The global economic crisis has hit some economies worse than others. Despite the drop in the price of oil, Saudi Arabia has not been as badly affected, for example, as Iran, China, the UK — or Latvia. Two days ago, the crisis brought down the government in Latvia. The Kingdom has massive reserves of finance and Saudi banks have not been as involved in dodgy financial instruments or as exposed to sliding property markets as others elsewhere.
Russia, the world’s second largest oil exporter and the largest producer of natural resources, is not so fortunate. It has suffered a double whammy. Like Saudi Arabia, the Russian government is highly dependent on oil revenues but does not have massive reserves of cash; it has spent most of them. Unlike Saudi Arabia, its financial system has been deeply damaged in the crisis, and the effects have spread to the whole economy. There are signs that it may have political consequences.
Ever since the political shuffle last year, when the all-powerful Vladimir Putin relinquished the presidency at the end of his second term to his faithful but weak protegé Dmitry Medvedev, slipping effortlessly into a power-enhanced premiership, questions have been asked as to how long the duumvirate could last. It is one thing to have a double-headed eagle as the national symbol but the political wisdom is that reality is different. Power-sharing deals have rarely worked anywhere in the world. In Russia’s case, the reason people initially thought it might succeed was because Medvedev was seen as the junior partner — a puppet in an emasculated presidency, with Putin the puppet master biding his time as prime minister until ready to take over as head of state once more.
That may have been the plan, but political plans so often go awry. That appears to be happening. For the second time in a month, Medvedev has hit out at the government — the government of Putin that is — for not reacting fast enough to the economic crisis.
There have been signs of political divergence between the two before. Last August, Medvedev slammed state officials for “terrorizing business” at the very time Prime Minister Putin was doing just that. But these latest attacks are the sharpest divergence so far. Medvedev seems to be biting the hand that fed him.
Putin’s problem is that his popularity was built on a decade of spectacular economic growth. Russians never had it so good. Not now. Government spending has been slashed — plans to spend hundreds of billions of dollars on replacing infrastructure are on indefinite hold while unemployment, which tumbled over the past decade, is now on an ominous rise, particularly in Moscow where it is up five fold compared to a year ago. Putin’s standing, so closely tied to the boom years, may still be strong but it is slipping.
It is, of course, entirely possible that the double-headed eagle is of one mind; that Medvedev’s criticisms are a Mutt-and-Jeff routine fully backed by Putin to get the public to think that the highest in the land are on their side and that it is inept officials who are the bad guys. But having played the “I’m not to blame” card, the pressure will be on Medvedev to distance himself from Putin and his past economic policies if the downturn is prolonged. The cracks are there. Inevitably, if the crisis deepens, so will the split.
