Based on the attached reading, students are to carefully read the work in question, and to critically assess it through a presentation of the author’s main idea(s), strengths and weaknesses of the argument, historical and literary contexts, contemporary applications, and other salient themes. Outside research welcome to help sustain key points, but analysis and reflection is the top priority.
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FIELD NOTES
Vladimir Putin’s Academic
Writings and Russian Natural
Resource Policy
Introductory Note
I
T is not often that a world leader publishes an academic treatise on his or her country’s most important economic issues before assuming office. In the
case of President Vladimir Putin, we have a unique
opportunity to examine how he viewed Russia’s most
important economic sectors before he became its
leader—and probably before he even considered such
a career possibility.
In June 1997, Vladimir Putin defended a Candidate
of Sciences degree in economics at the St. Petersburg
Mining Institute. Mr. Putin had served in the administration of St. Petersburg’s mayor, Anatoly Sobchak, since
the early 1990s, rising to first deputy mayor in 1994.
When Sobchak lost to Vladimir Yakovlev in the 1996
mayoral election, Mr. Putin needed to find a new job.1
It may well be that he thought an academic credential
would be helpful in this process. It is not clear when
the dissertation was completed, but the defense took
place after Mr. Putin moved to Moscow. He had by
then moved from serving as Pavel Borodin’s deputy
in the Kremlin Property Administration to working in
the Main Presidential Control Department.2
The text of the thesis is not publicly available. When
Mr. Putin was appointed prime minister in August 1999,
reporters who sought to read the thesis and accompanying summary (Avtoreferat) were informed that this was
not permitted.3 Russian colleagues who claim to have
read either the thesis or the Avtoreferat report that it
consists of three sections: an analysis of the economic
conditions in St. Petersburg and Leningrad Oblast emphasizing the importance of natural resources in future
48 Problems of Post-Communism
January/February 2006
development, a concept of strategic planning to be applied to resource development, and strategic planning to
improve regional port facilities in St. Petersburg and the
adjacent Leningrad Oblast, with an emphasis on facilitating natural resource exports. None of this appears to
be of national significance or to warrant secrecy. The thesis itself might contain sensitive data. It is possible that
Mr. Putin had access to material through his former employers (KGB/FSB) that could not be disseminated further. However, the thesis and Avtoreferat were not
classified before Mr. Putin’s appointment as prime minister, suggesting that bureaucratic caution is the main reason not much information is in the public domain.
Assuming that these descriptions of the dissertation
itself are correct, the article translated here is broader in
scope than the dissertation and of greater interest. It lays
out a comprehensive view of the ways mineral resources
can form the basis for Russia’s economic development.
Mr. Putin believes that the state has an important role to
play in this process, regulating the resource sector and
stimulating the formation of large, vertically integrated
financial-industrial conglomerates that would be capable
of competing effectively with Western multi-national
companies. While relying primarily on market mechanisms to influence development, the Russian government has a responsibility to adumbrate an appropriate
mix of market and administrative measures to guarantee development of the extractive and processing industries. These industries could then provide the basis for
the entire Russian economy to advance to sustainable
development based on high technology.4
Mr. Putin’s contribution was the lead article in an
annual edition (1999) of the Mining Institute’s journal
Problems of Post-Communism, vol. 53, no. 1, January/February 2006, pp. 48–54.
© 2006 M.E. Sharpe, Inc. All rights reserved.
ISSN 1075–8216 / 2006 $9.50 + 0.00.
devoted entirely to Russia’s fuel and energy complex.
The other ten contributions address narrower topics: two
deal with the “Blue Stream” gas delivery project, three
discuss the coal industry, one is devoted to a particular
mine, and individual contributions cover the gold, aluminum, oil shale, and electricity sectors.
There is not much information in the public domain
about Mr. Putin’s relationship to the Mining Institute,
his decision to pursue the Kandidat degree, or how the
article came to be published. Colleagues at the Mining
Institute have described how Mr. Putin contacted the
rector, V. S. Litvinenko, to discuss resource policy while
working in Sobchak’s administration. These sources say
that Litvinenko encouraged Mr. Putin’s interest and
eventually invited him to pursue the candidate degree.5
The sports complex at the Institute prominently displays
photos of Mr. Putin training with the judo team. If the
article was published in 1999, it most likely was completed either just before or just after Mr. Putin was appointed director of the FSB (July 1998).
Not e s
1. Mr. Putin discusses this period in some detail in Ot pervogo litsa:
Razgovory s Vladimirom Putinym (From the First Person: Conversations
with Vladimir Putin) (Moscow: Vagrium, 2000).
2. Mr. Putin states that he was not happy in this job and considered
leaving to start his own law firm. He does not mention looking for a position that would have involved using the material from his thesis. In 1998
he moved to being first deputy head of the Presidential Administration,
responsible for coordinating regional policy. He states that he found this
the most interesting work of his career (ibid., p. 123).
3. Reporter David Hoffman recounts having material taken out of his
hands at the Mining Institute Library, “Putin’s Career Rooted in Russia’s
KGB,” Washington Post (January 30, 2000). Rather than reflecting any
demand by Mr. Putin for this material to be classified, it could well be a
case of lower-level personnel being reluctant to take responsibility for granting access and also not wanting to make waves by forwarding the request. When M.E. Sharpe sought permission to publish this translation,
the Mining Institute’s rector, V. S. Litvinenko, finally granted the necessary permission.
4. I discuss the content of the article in the context of Russian energy
policy since Mr. Putin’s election as president in Harley Balzer, “The Putin
Thesis and Russian Energy Policy,” Post-Soviet Affairs 21, no. 3 (July/September 2005): 210–25.
5. Mr. Putin’s official biography on the Kremlin’s Web site states that
he received a degree in law from Leningrad State University in 1975 and
also notes that he “later earned a Ph.D. degree in economics.” See
www.kremlin.ru/eng/print/V_Putin_eng.shtml.
Harley Balzer
Mineral Natural Resources in the
Strategy for Development of the
Russian Economy
V.V. Putin
Sustainable development of Russia’s economy in the
near term must be based on systematic growth in her
developed sectors, and, most of all, on her mineral resource potential. In this regard sustainable development
based on natural resources means guaranteeing the economic security of the country through creating a reliable
natural resource base to meet the current and future needs
of Russia’s economy, taking into consideration ecological, social, demographic, defense and other factors.
Analysis of the development of the world economy
shows that economic growth in the developed countries
Translation © 2006 M.E. Sharpe, Inc., from the Russian original, © 1999
St. Petersburg State Mining Institute, V. V. Putin, “Mineralno-syrevye
resursy v strategii razvitiia Rossiiskoi ekonomiki” [Mineral Natural Resources in the Strategy for Development of the Russian Economy], Zapiski
Gornogo Instituta 144 (1999): 3–9. Translation by Harley Balzer, associate professor of government at Georgetown University.
is about 2–3 percent a year and is generally achieved on
the basis of introducing high technology. Considering
this, the Russian economy must have a pace of economic growth of 4–6 percent. We should note that this
growth can enable the reduction of Russia’s lag behind
the developed countries in terms of GDP per capita.
Economic growth must be no lower than this tempo,
and this can be achieved on the basis of extraction,
processing and exploitation of mineral raw material
resources.
Analysis of the economic potential of mineral raw
material resources based on the fixed capital and available technology in the extractive complex provides a
basis to draw several conclusions about the significance
and place of the mineral raw materials complex in furthering development of the country’s economy:
1. Mineral raw material resources have important
potential for the country’s economic development.
2. The main reserve to, in the near future, make Russia a great economic power with a high living standard
for the majority of the population is maximum support
for the fatherland’s processing industry based on the
extractive complex.
3. Analysis of the economic processes taking place in
the world demands all possible state support for creating
Balzer Vladimir Putin’s Academic Writings 49
Non-ferrous and
rare metals (6.3%)
$1,807
Ferrous metals
(6.8%) $1,962
Precious metals and
diamonds (1.0%)
$272
Other minerals
(14.7%) $4,193
Coal and shale
(23.3%) $6,651
Oil and condensate
(15.7%) $4,481
Uranium (0.01%) $4
Natural gas (32.2%)
$9190
Figure 1. Total Potential Value of Russia’s Mineral Reserves—$28.56
trillion (in billions of dollars)
strong financial-industrial corporations with an
interbranch profile on the basis of resource extraction enterprises. Such corporations will be capable of competing
on equal terms with Western multinational corporations.
4. The state must regulate the extractive complex
using purely market methods, and in this regard the state
must assist the development of processing industries
based on the extractive complex.
5. Conditions of fixed capital and available technology in the extractive complex of a country with a rich
endowment of natural resources are such that they cannot in the next few years provide additional significant financial contributions to the nation’s budget for
major state investment in its own processing industry.
6. Due to the low share of labor in the costs involved
in extracting raw materials and the relatively high cost
of jobs in the extractive branches, natural resources cannot be the reserves for raising the living standards of
the majority of the country’s population.
Russia’s economy in the twenty-first century, or at
least in its first half, clearly will maintain its natural
resource orientation. The potential value of the balanced
supply of Russia’s exploitable resources permits viewing the raw materials complex as the basis for sustainable development of the country in a long-term
perspective (see Figure 1). Possessing an extensive natural resource potential conditions Russia’s special place
among industrial countries. When effectively utilized
the natural resource potential becomes one of the most
important preconditions for the sustainable entry of
Russia into the world economy.
The country’s natural resource endowment is the most
important economic and political factor in the development of public production. The structure of the natural
resources, their amounts, their quality, the level of
50 Problems of Post-Communism
January/February 2006
knowledge about them and the orientation of their economic utilization exert a direct influence on economic
potential. Possessing rich and effective natural resources
offers a broad field for regions’ economic development.
Economic utilization of Russia’s natural resources
creates real possibilities to attract large-scale investments, including foreign capital; natural resource exports provide a significant share of hard currency
receipts (see Figures 2a and 2b).
Mineral deposits occupy a central place among
Russia’s natural resources, which is determined by the
following conditions:
•
•
•
•
the geographic situation, which makes it impossible to survive without significant use of natural
resources;
the preponderance of the raw materials’ share in
the economy, with orientation to extraction, processing and reworking raw materials;
mineral wealth is the most attractive realm for
foreign investors;
Russia’s enormous territory and the geological
exploration work carried out in previous decades
have made mineral resources an absolutely essential element of national wealth.
The total value of Russia’s mineral raw material base
based on explored and evaluated supplies of all types of
valuable minerals amounts to no less than $28 trillion.
However, the estimate of their profitable portion
amounts to just $1.5 trillion.
The Russian Federation possesses significant supplies
of mineral raw material resources. The variety of minerals discovered on her territory is unique and unmatched in the world. In supplies of nickel and of natural
gas (33% of the world’s supplies), Russia occupies the
first place in the world; in supplies of oil, it is second
after Saudi Arabia; in coal, Russia is third after the USA
and China; in gold, third after South Africa and USA;
etc. Along with having a broad spectrum of the most
important types of mineral ores, this economic complex includes a developed extractive and processing infrastructure and strong scientific-technical potential.
Russia’s mineral raw materials complex plays an
important role in all spheres of the life of the state:
•
It provides stable supplies to the raw materials
branch of the economy. Precisely the level of development of the raw materials sector facilitates
forming a solid industrial base that is capable of
meeting the requirements of both industry and
agriculture.
Machinery,
equipment, and
vehicles 9%
Food and
agricultural products
3%
Machinery,
equipment, and
vehicles 18%
Food and
agricultural
products 4%
Other 2%
Other 1%
Mineral resources
41%
Metals and metal
products 2%
Metals and metal
products 2%
Mineral resources
52%
Textiles, textile
products, and
footwear 10%
Textiles, textile
products, and
footwear 31%
Forrestry and
cellulose-paper
products 5%
Chemical industry
products 8%
Forrestry and
cellulose-paper
products 3%
Chemical industry
products 9%
Figure 2b. Composition of Export Goods to CIS Countries
Figure 2a. Composition of Export Goods to Non-CIS Foreign
Countries
•
•
•
•
It makes a major contribution to the country’s budget receipts; its production continues to constitute
the main source of foreign currency. Enterprises
that are part of the mineral raw materials complex
provide more than 50 percent of the country’s gross
domestic product. The share of export receipts in
the state budget directly or indirectly derived from
processing the country’s mineral raw materials
wealth amounts to 70 percent.
It constitutes the basis for the country’s military
might. A developed raw materials base is an essential condition for modernizing the military industrial complex and makes it possible to develop
needed strategic reserves and potential.
It provides social stability. Practically all the
major companies in Russia that either are part of
the mineral raw materials complex or are connected with it serve as the sole reason for the existence of individual cities (iavliaiutsia
gradoobrzaiushchimi). Therefore, development of
this sector of the economy will facilitate raising
the level of well-being of the population and diminish social tensions.
It facilitates development of integration processes
among countries. Complementary activity by
states in the framework of a unified economic
space facilitates possessing practically all types
of valuable minerals, which makes it possible to
have a large impact on the world commodities
market.
In the near term, the strategic factor in Russia’s economic growth must be restructuring the national
economy on the basis of the available mineral raw ma-
terials resources with the goal of significantly increasing its effectiveness. A particular difficulty in achieving this involves needing to reorganize branch and
production structures that were formed in conditions of
the administrative planning/distribution system and
complete isolation from world markets. This condition
is responsible for the low level of effectiveness and lack
of competitive capacity in world markets of the major
share of its production and, as a consequence, the lowered volume of production and liquidation of many enterprises in this sector of the economy.
The raw materials and, in particular, extractive
branches of industry are not in a position to absorb the
enormous mass of workers made redundant by the processing branches of the economy. At the same time a
large share of the extractive enterprises do not possess
adequate investment potential for expansion or even just
to continue their basic production. Thus, in the most
well-off branch of the mineral raw materials complex,
gas production, more than 60 percent of gas pipelines
have been in use for more than twenty years (when their
norm is 33), and in the coal industry more than two-thirds
of the fixed capital is on the edge of physical depletion.
In this regard the process of restructuring the national
economy must have the goal of creating the most effective and competitive companies on both the domestic and
world markets. Considering Russia’s enormous mineral
raw materials potential, restoration of national manufacturing industries must be carried out on the basis of its
complete integration with the extractive branches.
The most promising form of such integration must
be the creation, with full support from the state, of large
financial-industrial groups–corporations with an
interbranch profile that will be able to compete with
Western transnational corporations.
The financial condition of enterprises in the extractive
Balzer Vladimir Putin’s Academic Writings 51
and manufacturing industries today, using uncompetitive
technologies in their production processes, and lacking
budgets for geologic exploration work—all this means
state agencies must support organizing financial-industrial groups capable of accumulating significant financing on domestic and world capital markets.
The state’s basic priorities in creating interbranch financial-industrial groups must include:
•
•
•
•
•
providing the country with a sustainable supply
of mineral resources and products from their
processing;
increasing the effective utilization of mineral raw
material resources and creating necessary conditions for transferring the economy to a resourceconserving path of development;
further developing the raw materials base;
supporting and augmenting the country’s export
potential, changing its structure toward trading
processed and industrial products;
developing manufacturing industries and its export potential, and other tasks.
The emerging process of creating financial-industrial
groups in Russia on the basis of separate branches of
the mineral raw materials sector (first of all gas, energy, oil, aluminum and others) involves moving to a
new stage of development—unified multi-branch complexes with financial and commercial structures.
These complexes must determine the tempo of reform and growth of Russia’s economy as a stable source
of budget and foreign currency receipts, as an essential
pillar of stability, including as an effective employer of
the population, as a factor for restructuring and modernizing basic branches of the raw materials complex
and industry, and, finally, as an integrating factor within
Russia, in the CIS and with the world community.
Regardless of whose property the natural resources
and in particular the mineral resources might be, the
state has the right to regulate the process of their development and use, acting in the interests of society as a
whole and of individual property owners, whose interests come into conflict with each other, and who need
the help of state organs of power to reach compromises
when their interests conflict.
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