Oil's Crash Stirs Unrest in Russia as Slump Hits Home

[BanglaBhoot]

By ANDREW OSBORN and ALAN CULLISON

BARNAUL, Russia -- Russia's oil-fired economic miracle is unraveling as industry shrinks and job losses mount. Now the first stirrings of social unrest have the Kremlin groping for a response.

Gloom deepened over the outlook for oil-export revenue, Russia's main earner, as prices plunged Thursday despite OPEC's move this week to deeply cut production. Oil hit a 4½ year low on anxiety about falling global demand, with crude closing at $36.22 a barrel in New York, down $3.84. This could spell trouble for Russia, which has pegged its 2009 budget on much higher oil prices, meaning it will have to trim spending.

The drop in oil prices is eroding the Kremlin's ability to replenish its gold and foreign-currency reserves just when it needs them most. Although the country's reserves are the world's third-largest behind China and Japan, it has been spending tens of billions of dollars in an attempt to prop up its falling ruble and stave off public panic.

The central bank let the currency slide more quickly Thursday, the third minidevaluation in four days. The currency has lost more than 11% against the government's dollar-euro basket since August, when it hit its historic peak.

Prime Minister Vladimir Putin on Thursday painted a bleak picture of the economy. Since October, more than 7,500 firms have informed the government they intended to lay off people, and 207,000 workers have had their working hours reduced, he said, calling these "worrying signals."

The government is drawing up a list of the most significant enterprises in trouble that might need a bailout, Mr. Putin added. That would come on top of the more than $200 billion the Kremlin has already pledged to shore up the economy, and will cover a minimum of 1,500 firms. Deputy Economy Minister Andrei Klepach said on Thursday that the economy wouldn't grow again until the middle of next year.

The Kremlin has tried in state media to downplay the impact of the global financial crisis. Yet popular discontent is growing.

Last weekend, thousands of angry residents in the far eastern city of Vladivostok took to the streets and blocked traffic to protest government plans to raise tariffs on secondhand foreign cars, one of the impoverished region's biggest earners. Similar protests have been attempted in Moscow, St. Petersburg and Kaliningrad recently, and further demonstrations are planned for Sunday in Vladivostok.

Public anger also spilled onto the streets this fall in the Siberian town of Barnaul, as thousands of pensioners who had lost their right to discounted public-transport tickets staged noisy protests.

The government's response says a lot about the Kremlin's growing angst over the financial crisis. After several tense days, the pensioners got their discount tickets back, police detained younger protesters who had joined them, and state media made little mention of the event.

The prospect of further unrest poses what could be the biggest challenge yet to the authoritarian system built by Mr. Putin. It also foists a stark choice on the Kremlin: to stifle dissent, or to placate protesters to provide some kind of pressure outlet. For now, the Kremlin has decided on a mixture of both. But the government's options may narrow as its financial reserves shrink.

"They're incredibly scared of this," says Yevgeny Gontmakher, an economic adviser to the Kremlin. "They don't know how to operate in this environment."

Previous periods of low oil prices in the 1980s and 1990s contributed to the downfall of two Kremlin administrations -- those of Mikhail Gorbachev and Boris Yeltsin. Often, social discontent has begun in Russia's far-flung regions, where Kremlin control is comparatively tenuous.

Russia is just beginning to feel the impact of a slowdown that economists say could take the economy from nearly 8% growth earlier this year to near recession in the next few months. Wage delays have already led to a strike by migrant workers on a construction site in the Ural Mountains city of Yekaterinburg. Such social protest has been rare in recent years amid widespread political apathy and fear of government retribution.

Russia posted its first monthly budget deficit in November as falling oil prices and slowing production battered the economy. Meanwhile, Standard & Poor's has downgraded Russia's sovereign debt for the first time in 10 years.

Public panic is one of the Kremlin's greatest fears. "I've already seen how things get worse as the result of an oil-price collapse," says Yegor Gaidar, who was acting prime minister in 1992. "It's dangerous -- but people who have not governed a nuclear-armed country don't quite understand that."

Mr. Putin's party has told lawmakers to report layoffs in their regions, and a draft law would oblige employers to warn the government of problems that might trigger job or salary cuts.

The Kremlin has recently begun to talk publicly about the financial crisis. Before, it was seldom mentioned on state TV. Members of a Kremlin advisory body that monitors the media say officials told journalists not to use the word "crisis." Last month, regulators chastised Moscow's daily Vedomosti newspaper after it printed an article examining the potential for social unrest, the editor, Elizaveta Osetinskaya, says.

The Kremlin has accused the West and homegrown economic liberals of using the crisis to fan discontent. In a recent question-and-answer session with voters aired on Russia's two main state television channels, Mr. Putin blamed Russia's problems on "financial and economic authorities" in the U.S. They had "infected" the global economy, he said. Meanwhile, lawmakers in his party have turned on liberal Finance Minister Alexei Kudrin, complaining about the speed at which Russia's foreign-currency reserves are being spent on anticrisis measures. Mr. Kudrin has said the money is being spent "accurately."

This fall, Barnaul, an ailing Siberian industrial hub some 2,000 miles south of Moscow and one of the last regions to benefit from the oil boom, became one of the first to feel the crisis.

As the credit crunch poisoned Russia's economy, supply chains broke down on a lack of cash and trust, and orders dried up at the town's factories, which churn out diesel engines, heavy machinery and tires.

Three months ago, workers say, several factories sent workers home on reduced salaries until better times. Government data show over 1,000 workers in the region are in the process of being laid off; opposition lawmakers say hundreds more layoffs are likely.

In late October, when authorities revoked subsidized transport tickets for more than 200,000 pensioners in Barnaul, they gave no warning or explanation. When the pensioners -- among the poorest groups in Russian society -- learned the tickets were being axed, they panicked.

On Oct. 26, about 1,500 gathered in front of the regional government building to protest, according to people who attended. The pensioners blocked the town's main thoroughfare, Lenin Avenue, for three hours, and only dispersed after a local government official invited a few of the leaders inside for a chat, promising the tickets would be reinstated.

Still, protesters came back the next day. This time, they numbered only a few hundred but demanded the resignation of the local Kremlin-appointed governor, Alexander Karlin.

In a third protest, a crowd of 2,000 again blocked Lenin Avenue as regional lawmakers debated the decision to do away with the discount. Some demonstraters tried to storm the government building, but police lines held. The governor tried to calm the crowd, but was forced to retreat.

Eventually, the government decided pensioners could keep their discounted transport tickets, while a new system allowing them to choose between cash payments and free transport passes is introduced.

Spokespeople for the local parliament and regional government said that the unrest came about because of a "misunderstanding" and a government failure to adequately explain the reforms to welfare benefits.

Alexander Romanenko, a pro-Kremlin lawmaker in Barnaul,says the protests fizzled out after pensioners realized the government recognized their needs.

But political opponents believe remote regions and towns like Barnaul are the Kremlin's Achilles' heel. "They can only control what's within the Moscow ring road," says Vitaly Boldakov, a left-wing activist in Barnaul. "But beyond that road, their control collapses."

Oil's Crash Stirs Unrest in Russia as Slump Hits Home - WSJ.com

 

[BanglaBhoot]

Nervous Russia stomps dissent

Economic angst is prompting more rallies Sunday. How will the Kremlin react?
By Fred Weir | Correspondent of The Christian Science Monitor

from the December 19, 2008 edition

Moscow - The collapse of oil prices and the Russian ruble have ignited relatively small protests against the government here. But reaction from the Kremlin has been fast and furious.

Nationwide rallies planned for Sunday are expected to draw even larger crowds and will be the next major test of a Russian leadership increasingly anxious over dissent.

Leaders of the still-influential Communist Party, which is staging the upcoming rallies, say the Kremlin's fears were on display during protests last weekend in Moscow and St. Petersburg, when thousands of riot troopers confronted a few hundred demonstrators from the Other Russia, a broad anti-Kremlin coalition, and arrested 150 of them.

"On its face it seems ridiculous to see thousands of cops beating up a handful of peaceful demonstrators; logic dictates that they ought to ignore us," says Eduard Limonov, leader of the banned leftist National Bolshevik Party. "But the authorities fear opposition and ... [as the economic crisis grows] they have good reason for that. They read the FSB [security police] reports and they know that we are very well organized and ready to lead in the case of mass social unrest."

Mr. Limonov was among those detained and allegedly manhandled by police last Sunday.

Communist Party leaders have called for a nationwide day of "anticapitalist" rallies Sunday against growing unemployment and price rises. Although it's never easy to predict how many protesters will show up, organizers feel safe in their forecasts that hordes of police will be on hand.

"Our authorities want no protests to be seen on the streets in order to maintain the illusion that they still have the support of the majority of the population," says Oleg Kulikov, a leading Communist State Duma deputy.

Russia's state-run TV networks highlight official reassurances that Russia will weather the global economic storm while offering little hard reporting about rumored widespread layoffs and wage cuts. But public perceptions that something is amiss are rising. A November survey by the independent Russian Public Opinion Foundation found that 42 percent of respondents thought the economy is in crisis, and 39 percent said they felt "disaffected" about the government's handling of it.

Internet statistics issued by Google Russia this week show that between September and November Russian users queried keywords such as "crisis," "bankruptcy," and "firing" five times more often than in the same period last year. There has been no official effort to curb Russia's fast-growing online community, but last week leading Duma deputies of the pro-Kremlin United Russia Party met with several top website operators and "expressed concern that rumors about the consequences of the crisis and layoffs are being over-dramatized on the Net," according to the Moscow daily Kommersant.

Printed media have also come under tougher scrutiny. After Yevgeny Gontmakher, a former deputy social services minister, explored the potential for unrest this coming winter in an article in the business newspaper Vedemosti, a warning came from the government agency that oversees the press. The article, according to the government, "could be considered an attempt to incite extremist activities" under Russia's tough media laws. Such infractions could get a newspaper shut down.

Mr. Gontmakher, director of the independent Center for Social Policy, is unrepentant. "The situation is growing very serious, and I'm afraid social conflicts will break out in the coming year if something isn't done to establish dialogue between the population and authorities," he says. The danger is particularly severe in single-industry towns, of which Russia has about 700, he says. "People are trapped in small cities, where economic failure could bring social turmoil and political paralysis. I fear our authorities will not recognize this threat until it's too late."

Though Russia endured a decade of severe depression during the 1990s with only a few big social protests, some experts say the country is more volatile now. In the confusion following the Soviet Union's breakup, many workers in bankrupt factories went without salaries but retained their official jobs and often were paid in products – which they bartered for necessities – and were allowed to use company housing. A study in the mid-1990s found that half of all food consumed was home-grown.

"Society has changed radically since the 1990s," says Boris Kagarlitsky, director of the independent Institute for Globalization and Social Movements in Moscow. "Today, thanks to a decade of economic growth, Russia is a wage labor society. When you get unemployed today, there is nothing to fall back on."

In the 1990s, opposition parties dominated the Duma, and a more open, robust media existed. Experts warn that the concentration of power in the Kremlin under Vladimir Putin, and the near monopoly held by the United Russia Party, which Mr. Putin leads, leaves few outlets for dissent and no alternative avenues for spreading responsibility in the event of economic failure.

"The authorities argue that social stability has been the great achievement of the Putin era, and they are very much afraid of losing this image," says Vladimir Gimpelson, a professor at Moscow's Higher School of Economics. "The political system has become too rigid, and if unrest begins, there is a danger it can be completely broken."

Limonov, a best-selling novelist turned street agitator, says the Kremlin today is like many past Russian governments, which relied on security forces and propaganda to maintain order but had little genuine contact with their own populations. "Russian civil society is grown up, it has become modern, while our state remains medieval," he says. "No wonder they're afraid of us."

Nervous Russia stomps dissent | csmonitor.com

 

[PeterSon_12k]

The carbon dioxide captured by the project will be pumped into the ground to recover oil.The planned Norwegian plant would strip out 2.6 million tonnes of carbon dioxide a year. The gas could then be piped or shipped to offshore oil or gas fields, where it could be buried deep below the seabed.