Special Report on Russia: Handle with care

RUSSIA

Handle with care

Nov 27th 2008
From The Economist print edition

A cornered Russia could pose greater risks

THE magic word during Vladimir Putin’s eight years as president was “stability”. The social contract between the Kremlin and the people was based on rising incomes and private freedoms. Most people happily signed up to this. According to Boris Dubin, a leading sociologist, three-quarters of the Russian people feel they have no influence on political and economic life in their country, and the vast majority of them show little interest in politics anyway.

It was this contract, backed by high oil prices and cheap credits, that kept Mr Putin’s ratings up and allowed him to hold on to power as prime minister after his protégé, Dmitry Medvedev, was installed as president in March this year. When a foreign journalist asked Mr Putin shortly before the election why Mr Medvedev was not campaigning, the answer was candid: “Salaries in Russia are growing by 16% a year…people want this trend to continue and they see Dmitry Medvedev as a guarantor of this trend.”

The rise in earnings, albeit from a low base, has also masked discontent about the appalling state of the health system and the corrupt and ineffective police. Most people say both have been getting worse in recent years, but they generally deal with them by making private arrangements with their local doctor and finding friends among the police. Seventy years of living in the Soviet Union have made them inventive and adaptable.

The lives of ordinary Russians have got better, but not that much better. Half of them say they have enough money for food and clothes but struggle to buy durable goods. Most simply hoped things would not get worse. Now, with an economic downturn under way, things are getting worse, especially in big cities where the improvements had been most noticeable. Private firms are starting to lay off staff and cut pay. For now the government is trying to soothe people’s fears. Journalists have been told not to link the words “crisis” and “Russia”, so the state media consistently talk only about a world crisis and Russia’s “anti-crisis” measures.

Yet if the economy deteriorates, that will no longer be enough. A recent survey of successful young urban people showed that many of them contemplate emigrating. For now, most people have even less appetite for protests than they did in 1998, when rouble devaluation and debt default caused millions to lose their savings.

Most Russians are deeply cynical about their government: 60% say its members are “only concerned with their own wealth and careers” and just 9% say they are honest. After the 1998 crisis businessmen who had lost everything picked themselves off the floor and started again, and the same thing may happen this time, although state interference in business has increased. But the popularity of Mr Putin and Mr Medvedev, who are seen as promoting stability, is likely to suffer. After the 1998 crisis Yeltsin’s approval ratings, already in the dumps, plummeted from 15% to 1%.

Yet there are important differences between then and now. First, people have more to lose. Over the past decade GDP per person has almost doubled, to almost $12,000 at purchasing-power parity. Second, Russia’s rigid political system no longer allows much room for manoeuvre. When the 1998 crisis struck, Mr Yeltsin defused the situation by sacking the prime minister and the entire government. Until last year Mr Putin too had this option. When things went wrong people blamed the government, not the president. But now that Mr Putin himself is in the prime ministerial seat it may be harder for him to find scapegoats.

Third, in 1998 the government was bankrupt and weak, so businesses were left to deal with the crisis in their own way. Now the government is sitting on massive cash reserves which have already become the object of factional fighting. The Kremlin is by no means a homogenous entity. Indeed, the main reason for making Mr Medvedev president under Mr Putin’s supervision was that it would preserve the status quo. But now there may not be enough money to keep the large band of Kremlin friends happy.

Russian experts, whatever their differences, all agree on one thing: these are unstable, unpredictable and dangerous times. As Mr Satarov of the INDEM think-tank observes, the biggest advantage of democracy is that it allows political systems to adapt to changing economic and political circumstances. That luxury is not available to Russia. Instead, Mr Medvedev has proposed extending the presidential term from four to six years. This was Mr Putin’s idea, and he may be the one to benefit from it. The change, which has been rushed through parliament, would give him the prospect of 12 years as president when Mr Medvedev’s term expires in 2012. Some say Mr Putin might return earlier.

Whatever next?
The most optimistic (but unfortunately least likely) scenario is that the crisis will concentrate minds in the Kremlin and make it improve the country’s investment climate, build proper institutions and tame anti-American rhetoric. Mr Gavrilenkov of Troika Dialog argues that Russia’s attitude to America is closely correlated with its balance of payments. When that is strong, Russia turns anti-American; when it is weak, Russia becomes a friendlier place.

There are some signs that the crisis has strengthened the hand of economic experts in the Kremlin, such as the finance minister, Alexei Kudrin. One of Mr Kudrin’s deputies, Sergei Storchak, who was arrested a year ago in a power struggle between different factions, has suddenly been allowed out of prison. But as long as the oil price remains relatively high and economic growth in the rest of the world is weak, businesses will rely more on the government than on foreign investors.

Still, a recent survey of various Russian elites, including business and media people, lawyers and doctors, showed that some 45% disagree with the current authoritarian system. Worryingly, the same survey found that the group which feels most alienated and unhappy about the status quo is the armed forces.

The chances that Russia will indeed turn more liberal are minimal. The mood is against it, and liberal parties cannot even muster the support of the significant liberal minority that does exist. The Kremlin has launched its own “democratic” clone parties to gather up these votes. According to one modern Russian writer, Zakhar Prilepin, ideological opposition to the Kremlin is impossible because the elite has no ideology: it is capable of agreeing with both the extreme right and the extreme left of the political spectrum. Its only ideology is to stay in power.

ITAR-TASS

Some things have got betterA more likely—and alarming—scenario is that the current regime will harden its stance and tighten the screws or be replaced by an even more nationalistic and militant one. That is the direction in which Russia has been moving for the past eight years. In his book, “The Death of the Empire”, Mr Gaidar, the former prime minister, points to the dangers of post-imperial nostalgia in Russia and draws parallels with the dying days of Germany’s Weimar Republic. The war in Georgia made those parallels more obvious. It has moved nationalist ideologues from the margins of political discourse to the centre.

According to Andrei Zorin, a cultural historian and professor of Russian at Oxford University, periods of restoration that follow revolutions do not bring back the old order but often introduce new threats and instability. “Russia may yet emerge as a nation state, but in the process it could also turn ugly and nationalistic,” he says. In such a multi-ethnic country that would be a recipe for further disintegration.

Many Russian liberals argue that Western policy towards Russia has helped to make the country more nationalistic. America’s triumphalism after the cold war caused the same sort of resentment in Russia as the settlement of the first world war did in Germany. America’s unilateral withdrawal from the Anti-Ballistic Missile Treaty in 2001, its plan to put a missile-defence system close to the Russian border and NATO’s expansion played into the hands of Russian hardliners, as did the West’s recognition of Kosovo. “You can only imagine how much champagne was drunk in Russia’s hardline circles after the recognition of Kosovo,” says Mr Gaidar.

Yet America acted as a catalyst, not the primary cause. The process that led to the war in Georgia had its own domestic logic inseparable from Mr Putin’s authoritarian system. That system, says Lilia Shevtsova of the Carnegie Moscow Centre, relies on images of Russia as a “besieged fortress”.

More dangerous than the cold war
The Russian leadership can, and does, blame the current financial crisis on America. It is doing its best to mobilise Russians against the West and the Westernisers and is becoming more confrontational. That might conceivably lead to another war in the Caucasus or to an attack on Ukraine, vulnerable because of the ethnically Russian Crimea. Georgia remains a particularly explosive place. Russia’s recognition of South Ossetia and Abkhazia has made things worse. Pavel Felgenhauer, a Russian military analyst who accurately predicted the Georgian war in August, says a new and possibly bigger military conflict is only too likely.

Since Russia’s nationalism defines itself in relation to America and the West, much will depend on American diplomacy. Mr Gaidar argues that offering NATO membership to Ukraine or Georgia would be a gift to Russian nationalists. “This is not a return to the cold war. It is much more dangerous. With the Soviet Union everything was more or less clear and predictable. Both sides got used to each other and found a way of talking to each other. Both sides won in the second world war and were confident and not hysterical. Now we are dealing with a country that has suffered a collapse of empire. And a significant part of the Russian elite feels the time has come to fight back.”

The biggest challenge for the West will be to find a policy that neither appeases Russia nor ignores it. Given the country’s nuclear potential, its nationalism and its high levels of corruption, the risks are high. In the past Russia kept its nuclear technology out of reach of America’s sworn enemies, but a power shift inside the country could change that.

Historically, Russia has often demonstrated an ability to take unexpected turns, whether for good or ill. Few people foresaw the collapse of the Soviet empire. Russia today has a glass-like quality to it: rigid and fragile at the same time, and liable to develop cracks in unforeseen places. The danger lies in its unpredictability. Yet that may also be a reason for hope.