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Putin proclaims economic reforms. Will they actually happen?

Silvio Berlusconi Meets With Vladimir Putin

As one of the BRIC nations with investment grade status, Russia has the recourses and potential to be a very intriguing prospect. Since the resurgence of Vladimir Putin, the President has been constantly professing economic reform rhetoric however both international and domestic critics are extremely skeptical about how much change Putin will truly bring about. According to Rueters:

Russian President Vladimir Putin sought to reassure investors on Thursday that he is committed to building a “new economy” through liberal reforms and privatization, and said he would not let protests against his rule spill over into civil unrest.

But in his first big speech to investors since his return to the Kremlin in May, Putin offered nothing new and not everyone was convinced he will do any more to carry out promises of economic and political reforms in his new six-year term than in his last 12 years as Russia’s paramount leader.

“He was saying the right things to this audience, but the impact of those words is becoming less and less,” said Roland Nash, chief investment strategist at Moscow-based hedge fund Verno Capital. “What we really need to see is implementation – and if they get that right there’s a major opportunity.”

Addressing the main complaints about business in Russia, Putin said he would press on with the sale of non-strategic state assets, fight corruption, reduce red tape, strengthen property rights and cut Russia’s reliance on energy exports.

Privatization, he said, must be fair and honest, and open to foreigners – a reference to deals in the past that allowed a few Russian businessmen to amass wealth and power.

Aware that he faces skepticism from investors as well as the political opposition, Putin reiterated his commitment to a sound fiscal policy, a floating currency and free capital flows.

“Russia not only needs a deficit-free budget but a budget with a reserve of resilience,” Putin said.

In another move to reassure investors, Putin named Boris Titov, the former head of a business lobby group, as his ombudsman to help defend the rights of company owners and directors in court battles.

Putin said Russia would not impose restrictions on capital flows – $80 billion left the country last year in a sign of a lack of confidence in its economy – and underlined how far it has come since the Soviet Union collapsed in 1991.

But some investors said they had heard similar words too often in the past to believe they would see action now.

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