Russian President Vladimir Putin’s changing attitude toward two giant government-led high-tech projects sends a troubling message about his third term in office: Maintaining power is more important than modernizing the economy.
The projects, known as Rusnano and Skolkovo, were meant to propel Russia’s raw-material economy into the technology age. They involved multibillion-dollar government investments, the first in nanotechnology and the second in a new city that would become Russia’s answer to Silicon Valley. They were supposed to provide the infrastructure and stability required to attract large amounts of foreign investment.
Now, both have become targets in Putin’s campaign to demonstrate that he’s being tough on corruption and mismanagement of government funds. As a result, their chances of succeeding are looking increasingly remote.
Putin himself ordered the establishment of Rusnano in 2007, endowing the state-owned company with $5 billion to invest in ventures that would put Russia at the forefront of the nanotechnology revolution. Headed by Anatoly Chubais, the architect of Russia’s early 1990s privatization, Rusnano initially had to place most of its money in bank deposits for lack of ready projects. Since then, it has managed to invest more than $3 billion.
Trouble came in April, when the Accounting Chamber, a body charged with auditing government spending, accused Rusnano of inefficient management in a report that received ample coverage on state-owned TV. It said that Rusnano had transferred about $40 million to shell companies and pointed out that a silicon factory in which Rusnano invested about $450 million was not functioning and was about to be declared insolvent. The report also highlighted the state company’s 2012 losses of 2.5 billion rubles ($80 million) and the 24.4-billion-ruble (about $800 million) in reserves Rusnano had formed against potential losses from risky ventures.
In a recent televised call-in session, with questions carefully screened, Putin did little to support Rusnano and Chubais, who is still reviled by many for his role in the 1990s privatization program. “I believe that he and a number of people who worked with him then made many mistakes,” Putin said in response to a caller who asked when Chubais would finally go to jail. Putin then declared that CIA operatives had been among Chubais’ advisers.
Moving on to Rusnano’s losses, Putin suggested that investing in alternative-energy projects such as solar batteries doesn’t make sense in a hydrocarbon-rich country with long, dark winters. “It’s dark when you get up and dark when you go to bed, when would these batteries charge?” he said. All he could say in Rusnano’s support was that “it has invested inefficiently, but this is not theft.”
The company responded that its initial strategy was geared toward maximizing sales, not profit, and that it was far ahead of plan in that respect. But the objections did not get much airplay, and to a large extent the damage was done. Putin’s coldness and the widely publicized Accounting Chamber report offered a clear indication that the project is out of favor with the Kremlin. That’s not good for Chubais’ plan to have Rusnano fully privatized by 2020, with the first partial sell-off coming this year.