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| Putin Puts Pensions at Risk in $43 Billion Bid to Jolt Economy | Putin Puts Pensions at Risk in $43 Billion Bid to Jolt Economy |
| (about 14 hours later) | |
| ST. PETERSBURG, Russia — Faced with meager growth worldwide and a worrisome ebbing of Russia’s own oil and gas revenues, President Vladimir V. Putin announced an ambitious and risky economic stimulus program on Friday along with a novel amnesty plan for imprisoned white-collar criminals that was intended to improve investor confidence. | ST. PETERSBURG, Russia — Faced with meager growth worldwide and a worrisome ebbing of Russia’s own oil and gas revenues, President Vladimir V. Putin announced an ambitious and risky economic stimulus program on Friday along with a novel amnesty plan for imprisoned white-collar criminals that was intended to improve investor confidence. |
| Mr. Putin’s proposal to dip into the country’s pension reserves for loans of up to $43.5 billion for three big infrastructure projects and other investments provoked an immediate debate among some of Russia’s top financial minds. It also brought warnings from financial experts who said that it might produce a burst of inflation, and that what the Russian economy needed most was deep structural change, to diversify from oil and gas and to build investor confidence. | |
| Mr. Putin, now in his 13th year as Russia’s political leader, made the stimulus plan the centerpiece of his speech at an annual economic forum here that serves as a gathering of the country’s top financial officials, business leaders and foreign investors. Slowing growth has been the obsessive topic this year. | Mr. Putin, now in his 13th year as Russia’s political leader, made the stimulus plan the centerpiece of his speech at an annual economic forum here that serves as a gathering of the country’s top financial officials, business leaders and foreign investors. Slowing growth has been the obsessive topic this year. |
| In his speech, Mr. Putin said Russia would distribute at least $14 billion from the reserves as loans to modernize the storied Trans-Siberian Railway, which runs between Moscow and Vladivostok in the Far East; to construct a 500-mile high-speed rail line between Moscow and Kazan, the capital of the Tatarstan region; and to build a superhighway ringing Moscow. | |
| “Our key challenge in the coming years is to remove many infrastructure constraints that literally stifle our country and prevent unlocking the potential of entire regions,” Mr. Putin said. “Investors are hugely interested in infrastructure projects, especially if the state is ready to provide guarantees, minimize the risks and act as a co-investor.” | “Our key challenge in the coming years is to remove many infrastructure constraints that literally stifle our country and prevent unlocking the potential of entire regions,” Mr. Putin said. “Investors are hugely interested in infrastructure projects, especially if the state is ready to provide guarantees, minimize the risks and act as a co-investor.” |
| The Russian economy has been strong in recent years, functioning almost at full capacity, largely because of high energy prices, which helped build up the country’s reserve funds. But with nearly full employment, new government spending is more likely to cause wage inflation than to create new jobs, experts say. Instead, they add, Russia needs to review manufacturing, create new industries and attract foreign capital. | The Russian economy has been strong in recent years, functioning almost at full capacity, largely because of high energy prices, which helped build up the country’s reserve funds. But with nearly full employment, new government spending is more likely to cause wage inflation than to create new jobs, experts say. Instead, they add, Russia needs to review manufacturing, create new industries and attract foreign capital. |
| While not the headline measure in Mr. Putin’s plan, the amnesty proposal was by far the most surprising item. It was the brainchild of Mr. Putin’s business ombudsman, Boris Titov, who has championed it as a means to improve the business climate. | While not the headline measure in Mr. Putin’s plan, the amnesty proposal was by far the most surprising item. It was the brainchild of Mr. Putin’s business ombudsman, Boris Titov, who has championed it as a means to improve the business climate. |
| “The period that just passed was not the best for defenders of property rights,” Mr. Titov said last week in an interview. | “The period that just passed was not the best for defenders of property rights,” Mr. Titov said last week in an interview. |
| In 2000, when Mr. Putin came to power, the government re-examined many of the early post-Soviet privatizations, which were widely regarded as fraudulent, and later imprisoned the richest man in Russia at the time, Mikhail B. Khodorkovsky, on charges of tax evasion and fraud that many critics said were trumped up. | In 2000, when Mr. Putin came to power, the government re-examined many of the early post-Soviet privatizations, which were widely regarded as fraudulent, and later imprisoned the richest man in Russia at the time, Mikhail B. Khodorkovsky, on charges of tax evasion and fraud that many critics said were trumped up. |
| Taking a cue, police and Federal Security Service officers set about seizing businesses large and small throughout Russia from unpopular or unlucky businessmen, and often, in an Orwellian manner, emerging as the owners themselves. | Taking a cue, police and Federal Security Service officers set about seizing businesses large and small throughout Russia from unpopular or unlucky businessmen, and often, in an Orwellian manner, emerging as the owners themselves. |
| In fact, police officers who seize businesses are common enough in Russia to have earned the nickname “werewolves in epaulets.” | In fact, police officers who seize businesses are common enough in Russia to have earned the nickname “werewolves in epaulets.” |
| The intention of the amnesty plan is to free thousands of run-of-the-mill businessmen caught up in this turmoil, while avoiding the high-profile and politically tinged cases, like those of Mr. Khodorkovsky, who is not expected to be freed. | The intention of the amnesty plan is to free thousands of run-of-the-mill businessmen caught up in this turmoil, while avoiding the high-profile and politically tinged cases, like those of Mr. Khodorkovsky, who is not expected to be freed. |
| Mr. Titov said that 110,000 people were serving prison time for economic crimes, and that 2,500 others were in pretrial detention. The draft of the amnesty bill, Mr. Titov said, covers 13,000 of them. | Mr. Titov said that 110,000 people were serving prison time for economic crimes, and that 2,500 others were in pretrial detention. The draft of the amnesty bill, Mr. Titov said, covers 13,000 of them. |
| “This initiative will on the whole strengthen the trust of citizens” in the business community, Mr. Putin said in his speech. “I am certain the development of the state is possible only under conditions of respect for private property, to the values of economic freedom and the work and success of entrepreneurs.” | “This initiative will on the whole strengthen the trust of citizens” in the business community, Mr. Putin said in his speech. “I am certain the development of the state is possible only under conditions of respect for private property, to the values of economic freedom and the work and success of entrepreneurs.” |
| More broadly, though, the intention of Mr. Putin’s amnesty, Mr. Titov said, is to signal to the business community an easing police pressure. It is, he said, “a very positive, a very good signal for Russia, and that is important as in Russia. We don’t often have good signals.” | More broadly, though, the intention of Mr. Putin’s amnesty, Mr. Titov said, is to signal to the business community an easing police pressure. It is, he said, “a very positive, a very good signal for Russia, and that is important as in Russia. We don’t often have good signals.” |
| Yet, in a sign of the unsettled and unpredictable legal and political situation, on Friday the Russian authorities raided the Moscow headquarters of a nonprofit group, For Human Rights, in what was described as eviction proceedings, local news agencies reported. The group’s director acknowledged a lease dispute with the city, which owns the offices, but said the raid was illegal. | Yet, in a sign of the unsettled and unpredictable legal and political situation, on Friday the Russian authorities raided the Moscow headquarters of a nonprofit group, For Human Rights, in what was described as eviction proceedings, local news agencies reported. The group’s director acknowledged a lease dispute with the city, which owns the offices, but said the raid was illegal. |
| The stimulus plan was questioned by one of Russia’s leading economic authorities, Aleksei L. Kudrin, who said it would unnecessarily put pension funds at risk and, in the immediate term, would not create much growth. | The stimulus plan was questioned by one of Russia’s leading economic authorities, Aleksei L. Kudrin, who said it would unnecessarily put pension funds at risk and, in the immediate term, would not create much growth. |
| “I would prefer that such infrastructure projects sold their bonds on the market, then we wouldn’t have to involve the Welfare Fund,” he said. “We are lowering our insurance just at the time when the pension fund needs it most.” | “I would prefer that such infrastructure projects sold their bonds on the market, then we wouldn’t have to involve the Welfare Fund,” he said. “We are lowering our insurance just at the time when the pension fund needs it most.” |
| As for any economic jolt, he said it would be minimal. “These are big projects, but not gigantic,” he said. “We won’t have any economic growth for them.” | As for any economic jolt, he said it would be minimal. “These are big projects, but not gigantic,” he said. “We won’t have any economic growth for them.” |
| Igor I. Shuvalov, a first deputy prime minister, said the government was acting on expert advice. “Any advice we are receiving from international financial organizations or independent experts, they all say we need to invest in the infrastructure,” Mr. Shuvalov said. “Physical infrastructure is what is required for speeding up, for growth.” | Igor I. Shuvalov, a first deputy prime minister, said the government was acting on expert advice. “Any advice we are receiving from international financial organizations or independent experts, they all say we need to invest in the infrastructure,” Mr. Shuvalov said. “Physical infrastructure is what is required for speeding up, for growth.” |
| In his speech, Mr. Putin outlined several other steps to spur Russia’s economy, including a plan to limit increases in tariffs on electricity and other utilities, and to encourage lower interest rates on commercial loans. | In his speech, Mr. Putin outlined several other steps to spur Russia’s economy, including a plan to limit increases in tariffs on electricity and other utilities, and to encourage lower interest rates on commercial loans. |
| Mr. Putin also said Russia would continue efforts to curb inflation. Economists have cited Russia’s low growth and high inflation as evidence of structural flaws in the economy. | Mr. Putin also said Russia would continue efforts to curb inflation. Economists have cited Russia’s low growth and high inflation as evidence of structural flaws in the economy. |
| Mr. Putin was joined on stage by Chancellor Angela Merkel of Germany, who said, “Germany wishes to support Russia in the process of opening its economy, diversifying its economy.” | Mr. Putin was joined on stage by Chancellor Angela Merkel of Germany, who said, “Germany wishes to support Russia in the process of opening its economy, diversifying its economy.” |
| But the amicable appearance on stage belied a series of recent tensions, the latest involving a long-simmering dispute over the spoils of World War II. | But the amicable appearance on stage belied a series of recent tensions, the latest involving a long-simmering dispute over the spoils of World War II. |
| In a joint visit to the Hermitage State Museum, Ms. Merkel directly challenged Mr. Putin by reiterating Germany’s demand that Russia return a collection of artwork that was taken from German museums by retreating Soviet soldiers at the end of the war. The disputed art, including several gold bangles and objects known as the Eberswalde Treasure, is part of a new exhibit at the Hermitage on the Bronze Age. | In a joint visit to the Hermitage State Museum, Ms. Merkel directly challenged Mr. Putin by reiterating Germany’s demand that Russia return a collection of artwork that was taken from German museums by retreating Soviet soldiers at the end of the war. The disputed art, including several gold bangles and objects known as the Eberswalde Treasure, is part of a new exhibit at the Hermitage on the Bronze Age. |
| Earlier on Friday, officials said the museum visit had been called off, apparently as a result of the dispute. But at a joint news conference at the economic forum, Ms. Merkel said they would go together after all. | Earlier on Friday, officials said the museum visit had been called off, apparently as a result of the dispute. But at a joint news conference at the economic forum, Ms. Merkel said they would go together after all. |
| Mr. Putin said the focus should be on the exhibit, not on the dispute. “It’s a very sensitive issue,” he said. “We should look for solutions.” | Mr. Putin said the focus should be on the exhibit, not on the dispute. “It’s a very sensitive issue,” he said. “We should look for solutions.” |
| But once at the museum, Ms. Merkel insisted that Russia return the art. Mr. Putin refused. | But once at the museum, Ms. Merkel insisted that Russia return the art. Mr. Putin refused. |