Foreign Policy Research Institute A Nation Must Think Before it Acts Debt and Discontent: The Collapse of the Putin Consensus?
Debt and Discontent: The Collapse of the Putin Consensus?

Debt and Discontent: The Collapse of the Putin Consensus?

Debt and Discontent: The Collapse of the Putin Consensus? is the ninth of a series of reports in the Foreign Policy Research Institute’s Russia Political Economy Project. To learn more about this initiative, click here. To download the report, click here.

Executive Summary

For the vast majority of Russians, the vlast’—regime—they encounter is neither the Kremlin nor the Duma. It is considerably more local: regional governors, mayors, municipal bureaucrats, local ministry representatives, and their proxies. Although the Kremlin projects a centralized vision of the Russian Federation, in which Moscow’s writ is executed evenly throughout the country, this image is not the reality of center-periphery politics in Russia. This report analyzes the Kremlin’s handling of a subnational debt crisis, which its own policies sparked in 2012. Rather than managing the situation on a technocratic basis, the Kremlin has prioritized politically or strategically sensitive regions, while allowing fiscal problems to mount in others. The result is a paradox well known to observers of Russian politics: although the formal institutions that codify the center’s relations with its periphery treat the regions on an equal basis, informal power dynamics play a much greater role. The Kremlin has also opted at each turn to delay painful repayments of subnational debts, pursuing an ad-hoc policy of immediate survival rather than a long-term strategy.

When a financial crisis crippled the Russian economy in 1998, it surprised many foreign investors and even Russia watchers. Conditions in the regions beyond Moscow and Saint Petersburg, however, would have made clear that the status quo was not sustainable. Today, Russia watchers are again walking blindly. Center-periphery politics in Russia are not dead, but hidden. If the “Putin consensus” begins to break down in Vladimir Putin’s fourth term, its cracks will not initially form in the country’s formal institutions; they will appear first in the informal relationships that define Moscow’s interactions with its periphery.