Did you know that Russia has its own version of the Nobel Prize? Neither did I, until the other day that is. Catching up with the local news on arrival in Moscow, I found the country lauding the winners of this year’s prize that has previously been bestowed upon, among others, Valentina Tereshkova, the first woman to enter space.
The Russian Nobel is, quite literally, a sibling of the more famous Nobel Prize that is handed out annually in Norway and Sweden in the memory of Alfred Nobel, the inventor of dynamite. Ludvig, an elder brother of Alfred, moved to Russia at an early age and made his fortune in arms manufacture and oil exploration. The foundation and the awards his wealth endowed were revived in 2005 after they were mothballed around the time of the Bolshevik Revolution.
Proving slightly more difficult to kick-start, however, is the Russian economy. Among its emerging-market peers, Russia’s public finances look relatively healthy and the economy is growing at a steady if not spectacular clip after taking a big knock during the darkest days of the global economic slump a few years ago. While Russia has come a long way from the wild and volatile post-Soviet years of the 1990s, its economy is still heavily reliant on commodity exports and oil prices. Plans to diversify and modernise the economy haven’t quite taken off yet.
A good example of the challenges Russia faces is the fate of the iconic Lada car produced by AvtoVAZ, the state-owned car maker that has now agreed to cede a controlling stake to Renault-Nissan. After years of falling sales, AvtoVAZ recently decided to stop the production of the three-decade-old Lada Classic, a symbol of the stodgy stuff that used to roll off the assembly line during the Soviet years. In an attempt to give its branding a makeover, AvtoVAZ then announced that two sleek new designs of the Lada would replace the Classic. Within days, however, the company had to announce a recall of nearly 100,000 units of the new models – due to technical faults. No wonder Russian drivers are increasingly turning to foreign auto brands that offer better value for money.
Unreliable product quality, lop-sided growth, low productivity and an ageing population are just some of the factors holding back the Russian economy. But another pressing impediment for Vladimir Putin to tackle as he returns to the Kremlin for yet another stint as president is red tape. Bureaucratic labyrinths are commonplace in many developing countries but Russia's appetite for form-filling and box-ticking can sometimes require the patience of Job. And for better or worse, the shadow of the state always looms large over the private sector. By some estimates, the state's share of the economy is around 40 per cent, which makes foreign investors and entrepreneurs nervous. It hardly came as a surprise when the UK-based BP, one of the world's largest energy companies, announced this week its intention to finally end an unhappy marriage with its Russian partners at the TNK-BP joint venture.
Domodedovo is Moscow’s largest international airport. If you choose to take a taxi into the city from there, it could take you anywhere up to three hours, depending on the ebb and flow of Moscow traffic. If you take the airport express train, you could be sipping vodka in a downtown bar within an hour. But if you get caught in a spot of local difficulty at the airport, good luck to you. After a bomb blast at the airport last year killed 35 people, the government set up an investigation to pin responsibility for lapses in security. But the inquiry failed to even identify the owner of the airport. Apparently, so afraid were the airport's owners of a takeover by the state that they turned its ownership structure into what Winston Churchill once said of Russia itself: a riddle wrapped in a mystery inside an enigma.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.
