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Putin Propagandists: Russia’s Economy Is Just Fine
The figures, however, tell a different story.
When the European Union extended economic sanctions on Russia until January 31, 2016, it caused little kerfuffle among pro-Kremlin mouthpieces. The decision made in Luxembourg by EU foreign ministers, premised on Russia’s war against Ukraine, elicited a stock reply from Moscow: “Your sanctions are a big mistake and it’s you who will suffer from them.”
Yet outside the Kremlin wall, Russians have begun to suffer from an acute economic crisis. Recent surveys by the Russian Public Opinion Research Center, a Kremlin-employed pollster, showed more than 70 percent of Russians admitting that their wallets have shrunk. Unemployment has increased by 14 percent. None of this seems to have registered with Moscow officialdom. The government was too busy celebrating the success of last week’s International Economic Forum in St. Petersburg, boasting of its 7,000 guests and 1,000 international companies that partook in Russia’s answer to Davos.
If Russia has been “isolated” by the war in Ukraine, it isn’t among the global financial elite. No participants turned down their invitation to the St. Petersburg forum, the organizers bragged. The American Chamber of Commerce in Russia reported more American businesspeople attending this year than last. Meanwhile, embattled Greece has signed a memorandum for cooperation on the Turkish Stream pipeline project worth $2 billion, and Chinese Vice Premier Zhang Gaoli agreed with President Vladimir Putin on major investment plans, including a high-speed rail project worth billions.
“Only in the E.U.—the direct financial losses from the counter-sanctions amount to €100bn and 200,000 jobs,” Sergei Ivanov, Putin’s chief of staff, told the Financial Times last week.
However, the bravado of the Putin propagandists is betrayed by cold hard facts. Most officials visiting the forum were from non-Western countries. Also, this year Russia signed trade deals for $2 billion less than in 2014.
Those out of government were more honest in their appraisal of the Russian economy than those in. “In recorded history since 1992, this year Russia has the lowest share in the world economy,” Alexei Kudrin, the former minister of finance and key economy adviser to Putin, told the radio station Echo of Moscow. “This year, we have about 3 percent, and in the next two to three years we will move presumably to the level of 2.7 percent. This steady decline is because the average rate of increase we will have is no more than 1.5 percent in the next few years.”
The automobile industry contracted by 46 percent; one of Russia’s biggest car manufacturers, AvtoVAZ, which at its peak employed 180,000 people, recently stopped production indefinitely.
The locust years for Russia’s economy show no sign of ending soon. Corruption is still a national economic cancer, with Russia ranking 136th on Transparency International’s 2014 index of countries, together with Cameroon, Lebanon, Nigeria, and Kyrgyzstan. But fighting corruption was only ever a rhetorical priority.
In July, inflation rose to 15.5 percent, the Russian Finance Ministry reported on Tuesday. Thousands of Russians are losing jobs, and the country is suffering from a lack of quality medical service, bad roads, and Soviet-style bureaucracy, not to mention one of the worst crackdowns on dissent and civil society since the end of communism. Yet Putin’s popularity, however jerry-rigged by state television, continues to climb. Last month his approval rating reached a sky-high 89 percent. Neither a dismal economy nor Western sanctions are disrupting the Kremlin-scripted narrative: Russia has many enemies trying to destroy it, but Putin is still the best guarantor of stability.