Discontent Amongst Ordinary Russians is at a Five Year High as Sanctions Have Adverse Effects.

October 19, 2018

The role of Western sanctions is having marked effects on the Russian economy. Ordinary Russians are becoming more and more unhappy with living standards and costs, while leaders in the oil industry are experiencing a boom.

Russian citizens have growing concerns over price rises, poverty and unemployment, a recent study from the Levada Centre has shown. The annual study shows the aspects of life that concern Russians the most. Since the 2017 study Russians have expressed a marked increase in concerns about pretty much every aspect of their lives.

Here are the key findings from the study:

  • 72% of respondents expressed concern over the growth in prices. This is an 11% increase from 2017.
  • 52% of respondents saw poverty and the impoverishment of large sections of society as a concern. In 2017 this figure was 45% – 7 points lower than 2018.
  • 48% of respondents felt that rising unemployment was also a notable concern. This is a 15% increase on the year before.

It is unsurprising that growing prices have become harder felt amongst ordinary Russians: in the wake of new sanctions – introduced in response to Russian state involvement in US elections and the Salisbury attack – the value of the ruble has dropped. In turn, this has led to spiking inflation rates in Russia, which has driven up prices. The Russian central bank has been unable to curb these sharp rises, with inflation for this year expected to reach 5.5% – 1.5% above the four percent target.

As discontent amongst Russian citizens grows, so the political will to combat the causes of discontent should increase. This is a presumptuous approach to take when dealing with a regime that has zero accountability to its people. The decision of the ruling party, president Putin’s United Russia, to hike up the retirement age in spite of mass demonstrations is indicative of this.

Another harsh reality for Russians feeling the pinch of sanctions is that certain sectors of the Russian economy have bloomed in strange defiance of Western sanctions. This is not to say that sanctions have been completely impotent since their introduction after the annexation of Crimea in 2014; rather, it is the most recent set sanctions that came in to force in April 2018, which have unintentionally created a currency-exchange-driven bloom in the Russian oil sector.

As reported in the Wall Street Journal, rising oil prices (traded in dollars) vis-à-vis a weakened ruble has meant that Russian oil firms have been able to sell their crude at higher prices in dollars, only to then further increase revenue when exchanging dollars back into rubles. In dealing terms, the value of a barrel of Russian oil has increased by around 40%. In commercial terms, Rosneft and Lukoil have seen share prices grow by 56% and 39%, respectively.

On top of this, the most recent publication of the Bloomberg Billionaires Index indicates that Russian billionaires have increased their wealth by 10.8% over the last year. This makes Russia the best climate for billionaire wealth hoarding. This climate is by and large indebted to the surging oil market outlined above.

If we are to accept that leading shareholders and CEOs of the booming oil industry are almost certainly associated with or more probably allied to Putin and his klepotocratic regime, then we may presume that the  government and its many corrupt officials are unlikely to be feeling the squeeze of sanctions. This gulf in economic realities between the governed and the governing may explain Putin’s passive response to the growing concerns of his citizens. Alternatively, Putin and his allies may be completely aware of this paradox and know that in a merely nominal democratic country citizens have very little choice over who governs them.

Finally, this paradox could force policy makers in the West to re-think their approach to sanctions, opting for asset-freezes and wealthy individuals instead of sanctions for entire sections of the economy. However, the growing disparity between the lives of ordinary Russians and Putin’s associates may serve as a catalyst for political change in Russia – change that should be welcomed in the West.

Print Friendly, PDF & Email