Parliamentary elections will be held in less than six months, and President Vladimir Putin is intent on ensuring that the campaign season does not bring a repeat of the anti-government protests that erupted ahead of the last elections in 2011. Toward the end, the date for the vote has been brought forward from December to September, clearly in the hope that Russians will be too busy with holidays and the harvest season to dwell on their political grievances. In addition, changes to election rules approved in 2014 and a new anti-protest law will both increase the likelihood that Putin’s United Russia will retain its majority in the State Duma.
The concern that is motivating the various attempts to create an electoral firewall is understandable. Oil prices remain stuck far below the recent historical trend, and the economy is struggling to escape from recession. Ordinary Russians are feeling the squeeze from a devalued ruble, federal budget cuts, and a ban on food imports from the EU, all of which are contributing to high inflation and uncertainty in the jobs market, especially in the more exposed industrial regions.
Putin remains personally popular, in part because average Russians are mostly unaware of foreign allegations of corruption and other abuses against the president and his inner circle, thanks to the government’s tight control of domestic media, but also because Putin has skillfully exploited nationalist sentiment to distract attention from his government’s weaknesses. Nevertheless, there have been overt signs of discontent, and while demonstrations have been small in size and narrow in focus, and there are no signs that the eruptions of anger might coalesce into a broader movement, the danger of such a development will be present as long as the economic hardship persists.
Of greater immediate concern to investors than the elections is the risk posed by an evident strain on government finances, which is compounded by the federal government’s pressure on regional administrations to maintain high levels of spending. The pace of economic contraction has eased somewhat of late, and oil prices, while still volatile, had moved above $45 per barrel as of late April. However, Russia remains shut out of the international debt market and its main reserve fund, which amounts to an estimated 4.5% of GDP, will shrink rapidly in the absence of a more concentrated effort to close the fiscal gap, which is unlikely in an election year.