The End of Pragmatism

President Putin Sacrifices the Economy

Remember President Putin’s speeches from a few years back? A considerable portion of those public addresses, including the annual state of the nation, was taken up by a mind-numbing laundry list of numbers: Russia’s GDP growth, the square meters of housing that had been added, the percentage of value science added to the Russian economy, the amount by which unemployment payouts had been augmented, the number of hours children should dedicate to physical education, and the change in output by various Russian industries.

There was a time when the practical, money-conscious president knew how to lull journalists to sleep with facts and figures, keeping them waiting for his earth-shattering policy pronouncements, taking refuge in economic figures when asked a tricky question.

That Putin is no more.

As Russia sinks deeper into a Ukraine crisis set in motion by the annexation of the Crimean peninsula, Putin’s priorities have shifted away from the economy. His latest address, in December, was not peppered with economic figures. In fact, several analysts remarked on Putin’s detachment from economic reality and his new focus on intangibles. In his speech, the president called Crimea “sacred” to Russia, for example, and he touted Russia’s resilience in the face of evil Western sanctions, which he compared to the toughness of the Soviet Union in the face of Nazi Germany’s assault in World War II.

The ruble’s spectacular plunge in December, driven less by Western sanctions than the falling price of oil, is not being treated as a problem that could drive the economy into an abyss darker than the 2008 economic crisis. No, as Putin told TASS, the falling exchange rate actually helps the budget: “before, we sold a product that cost a dollar and received 32 rubles for it, and now we will get 45 rubles,” he said.

Two weeks later, Russian oil sales abroad fell even further and the exchange rate reached 53 rubles to the dollar, a downward spiral that the economy ministry said was one reason Russia is headed for recession in 2015. The ministry report also predicted growing inflation and a decline in real incomes. So unexpectedly dire were the predictions that the report was pulled from the ministry’s website less than an hour after it was posted. The report had not been approved by the rest of the cabinet, the finance ministry explained.

And the ruble kept falling.

Faced with colossal capital flight, brain drain, resurgent terrorism in the Caucasus, and a budget that balances only if the price of oil is $100 dollars a barrel (as compared with prices hovering around $60 at press time), what awaits Russia in 2015? For a while, ordinary Russians will blame rising food costs and their inability to vacation abroad on Western sanctions and “Russophobia,” rather than on the Kremlin’s inflexibility.

But will that attitude endure what is bound to be a very tough year? Are Russians prepared to trade their economic well-being, which has been a major pillar of Putin’s power, for a feeling of “Slavic exceptionalism” and an audacious foreign policy that seems mainly aimed at thumbing one’s nose at the United States, treaties be damned?

Stay tuned.