Russia: The Crisis and the Potential for Unrest
Global Voices Online
Veronica Khokhlova
2008-12-21
Business, Development, Eastern & Central
Europe, Economics, Energy, English, Feature,
Finance, Freedom of Speech, Governance, International
Relations, Labor, Media, Politics, Protest,
Russia, Russian, Weblog
In mid-October, Global Voices [1] published a roundup of Anglophone bloggers' views on the
financial crisis in Hungary, Estonia, Latvia, Lithuania, Serbia and Ukraine.
Below is another installment on the effects and the likely consequences of the
crisis in Russia.
Edward Hugh of Eastern Europe Economy Watch [2] examines the figures and concludes that “Russia's macro data
starts to confirm the severity of the downturn”:
[…] So the ruble is falling and the reserves are flowing out at a rather
fast rate, but this is not producing inflation in Russia - in fact quite the
contrary, disinflation is very strong in Russia right now, and indeed if
things continue at this rate (especially given the sharp contraction in
internal demand) deflation and not inflation is going to be
the big headache.
[…]
Unemployment is also rising, as are overdue wages, which were up 93% over
the previous month. The unemployment rate rate rose to 6.6 percent in
November, which is the highest since April, but still comparatively low by
historic standards, although experts suggest we could easily see this number
rise towards 10% to 11% in 2009.
[…]
So an incredible trifecta - a unilateral decision to recognise Georgia's
two separatist regions, a 66 percent fall in oil prices and the worst global
financial crisis since the Great Depression - has been whisked up, and has
lead to a sharp spike in investor unease such that around $211 billion has
been withdrawn from Russia (estimate by analysts at PNB Paribas) since that
fateful day in August when the tanks went though roaring through the Roki
tunnel. We now await to see just how sharp “sharp” means when we are talking
about the slowdown in Russian GDP in 2009, although the real questions which
must be in everyone's minds concern the future beyond 2009. If the ruble
devaluation produces - as seems likely - a rise in corporate and household
defaults on forex loans, just how long will it take Russian consumption and
Russia's banking system to recover from the blow that this will represent? And
when oil prices do eventually recover (in 2010?) just what will the Russian
central bank and those responsible for economic management have learnt from
this most unfortunate “boom-bust” episode.
The Economist's Edward Lucas [3] writes that the Russian “economy is looking wobbly”:
[…] Russia has been hit by a double blow. One is a collapse in the oil
price. Urals crude is trading around $44 a barrel, whereas Russia’s budget had
pencilled in an oil price of $70. The other is the credit crunch which means
an end to cheap loans for an economy that had become used to a flood of
petroroubles.
[…]
Public discontent is beginning to simmer. The problem is less the tiny
self-proclaimed opposition, but spontaneous protests by citizens fed up with
incompetent and arbitrary behaviour. A protest by drivers in the Russian far
east brought a nervy response from official Kremlin media. […]
Oleg Kozlovsky, one of the activists of what Edward Lucas calls “the tiny
self-proclaimed opposition,” [4] writes this about the crisis:
[…] By the way, the crisis is already beginning to affect
the people. Andrei Illarionov (a prominent Russian economist, former Putin’s
advisor on economics) publishes the official figures of industrial recession
that he calls “disastrous”. Industrial output fell by 6.7% in November alone,
which makes 13% in last five months. This is the worst monthly decrease since
the beginning of the devastating World War II. It is even worse than in early
1990s (that are considered to be a synonym for nightmare in modern Russia) or
during the 1998 crisis.
The gold rivers are dry for the first time since Vladimir Putin came to
power and his government doesn’t seem to be prepared. Salaries and pensions
are not paid in time anymore. In some regions elderly people only got half of
their pension two weeks later and they don’t know when they receive the rest.
The government tries to get more money from the people and raises tariffs,
taxes and duties. This begins to cause discontent among the citizens. In
Vladivostok, several thousands car drivers blocked all the main roads
protesting a significant increase of customs duty for foreign cars. They
demanded cancellation of the proposed reform and resignation of Vladimir
Putin. Their next protest is scheduled for this Sunday.
Streetwise Professor [5] argues that the
pace of the Russian rouble devaluation is too slow, which is bad for the
economy, and that the reason Russia is “boiling the frog by slowly turning up
the temperature gradually, rather than allowing the currency float to a level
that reflects the dismal fundamentals now facing the country” is “almost
certainly domestic politics”:
[…] [6] The most recent–and most serious–protests occurred in Vladivostok
in response to the government’s attempt to protect the imploding domestic car
industry (misery loves company) by restricting imports of used cars.
As Russia has experienced numerous times in its history–think 1905, 1917,
1991–protests of this sort can snowball.
[…]
The car tariff decision reeks of desperation in the Kremlin–and the White
House (on the Moskva). An ad hoc response taken in haste to defuse one problem
creates another. Putin has few good options. With the entire economy
imploding, everybody is hurting, and moves to help one sector will only
aggravate the suffering in others. Such clumsy moves will quickly undermine
the aura of competence surrounding Putin–an aura created by luck (skyrocketing
prices for raw materials and a predictable recovery from an inherited economic
disaster) rather than by any real economic policy acumen. Once this aura
disappears, the potential for protests and disenchantment grows. He has only
made the ultimate reckoning worse by his failure to level with the Russian
people about the seriousness of the situation. How will Putin likely respond?
I think we all know (and dread) the answer–the answer implicit in the
strengthening of the MVD. […]
In another post, Streetwise Professor [7] cites a number of
media stories “that openly discuss the potential for unrest in Russia, and
the government’s likely response to it” - and concludes:
[…] Discontent is rising, albeit slowly, and the authorities are very, very
nervous. What is remarkable is that the full economic impact of the crisis has
not been felt. The layoffs are just beginning. […]
Sean's Russia Blog has [8] more on the drivers' protest in Vladivostok:
[…] While most international reporting has focused on the arrests of some
90 demonstrators at the sparsely attended the Dissenters’ March in Moscow, on
the other side of the country thousands of people paralyzed the city of
Vladivostok for five hours in a protest against taxes on the purchase of
foreign cars. The [9] increase set to take effect on January 11, 2009 will increase
the price of an imported car by 10 to 20 percent.
The action pits the Russian government and citizen against each other in
the form of a classic tax revolt. Ironically, the government’s attempt to
protect the fledgling Russian auto industry from foreign competition has found
its greatest foe among the very people Russia’s economic boom has benefited:
those Russians who now have enough disposable income to buy a new car.
[…]
The protesters can say that their action was a success. They may have been
dismissed by the national television media, but they got the attention of
their intended target: local and national leaders. Today, deputies from
Primorya voted unanimously to appeal to Medvedev, Putin and the State Duma to
reverse the planned tariffs on foreign cars. The Federal Council has already
promised to help the protesters. […]
IZO [10] links to LJ user matroskin-cat's [11] photos from
the Vladivostok protest (RUS).
Window on Eurasia [12] provides translation of some of the slogans that were seen in
Vladivostok:
[…] But perhaps more worrisome to the authorities both locally and in
Moscow were some of the slogans that the protesters carried. Many cars
featured printed signs saying “Separate Moscow from Russia,” and at least a
few had posters saying “Give Vladivostok and the Kuriles to Japan”
[…].
RFE/RL's Russia blog - The Power Vertical - [13] writes this about the crisis-related protests in Russia:
[…] But bread-and-butter issues have greater resonance (and not just in
Russia, of course). And there are indications that the number of
bread-and-butter issues — inflation, unemployment, utility-rates hikes,
officers released from service because of military reform, etc. — that
Russians might become peeved about is on the rise as the economic crisis
unfolds.
[…]
But the Kremlin is sure to recognize the danger of giving in to the demands
of this small protest (about 5,000 people in Vladivostok). In a country with
mounting social tensions and economic problems, with a stage-managed political
system and a tongue-tied media, the last thing the authorities will want to do
is send the signal that the “feedback mechanism” of mass unrest is a good way
of getting a message to Moscow. […]
[14] At Robert Amsterdam's blog, there is “an exclusive translation
from [15] RBK Daily on the preparations being made by the Russian
security forces to handle an uprising or unrest over the economic crisis.”
Also at Robert Amsterdam's blog, there is a translation of a “handy glossary
of politically correct journalistic vocabulary in times of crisis” - and [16] below is a sampling:
“Crisis” - ought to write - “world crisis”
“Threat of devaluation” -
financial crisis in the USA
[…]
“No job openings” - the personnel
shortage in Russia has been overcome
“Oil has gotten cheaper by two” -
prices for gasoline have fallen by 0.37%!
[…]
“I've been laid off” -
I've gone freelance
“Dollar” - the falling-in-the-long-term American
currency
[17] This post at Notes on Moscow shows that the Russian
media may indeed be using the euphemisms quoted above, in one way or
another:
[…] The financial crisis here is entirely blamed on America and excesses of
the West by the media, where the press is allowed to speak only of a global
financial crisis to which Russia has fallen victim, not that Russia has in any
way contributed to its economic issues. […]
