The Kremlin’s Failing Monopoly

CAMBRIDGE – Ever since Vladimir Putin came to power a decade ago, the Kremlin regime has relied on two pillars: the security forces and energy exports. By suppressing internal rivals and absorbing their assets, the regime created a dual monopoly.

Redistributing some of the profits from high energy prices enabled the regime to improve living standards and make itself popular with ordinary Russians. And resolving internal problems through a disproportionate use of force reassured even the regime’s security obsessed ex-KGB men.

Until recently, this combination of carrots and sticks functioned effectively. The virtual absence of popular protest in Russia during the Putin years seems amazing. But make no mistake: Putin’s popularity ratings relied not on his vigor, humor, or mystique, but on salaries and credits that Russians had never enjoyed before. And, as long as oil prices were growing faster than Russian salaries, those in power could still grab a big slice of the profits.

Now that happy union between the Kremlin and ordinary Russians is ending. Few Russian policymakers, much less the Russian public, expected oil and gas prices to collapse as they have. We do not know what will happen next. If prices rebound, Putin and his people will glorify themselves for their wisdom. But if prices remain stagnant at current levels, Putin’s system is doomed to failure.