State of the Nation

In reading through analysis of Medvedev's "State of the Nation" address, you can almost hear the ghost of Hunter S. Thompson whisper, "strange vibes all around us." More importantly, recent events could auger a new trend, which may or may not involve brutal quantities of mescaline.

1) The run-up in the Kremlin’s power was predicated on a basic quid pro quo, prosperity in exchange for political rights (See: Russia's last election).

2) Russia’s middle-class -- and especially the poor and working class -- have been hit especially hard in the recent downturn. Companies are cutting costs, salaries, and jobs. A devaluation in the ruble, which is increasingly likely if the current trend holds, would hurt these groups just as hard as it did in 1998. In fact, the last devaluation proved catastrophic.

3) $100 oil hid the core weaknesses in Plan Putina and the myth of effective autocratic rule. With oil at $60, the Kremlin is shoveling foreign currency into the boilers to keep the ruble afloat. Where is Plan Putina, or the promised investment in non-energy, heath, housing, education, agriculture? (Hint: see boilers.)

Here’s the problem. Russia's citizens no longer enjoy a clear mechanism by which they can register discontent or change their leaders through the ballot box. Plan Putina has deprived Russians of any mainstream alternative to the (increasingly dire) status quo.

As such, we could very well see a spike in the popularity of fringe groups (some violent). Worse yet, the lack of democratic outlets, or a free press, will likely produce a highly acidic social and economic malaise in Russia. This malaise would corrode the pillars of Russia's economic-political system, and leave the government dangerously exposed to continued downside moves in oil, or unexpected political shocks like the Kursk disaster or the Moscow hostage-taking.

Hence, Jamestown’s spot on analysis:

It is clear that the Russian leadership was caught unprepared by the global financial meltdown and cannot comprehend the deepening impact of the spectacular reversal of the upward trend in oil prices. Putin is obviously irritated by the situation in which he is not only losing some formal prerogatives of power but also control over economic processes that respond neither to administrative levers nor financial stimuli. His angry orders to the elites not to exploit the crisis for self-enrichment are being ignored, and his “national leader” balloon is deflating alarmingly fast. “Rallying around the flag” apparently reached its peak during the war in August, and now the panicking oligarchs, the sinking middle class, and the public are discovering that their “great helmsman” is lost at sea. The next thing they might start thinking about is change.

The scope of that “change” could prove telling.