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Crisis planning: which way forward for Putin's regime?
opendemocracy.net - 4.4.12 - JRL 2012-62

Dmitri Travin is Research Director at the European University in St. Petersburg's Centre of Modernization Studies.

The elections are over; the protests continue, though in muted form. Russia's way forward is not solely a matter of internal politics, but closely linked with Europe's economic problems. So far Putin has been protected by high oil prices, but he could still prove to be dangerously weak, and what then? Dmitri Travin considers the options

Vladimir Putin is President once more, the protest movement is on the wane and there is ever less interest in the predictions bandied about not so long ago that the Putin regime would fall any day now. But this temporary stabilisation does not mean Putin has no problems. On the contrary, they are extremely serious.

This makes a study of the various ways in which Russia might develop very worthwhile. At first glance, it could appear under an authoritarian regime the future is very predictable, but a closer look reveals that there is more than one possible scenario.

Russian governments do not change in a predictable way, as they do in democratic countries: the forms they take on are often very fanciful and dictated by the economic crises, the mood of the people and the distribution of power among the elites etc. Today we cannot know which the scenario will actually be, but we can quite realistically forecast the forks in the road ahead.

Tough guy Putin

The first and most natural possibility we will call 'tough guy Putin.' Russia's ruler has no serious reason to moderate his internal politics and turn the TV from vehicles for mass propaganda into channels for information, because many years of experience have convinced Putin that any resistance can be crushed.

We are likely to encounter the next and most obvious fork in the road of the future if the world economy goes into extended and severe free-fall. Everything will depend on the scale of the crisis and the lessons that our government can draw from it. If the crisis is not very severe or very long-lasting, then the 'tough guy' scenario could be preserved for an indefinite period. If the crisis is serious, however, the challenge to Putin could be very dangerous for him. He will have to decide what resources he will use to prop up the economy.

We saw in 2009 that when oil prices fall, Russia's GDP can plummet by 8% a year. That crash, however, happened in conditions that were comparatively more favourable for the regime, because the crash was preceded by long years of steady growth and Putin enjoyed a high level of support.

Crisis responses

Theoretically Putin has 3 possible ways of responding to a serious economic crisis. The first is to increase government borrowing, which in relation to GDP is at the moment not too high. The second is to increase the tax burden, which was significantly reduced at the beginning of Putin's reign? . The third is to increase the supply of money i.e. impose an inflation tax on the country, as happened in the first half of the 90s.

All three solutions are possible, but the first has the fewest disadvantages. It would permit Putin to keep going for quite a long time and to carry on feeding Russia ­ more or less. But, in view of events in Greece, Italy, Portugal etc, financial markets are unlikely to make funds available to Russia on acceptable terms without demanding relevant me