Russia’s Quiet Revolution – Update

by Gordon M. Hahn

The World Bank recently announced that Russia jumped from 40th to 35th place in its annual ‘Doing Business Report’ evaluating the ease of doing business in 190 countries based on parameters such as ease in starting a business, registering property, getting loans, paying taxes, and enforcing contracts (www.doingbusiness.org/~/media/wbg/doingbusiness/documents/profiles/country/rus.pdf). Russia’s rank in the 2018 report puts it ahead of several Western countries, including Belgium and Italy. Russia has steadily risen in the overall “Doing Business” rankings over the years. After the country had ranked 120th in 2011, Upon returning to the Kremlin in 2012 Russian President Vladimir Putin signed a decree setting the goal of reaching 20th place by 2018. Russia ranked 120th in 2012 (https://themoscowtimes.com/news/russia-climbs-5-spots-in-world-bank-business-ranking-59429).

As I wrote last year (https://gordonhahn.com/2017/01/05/russias-quiet-revolution/):

Over the past few years a quiet revolution has been developing in Putin’s Russia: ‘eternally’ backward and bureaucratic-authoritarian Russia has achieved European standards in its business environment through a deregulation revolution. In 2015 Russia moved from 54th to 36th (out of 190 countries) in the World Bank’s ‘Ease of Doing Business’ ranking or EDB (www.doingbusiness.org/rankings). It fell to 40th in 2016 but remains in good standing comparatively. Only eight non-European, non-Asian tiger countries (Hong Kong, South Korea, Singapore, and Taiwan) remain ahead of Russia in the EDB ranking [Armenia (38), Australia (16), Georgia (16), Japan (34), Kazakhstan (35), Malaysia (23), New Zealand (1), and United Arab Emirates (26)], and Australia and New Zealand can be considered European by heritage if not by geography. Japan has long been a highly Westernized country as well.

In 2010 Russia was ranked 124th, improving annually since then (www.tradingeconomics.com/russia/ease-of-doing-business). In 2011 Russian President Vladimir Putin vowed in a speech to a forum of Russian business representatives to make Russia’s business climate one of the best in the world within 10 years (www.wsj.com/articles/SB10001424052970204464404577112373387389092).

Russia has surpassed 13 European countries, including seven EU member-states: non-EU members Ukraine, Albania,  Bosnia-Herzegovina, Kosovo, Montenegro, Serbia and EU members Belgium, Croatia, Greece, Italy, Luxembourg, Hungary, and Cyprus. The US’s Puerto Rico is ranked 55th, 15 places behind Russia. Economic powerhouse China, with much U.S. and European to boast of, is far behind Russia in the EDB ranking, sitting in 78th place.

Russia stand behind only 3 post-Soviet states: Armenia, Estonia, Georgia, Latvia, Lithuania, and Kazakhstan. Armenia and Kazakhstan are members of the Russian-led Eurasian Economic Union (EEU). Georgia is regarded in the West as a model of post-Soviet transformation and one that Ukraine should follow. Ukraine came in 80th place in the EDB in 2016, more than two years after the Maidan revolt overthrew President Viktor Yanukovych in order to consolidate its ‘European civilizational choice’ and free itself from Russia’s influence and that of a large part of its own population preferring Russia and its EEU project.

Russia’s progress here is a sign that Moscow is stealing a page from China’s playbook, seeking to integrate itself into the Western economy, something that has not just economic advantages but also pays political dividends in creating Western dependence on Russia. This will make it more difficult in future to oppose Russian politically or impose sanctions and the like. Russia has already deployed this penetration strategy to some advantage by using its energy exports (natural gas, oil and nuclear).

More importantly, this advance undermines several assumptions about ‘eternal Russia.’ First, it shows that Russia is reformable and can modernize; its bureaucracy is not necessarily an impermeable obstacle to modernization. Second, Russia is capable of Westernizing and is in fact Westernizing, slowly albeit. These facts confound the broadly held Western assumption — and one shared by many Russians — that Russia cannot be fundamentally transformed. The only obstacles are Russian traditional culture and the time needed to change it. Third, Putin’s Russia is not as retrograde as many in the West assume. The West needs to keep all of this in mind and muster the patience to wait out ‘eternal’ Russia’s gradual transformation rather than force change as the West has done elsewhere with the well-known regrettable results.

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About the Author – Gordon M. Hahn, Ph.D., is a Senior Researcher at the Center for Terrorism and Intelligence Studies (CETIS), Akribis Group, San Jose, California, www.cetisresearch.org; an expert analyst at Corr Analytics, www.canalyt.com; and an analyst at Geostrategic Forecasting Corporation (Chicago), www.geostrategicforecasting.com.

Dr. Hahn is the author of the forthcoming book from McFarland Publishers Ukraine Over the Edge: Russia, the West, and the ‘New Cold War. Previously, and three well-received published books: Russia’s Revolution From Above: Reform, Transition and Revolution in the Fall of the Soviet Communist Regime, 1985-2000 (Transaction Publishers, 2002);  Russia’s Islamic Threat (Yale University Press, 2007); and The Caucasus Emirate Mujahedin: Global Jihadism in Russia’s North Caucasus and Beyond (McFarland Publishers, 2014). He has published numerous think tank reports, academic articles, analyses, and commentaries in both English and Russian language media and has served as a consultant and provided expert testimony to the U.S. government.

Dr. Hahn also has taught at Boston, American, Stanford, San Jose State, and San Francisco State Universities and as a Fulbright Scholar at Saint Petersburg State University, Russia. He has been a senior associate and visiting fellow at the Center for Strategic and International Studies and the Kennan Institute in Washington DC as well as the Hoover Institution at Stanford University.

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About Gordon M. Hahn