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Putin vs Post-COVID Russia

This spring has not been easy for any of us. The COVID-19 pandemic has exposed significant flaws in our neoliberal society on a global scale, i.e., depleted healthcare and public sector, high dependency on commodity prices, domestic inequality, pollution from all various unsustainable economic activities, and etc. The question of how countries plan to gradually face post-quarantine measures to restore the economy is yet to be answered. 

For some authoritarian states, such as Russia, spring was supposed to be a juicy season. The referendum to amend Russia’s constitution to consolidate Putin’s power till 2036, the 75th year of victory over Nazi Germany, and the grand military parade on the 9th of May have all been put on hold. Currently, Russia has the second largest population of infected, after the United States, which is around 262,843 cases, and the peak of the outbreak is сoming soon

On May 11th, Putin went on television to announce news of lifting a six-week nationwide lockdown starting from May 12th, with every regional governor held responsible for how and when the remaining restrictions will be resolved. For instance, the mayor of Moscow, Sergey Sobyanin, said that the capital will remain in the formal lockdown till May 31st, while other small and middle-sized cities are already easing the non-working period.  

This is a testing time for Putin and his elite. Vladimir Putin’s approval ratings have shrunk by 7%, making it 63% in March 2020. Ironically, throughout the ongoing pandemic, Putin has maintained a role of a passive leader, and for the most part, delegated domestic governing duties to others, which is counterintuitive to his image as a man of action. Even the Orthodox church is incapable of compensating for the falling ratings associated with the overall questioning of legitimacy and satisfaction with the current government. 

For the past three months, Russia’s economy has steadily plunged to the bottom, with Russian Central Bank predicting a 4% to 6% drop in GDP in 2020. In March, before the lockdown, Russia had triggered an oil price war with Saudi Arabia, with the Kremlin being primarily interested in capturing a substantial market share and weakening the already-volatile shell sector in the US. Probably, the time for such a move was by far not the best. The crude oil demand fell to just 30m barrels a day. Hence, no recent deal signed on April 10th between the OPEC+ members, including Russia, to cut down production by 10m barrels will do any good in resurrecting the market. 

For a mono-economy, like Russia, this means a recession, and probably far more severe than the 2009 global recession. A lockdown just for four weeks in April has cost 2% of Russia’s GDP or roughly $150m a week. Around 30% of Russia’s GDP account just from the oil and gas sector. The former finance minister of Russia, Alexey Kudrin, predicts that around 8m of people could potentially lose their jobs. Furthermore, ⅔ of the population has no savings, meaning a real struggle can set off. According to Sberbank, services’ consumption dropped by 60%, comparable to 2007 level of consumption, with a total of 6% fall by the end of 2020. 

So far, the Kremlin was pressured to depart from its usual fiscal conservatism and has applied two stimulus packages, accounting around 3% of GDP, but has mainly targeted big firms, rather than small businesses or families forced into poverty. The public has been reacting with opposition towards the current measures, by hosting virtual live protests, angry comments, etc; some even took their criticism to the streets. In Vladikavkaz, people protested over the mass job lay-offs. In response, the Kremlin is preparing a National Recovery Plan by June 1st, targeting small and medium-business bailouts, unemployment payments, medical coverage expenses, etc. 

With roughly $150b in reserves in the National Welfare Fund, the government is keen on keeping it and see how the situation further unfolds. The questions of how long the reserves will last and in what ways the Kremlin can minimize the recovery from a recession are still to be answered. Considering the current public opposition, it remains unlikely that it poses a big threat to Putin’s presidency. History has shown that Russians have an exceptional strength to withstand adversity. All in all, Mr. Putin’s primary focus should be resolving domestic hardships and less concentration on expansionist foreign policies. The current crisis mitigation will set a premise on Vladimir Putin’s potential re-election in 2024. We will keep watching. 


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