MOSCOW — Vladimir Putin enjoys sky-high approval ratings at home — for now. But economic free fall beckons.
When Putin ordered his “little green men” into Crimea to steal Ukrainian territory, most Russians were ecstatic at the assertion of national power.
Then Putin doubled down by covertly initiating a civil conflict in eastern Ukraine — but the resulting Western sanctions, combined with falling energy prices, are starting to hit harder than he could’ve expected.
One obvious problem is the collapse of the ruble, down nearly 40 percent since June. This is driving inflation sharply higher and making it ever harder for Russian companies to repay their hard-currency loans.
Indeed, Russia’s financial reserves are dwindling quickly as state-owned companies turn to the Kremlin to roll over tens of billions in loans now that they’re cut off from Western financing.
For essentials like food, inflation is soaring. Kremlin policies only add to the pain: In response to US and EU economic sanctions, Putin proudly announced countersanctions, including a ban on food products from the European Union and America.
This is hurting Russian consumers far more than it punishes Western producers. They’ve found other markets to sell in, even if their profits suffer at the margin. But for many food products, Russia itself has few alternatives to imports.
For all the brave talk of local producers filling the gap, the few food products Russia actually produces are shoddy and often more expensive than imports.
Fish must now be shipped from faraway countries like Chile rather than neighboring Norway, while French Camembert and Danish Jarlsberg have been replaced by Serbian brinza and yellowish lumps from Belorussia purporting to be cheese.
Meanwhile, Russia’s economy is under severe pressure from falling global energy prices.
Russia has never been able to produce manufactured goods anyone would want to pay cash for.
Instead, it’s critically dependent on oil and gas exports to balance its trade accounts and to finance the government.
But oil has dropped 30 percent this year, and natural gas prices are following. Unless energy prices rebound, Russia is heading into a painful recession and a budget crisis.
The longer-term outlook is more dire yet. Russia is rapidly exhausting its older oil fields, with their relatively low production costs. To maintain production, it needs to develop offshore and Arctic fields that may turn out to be uneconomic if oil prices go much lower.
Plus, Russia lacks the advanced technology to bring these fields online — and sanctions are starting to cut off the Western sources of this critical know-how. (Fears of expropriation in lawless Russia don’t help.)
Meanwhile, much of the windfall from the flush times of high energy prices has been wasted on worthless “prestige” projects like the $50 billion Sochi Olympics, the $20 billion 2018 World Cup and a $6 billion bridge to Crimea. (Of course, prestige was never the only important point. Huge projects also enable large-scale graft.)
By terribly mismanaging Russia’s economy, Putin and his minions have made his 14 years of iron-fisted rule an era of lost opportunities.
Rather than modernizing the economy and opening up to the civilized world, Russia has nursed illusory grudges while isolating itself, economically, diplomatically and culturally.
Things may well get far worse before they get better. As the economy falters, Putin will surely turn to “tightening the screws” on domestic dissent and possibly seek to escalate conflicts in Ukraine and elsewhere to burnish his tough-guy image and distract the public.
The Soviets long argued that their Russia was an exceptional country that could forge a new world order via repression, central planning and external aggression; the result was disaster.
Today Putin claims he’ll lead his countrymen to new heights of glory by defying the United States, civilized norms of behavior and the principles of Economics 101.
As he continues to lead Russia down an increasingly treacherous dead-end street, America and its allies must prepare to deal with the chaotic fallout of Vladimir Putin’s woeful misrule.
Mark Nuckols is writing a book on state-sponsored anti-US sentiment around the world.