sanctioned businesses use to blackmail unwanted competitors. (Some of those dismantled conglomerates might conceivably list their shares on the Russian stock exchange.)

It all sounds great, business people say, if any of it actually happens. Most of the conference audience remained skeptical that Putin, chief architect of the current overweening Russian state, is the man who can beat it back. “If all these changes are so necessary, you have to ask why none of them have happened until now,” quipped Oleg Vyugin, a former chief Russian securities regulator and current chairman of the country’s 15th-biggest bank, MDM.

Yet some Russia hands are starting to believe Putin’s good intentions may last past election day next month. “This is the most exciting thing that has happened here since Yeltsin,” one veteran Western fund manager says, referring to Boris Yeltsin’s toppling of Soviet Communism 20 years ago. “What needs to change in Russia is the government, and now it could change.”

An important sign to watch is whether Putin, whose reelection seems assured thanks to a weak and divided opposition, cruises to a majority in the first round of voting or is forced into a run-off, most likely with perennial Communist standard bearer Gennady Zyuganov. Going to a second round will make Putin feel weaker and more likely to pursue post-election reforms, analysts say.

In any case, the oft-villainized Putin deserves some credit for listening to his street protestors, however ephemerally, rather than trying to crush them on the Arab model. Arab Spring in the world’s top oil producer and No. 2 nuclear power is not a gamble the rest of the world should be eager to take.