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By Leonid Bershidsky,
Bloomberg,
5 April 2017

Putin Is Up, But Russians Are Feeling Down

Russia`s long recession is officially over: In the fourth quarter of 2016, the country`s economy grew 0.3 percent, and growth appears to be continuing. Consumer sentiment is in positive territory for the first time since 2014. The numbers indicate that President Vladimir Putin`s Russia is regaining some of its lost economic optimism.

And yet it doesn`t quite feel that way. It`s the anti-Putin opposition that seems more encouraged than the Kremlin.

The nationwide anti-corruption protests of a week ago, called by the crusading lawyer Alexei Navalny, weren`t numerically impressive. That means they weren`t directly dangerous to the Kremlin. But Putin is clearly taking the feeble revival of the protest movement seriously. Last week, he spoke out against the anti-corruption agenda:

I consider it wrong when political forces try to use this tool for their own promotion and not to improve the situation in the country. This is the tool of the Arab spring: We know quite well where it has led. It was also the pretext for the coup d`etat in Ukraine that plunged the country into chaos.

The comparisons appear alarmist for someone as cautious about empowering his enemies as Putin. That`s a gift to his scattered political enemies, who feel the momentum is with them. Because of the March 26 protests, "The political situation in Russia has radically changed," wrote former world chess champion Garry Kasparov, who is normally no fan of Navalny but is an even greater foe of Putin. "No matter what Navalny and his supporters are thinking, their actions have led to the serious destabilization of the government and are laying the ground for a revolutionary situation."

Former oil magnate Mikhail Khodorkovsky, a Putin foe living in Europe who is persona non grata in Russia and who funds anti-Putin activities in his home country, also appears to feel energized by the protests and is calling on his supporters to take to the streets on April 29. There are reports of a growing farmers` protest movement in the south of Russia. In St. Petersburg, many residents are angry about the city`s plan to hand over one of its most famous landmarks, St. Isaac`s Cathedral, which is now a museum, to the Russian Orthodox Church.

Navalny, jailed for 15 days for organizing the protests, will probably try to build on his relative success as soon as he comes out.

Many observers expected protests to grow in 2015 after the twin blows of steeply falling oil prices and Russia`s decisive split with the West following its annexation of Crimea. But Russians sat out the worst economic times as Putin fed them promises of improvement within two years and news of Russia`s growing international power.

The economic promises have been kept, at least on the surface: Decline has stopped. In the first quarter of this year, the Russian Central Bank predicts gross domestic product growth of between 0.4 and 0.7 percent. The Bloomberg consensus forecast for this year is a 1.2 percent increase in economic output, and the Central Bank says it may even reach 1.5 percent if oil prices don`t drop. Domestic consumption declines, which largely caused the recession of 2015 and 2016, are continuing, but are not as steep as before. So why are Russians restive?

A March survey by the Levada Center, one of the few polling organizations in Russia that have remained independent from the Kremlin, provides some clues. Immediately after the Crimea annexation, a bigger-than-usual share of the Russian population felt that the government needed support during a tough situation. That effect has run out by now, and people don`t feel the government is doing enough for them.

Russia`s geopolitical wins of 2016 -- in Syria, for example -- weren`t linked to any improvements for ordinary Russians, and were mostly advances that don`t seem to be backed by continued success this year. The economy is stagnant and corruption is still rampant. There doesn`t appear to be a clear purpose to Putin`s policies.

To counter the trend, Putin and his entourage need to paint an attractive picture of the future. The protesters -- and, apparently, an increasing number of Russians -- see them as time-servers whose primary concern is their own welfare. That`s why Navalny`s corruption investigations resonate. But the Kremlin is making little effort to explain where it`s trying to take the country. Instead, there are signs that a dead end is ahead

In a strategy document last fall, the Russian state agency that administers the country`s mineral wealth pointed out cautiously that oil production -- which provides the most important share of the government budget -- will start dropping after 2020 unless the oil industry starts going after more hard-to-get oil reserves, something that requires investment, advanced technology and higher export prices. Experts without links to the government have described the problem in starker terms: Mikhail Krutikhin of the consultancy RusEnergy predicts that after 2022, oil production will be dropping 10 percent a year, until Russia only produces enough for its own needs in 2035. Andrei Movchan, who heads the economic program at the Carnegie Endowment`s Moscow think tank, has backed Krutikhin`s assessment, saying that in 10 years Russian might be in danger of disintegration because of falling energy revenues.

The gloomy predictions have been widely shared on the social networks, and though the government denies the possibility that oil revenues will dry up anytime soon, Russians, especially younger ones, increasingly ask themselves what lies ahead. Recent data show that, unlike any other age group, a plurality of Russians between 18 and 24 do not show a preference for working in the public sector -- under the Putin regime, all other prospects appear dim.

Putin faces re-election next year, and though the Kremlin will, as usual, employ all its resources to skew the vote in his favor, he still needs to think about communicating some sort of hopeful message to voters. Otherwise he has to rely on playing up Russians` sense of danger. Events such as Monday`s apparent terror attacks in the St. Petersburg subway make that possible, but depending on them for electoral success would be too cynical even for Putin.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Leonid Bershidsky at lbershidsky@bloomberg.net
To contact the editor responsible for this story:
Jonathan Landman at jlandman4@bloomberg.net


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