Putin Grapples With Urban Russia’s Ire as Challenge for Third Kremlin Term

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Photographer: Alexander Zemlianichenko Jr./Bloomberg

As many as 20,000 people rallied in downtown Moscow yesterday after international observers criticized the presidential election as unfair.

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Photographer: Alexander Zemlianichenko Jr./Bloomberg

As many as 20,000 people rallied in downtown Moscow yesterday after international observers criticized the presidential election as unfair. Close

As many as 20,000 people rallied in downtown Moscow yesterday after international observers criticized the... Read More

Photographer: Alexander Zemlianichenko Jr./Bloomberg

Anti-corruption blogger and opposition leader Alexei Navalny speaks at a protest rally in Moscow. Close

Anti-corruption blogger and opposition leader Alexei Navalny speaks at a protest rally in Moscow.

Photographer: Alexander Zemlianichenko Jr./Bloomberg

Riot police detain a protester during a demonstration by opponents of Russia's prime minister Vladimir Putin in Moscow. Close

Riot police detain a protester during a demonstration by opponents of Russia's prime minister Vladimir Putin in Moscow.

Photographer: Alexander Zemlianichenko Jr./Bloomberg

Russian billionaire and presidential candidate Mikhail Prokhorov speaks at a protest rally in Moscow. Close

Russian billionaire and presidential candidate Mikhail Prokhorov speaks at a protest rally in Moscow.

Photographer: Alexander Zemlianichenko Jr./Bloomberg

Opponents of Vladimir Putin, Russia's prime minister, attend a protest rally in Moscow. Close

Opponents of Vladimir Putin, Russia's prime minister, attend a protest rally in Moscow.

Photographer: Kirill Kudryavtzev/AFP/Getty Images

Police officers detain one of the protesters at Moscow's Pushkinskaya Square, on March 5, 2012, as the protesters refuse to leave the venue at the end of their larger rally earlier. Russian police broke up today a protest in central Moscow against Vladimir Putin's victory in presidential elections, roughly arresting dozens of people, an AFP correspondent said. Close

Police officers detain one of the protesters at Moscow's Pushkinskaya Square, on March 5, 2012, as the protesters... Read More

Vladimir Putin, who won another six years at the Kremlin amid allegations of fraud, faces rising discontent among the country’s urban middle class that owes its success to prosperity under his rule.

“Our society has no future,” Oleg Ermolaev, 34, the head of a company that designs power networks, said as he cast his ballot against Putin in Moscow on March 4. Ermolaev, who voted for billionaire Mikhail Prokhorov, was among the tens of thousands who protested after alleged fraud in a Dec. 4 parliamentary vote in the biggest anti-Putin rallies.

Ermolaev is part of a generation of educated Russians who have seen real income rise 12 percent per year since Putin first rose to the presidency in 1999. While Putin granted some concessions in the run-up to the election, Russia’s middle classes are demanding more to ease political restrictions and tackle corruption that Transparency International says is the highest of any major economy.

The risk for Putin is that he will gradually lose sway over the urban elite, according to Mikhail Dmitriev, head of the Center for Strategic Studies. Ernst & Young estimates that city dwellers command 85 percent of the country’s purchasing power.

‘Grown Out’

“There are signals the middle class has grown out of the political system that exists,” Dmitriev said. Putin will have to be careful to avoid repeating the final three years of his predecessor Boris Yeltsin’s presidency, which ended in his resignation in 1999 after losing the support of the Russian political elite, according to Dmitriev.

Only 19 percent of voters want Putin to remain as president after 2018 elections, with 6 percent backing his successor, President Dmitry Medvedev, the independent Levada Center said in an opinion survey published today. Almost a quarter of respondents prefer to see “another politician,” while 52 percent said they were undecided or unable to answer, according to the poll, which surveyed 1,600 people on Feb. 2-19 and had a margin of error of 3.4 percentage points.

Discontent with Putin burst into the streets of Moscow and St. Petersburg in December amid allegations that his United Russia party inflated its vote in parliamentary elections to about 50 percent from 30 percent.

Moscow Rally

As many as 20,000 people rallied in downtown Moscow yesterday after international observers criticized the presidential election as unfair. A new protest is planned for March 10, said Vladimir Ryzhkov, a former lawmaker and one of the organizers,

Russian stocks today slumped the most since Dec. 9, when anti-government protests roiled the Micex Index. (VTBMICX) The gauge closed down 3.9 percent at 1,562.19 in Moscow. The ruble depreciated 1 percent to 29.635 per dollar.

Putin won the election after reaching out to voters with a promise of increased spending on social welfare and the military, pledges which Capital Economics says amount to 5 percent of gross domestic product through 2018.

The campaign helped Putin partially rebuild his reputation with voters, propelling his official vote at the election to 64 percent. Just three months previously, FOM put his support at as low as 42 percent.

‘Successful Campaign’

“Putin ran a very successful campaign,” Alexei Mukhin, head of Moscow’s Center for Political Information, said March 3 by phone.

Nor have urban voters all turned their back on Putin, who helped rebuild the country after the Russian default of 1998 decimated the savings of the country’s middle classes.

“We want stability, peace, no revolution,” said Tatiana Mironova, 54, a Moscow service-industry worker, as she cast her vote. “The opposition that is leading protest is getting paid by the Americans and want to rip Russia apart.”

At the same time, the Russian leader risks gradually losing popular support unless he keeps his spending promises and acts to regain the trust of the middle class, according to Valery Fedorov, head of the All-Russian Center for the Study of Public Opinion, or VTsIOM, a state-run pollster.

Municipal tariffs rising in July may be an early test of the breadth of Putin’s support, said Alexei Grazhdankin, deputy head of the Levada Center polling group.

Putin’s Legacy

The middle classes are a product of Putin’s success in stabilizing the Russian economy, a legacy that was aided by soaring oil prices.

The proportion of Russians with at least $500 of monthly income per capita rose to about 50 percent last year from less than 10 percent in 2004, according to Citigroup Inc. (C) That helped drive up retail sales by an average of 11 percent a year in the decade through last year, including a contraction in 2009, attracting retailers from Ikea Group to Inditex SA. (ITX)

The September announcement that Medvedev would step aside to allow Putin to run for a third term as president awoke educated urban voters politically, according to FOM. Medvedev, 46, a former corporate lawyer from Putin’s home town of St. Petersburg, had promised to curb graft and promote civil liberties.

Middle classes had been loyal to the authorities, “enduring defenselessness and corruption,” because they saw Putin as a guarantor of prosperity and stability after the economic turmoil of the 1990s, said Larisa Pautova, a sociologist with the Public Opinion Foundation, or FOM.

‘21st Century People’

The announcement of Putin’s planned return broke the trust between the group FOM terms “21st century people” and Russia’s leaders, Pautova said.

“Putin threw down a challenge to us all,” Sergei Mitrokhin, leader of the pro-democracy Yabloko party said at last night’s rally in Moscow. “From this moment on, the real battle starts.”

While protests have been held mainly in major cities including Moscow and St. Petersburg, Russia’s second largest, people from smaller population centers have also started to show growing dissatisfaction.

“Politicization is under way not in Moscow only, but in the regions too,” said Ivan Begtin, an Internet researcher who found that websites in 150 small and medium-sized towns showed increasing criticism of local and federal authorities since late last year. There are 54.5 million Russian Internet users, representing 47 percent of the population, according to FOM.

As Russians became wealthier, they tolerated Putin consolidating his power by controlling the political process and mass media, Natalia Tikhonova, the deputy head of the Institute of Sociology at the Russian Academy of Sciences, said by phone.

‘Pre-Industrial’ Model

Russia’s middle class have now decided they don’t want to be treated anymore as feudal “subjects,” Tikhonova said. “This model is from the pre-industrial era, and the middle class is not from that era anymore.”

Fraud allegations during the presidential vote exceeded reports received during the election three months ago, Alexey Navalny, an anti-corruption blogger and opposition leader, told the Ekho Moskvy radio station. He was among 250 people detained by police last night and was released early this morning, according to a posting on his Twitter Inc. account.

Moscow police showed “professionalism and effectiveness” in controlling the rally in the capital, the president-elect’s spokesman, Dmitry Peskov, told reporters today.

Observers from the Organization for Security and Cooperation in Europe identified violations at one-third of the polling stations monitored by the democracy watchdog during the vote. The election “didn’t meet important democratic standards,” said Tonino Picula from the OSCE’s parliamentary assembly.

The demonstrations will probably diminish significantly by the summer, VTsIOM’s Fedorov, Grazhdankin from Levada and Alexander Oslon from FOM said by phone. Still, the resentment will remain, and may find a new spark to again boil over into street protests, Fedorov said.

“The appetite for change has come, and won’t disappear until it’s satisfied,” Fedorov said. The urban opposition will seek to drum up support across the country, most of which is loyal to Putin.

To contact the reporters on this story: Stepan Kravchenko in Moscow at skravchenko@bloomberg.net; Henry Meyer in Moscow at hmeyer4@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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