Try again, Putin

While Putin seeks to highlight Russian might through Sochi games, reality is that Russia today is extremely vulnerable

The world descended upon Sochi on February 7 for what are the most expensive Olympic Games in history. Set in the troubled North Caucasus, Sochi will be the highlight of Russian President Vladimir Putin’s political career. At an estimated cost of $50 billion, the winter games in Russia are set to break the record of largesse set by the 2008 Olympics held in Beijing. With a stagnating economy, an unproductive workforce, and a regime that is disliked by its neighbours, Sochi showcases everything that is wrong with Russia today.

Costs of the games have quadrupled since Russia won the bid to host the Winter Olympics and the entire process has been mired in corruption scandals. A member of the Olympic Committee claimed that out of the total budget, a third was stolen. What remains of the opposition in Russia is claiming that the true figure is close to 50 per cent. While the Beijing Olympics cost $132 million per event, each event at the Sochi Games will cost an astounding $532 million. These gigantic figures sum up Putin’s Russia today, where corruption, cronyism and misplaced ambition reign supreme.

Sochi is located in North Caucasus which, for long, has been a troubled region for Russia. Marred by violence, the Russian Federation has for years exerted influence in the region and showcased its power to neighbouring countries. While the Second Chechen War ended in 2009, an insurgency in the region continues to this day, with Chechen insurgents continuing their resistance against the Russian state. There have been fears that the games will be used by insurgents to draw attention to their cause. Twin suicide blasts in Volgograd that killed 34 people in December confirmed these fears. Due to the threat of violence, over 100,000 Russian security personnel have descended on Sochi to ensure that no untoward incidents take place. In a bid to filter out both terrorists and political opponents, the Russian government is also giving out special passports to visitors attending the games.

The Games are also turning into an international battle between Russia and the West. Western leaders, including US President Barack Obama and British Prime Minister David Cameron, will not be attending the games. Human rights activists and opposition figures are using the games to highlight Putin’s human rights abuses in order to pressure Moscow to allow opposition groups greater freedom in the country. The tussle between Russia and the EU in Ukraine is also raising tensions, ensuring that the games play second fiddle to the ongoing geopolitical drama. Western media outlets have carried news items that highlight the repressive nature of Putin’s regime, its continuous interference in neighbouring countries’ affairs and the huge corruption of the government.

While Putin seeks to highlight Russian might to the world through the Sochi games, the reality is that Russia today is extremely vulnerable as a country. The country’s economy is vastly dependent on oil and gas revenues which accounts for 75 per cent of all the exports. The economy is dominated by the gigantic state-owned enterprises that dominate energy, infrastructure, and banking, and the government remains the largest employer in the economy. High oil prices have allowed Putin to shower government employees with fatter salaries and better perks. The massive funds accumulated from oil revenues were used to boost public spending by 40 per cent in a bid to shock the economy back into action after the 2009 crisis. As a result of this public largesse, the price per barrel of oil that the Russian government needs to balance its budgets has skyrocketed from a paltry $20 in 2005 to $103 in 2013.

As the shale oil and gas boom takes hold in the United States, global energy prices are set to ease in the short to medium term. This will reduce Russia’s export revenues, putting pressure on its budget and currency. The era of where Putin could expand public spending to boost growth and quell domestic criticism is coming to an end. Meanwhile, the gas monopoly through which Russia held the EU hostage is also coming to an end. Not comfortable with their reliance on Russian gas, European countries are turning to other suppliers in order to reduce the impact of Russia cutting off gas once again. Qatar has significantly increased its Liquefied Natural Gas (LNG) capacity and has developed a fleet of LNG tankers that will export gas to the EU and eat away Russia’s share of the European market.

As its economy stagnates, domestic pressure in Russia is bound to turn into political opposition. Putin has pre-empted this and clamped down on political opposition with an iron fist. However, as the economic pressures continue to pile on, a sustained opposition movement is bound to emerge. In a bid to boost popularity, Putin has freed some prominent opposition leaders in the last few weeks. However, the criticism at home and abroad will continue to grow, forcing Putin to respond using force. This will further isolate the president locally and internationally, increasing pressure on him to give greater freedom to opposition groups challenging his authority.

Vladimir Putin might want the world to believe that Russia is back on the world stage and is stronger than ever. Beneath the veneer, however, Russia is weaker than ever. The country’s reliance on oil and gas revenues, its bloated and ineffective government and state-mandated corruption and largesse have weakened the state more than ever. As Putin’s past achievements are forgotten by Russians, pressure on his regime to open up the economy and political process are set to grow. In the past, Putin showed a heavy-handed approach to opposition and it seems like he will continue to follow this tactic in the future. In the end, however, Putin will have to make way for a new and more open government.

Published in The Express Tribune, February 17^th,  2014.

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