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Fragmented and Apathetic

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As if right on cue to accompany the news that Russia’s industrial output has slumped by more than 10% for the month of November – far exceeding even the worst expectations – the Financial Times is running a piece which asks how long the political leadership will be able to weather the storm.  Although Masha Lipman says mass protests aren’t likely to spring up immediately, one should never underestimate the cohesive, organizational power of suddenly having a common grievance to fight for.  The article also mentions the swelling rumors of Vladimir Putin’s increasing discomfort in the role of prime minister, and the possibility of a shift in office to make someone else carry out the deeply unpopular devaluation of the ruble.

Pavel Teplukhin, president of Troika Dialog Asset Management, points to a 20 per cent drop in railway freight traffic between October 2007 and October 2008, and a drop in electricity consumption of between 3 and 5 per cent over the same period. The iron and steel sector has been hard hit, with the big steel plant at Magnitogorsk, in the Urals, cutting production by up to 30 per cent.

There are two big dangers for Mr Putin. One is a substantial forced devaluation of the rouble. The other is a sharp increase in unemployment.  (…)


But Masha Lipman dismisses the likelihood of mass politicalprotests. “Society is extremely fragmented and apathetic. I am surethere will be more protest rallies here and there, but they will belocal. For the Russian people to reach out to each other will take atremendous shock.”

The greatest political danger for Mr Putin is different. Hitherto hehas kept power by maintaining a balance between the factions aroundhim, representing different arms of industry and the security services.As long as the economy grew, they could all be kept happy.

Today, he may be forced to choose between them, who gets help inrepaying the huge foreign debts accumulated by the likes of Gazprom andRosneft.

There may not be enough to go round. That is when the factions will start fighting.

Photo:  A group of pensioners and youngpolitical activists display staple foods, foreground, as they stage apicket in downtown Moscow on Monday, Dec. 1, 2008, to attract attentionto the dismal state of retired people in Russia. Russia’s economy isspiraling downhill much faster than many expected just a few weeks ago.Companies have slashed up to a fifth of their staff, economists havedrastically cut their growth forecasts, there are concerns of a steepcurrency devaluation and oil prices are in the doldrums – no good thingfor an economy based on energy exports.(AP Photo/Alexander Zemlianichenko)