Will Russia's Crumbling Economy Topple Putin?

Putin's new military doctrine
The ruble is in freefall, prices are sky high. And everyone is to blame but Putin. Sergei Ilnitsky/Pool/Reuters

In recent weeks, President Vladimir Putin has made two big speeches: his annual address to the Federal Assembly on December 4 and his annual press conference on the December 18. Between the two, Russia's worsening currency situation deteriorated rapidly.

On December 15 alone, Russia's Central Bank said it had made $1.961 billion worth of foreign exchange market interventions. That day constituted black Monday—the ruble lost almost 19 percent of its value, and it was followed by an even darker Tuesday.

On the December 16 interest rates were lifted from 10.5 to 17 percent in a bid to stem the currency depreciation. The Russian government has blamed falling oil prices and Western sanctions for the recent economic problems, but flawed fiscal policy and Russia's failure to diversify economically also contributed.

A key question for many is whether severe economic problems in Russia could threaten Putin's position as president. The prospect of further economic hardship, and the government's visible difficulty in tackling it, will bring the government's effectiveness under question.

Read Newsweek's feature story, "Cheap Oil Puts Russia's Economy in Tailspin"

It is easy for the Russian media to manipulate its accounts of the war Russia denies it has been fighting in neighboring Ukraine, but it is impossible to mask the economic issues that are felt by Russian voters on a daily basis. The fervor of patriotism and high popularity ratings for the president will surely wane if the Russian people begin to really suffer economically.

A Russian Maidan?

The idea of popular discontent turning into coherent political protest that could truly threaten Putin's position looks unlikely. According to an October survey by the Levada Centre, an independent polling organization, 81 percent of those asked said they were "unlikely" to participate in mass protests if they were to occur, even if it led to a drop in their standard of living.

The failure of Russian opposition leaders to challenge the political status quo through elections was highlighted by anti-corruption blogger Aleksey Navalny's loss in the 2013 mayoral elections, albeit disputed. Under Putin's rule, broader popular political protest has been relatively unsuccessful in Russia.

The crackdown on the Bolotnaya protests beginning in 2011 may be indicative of how popular protest might be dealt with. Some have placed hope on formerly imprisoned, now exiled oligarch Mikhail Khodorkovsky's chances of returning to become an opposition leader, but it is hard to see currently how he would launch a challenge to Putin from afar.

Obviously, the urgency of the economic situation has intensified since the recent Levada poll, and economics may be a far more powerful catalyst for change than dissatisfaction with the political status quo. There is a layer of society that would certainly like to see regime change from what is perceived to be a system of corruption and economic mismanagement.

However, for the majority, Russia's new prominence in the international arena and reinvigorated national identity since the start of the Ukraine crisis, and Putin's image as a strong leader, means there is a lot riding on both Russia and Putin's success. To admit that their strongman is not up to the job of ensuring stability would be a psychological blow to the population itself, much of which has internalized the rhetoric produced by Russia's media machine. Moreover, a "color revolution" in Moscow would be uncomfortable, as it would place Russia on par with pro-Western Georgia and Ukraine.

In the absence of any political opposition, Putin has others to blame for Russia's current economic problems. His recent press conference demonstrated how he can differentiate himself personally from economic decision-making within the government.

When addressing such issues, he said, "I believe I made it quite clear that the Central Bank and the government are generally taking appropriate measures in this situation. I believe some things could have been done sooner, and this is actually what the expert community are criticizing them for…of course, I see the criticism leveled at the Central Bank and its governor. Some of it is justified, some is not." This deflection of blame onto others whilst simultaneously removing himself to a position apart from "the government" means that there are still internal elements to blame before the president will accept responsibility for the state of the economy.

A consistently effective and much-used blame tactic attributes economic problems to outside factors. In his December 4 speech, Putin maintained the semi-conspiratorial line that the economic problems are due to "speculators" who are "playing on fluctuations of the Russian currency."

Other top officials are happy to echo this. Aleksandr Bastrykin, the head of the Investigative Committee, recently ordered more criminal cases to be brought for currency speculation.

America is also, of course, to blame. Deputy Minister of Foreign Affairs Sergei Ryabkov said "there is no doubt that Washington has purposefully and intentionally had a hand in the creation of complications for the Russian economy." In his Federal Assembly speech Putin also said that, even if Ukraine had not happened, the West would have found a reason to "contain" Russia.

This does not necessarily mean that the general population links economic deterioration with weakness in Putin. There are plenty of other people to look to for scapegoats, both within the government and outside. Although a deterioration of the economic situation will certainly lead to popular discontent, it remains to be seen how that will manifest itself. There are, of course, sections of the Russian population that desire economic reform to ensure stability, but their power to enforce that change is weak.

The Rosneft deal on December 12 demonstrates how the system can be mobilized to protect certain interests and close associates of Putin over others.

But to achieve proper fiscal and economic reform in Russia, it will need an overhaul of the current political system. Given what's at stake for those within the upper echelons of the Russian political elite, such change seems unlikely.

Sarah Lain is a research fellow at the Royal United Services Institute for Defence and Security Studies, London. This article first appeared on the RUSI website.