Russia’s Financial Beslan

putin112808.jpgSometimes in looking back on the truly pivotal moments in contemporary Russian politics, we can see not only the impact of the deep crises the country has suffered, but also the uses and expediency of these national traumas by the powers – a seizure of an opportunity to pass measures to further consolidate authority. 

A prime example of this trend was seen in the aftermath of the uniquely horrific Beslan school hostage crisis in 2004, which resulted hundreds of deaths (mostly children) and a widespread moral panic of terrorism that had few rivals outside of Sept. 11th.  Although the police response to the crisis is accused of being tragically inept, after a few days of silence and confusion, President Vladimir Putin’s response was decisive and politically pitch-perfect.  He saw that the Russian people were clearly frightened by this act of unimaginable cruelty, and needed to hear the voice of a strongman who would indicate who’s in control. 

Solution:  Putin gave a speech not only denouncing the cowardice of the terrorists and his administration’s determination to stamp out such groups, but alsom making a seamless segueway into a discussion about the benefits of security under the former Soviet state, and lamented that this crisis had become possible as a result of not enough central control over the regions.  It was an argument which implied that this terrorist attack happened as a result of weakness, and that this weakness was democracy.  The only sensible thing for the state to do in response, he concluded, was to eradicate the local election of governors, and empower the Kremlin to handpick representatives from Moscow.  It was a major turning point in Russia’s slide toward authoritarianism.

Now, we have another crisis, and another instrumentalization of its aftermath to push through constitutional changes.

Of course Russia is far from the only culprit to be opportunistic with public crises – and may well have taken their cues from the Bush administration in the wake of 9/11 in terms of expanding powers on the back on public security panic.  I sometimes think that we are very lucky that this financial crisis is happening at the tail end of the lame duck year of Bush’s presidency, rather than at a time when it could be instrumentalized to do something really stupid, like nationalize the Big Three ExxonMobile.

Back in Russia though, it seems clear enough that the current financial crisis slamming the economy is presenting another opportunity for a further consolidation.  The RTS and the Micex have both lost around 70% of their value, several of the country’s industrial titans have fallen into debt – including the state-run Gazprom and Rosneft (who are likely to get the lion’s share of state aid), oil is trading around $50 a barrel causing Moscow to flirt with OPEC, the ruble has been allowed to slide for the second time in a week, and the state’s highly prized and ample reserves are leaking to the tune of about $50 billion in just two weeks.

The government has kept a very tight lid on the media, forbidding them to report on the crisis, but word is beginning to get out as the layoffs begin, the prices rise on the devalued currency, and the wage arrears accumulate.

However, unlike the aftermath of Beslan, which posed very serious national security questions before a president whose background in the KGB may have carried some certain predictable connotations, this time we have Dmitry Medvedev nominally in control, a law professor and constitutionalist, facing an economic policy problem.  It would be a question of decisive positioning over the the Central Bank, regulatory authorities, and Ministry of Economy, rather than a mobilization of the armed forces to hunt down terrorists.

Instead, we got the same response – a new blame game, this time with Medvedev angrily blaming the reckless policies of the United States for causing the global credit crisis, shortly followed by exercises in Cold War-like rhetoric in Kaliningrad and Venezuela, helping to provide a distraction from his rushed proposal to change the constitution to extend the presidential term from four to six years.  Quite ironically, it was left to the Communists in the Duma, the only “opposition” left to the governing party, to ask the very reasonable question:  “Why are we in such a hurry? A strict authoritarian regime has alreadybeen established in this country. There is already an unprecedentedconcentration of power in one person’s hands.

The timing of the constitutional amendment couldn’t be more inappropriate. This government has very serious problems to attend, and urgent concerns of its citizens to satisfy, which would leave presidential terms as a relatively low priority item on a long agenda – but it appears a decision was made to pass this resolution while they still could, betraying perhaps an element of concern among the leadership that the coming pains in the economy may open up some fissures in their base of support.

Or you could take the other prominent theory out there – that the constitutional change signals that Medvedev is being made to play the fall guy in order to pass a number of politically painful measures (such as ruble devaluation), then preparing to resign for the reinstatement of the ever popular, untainted teflon Putin.

I haven’t yet made my mind up about that line of thinking, but what we do know now is that the financial Beslan is already well underway, and the question we should be asking is how far it will go.  However I might add that the stakes are much higher this time, and the time is running out for world leaders to be anything but sincere in their words and actions – by that, I mean that in taking a look at Russia’s extremely skewed econometrics (this market should be performing much better than it is right now), time may be running out for these kinds of authoritarian games.

At one point in Russia’s recent history, the pursuit of this style of populist authoritarianism + great powers antagonism was arguably mutually conducive to the “relatively smooth operating” of the administration and economy.  Today, we are seeing a mutual conflict of interests between the maintance of personal power in the absence of accountability, and the success of the country for the future.  The fuse is running short.