Networks in the Russian Market Economy

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Russia’s Crony Capitalism: The Path from Market Economy to Kleptocracy

This hierarchy helped the President to achieve his goal—to establish control over the entire political process, eliminate possible risks of competition, and restructure the system of checks and balances. By silencing a group of powerful non-conforming businessmen 2 , Vladimir Putin sent a clear message to the business community to distance themselves from politics and thus established control over corporate Russia.

From now on, only those who complied with his political line and demonstrated loyalty and support were allowed to continue their business as usual.

The state learned to utilize a wide selection of political, economic and legal tools to put pressure on and intimidate the media [Vartanova]. Some of them are:. Application of these techniques transformed Russian media system into a restricted homogenous field, where only state-controlled media outlets were allowed to operate on the national scale. The regime allowed for limited operations of the independent media the press and the internet media to absorb the protest mood 3.

The period of the relative freedom of press ended with Vladimir Putin ascension to power, it was too short for the Russian media to become a strong democratic institution and a watchdog. Therefore, by choosing to serve as propaganda tools to receive benefits from the state, by abandoning their public duty to report the truth, the majority of the media voluntarily chose to engage in corrupt practices.

Deterioration of the public political discourse is a direct result of the lack of political pluralism and competition. As a result, the content of political discourse became flat and dull. Considering general disillusionment of the Russian citizens in politics and in their own abilities to influence political process or bring about change, public interest shifted from politics to the entertainment segment, which drives the expansion of the entertainment segment. Another reason for this expansion is commercialization of the global media market driven by advertising industry and aimed at stimulating consumption.

As mentioned above, the diminishing political discourse created an information vacuum in Russia that, with lack of other alternatives, had been filled with entertainment content. Eventually, this process led to tabloidization of the media and the prevail of the popular media formats that appeal primarily to the mass audience. The outlook of the Russian media market provides an insight into the type of information Russian media produce and the public consumes.

It shows that entertainment content has filled the empty niche of the political programming. At the same time, while political and investigative journalism is declining in Russia, Russian media market is booming due to the high inflow of advertising money.

Today, Russia ranks ninth in the top media markets in the world, and in its market growth rate is estimated to be at 12 percent—the highest rate across the top ten media markets see Table 1. Industries, such as medicine and IT, have demonstrated the highest growth of 18 and 13 percent respectively. The Sochi Olympic Games is expected to give the market an additional boost next year. The ownership structure of the Russian media market shows that the national media outlets with the highest audience reach are controlled by the state, primarily—television.

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Television in Russia is the leading source of information. The core of the TV market consists of 19 federal channels available to more than 50 percent of population. Russian television is a mixture of two models—one is state-controlled major TV channels are either owned by the state or by businessmen and companies loyal to the state ; the other model is purely commercial—it provides entertainment content. Regardless of the ownership structure, Russian television is mostly financed through advertising and sponsorship [Vartanova]. NTV is also controlled by the state through Gazprom Media.

TNT and Pyatiy Kanal that come respectively fourth and fifth in the top TV channels by audience reach, are also controlled by the state.


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According to the recent Report of the Russian Guild of Press Publishers, the total circulation of print media outlets in Russia is around 7. Similar to the television segment, the press market is divided between the two media models: quality dailies and weeklies that are mostly business oriented and have relatively small readership; and popular newspapers and magazines that are inclined to tabloidization. For the last five years, the share of print press has been steadily decreasing. In the first half of , the circulation of national newspapers and magazines went down by 7.

The main reasons for that were the recession following the financial crisis, growth of the share of internet media, ban of advertising alcohol beverages since January, and the expected ban of advertising tobacco products projected to come into force in Tobacco and alcohol companies were among the major contributors in the print market profits.

The structure of the print press market is much more diverse in terms of ownership, but publications with entertainment content, glossy fashion magazines, tabloids, et al. It is noteworthy that Izvesti a, a well-known, respected Soviet brand, was acquired by the National Media Group in The new owners pronounced it to become a state-controlled competitor of Kommersant and Vedomosti.

Western-backed ultra-liberal political parties competed unsuccessfully for national and local offices. The US decreed sanctions on Iran, a major lucrative trading partner with Russia. Goading Russia in the Caucasus and on the Black Sea, the US backed-Georgian regime invaded a Russian protectorate, South Ossetia, in , killing scores of Russian peace keepers and hundreds of civilians, but was repelled by a furious Russian counter-attack. In , the Western offensive to isolate, encircle and eventually undermine any possibility of an independent Russian state went into high gear.

Washington imposed a puppet regime deeply hostile to Russia and ethnic Russian-Ukrainian citizens in the southeast and Crimea.

What is a Market Economy?

Russian state oil companies, engaged in joint ventures with Chevron, Exxon, and Total, were suddenly cut off from Western capital markets. Nevertheless the Western sanctions policy and the aggressive political — NATO military encirclement of Russia, has exposed the vulnerabilities of Moscow.

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They retained enormous economic power and profits, but not political power. In contrast, those oligarchs who sought political power and financed Yeltsin-era politicians were targeted — some were stripped of their fortunes and others were prosecuted for crimes, ranging from money laundering, tax evasion, swindles and illegal transfer of funds overseas up to financing the murder of their rivals. Putin sought to secure greater political-military integration with the US and EU to ensure Russian borders and spheres of influence.

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Russian firms raised loans in Western capital markets; foreign investors flocked to the Russian stock market and multi-nationals formed joint ventures. Major oil and gas ventures flourished.

‘Sistema’: How Putin’s Russia is governed | UCL UCL SSEES Research Blog

The Russian economy recovered the living standards of the Soviet era; consumer spending boomed; unemployment fell from double to single digit; salaries and back wages were paid and research centers, universities, schools and cultural institutions began to recover. By outright purchase and buy-outs, through financial audits and the confiscation of the assets of gangster oligarchs, the Russian state takeover of oil and gas was successful.

These re-nationalized sectors formed joint ventures with Western oil giants and led Russian exports during a period of peak energy demand. The West favorably counterpoised the Golden Years of unrestrained pillage and domination of the Yeltsin period to the Putin era of an independent and dynamic Russia — by constantly tying the Russian president to the defunct Soviet Union and the KGB. Russian territorial borders, its allies and spheres of influence became Western targets. The coup was financed by the West, while far-right and neo-Nazi Ukraine gangs provided the shock troops.

The Kiev junta organized a war of conquest directed at purging the anti-coup, pro-democracy forces in the southeast Donbas region with its Russian ethnic majority and heavy industrial ties to Russia. In contrast to the Chinese, the Russian oligarchs have been totally dependent on Western markets, finance and technology and have done little to develop domestic markets, implement self-financing by re-investing their profits or upgrade productivity via Russian technology and research. They press Putin to give in to Washington as they plead with Western banks to have their properties and accounts exempt from the sanctions.

They are desperate to protect their assets in London and New York. In a word, they are desperate for President Putin to abandon the freedom fighters in southeast Ukraine and cut a deal with the Kiev junta. Today the capacity of the Russian government to mobilize and convert its economy into an engine of growth and to withstand imperial pressure is much weaker than the economy would have been if it was under greater state control.

Putin will have a difficult time convincing private owners of major Russian industries to make sacrifices — they are too accustomed to receiving favors, subsidies and government contracts. Moreover, as their financial counterparts in the West press for payments on debts and deny new credits, the private elites are threatening to declare bankruptcy or to cut back production and discharge workers.


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  8. Washington and Brussels were unwavering in their strategy to encircle and maintain Russia as a client. Instead of turning west and offering support for US-NATO wars, Russia would have been in a far better position to resist sanctions and current military threats if it had diversified and oriented its economy and markets toward Asia, in particular China, with its dynamic economic growth and expanding domestic market, investment capacity and growing technical expertise.

    While Russia has now turned to increase economic ties with Asia in the face of growing NATO threats, a great deal of time and space has been lost over the past 15 years.