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A Russian Swallow Taking Flight?

By Krzysztof Głowacki, Economist

On March 26, tens of thousands of Russians protested against the country’s corrupted political elites in cities throughout the country, from Kaliningrad to Vladivostok and from Murmansk to Makhachkala. The protests were never destined to bring any change in authoritarian Russia, nor were they designed for that purpose, but they are a nagging reminder for President Putin and for the world that there is a limit to what Russian society can tolerate.

The protests had their formation in the release by the Anti-Corruption Foundation, headed by opposition leader Alexey Navalny, of footage documenting the lavish and corrupt life of Prime Minister Dmitry Medvedev. Medvedev was reported to be in possession of several mansions, yachts and vineyards, all financed through a network of bogus charity foundations that receive money from government‑controlled banks and enterprises. An estimated 90,000 protesters took to the streets, a number which surprised both the authorities and the organizers. The protests, which were facilitated by the growing use of the internet and social media, were an outcry of frustration over the grim economic reality in the country.

This grim reality shows little signs of abating. Russia’s GDP contracted by 0.2% in 2016 and by 3.7% a year earlier, marking seven consecutive quarters of economic decline. In spite of the historic deal signed between Russia and OPEC last year, world oil prices hover around a meager USD 50, hurting an economy that relies on oil as its main export good. Moreover, Western sanctions imposed on Russia for its invasion of Ukraine and annexation of Crimea have hit the national economy hard, cutting the country off from investments in the energy sector. As a result, national energy giants such as Gazprom and Rosneft have had to postpone crucial exploration and infrastructure projects. Russia’s counter‑sanctions, a massive boycott of Western food products, have made the situation even worse for ordinary people by drastically limiting supplies in the import-dependent sector and temporarily giving rise to double-digit inflation. The sanctions war also caused the ruble to depreciate by over 50%, forcing the central bank to spend billions’ worth of its foreign reserves to prop up the currency.

But the Russians are protesting more against rampant inequality than against poverty itself. In a country that suffered seventy years of Communism, a decade of painful (and unfinished) transition after the Soviet Union’s collapse, and an even more acute crisis of 1998, the society is used to belt‑tightening. It is the extreme social unfairness spawned by Putin’s crony capitalism that is the outrageous novelty.

Like Belarus and unlike Ukraine, Russia is still very distant from committing itself towards a political and economic transformation. The recent protests, the largest in five years, were but a solitary swallow in the air — but one that might herald the arrival of spring one year.

CASE — Center for Social and Economic Research is an independent, non-profit economic and public policy research institution, established in 1991 in Warsaw.

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