The financial crisis also had a profound impact on state finances. Instead of the budget surpluses, the precipitous drop in global energy prices—source of more than half of the state revenues—meant a fall in revenues and a ballooning deficit. In early January 2009 the government projected a deficit equal to 3.2 per cent of the GDP, but a month later revised that estimate and projected a deficit of 6.1 to 7.6 per cent; outsiders forecast an even larger deficit (on the order of 8 to 8.5 per cent). Such projections depended, first and foremost, on the price of oil, and as the price of oil dropped below 40 dollars a barrel, Moscow was forced to revise its budget projections (which earlier assumed the price of oil would be twice as high), with the inevitable consequence of still greater deficits.
Despite the global economic crisis (which reduced the demand for Russia’s energy exports) and internal financial problems, the government not only resisted budget cuts but even made plans to increase pensions and unemployment compensation. Those policies helped to sustain high popular approval ratings for both Putin (83 per cent) and Medvedev (78 per cent) in December 2008, four months into the crisis. There was, to be sure, growing concern; those who thought the country was moving in the right direction dropped from 61 to 43 per cent during the same four months. Although the approval ratings showed some slippage, even for Putin, faith in his leadership remained unwavering.
Putin certainly did all in his power to buoy confidence. Apart from assistance for debt-ridden companies and banks (with a 200 billion dollar stimulus package), Putin staged his seventh ‘national town meeting’ on 4 December 2008—as before, a well-rehearsed and impressive conference with the public, not just journalists, which lasted over three hours and allowed the prime minister to respond to phone calls, emails, text messages, and live interaction with small groups around the country. He answered 76 questions and demonstrated his usual mastery of detail, grasp of broader issues, empathy for fellow citizens, and flashes of humour. The public voiced a broad range of concerns—demands for tougher sanctions against paedophiles, the dangers of inflation, the violence perpetrated by ‘skinheads’ against minorities, traffic congestion, and even the weather (‘When will it snow?’, to which Putin responded ‘That’s up to God’). Other than the weather, Putin made clear that everything else was up to him and his government. Putin also exuded sympathy for those in need, like that in a message from an elderly woman: ‘To Putin. From Nadezhda Mukhanova, a pensioner, 68 years old. My pension is 3,500 roubles [116 dollars]; fire wood costs 10,000 roubles [333 dollars]. How can I survive?’ In such cases Putin promised to have the relevant ministry investigate or to direct local authorities to take action. As for the general economic crisis, a confident Putin offered reassurance: ‘Russia has seen greater problems and coped with them. We shall cope with the present crisis too if we follow the right course and are purposeful about our complicated economic and social matters.’ He noted that the country’s large foreign exchange reserves would ‘allow us to plan for a soft landing’.
By early 2009, however, the prospects for a soft landing appeared to be fading. Putin predicted that the GDP would grow by 2.5 per cent in 2009, but other estimates were far more pessimistic, with forecasts that the GDP would decline by 3.0 to 15.0 per cent, depending on the price of oil and metals on international markets. In June 2009 the World Bank offered a more disinterested forcast, predicting that the GDP would decline by 7.5 per cent in 2009, but actually show a growth of 2.5 per cent in 2010. The range in projections reflected not so much political prejudice or posturing as the uncertainties in the global economy; given Russia’s reliance on commodity exports, the health of the global economy—and the demand for Russian resources—would determine the magnitude and duration of the Russian recession. Putin had achieved much during his two terms, promoting prosperity at home, amassing huge foreign exchange reserves, creating a stabilization fund, and reestablishing a centralized government. He positioned Russia as well as possible, but a country that gained so much from global boom was fated to lose just as much from a global bust. His plans for a ‘soft landing’ would depend heavily on global market forces far beyond his control.
MAPS
CHRONOLOGY
For a detailed chronology of Russian history, see Francis Conte (ed.), Great Dates in Russian and Soviet History (New York, 1994).
860–1240 — Era of Kievan Rus
862 — Traditional date for arrival of ‘Riurik’ of Varangians (Norsemen), founder of Riurikid dynasty (862–1598)
980–1015 — Vladimir reigns as grand prince of Kiev
988 — Conversion of Kievan Rus to Eastern Orthodox Christianity
1019–54 — Iaroslav reigns as grand prince of Kiev
1037–46 — Construction and decoration of Church of St Sofia in Kiev
1051 — Hilarion consecrated as metropolitan of Kiev and all Rus
1055 — Polovtsy appear on steppe
1061 — Polovtsy attack territories of Rus
1072 — Canonization of Princes Boris and Gleb
1096 — Polovtsy attack Kiev and burn Pecherskii Monastery
1097 — Princely conference at Liubech
1113–25 — Vladimir Monomakh reigns as grand prince of Kiev
1132–6 — Emergence of semi-autonomous Novgorod
1147 — First chronicle mention of Moscow
1156 — Construction of first kremlin walls in Moscow
1169 — Armies of Prince Andrei Bogoliubskii of Vladimir sack Kiev
1191–2 — Novgorod signs commercial treaty with Scandinavians and Germans
1223 — Battle of Kalka: first encounter of Mongols with Kievan Rus
1237–40 — Mongol conquest of Kievan Rus, culminating in the sack of Kiev
1240 — Prince Alexander Nevsky defeats Swedes on the Neva
1240–1340 — Early Mongol Suzerainty
1242 — Prince Alexander Nevsky defeats Teutonic Knights at Lake Peipus
1300 — Moscow conquest of Kolomna: beginning of ‘in-gathering’ of Russian land
1317–28 — Metropolitan moves to Moscow
1327–41 — Ivan I (Kalita), designated grand prince of Vladimir, by the Mongol khan
1340–1584 — Rise of Muscovy
1337 — Founding of Holy Trinity Sergius Monastery