Why pensions, not poisonings, define Vladimir Putin’s Russia

IT is the issue that gives us real insight in to the rule of Vladimir Putin. And it has nothing to do with his adventures in Syria, cyberattacks or even the Salisbury poisonings.

کد خبر: ۸۴۱۰۶۶

تاریخ: ۱۷ مهر ۱۳۹۷ - ۰۸:۳۵

Earlier this month the Russian president signed in to law reforms that will raise the retirement age from 60 to 65 for men and 55 to 60 for women.

Pension changes - originally announced in a June bill - have already brought thousands out onto the streets. Amendments to the bill failed to prevent further protests across the country on September 9, the day of regional elections.

Mr Putin set out the reasons for his policy earlier this year when he revealed ambitious and expensive development goals for the country; envisioning an economic transformation touching innovation, digitalisation, education, healthcare and housing. Money from the state budget – the kitty helping to pay for these improvements – is being increasingly used to correct the growing pension fund deficit. The government forecasts that by 2044 pensioners could equal the number of those in work. Reform isn’t surprising.

However, even with these changes, the goals set out in May will be difficult to meet. The problem is not just demographics – countries across Europe face similar pension challenges.

For Russia under Mr Putin, what is becoming increasingly clear is that an economy driven not by growth, but by a brand of political control, has lead to the state promising its population things it cannot deliver.

Vladimir Putin

While Russia’s economy is often portrayed as on the cusp of collapse it remains surprisingly durable. Foreign currency reserves are recovering. The budget is balanced thanks to a well-managed central bank. A focus on macroeconomic stability keeps inflation and external debt down.

Yet the economy has been stagnating for almost a decade. The business climate remains shaky. Capital flight continues at pace. Investment is increasingly dominated by large state-run projects like bridges and railways. Regional budgets are being squeezed. While Mr Putin saw growth of around 7 per cent during his first eight years of rule, International Monetary Fund forecasts for this year and next sit well below 2 per cent.

Much of this is self-inflicted. Moscow continues to make counterproductive decisions, internationally and domestically, which foster an environment where the economy is more likely to stutter than flourish. Take the economic sanctions resulting from tensions with the West. In the short term they spook markets and keep foreign investment away. In the long term, those sanctions targeting the oil and gas sector could damage Russia’s competitiveness, particularly those impacting fracking and offshore development capabilities.

Pension reform protests in Russia

Then there is the prioritisation of control over growth, epitomised in the recent announcement of a secure phone network just for government officials. The money for the network is to come from a new programme to develop the digital economy, something Mr Putin sees as fundamental to Russia’s future. But while the country is home to a wealth of tech-talent and a growing start-up culture, the Kremlin still views the digital economy through a security lens. It fears the flexibility and openness needed for the sector to grow. Many of the country’s great minds end up abroad, like the founder of Telegram, a messaging app that was clumsily banned earlier this year.

There are plenty around Mr Putin who have pushed for economic change. But the reforms needed to properly diversify the economy would also fundamentally restructure a balance of power that has benefited a close inner circle. Mr Putin has little interest in doing this.

Russian flag

The resulting inertia risks damaging the president’s own political capital. Trust in his rule has dropped to levels not seen since before the annexation of Crimea. The number of Russians who regard their country moving in the wrong direction has risen. Mr Putin’s ‘father of the nation’ role relies on him appearing above politics and outside normal channels of criticism. But with more Russians now willing to protest, the economy stalling, and foreign adventure no longer a reliable vote-winner, Mr Putin has little option but to show face. After all, in many cases – like with the recent pension reform –, thanks to the hollowing out of institutions he is the only individual left in government with mass public legitimacy.

Make no mistake – Mr Putin will manage. He has held onto power for nearly two decades. His popularity remains high. It helps that there are no credible alternatives. But in the long term, economic and demographic realities are setting up problems which will be difficult to avoid. Putin has six years left in charge. So far he doesn’t appear to have the answers. For Russia, the question now is whether his successor will.