Russia – Putin Playing Defense at Home

President Vladimir Putin won a six-year extension of his tenure as president by a landslide at an election held in March 2018, and his allies in United Russia control a comfortable majority in the national legislature. However, Putin’s stock has diminished in recent months, amid rumblings of discontent over the hardships resulting from a combination of weak economic performance and fiscal austerity, as well as the perceived corruption of a ruling class that shows little obvious concern for the plight of ordinary Russians.

A poll undertaken in January by the independent Levada Center revealed a first-ever instance of majority support for the dismissal of Prime Minister Dmitry Medvedev and the rest of the Cabinet. Given the very close connection between the president and Medvedev, disapproval of the prime minister can probably be assumed to be a rough proxy for sentiment toward the president.
There is, in any case, little immediate threat to the regime’s position. Elections for seats in the State Duma do not fall due until September 2021. Were discontent to persist to a point where United Russia’s continued dominance in the Duma is endangered, Medvedev could be called upon to take one for the team. If nothing else, firing the prime minister would send a signal that Putin recognized the depth of popular discontent.

It is an open question whether simply embarking on new foreign policy offensives would be enough to boost the government’s sagging popularity. Upcoming elections in Ukraine, where a presidential contest is scheduled for next month and parliamentary elections are required by late October, will provide a perfect opportunity for Putin to test that hypothesis. Russian security and intelligence agencies can be expected to use various cyber-related methods in an effort to influence the outcome of the Ukrainian elections, and toward the same end will be inclined to encourage a heightening of conflict in the Donbas, where a fragile truce has been breached repeatedly. Moscow has warned that it is prepared to take direct military action in Ukraine, if necessary, but Putin’s troubles on the home front are nowhere near a magnitude where the risk of provoking military retaliation by NATO partners could be justified as politically expedient.

The economy has benefited from a moderate recovery in oil prices and the stimulus from infrastructure projects related to Russia’s role as host of the FIFA World Cup in 2018, but real GDP growth averaged just 1.6% in 2017–2018. Russia will be obligated to limit oil production under the latest OPEC-plus agreement, but the anticipated price rise may fail to materialize if the rapid growth of the North American shale supply undermines OPEC’s strategy. The pace of expansion is forecast to slow to 1.5%, and a recession is possible in the event of a significant tightening of international sanctions or a prolonged slump in global oil prices.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This commentary represents a sneak peek from our upcoming political risk reports. For more information please contact us at (315) 431-0511 and sales@prsgroup.com, or explore a subscription to PRS Online and/or ICRG Online today to receive political risk updates.

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