February 9, 2016

V. Putin's Domestic Fronts

According to the latest forecasts of experts of the American intelligence and analytical company Stratfor, in 2016 Russian President V. Putin is to face mass protests across the country, first of all because of the difficult economic situation in the Russian Federation. The US analysts believe the Kremlin will give permission for small-scale actions, related to the economy, but will try to avoid large, well-organized protests with anti-Kremlin colouring. Moreover, the anti-Islamist rhetoric of Russia's leadership can provoke ultranationalist riots against migrants, and in September, on the eve of parliamentary elections, the Kremlin will struggle against opposition forces and their leaders, seeking to prevent formation of an organized protest movement.

Let us try and analyze in detail, what really is going on in Putin's Russia?

Despite the bravura statements by the Minister of Energy A. Novak and Minister of Economic Development A. Ulyukayev about alleged “margin of safety”, the implementation of negative external scenarios, in particular, a further fall in oil prices, will end in Russia's entering a phase of new system crisis with devastating social consequences, as the Russian Federation's government cannot provide the approved for 2016 macroeconomic budget targets.

The state budget of the Russian Federation for 2016, developed based on an oil price of 50 US dollars per barrel and the exchange rate of 63.3 rubles for 1 US dollar, has now reached the 30 % level of the deficit.

At the same time, in case of the Kremlin's refusal to cut budget expenses, the Reserve Fund can dry out before the end of this year. Moreover, the predicted by majority of foreign experts retention in oil prices in the next year or two at the level of 25-40 US dollars per barrel threatens the Russian Federation with a default on domestic obligations, the RF Central Bank's turning on the printing press and repetition of the 1998-1999's crisis in anticipation of the new election cycle.

Not long ago, the authorities claimed that the devaluation of the ruble would be an economic driver for Russia. But the reality turned out quite different. The weakening of the ruble destabilizes the most important sectors of the economy and they lose financial resources. Weak ruble together with high interest rates on loans inhibits the production of capital goods and development of infrastructure, which has a negative impact on investment activity and GDP. If the authority decides to target support troubled industries, it will lead to a sharp rise in inflation.

Besides, the experience of 2014-2015 shows that in the situation of implementation of the militarist-imperial foreign policy, Russia's leadership now is not able to provide realistic strategic planning and forecasting. The import substitution policy has not provided the desired results, and the activities of foreign businesses (from countries that have not joined the sanctions) in Russia have not led to any significant advantages that would allow to expand their share in the Russian domestic market.

In view of the above-said, today we can observe the Kremlin's increased attention to the proposals of the liberal wing of the so-called “conservative-democratic camp” from V. Putin's environment, providing for the need in de-escalation of relations with the West, as well as liberal reforms in Russia, or at least simulation of the process of reforming.

A. KudrinAt the level of the presidential administration and the Russian Federation's government, consultations are taking place about the possible appointment of A. Kudrin to one of the key positions (the level — First Deputy Chairman of the government) in the Russian government. The Head of Sberbank of Russia G. Gref also continues his “anti-system freethinking”. At this, A. Kudrin demands powers to “radically change the system of governing the state” and determining for himself a clear program of action and certain political powers, — all this sharpens contradictions in relations between groups of influence in V. Putin's environment. In particular, against the appointment of the ex-Finance Minister, who has 11 years of experience in this work, are D. Medvedev, V. Volodin, A. Gromov, A. Belousov and S. Glazyev.

The widely spread among the pro-Putin elite rumors about possible introduction of an oil embargo and/or blocking of Russia's international reserves placed in securities of western countries, which have not supported the sanctions, do not add to improvement of interaction between different branches of power and seeking for adequate ways to bring the country out of the crisis.

Besides, the degradation of the Russian economy leads to Russia's losing in the eyes of its allies in the CSTO and EAEC project the status of a “donor state”. In view of this, in December 2015-January 2016 the camp of countries-skeptics (Kazakhstan, Belarus) was joined by Kyrgyzstan.

G. GrefSo, the Russian authorities now have fewer, if any at all, effective tools for counteracting the crisis. Besides, the national economy is entering a phase of prolonged recession, which, in case of continued sanctions and low oil prices, may last for the next few years. At the same time, even on a long-term horizon, the current model of the Russian economy will not be able to ensure the resumption of the Russian Federation's potential which it had by the beginning of the Russian-Ukrainian conflict, and Russia's technological lagging behind Western countries will not be overcome even in the long term perspective.

In the context of an approaching worsening of the socio-economic crisis, V. Putin's regime continues to systematically control socio-political processes, especially in preparation for the controlled parliament campaign based on the principle of “no surprises.”

Following the First Deputy Head of the Presidential Administration V. Volodin's concept, “Yedinaya Rossiya” (“United Russia”) will go to the elections with pseudo-right-liberal slogans. And the party “Rodina” and another 7 (seven) parties that, under Russian law, have the right to automatically overcome the pre-election filter, will play the role of satellites to implement the announced by the Kremlin slogan about “competitive, open and legitimate elections”.

 The new head of the GRU of the General Staff of the Russian Federation Ivan KorobovAt this, socio-economic threats related to the stability of Putin's regime, more and more influence the situation in his environment. In particular, relations among the so-called “siloviki” are characterized by growing restraint, suspicion and distrust, which complicate the process of making consensus decisions. Such moods have arisen as a result of fears of heads of security agencies that V. Putin against the background of the continuing transformation of his psychological and emotional state, may proceed to the scenario of “elimination of the unreliable”. In this context, they are alert to Russian president's steps to ensure the leader of Chechnya R. Kadyrov's loyalty to him that looks more like banal bribing the latter. The new lines of conflict have arisen because of the sudden death of senior officers of the Russian Federation, especially of the Chief of the GRU of the General Staff of the RF Armed Forces Colonel-General I. Sergun.

At the same time, Russian sociological centers state that there is a stable trend for worsening of the social self-awareness of Russians and growing of protest moods. Experts also draw attention to public displays of regional separatism due to the demonstration by the leaders of Tatarstan and Yakutia of their unwilling to move in the wake of the Kremlin's policy of “termination of relations with Turkey”, while the leading politicians of Tatarstan openly oppose renaming the post of President of the Republic in accordance with federal law, which had to be done by January 1, 2016.

The situation in the Muslim clergy is also getting more complicated due to the aggravation of confrontation between the Central Spiritual Leadership of Muslims of Russia and the Council of Muftis of Russia, as well as in the relations between religious communities of the North Caucasus because of Dagestan's reluctance to implement the course, declared by muftis of Chechnya and Ingushetia for the general struggle against fundamental Islam, especially Wahhabism.

But the greatest threat to the stability of V. Putin's regime, according to pro-Kremlin experts' estimates, will be not building-up of labor protest activity, but an increase in ethnic tension on the territory of Russia. At this, the Russian Federation's military intervention into the conflict in Syria, as well as exacerbation (because of this) of the relationship with the leading countries of the Sunni Muslim world, in the first rate — with Saudi Arabia and Turkey — and V. Putin's regime's bringing this confrontation into the Russian information space can become an additional catalyst for the growth of the threat of ethnic conflicts in Russia.

The spread of radical Islam raises the potential of inter-ethnic conflicts, even in relatively well-off social subjects of the Russian Federation. Despite the reticence of information by Russian media, escalation of quite small (including everyday) conflicts on ethnic and religious grounds in major cities is already causing a rise in xenophobia all over Russia. A main line of international conflicts is unwillingness of the local population to tolerate national-psychological peculiarities of behavior of representatives of the North Caucasus outside the North Caucasus Federal District.

At the same time, the ongoing economic crisis causes a gradual degradation of the socio-economic situation in most federal districts, offsetting the effects of their competitive advantages and creating favorable conditions for further growth of the potential of ethnic instability in the whole territory of the Russian Federation. According to Russian experts, within the framework of federal districts in the regions of potential inter-ethnic instability there live more than half of the population of the South, the North Caucasus, the Central, Northwestern, Urals and Volga federal districts.

Considering the above-mentioned, and taking into consideration Russia's entry into the electoral cycle of 2016-2018, turning of latent ethnic conflicts into open forms can have multidirectional electoral effect for the ruling regime. Serious risks to stability of the socio-political situation today arise in the territories of key industrial and production centers of the Russian Federation, namely in the Ural and Volga Federal Districts. At this, among the local population can be observed a gradual increase in the popularity of reactionary nationalist forces and political disappointment in the “United Russia”, which is perceived by the Kremlin as an objective threat to the regime, in particular, because of the risk that latent conflicts on ethnic grounds can turn into an open form. In the same context, dangerous is the increasing inclination of the inhabitants of the adjacent to the Ural and Siberian Federal Districts to actively respond to the outbreak of inter-ethnic conflicts in other regions of Russia, which will complicate the situation in the Russian-Kazakh border area.

Implementation by the federal center of the agreed with the elites of the North Caucasus mechanism of controlling republics on the principle of “economic content in exchange for peace”, maintaining control over the situation in breakaway Abkhazia and South Ossetia, as well as preventing the return to Russia of terrorists who have been participating in hostilities in the East of Ukraine and the Middle East, will also need significant spending resources.

So, as rightly states the American financer G. Soros, the state reserves which allow V. Putin to maintain a “social contract with the population” and to lead aggressive foreign policy, will end in 2017, which will be the “year of no-return”.

The future strengthening of sanctions after the decision of the High Court in London for the murder of A. Litvinenko with a direct accusation of the President of the Russian Federation and the collapse in oil prices will force the Russian government to look for new ways of reconciliation with the West up to the Russian side's resorting to a compromise in the “Ukrainian issue”.

This is evidenced by the meeting of the US Assistant Secretary of State V. Nuland with Assistant to the President of the Russian Federation V. Surkov — a typical representative of the so-called Russian “political siloviki” dealing with internal policy and former Soviet territories.

The Kremlin leader should not hope for calm either at foreign or at domestic “fronts”.