The real story behind Putin's return to the throne: Russia is headed for economic catastrophe, and nothing he does can stop it.
- By Julia IoffeJulia Ioffe is a contributing writer to Politico Magazine and Huffington Post's Highline. She was a senior editor at the New Republic and was the Moscow correspondent for Foreign Policy and the New Yorker from 2009 to 2012.
MOSCOW — On Saturday afternoon, Vladimir Putin announced that he would finally sync reality with formality and become Russia’s actual president yet again. Once the initial sting wore off — Putin seems on track to rule as long as Stalin — cooler heads began to prevail. This will bring clarity and end the schizophrenia of the tandem contradicting itself, the thinking went. Putin was talking like he understood reform was necessary — and even doubters had to admit that he was the only person with the political capital to accomplish it.
Just two days later, however, the ground shifted yet again. Dmitry Medvedev, coming off a couple of really bad days, very publicly fired the finance minister, Alexei Kudrin: perhaps the one person in the Russian government whom Western investors see as credible, the one who saved Russia when the bottom dropped out in 2008, the one holding the Russian government back by the scruff of the neck from total economic disaster. Kudrin’s abrupt firing stunned everyone and completely destroyed the thesis that Putin’s announcement would calm down Russia and its uneasy economy. Everyone knew there were power struggles going on behind the curtain, but rarely have there been so many elbows and knees jutting through, and, in recent weeks, actual people flying out.
What is going on? In short, no one really knows. But one thing is clear: Putin’s return is not going to usher in a new reign of stability. If anything, the system is as unstable as it’s ever been, and no one can tell when — or into what form — it will settle. And with the country’s most competent economic official heading for the door while Russia stares down the barrel of another massive recession, it’s probably not going to be anything good.
After Putin’s surprise announcement on Saturday, everyone was asking: Why so soon? The substance of the announcement, of course, surprised almost no one. It’s been clear for months that Putin was positioning himself, via motorcycle gangs and half-naked girls, for a comeback. But the timing was shocking. Going into the United Russia party congress, the conventional wisdom was that nothing about the presidency would be announced. It was too soon to hobble Medvedev, too soon to end the intrigue that only reinforces Putin’s position as the country’s arch arbiter. If you recall, last time around this announcement came in December; so why September, a full six months before the presidential elections? One explanation is the impatience of elites, evidenced by a growing unrest in the system that culminated with the implosion of the Right Cause project less than two weeks ago: Mikhail Prokhorov, the Kremlin-curated party’s leader, bucked control and publicly slammed the very secretive curator of Russian politics, its eminence gris: Vladislav Surkov. It was a major, messy fail for the Kremlin, and it deepened the sense that the system has ossified to the point of inoperability.
The other, perhaps more urgent, explanation is the impatience of the market. At least $50 billion have leaked out of Russia this year. That’s just one of many miserable economic indicators that point to big trouble ahead: the ruble at a two-year low, sliding domestic stock indexes, a budget that could barely be balanced even if oil were still at $116 a barrel (today, it’s $107). Siberian oil fields are in decline, it’ll be decades before Arctic drilling comes online, and the center of world oil production is shifting increasingly to the Americas. Then there’s the looming economic crisis in Europe scraping at the door. None of it, frankly, looks very good.
So Putin’s goal on Saturday may have been to step in and put a firm hand on the wheel, to assure everyone that the system was in fact functional at such a sensitive moment. The day before, behind the scenes of the first day of the convention, one of his strategists told a European news channel, "It’s not the time to experiment with big political change in times of such economic uncertainty." Putin’s return for, potentially, 12 years was supposed to signal an end to talk of such an experiment. The speeches he made at the conference — including the one about government’s duty to give "bitter medicine" — were supposed to reassure foreign investors that he would implement urgent reforms. (Or, as the famous Kremlinologist Olga Kryshtanovskaya told me the other day, "Modernize or die.")
And for a day or so, this strategy seemed to be working. People spoke of clarity, of stability, of concrete reforms. "Putin is a person of balance; he is constantly balancing the conservative with the liberal," said Kryshtanovskaya. (Putin is, in fact, a Libra.)
"During [Putin’s] first two terms, there was so much money that the feeling was, why do you need anything like political parties?" Nikolai Petrov, a political analyst at Moscow’s Carnegie Center, told me after Putin’s speech. "Now the situation is more complex and the system has to become more complex to accommodate it, and Putin can do it more effectively. And when the system lines up under him, you get rid of the complexity and decoration that was making it ineffective."
The Kudrin fracas completely turned this notion on its head. On Sunday morning, Moscow awoke to the news that Kudrin, in Washington at the time, had already started fulminating against the swap, which would make Medvedev his new boss instead of Putin. "I do not see myself in a new government," Kudrin said to reporters. "The point is not that nobody has offered me the job; I think that the disagreements I have [with Medvedev] will not allow me to join this government." On Monday, before a meeting of the Kremlin’s Modernization Committee, Medvedev — who had long clashed with Kudrin on budget issues, particularly increased military spending, which Kudrin has been staunchly against for years — awkwardly, angrily read out a nasty pink slip from his iPad screen.
Kudrin’s departure set off a new round of conspiracy-theory-spinning (was he just trying to swipe at Medvedev for taking a job many thought would be his? Was this a long-term strategy to become head of Russia’s central bank?), until Tuesday night when he issued a new and more broadly explanatory statement to the press. He revealed that his kamikaze statement in Washington had been carefully considered. He also admitted that, due to his long-running fiscal conflict with the Kremlin, he had handed in his resignation to Putin back in February. Putin rejected it, telling Kudrin he was needed for the election season.
So, basically, Kudrin left when he felt the election season was over: the day Putin announced his return. "On September 24, the power structure in our country was determined for a long time to come," Kudrin wrote. "And I determined things for myself, too, after explaining my position." What was his position? "Over the course of several months, despite my numerous — and public — objections, there were decisions made vis-a-vis the budget that, without a doubt, increased the risk to the budget," Kudrin wrote. These, he added, would then spread to the rest of the domestic economy.
The whole situation, it turns out, was far simpler than anyone had thought: Kudrin was just fed up and, quite likely, did not want to be held responsible for a policy he couldn’t control, especially on the eve of another economic meltdown. Kremlinology had become its own obfuscation. And now it looks like we’re set to miss the biggest story in many, many years: The rigid system is teetering, and its key components are breaking down. Oil money is running out, the economy is sputtering, social discontent is growing, all of the massive problems that the Kremlin first threw money at and then ignored in favor of pointless political intrigue are coming home to roost. And the charades that the Kremlin used to be so skilled at pulling off in order to release political pressure are now falling flat because very senior-level participants are, essentially, defecting. There have been two such implosions in the last 10 days and, given the fact that they’ve only made the system more untenable for those who remain, there’s no reason that they’ll stop.
Things are eerily simple this time around because things are eerily grim.
As for why Medvedev had to fire Kudrin even though Kudrin has publicly criticized him before, that’s simple, too. Kudrin — probably intentionally — hit Medvedev at his weakest moment, which is why much of Medvedev’s rant was about the fact that "No one has abolished discipline and subordination."
"Anyone who doubts the course of the president or the government can openly appeal to me with a proposal," Medvedev went on. "But I will put an end to any irresponsible chatter — up until May 7," he said, referring to his last day in office.
In the meantime, everything’s still more unstable than ever. Today came the news that the number of Russians living below the poverty line increased by over 10 percent in just the first half of this year. And Kudrin is still out of a job: evicted from his official dacha, a photo of his boxed-up office surfacing on Twitter.
While Kudrin packed his things, Medvedev was in Cheliabinsk, watching a military training exercise. Military spending, he said afterward, would always "be the government’s highest priority…. Whoever doesn’t agree with this can go work somewhere else. That’s an order!" And so Kudrin did, perhaps because he discovered that there’s only so much you can do to save a sinking ship, no matter how many guns it has.