The Present Stability of Putin’s ‘Sistema’

by Gordon M. Hahn

Although 2016 will be a challenging year for Russia’s political stability, there is little likelihood the country will experience serious political tremors. The worst case scenario is a something akin to the demonstrations of winter 2011-2012 in the wake of the September Duma elections. A perfect storm is over the horizon but is still distant (2019) and can be avoided in the mid-term or at least delayed into President Vladimir Putin’s fourth term (2018-2024). Political stability will depend on two political factors: the unity of the ruling elite and the non-mobilization of society.

Despite the challenges that Russia’s already mid-length economic crisis has posed for currency reserves, state enterprise income, budget revenues and political patronage, Putin’s so-called ‘sistema’ retains sufficient resources for the near-term in order to maintain political unity through the year. Most fundamentally, according to Russia’s Central Bank, if Russia’s sovereign funds continue to be spent to support deficits at the pace planned for 2016, then Russia’s rain day funds—the Reserve Fund and National Welfare Fund—will be exhausted in early 2019 [См. Банк России, Обзор финансовой стабильности: II-III кварталы 2015 года, декабрь 2015, стр 41]. One way to better avoid an economic meltdown would be to carry out the long promised major privatization drive. The government could raise tens of billions instead of the billions of dollars if the planned new round of privatization would go beyond the announced offerings of two state-owned oil companies, Rosneft and Bashneft, the major shipping firm Sovkomflot, and a few other goodies and instead resulted in a major economic restructuring that boosted the private sector’s share of the Russian economy.

However, Putin’s preference in building the Russian economy has run precisely counter to any pro-market restructuring of Russia’s economy. This is perhaps Putin’s Achilles heel in the long-run, as it was Mikhail Gorbachev’s and other ultimately failed leaders in Russia and elsewhere. Moreover, the economy’s downturn has faded, and growth is expected next year, making any serious structural reform unlikely. This also means that a regime-threatening economic meltdown, despite forecasts of continued low energy prices, is unlikely for the remainder of Putin’s third term, with presidential elections set for 2018. There are, however, several caveats to this limited potential for a meltdown. Some financial experts do not rule out a crisis in the banking sector involving massive bank closures; something that becomes likely in the event of an international financial crisis, which also cannot be excluded given the Federal Reserve’s decision to issue a series of rate hikes through 2016. Putin’s recent move to bring former Finance Minister on board to design an economic plan for the next few years suggests that the administration will be focused on the banking sector’s stability.

In sum, in lieu of such economic woes, the unity of the regime’s ruling clans is ensured for duration of this year and next. The regime figures who are more interested in rent-seeking than ideology and politics remain firmly on board. However, the economic crisis combined with the upcoming federal elections has put some strain on the system. So we see some fraying of regime unity at the edges. The most likely victim during the early stages of any regime split is the pro-Kremlin ‘Yedinaya Rossiya’ (United Russia) party or YeR. The YeR’s decision to hold primaries for selecting Duma election candidates is creating new stresses on a party that has experienced declining public support in recent elections. At a certain point, YeR’s declining electoral performance could require so much election rigging that it will spark another protest movement similar to that born in the aftermath of the December 2011 Duma elections. The strain of primaries was recently on display in some regions already, for example in Yaroslavl.

At present, however, fraying of the regime is marginal. To the extent it is occurring at all, it is confined largely to the ideological fringes of Putin’s coalition. Thus, ethno-nationalists and liberals have demonstrated the greatest tendency to stray off the reservation. SberBank Chairman German Gref’s comments at the St. Petersburg Economic Forum in January was the most serious sign of elite dissent since fellow liberal Kudrin defected from the regime in September 2011 and appeared at opposition demonstrations in winter 2011-2012, the last serious moment of political instability in Russia. Gref’s call for a complete overhaul of the entire system reiterated Kudrin’s sentiments and reflected those of most of the regime’s liberal civiliki.

It should serve as a warning to Putin and the siloviki that any sharp turn towards a harder line is fraught with mass defections of regime liberals to the opposition camp. A similar development during the perestroika era undermined Mikhail Gorbachev’s hold on power and encouraged hard-liners to make their move against him in 1991.

Other intra-elite tensions appear to have more to do with identity politics and perhaps growing nationalism whipped up as a result of the Ukrainian and Syrian crises than with any impending resource deficit at the feeding trough. Chechnya President Ramzan Kadyrov’s likely involvement in the assassination of Boris Nemtsov and recent threats made against liberal ‘fifth columnists’ such as Mikhail Kasyanov seem to be dictated by his Chechenness and sense of impunity as Putin’s lone guarantee of a stable Chechnya and North Caucasus. Given multiple foreign policy crisis, Putin can ill afford a shaky security situation on the homefront, making him even more dependent on Kadyrov than vice a versa.

Deputy Prime Minister Dmitrii Rogozin’s speech several months before a neo-Nazi demonstration on Moscow’s outskirts in which he expressed alarm at Chechens’ alleged growing influence seemed to be a scouting foray to feel out the prospects for ultra-nationalist politics as the federal elections approach. However, it is unlikely that the possibility of diminishing defense spending in coming years motivated Rogozin.

This fraying could be exacerbated this year and next as a result of the stresses on the system created by the Duma elections upcoming in September. But the more moderate statist core within the elite remains intact.

Some in Washington, such as the Washington Post, were encouraged when Levada Center surveying in March registered a drop in Putin’s popularity from 83 to 73 percent (www.washingtonpost.com/news/worldviews/wp/2016/03/21/russias-remarkable-trust-in-putin-has-been-shaken-poll-finds/). More recent polls, however, show Putin’s approval rating rebounding and an overwhelming majority of Russians ready to vote Putin a fourth presidential term in 2018. According to VTsIOM’s figures, 82 per cent of Russians now approve of Putin’s activity and 84 per cent do not exclude voting for him in 2018. (www.vedomosti.ru/politics/articles/2016/05/05/640026-putinskoe-bolshinstvo-ukreplyaetsya-nevziraya-krizis). Those expecting Putin’s imminent overthrow by a revolution from below, therefore, have at least a couple more years to wait.