As liberals and state interventionists fight for control over Russia's economic destiny, analysts say the oil-rich country may fast be approaching a fork in the road.
If Russia sweeps away obstacles for investors, domestic and foreign alike, it could open the door to the kind of explosive growth that Japan enjoyed in the 1960s and South Korea in the 1970s.
But if Moscow veers toward relying on big doses of state spending to double the economy's size -- something President Vladimir Putin has promised to achieve in a decade -- Russia may be heading for Latin American-style booms and busts.
Economists and analysts agree Russians are not investing nearly enough for a country that has set its sights on joining the advanced industrial world. But there is no shortage of money with some US$250 billion spirited abroad by wealthy Russians.
"We think Russia is much closer to Latin America with investment at around 20 percent of gross domestic product," said John Litwack, an economist at the World Bank's office in Moscow.
"That compares with investment of at least 30 percent of GDP by most East Asian tigers," he said.
Rich Russians, echoing Latin American counterparts who keep second homes in Miami, invariably have bank accounts abroad and own property in places such as London or Paris.
Some key government members want to use Russia's windfall from booming oil exports to fund big-ticket industrial investment, a path trodden unsuccessfully by Latin American oil producers Venezuela and Mexico in the 1970s.
Conflict
How a conflict within the government plays out between liberals, led by Finance Minister Alexei Kudrin, and state interventionists whose cause is championed by Prime Minister Mikhail Fradkov, may determine which way Russia is headed.
Kudrin has so far fought off attempts by Fradkov and others to raid a special windfall fund which he has set up to prevent a flood of oil dollars, sucked in by record crude export prices, from overheating the economy.
Fradkov and others want to use the fund as a motor for state-led investment.
The finance minister is insisting that the so-called stabilization fund, now worth more than US$23 billion, should only be used to help pay off US$44 billion of debt owed to creditor nations in the Paris Club. So far Putin has backed Kudrin.
"I am not very confident in the Fradkov idea," said Peter Westin, an economist at Aton brokerage in Moscow, who said that business investment steadily declined last year as a Kremlin-led assault on oil company Yukos gathered in intensity.
Whatever the fate of the stabilization fund, sustained growth will elude Russia unless the government allows private business to flourish without fear of harassment from corrupt officials and predatory tax inspectors, analysts say.
Indifference
The Yukos affair and its aftermath has exposed an alarming degree of indifference among Putin's inner circle of advisers toward creating a climate in which private business can thrive.
"People who take decisions in Russia do not take into account how they will affect investment growth. They don't seriously care about creating a good investment climate," said Ksenia Yudaeva, an economist at the Carnegie Moscow Center.
Yukos, whose founder Mikhail Khodorkovsky fell foul of the Kremlin, was relentlessly bombarded by huge tax claims, culminating in the sale in December of Yukos' main oil unit, Yuganskneftegaz, to state oil firm Rosneft.
Many see the episode as the twilight of the "oligarchs," the buccaneering tycoons who made billions in the 1990s, buying state assets for a song and turning huge profits.
It also underscored Kremlin intentions to extend its reach over the oil industry, which is mostly in private hands.
Private business investment has continued to dwindle despite government promises to rein in arbitrary and intrusive tax inspections.
By threatening the oligarchs, the Kremlin may be shutting down the only source of long-term growth finance the country has. Foreign direct investment is far too low to pick up the slack.
"Some 73 percent of fixed investments in Russia are from retained earnings. It means the oligarchs will remain the financial muscle of Russia. When you crack down on the oligarchs you crack down on the country's financial muscle," Westin said.
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