2008 Crisis a Greater Threat to Russia than was the 1998 Default, Satarov Says
by Paul Goble

On-going series: Crisis in the Caucasus - 2008
The Russian / Georgian Conflict and Its Impact on Azerbaijan

Window on Eurasia: Original Blog Article

Vienna, October 20 - Gyorgy Satarov, the president of Moscow's Indem Foundation, says that the 2008 financial crisis poses far greater challenges to the social and political stability of Russia than did the 1998 default because of changes in the nature of that country's economy and political system over the last decade.

The difference between the two is very great, he argues. Now unlike in 1998, there are no checks on the power of the executive, an absence that makes sensible decisions "less likely." Businesses are less independent of the state than they were, and consequently it is far from clear that it will be the worst performers who will fail.

But most important, this crisis is taking place in a very different Russia than the one that existed 10 years ago. Then people felt that things were going from bad to worse, but for the last few years, Russians have been encouraged to have "positive expectations" about the future. "But a crisis [like the current one] destroys them.

And as the social science theory of relative deprivation teaches, Satarov continues, "people revolt not when things are bad but when the gap between their expectations and the reality they experience grows," something that is happening with dizzying speed over the last few weeks.

"That is how the Great French Revolution began," he points out. Today in Russia, one can imagine some very radical outcomes: The military is angry with plans to cut the size of the officer corps, a step the Kremlin is pursuing despite the well-known principle that "officers in reserve are more dangerous than those on duty.

Moreover, the current economic crisis is hitting the country's new middle class at precisely a time when "businessmen had begun to organize themselves." And third, there are fears among, not just the middle class, but many layers of society that they are about to lose again the savings that they have put in banks.

Separately, each of these developments represents a problem for the Russian government, Satarov says. If they should come together ­ and the Indem analyst clearly implies that they are moving in that direction ­ then together they would pose an even greater challenge for the regime in Moscow.

On the one hand, Satarov's apocalypticism is almost certainly overblown. In the hothouse atmosphere of Russian commentary today, the best way to get attention is to predict disaster, even though there are many reasons to believe that the situation, especially given the impact of the falling price of oil, may not be as immediately dire as he suggests.

But on the other, his point that Russia is more at risk of a social and political cataclysm now than it was under Boris Yeltsin is a useful corrective to the views of many in both Moscow and Russia that Vladimir Putin's regime by its actions alone brought something more permanent than the brittle authoritarianism now on view.

And that, in turn, makes the examination of evidence that individual components of the Putin system may be far more at risk of collapse than anyone had thought. An example of this involves what is taking place in one of the government's first lines of defense if things should go wrong ­ the militia.

A letter from an interior ministry official and an accompanying analysis on the http://Forum.msk.ru website over the weekend suggest that if things go wrong in the broader society in some of the ways that Satarov and other commentators have suggested in recent days, the militia would be likely to crumble as an effective force.

Were inflation to continue to rise, the ruble and the stock market to fall, and unemployment and shortages in the stores to increase, the http://Forum.msk.ru site suggests, it is "doubtful" that the militia would continue to function as "an organized force" because its members and their families would all be suffering from these trends.

The government, the article says, might counter by raising their pay and giving them apartments but only at the risk of increasing public hostility to the officers of this never beloved group. And in that situation, the militia would likely break apart into "feudal detachments" serving only those "who give dollars' and would not fight for the Kremlin as it did in 1993.

And if the interior minister official who wrote the letter is correct, the country's first line of force may already be in trouble: "At present," he says, "the structure of the interior ministry of the Russian Federation has been completely destroyed as an effective unit" by corruption, low pay, and the hypocrisy of its leaders.

Again, this statement too may be overblown, but it points to problems in an area that any government facing social problems of the kind the Russian authorities now do because of the impact of the worldwide financial panic and dramatically falling oil prices can ignore only at its most extreme peril.

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