Putin’s Longevity
Putin’s popularity and Russian economic growth were strongly correlated throughout the first decade of the century. The reversal of Russian economic fortunes therefore inevitably raises the question of whether Putin’s popularity will sag alongside empty Russian wallets. Putin would not be the first, nor the last, ruler to stumble under the strain of low oil prices and sanctions.
In April 2016, Foreign Affairs, one of the preeminent foreign policy journals in the United States, sought to shed light on this question. The publication asked dozens of American and non-American specialists in international affairs—most of them experts on Russia—whether Putin “will still be in control of Russia five years from now.” The results must have made Vladimir’s heart warm. Of the twenty-five who responded to the survey, four-fifths either “strongly agreed” or “agreed.” Only three—interestingly, all of them Russian—disagreed with the statement.
I found a similar confidence in Putin’s political future during my visit to Russia in late October 2016. In meetings with dozens of Russian activists, academics, businessmen, and others, I found no one who described Putin to be in a precarious political position. None imagined that a popular uprising such as that seen in the Arab world or in the peaceful uprisings in former Soviet states known as “Color Revolutions” posed a real threat to Putin and his regime. Economic discontent will increasingly rankle the average Russian, and protests particularly around the issue of corruption will sporadically occur. But most experts seem to agree that there is no real opposition to harness this discontent into a political movement that could pose a challenge to Putin’s grip on power. Certainly, the September 2016 elections to Russia’s parliament, the Duma, pointed to a flagging opposition. Such leaders have either been effectively marginalized or eliminated, or have emigrated. There is no effective alternative to Putin’s regime right now, most seem to agree.
At the Pushkin Café in Moscow, Dmitri Trenin explained to me, “Russians do not have a habit of changing their leader through the ballot box every 4–6 years, but they have a record of bringing down the entire state twice in the last 100 years.” If Putin were to face a challenge, experts in 2016 seemed largely in accord that it would come not from a popular movement, but from within the establishment leading to a “palace coup.” But even this scenario appears unlikely, given how Putin has consolidated control and established himself as a person with unique powers.
Putin plays three critical roles in maintaining the current Russian system. He is the distributor of patronage, the arbiter of opportunities and disputes, and the protector of the status quo. True, as low energy prices eat into revenues, Putin’s inner circle—many of them sanctioned by the European Union and America—has come under stress. According to Forbes, the number of billionaires in Russia dropped from 111 in 2014 to 77 in 2016. But the nontransparency of the system provides a variety of mechanisms for Putin to create and share largesse, even in declining economic fortunes. Over dinner at Moscow’s Hermitage Gardens in the summer of 2014, a journalist shared with me what he deduced from unusual trading in advance of significant comments from Putin. The Russian stock market had plunged by more than 20 percent between the start of 2014 and early spring, causing Putin’s cronies to lose great wealth. But trading patterns suggested that Putin was possibly able to offset these losses by informing associates in advance of when he would make a conciliatory statement regarding Ukraine. Given the close correlation at the time between Russia’s activities in the Ukraine and the stock market, clever investors were able to make a healthy fortune with the right tip.
According to David Szakonyi, a professor specializing in Russian politics at George Washington University, other methods of keeping Putin’s elites satisfied are found in laws and regulations not geared to promote economic growth, but rather to “partially compensate insiders for their losses due to the crisis.” The execution of import substitution policies and the awarding of contracts—such as a $4 billion deal to build a rail bridge that was allegedly granted to Putin’s judo partner—are two examples. One diplomat serving in Moscow shared another, even more egregious, example. A new mega-gas-pipeline project from China to Russia is being built in stages, not because there is inadequate financing, but because to have one company bid for the entire pipeline would require the bid be put out to public tender; constructing the pipeline in small pieces is slower, but allows the contracts to be awarded to politically favored companies.
More importantly, the politically powerful and the outrageously wealthy stand by Putin not only for what he can bring to them, but also out of fear of their fate in a different system or under another ruler. Although their situation may not be as comfortable as it was before sanctions or the oil price plunge, jettisoning Putin in favor of a less certain successor would entail grave risks. It is more likely that Putin’s elites are eager to extend his rule as long as possible. Stephen Kotkin of Princeton University likens the situation to the death of Soviet leader Leonid Brezhnev, whose inner circle “kept him in power for the sake of their own power even after his clinical death.” Experts who could at least imagine Putin gone from power in the next five years cautioned democrats to hold their celebrations. The departure of Putin—who “is human,” as one specialist felt compelled to point out—would likely be followed by someone who would head a regime very similar to Putin’s.
The confidence with which a wide array of experts predicts Putin can and will survive the economic trials posed by low oil prices and other challenges does not necessarily mean that Russia will be politically stable. Although Russians may have a high tolerance for adversity, continued economic hardship—and the budget cuts that persistent low oil and gas prices will force—could have even broader implications than rankling the Russian population. For instance, Moscow could lose some of its ability to maintain a firm hold on the scores of regions that make up Russia. Spanning eleven time zones, Russia is composed of eighty-three federal, regional, and local entities—plus two new “federal subjects” since Crimea was reabsorbed into Russia in March 2014. A very important source of budget revenues for many of these entities is shared federal taxes (which include taxes on oil and gas extraction) and transfers from the federal government. Many such entities saw a cut in transfers from the center even before the price plunge. Now, with less largesse to distribute, Moscow will find it harder to buy off some actors and support others. These limitations could result in security problems in places such as the Northern Caucasus, where three- to four-fifths of the regional budgets consist of subsidies from the federal government. A loss of control of these areas would be gradual and identifiable, at least giving Moscow and other powers whose interests would be threatened by such developments time to react and stave off the worst eventualities.
Putting the Brakes on Reform
If a poor economic situation is unlikely to dislodge Putin from power, it could at least theoretically spur his regime to take new policy initiatives. In the absence of Russia’s crisis with the West and the rise of Putin’s new politics, reform might have been a predictable outcome of the unconventional boom. A sampling of Russian experts just before the oil price collapse yielded a strong consensus that the economic pressures created by the unconventional energy boom would force Russia to reform its energy industry. In a world of more competitive prices, many predicted the Russian government would be compelled to improve its investment climate in order to attract more outside capital and technological know-how. Gazprom would need to become leaner and more efficient, something perhaps only conceivable if greater competition were introduced within Russia’s internal gas market. Energy reforms, some anticipated, would be a precursor to wider economic reforms in the country.
Several developments in recent years did suggest a movement toward reform in the ever-critical Russian energy sector. “Independent” oil and natural gas companies, not owned by the Russian government but still heavily influenced by Moscow—such as Novatek and Rosneft—became significant playe
rs in the internal market, competing with Gazprom for domestic consumers. In addition, the Russian government began a gradual liberalization of domestic gas prices, although that effort was suspended in 2013. In the final months of that year, Putin instituted a significant change to the long-standing policy that gave Gazprom a monopoly over the sale of all natural gas abroad; now other companies are allowed to export LNG, at least when its destination is in Asia. In a lower-price environment, Russian production (and resultant government revenues) might depend even more on greater efficiency, less corruption, and foreign technology. Reforming the system to be more transparent, less arbitrary, and more welcoming of investment from abroad seemed essential.
Unfortunately, such hopeful signs of economic reform now appear to be relics of the past. On a sweltering Moscow day in the late spring of 2014, an advisor to the Russian government told me, “The government will reform Gazprom when there is no risk to doing so”; I took the statement to be the equivalent of “never.” Despite the potential benefits of liberalization in a new low-price environment that were earlier anticipated by many, the pressure Putin and his government is under from international circles and domestic realities actually diminishes the prospects for reform in the critical energy sector. Here’s why: in a neutral or positive international environment, Putin and Russia could be confident of reaping the fruits of such reform—increased international investment, capital, and technological know-how—that are vital to the modernization of the Russian economy. In more positive times, Russian leaders might consider this outcome worth the political risks required to reform organizations—such as Gazprom—that have underpinned Russia’s power structure for decades. But in the political environment of 2017, such reforms would undermine Putin’s mechanisms for delivering patronage to his networks and could eliminate the need for Putin to remain in power as the arbitrator of a corrupt and capricious system. Moreover, in the current international climate, these reforms might fail to bring benefits from external actors, who may be unable to respond to a more positive investment climate due to sanctions or other punitive policies. Remembering the unanticipated events and eventual collapse first set in motion by former Soviet leader Mikhail Gorbachev’s reforms, Putin is unlikely to opt for dramatic changes in the energy sector in today’s political environment.
The evidence against any real movement toward reform is powerful. Rising economic stagnation is translating into even deeper collusion and entrenchment between Russian business and political power. As a result, Russia’s state-owned giants, chiefly Gazprom and Rosneft, are gaining even higher status and political clout.
Nevertheless, the resilience of Putin’s power structure and his ability to resist serious reforms in Russia’s largest and most critical industry will have its limits over the long run. Some in Russia interpreted the May 2016 welcome of Alexei Kudrin, a former finance minister and constant proponent of economic reform, back into government as deputy head of Putin’s economic council as recognition of that reality. But proof will be more in Kudrin’s ability to convince Putin to make changes than in his simply assuming a new title. Reportedly, previous ministers submitted plans for reform to Putin, only to have them ignored or fundamentally altered. The proposals Kudrin has advocated—such as increasing taxes, raising the retirement age, and reforming the police—would all threaten Putin’s lock on power. According to Kirill Rogov of the Gaidar Institute for Economic Policy, Putin’s promise to consider Kudrin’s plans will amount to little more than tweaking at the margins. In the Moscow Times, Rogov wrote, “Imagine owning a horse-drawn cart: Someone brings you plans to convert it into a car and you promise to ‘take it into consideration.’ At some point, you attach side mirrors, replace the two rear wheels with alloy rims, apply metallic paint to the sideboards and install an air conditioner for the driver. The result is that you have ostensibly achieved 35 percent fulfillment of the plan. The Russian government takes a similar approach.”
Russia Acts Out
If the pressures of the new energy abundance fall short of promoting dramatic changes in the domestic realm, they are having wide-ranging implications for Russia’s behavior abroad. In 2010, with the world’s economy still fragile, historian Niall Ferguson and I made a bet at the weekly board lunch of the Belfer Center at Harvard University’s Kennedy School. The stakes were an ounce of gold, and the bet was whether Russian forces would cross into another country in the next five years. It had been two years since Russian forces had overrun Georgia, a country in the region of the Caucasus. I thought yes: Niall thought no. Although long settled, the bet is a reminder to me how reasonable people can disagree over whether and to what extent economic factors can spur foreign policy quiescence or belligerence.
One might naturally turn to past Russian responses to international crises during times of domestic economic woes to gain insight into how today’s economic fragility will affect future Russian behavior abroad. In 1999, when Russia was struggling to recover from financial collapse, Moscow limited its opposition to NATO air strikes in Kosovo to fierce rhetoric. Similarly, at the end of 2004, when the Russian economy looked as if it was slowing down again, Moscow reacted tepidly to the Orange Revolution in Ukraine. Economic fragility at home, one might conclude from these two episodes, will temper Russian meddling abroad.
Drawing this conclusion, however, can be misleading. The Russian government has a very different domestic orientation today than it did during those historical episodes. In 1999, 2004, and even in the aftermath of the Soviet collapse, those in power in Moscow were either liberal reformers convinced that the West held the keys to Russia’s restoration, or moderate nationalists (including some of today’s leaders at the time) who were pragmatic about the need to cooperate with the West where possible. Today is very different.
Over the past decade, Russia’s ruling class has narrowed considerably and those espousing close cooperation with the West have been marginalized. Putin, himself a moderate nationalist in the early years of his rule, has become more of a Russian conservative. His focus is primarily on the protection of traditional Russian society from Westernization and the restoration of Russia’s greatness through the reestablishment of a Russian sphere of influence in the post-Soviet space. Putin frequently quotes Russian philosophers of the late-nineteenth and early-twentieth century such as Nikolai Berdyaev, Ivan Ilyin, and Vladimir Solovyev on Russia’s great destiny and the need to preserve Russia’s historical borders. The Kremlin has even reportedly instructed regional governors to read the works of these thinkers in their free time.
Meanwhile, the Russian government continues to close the space for civic freedoms, placing curbs on “nontraditional sexual relations,” press freedoms, and other civil liberties. In this domestic environment, economic and political stresses—combined with perceived international provocation—have encouraged the emergence of a more petulant Russia, rather than a more docile one. In fact, Putin needs a state of tension in order to gain and maintain popular support for his rule.
Certainly, the 2014 crisis over Ukraine and Crimea suggests that domestic economic and political strains have spurred foreign policy adventurism in today’s climate of more conservative politics. Some believe the annexation of Crimea was part of a long-standing Putin plan to reestablish the influence of the old Soviet Union. This interpretation of events, however, gives Putin too much credit as a strategist and overlooks the fact that Putin may have felt compelled to react to events in Ukraine as he did because of growing economic weakness at home.
During my May 2014 visit to Moscow, only a week after Russia officially annexed Crimea, I listened as many Russian elites recounted how Europe had rebuffed Putin’s numerous efforts to draw closer to it. As evidence, some even pointed to a 2000 BBC interview of Putin in which he answered a question about Russia joining NATO by saying, “Why not? I do not rule out such a possibility.” These elites also lamented the perceived European indifference to articles Putin wrote about the need for greater Russian integration with Euro
pe. Moreover, they perceived the levying by the EU of the “Third Energy Package” to be directed at Gazprom specifically. Even more importantly, they believed that Putin saw the United States and the West as aggressively seeking to bring more of Eastern Europe into its orbit, at the expense of Russian pride and national security. Although the Obama administration was not interested in Ukrainian accession to NATO, Putin and Russians generally interpreted events otherwise. In the face of slowing economic growth and declining political popularity, Putin may have found the prospect of the ouster of a Kremlin-aligned president and the embrace of Ukraine by Europe and its institutions as intolerable.
Subsequent Russian intervention in Syria can also be at least partially understood in this light. Putin certainly felt compelled to rescue his ally, Syrian president Bashar al-Assad, when opposition forces were gaining momentum in the summer of 2015. For one, Syria is home to Russia’s only naval base on the Mediterranean. And Putin’s fears of radical Sunni Islamist forces gaining the upper hand in Syria are genuine, given the potential for such developments to drive further instability in Russia’s nearby Caucasus region. But Syria also provided Putin with another opportunity to provide psychological benefits to the Russian people at a time when he could offer nothing but economic pain. Russia’s Syrian escapade allowed Putin to show up a dithering United States and to reestablish a physical presence in the Middle East, something it had not had since Henry Kissinger’s diplomatic efforts drove the Soviet Union out of the region after the 1973 Arab-Israeli War. As one leader of a Gulf country told me as we sat in his royal court in early 2016, “Now Putin—he knows how to be an ally!”
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