Cracks under the surface: How resilient is Russia?

With its overar­ching theme “How fragile is the Putin system?” the recent meeting of LibMod’s Expert Network Russia at the Eastern Studies Centre in Warsaw sent a clear message: A fragile Russia is a realistic scenario and Western policy­makers need to prepare for this rather than fearing instability.

Editor’s note: We do not attribute quotes because the meeting was held under Chatham House Rules.

At first glance, the kickoff panel discussion “Cracks in the Ruling Elite: Oligarchs, Technocrats or the Siloviki?” brought a lot of evidence to the contrary: The experts agreed that the regime has consol­i­dated consid­erably since last summer, when the revolt of the Wagner merce­naries failed and their ringleader Yevgeny Prigozhin was subse­quently killed in a plane crash that bore hallmarks of a Kremlin-orches­trated assas­si­nation. “Even the Siloviki (the military and all other armed security services) showed resilience … and the armed forces adapted to the Ukrainian counterof­fensive” one panelist said.

Since then, domestic repression in Russia has increased even more, especially against LGBT commu­nities and the few remaining dissenters. There are growing fears that Vladimir Putin will use the presi­dential “election” in March not just to secure himself another six years in office but to further weaken any internal opponents.

Also, the personal sanctions against Russian business­people are not working as intended: While those targeted may be unhappy about the sanctions, they are o.k. with Putin. And a seemingly strong Putin makes splits less likely: “The elites only confront the President with uncom­fortable truths when they feel he is losing. When they feel he is winning, nobody dares”, one panelist argued.

Never­theless, there clearly is fragility below the surface. Russian business is unhappy with the Kremlin’s imposition of capital controls and the growing number of asset redis­tri­b­u­tions. Panelists also noted that the Kremlin fears a radical­ization of mass sentiment for social reasons as well as dissat­is­faction with the lack of resources and decision-making compe­tencies in the regions.

The Prigozhin revolt caught the regime off guard to some extent, because it was carried out by nation­alist hardliners. However, Russia’s nation­alist opposition was soon exposed as being overrated. When Igor Girkin, their most outspoken figure, was arrested on 21 July, protests were at best muted.

Many panelists identified the so-called technocrats as the strongest elite group to emerge from the war. Unassuming but effective bureau­crats like Prime Minister Mikhail Mishustin and Central Bank Governor Elvira Nabiullina are credited with keeping Russia functioning despite sanctions. Mishustin is emerging as a potential successor to Putin: “The technocrats’ adaption is so strong that they can remain in place even without Putin”, one partic­ipant said.

Russia’s economic resilience – an illusion?

The Russian economy presents a similar picture. While on the surface, GDP has been growing since the sanctions regime’s imposition, a closer look tells another story: The “new Russian economy” that emerged this year, actually is less resilient than the previous one: There is a massive labour shortage and the arms sector could expand only at the expense of civilian indus­trial production, which has stagnated since May 2023.

Also, labour produc­tivity is 6 to 11 times lower than in Western Europe. Exports are less diver­sified (non-energy exports are down by 50 per cent) and the country is more dependent on imports while at the same time diver­si­fying its import sources. The transition towards a war economy means that GDP growth no longer reflects increases in the quality of life. Any further brain drain, like the 2022 exodus that followed the Kremlin’s mobilization, will directly affect Moscow’s arms production. Russia will emerge from the war as a poorer country with a more backward economy (at least outside the arms sector).