[Marxism] Russians’ Anxiety Swells as Oil Prices Collapse
lnp3 at panix.com
Sat Jan 23 07:06:03 MST 2016
NY Times, Jan. 23 2016
Russians’ Anxiety Swells as Oil Prices Collapse
By NEIL MacFARQUHAR
KRASNODAR, Russia — Last year was bad enough financially for Sergei and
Victoria Titov, both music teachers getting along in years. Her
government salary was slashed by one third, and rampant inflation put
some basic groceries like eggplant and cucumbers out of reach.
Then came Jan. 1, and the abrupt decision by the regional government
here in Krasnodar, the capital of Russia’s southern agricultural
heartland, to chop transportation subsidies for older Russians, forcing
the couple to limit their trolley rides.
Indignant and fearing worse amid Russia’s accelerating economic
problems, Sergei joined an unauthorized demonstration last week by
hundreds of older Russians who gathered under the bronze statue of a
Cossack horseman on the main square here and chanted, “Return our benefits!”
They were not alone, neither in Krasnodar nor across this vast nation,
where illegal protests and wildcat strikes are erupting with increasing
frequency by truckers, teachers, factory workers and all sorts of
Russians facing steep government cutbacks because of plummeting revenue
from oil and gas.
The global collapse in oil prices is reordering economic relations
around the world, but the change is particularly daunting for Russia,
which relies on energy exports for 50 percent of its federal budget.
In December, President Vladimir V. Putin told the nation that the worst
of the recession — the economy shrank 3.9 percent and inflation hit 12.9
percent in 2015 — was over and that modest growth would return in 2016.
He has been pushing the oil collapse as an “opportunity” that will wean
Russia off energy imports and diversify the economy.
Then in January oil fell below $30 per barrel, with no bottom in sight,
and the ruble hit a record low of nearly 85 to the dollar before
The last time oil prices dropped so low and stayed there, in the 1980s,
the Soviet Union disintegrated. Steadily rising prices since 2000 have
lifted Russia out of poverty and economic chaos, buoying the prosperity
of many Russians with it. Mr. Putin was lucky enough to be president for
much of that period, but he now faces an extended decline, with real
With the federal budget approved in December based on oil at $50 a
barrel, Anton Siluanov, the finance minister, announced that the country
faced a budget deficit of about $40 billion, and ministries were ordered
to cut spending 10 percent. Budgets were similarly guillotined last year.
In Krasnodar, Mr. Titov, 64, braced for harder times. “I do not know
what they will cut, but I know it will affect us,” he said. “We are
watching all this with alarm. It is clear that the government lacks the
necessary resources to give us a normal life.”
In Krasnodar, a city of about 800,000 people, retirees register a kind
of sticker shock when discussing food prices, yelling out items as they
remember newly high prices. “Apples!” one shouted, noting that the cost
had nearly doubled. Then “Zucchini!” Then “Smoked sausages!”
Food prices rose 20 percent last year, according to official statistics,
but often Russians say their grocery tab is up by a third or more,
thanks in part to sanctions Moscow slapped on Western food imports in
retaliation for sanctions the West imposed over Ukraine.
Sergei Galustian, 65, a retired police officer, lives on a downtown
street with just 27 houses, their proximity making it easy to assess change.
“Nobody is starving yet, but incomes are definitely down,” he said,
noting that homes are colder, that neighbors turn on just two lamps
after dark where they once used five and that people have stopped buying
new clothes. Retail sales across Russia were down by 13.1 percent for
the year ending in November, according to official statistics, with car
sales off nearly 40 percent.
The 100 or so workers at the giant Seydin Machine Tool Factory, once the
pride of the city during the Soviet era, have not seen a paycheck for a
year and recently received layoff notices. They, too, have on occasion
gathered in the main square to demand their back pay. The workers “have
to take to the streets!” they wrote in an open letter to Mr. Putin.
In a tradition dating from Soviet times, most firms, and especially
state-run companies, tend to cut hours or stop paying salaries rather
than fire people to diminish the chances for social unrest.
In Moscow on Wednesday, about 15 employees of Sbarro, the pizza chain
based in Ohio, stood in the brutal cold outside one franchise holding
signs saying, “Give us our money.” Several said they had not been paid
for at least three months.
“They just tell us they have problems,” said Sergei Yudichev, 50, a
driver for the chain for more than two years.
Albeit poorer, Russia remains a petro state, so there are pockets of
plenty. Rolls-Royce reported a 5 percent jump in sales last year, the
rich splurging as the value of their assets nose-dived.
Others just seemed oblivious. Moscow’s City Hall advertised for tenders
for its banquets, noting that menu items should include foie gras and
Parma ham (which is banned elsewhere in Russia because of sanctions).
Social media erupted in mocking resentment. One Russian quoted a famous
line by the Russian poet Vladimir Mayakovski from the 1917 revolution,
“Eat pineapples, munch your grouse!” and left unstated the second line,
“Your last day is coming, bourgeois!”
Russia pumped record amounts of oil last year, nearly 11 million barrels
per day, but that pace will not save it in the current global glut. The
main government strategy so far seems to be to cut spending and to rely
on its reserves until oil prices improve.
Russia has around $360 billion in foreign currency reserves and some
$120 billion in two rainy day funds, down from just under $160 billion a
year ago. At current spending rates, however, the two funds are expected
to last only 18 months. It might also sell significant stakes in
state-run companies like the oil giant Rosneft or Sberbank, and it will
not increase military spending.
Mr. Titov, a veteran organizer for the Communist Party, said he felt the
economic problems were contributing to a corrosive sense of drift.
“Russia always lived with some manner of national idea, a goal: We were
building socialism and communism,” he said. “But there is no national
idea. Now, we just go with the flow and it is not clear in what direction.”
Russian involvement in wars in Ukraine and Syria has swelled the general
whirlpool of anxiety, with the possibility of a global war discussed on
state-run television. Some analysts accuse the Kremlin of deliberately
seeking overseas adventures to distract people from domestic economic woes.
“People are more alarmed and more tense, because now we are speaking not
only about their well-being, but their lives in general,” said Valery
Fedorov, director general of the government-owned Russia Public Opinion
Research Center, known by its Russian initials, Vciom.
Many analysts expect people to do what Russians always do in hard times
— hunker down, tend to their vegetable plots and wait it out. Others say
that Russians have gotten used to a higher standard of living and that
they will protest losing it.
The government allows street protests over issues like lost wages, but
its distinctly authoritarian edge emerges in the face of political action.
ocal governments have reacted lightly to the protests. The governor of
the Krasnodar Region restored transportation passes for the older
Russians receiving the lowest pensions.
Some residents, like Mr. Titov, groused that the wealth was being wasted
on prestige projects rather than helping ordinary people. Still, he does
not expect Russians to sour on Mr. Putin any time soon. In nearby Sochi,
Russia spent around $50 billion to host the 2014 Winter Olympics, and a
similar construction juggernaut is building stadiums nationwide for the
2018 World Cup.
“The Russian people got what they wanted, a czar ruling the country,” he
said of Mr. Putin. “What we need is an effective manager, but what we
got is the Olympics, soccer and war.”
Alexandra Odynova contributed reporting from Krasnodar, and Ivan
Nechepurenko from Moscow.
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