Putin faces economic challenges

MOSCOW – As he hits his 60th birthday, Vladimir Putin seems to be in the prime of life: He hang-glides with Siberian cranes, shows off judo moves and exudes supreme self-confidence at Russia’s helm. But scratch the surface and a picture emerges of a surprisingly vulnerable leader whose fate hinges on the vagaries of oil prices and popular docility in the face of strong-arm tactics.

The legacy of Putin’s 13-year rule is an economy that depends entirely on an oil-and-gas bonanza and a rigid political system that has stifled dissent, turned the parliament into a rubber stamp and reduced courts to obedient tools for the government.

Are the Russians getting tired of their macho leader, who celebrates his birthday today?

Not yet, experts say, but many of Putin’s supporters are backing him out of apathy and fear of change rather than genuine enthusiasm. Such support may fade away quickly if energy prices slump, leading to widespread hardship.

Some observers see new repressive Kremlin laws as not merely a response to mass winter rallies in Moscow against Putin’s rule, but a pre-emptive move against a potentially much wider protest over economic worries. Utilities fees and other municipal payments already have risen in the summer, and analysts predict that public discontent will grow in the fall.

Analysts warn that the government would quickly run out of cash to pay wages and pensions if Russia’s energy revenues dry up. Even with the current relatively high oil prices, the Kremlin has been struggling to raise funds for a planned pension reform.

Putin has pledged repeatedly to ease Russia’s dependence on energy exports, encourage high-tech industries, create incentives for small and medium business and improve the investment climate. But oil and gas revenues still account for the bulk of the government budget, while red tape, rampant corruption and courts bowing to official orders have spooked investors and stymied economic development.

“Putin hasn’t moved a finger to change the economic model established during his 13-year rule, and he can’t be realistically expected to make any changes now,” said Stanislav Belkovsky, a political consultant with past ties to the Kremlin.

During the election campaign, Putin made generous pledges to raise wages and pensions, as well as boost social programs and the military budget. Even Cabinet officials have acknowledged that his promises can’t be fulfilled without destabilizing the economy – meaning he could face trouble whichever way he turns.

“We can’t afford to simultaneously maintain a high level of paternalist-style social protection, to keep a very big army and to retain a large share of economy in state hands,” Deputy Prime Minister Arkady Dvorkovich told a business forum last week.

Lev Gudkov, the head of the Levada Center, Russia’s leading independent pollster, said workers at state-owned factories, who back Putin in a hope that the government will continue to prop up their inefficient industries, form the most loyal part of his support base: “These people feel strongly against reforms and modernization and are nostalgic about the Soviet times.”

Putin also continues to enjoy solid support among teachers, doctors and others who receive their wages from the state, but their sentiments are more volatile. “If the situation worsens, they may join the protest movement,” Gudkov said.

Putin has suffered a gradual decline in popularity, but he still enjoys majority support largely thanks to the absence of a strong alternative after years of Kremlin efforts to sideline the opposition.

“It’s a politically passive majority which accepts the existing realities,” Gudkov said.

While running for a third term in March’s election, Putin relied on anti-American rhetoric to mobilize his core electorate, accusing the U.S. of fomenting protests against his rule in order to weaken Russia. He also tried to play blue-collar workers against the educated urban professionals forming the core of massive protests in Moscow, whom he described as members of the coddled elite at odds with the hard-working majority.

After his inauguration, Putin cracked down on his foes with a slew of draconian laws that hiked fines 150-fold for taking part in unauthorized protests, recriminalized slander and required non-government organizations that receive foreign funding to register as foreign agents. Another bill under discussion widens the definition of treason to include handing over information to international organizations.