Putin Seeks Solitude Amid Russia's Perfect Storm

By: STRATFOR

Russian President Vladimir Putin celebrated his 62nd birthday Tuesday in a peculiar fashion: by himself in the Siberian forests. For the past few days, Putin's spokesman, Dmitri Peskov, has brushed off journalists' questions about why the president decided not to celebrate his birthday in Moscow or do other work as he has in previous years. This is just another odd piece to an increasingly complex puzzle surrounding the stability and future of the Russian president and his government.

Current Instabilities

Russia is in the eye of the perfect storm. Though the crisis with Ukraine has been reduced to a simmer, Russia has seen a strategic reversal in its critical borderland. In addition, the crisis moved the West to enact sanctions on Russia and loosen many financial and economic ties to the country. Now the Kremlin is in the midst of an economic crisis that is every bit as serious as the Ukraine situation. In the past two days, Russia's central bank used $1.6 billion of its currency reserves to shore up the Russian ruble. Since the start of 2014, the central bank has injected $51 billion in currency reserves to keep the currency stable. The Russian economy is projecting flat growth for 2014, while foreign investment into Russia has fallen by 50 percent. The Kremlin may have $630 billion in its reserves, but these funds are being used quickly in an attempt to fill the cracks.

Concerns over Russia's financial stability have erupted into public battles between the various Kremlin factions. On Tuesday, Russian Finance Minister Anton Siluanov, a key figure in the liberal economic clans, publicly called on Putin to cut Russia's ambitious defense spending program. Russia is set to start a 10-year, $770 billion defense rearmament program in 2015. Siluanov reportedly rejected the plan during recent budget drafts in September, prompting Putin to move decision-making on defense spending under his office and away from the Cabinet.

While Siluanov's argument against defense spending is financial, Putin also has to consider the security and political ramifications of such a decision. Russia's continued struggles in its borderlands will require a robust military. Moreover, Putin is using the defense budget to appease Russia's various security and defense circles.

The Rise and Fall of Russian Leaders

Though Putin has ruled Russia for 15 years in a centralized and autocratic fashion, like any other leader he must balance various factions within the country. His ability to manipulate the various political clans is what brought him to power. The lack of that ability is what caused the downfall of Boris Yeltsin in the 1990s, and many leaders before him. Yeltsin was unable to manage the competition between his own loyalists, the more liberal circles of economists and the security and defense circles. Yeltsin wildly shifted policies in order to retain a grip on power, such as his economic shock policies and the restructuring of the Federal Security Services. Such erratic moves contributed to the Russian economic crash, the breakdown of the security services and the erosion of Russia's military as it fought a savage war in the North Caucasus.

Yeltsin's stumbling enabled Putin's rise to power. Putin understood that a Russian leader could rule only as long as he could balance the competing groups. Putin is a former KGB agent, tying him into the security circles, while his knowledge of Russia's need for Western technologies gives him an understanding of the more liberal economists. In his first years in power, Putin divided Russia's assets and tools of power between the clans, keeping them in constant competition and positioning himself as the ultimate arbitrator.

The problem now is that the clan system has begun to crumble. The security circles are being blamed for failures in Ukraine, while the liberal economic circles are being blamed for the sour economy. Many personalities and groups are putting their own positions (and financial revenues) before the betterment of the state. Putin continues to try to maintain balance, as seen in the recent weeks of budget debates between the liberals and security circles. But Putin's 15 years of success at balancing the clans came during times of rebuilding and resurging for Russia. Now, Putin is attempting to find balance from a position of weakness.

Putin's grasp on power is not easy to gauge from outside the Kremlin. The decision for new leadership is made within the Kremlin walls, not among the people. Previous Russian leaders, from Nikita Khrushchev to Leonid Brezhnev to Yeltsin, were removed or pushed aside by the ones closest to them. Thus, it seems fitting that the current Russian leader chose to celebrate his birthday far from the Kremlin and its clans.

"Putin Seeks Solitude Amid Russia's Perfect Storm is republished with permission of Stratfor."

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