Coronavirus crisis leaves Russian government rudderless

When Vladimir Putin tapped Mikhail Mishustin in January to become prime minister, the little-known tax official was meant to spearhead a push for stimulus spending to help Russia’s president remain in power.

Four months later, coronavirus has meant there is no longer the money to spend, nor Mr Mishustin to spend it — the 54-year-old has temporarily resigned his post, reduced to holding meetings from a makeshift office in the state hospital where he is recovering from Covid-19.

The task for his stand-in Andrei Belousov, a longtime economic adviser to Mr Putin, borders on the impossible. Suppress the world’s second-fastest growing rate of coronavirus infections while also lifting a six-week long national lockdown that has paralysed the economy. Fail, and further dent public support for the president, whose approval ratings fell last month to a record low in his 20 years in power.

A collapse in oil prices — Russia’s key export — means a $165bn national reserve fund previously earmarked for Mr Putin’s stimulus programme was instead being rapidly used up to plug the resulting hole in the budget. Government officials expect the economy to contract by 6 per cent this year, the budget to swing to a deficit worth 4 per cent of gross domestic product, and unemployment to double.

“We are now actually entering a more difficult period from the point of view of the economy,” Mr Belousov admitted last week.

For much of his presidency, Mr Putin has concentrated on foreign, defence and security policy, and left economic and financial matters mainly to his prime minister and a handful of senior aides.

Since 2014, and Russia’s last financial crisis, their orders were to tighten up spending and swell Russia’s reserves. But that shifted in January when Mr Putin announced social spending measures aimed at bolstering his popularity and extending his rule beyond 2024.

Coronavirus has wrecked that plan. Russia has more than 220,000 Covid-19 infections, the world’s fourth-largest total, and has recorded more than 10,000 new cases for nine consecutive days.

“The government does not have an economic policy now. It is just a committee for the redistribution of money flows and budget preservation,” said Andrei Kolesnikov, senior fellow at the Carnegie Moscow Center. “In that sense, Mr Mishustin and Mr Belousov are in the same boat.”

Cemetery workers wearing protective gear bury a coronavirus victim at a cemetery on the outskirts of St Petersburg in early May © Olga Maltseva/AFP/Getty

An ardent supporter of state-run business, Mr Belousov, 61, was a champion of a Rbs25.7tn spending programme on infrastructure dubbed “national projects”, aimed at boosting stagnating living standards.

But with oil prices well below the $42 a barrel required to balance the budget, Russia’s national wealth fund is being spent at a rate of as much as $300m a day to meet day-to-day needs. It could last for only the next two years, finance minister Anton Siluanov said last week. 

Finding a way to get the economy moving again is Mr Belousov’s most pressing task. Data from IHS Markit showed the country’s business activity crashed to an all-time low in April. But the country’s failure to curb the number of new infections means a full reopening could be months away.

On Monday, Mr Putin rescinded federal stay-at-home rules in place since March but said regional governors should only ease specific quarantine measures when appropriate.

“The exit from the restriction regime will not be quick, it will take considerable time,” he said in a national televised address. “Therefore, starting from May 12, at all stages, until the epidemic is completely completed, it will be necessary to maintain both general sanitary requirements and additional preventive measures in the regions.”

This week 500,000 workers at construction sites and industrial plants in Moscow will return to work, even as the city’s mayor makes wearing face masks mandatory on public transport and warns that quarantine measures will remain for at least the rest of May.

“This is well known as the ‘two hares’ strategy: strengthening quarantine as much as possible and opening all the businesses,” Tatyana Stanovaya, founder of political analysis company R. Politik wrote on the Telegram messaging app. “So everyone who can’t work gets a lock on their door and cameras everywhere, and those who can are sent to the shop floor in spite of the risks.” 

Andrei Belousov: ‘We are now actually entering a more difficult period from the point of view of the economy’ © Alexander Astafyev/EPA/Shutterstock

While the pandemic presents possibly the biggest ever challenge to Mr Putin’s authority, the president has often appeared disengaged and distant, delegating the task of tackling it to his underlings.

At one point during a video conference with Mr Belousov and other senior officials last week, he appeared distracted and bored, listlessly rolling his pen across his desk while his health minister spoke.

In Russia’s heavily bureaucratic and top-down political system, that lack of imperative from the Kremlin has led to inconsistencies in implementing anti-pandemic efforts, with some regions allowing citizens to openly flaunt quarantine measures as others tighten up with police checkpoints and electronic tracking systems.

Failing to overcome these difficulties and delivering either a slowdown in infections or a boost to the economy could mean Mr Belousov’s promotion rapidly turns into a poisoned chalice.

“This could all be a plot to get rid of him by putting him in charge,” joked an executive at a large state-run company. “If [Belousov] keeps behaving the way he normally does, in two or three weeks everyone will be praying for Mishustin to come back.”

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