Signs of a Kremlin Fearful Of Unrest

This is the 12th in a series of reports about the effect of the global financial crisis on Russia.



Sociologist Yevgeny Gontmakher has painted a disturbing picture of what might emerge from the financial crisis.

As Gontmakher sees it, a provincial industrial town will see huge protests after massive layoffs at its main factory next year. The authorities scramble haphazardly to contain the unrest. Violence will spread, ultimately reaching Moscow.

The scenario, published under the headline "Novocherkassk 2009" in Vedomosti last month, is purely fictitious. But it triggered a very real reaction from the authorities. The government's media watchdog fired off a warning to Vedomosti that it was inciting extremism. Vedomosti is part of Independent Media Sanoma Magazines, the parent company of The Moscow Times.

Novocherkassk is a town in the southern Rostov region where Soviet police brutally quashed rioting workers in 1962.

Gontmakher, a deputy social protection minister and Kremlin official in the 1990s, said he had not expected such a response from the government, but the threat is real and growing daily as the crisis takes it toll. "Of course they are worried, and they should be," he said of the government.

Prime Minister Vladimir Putin, on the other hand, has said Russia should be able to get through the crisis with minimal problems. He has repeatedly denied that his government bears any responsibility for the crisis, saying the economic downturn spread from the United States and has infected "all the economies of the world."

But Gontmakher is by no means alone in arguing that Russia's political stability, seen as a major achievement of Putin's eight-year presidency, is deceptive. The crisis has already led to a wave of layoffs across the country, despite the fact that Russian companies traditionally reduce wages before shedding staff.

Putin himself acknowledged in his televised question-and-answer session last week that the number of unemployed workers was expected to increase next year to "a little over 2 million" from the current 1.7 million.

In another sign that the government is nervous about disorder, President Dmitry Medvedev last month ordered law enforcement agencies to stamp out any social unrest linked to the crisis. "If someone tries to exploit the consequences of the financial crisis ?€¦ they should intervene, bring criminal charges. Otherwise, there won't be order," he told senior police officials at a public briefing in St. Petersburg.

Incidentally, Putin and Medvedev visited Novocherkassk this February and laid flowers at a stone in memory of those killed in 1962.

Vladimir Ryzhkov, a former independent State Duma deputy and liberal opposition activist, said much of the crisis has been brought on by the government and its refusal to deregulate the economy, be held accountable by the parliament and allow political competition.

"This crisis did not arise because of events in America. It arose because of [the government's] mistakes," he said.

Ryzhkov said Russian companies would not have secured so much foreign debt during the last three years ?€” decisions that now have led the economy to the brink of bankruptcy ?€” if the parliament had been given oversight over the government's actions. He singled out Medvedev and Deputy Prime Minister Igor Sechin as being particularly responsible for the current financial straits, noting that Medvedev, who was chairman of Gazprom before acceding to the presidency this spring, and Sechin, Rosneft's chairman, had overseen heavy foreign borrowing by the two state corporations over the past three years.

Yet opinion polls indicate that the government faces little public discontent. Trust in Putin stood firmly at 59 percent in late November while trust in Medvedev dipped slightly from 45 percent to 44 percent, according to a survey by state-run VTsIOM. The poll had a margin of error of 3.4 percentage points.

The government's popularity will depend largely on its ability to stave off the crisis, said Nikita Belykh, the former leader of the Union of Right Forces, who this week was nominated by Medvedev to become the governor of Kirov.

"The Kremlin has enough money to keep the situation under control for a few months. But in the medium term, political changes are inevitable, and there will be clashes between powerful political groups," Belykh said.

Two factors in the government's favor, he said, are its ability to control information through state media and Russians' tendency to be apolitical. However, popular anger against the authorities could increase considerably because the public is feeling increasingly alienated from the country's leadership, he said.

Ryzhkov said the crucial question was whether the government could balance the budget over the first half of 2009. "The turning point will come when they cannot pay off state corporations' gigantic debts anymore," he said.

The government's financial capabilities are largely linked to oil prices, which have fallen to less than $50 a barrel from a high of $147 in July.

"If oil falls below $20, there will be a revolution," said Vladimir Pribylovsky, a political analyst with the Panorama think tank.

He said Putin's popularity rested on the fact that ordinary people had gotten a share of the riches, in stark contrast to the 1990s when a tiny minority got very rich while the majority sank into poverty.

"Crises will break out left and right if the Kremlin oligarchy can no longer share the wealth with the people," Pribylovsky said.

While the economic boom of recent years has increased the real incomes of most people, inequality levels have not come down. Moscow's Gini index, a scientific standard for measuring income distribution, is estimated at 0.6, making the capital one of the world's most unequal cities.

Putin's popularity is almost entirely built on the economic boom, so it could crumble if the economy goes bust, said Olga Kryshtanovskaya, a sociologist who tracks Kremlin politics. "Everyone was happy as long they got government money," she said.

That puts the government in the difficult position of how to trim spending. Cuts to the public sector would upset bureaucrats, while cuts to defense would anger the powerful siloviki.

The government has shown reluctance to speak out openly about the crisis after many people saw their savings vanish in two previous crises ?€” the Soviet collapse in 1991 and the 1998 default. The authorities "only have two choices ?€” to lie or to create a panic. In 1998, they chose the truth and panic, and the result was very bad," Kryshtanovskaya said.

In late November, the Economic Affairs Committee of the Council of Europe's Parliamentary Assembly warned that a global recession would threaten "to undermine the very foundations of democracy" in many countries.

Interestingly, the government appears to have stepped up its efforts to rein in opposition groups. Last month, remnants of the Union of Right Forces, or SPS, were folded into a new pro-business party called Right Cause, a move that is widely seen as a Kremlin attempt to round out the political spectrum with obedient parties.

Belykh, who resigned from SPS saying cooperation with the Kremlin was unacceptable, raised eyebrows in liberal circles this week with his decision to accept Medvedev's invitation to become governor.

Ryzhkov said that even though Russia's opposition was weak and divided, there were people in the regions who were willing and able to challenge the government. "I will not name anyone, but I can tell you that there are terrific specialists on economic and political reform who could make up a Russian dream team that would fix the flagrant mistakes made by Putin's people," he said.

In the meantime, people are wondering how bad matters will get. Harald Leibrecht, a German lawmaker with the liberal Free Democrats and deputy chairman of the German-Russian parliamentary group, said the Vedomosti incident showed that the situation was not as rosy as depicted by Putin and Medvedev.

"It is very strange but telling" that the newspaper received the warning, Leibrecht said in e-mailed comments.

The warning is probably linked to government fears that the country might slide into the chaos of the 1990s, he said.

The media watchdog, the Federal Service for Oversight over Communications and Mass Media, has the power to ask a court to revoke a newspaper's license after issuing two warnings. But Vedomosti lawyers have decided that last month's warning did not qualify has an official warning but as a reminder.

In any case, the head of the watchdog, Boris Boyarskov, was dismissed last week by Medvedev after four years in the post, Interfax reported Wednesday. The circumstances behind the decision were unclear.

Previous reports in this series can be found at www.themoscowtimes.com.