Third time, not so lucky

Buying the loyalty of different interest groups is easy when the pie is growing, but much harder when it is shrinking. Once incomes began to fall, Gaidar predicted, the regime would face a choice between repression, which would eventually lead to revolution, and democratisation, which might also mean the loss of power. Mr Putin has tried to dodge that choice over the past year. He has made decisions ad hoc: staging show trials for political activists and locking up opposition leaders such as Alexei Navalny one day, then letting Mr Navalny run for mayor of Moscow the next. At the end of last year he released Mikhail Khodorkovsky, a tycoon he had kept in jail for ten years, but expelled him from the country. Spooked by the unrest in Ukraine, Russian prosecutors are demanding five- and six-year jail sentences for Russia’s own protesters. The independent TV Rain channel, popular with those protesters, is under fire.

As a faithful son of the KGB, Mr Putin would prefer to deal with the worsening economic situation as his one-time boss and political model, Yuri Andropov, did in the 1980s. Andropov suppressed dissidents while trying to modernise the economy from the top, thus keeping the regime secure. Mr Putin believes that if Andropov had not died in 1984, his plan would have worked. Yet he has also inherited a deep fear of unleashing the mass repressions and purges which Andropov’s generation of leaders agreed to abandon after Stalin’s death, in order to preserve themselves.

Skilful tactician though he is, Mr Putin does not seem to have a strategy. He may be hoping that the oil price will recover. At present it has stabilised at about $100 a barrel, but it is unlikely to stay there. With the rise of fracking in America and elsewhere, analysts estimate that the price could drop by 15% in the next six years.

Given the relatively low level of state debt, Russia could also start borrowing more to keep the budget afloat. This is what the Soviet Union did when the oil price fell. The Russian economy is far better equipped to deal with an oil-price drop than the Soviet economy was. It has built up substantial foreign-exchange reserves and has a floating exchange rate, which allows it to adjust to a fall. However, given the level of imports, a currency devaluation would hurt living standards and could lead to inflation higher than the present 6.7%. The unequal distribution of incomes in Russia means that, even if the economy continues to tread water, the bottom 40% of the population will see their economic situation worsen, says Mr Rogov.

Experts agree that, however the oil price moves, all scenarios "carry the risk of administrative crisis, elite squabbles and confrontation between the people and the regime". Even with the oil price at its current level, attitudes to Mr Putin are changing fast, according to Mikhail Dmitriev of the Centre for Strategic Research--who has recently been removed from his post as the think-tank’s president. Over the past year discontent in the country at large has deepened and broadened, spreading across all social groups and ages. In contrast, Moscow and St Petersburg, where GDP per head is higher and infrastructure has improved, have become more stable and even loyal.

Mr Dmitriev says the latest focus groups show that Mr Putin is less associated with stability and more with uncertainty. His past achievements are becoming a distant memory, and his recent stunts, such as flying with cranes or diving for ancient amphorae, merely cause irritation. According to the Levada Centre, a pollster, almost 50% of the country does not want him to remain president after 2018 when his term expires. The change in mood has been caused not so much by worsening personal circumstances, as by a growing concern that the country is fast approaching a dead end. The danger for the world is that a weaker Mr Putin may be a more aggressive one, in Ukraine and elsewhere.

The risk for the Kremlin is not mass protests, but the exploitation of this discontent by the elites for their own political and economic ends, just as their predecessors did at the end of the Soviet era. Mr Putin’s idea of centralised "vertical power" is popular with regional governors when money flows down from the top; less so when Moscow tries to extract money from them and leaves them with discontented populations and welfare burdens they cannot support. At this point, the idea of centralisation starts to lose its appeal and it is every local baron for himself.

Recent opinion polls and Mr Dmitriev’s focus groups, held outside Moscow and other big cities, confirm a growing demand for decentralisation, government accountability, an independent judiciary, a free media and the right to protest. All this chimes with the feelings of the middle class in the cities. In the mid-1980s it was precisely that combination of widespread popular dissatisfaction and discontent among the elites that shook the Soviet system. In the end, the Soviet Union fell apart not because of mass street protests, but because the nomenklatura no longer saw any economic benefit in defending the regime.

How long will it take before that is true again? To return to Gogol, "Rus, where are you speeding to? Answer! It gives no answer. The little carriage bell peals with a magical ring…The air, torn into pieces, roars and becomes wind."

Date: 2016-01-14; view: 834