Economic crisis forces Russia to look inward

In print | February 26, 2009

The current economic crisis has hit Russia hard. Last week the Russian Economy Ministry forecast a major slowdown in the state’s economy, declaring that the country’s GDP is likely to contract by more than 2.2 percent. Unemployment is higher than it has been in years and, worst of all for Russia, the prices of two of its main exports — oil and natural gas — are in a state of freefall. Many economists predict that a recession is on Russia’s horizon.

The current regime, however, remains popular and resilient. But the economic crisis is certain to alter the ambitions of the Russian government, and we can expect to see a more introverted Russia in the future.

Putin and Medvedev have badly bungled their handling of the economic crisis.

The Kremlin banked on the (ultimately erroneous) assumption that oil and gas prices would continue to rise, and during the time period that their assumption held true, Russian politicians and businessmen (categories which frequently overlap) failed to take action to diversify the economy. Thus, when the price of oil dropped as precipitously (and, some have argued, predictably) as it did, the Russian economy took a major hit.

Myopic government planning goes a long way in explaining why Russia is suffering so much worse than most of the countries affected by the worldwide economic downturn.

The current regime reacted extremely late to the crisis, with Russian leaders fondly proclaiming in the early days of the downturn that their country had escaped the global economic crisis. Even now, the Russian government maintains wildly optimistic expectations about the chances for immediate recovery. Meanwhile, according to The Economist, a number of independent economic analysts predict that the Russian economy will contract at over twice the rate predicted by the Kremlin.

Already, a poll of Russian citizens conducted by the state-controlled Russian Public Opinions Research Center shows that Putin’s support has dropped from 80 percent in Dec. 2008 to 74 percent in Feb., and that President Medvedev’s support has gone from 74 percent to 69 percent. These numbers are not jaw dropping to an American public accustomed to President Bush’s below 40 percent approval ratings, but they do suggest that Putin and Medvedev, who both regularly achieved far higher approval ratings over the past couple of years, are finally being held responsible by Russians for the sorry state of their economy.

It would be a mistake, however, to underestimate the strength of Putin and Medvedev. Despite the economic and civil turmoil, the Putin-Medvedev regime isn’t going anywhere soon. No major city in Russia has seen protests comprised of more than several hundred people. In fact, most Russians polled seem inclined to blame the current hardships on America. The television media remains largely state-controlled, and Medvedev has appeared on-air constantly these past few weeks to assure Russians that he understands the depth of the current economic crisis. Arkady Ostrovsky, a Russia expert and journalist, wrote that despite the danger that the economic crisis poses to the Kremlin, “There is nothing more misleading than to portray Russia as a liberal-minded society suppressed by a nasty bunch of former KGB agents … Putin even now remains authentically popular.”

Another one of Russia’s long-term problems that has been exacerbated by the economic crisis is occurring in Chechnya. Chechnya, the unendingly volatile region in Russia’s south, has large separatist groups that have been trying to gain independence from Russia since the Soviet Union’s collapse.

The Kremlin has managed to subdue the region primarily by funneling large sums of money to the Putin-appointed president of Chechnya, Ramzan Kadyrov. But Russia no longer has the money necessary to engage in large-scale social programs in the region, and some have predicted that it won’t be long before violence and talk of secession flare up again. Add to this the ongoing tension in Ingushetia and Dagestan, Russia’s other southern Muslim republics, and the “Greater Russia” that Putin was bragging about during last summer’s conflict with Georgia, may well become fragmented, war-torn and decidedly less great.

There is no question that Russia is going to have to curb its imperialist urgings. Russia simply can no longer afford, for example, its regular tactic of denying nearby countries access to oil. But potential unrest in Chechnya could solidify the Russian regime, which regularly plays to its population’s nationalism. this even as the unrest forces the Russian government to focus on its internal concerns.