Sun, May 08, 2016 page9

• Russia’s economic pain reveals limits to Putin’s power

  After years of taking credit for a booming economy, forces largely beyond his control have backed the nation’s leader into a corner

  • By Andrew Higgins / NY Times News Service, PIKALEVO, Russia
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  The factory meeting room where Russian President Vladimir Putin browbeat one of Russia’s richest tycoons in front of cameras from state television has become a shrine, hallowed ground where Putin showed a path out of economic pain for ordinary people and calmed a spasm of worker unrest.

  “It all happened here. This is where he solved the future of our factory,” said Sergey Lyakhov, a manager at the sprawling plant, proudly showing off the tidy third-floor conference room.

  However, that was nearly seven years ago, when Putin was Russian prime minister. Today, the economic troubles that Putin went there to make a big show of solving are back, only worse and involving far more intractable problems than just the “trivial greed” of tycoons that Putin blamed for Pikalevo’s tumult in 2009.

  

  Illustration: Constance Chou

  Pikalevo, about three hours east of St Petersburg, and the rest of Russia are now mired in the nation’s longest recession since Putin came to power at the end of 1999, with the World Bank last month warning that the nation’s poverty rate would increase this year to 14.2 percent of the population, “undoing nearly a decade’s worth of gains.”

  Russia’s crisis, though largely caused by market forces beyond the Kremlin’s control, notably a slump in the prices of oil and gas, has pushed Putin into a corner. After years of taking credit for a booming economy, which also had little to do with his actions, and casting himself as a can-do leader capable of untying the toughest economic and political knots, he faces a crisis that has exposed the stark limits of his power and prowess.

  A recent rebound in oil prices has lifted hopes in the Kremlin that the worst of Russia’s economic storm has passed, but it has also highlighted just how much Putin’s fortunes depend on unpredictable and uncontrollable outside forces, such as the energy market or the economic sanctions imposed by Europe and the US.

  Putin’s power, for example, does not touch the torrent of slurry, a muddy sludge used to make cement, that now flows uselessly into an overflowing storage pit. The sludge is a byproduct of alumina production at Pikalevo’s biggest industrial plant and it used to feed production at an adjacent cement factory. However, that factory, hammered by slumping demand as a result of Russia’s recession, has slashed production and takes only 20 percent or less of the brown muck it used to buy.

  Nor does it touch Pikalevo’s only hotel, a dowdy Soviet-era hostelry where the staff members, all middle-aged women, were recently told that their services were no longer needed as the owner, the alumina factory, had other, unspecified plans for their workplace.

  Putin’s power has not even protected one of his most ardent local supporters, Pikalevo Mayor Dmitry Nikolaev, who was suspended from his post on April 19 amid a criminal investigation into corrupt payments involving the alumina factory and a construction company.

  As leader of the world’s biggest nation, a nuclear power intent on asserting itself on the world stage, Putin has far more pressing concerns than Pikalevo’s myriad troubles.

  However, throughout his 16 years in power, whether as president or prime minister, Putin has presented an image of an omniscient and omnipresent leader interested in and capable of addressing his nation’s most microscopic concerns.

  “He is ultimately responsible for everything that happens in Russia,” said Maxim Volkov, chief executive of the Pikalevo factory visited by Putin in 2009, the largest of three interdependent, but, since the collapse of the Soviet Union, separately owned plants. “This is very good, but also very bad.”

  While praising Putin as a “tough and efficient” leader, who ended the drift and decay that characterized the rule of former Russian president Boris Yeltsin in the 1990s, Volkov said the concentration of power in the Kremlin had left the president “responsible for all the idiots who work under him” and for solving all the nation’s quarrels and problems, no matter how small.

  “The government simply cannot resolve every dispute in this country,” he said.

  On a nationally televised call-in show last month, Putin displayed omnivorous interest in the concerns of ordinary people. At the same time, he dropped his customary swagger in response to a flood of questions about the economy, acknowledging that this year, there would be yet more contraction, instead of growth as he predicted on the same show last year.

  “It is difficult to say exactly where the bottom lies,” he said.

  Russia “is going through a gray period,” Putin said.

  Nina Suslova, a veteran worker at the cement factory, sees it in hues closer to black. She was informed on a recent morning that her job was being split between three people, meaning that she would work only a few hours a day and have her salary slashed accordingly.

  “We need to eat. We need to pay our bills. We can only think about surviving now, not about the future,” Suslova said during a visit to her trade union representative to appeal for help.

  Such cost-cutting maneuvers, which keep workers off the unemployment register, but in some cases, reduce their income to almost nothing, are increasingly popular with Russian businesses hammered by the downturn. However, they are deeply unpopular with a population that had grown accustomed to rising salaries under Putin.

  “They do not like the word cuts and prefer to say they are optimizing workplaces,” said Elena Petrova, the trade union representative for the cement factory, her office wall adorned with portraits of Putin.

  The downturn seems to be taking a toll on Putin’s standing, or at least faith in his policies, as Russians’ fascination and delight with his foreign ventures wanes and pocketbook issues increasingly dominate public worries.

  About half of those polled this year by the independent Levada Center said they think Russia is moving in the “right direction,” compared with 64 percent last summer.

  All the same, Putin remains hugely popular, with 73 percent of those polled in March saying they trust the president. This is down from 83 percent in the same month last year, but still far above what any Western leader can muster.

  Suslova, the disenchanted worker, said she had always voted for Putin, had cheered his 2009 visit to Pikalevo as offering salvation and had believed his rule would steadily make her life better, but added that she now realizes that “one man cannot do everything.”

  However, for 16 years, the Kremlin, aided by hagiographic reports on television, has been telling and, to a large degree, convincing Russians that, in the case of their leader, one man could do just about anything and everything.

  His visit to Pikalevo in 2009 helped construct the image. However, the problem he solved then was relatively simple: The three separate private owners of a once-unified industrial combine could not agree on the price of the products they supplied to one another and which each needed to keep going. Starved of vital supplies, they halted production, leaving workers without work and Pikalevo’s 22,000 residents without heat and hot water. Angry residents blocked a nearby federal highway in protest.

  In just a few minutes, during a June 2009 televised meeting with the owners, including Oleg Deripaska, a billionaire aluminum magnate who owns the biggest of the three factories, Putin put everything right. Describing the owners as “cockroaches,” he accused them of making “thousands of people hostages to your own ambitions, your non-professionalism and maybe, simply your trivial greed; it is absolutely unacceptable.”

  The owners, fearful of losing their assets, swiftly ended their quarrel. Behind the scenes, the Kremlin leaned on Gazprom, the state-controlled gas giant, to cut the price of energy to the Pikalevo plants and on state-owned banks to provide cheap credit.

  The factory at the center of those troubles, Deripaska’s alumina plant, is now pumping out its primary product, a chemical compound used in aluminum smelting, as well as hot water for the whole town and a tide of slurry for the adjacent cement factory that no longer wants it.

  On a recent day, only one of six kilns at the cement plant was operating. Managers at the plant, owned by Russian building materials group Eurocement, declined to be interviewed.

  Volkov, who runs the alumina plant, said the cement factory’s antiquated equipment and plummeting demand for its products left it no hope of recovery.

  “There is no solution,” he said. “Even if they get their materials for free, they still could not compete.”

  This, in a nutshell, is the Kremlin’s current nightmare: With low global energy prices and Western sanctions over the Ukraine conflict crimping Russia’s prospects of recovery, the economy has hit a wall. It simply cannot compete with China, the US or even the European nations that Russian state media constantly portray as fading has-beens. The easy and popular fixes the Kremlin used in the past to resuscitate the economy — or at least placate the public — have all been exhausted.

  However, there are few signs that Russians would take to the streets in protest or flock to the banner of a divided and feeble opposition.

  Svetlana Antropova, a local trade union leader, who helped organize the highway blockade in 2009, cursed what she called the “torture” inflicted on Pikalevo workers, but she said she sees no point in street protests and has instead filed a raft of lawsuits over alleged violations of the labor code. She also quit Putin’s political party, United Russia.

  She said she recently received a call from a trade union colleague in Moscow, who asked about setting up a Pikalevo branch of Yabloko, a pro-Western liberal party critical of the Kremlin.

  She said she told him not to bother even trying.

  Asked who is at fault for Russia’s economic troubles, she shrugged and said: “The world market? The Chinese? The Europeans? Frankly, I do not know.”

  All she knows for sure is that ordinary people are suffering, she said.
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