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The economic, social and security situation in Russia has significantly worsened recently. However, Russian authorities still lack a strategy for dealing with these problems, and are far from willing or able to tackle them right now. Activities of rebels in North Caucasus, attacks in Moscow metro, killings of policemen, numerous cases of outrageous arbitrariness by federal and state officials, like the supermarket shooting involving MVD Major Evsukov, are more than sufficient proof of this. Moreover, the exaggerated dependence on the export of natural resources, social divisions within Russian society, and the pronounced failure to create a viable middle class present threats to Russia’s long-term development. As noted by President Dmitri Medvedev, Russia urgently needs to change course if it does not want to end up a third-world country.

These mounting internal problems have been recognized at least by a part of Russia’s ruling elites headed by President Dmitri Medvedev. The proposals and plans for reforming the Ministry of Internal Affairs (MVD), as well as the creation of the so-called analog of Silicon Valley in Skolkovo, are part of the answer to these challenges. However, the question of whether these policies are enough and whether they will succeed remains open.

First of all, the necessity of reforms is not universally accepted by Russian elites. President Medvedev is only de-jure the leader of the political establishment. The 'vertical' structure of power built by his predecessor is hard for him to control. At the same time, the short-term ability of bureaucrats and oligarchs to prosper via rent-seeking and corruption prevents the successful implementation of the reforms. Moreover, the upcoming 2012 elections and the uncertainty over who will head the United Russia Party in the contest undermine President Medvedev's position. Civil servants are presently dragging their feet on the reforms, which have stalled for the most part.

Second, without a focus on deeper institutional reforms the proposed reforms are doomed from the outset, since the state lacks stable and well-functioning institutions. Russia’s institutional matrix remains deeply permeated by informal norms that were associated with the Soviet system: unaccountability of government, fragile rights to property and a low degree of trust in the efficiency of public agencies still constitute the core of the institutional legacy in Russia. With an eye to the existing weak, unaccountable, and highly corrupt government agencies, there is not much hope that the reforms can be successfully implemented.

That is why the prognosis is poor for the creation of an innovative economy. The project of building Silicon Valley in Skolkovo will not succeed. It is intened to reduce Russia’s dependence on raw material exports and as a vehicle of modernization. The success of modernization projects depends not on the resources that the government pumps into any one prioritized branch of economy, but on the existence of lack thereof of entrepreneural initiatives. As researcher Terence Kealey noted, 90% of commercially valuable innovations in the United States come into being based on the efforts of private firms to improve already existing technologies. There is no evidence of a positive correlation between the increase of state expenditures on science and GDP growth. Thus Russian officials will hardly achieve their proclaimed goal of boosting the confidence of investors and attracting new capital without systemic institutional reforms. Nor is this realistic absent any type of protection extended to businessmen to help safeguard their lives, livelihood, and property. The lack of access to the necessary infrastructure and professional management is not helpful either.

Though it may appear paradoxical, the declining power of Russia and its rising internal problems mean that the United States and the EU should pay even more attention to the region. Although Russia regards the post-Soviet area as its own sphere of influence, it cannot realize its ambitions. Moreover countries of the region feel less secure and less willing to cooperate with Russia, whose influence in the region is declining. Central Asia is drifting away from Russia, as the Chinese and Western presence becomes ever the more evident there. Even the Belarusian leadership - despite the country's huge dependence on Moscow - is trying to secure material benefits for itself by slowing down the integration processes and postponing joining the Kremlin’s lastest project; the Custom Union. Nor has the new “pro-Russian” leadership in Kiev abandoned the Ukraine's European aspirations entirely and is bargaining as hard as its predecessors. The Georgian leadership’s positions remains strong, while Azerbaijan has become a key ally of the West in implementing its regional energetic projects. The USA and West should foster ties with the countries that are willing to cooperate with them and stand firm on its principles that present them with an attractive alternative to Russian increasing feebleness.

Gregory Nizhnikau is a student at Uppsala University, Sweden.

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