twelve thirty pm in moscow you are to have right the u.s. teams up with arab allies to pressure syria's government into submission despite ongoing un efforts to mediate a diplomatic solution abroad u.s. led coalition expected to provide more support to syrian rebels sunday. washington post the squeeze on syria's ally iran pledging to sanction countries that don't reduce oil imports from the islamic state of new measures come into full force at the end of june. reliving the past start he visits the only remaining soviet

forced labor camp in the gulag and here's her accounts from former inmates converted into museum it's hope the site will act as a permanent historical reminder. up next payroll bells show on the money stay with us here on r.t. . blowing welcome to on the money with the business of russia is business i'm peter all about being elected for a third six year term as russian president vladimir putin returns to power in

a very different country than only four years ago the candidate who ran on a mostly populist platform can be elected politician deliver the goods and keep the economy growing as well as interest to foreign investors. to discuss the economic and financial environment in russia but what i mean putin will face those returns office i'm joined by you know slightly savant he is the chief economist at deutsche bank and given chicago he is the chief economist for russia and c.i.s. at renaissance capital we also have been heiress he is the editor in chief of business new europe as well as come monday he is the chief strategist and a critic but first let's have a look at how russia's new president may transform the country's economy. in four years time russia is expected to break into the ranks of the top five economies in the world with annual g.d.p. growth reaching up to seven percent however that's contingent on

a thriving and innovative business sector the dimmer putin who is set to return to the post of russia's president this may winning more than sixty three percent of the votes has valves to make this vision of economic transformation areality the foundations of this economic policy have their roots in the shop for hours and world oil prices. says that coincided with the dimmer putin's first presidential term however moves to stimulate private business and lessen the economy's dependence on commodities especially oil and gas became a challenge in two thousand and four current state of russian economy is the same as it used to be one year ago five years ago basically economy's very good pendant while. on commodities and their price. basically we don't see any significant developments in the transformation of the economy the words higher value added in the eight is since two thousand and four there's

certain things have changed in the russian political landscape buttons determination to implement reforms and reduce it budgets reliance on high oil prices is still there and if you go to overlooked sectors of the economy can be developed and the economy diversified one meghan threat to the country's fiscal health commodity price volatility risk will be reduced greatly and such risks were clearly demonstrated in the wake of the two thousand and eight two thousand and nine label economic crisis its people gave way to bed of as russian president russian industries primarily split between globally competitive commodity produces in two thousand and nine russia was the world's largest exporter of natural gas the second largest exporter of oil and the third largest exporter of steel in primary elim and other less competitive heavy industries that remains a pendant on the russian domestic market this reliance on commodity exports makes russia called the ruble to boom and bust cycles that follow the highly volatile

swings in global commodity prices on the back of shrinking world demand for its prime moneymaking exploits as well as state and global credit markets the russian economy's growth prospects started to contract in two thousand and nine since then lending to russian banks and firms. and economic growth is back on the positive side if you see from your point of view he's a year. or forty persons. presidencies are first when you create forty percent to get you were. i know your. age you're bankruptcy might. know your. resume. however the country still face some short term challenges the most notable is a prolonged recession which could trigger a global slowdown and that could lead to another commodity price pressures

economists say. but given the six year term ahead of him and bulging state thanks to one hundred and twenty five dollars oil. ample time to implement the reforms and they are on the money. ok gentlemen let's start hashing out the next six years in russia itself is going to be a walk in the park for the returning president because. this way let's compare the last four years when putin was president and his next six what's the similarities what are the differences. yeah well clearly the biggest difference is the external environment i mean the last four years of putin's presidency centrally preceded the crisis in russia and were actually times were quite favorable in terms of including a foreign investment poorly and to usher in a major scale in two thousand and six two thousand and seven so that is probably

one of the differences another one i think is that certainly the degree of political capital that putin used to have during his first two terms was very significant now it's still very significant but lower and now the trend maybe not as one way and favorable all the time to putin so in this more difficult environment putin still has to have the courage to spend the political capital that he has to change the system because ultimately this system has to be changed even when you think about it i mean is it a walk in the park because you know we have a very different environment right now and we have to talk about politics as well in this program so what is the major challenge that makes this a three to one of the work in the party but i think that the single most important difference for me is the incentives. for now to do forms of certain forms versus

the incentives that you might might have had before that before the great recession if not a greater station russia was a country that was having significant fiscal and kind of the come surpluses this is changing right now and for needs from the most important economic incentive for pushing to deliver on a sound that a force that is to surprise us at all if the expectations which i think we will all agree not very high for him ok can i go to you are we going to be pleasantly surprised over the next few years remains to be seen i mean this reminds me a lot of two thousand when putin first came in then funny enough we were back in the so. position where we we really have no idea which way it's going to go and there's a lot of talk about reform but then you know the political situation he's been quite quite tough with the opposition and commentators looking at it and i'm sure having said that though the strategy that they're drawing up with the twenty twenty strategy has all the right things in it i mean i think the key here is in the first

period of growth that sort of finished with the crisis in two thousand and eight it was simply a question of state spending and that produced growth automatically catch up face and russia's economy is mature to the point where that doesn't work with state spending is actually detrimental the old model is broken and has to be replaced with a model where the state steps back and nurtures private business so that's a complete change in mentality mindset completely changed system and we're waiting to see them to live around that's ok tom you know we've heard a lot about reform over the last twelve years ok is it incumbent upon the next administration to really follow through on a lot of those promises because i'm looking at corruption making it easier for businesses to get started more for our foreign investment friendly i mean is it incumbent upon the incoming president to be really serious about that now. well i think the mindset is definitely changed rather than mindset and two thousand and four is very much that this is

a demonstration which confront growth through state spending and about building up foreign exchange reserves from russia that isolate itself from fluctuations in global commodity markets and i think what's changed crowd markedly is they've understood that that's no longer the case and for this is a government needs to do much more as are encouraged and investment from abroad and in doing so to try for us to find the economy and reduce the reliance on the export of its resources and in that context you know i am quite encouraged by some of the rhetoric that has come out of the putin administration either as a prime minister and a future president which should do something to encourage investment and there have been a number of policies which have been proposed to help that i mean the most notable has been transparent and stable probably isn't proving the relationship between free cash flow and dividend payments among state run companies i think that's a very positive step and i think you'll see you look at the financial services from work in russia driven by the mice that starts us merger that's something also that

can help to drive in good investment and to get more foreigners involved in russian acts and markets now should be special that sort of gets that however i would be slightly questioning whether or not this government is serious about a real political liberalization there's been some moves and we know them well suits to allow regional governors to be elected for example lower the threshold scared into the duma and i think we need to wait a little bit longer because i'm still not so sure that this is an administration that wants to see a real debate. or it isn't within the dream or what i think that suddenly the foreign investment community is looking at might be disappointed it is not going to i think the new administration is actually interested in debate because we actually reacted to the protests of december and right before the presidential election that i think they get it now ok and i think it's also important. point out to our viewers is that they put in actually does what he says very very often ok he does have a core group of people he has to keep them happy he is a politician after all he also has to attract foreign investment how does he

balance yeah in my view clearly one of the barriers for putin to actively pursue the economic agenda was the electoral cycle and clearly this was something that put off some of the difficult decisions by a certain period of time and will probably have to wait for real more tangible reforms to happen for another probably two to three months at least and then of course another issue is significant state spending budget spending a little promises that in the medium term. do create. problems that when the source of the additional sources of financing but in the end i think yes he does get it and while he may have accumulated some political council through this additional spending in the end rushers still has a very strong solvent balance sheet one of the lowest levels in the world and that

does allow putin i think to pursue. the quite aggressive economic reform agenda that i think given some of the challengers in the medium term including in the first will steer will have to squarely focus on the efficiency of state spending and the efficiency of the whole apparatus so anti-corruption measures and that will guard will be absolutely crucial ok gentlemen we're going to go to a short break and after that break we'll continue our discussion on the new economic policy of russia stay with r.t. .

for. the. book you want to talk. to. the streets to keep some secrets but it's time to reveal that in the soviet files and. there hasn't been anything yet on t.v. . it is to get the maximum political impact. the full source material is what he journalism on we. we want to present. something.

to. welcome back on the money on people of our ok let's continue our discussion on the financial environment in this country after the presidential election ok right before we went to the break you wanted to jump in there we were talking about political reform and putin's agenda go right ahead yeah i think we're seeing skirting around an issue here at the core of what's going to happen next and that is this person actually believes in markets that he actually wants a free market a liberal open economy you know always he just going to carry on spending and have . seen from the outside do you have an answer to that the idea that i think you go ahead. i do in so much as i think after the ninety eight crisis there was a never again moment how can we avoid that and the answer it's about was to build up the reserve and then going into the two thousand and eight crisis they thought they had plenty of money enough to weather

a crisis i mean russia had six hundred billion dollars in hand and then suddenly by february of the year two thousand and nine they realized that that wasn't enough money and that you couldn't have a cash that would save you and i said late she was term said from the global economy and so this time around they realize now that a fundamental level they have to do it they have to do the reforms and build an open economy because there's no alternative if you go run the country and provide for the people long term ok tom no alternative i like that i like i kind of talk from them what do you think but yeah i think there's. certainly been a growing awareness of the of the economic necessity for foreman there is one way to if you've got is to provide investors with a long term stable return on the capital but then vast and i think that's something that this administration over the years up to now have got really really wrong particularly by messing around with tariffs and tire tire of changes by taxation and the old gas act or by issues surrounding corruption by targeting specific

industries and businesses with seeming randomness now that's something that they absolutely have to tackle otherwise they'd be very few people who want to bring their money into russia i but the very encouraging sort of area has been that the government seems to want to address this and. mentioned corruption they seem to want to handle corruption you talked i mentioned earlier this issue about dividends getting statement companies try to provide a returns for investors to make companies more efficient make budgets mining more efficient suddenly the rhetoric right now is very positive and i think it's tough and we know we will have to wait a little bit before we see any real changes but this issue about spending. political capital is very very important i think putin recognizes that he has a relatively short window post-election to make serious changes we saw that in two thousand and five and the monetization of social benefits which is very unpopular

he has a window now he can spend this political capital and he can push through what should be some quite unpopular reforms and i think that could be very very hostile for investors ok but when you think about that i tend to agree that i mean we have a window of opportunity right here capital is there irrespective what western mainstream media says putin is still very popular in this country did win the election here but there's a lot of high expectations right now and we saw again i don't want to go about the protests that we saw in december a lot of high expectations all around sure i think that put in the euro the number of important speeches over the last couple of months three of them were on the economy i think it was one that was particularly important for one that was deliberate and pointed to that of december i think it got lost a little bit in the christmas spirit within that particular speech which was talking about increasing the investment in this economy and i think sixteen really positive because for example if you take russia against the rest of the big economies there is a very favorable demographic they now mix so the only way for russia to offsets the . demographic dynamics is to invest more or to have

a higher rate of capital accumulation then the rest of the bric economies i was personally very encouraged that this message about her investment was delivered from such a high level for there for a start to something at the here because if you're going to sort out your year i mean it's a very you know capital invested investing me kind of investing in people what about those slippery fingers are always you know in the till and he keeps going back to corruption here ok it seems to me that's the make the make or break issue it is a completely agree it is the decisive moment in terms of tackling this issue it cannot be postponed further and actually one of the constraints on this system working as a before going forward one of the major constraints is capital flight. the fact that we had eighty four billion dollars worth of net outflows during a period of high oil prices is clearly a constraint on the whole system continuing to churn the before so i think that

kind of an economic factor in the continuation of these capital flows since two thousand and ten is something that will force greater changes that need these changes really necessary and i think you know the improvement in the investment climate generally but especially tackling corruption tackling not just the macro level policies work russia has been quite good at in the past ten years but really the micro-level of companies and really improving corporate governance that is the key issue right now this year ok term it looks like you read my article in the national interest was like i said it over the last twelve years that the ruling political has got the extensive growth under control now it's the intensive growth and it's exactly what we just heard here are they up to it are they up to the to the market and tackling these very hard hard deep rooted issues. well i mean i've

long argued that one of the issues in russia is there is no federal body image overseas issues of corruption and that's a big problem is a big problem in any country i think into positive steps that he made recently tackling this one is that russia is not a party to the o.e.c.d. unsee bribery convention which allows external oversight to make sure russia does to certain parameters and the second is the creation of financial crimes unit units and. similar problems as of course it's not enough in itself but he's he's come out already quite aggressively in a couple of months that this part with this organization has been running mentioned capital flight it's been looking more deeply into the sources of capital flight and i think that is quite encouraging i think great great trying to get it back get the importance of flooding down on corruption but it's a major major systemic problems existed in russia of countless centuries whether they can deal with this immediately you know that's a very very difficult thing but i think they need to give investors more confidence that's serious about it and they're serious about companies going their books and.

they're looking a lot about corruption and it seems to me that this issue is a little bit blown out of proportion usually people look at the transparency international headline index which ranks russia hundred fifty four out of hundred seventy eight countries it gets even more exciting than that because russia is a tree sandwiched between but when you guinea anted you can see that but the problem with that it's a what so exception perception makes and dispossession english could be influenced by media coverage of this country for example if you go to a prospectus international also goes to individual countries and ask people and people themselves have you brought a member of your family experience corruption the last year or so while twenty percent of russians says say yes this is not something to be proud of but i think given the level of income this is not out of proportion with the rest of the world so i think this is something that sometimes who i normally usually forget my most western countries have institutionalized corruption but that's a different topic it is like going back to you what. well if we're looking for one

single driver to do to enhance grow the economy what would you would be looking at from a policy perspective from a policy perspective i would say investment growth fixed investment growth and infrastructure development as the driving force for that so we've seen episodes during which and second term when investment was the main driver of economic wealth when it was driving significant productivity growth this is really i think in terms of all fathomable economic models for russia this is the driver that will take it to higher level in terms of the trajectory of russia as well so in order for investment to tune through significantly you clearly need those capital outflows to cease to be reversed and you need more of the i in order for of the i to come you probably also need better investment climate including for portfolio investment because previously the previous paradigm was we don't need portfolio investment we need only of the year as a result we didn't get

a lot of of the as well so this this kind of change this focus on improving the investment climate especially at the micro level i think is going to be critical for investment becoming them into what we think about their opinions like the right driver that you'd be looking at i think it's the key is getting people confidence about coming here but in that sense it's really a p.r. and public fight against corruption would do a lot for us as image and reassure investors who don't even look at russia i mean people are worried about fits and those kind of people they don't even start to think about coming here because the image is so poor and making a dent in the corruption publicly i think would actually have a knock on effects i mean the things that the us that was talking about if the portfolio investment would follow on from that naturally i should say i'm talking to transparency international most of them in the head of the office here. she's actually very upbeat in so much as she thinks the kremlin's let the cat out of the

bag with the public discussion of corruption and they have to do something about it i mean it's become public there's no going back on that and we're seeing the beginnings of some institutionalized. institutionalization of anti corruption in the form of you know the utility companies are not allowed to do contracts with kind of parties where they don't know who the beneficial owner is and stuff like that that we need to see more of comedy about what about you what's the driver you're looking at what's the driver did putin should be giving you the most attention to over the next six years or maybe the first six months of his presidency. i'd like to see a dr on full time liberalization so you can fit the mustard gas prices and i think that is something that could help us reduce our subsidies that the government pays to to the consumer and in doing so would reduce the profits reliance on the oil price that i could have a knock on effect as of reducing some of the volatility in the acting market and

one of the big issues for investors is that the action market is a very hard to beat up on your price but would be very good stuff. i'd also like to see more progress on pension fund reform i'd like to see a more natural buyer of russian actions which is more which is locally based i'm currently only seven cents and from russian fund money is invested in next in the market and that's clearly that's clearly not enough again i think you know exactly what ben said i think the government is get gets this and i think we're seeing some very positive steps but perhaps a wait and see but those are the factors that are in place if you do who do you want to see as prime minister you describe the person i think not only even in the most difficult question. i think that somebody that i did support the first person to work in units we could see obviously because this is something that will help the country go in the same in the same direction in terms of things i would i would like to make to mention any names but again we need

a you need to when we. discuss names i want to thank my guests today for joining me here on the program and thanks to our viewers for watching on the money see you next time and stay r.t. . to.

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