Another Russian Revolution?

Sarah Michaels
Deputy Director of Analysis

An Oxford Analytica Roundtable, Tuesday February 7, 2012

On Tuesday February 7, Oxford Analytica hosted a roundtable event in London focusing on the developments that are currently reshaping Russian politics and policy-making.

Sarah Michaels, Deputy Director of Analysis and Senior Russia Analyst, provides a summary of the discussion which took place:

“Thank you very much to all of our guests for attending our breakfast discussion in London on February 7, and for their continued engagement with Oxford Analytica. I hope the event answered your questions and provided useful insights into the extraordinary developments that are reshaping Russian politics and policy-making.

My hope is that by engaging in some slightly unconventional thinking, Oxford Analytica can help you better anticipate the challenges and contingencies Russia is facing over the next year and beyond. I’m very proud of the scenario analysis practice we have developed, and would be pleased to discuss how we can offer you a customised assessment of Russian risks and opportunities for your organisation.

To summarise our analysis, I’d like to offer a quick survey of the three most likely scenarios for Russia in 2012-13.

Systemic liberalisation

This is the most optimistic trajectory -- though it is far from revolutionary. In this scenario, Aleksei Kudrin becomes prime minister by the third quarter of 2012, and other systemic economic liberals retain considerable influence over industrial, investment, fiscal and monetary policies. There are a few things that could catalyse such a sequence of events, such as a deep euro-area recession and/or a downward oil price shock, both of which would make the elite liberals’ case for reform all the more urgent. Notably, this trajectory becomes more -- not less -- likely in the event that the Moscow street protests are violently repressed, because of the very high risk of widespread backlash against an authoritarian turn of events. (Incidentally, this is why I think Vladimir Putin will refrain from a hard-line crackdown on the demonstrations.)

Status quo ante

Many experts believe this is the most likely scenario -- a continuation of the political and economic drift we have witnessed over the last four or five years. In this sequence of events, Dmitry Medvedev retains the premiership that Putin promised to him last September -- and while the rhetoric of modernisation persists, the reality still comes up far short. This scenario requires a degree of external and internal macroeconomic stability; it assumes that Russia can weather a moderate euro-area recession reasonably well, and that its own GDP growth will hover around 2.5-3.0% in 2012. There are two other signposts to watch for: the possibility that the Kremlin will more astutely manage and respond to popular protests via some version of ‘managed democracy’ -- and on the flip side, that the liberal opposition fails to regain the political momentum it generated shortly after the December parliamentary elections.

Creeping authoritarianism

For nearly all investors and interlocutors, this is the worst-case scenario -- or at least the worst realistic one. Such a trajectory would see the ‘siloviki’ (‘men of force’) decisively dominate the policy-making process and the corporate sector, with Dmitry Rogozin or Igor Sechin becoming prime minister this year. Several things could set Russia on a more authoritarian path. The protest movement would evaporate, with no significant public opprobrium following the March 4 presidential election. The global market price for oil would rise significantly, perhaps as a result of an Iranian strategic miscalculation to close the Strait of Hormuz. Elsewhere in the Middle East, the fall of Syria’s President Bashar al-Assad -- a crucial Russian ally -- would exacerbate the ‘fortress Russia’ mentality that has dominated foreign policy-making for the last few months. More to the point, it would convince Putin that he needs to return to an overtly statist, centralising agenda.

There is no quick and simple answer to the question of which of these scenarios is most likely to transpire -- but I would like to offer a coda to our discussion on the 7th. There is (at least) one thing that Vladimir Putin dislikes more than liberalisation: losing power. If he is truly backed into a corner, Putin would rather offer reformist concessions than go down fighting, Assad-style.”