Political analysts continue to comment on Russian President Vladimir Putin’s speech at the 43rd Munich Conference on Security Policy. It should be acknowledged that the same criticism that was expressed by Putin was heard from other conference participants, and this includes Germany’s Green Party. It is quite likely that quite a few agree with it, though the form of this criticism has made many people concerned.

How can Russia break its "oil drug habit"? Traditional, although far from conclusive, discussions of the question have recently been given a powerful, imperious tone. President Vladimir Putin announced a way Russia can switch from having an economy dependent on natural resources to an innovative path focused on technology. In doing so, he put the matter on the agenda of the political and business elite of the country.

The ability to attain such an objective has never been denied by responsible Russian politicians, even in the 1990s. And today the vigorous growth of the innovation sector of industrialized countries’ economics—an "economics of knowledge," not of resources—has become an evident threat to ambitious modernization projects in Russia that have been declared as the basis of the Kremlin’s current course.

Still, Russian exports of natural resources grew from 80 percent in 2000 up to 85 percent in 2005. But Russia exports natural resources, and imports advanced technology products. According to the words of a well-known political scientist, the author of "Energy Superstate" Konstantin Simonov, Russian economics is reduced to the fuel and energy complex; meanwhile, other branches are connected to it or serve it.

This reality has contributed to Russians thinking of ways to use the might of the resources sector, coupled with internationally high prices for energy carriers, in order to push a still low-scale innovation segment to the foreground.

So far, such attempts have lead solely to the innovative tools introduced by the government in 2005 and 2006: the Investment Fund, venture enterprises, and extra economic areas. Experts estimate that these efforts are insufficient. As a matter of fact, the size of Investment Fund in 2007 will aggregate, as a whole, around $5 billion, and the governmental financing of extra economic areas will aggregate around $400 billion. Therefore, "warehousing" extra income from natural resources profits into the Stabilization Fund seems natural.

However, the fund will soon exceed $100 billion, and is subjected to criticism. In this way Russian economist Leonid Grigoriev considers comparisons to the Norwegian Petroleum Fund to be apt. In Norway the annual gross domestic product exceeds $65,000, and in Russia the same index is a sequence lower. This means, claims Grigoriev, that Russia feels a great need to develop, which is to correspond to an appropriate policy orientation.

It wasn’t by accident that Putin chose the Russian Union of Industrialists and Businessmen—a union made up of mostly resources business captains—as a basis of declaring a new course. According to the words of the president, Russia already comes first in the world in gas production, fourth in electric energy production, and has the ability to come in first in oil production. Further, Putin has unexpectedly claimed that he is "not sure we need that." The most successful businessmen have been asked "to be able not only to export to advantage, but also to process natural resources and to go out to the external markets with an adequate product." In the president’s opinion, big business should be able to achieve that: "It has acquired both appropriate ambitions and resource needed for large-scale investments abroad, as well as within the country."

It did not appear to be something new, but the Russian Union of Industrialists and Businessmen head, ex-vice president Alexander Shohin, requested tax preferences and an added-value tax reduction from 18 to 10 percent. He also asked for a tax vacation for enterprises that run risks to come into processing. However, tax remissions in past years have generally been used to increase the profit of enterprises’ owners, rather than to modernize production methods. But, even setting aside an uneasy estimation of such measures, as well as an increased level of big business controllability, it is impossible to see an alternative. Resources business has it easier to work in accordance with the present concept.

A number of members of the Federation Council—the upper house of parliament—have spoken after the strong speech of the head of state on their views of the treatment of this problem. They believe Russian economics possesses the tools and facilities necessary to accomplish a break from its natural resources-orientation to a path toward innovation. But it is necessary to unite the energies of the state and businesses at the same time—in not less than 10 years.

"It is necessary to choose those sectors of economics where we do possess the advantages, and to act purposefully with regard to those directions." This is a formula from the head of the Federation Council’s Committee On Economical Policy, Business Undertakings and Propriety Oganes Oganesyan. And the deputy chairman of the Federation Council’s Committee On Natural Resources, Vasiliy Duma, considers that "we need money that we have and the time which is partially missed. If we start today, we shall come to diversified economics in another 10 years." And he offers an unexpected conclusion: "We have to address the experience and the energy of our resources-sector managers. Then we shall constitute a country possessing high technologies in a few years."

As we may see, the power of the Russian resources sector creates a magical impression in the West, with the oil pipeline Druzhba, then the creation of a "gas OPEC." Will the Russian resources business be able to fulfill one of the most difficult objectives in the history of the country? And, let’s not forget, Putin has not accidentally addressed it. It is going to be a main factor in estimating the effectiveness of the Russian authorities at a new stage of Russia’s development after 2008.

By Igor Veletminsky