Russia – No Room for Complacency

Vladimir Putin’s fourth term as president is proving to be more uncomfortable than expected, with a public backlash against proposed pension reforms forcing the government to make a partial retreat in August. Putin agreed to soften some of the more controversial elements of the reform bill, but that has not fully silenced the grumbling among the population.

Indeed, many voters took the opportunity to express their disgust with the governing party at regional elections held in September, leading to an unexpectedly disappointing showing for United Russia. Although the ruling party remains a dominant political force, candidates from the KPRF and the LDPR managed to defeat three United Russia incumbents and a fourth contest was marred by allegations of ballot-box stuffing, and is to be re-run in December.

Putin’s reaction was perhaps entirely predictable, as he embarked on a cull of regional governors, removing 10 all told, nine of whom were facing tough re-election campaigns in 2019. The president has little need to panic, with his six-year term barely under way and the next elections for the State Duma still three years off. Even so, KPRF leader Gennady Zyuganov and LDPR leader Vladimir Zhirinovsky have announced plans to form a governing partnership in the three regions where they control the governor’s post, signaling their possible intention to play a more assertive opposition role going forward.

The emergence of electoral competition could have a salutary effect in the near term by creating pressure on the government to be more accountable and efficient, and to make a genuine effort to crack down on the rampant corruption that is the potential Achilles’ heel of the Putin regime. That said, this is not the first time that stirrings of dissent prompted speculation that the Kremlin would finally grasp the nettle of reform. As in the past, it is probable that such expectations will again be disappointed.

In the foreign policy arena, Moscow’s incessant picking of fights is making it difficult for US President Donald Trump to pursue his goal of improved bilateral relations with Russia. Facing the prospect of additional US sanctions following the victory of the opposition Democratic Party at mid-term congressional elections held on November 6, Putin has begun to apply indirect pressure on the western countries by encouraging pro-Russia separatists in the eastern Donbass region of Ukraine to hold elections without approval from Kiev. Moscow has also frozen the assets of key members of the western-allied political elite in Ukraine, and slapped sanctions on Ukrainian businesses with ties to Russia, including manufacturers of poultry (MHP), iron ore pellets (Ferrexpo), and sunflower oil (Kernel), all moves that will increase the risk of escalating tensions that culminate in direct hostilities between Russia and Ukraine.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This excerpt is from our latest Political Risk Letter publication, for more information please contact us at (315) 431-0511 and sales@prsgroup.com

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