Europe | The rouble crisis

Back to the lean years

Economic troubles have sucked the air out of Russia's nationalistic euphoria

AS THE rouble fell off a cliff over the past two days, a new skit appeared on Russian state television. A popular talk-show host asks his iPhone's voice-recognition app, “Where shall I go on holidays next year?” “This year—nowhere,” answers the app, dubbed “OK Rouble”. “OK Rouble, what will the exchange rate be tomorrow?” continues the host. “Here are five recipes for making porridge,” the app responds. Even as Russians were sharing the skit on social networks, Apple suspended its online store in Russia due to the rouble's volatility.

Russia's dawning currency crisis has already produced a rich folklore, reawakening the survival instincts that Russians developed to cope with Soviet-era shortages, the hyperinflation of the early 1990s, and the devaluation of 1998. Russians are rushing to spend their roubles while they are still worth something, buying foreign currency, jewellery and electronics. The less well-to-do have stocked up on oil, grain and soap. Russian bureaux de change have placed orders for electronic signs with three digits before the decimal point, preparing for rouble-euro exchange rates above 100.

The past 15 years of rising oil prices have underwritten Kremlin presumptions of economic stability, even leading to talk of the rouble becoming a reserve currency for other former Soviet republics. Now Russia is haunted by memories of the default and devaluation of August 1998. “Happy New 1999”, read the headline of one business newspaper. Vladimir Putin, Russia’s president, has yet to speak about the currency crisis, but will be forced to do so at his annual press conference on December 18th. The country he will address is already different from the one that cheered his annexation of Crimea and intervention in Ukraine. On December 15th Dmitry Medvedev, Mr Putin’s prime minister, published a newspaper article talking up Ukraine's economic troubles. His Russian readers were too preoccupied with their own crisis to pay any attention.

As the patriotic intoxication of this year's military adventures wears out, a hangover is setting in. The urban middle class has been hit by the degraded value of its savings and the rising cost of mortgages denominated in foreign currency. Poorer folk outside large cities have been hit by food price inflation that is running as high as 30%.

It is too early to say whether the crisis will affect Mr Putin’s popularity rating, which is still running at up to 85%. But his support could melt away faster than most Western analysts think. Accusations that the government is to blame for economic problems and for Russia’s international isolation are growing more frequent. The nationalistic soap opera of a war against supposed Ukrainian "fascists", which Russian television has fed the public continuously for the past six months, no longer attracts viewers. Ultimately, in the war between the refrigerator (rising food prices) and the television set (the war in Ukraine), the refrigerator is likely to win. The crisis has ended the era of Putinist consumption, the tacit deal under which the Kremlin promised its middle classes rising living standards in exchange for political quiescence.

How will Mr Putin replace it? Among other things, he will surely blame internal and external enemies for Russia's troubles. But to be truly effective, this strategy would need to be backed by political repression—something the Russian public is not ready for, according to a recent poll. He could try to restart the war in Ukraine, but the majority of the public does not support the presence of Russian troops there. Indeed, Moscow’s rhetoric towards Kiev has been more conciliatory in the past two days than it had been in months.

Sergei Lavrov, Mr Putin’s foreign minister, said on December 16th that “Russia does not insist on the federalisation of Ukraine or the autonomy of Donbas,” a sharp turn from the Kremlin’s previous line. For months, Russia has pooh-poohed any connection between its actions in Ukraine and its economic troubles, chalking up the fall in the rouble to the falling price of oil. In the past two days, that correlation has been broken, and it has become clear that the rouble's fall also reflects lack of confidence in Russian governance.

Meanwhile, the war of imagery rages on. A promotional video for Mr Putin’s press conference features flames and smoke in Kiev, Olympic gold in Sochi, a collapsing dollar (apparently hypothetical), and lapping waves in Crimea. The plunging rouble is notably absent. For that, Russians must turn to the website Russian Zen, which simply displays the exchange rate for the euro, the dollar and the price of oil, with meditative music and an image of crashing ocean waves in the background.

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