Russia Has a 50/50 Chance of Serious Turmoil

Interesting article on Russia's economy and its future:

Uncertainty is creeping up on Russia. For the first time since Vladimir Putin's rise to power, Moscow confronts the prospect of real political instability. One of Russia's savviest politicians, Anatoly Chubais, said last month that the likelihood of serious turmoil -- economic, social and even political -- is 50 percent.

The current crisis is global, and there is no sure way to forecast its length or depth. Such uncertainty would be disturbing in any country but is especially alarming here. For years, Putin steadily eliminated all political threats to his power, and by the end of his second term as president he enjoyed absolute authority. Now that authority is being challenged by forces beyond his control.

Putin was blessed with rising energy prices that enabled him to build his oil-greased authoritarianism. He delivered generously to the nation, and the people readily withdrew from politics and rewarded him with high approval ratings. Likewise, the Russian elite stayed loyal, since the abundant oil revenue produced lucrative opportunities and comfortable lifestyles. In this environment, any remaining political opponents were easy to marginalize; only in very rare cases did Putin resort to repression.

The price of oil is now about a quarter of what it was only a few months ago, and economic problems are building within Russia. Investors are gone; the stock market barely exists. After nine years of surpluses, Russia will have a budget deficit in 2009, and the solid economic growth of recent years may give way to a contraction. An increasing number of enterprises are shifting to two- or three-day workweeks, sending their employees on unpaid vacations or laying them off. Unemployment, which had been very low in recent years, is rising, and the country lacks an adequate social infrastructure to help those who are losing their jobs. The situation is especially grave in the numerous company towns where new jobs are almost impossible to find. Meanwhile, geographic mobility is strongly limited by Russia's underdeveloped housing market.

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