Russia’s Economy is dying from Cheap Oil
Perhaps we should be more careful what we wish for. Two desires many people have had in recent years have been cheap oil and the end of Russian President Vladimir Putin’s noxious political career. Unfortunately, the world now has cheap oil, and low oil prices could soon put an end to Putin.
Russia’s economy is currently in complete meltdown. The ruble has lost 12% of its value since the beginning of the year, a period of less than three weeks, because oil prices have been plummeting, The Washington Post’s Wonkblog noted. The cause of the ruble’s devaluation is simple: oil has lost 75% of its value in the last year.
Among other things that caused Russia’s economy to shrink by 3.7% in 2015, and the International Monetary Fund (IMF) expects it to shrink even more this year, is the fact that Putin’s government has already announced a 10% cut in spending because it simply lacks the tax base to support spending.
Truly worrying for Putin should be the fact that average Russians have seen their incomes fall by 9% in the last year, even though Putin has claimed the economic crisis is over. He apparently based that ludicrous statement on the fact that some economists had expected Russia’s economy to shrink by 3.8% rather than 3.7%.
The .1% will not make much difference to average Russians who see the economy dying right before their eyes. Retail sales in the country fell by 15.3% between December 2014 and December 2015, according to The Telegraph. One has to wonder how long it will be before this ignites protests and calls for political change.
Is this the End for Vladimir Putin?
The next casualty of this crisis could very well be Vladimir Putin’s political career. Putin’s support is based on handing out oil money to the voters in the form of pensions and other benefits, but what happens when it dries up?
So far, Putin has clung to power with a combination of nostalgia, coercion, and bribery to powerful special interests, including the military, the Russian Orthodox Church, and the remains of the Communist security establishment. He’s also done a pretty good job of distracting the Russian people with nostalgia for Russia’s past glories and military adventurism, particularly in Syria.
Polls reveal that this edifice rests on extremely shaky ground because the majority of Russians hold views opposed to Putin’s. For example, Putin maintains that the tomb of the founder of the Soviet Union, Lenin, in Moscow should remain open as a monument to Communism, even though polls reveal that 61% of Russians would like to see the mausoleum closed and Lenin given a Christian burial. Despite that, Putin has said in a public speech that Lenin’s body should remain on display, probably to placate diehard Communists in Russia’s military establishment.
What Comes After Putin?
This means there could actually be little or no popular support for Putin, so even a modest crisis could bring him down. That means we need to ask who or what would replace Putin. The democratic opposition seems leaderless and disorganized. Russia’s Communists are organized, but they are also an obnoxious and unpopular minority. Part of the reason why Putin has stayed around is that there is no real alternative to him.
A strong possibility is that Putin will be quietly pushed aside and the Russian Orthodox Church and its allies in the Kremlin will put forward a new younger leader. A historical parallel could be in the career of the obnoxious Soviet leader Nikita Khrushchev, who was ordered to “retire” after the debacle of the Cuban Missile Crisis.
The problem is that the new leader might not be able to maintain political stability in Russia. Economic collapse could lead to political collapse and chaos. That should concern us because Russia still has several thousand nuclear weapons – 1,582 of which are deployed, which means that they can be fired – according to Armscontrol.org. It also has some of the world’s most advanced military technology, including robotic tanks.
Hopefully, we will not end up being nostalgic for the good old days when Vladimir Putin at least maintained an illusion of order in Russia. Cheap oil could soon bring him down and cause the Russian Federation to collapse in the process.