Despite economic woes, propaganda and patriotism have protected Russia's President—so farby Amy Knight / November 13, 2014 / Leave a comment
Published in December 2014 issue of Prospect Magazine
The Russian economy has been in a downward spiral for several months, with inflation now at 8.3 per cent, food products disappearing from shop shelves, capital flight from the country accelerating, its Gross Domestic Product declining and the value of the rouble at a four-year low. Yet Russians, for the moment at least, are more satisfied with their President than ever before. Putin’s approval ratings are over 80 per cent and surveys conducted by the independent Levada Centre over the past two months show that more than 60 per cent of Russians are content with the direction in which the country is going.
In the past, oil revenues have bolstered public support for Putin; during the 2008 financial crisis when the oil price declined, soaring prices, wage cuts and job losses led to public discontent. But the government weathered the storm by spending $200bn of its reserves, and oil prices bounced back, providing the Putin regime with a steady stream of capital to support state-funded welfare programmes, pensions and subsidies to unprofitable sectors of the economy.
Now the Kremlin is confronted with another drop in the price of oil, to around $83 a barrel. Since oil revenues account for more than 50 per cent of Russia’s federal budget, the government will again have to rely on its reserve fund to maintain a balanced budget. The consequent decline in the rouble’s value has forced the central bank to raise interest rates to counter the impact. Western sanctions against Russia because of its involvement in the Ukraine crisis have accelerated economic difficulties, especially because the sanctions have limited access of Russian banks and companies to financing abroad.