The Russian rouble may have stopped falling, but its economy still faces a long, cold winter. Is Vladimir Putin’s position under threat?
What’s happening?
After falling to a low of 79 roubles to the dollar earlier this week, the rouble has recovered to around 60 after the Russian Central Bank decided to use its foreign exchange reserves to defend it.
However, even if the currency is successfully stabilised, the fall in the price of oil (which accounts for two-thirds of Russia’s exports) and the increase in the main interest rate to 17% will have a disastrous effect on growth and the budget.
Neil Shearing of Capital Economics thinks that unless oil prices start to rise again significantly, “Russia is now staring down the barrel of a deep recession” and that GDP will shrink by around 4%-5%, similar to what happened in 1998. Even the Russian government now expects a recession next year, with Putin admitting that it will be two years before it recovers.
Will this damage Vladimir Putin?
Experts think that this could be bad news for the Russian leader. Michael Birnbaum of the Washington Post thinks that Russia is “heading into uncharted territory, with the rising living standards that have formed the backbone of Putin’s rule receding into memory”.
Professor Anastasia Nesvetailova of City University in London thinks that one likely scenario is that “Putin is ejected from power by domestic clan wars or a popular uprising”. In her view, an internal power struggle amongst the elite may be “already under way”, with the Russian leader “isolated” and “caught between powerful interest groups”. Indeed, many of his allies have been recently “removed from power or in some cases, put under house arrest”.
Could the Russian leader survive?
Others, however, think that Putin’s grip on power is relatively secure. Respected intelligence expert John McCreary, chief analysis officer of KGS (Kforce Government Solutions), thinks that there is “no chance of him being forced from office”. Even if he uses this “as an opportunity to impose tighter restrictions”, the fact is that “most Russians will not object” since they are used to “uncomfortable conditions”.
Opinion polls suggest that he still is popular, with surveys putting his approval rating between 49% and 80%. That said, as The Daily Telegraph’s Tom Parfitt points out, “political surveys conducted by telephone in a country where people fear retribution for criticising the authorities may not be the best test of sentiment”.
If he goes, who might replace him?
One worry is that if Putin does fall from power he will be replaced by someone very similar. The New Republic’s Julia Ioffe worries that “knowing the weakness of the liberal opposition and the strength of Putin’s security apparatus, it’s hard not to fear that his replacement will make us long for the days of his thuggishly predictable unpredictability”.
If Putin does fall from power, one possible replacement is Dmitry Medvedev, the Russian prime minister. As president between 2008 and 2012, Medvedev pursed a less aggressive foreign policy and some limited economic reforms.
Popular turmoil could also benefit lawyer and activist Alexei Navalny, who is seen as the head of Russia’s opposition.
Are there any other scenarios?
It’s important to note that even Professor Nesvetailova accepts that things could get even worse. An alternative scenario is one where “the Kremlin attempts to resolve the economic crisis by entering into another conflict”.
Beijing could even try to prop up Putin, turning Russia into “a satellite of China”. This would start “a global realignment of powers and geopolitics”, which would increase global tensions rather than reduce them.
However, Alison Smale of the New York Times reports that “the turmoil in the Russian economy appears to be encouraging Moscow to seek compromise in the crisis over Ukraine”. Indeed, at his annual news conference today, Putin has said that he wants to restore political unity to Ukraine (though he has said similar things before).