Thursday, March 30, 2023
HomeOpinionPutin has weathered Russia's Covid toll by shifting blame

Putin has weathered Russia’s Covid toll by shifting blame

The Kremlin & Russian PM's govt have played a cynical game, shoving off responsibility for handling Covid crisis onto regional governors but holding on tightly to the financial reins.

Text Size:

Russian President Vladimir Putin’s methods of alleviating the economic damage from the Covid-19 pandemic have concentrated most of its resulting pain in the bigger cities, which traditionally have seen the highest protest activity. You would think that hurting the places most likely to complain would be a losing strategy. Yet this seeming miscalculation hasn’t noticeably undermined Putin’s hold on his country, because he’s managed to share out the blame.

The system Putin has built in Russia is highly centralized — more so than in other countries structured as federations. The trends in Russian government spending and borrowing this year illustrate how the centralization works.

A number of Russian regional governors have sought to plug Covid-induced budget deficits with frantic borrowing. The city of St. Petersburg increased its debt by 182% between Feb. 1 and Nov. 1; the Perm Territory in the Ural mountains added 86% to its debt burden; and the impoverished republic of Ingushetia in the Caucasus added 64%. But given that the average yield of a Russian regional bond is about 6.4%, according to data tracked by Bloomberg, compared with 4.9% for sovereign bonds, that’s something of a desperate strategy. More than half of Russian regions — 44 out of 85 — have either kept debt levels stable or even lowered them, relying on Moscow’s handouts, which grew 58% year-on-year in the first eight months of 2020.

That’s why the central government has had to increase its debt burden by a greater percentage than the regions. According to data published by the Russian finance ministry, the Russian Federation’s debt has increased by about 20.6% between Feb. 1 and Nov. 1: There’s been a 5% drop in foreign debt and a 31% increase in domestic borrowing as the government strives to reduce currency and sanction risks. But the outstanding debt of the Russian regional governments has increased by a mere 9.4% in the same period. For comparison’s sake, in the first six months of 2020 Germany’s federal debt rose 9.3%, while the German states ended up owing 8% more than at the end of 2019.

The central government’s moves to prop up Russian households — increased government payouts to families with children, pension hikes, tax cuts for small businesses and beefed-up unemployment benefits — delivered uneven effects across different geographies and social groups. According to an October report by Mikhail Matytsin and Samuel Freije-Rodriguez of the World Bank and Daria Popova from the University of Essex, the policies have disproportionately benefited people in the poorest regions with the highest birth rates, as well as the residents of rural areas and small towns.

Rural and small-town Russians are actually better off than they were pre-Covid, according to the Matytsin report, while big city residents are worse off. This surprising conclusion dovetails with poll data from the Levada Center, an independent polling and research organization. In November, 15% of rural residents — the highest percentage of any category — said their families were better off this year than in 2019. Small-town residents had the second highest percentage of optimists. (Most Russians, no matter where they live, traditionally say their situation worsened or didn’t change.)

Russia’s big cities, especially Moscow and St. Petersburg, but also the industrial centers of the Volga, the Urals and Siberia, have been the hardest for the Putin regime to keep in check. To the extent that Russians have protested or voted against Putin during his 20 years in power, that has always happened in the cities. So, in a way, Putin has no reason to reward them — but undermining the relative economic advantage that city residents enjoy might also be seen as playing with fire. It looks, however, as though the risks are low. According to VTsIOM, the state-owned pollster, Russians are less inclined to protest than last year, and Levada sociologists also have been dismissive of the nation’s propensity to explode in anger.

The Kremlin and Prime Minister Mikhail Mishustin’s government have played a cynical game, shoving off political responsibility for handling the Covid crisis onto regional governors but holding on tightly to the financial reins. The governors were the ones who mandated various restrictions and had to make sure hospital beds were available after Moscow-directed health care reforms drove down the number of beds by some 15% between 2015 and 2018. Meanwhile, it was Putin and Mishustin who handed out money to families and retirees. That appears to have worked; Putin’s approval rating only dropped a little, the prime minister’s soared, and the governors’ took a hit.

The bird’s-eye view, of course, is always deceptive when it comes to a country as diverse as Russia — and polls are especially hard to take seriously given the regime’s increasingly repressive inclinations. It’s just as easy to use a mix of macro and anecdotal evidence to paint the picture of a regime that’s cracking at the seams. A drop of 4.3% in real disposable incomes between January and September, the first increase in bread consumption in five years as families run out of money for a healthier diet, the recent suicide of an elite Kremlin security officer who apparently felt he was overworked and underpaid — all these are signs of a country in deep economic trouble.

One has to remember, though, that this has been Russia’s customary state for decades, excluding some fat years when a hungry oil market rained money on the country. Plugging holes is the accustomed mode of operating for everyone from Putin to the governors to any of the growing number of unemployed Russians. So, for all its failures and inefficiencies, the regime is as resilient as the average Russian — or, perhaps, as a virus against which there is no known vaccine. -Bloomberg

Also read: Vladimir Putin can’t take Russia’s ‘safe’ Covid vaccine, Kremlin says


Subscribe to our channels on YouTube & Telegram

Support Our Journalism

India needs fair, non-hyphenated and questioning journalism, packed with on-ground reporting. ThePrint – with exceptional reporters, columnists and editors – is doing just that.

Sustaining this needs support from wonderful readers like you.

Whether you live in India or overseas, you can take a paid subscription by clicking here.

Support Our Journalism