Weekly Roundup of Russia

The good news for Russia these days is that the country made it through the world economic crisis and is well into recovery without political instability. GDP is set to grow more than 4% this year after a scary contraction of almost 8% in 2009.

The bad news is just the same: Vladimir Putin’s crony capitalist system, whose Transparency International corruption rankings are on a par with esteemed company like Sierra Leone, remains firmly in place, though President Dmitry Medvedev grows increasingly restive with his calls for “modernization.”

This week’s top news stories reflect the growing short-term bullishness in Russia: Local banks are rushing back to international credit markets and auto makers welcome rebounding sales. They also point up the intractability of the long-term status quo. One of Medvedev’s key reforms, a new law controlling the police, seems bogged down in parliament, and analysts doubt its effectiveness anyway.

One economic event even Putin couldn’t control was this summer’s record heat wave and drought in Russia, which may cut the country’s wheat harvest by 20%. But don’t expect the Kremlin to come begging Washington for grain like in Soviet times. Russia has turned major farm exporter again, and its shortfall should push up world prices.

Russia’s RTS stock index is meanwhile slumping with the rest of the world, shedding 16% of its value so far in August -- one more thing beyond the reach of Putin’s “power vertical.”

Here are some telling stories out of Russia this week:
 

• Russian banks, buoyed by record deposits, are back to borrowing money abroad after a long freeze.
  
  
• Foreign car makers who have set up shop in Russia paint a rosy sales outlook.
  
  
• This summer’s crop losses also underline Russia’s renewed strength as a grain exporter.
  
  
• President Medvedev struggles to get Russia’s brutal police under control. Results uncertain.

(In Russian markets, Market Vectors Russia ETF (RSX) is currently +0.49 to 30.26.)