The foundations on which Vladimir Putin built his 15 years in charge of Russia are giving way.
The meltdown of the ruble, which weakened to a record low this week, is endangering the mantra of stability around which Putin has based his rule. While his approval rating is near an all-time high on the back of his stance over Ukraine, the currency crisis risks eroding it and undermining his authority, Moscow-based analysts said.
The president took over from an ailing Boris Yeltsin in 1999 with pledges to banish the chaos that characterized his nation’s post-communist transition, including the government’s 1998 devaluation and default. While he oversaw economic growth and wage increases in all but one of his years as leader, the collapse in oil prices coupled with U.S. and European sanctions present him with the biggest challenge of his presidency.
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“People thought: ‘he’s a strong leader who brought order and helped improve our living standards,” said Dmitry Oreshkin, an independent political analyst in Moscow. “And now it’s the same Putin, he’s still got all the power, but everything is collapsing.”
New Era
In a surprise move early yesterday, the Russian central bank raised interest rates by the most in 16 years, taking its benchmark to 17 percent. That failed to keep the ruble from plummeting as low as 80.1 per dollar from about 34 in June as the price of oil, the country’s biggest export, dropped by almost half to below $60 a barrel. The currency surged 12 percent to 60.1 a dollar today as the government sold foreign currency and the central bank took steps to supported banks.
The ruble meltdown and accompanying economic slump marks the collapse of Putin’s oil-fueled economic system of the past 15 years, said an executive at one of Russia’s three biggest banks, who was talking in a personal capacity. He asked not to be identified because of the sensitivity of the issue.
The higher interest rate will crush lending to households and businesses and deepen Russia’s looming recession, according to Neil Shearing, chief emerging-markets economist at London-based Capital Economics Ltd.
