Ghosts of the 1990s haunt Putin as Russia’s economy descends into chaos
As the economy slumped and skyrocketing inflation decimated living standards, an enterprising Russian turned to moonlighting as a taxi driver to pay the bills.
“We lived like everyone else but sometimes I had to earn a little more money,” he said a few years ago, referring to the severe economic difficulties that followed the collapse of the Soviet Union in the early days. of the 1990s.
“It’s not nice to talk about it honestly, but unfortunately that’s what happened.”
The black cab driver lamenting the pain of Russia’s 1990s crisis and years of economic mismanagement was Vladimir Putin. Today, the president is the one inflicting such economic pain on ordinary citizens.
The current scale of economic suffering facing Russian households dates back to the dark days following the fall of the Soviet Union.
A 20% plunge in GDP and a spike in inflation are predicted after another slump in Russian assets on Monday – which followed a weekend of panicked citizens rushing to the ATM. According to the Institute of International Finance, people withdrew nearly a trillion rubles (£7.6bn) over the weekend as thousands of Russians were arrested for protesting the war .
“The impact on the Russian economy will be severe, most likely leading to a substantial increase in the cost of living,” says Peter Schaffrik of RBC Capital Markets.
For ordinary Russians, the fallout from Western sanctions will affect vacations, football matches and even the Eurovision Song Contest. But what will prove most dangerous to Putin’s hold on power is a plummeting standard of living and an economy bent under the weight of sanctions.
Professor Gulnaz Sharafutdinova, an expert at the Russian Institute at King’s College London, warns Putin fears a coup as battlefield unrest spills onto the streets of Russia.
“His position is under threat and he realizes it, and he puts a lot of resources and thought into protecting himself personally,” she says. “With the hit we are seeing on society and on the economy, the elites could split and there could be [some] plot against him. »
The Kremlin’s warning of a changing “economic reality” on Monday, after a weekend of escalating sanctions, is starkly different from the view Putin presented two decades ago.
On becoming president, he promised to raise the standard of living which he believed could catch up with the level in Portugal.
While the economy has seen some growth on the eve of the financial crisis, Russia has largely stagnated over the past decade, especially since the annexation of Crimea and the fall in oil prices in 2014.
The country’s standard of living is still well below that of Portugal, and economists expect the chasm with the West to widen even further.