VZCZCXRO4998
RR RUEHDBU
DE RUEHMO #3109/01 3580930
ZNY CCCCC ZZH
R 240930Z DEC 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 5789
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC

C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 003109

SIPDIS

E.O. 12958: DECL: 12/24/2018
TAGS: PGOV PREL PHUM PINR ECON ETRD KDEM RS
SUBJECT: SYSTEMIC REFORMS UNLIKELY WITHIN MEDVEDEV'S
MODERNIZATION AGENDA

REF: MOSCOW 002781 

Classified By: ADCM Susan Elliott for reasons 1.4 (b) and (d).

¶1. (C) Summary: President Dmitriy Medvedev's high-profile
campaign to modernize Russia appears designed to give Russia
modest, mostly long-term, economic benefits without altering
the basic economic and political structures that Medvedev
inherited from Prime Minister Vladimir Putin. To the chagrin
of some experts close to the President, the proposed changes
are tactical in nature. If specific measures in Medvedev's
agenda like enforcement of the rule of law, decreasing
corruption, increasing transparency, building basic
infrastructure, and protecting intellectual and property
rights could be implemented, broad based growth could take
place. Medvedev's desire to possibly run for re-election may
be partially responsible for his push to modernize Russia
and, unlike Putin, hold officials accountable for their
actions in the aftermath of recent tragedies. Nonetheless,
Medvedev's modernization drive provides US officials another
potential hook for cooperation. End Summary.

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Modernization Tactical Or Strategic?
------------------------------------

¶2. (SBU) Medvedev's ability to change Russia is based upon
his concept of modernization, which he and Putin have
publicly defined in different ways. During his annual
address to the Federal Assembly on November 12, Medvedev
described modernization as a broad change of mindset and
business practices, with the focus on developing medical,
energy, and information technology, space and
telecommunications systems, and increasing energy efficiency.
He described Russia as a multi-party democracy (reftel), and
also said that the country needed "comprehensive
modernization," which would result in a more democratic,
market-oriented, competitive country. Medvedev has continued
publicly to discuss modernization and has met with various
committees, government bodies, and the media to push his
agenda.

¶3. (SBU) In his speech to the United Russia Congress on
November 21, Putin emphasized the economic aspects of
modernization and cited Medvedev's five key areas of focus.
He specifically pointed out the need for modernization of
industrial and defense enterprises, ports, and the pension
system. Putin also noted that Medvedev's call to "overcome
chronic backwardness" and raise the level of Russia's overall
development reflected the mood of all of Russian society.
Putin only mentioned modernization twice during his four hour
televised call-in event on December 3, despite numerous
questions about what the Government would do to improve
Russia's economic situation.

¶4. (C) Medvedev's tactical measures for achieving success in
the five defined areas could be achieved with minimal
structural changes to the economy. Installing individual gas
meters to promote less-wasteful use of fuel, changing to more
energy efficient light bulbs, studying the effect of
decreasing the number of time zones in Russia, and building
more supercomputers could provide short to medium-term
economic benefits. They would not, however, significantly
change the structure of the economy or the murky political
context in which businessmen and investors operate. Some
contacts with whom we spoke have jumped on terms such as
"comprehensive modernization" to suggest, perhaps
optimistically, that modernization would include wholesale
changes to Russia's economic and political systems.

-----------------------------------
Some Prospects for Strategic Reform
-----------------------------------

¶5. (C) Contacts have noted to us that modernization would
lead to some targeted economic improvements, but, with a few
exceptions, have expressed strong doubts about prospects for
systemic reforms. xxxxx said on December 22 that the President might make
some changes on the edges of the political system, but denied
that Medvedev's reforms would have any major impact on
Russia's political structure, which he said had been
painstakingly formed over the last 15 years. Medvedev might
make some significant reforms in Russia's economic structure,
but would have to "non-violently enforce" modernization on
the business elite, who preferred the status quo and who
wanted to avoid making expensive investments.

¶6. (C) xxxxx

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told us December 7 that while various groups of elites have
competing views on modernization, it was possible for
Medvedev, with the Government's support, to overcome
bureaucratic inertia and push through broad economic and
political reforms. One key institution for Medvedev was the
Commission on Modernization and Technological Growth of the
Russian Economy, de facto led by First Deputy Presidential
Administration Head Vladislav Surkov. Medvedev, xxxxx
added, wanted to add influential elites to the commission,
and meet with it more often in order to give it authority and
provide an impetus to fulfill his modernization agenda. Some
siloviki, however, such as Rostechnologia's Sergey Chemezov,
have reportedly boycotted the commission.

-------------------------------------
Modernization's Tactical Significance
-------------------------------------

¶7. (C) Other analysts stated that Medvedev had no chance of
changing the economic or political systems because he did not
have the inclination, power, or buy-in of the bureaucracy to
do so. xxxxx told us December 21 that they see little prospect
for systemic reforms within the President's modernization
agenda. xxxxx said that democratic reforms could be
the spark that helped push through additional large-scale
reforms, but he "unfortunately" did not anticipate Medvedev
making any major improvements in the economic or political
spheres. xxxxx told us that modernization was focused on
economic policies and that Medvedev could make some quality
improvements in the economy. xxxxx agreed, however, that
reforms would have to occur within the current political
system because it was an "illusion" to think that the
President could overhaul the political system.

¶8. (C) xxxxx told us
December 17 that Medvedev, who he half-jokingly characterized
as Putin's Minister of Economics and Assistant on Cadre
Policies, had no chance of modernizing Russia.
Modernization, he added, was unlikely to increase Medvedev's
public standing or his ability to increase his team's power.

¶9. (C) Longtime expert on political systems xxxxx said on December
10 that Medvedev was trying to make some tactical changes,
but had no levers to implement systemic reforms. Russian
bureaucracy had watered-down, stalled, or hindered reforms
for hundreds of years, and would be successful in preventing
any broad reforms. xxxxx added that while Medvedev's
reforms sounded nice, the President would never significantly
alter the political system and create a "true" democratic
system. According to xxxxx Medvedev has benefited from the
current political system, and any attempts to change the
system would introduce a level of uncertainty reminiscent of
former Soviet leader Mikhail Gorbachev. xxxxx also noted that the bureaucracy feared losing
their privileges and would fight change through bureaucratic
measures.

¶10. (C) xxxxx Public Chamber member, xxxxx bluntly stated to
us December 9 that the President was not able to reform the
political system. Medvedev could not implement his
modernization agenda, which xxxxx saw as a positive
program for Russia, because the President lacked the levers
to make systemic reforms, and because of bureaucratic
opposition. xxxxx characterized Medvedev as a
"Manilov," in reference to 19th century author Nikolay
Gogol's fictional character Manilov, who was known, as they
described, for devising grand schemes, but failing to ever
implement them.

--------------------------------------------- ---------
Modernization Only One Part of Medvedev's Future Plans
--------------------------------------------- ---------

¶11. (C) With Russia's presidential campaign season
unofficially starting in about a year, many people with whom
we spoke saw the present as pivotal for Medvedev's future if
he wanted to prove that he could become an independent
political leader. xxxxx said that the President needed to

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fulfill his promises, such as modernizing the country, to
show all Russians that he can be relied upon to get things
done. xxxxx said that the key question was when the tandem
would divide, and that modernization was only one part of
Medvedev's case to maintain the reins of power. The
President had made other steps that differentiate his style
from Putin's, such as holding senior regional officials
responsible for their duties in the wake of the club fire in
Perm that killed 150 people and the death of lawyer Sergey
Magnitsky while in pre-trial detention, that might elevate
his case.

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Comment
-------

¶12. (C) Modernization may not facilitate the structural
changes to the political and economic spheres that some
experts had hoped, but it could be another tool for Medvedev
to demonstrate his leadership and, depending on his
implementation and governing skills, introduce some
uncertainty into the public and elite over his standing.
Medvedev is finally challenging the low expectations and
assessments of many experts after 19 months in office as
Putin's junior partner. Medvedev has also refrained from
challenging Putin's authority, control over day-to-day
economic matters, or respect with the public and siloviki.
Few currently doubt that the tandem member who will occupy
the presidency in 2012 remains Putin's decision, but as the
presidential campaign season approaches the risks and rewards
for deviating from the tandem's stable relationship
substantially increases for significant groups of elites with
an interest in succession politics.
Rubin