By Owen Matthews and Anna Nemtsova
The credit crisis now looks like it's going to hit banks and ordinary Russians hard--and it may strain Prime Minister Vladimir Putin's hold on power.
Russia’s retail banking system is grinding slowly to a halt. Even Central Bank Chairman Sergei Ignatyev expects at least 70 Russian banks to go under. The larger-than-ever Russian middle class is feeling the credit crunch. Veronika Ponomareva, head of sales at the Moscow-based Calipso travel agency, says that she needed to make a quarterly transfer of $300,000 to the International Air Transport Association last week – but her bank told her they couldn’t draw on her account because of a lack of liquidity. “Too many people were withdrawing all their money, so the bank just didn’t have our money,” she says. “We had to run to our friends and borrow eight million rubles.” And Vladimir Ivanov, head of a small construction company in Nizhny Novgorod, complains that he cannot pay for materials because his bank needs at least a week to make a transfer. “Our leaders say they are pouring money in to stabilize the banking system,” he says. “But we do not feel it here. There must be someone in the middle using the situation in their favor."
President Dmitry
Medvedev tried to put a good face on the situation this weekend when we went on television to assure viewers that the “world
financial crisis” could actually be an opportunity for companies to
“improve management structures" and improve “effectiveness and
productivity.” Of course, Russia's $150 billion in oil windfalls and a further $480
billion in foreign currency reserves are enough to prevent the ruble
from crashing, as it did in August 1998. Some banks will be bailed out – but inevitably, there won’t be enough money to save everyone.
That will put a severe strain on the consensus that Putin built up with Russia’s elite over his years in power – a consensus based on the principle that everyone would be allowed to get filthy rich as long as they kicked back to the right bureaucrats and stayed out of politics. "Suppressing pockets of panic with promises of presidential aid, Medvedev aims primarily at projecting the message that the system of power is rock solid and can sustain any storms blowing from outside,” says Pavel Bayev, senior researcher at Norway's International Peace Research Institute. “Undeserved rewards and instant gratification have been the fundamental values of the elite consensus, and they are gone for good.” Putinism, he says, is in for a “hard landing.”
