Yesterday Bob blogged about the strangely taboo topic of talking about the economic crisis in Russia’s state-owned media, and the sense of surreal opacity and rumors it has generated. Today there’s a nice piece over on Eurasia Daily Monitor about how the crisis may have an impact on the consensus of Russia’s elite for the Putin-Medvedev tandemocracy of authoritarian capitalism. Pavel K. Baev writes that “The abrupt end of a petro-prosperity that had been taken for granted has revealed and exacerbated divergences and clashes of interests among various groups of loyalists, who suspect that their “social contracts” have been revised without their consent. (…) Who will be rescued from bankruptcy and who is the designated loser is open to bargaining, so the oligarchs have been camping around the Kremlin and wailing about their “social responsibility.”” It’s certainly true that many oligarchs are losing their shirts.
We recall that the king of Aeroflot and frequent Londongrad socialite Alexander Lebedev lashed out in direct criticism of Putin and then founded a new political party with Gorbachev after losing about 60% of his wealth. Today Sky News quotes Lebedev as commenting that “When you have all the power concentrated on top of one man – you cannot deal with any problem facing you. You have to delegate authority to the parties, parliament, elections, mass media – because this is an economic instrument. You cannot make a country prosperous if you carry on ruling it yourself.“And then there is the Oleg Deripaska problem. Russia’s undisputed most wealthy man (unless the rumors about Putin’s wealth via Gunvor and Gennady Timchenko are true) and owner of the Rusal metals empire has been in the news quite a lot recently, as the credit squeeze has forced him to sell a beloved stake in Magna, he’s the target of a wire transfer probe, he’s been having major troubles in a political/industrial project in Montenegro, endless litigation in London, and, over the past few days, he has been excoriated in the British press for his allegedly improper relationship with Lord Mandelson – a political headache whose potential could be significant.Smart Money magazine writes that Deripaska has been the biggest victim of the economic crisis bar none – judging his losses totaling $28.4 billion. That amount alone accounts for more than 13% of the government’s planned total $210 billion bailout package.The key question appears to be what extent the Kremlin can handle this crisis through such non-transparent kingmaking, as Mr. Baev points out the EDM article. For example, one would assume that this is a day of reckoning for many oligarchs, with those who have politically behaved and acted in the state’s interests for the past number of years to get rescued, while those who ever exhibited a sense of independence or social agenda outside the aims of the siloviki (or somehow otherwise done something to anger a government official) to see their businesses collapse.Why then, is Deripaska – arguably one of Putin’s most loyal people in the private sector, who has publicly stated he would give away Rusal to the state without question – being left out in the cold so far?It’s possible that we entirely overestimate the state’s ability to assume an even larger role in the economy as a result of the bailout process, or whether Russia can and would function once again under an economy entirely controlled by the bureaucracy. Depending on just how many losers will have to be thrown in front of the bus in this crisis, the non-transparent bailout process could prove to be politically unsustainable.Above image of the crashing indices comes from the Economist.