@senheiser
As Russia continues to retrench into a dictatorship, optimism about Russia’s democratic potential seems a distant memory. But it was only 21 years ago that Russian President Boris Yeltsin addressed U.S. Congress as Russia’s first popularly-elected president and “as a citizen of the great country which has made its choice in favor of liberty and democracy,” promising, “[t]here will be no more lies–ever.”
Today, Russia’s choice hardly appears in favor of democracy. Russian President Vladimir Putin’s approval ratings soared after he annexed Crimea in March 2014, from an all-time low of approximately 53 percent, to an all-time high, over 80 percent. And so far, the high approval ratings show few signs of decline.
But what will happen to Putin’s approval ratings once the Russian economy plummets? This is a critical question to consider because many indicators show that is where the economy is headed.
The Russian economy has begun showing signs of decline approximately two years ago. But today there are signs that a much more severe and long-term recession could come to Russia. The decline in oil prices and the Russian ruble, high inflation, capital flight, Western sanctions, and the government’s over-commitment to social benefits—all within the context of a corrupt and stagnant economy over-reliant on oil and gas revenues, together are the perfect recipe for disaster.
The Kremlin’s budget for the years 2015-17 is based on oil prices staying at $100 a barrel. But these prices fell below $85 a barrel in October 2014, and could easily fall even further. A $15 price difference may not seem like much, but in reality it would mean billions of dollars in revenue loss. The Russian economy is based primarily on oil and gas revenues, and such massive losses would at the very least prevent the government from delivering crucial benefits.
Here is one such example. According to a major study by Russian Academy of Sciences’ Sociology Institute released in May 2014, the Russian state employs the majority of Russia’s middle class. Putin’s support traditionally comes from the lower classes. It is the middle class, educated elites that he worries about. To keep them satisfied, the state pays artificially high salaries and doles other benefits. Once the government is unable to deliver these benefits—and the drop in oil prices is likely to contribute to this— it is possible this group will no longer support Putin.
Rather than work to re-set policy, should the United States and Europe seek a second chance for a democratic awakening in Russia, it is this group they need to cultivate. For, if the middle class rejects democracy as a model after Putinism fails, others possibility for it could be to embrace the crazy and extreme Russian nationalism personified by such characters as Vladimir Zhironovsky or Dmitriy Rogozin. Though such a scenario may seem completely outlandish, consider that according to a 2013 Levada Center poll, majorities in Russia support ideas such as “Russia for Russians” and deportations of migrant workers.
Inflation in Russia has now reached approximately 8 percent—the highest since 2011, and is growing at the fastest pace in three years according to Bloomberg. While this rate of inflation is the aggregate reflection of prices, prices on certain basic foodstuffs in particular rose by as much as 30 percent.
The Russian ruble plummeted by percent after the crisis in Ukraine broke out and the West imposed sanctions on Russia. The weakened ruble, some economists believe is the driver of high inflation in Russia. According a Blumberg report on October 3, 2014, the ruble has been the worst performer among over 170 currencies. And economists predict this trend will only worsen.
According to a poll conducted by Russia’s own Public Opinion Research Center released in July 2014, 59 percent of Russia’s respondents said their number one concern is inflation—above issues such as human rights and democracy. This result is not surprising. Hyperinflation ran rampant in Russia after the Soviet Union broke apart. Many who have lived through that period remember it well, and would not want to relive it. Growing inflation could be another factor that contributes to decline in Putin’s support.
Capital is fleeing Russia. According to Russia’s official statistics, approximately $75 billion left the country in the first half of 2014, although the real numbers are likely to be far higher. ”Somewhere between $100 billion and $200 billion of capital flight has taken place,” said President Barack Obama on August 6.
And capital is not the only thing fleeing Russia. According to Russia’s official statistics, the number of Russian emigrants in the last two years grew by approximately 500 percent as compared to 2010 and 2011. Again, the real numbers are probably higher.
Capital and people were fleeing Russia even before the Ukraine crisis, but the crisis is exacerbating the problem. Western sanctions, if anything, will only make the situation worse, by reducing investor confidence.
Other costs are mounting. According to Gazeta.ru’s calculations, the integration of Belarus, Kazakhstan, Armenia and Kyrgyzstan into the Eurasian Union will cost Russia $5.2 billion annually in direct expenses alone. Reintegrating Ukraine’s east will also be expensive. This region is Ukraine’s traditional underperformer, and Russia, ironically, will only be burdened by Ukraine’s east.
What does all of this mean for Putin’s regime and the future of democracy in Russia? Putin will fight for power. He will keep blaming the West for Russia’s problems as he attempts to shield his traditional support base from the effects of the economic decline, likely keeping state sector salaries high and raising military spending. This means his policies will not be aimed at economic efficiency, and will therefore only drive the economy further down.
He will also try to punish the elites for their lack of support. One example of this is Putin’s ban in August on certain food and agricultural products in relations for Western sanctions. The ban targeted wealthy urban elites who consume these products, as majority of Russia’s population relies primarily on domestic products. The ban is likely driving up inflation, exacerbating Russia’s economic decline even further.
In a way, history is repeating itself in Russia. The Soviet Union collapsed from economic inefficiencies. Ultimately the Soviet authorities could not conceal forever their massive failure from the population, nor convince it that the West is to blame for their problems. Russia’s people at the time may not have been thinking about freedom and democracy directly, but they were fed up with the poor economy and with daily disrespect doled out by petty bureaucrats. And deep down, they resented the Soviet authorities for cutting them off from the rest of the world. How ironic, it is then, that rather than replicate the success of the American broadcasting of Radio Free Europe (RFE/RL) and Voice of America (VOA) into Russia at the height and during the decline of the Soviet Union, what Washington now provides is radio silence. To give one example, according to the 2013 Broadcasting Board of Governors report, the actual spent budget for Russian language programming of RFE/RL has declined by over 11 percent since 2006.
Today in Russia people have access to more information than in the Soviet era, despite Putin’s rampant censorship. Liberal opposition is small, but it is fighting back. German Gref, head of Russia’s biggest lender Sberbank, has repeatedly warned about the dangers of Russia’s current economic inefficiencies reminiscent of the Soviet times. “We have inconceivable social costs in the area of public administration,” he said last month according to Moscow Times in a speech to investors and senior officials at the VTB Russia Calling investment forum.
Putin promised to bring stability and prosperity, but as the economy keeps plummeting, more people will start asking themselves if he delivered on his promise. Russia’s history generally does not lend itself to optimism. Whether freedom and democracy will come to Russia anytime soon is an open question. But Putin has put Russia on a path of economic decline, just as the Soviet authorities had done to Russia before him. And just as the Soviet leadership lost the support of its population, it is likely, that so will Putin.
What Will Happen To Putin's Approval Ratings Once Russia's Economy Plummets? - Forbes
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, instead of focusing on more productive sectors of its economy like Finance, manufacturing,electronics, machinery etc. Had Russia done this and created a strong/viable industrial sector thereby creating mutual dependence between us and them , then it would have been unthinkable for us to place such economic sanctions on them today(its the reason we wont try this with China, since our inter dependence is simply too big), this is without talking about the level of corruption/mis management which promotes waste/inefficiency. Russia;s Soviet days are indeed over. Its only its relic Soviet weapons and natural resources which still makes it a little relevant/worthy of consideration. But with each passing year even this little influence will keep decreasing as other emerging powers grow faster/gain more influence in the world.
which shouldnt be the case at all, judging Russia still has room for growth(low GDP per capital). This is without talking about all the Russian billionaires emmigrating to the west/U.S every year(there are lots of them here in London alone), if Russia was such a nice place to invest/live for them, im sure they wont be leaving the country in droves, so expect the capital flights to only get worse coupled with sanctions, my guess is it will top over 300billion(more than Vietnams entire GDP) by next year. Anyway lets just keep enjoying the show.
Nice avatar bro. 
