Assignment: Round of Budget Cuts

Assignment: Round of Budget Cuts

NOW FOR AN ORIGINAL PAPER ASSIGNMENT:Assignment: Round of Budget Cuts

But Putin continues to rely heavily on Russia’s law enforcement agencies—specifically the Federal Security Service (the FSB) and the new Investigative Committee under a Putin crony—to maintain his grip on power. FSB officers and veterans still proudly call themselves chekisty—heirs of the Cheka (Lenin’s secret police). Putin himself got his start as a KGB officer under the old Soviet system.

Putin’s relations with Europe and the United States are strained. In the eyes of the West, Russia has consistently backed the wrong side, be it Iran’s nuclear ambitions, the civil war in Syria, or the secessionist movement in eastern Ukraine.

The Economy: Neither Fish nor Foul

In the early 1990s, Russians dared to hope that Russia was finally shedding its stifling autocratic political institutions and uncompetitive, anti-consumer economy. But that hope soon faded. With Putin at the helm, it all but vanished. Putin restored order and recentralized power, but he failed to take advantage of windfall profits from Russia’s oil and gas exports to modernize and diversify the Russian economy. At the same time, he allowed cronies and corrupt insiders—so-called oligarchs—to amass fortunes and divert billions of rubles into private bank accounts abroad.

By 2014, Russia’s emerging middle class constituted 42% of the population. In Russia’s major cities, notably Moscow and St. Petersburg, these numbers were even higher. Arguably, Putin and his old-style Russian politics are out of step with this fundamental change in the class structure of Russian society.

At first, high oil prices allowed Putin to restore a measure of popular trust in the paternalistic state, which fell into disrepute in the turbulent 1990s. But in 2014, Western sanctions designed to punish the Kremlin for its support of east Ukrainian separatists began to take a heavy toll on the Russian economy (see Table 8.2). As the price of crude oil went into free fall (trading at $71.00 a barrel in early December 2014), and with the ruble losing value (down 40%), the nation braced for a new round of budget cuts and belt-tightening.

Given the dire circumstances, the Russian economy was expected to contract at least 0.8% in 2015 (a worst-case scenario—oil falling to $60 a barrel—put that figure at 3.5–4.0%).