Uncertainty in Moscow

December 24, 2008 Topic: Economics Region: RussiaEurasia Tags: BeslanBlack SeaHeads Of State

Uncertainty in Moscow

Things look somewhat normal in Russia, but the global financial crisis is taking its toll. What impact will it have on the Kremlin’s behavior?


Beneath the façade of normalcy, social and political tensions are brewing in Russia. During a visit to Moscow last week, I was struck that prestigious restaurants were as full as ever, elite boutiques had what looked like a normal share of shoppers and the business-class lounge at Sheremetyevo Airport was crowded with fashionably-dressed Russians leaving for their holiday vacations overseas. In contrast to New York, no major Russian financial institution has gone down so far, and the Russian government has issued regular assurances that it has sufficient reserves in various state-controlled funds to deliver on all of its social commitments to the people. The Russian State Duma, the popularly elected lower chamber of the parliament, is fully controlled by pro-government parties and continues to give President Dmitry Medvedev and Prime Minister Vladimir Putin an unqualified vote of confidence.

Still, traveling by car through the Russian capital's nightmarish traffic quickly reveals signs of trouble. The vast majority of the numerous construction sites appear frozen, with cranes standing idly and no crews in sight; pages of Russian papers are filled with obligatory bankruptcy announcements; and at the Alexander House, one of Moscow's most prominent business addresses, there is no normal line in the cafeteria. Many employees of energy and consulting firms in the building have been put on unpaid leaves of undefined lengths. Nonprofits have been hit particularly hard. Few have any meaningful endowments, and with sponsors disappearing, many public policy and charitable organizations have had to cut their staff and programs dramatically.


With oil prices falling below fifty dollars, the figure on which the Russian budget is based, it is clear that 2009 will not be a rosy time for the Putin-Medvedev leadership. The regime Mr. Putin has built, while authoritarian by Western standards, has enjoyed genuine popular support because the combination of high energy prices and prudent fiscal policy has assured remarkable growth in living standards. During Putin's years in power, per capita income more than doubled. And while political liberties were severely curtailed, personal freedoms have remained largely intact. People could freely select their place of employment, move from one private company to another, travel abroad with very few, if any, restrictions, experiment with artistic shapes and forms without much official interference and even criticize the government without fear of consequences-not just in the privacy of their homes, but on the internet and to a lesser extent, in printed media. . . .


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