A Bad Summer for Putin

Russian dictator threatened by multiple crises, with more to come

Russian dictator threatened by multiple crises, with more to come

It’s been a turbulent summer for Vladimir Putin. It saw the Ukrainian counteroffensive building up to a markable progress, the shock of the Wagner revolt and the subsequent oath-breaking assassination of its leader Prigozhin, the plunging course of the ruble and Russia’s deepening economic woes, more setbacks at the international arena, and worrisome trends in the domestic public opinion. These events are the harbingers of the tougher times ahead for Putin’s regime.

Some argue that Putin’s system has demonstrated a remarkable resilience in the face of Western pressure and despite its growing international isolation. The economy hasn’t collapsed and is actually showing signs of recovery. There’s a seeming unflinching unity among Putin’s elites in support of his war against Ukraine. Prigozhin’s mutiny was effectively mitigated and Prigozhin subsequently eliminated.  The Russian public generally appears quite calm and shows no inclination to revolt against the government. The state maintains significant resources to continue the war for a protracted period. Despite its barbaric aggression against Ukraine, major powers of the Global South are willingly doing business with Russia, undermining the effectiveness of international sanctions.

However, under this surface,  several powerful sources of disruptive change are brewing.

The June Wagner rebellion exposed profound schisms within Putin’s military and security structure and came perilously close to sparking major infighting between armed groups. Many assumed Putin would eliminate Prigozhin in the aftermath of the revolt, the prediction that materialized within two months. The circumstances surrounding Prigozhin’s demise leave little room for doubt that it was orchestrated by Russian authorities. Notably, Russia declined Brazil’s request to investigate the crash of the Embraer jet carrying Prigozhin.

However, the problems that blew up into an open conflict between the Wagner group and the Defense Ministry— inefficient military management, non-transparency, corruption, shortage of resources— still remain. Three weeks after the revolt, a senior Russian general Ivan Popov, who has recently been dismissed from his post as the Commander of the 58th Combined Arms Army, published an angry audio message, blaming the Defense Ministry for «betraying the troops» by failing to provide adequate support on the battlefields of Ukraine.

The problem is systemic. The resources allocated are wildly insufficient for  sustaining the current scale of military operation in Ukraine. Although Russia’s annual military budget was increased by over 40% in 2022-2023 from pre-war levels, it is still not enough for the current intensity of combat. For starters, the total annual budget allocated for supplies of the army barely exceeds $6 billion per year under the current exchange rate— and that is for the entire Russian military, not just for units deployed in Ukraine. This a biproduct of a deliberate prioritization of the military production in spending allocations. Over two-thirds of the Russian military budget is traditionally spent on procurement of weapons and ammunition, with only about one fifth on salaries of military personnel, and the remaining 10-12% on supplies. Increasing focus on supplies will require significant de-prioritization of military hardware and ammunition or a dramatic increase of the overall military budget. Putin can’t afford either.

Frustration around these issues is likely to intensify in the coming months. The Russian government’s finances are under severe stress due to sanctions. After the first 7 months of 2023, the federal budget deficit reached almost 100% of the anticipated annual deficit for the whole year. Oil and gas revenues were down 41.4% year-to-year during this period. To bring the deficit under control, the Ministry of Finance chose to dramatically reduce federal spending (from nearly 3 trillion per month in January-May 2023 to just 2 trillion in June-July) and suggested that ministries and agencies cut at least 10% of their non-essential budgets to add up to 4 trillion.

Most of the funding allocated for the Ministry of Defense for 2023 has already been spent, but the military is clearly running out of cash and supplies. This may lead to a showdown between the military and the Ministry of Finance when, by the end of September, the government will send the amended 2023 federal budget and the 2024 draft budget to the State Duma. Powerful lobbyists fighting for their own slice of the pie will be active in this scuffle. In the 2023 budget, spending on the «national economy» was cut by nearly 20% compared to 2022, and that was even before the recently announced cuts. Influential lobbying groups won’t be pleased.

The primary standoff, of course, will be between Ministry of Finance and the Ministry of Defense— in which the MoD’s calls for increased spending will be amplified by «turbopatriots»and milbloggers to shape public opinion.

Neither did  the murder of Prigozhin solve fundamental elite in-fighting risks for Putin’s system. Yes, he has demonstrated to his elites, the military and to voters how far he is ready to go to silence criticism and disloyalty. But the key underlying challenges just won’t go away, and have a great chance erupt some time soon— most likely, under pressure from mounting Ukrainian counteroffensive.

Despite the lack of significant breakthroughs during the summer 2023 Ukrainian counteroffensive, the Ukrainian Armed Forces have achieved a major objective— they have significantly depleted Russia’s forces at the front. The number of combat-ready and skilled Russian troops is growing thin; those remaining on the battle lines are worn out, serving long months without rotation and rest. New recruits mostly fail to meet combat readiness standards. Wounded are treated badly and sent back to the front. Troops are badly equipped and poorly supplied. Army command is forced to haphazardly move combat-able units back and forth between critical battlefield areas, because there’s not enough of them for all the frontline length. «Turbopatriots» and milbloggers are increasingly criticizing Russian military command for failing to recruit and train effective middle-level military commanders for the frontlines. The deficit of skilled officers to command the army units may soon present a serious challenge for the Russian ability to  continue effective combat operations. The supply challenges are increasingly marring the battlefield situation.

In light of these factors, chances are increasing for breakthroughs in Ukrainian counteroffensive in the near future. In turn, Putin’s army will be hardly able to hold on to its defensive positions for too long in such an environment— with such significant lack of personnel, supplies, and funding. This is exactly what Yevgeny Prigozhin, Igor Girkin and other «turbopatriots» have been publicly warning about in the past few months; killing Prigozhin and jailing Girkin won’t solve these systemic problems.

The spectacular murder of Prigozhin— is also a sign of growing turbulence in the Russian power circles. Putin may like to think that he has restored «order» by brutally crushing a challenging opponent. But based on our conversations with insiders, most are deeply troubled by military riots and takeover of major cities by private armed units, and the subsequent brutal downing of business jets in the vicinity of busiest Sheremetyevo airport area. The country has reached the level of instability unseen even in some of the worst years of the post-Soviet period.

Then there are Ukrainian drone attacks on critical Russian infrastructure, which have become a new daily normal and is a major source of anxiety for the Russian elite. Although the authorities try to downplay their significance, their scale is formidable. Virtually any building and facility in Russia is now exposed and emergency airport shutdowns are a new daily reality. These attacks are relatively cheap to carry out, so they will likely persist and even intensify in the near future. The Russian Railways alone has spent an additional 45 billion rubles per year on «extra security measures» to protect the infrastructure from sabotage. This is close to 3% of the total revenue from railway cargo shipments. A debate is ongoing on raising freight rates to finance these extra costs.

Russian economy is in deep trouble too. After the slight rebound of the second quarter of 2023, economic indicators began to out. Investments are  not growing; massive capital flight continues. The relatively stable economic picture is only supported through massive state spending, but the government’s resources are finite— which is why the Ministry of Finance is suggesting austerity measures, which would hamper recovery. Another recovery killer is the Central Bank’s drastic hike of  interest rates (two increases in July and August that have brought the rates from 7,5% to 12%, with even further adjustments planned.

Nearly all current economic issues in Russia— deficit spending, ruble depreciation, expensive logistics of trading with Asia, wild shortages of skilled labor due to war, mobilization and mass emigration— are pro-inflationary. Therefore, it is not clear how the Central Bank rate hikes are supposed to help to calm them down without significantly curbing the economic activity. Putin’s appointee, business ombudsman Boris Titov condemned the rate hikes, saying «new rate puts an end to the development of the debt market, to new sources of financing for investment projects».

Another problem is the deep depreciation of the Russian currency. Unsurprisingly, the much-advertised «import substitution» never delivered due to the sabotaged international cooperation, monopolism, corruption of key businesses controlled by Putin’s cronies, as well as the lack of favorable business environment. Not capable of producing most goods domestically, Russia relies heavily on imports to keep the economy going— and imports of consumer and industrial goods have restored to pre-war levels and even beyond. This, however,  creates a «foreign currency glut» —export revenues are down significantly due to Western oil embargo and shutdown of gas supplies to Europe by Gazprom, while import bills have recovered to pre-war levels. In the lack of import substitution and with depressed export revenues, this situation will persist — ruble will continue to depreciate, translating into higher inflation, which is justifiably a key concern for the authorities.

Western sanctions against Russia exacerbating all these trends and leaving few instruments for the government. In the coming months, we will likely see continued trends of budget deficit, ruble depreciation, inflation, recovery slowdown, wrangling over budget outlays.

On top of the economic challenges, Putin has suffered major international setbacks. Main humiliation came from the South African government: although current leadership of South Africa may be considered quite friendly to Putin, even President Cyril Ramaphosa was forced to put pressure on Putin to convince him not to attend the August BRICS summit in Johannesburg in person, to avoid challenges related to South Africa’s obligation to arrest Putin under International Criminal Court’s arrest warrant. To many in the Russian elite, Putin giving in to South African demands not to attend the BRICS summit in Johannesburg in person is an incredible humiliation, and a sign of Putin’s major international weakness.

Since the beginning of the full-scale aggression against Ukraine in February 2022, Putin has been trying to convince his elites that he is capable of forging a major international anti-Western coalition of the Global South countries — primarily heavyweights of the BRICS coalition — which will serve as a worthy alternative to severed ties with the West. But that’s not happening. Even some of the closest and most friendly countries demonstrate that they value the rules-based international order higher than ties with Russia. Putin is forced to significantly curb his international travel schedule — he will not attend the September G20 summit in India, limiting his trips only to a handful of safe capitals like Beijing.

There were other setbacks as well. Despite much propaganda fanfare, the Russia-Africa summit held in end-July yielded no visible positive results, and the attendance of top African leaders nearly halved as opposed to the previous summit of 2019 — just 27 heads of state and government attended the 2023 summit, against 45 in 2019.

Russia’s threat to exit from the Ukraine grain deal in July was supposed to be a major show of force against the free world and international food trade — but the blackmail hasn’t worked, Ukraine continues to find ways to export its grain, and Turkish President Erdogan is aimed at bringing Russia back into some sort of similar framework for Black Sea food exports.

But the biggest challenge for Putin is presented by the worsening trends in the Russian domestic public opinion. Public opinion still matters in Russia — not least because it is used to legitimize Putin’s unchallenged domination over other people in power, because he is the only one who has some historic popular backing. However, visibly weakening public support for Putin may change that equation.

The negative public reaction to the first wave of mandatory mobilization in August 2022 was overwhelming, and translated directly into plunging Putin’s approval ratings, so Putin is clearly hesitating to call a second wave, even under the pressure from Ukrainian counteroffensive, and desperate shortage of manpower at the battlefield.

Careful to not disturb public opinion the Kremlin is hesitant to block YouTube (which remains not only a major source of opposition broadcasting for the Russian population, but also a quite popular entertainment platform, to which Russia hasn’t yet created any viable alternatives), or to shut down borders and to introduce exit visas to curb emigration and draft evasion.

Putin has a lot to worry about regarding public opinion in Russia. His effective positive approval is already well below 50% — although aggregate polling numbers suggest that Putin’s support is above 80%, detailed breakdown of public answers shows that the number of those with cautious-neutral attitude («can’t say anything bad about him», «neutral or indifferent») stands at 43%, whereas «sympathy» and «admiration» — just 42%. Another 14% say that their views of Putin are suspicious or outright negative.

For Putin, such trend is unsustainable. As it was the case with the outcry resulting from partial mobilization last August, public opinion may rapidly swing into negative territory after just one unfortunate decision. Putin is afraid to lose legitimacy, which will undermine his domination in power circles.

Putin’s war against Ukraine is not nearly as popular among Russians as many in the West suggest. According to the very recent Levada poll, in August, firm support for Putin’s war in Ukraine — «definitely support» — dropped to record low of 38%, against 53% at peak in March 2022. 50% of Russians favor peace negotiations with Ukraine to end the war, over just 38% who favor continuing the combat.

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Independent Russian media Verstka reports that, during the ongoing electoral campaign in dozens of the Russian regions, the ruling United Russia party candidates, as well as candidates from other systemic parties with «ultra-patriotic» positions — Communists, LDPR — prefer not to raise the topic of the war in their campaigns, because it is unpopular and «dangerous». Independent opinion pollster Russian Field reports a record-breaking number of denials of respondents to talk about the war — 94,1% of refusals or interrupted conversations, or 16 refusals or interruptions per one fully completed interview. Analysis of Yandex and Google search statistics shows that, while Russians are still inclined to watch the official propaganda, their moods are largely anxious and depressed, there are no signs of any kind of patriotic upsurge in the society at all.

The looming Ukrainian counteroffensive and expected battlefield successes in liberating the occupied Ukrainian territories, as well as intensifying drone strikes against the Russian territory, are terrifying the Kremlin in terms of potential repercussions for public opinion. In mid-August, an influential group of Russian Senators introduced a draft law banning the distribution of information and evidence of Ukrainian battlefield successes and Russian retreats, as well as strikes against Russian territory. Clearly, the authorities anticipate a war fatigue in the Russian society.

Importantly, Putin has failed to mobilize any significant number of volunteers to fight in Ukraine. All Russian cities are filled with ads of contract military service at generous pay by regional standards, and central town squares are filled with recruitment kiosks which remain empty. Russians don’t want to fight, and many of those engaged in combat operations in Ukraine at the moment are doing so out of fear and under threats, as documented by numerous video public pleas recorded by soldiers stationed at the occupied territories of Ukraine. Putin’s regime is facing mounting challenges on many fronts – on the battlefield, dealing with the internal wrangling within the system, fending off the disturbing UAV attacks against Russian territory, economic problems, international setbacks, negative trends in domestic public opinion. While that does not necessarily mean that Putin’s regime will collapse tomorrow, it does put the system under an enormous stress, forcing him to minimize liabilities. In such a situation, sustained Western sanctions together with demonstrated resolve to uphold the sanctions regime as long as necessary is the most powerful tool to support Ukraine’s victory.

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