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Russia’s Crisis Policy

by Gordon M. Hahn


Russia is on lockdown until mid-May at least. The May 1st and sacred May 9th Victory Day celebrations are postponed. Russia has more than 100,000 COVID-19 cases, including infected Prime Minister Mikhail Mishustin and more than 1,000 deaths. Russia’s oil revenues have collapsed due to free-falling oil prices. The population is on lockdown, euphemistically called “self-isolation.” As a result, Russia’s economy, like the rest of the world’s is on its way to a recession, if not a depression, and the country’s fiscal sustainability is under threat. The world, including Russia, has overreacted to the pandemic, in my view, but Russia’s response is in the mid-range of countries between ‘libertarian’ (Belarus and Sweden) versus ‘totalitarian’ (China) response modes. It is consistent with President Vladimir Putin’s centrist, balanced, if authoritarian approach to politics and policy.

Some myths are being propagated: that Putin is hiding, sloughing off responsibility to others, and providing little to no support to the population or sectors thereof during the crisis. The reality is quite different and more complex, but the crisis bodes ill for both Putin, Russia, and the world. It remains unclear who will remain standing once the multiple pandemic, oil, and economic crises have had their say.

Is this report a real fake?

Political Myth and the Reality of Russia’s COVID Response

Some are arguing that Putin has avoided responsibility in responding to the crisis and has laid all into the laps of the regions’ governors. Forgotten apparently is that it was his presidential ukaz (decree) that initiated the 30-day working ‘holiday.’ An opposition writer, Liliya Shevtsova, wrote: “Putin also demurred from addressing the nation for several weeks….Hiding in his residence in Novo-Ogaryovo….Putin finally addressed Russians on April 29″ ( In fact, by April 29th Putin had addressed at least twice on television and appeared numerous times by videoconferences distributed on the web and archived for viewing on the same day at the Kremlin website. Putin’s first address to the nation on COVID came on March 25th ( By the end of that day, Russia had at most 700 cases; it had experienced the coronavirus death on March 19th ( If he addressed the nation ‘several weeks’ earlier than he did, as Shevtsova thinks he should have, he would have been probably the only world leader to address his country more than two weeks before the country had seen its first case.

Shevtsova also claimed: “The Kremlin has elected to stay above the fray, putting all responsibility for combatting coronavirus on the government and the regions” (my emphasis). To be sure, the governors were given leeway in deciding to what extent if any the work of business enterprises, other organizations, transport etc. would be curtailed. Yarolsavl’s governor chose to take no measures mimicking Belarus and Sweden. Tatarstan and then several other regions instituted the requirement of a QR-code as a permit for leaving one’s residence. Some regions banned the sale of alcohol; some – transportation from outside their region, which was immediately criticized by Putin and other federal officials. In fact, as I make clear herein, Putin and the federal government have been very hands on in organizing the government’s response to the crisis and has appeared several times on television and several more on the Internet addressing the public about the government’s measures.

Another claim came in a recent Carnegie Moscow Center piece asserting that there is no federalism in the distribution of authorities Russian President Vladimir Putin put in place in response to Russia’s own COVID-19 epidemic ( Central versus local control has been a ticklish issue for many governments. The U.S. has seen President Donald Trump overstate his constitutional authority on epidemiological-health issues, a good deal of state-level policymaking and implementation, and efforts by state governors to push responsibility upwards to Washington and Trump. In Russia’s less robust federative system, the problems are different. The same Carnegie Moscow Center piece sees Putin shirking responsibility by delegating powers regarding the specifics of quarantines and the like in the regions. However, it was Putin’s decision to delegate power, and should governors prove inept at dealing with COVID he could still be held responsible. And again, the federal government is playing an active role, and Putin has now made three or four addresses dealing with the crisis and its economic fallout. Try as he might, but Putin will be loath to shirk responsibility in this crisis. He knows he cannot afford to do so in terms of both administrative and political effectiveness. Russia’s so-called ‘sistema’ is his. He largely made it, and he will sink or swim with its effectiveness or lack thereof in this, the biggest crisis of his career or at least since August 1991.

Moreover, the Russian constitution and law allows for considerable federalism and decentralization should the chief executive choose to facilitate them, even after 20 years of Putin’s re-centralization efforts. This is especially true as regards what is usually the very local and not very politically sensitive issue of epidemics. According to the relevant federal law, the federal government has authority over sanitation-epidemiological (S-E) issues regarding the determination of the “basic directions” of policy, the adoption of laws related to S-E policy, and the “introduction and termination of restrictive measures (quarantines)” ( But Russia’s regional authorities have the power to adopt regional S-E laws and “to introduce and terminate restrictive measures (quarantines) on the basis of proposals and prescriptions of head state sanitary doctors and their assistant heads” ( Moreover, article 5 of the relevant federal law also allows the federal government to transfer federal authorities on S-E issues to the regions ( The law on transfers of authority requires the federal authorities to send through the government to the regional legislatures and executive bodies a list of powers to be transferred. The regional bodies then have 30 days to send reviews or commentary (otzyvy) of the transfer plan, and the regions’ reviews must be considered by the federal government. Thus, the process envisages a certain amount of potential negotiation on such issues, though such consultations may be quite limited, at least in normal situations, given Putin’s personal power and authority (

Thus, it appears that contrary to the view that there is no federalism involved in Russian President Vladimir Putin’s delegation of authority in dealing with COVID to the regions, the distribution of powers between the federal and regional authorities is following precisely the federative process envisaged in the Russian constitution and present Russian law. To be sure, Russian federalism has been weakened considerably under Putin’s overwrought attempt to rein in the chaos of unofficial asymmetry in Russia’s hyper-federative, de facto confederative ‘system’ under Yeltsin (Gordon M. Hahn, “The Russian Federation,” in Barry Rubin, ed., Guide to Islamist Movements Vol. 2 (Armonk, N.Y.: M.E. Sharpe, 2009), pp. 493-518; Gordon M. Hahn, “Russian Federalism under Putin,” in Stephen White, Zvi Gitelman, and Richard Sakwa, eds., Current Developments in Russian Politics – Vol. 6 (Durham, NC: Duke University Press, 2005), pp. 148-67; Gordon M. Hahn, “The Impact of Putin’s Federative Reforms on Democratization in Russia,” Post-Soviet Affairs, 19, 2 (April-June 2003), pp. 114-53; Gordon M. Hahn, “The Past, Present, and Future of the Russian Federal State,” Demokratizatsiya, 11, 3 (Summer 2003), pp. 343-62; Gordon M. Hahn, “Putin’s Federal Reforms: Integrating Russia’s Legal Space or Destabilizing Russian Federalism,” Demokratizatsiya, 9, 4 (Fall 2001), pp. 498-530; and Gordon M. Hahn, “Putin’s ‘Federal Revolution’: Administrative Versus Judicial Methods of Federal Reform,” East European Constitutional Review, 10, 1 (Winter 2001), pp. 60-67). Nevertheless, on less political issues – such as S-E policy usually is – there remains a significant residue of federative relations in Russian government. From Yeltsin’s hyper federalism Russia arrived under Putin to a semi-federative system, but in the case of COVID and S-E authorities it si working at least for now.

The same Carnegie Moscow Center piece claimed that the added responsibility placed on governors subjects them to a “new level of non-freedom,” since they “have not received any new possibilities – neither financial, nor political.” Russia compares poorly with Europe, the leaders of which, in the Carnegie assessment, “are introducing quaranties and supporting business and the population with payments” ( Of course, Putin has instituted a quarantine, only he called it a holiday in tongue-in-cheek fashion and governors are free to implement one in their regions or not and almost all are. In terms of financial assistance to the regions, budget support from the federal government to regions in connection with the crisis will amount, as of now, to R200 billion ($2.5 billion) and include the postponement or restructuring of budget credits as well as direct support for balancing regional budgets ( Regarding the lack of any new ‘political’ powers for governors, what can this mean in the context of a pandemic when the federal government has called for a nationwide quarantine but left it up to governors whether and how to implement one? What politics can there be? Mass gatherings are banned (though they are occurring). If politics is defined as the struggle over policy and power and any power struggles that occur in Russia (limited competitive politics plus internal bureaucratic ‘crypto-politics) largely must be on hold, then only policy is left. For the crisis, Putin gave the governors considerable local control over coronavirus policy in their regions, financial resources, and other forms of support. With this, some governors went so far as to close their regions to transportation from other Russian regions. To be sure, they were rebuked and rightly so by Putin and Prime Minister Mikhail Mishustin and they repealed such closures (, but this demonstrates that not only have the governors received ‘new’ authorities to deal with the crisis but that at least some governors are willing to take an independent, even bold tack.

Economic Realities

As is his wont, Putin maintained flexible response to the crisis as it unfolded. This allowed accusations to emerge that he was refusing aid to small and medium-sized business in an attempt to stamp out the private sector and/or his political opponents ( Putin’s first response was to propose rather limited assistance to small, medium-sized, and private businesses. State and state-tied companies and institutions (including government workers) would continue to pay employees their wages, covering perhaps two-thirds of the country’s population. The Government put in place a set of measures designed to address issues facing small and medium-sized businesses. The most important were: six-month deferrals on payments for taxes on profits, loans and insurance; interest-free credits; a temporary ban on inspections; and more forgiving bankruptcy rules, including a six-month moratorium of bankruptcy declarations; and expansion of the number of bankruptees whose debts can be written off as impossible to make payment on (,, and

However, as the scale of the crisis in Russia became more apparent, the government shifted course and stepped up assistance, introducing a second wave of economic assistance followed by a third more robust installment (compare with The larger second government program includes: lowering of insurance contributions from 30 to 15 percent for small and medium-sized businesses with monthly salaries above the minimum living wage, costing the federal budget R350 billion ($4.2 billion) this year and another R80 billion ($1.1 billion) in 0 percent credits to assist small and medium-sized businesses to pay minimum living wages to employees for companies who retain 90 percent of their pre-crisis work force (Finance Ministry estimates this will help 970,000 companies and individual entrepreneurs) (

It is worth looking at the government’s economic assistance measures in detail. The government’s second package included six programs for businesses, and several were up and running before April 15th, according to government officials. Together they will provide R1.5 trillion. Three of the programs target individual entrepreneurs and small and medium businesses. The first of the three main programs for individual entrepreneurs and small and medium businesses – the credit holiday – provides relief to creditors to allow borrowers to postpone debt and interest payments for six months. Eligibility for postponement requires a 30 percent drop in monthly income. According to first deputy premier Andrei Belousov in his report to President Putin, this program has proven very popular, attracting 100,000 applicants, of which 39 percent had been approved and were already receiving assistance by April 15th. The second program, called ‘1/3-1/3-1/3’, involves a deferral of debt payments for six months and a payment by the borrower of one-third of the interest on the debt with the potential to capitalize it. The other thirds are to be paid by one of 12 participating banks and the government. It had seen only 0.5 percent participation by those eligible compared to 39 percent participation as of April 21st and is apparently being used only by those who are ineligible for the first program. The third and final program for individual entrepreneurs and small and medium businesses is to assist them in paying salaries with interest-free loans to provide employees with the official minimum living wage for six months on condition that there is no reduction in the enterprise’s personnel for that period. This is similar to a U.S. program, except for the considerably important difference that the Russian payment is not a gift that does not need to be paid back but a loan that must be repaid even if there is no personnel reduction. Almost R14 billion had been paid out to approximately 6,000 approved applicants under this program as of April 21st, according to Belousov ( and In addition to the above there are smaller efforts such as a deferral for payments for rented urban real estate, a 50 percent discount on other rental payments for companies in sectors badly affected by the crisis, and a postponement of the deadline for payment of trading fees to the end of the year.

The three programs for larger entities under the second package include assistance to banks to cover the deferral of loans payments granted to businesses and to the construction sector. The first (fourth overall) was still being launched last week and will benefit up to one thousand large ‘system-forming’ companies and comprises two-thirds of the total ruble assistance envisioned under the six programs planned so far. It will provide low interest credits (the Central Bank’s 6 percent key interest rate) for a year to cover the average monthly turnover of funds in order to cover liquidity of these companies as economic activity slows. The second program (fifth overall) stipulates a special mortgage interest rate of 6.5 percent to be introduced by November 1st. The government estimates this will draw from banks at least R900 billion into the construction sector, with any additional funds of up to R80 billion to be provided by the government directly. The sixth program will provide R12 billion for subsidized interest rates for developers. ( and To replenish the now leaking budget and discourage the expatriation of funds, the government instituted a 15 percent tax on transfers of funds out of the country and a tax on those with investments in bonds exceeding a million rubles to the tune of 13 percent on income from such investments.

There was also coronavirus crisis-related federal assistance to individuals and families, including: sick leave and unemployment benefits are being raised to the minimum living wage; a six-month automatic extension of all benefits and subsidies without the need to apply; an increase in unemployment benefits and social welfare payments to families with young children in response to the coronavirus crisis in addition to recent increases made when he announced his constitutional gambit in January. The government has moved to expedite the issuance of sick leave permissions and payments for those in quarantine and self-isolation ( In addition, the Moscow city government is pledged to cover all salaries in the city, but Moscow is very likely the only regional government that can afford such a measure. Moscow holds some 7 percent of Russia’s population, this measure will help dampen any protests that might be driven by the crisis for some months in the politically pivotal capitol. Democratically minded St. Petersburg, Russia’s second largest city, and even more some provincial capitols could be a vulnerable to political instability if the crisis continues through summer or the end of the year, however.

The government did some deceptive shuffling when it mentioned in connection with the present crisis changes in the state program increasing subsidies to Russians with children aged between three and seven and incomes below the subsistence level. In addition, to the R5,000 promised for each child in each family (a new subsidy the start of which was moved up to April instead of May because of the crisis), for low-income families the government will provide additional monthly payments of no less than half of the subsistence level set for each such child. Overall, over 136 billion rubles are set aside for this additional subsidy, some 75 percent of this sum coming from the federal budget. The catch is that this will come into effect only on 1 January 2021 ( Thus, it appears that this change was part of President Putin’s January proposals connected with the constitutional amendments he proposed then.

Criticism was sharp that the use of easy credits rather than direct payments to cover salaries and the postponement of tax payments instead of a tax holiday were instituted (,, and An online petition for a tax holiday for businesses had gathered more than 354,000 signatures as of May 5th ( It may be that the response to the criticism was Putin’s late April order to the government to prepare a third package of even more robust economic assistance as well as a plan for gradually removing the coronavirus emergency regime, both to be approved in May (

The fact is that while the assistance the Russian government is providing to bolster the economy in crisis, while small compared to American assistance levels, is proportionally more competitive and significantly exceeds that being offered in many other countries, for example, Ukraine, despite Kiev being the likely recipient of an EU assistance package (

Liberal economists, such as Sergei Guriev are proposing direct cash handouts of R20,000 ($275) per month to each Russian and small business for each employee along the lines of a similar U.S. programs. He estimates that Russia needs to pay out 10% of its annual GDP to cover the crisis for its duration and can use its sovereign wealth fund, the National Wealth Fund (NWF), to accomplish this ( Similarly, Higher School of Economics and University of Chicago professor Konstantin Sonin has called for unconditional cash handouts of 40,000 rubles ($550) to individuals this year ( Leader of the Yabloko party’s Moscow city organization and a deputy in the Moscow City Duma has proposed using the National Wealth Fund and moneys on federal government accounts to assist small and medium business, recruiting Russia’s billionaires and millionaires to finance combatting the disease itself, and the free distribution of masks and antiseptics to the entire population ( Such populist and arguably overreactive calls could resonate among Russia’s typically patrimonial, state-dependent society.

It is likely that open-ended assistance, a tax holiday, greater debt assistance, and even direct cash support to individuals or families are reserve positions the government will turn to if the crisis persists in strength, say, into late May. One government official said direct subsidies to medium and small businesses is being considered, and reports indicate this might occur but no earlier than late May ( However, in late April another official said that the government was focusing on assistance to the “whole population” and this would by definition include people with micro-, small-, and medium-sized businesses (

Gaidar Institute estimates indicate an outlook of at least a severe recession with potentially explosive sociopolitical consequences. In the case of a positive scenario – the gradual lifting of pandemic-related restrictions beginning before July 1st – Russia’s GDP growth could fall by 7-8 percent in 2020. If restrictions last longer – the Russian economy might decline by as much as 12 percent. Investments in fixed assets could shrink by 9-16 percent depending on the scenario. Unemployment will rise to at least 8 percent and perhaps go as high as 12 percent. Real incomes of the population will fall by anywhere from 3.5–6.5% by year’s end ( However, these static estimates cannot take into account the government’s shifting economic assistance programs or changes in oil prices.

Fiscal Realities

The six-month period attached to many of the measures the government has taken suggests that the administration will conduct a policy review in September and perhaps then undertake more robust measures beyond those to be announced in May if necessary certainly in terms of the economy and perhaps in terms of the virus. Financial-economic strategy is supported by Russia’s NWF. As one analyst notes, the government will balance between not exceeding the assumed safe level of a 3 percent federal budget deficit, on the one hand, and preserving currency reserves, on the other hand ( The NWF can support such a strategy at most for several years. The NWF stood at R12.856 trillion ($165 billion) as of April 1st, equalling 11.3 percent of Russia’s GDP ( A year-long coronavirus crisis, low oil prices, and economic recession will not threaten the regime’s stability with any criticality. However, a longer crisis means things will begin to unglue.

SberBank Director and former Economics Minister German Gref estimated 10% of GDP would be the maximum Russian finances could spend to address the crisis, but this seems extraordinarily stingy, since as of early April planned measures already reached 5%, which Putin said was a minimum. Accounting Chamber Chairman and former Finance Minister Aleksei Kudrin said should be at least 7 percent ( Thus, it appears matters could very well move towards Gref’s 10 percent of GDP limit by year’s end. Russia’s Finance Minister Anton Siluanov announced that the NWF, rather than lasting a decade, as he stated a month ago, would be reduced by some 45 percent by the end of this year as a result of the crises—from R12.9 trillion to R7 trillion ( According to the Gaidar Institute, depending on the range of scenarios for easing the ‘self-isolation holiday,’ the federal budget deficit in 2020 will be from R3.7 trillion to R6.7 trillion, 3.8 to 7.2% of GDP, respectively. The budget deficit of the ‘expanded government’ (federal, regional and municipal budgets) is already destined to range in the area of 6.5 percent to 11.4 percent of GDP. A soft scenario for borrowing from the NWF to cover the federal, regional, and municipal budget deficits this year will be in the range of R4.8-6.6 trillion ( Either way, this means a meltdown of the NWF by 2022 and state finances shortly thereafter, if oil prices do not stay above $15/barrel and the global recession/depression persists.

Political Considerations

Should Putin’s health wane or should he pass away in the midst of this crisis period, the regime’s survivability — in a condition of a combined social and economic crisis — could be severely tested. Putin’s indispensability has been reinforced by the crisis, and contrary to comments that he has sloughed off responsibility on the regions’ governors, he has been making repeated public addresses and conducting publicized government organizational and planning meetings to address both crises. He appears in charge and focused, if somewhat grim.

It is worthy of note that the regime has not taken many steps more drastic than those adopted in many Western countries reducing citizens’ rights in the effort to fight the pandemic. Moscow’s measures fall somewhere in the middle between the laxity of Belarus and Sweden and the totalitarian approach taken by China. This is no surprise. Rather, it is arch-typical of Russia’s soft authoritarian regime.

However, the regime is on the clock. Putin’s 2024 problem just got bigger, and it remained unclear prior to the present ‘perfect storm’ whether he could overcome politically the constitutional barrier to a third consecutive term he is currently attempting to dismantle with constitutional amendments and a quasi-referendum, which is now postponed indefinitely. Finance Minister Siluanov promised there were enough funds to support the economy until, significantly, “2024,” but Deutsche Bank gives the NWF two years, all else remaining as is. If oil prices average $30 rather than $15 per barrel — they rose to $25.barrel on May 7th — the DB estimates the NWF survives six years ( With depletion of the NWF perhaps in 2022, wholes in the Russian budget, already being widened substantially as a result of the oil price collapse and unexpected coronavirus expenditures, will mean massive budget deficits and reduced social spending, making any additional politically motivated social spending prohibitive. Selling off some of Russia’s $540 billion in gold reserves could buy some more time, but would leave Russia with no backup for fiscal and monetary stabilization once the crisis is over. Add a follow-on crisis, and the ballgame may be up.

Even under the rosier scenario of $30/barrel or borrowing extra time with the gold reserves, it now will be impossible to carry out the kind of pre-election social spending the Kremlin tends to use certainly in the run-up to the 2021 Duma elections and even before the 2024 presidential elections. Since elections tend to test the stability of regimes — recall that all ‘color revolutions’ in the post-communist world after the Soviet collpase occurred around election disputes — this creates a new problem for the Kremlin. Putin’s gradually declining ratings and the pro-Kremlin Yedinaya Rossiya party’s dismal ratings and recent election performances create a much less fortuitous situation than that before the destabilizing 2011 Duma vote. Add in the coronavirus-oil-economic-financial crises into the mix, and Putin has reason to be concerned. In short, the smell of economic and political discontent could soon very well be in the air.

In addition, with drained reserve coffers, there will less in the state feeding trough for political patronage binding together Putin’s pyramidal system of patrimonial political-business clans. This will make regime defections and splitting more likely though not inevitable in the short-term but very likely in the event of crisis- and/or election-sparked protests of the kind that developed in late 2011-early 2012.

In sum, if the epidemic, oil malaise, and recession last well into 2022 and Putin is unwilling to take more harsh measures to quell the epidemic and/or to liberalize the economy in order to spark growth, then his regime’s stability could very well be severely challenged by or around the 2024 presidential election. One way out is regime liberalization, but that also might rock the boat beyond its hull. All this explains why Putin is looking grim. Right now the odds still are that the regime survives until 2024, but the crises and the 2024 problem of succession or not-succession have brought storm clouds. Whatever happens, one must hope it unfolds smoothly or at least peacefully.


About the Author – Gordon M. Hahn, Ph.D., is an Expert Analyst at Corr Analytics, and a Senior Researcher at the Center for Terrorism and Intelligence Studies (CETIS), Akribis Group, Dr. Hahn is the author of the forthcoming book: The Russian Dilemma: Aspiration, Trepidation, and the West in the Making of Russia’s Security Culture (McFarland, 2021). Previously, he has authored four well-received books: Ukraine Over the Edge: Russia, the West, and the “New Cold War” (McFarland, 2018); The Caucasus Emirate Mujahedin: Global Jihadism in Russia’s North Caucasus and Beyond (McFarland, 2014), Russia’s Islamic Threat (Yale University Press, 2007), and Russia’s Revolution From Above: Reform, Transition and Revolution in the Fall of the Soviet Communist Regime, 1985-2000 (Transaction, 2002).

Dr. Hahn also has published numerous think tank reports, academic articles, analyses, and commentaries in both English and Russian language media. Dr. Hahn also has taught at Boston, American, Stanford, San Jose State, and San Francisco State Universities and as a Fulbright Scholar at Saint Petersburg State University, Russia and has been a senior associate and visiting fellow at the Center for Strategic and International Studies, the Kennan Institute in Washington DC, and the Hoover Institution.


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