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Putin Is a Compulsive Risk-Taker

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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Now that low oil prices have exposed Russia's short-lived economic revival as a bubble, it's tempting to dismiss President Vladimir Putin as a corrupt bureaucrat who got lucky for a while. That analysis fails to take into account his cavalier attitude toward risk.

QuickTake Vladimir Putin

Brent oil is hovering around $30 a barrel, a highly uncomfortable level for the Russian economy that pushes the exchange rate down and inflation and the budget deficit higher. You'd think Putin might see this as a good time to stop juggling some of the crises he has struggled with: Ukraine, Syria or the stifling government control of the economy in the interests of his cronies. Yet he persists, even though domestic public opinion seems to be showing alarming signs of weariness with the government. If nothing else, this is a sign of uncommon courage.

Putin hasn't backed down on Ukraine. Most recently, he appointed former Interior Minister Boris Gryzlov, an inflexible, hard-line apparatchik from St. Petersburg, as his chief negotiator on the implementation of Minsk cease-fire agreements. Last month, Gryzlov visited Ukrainian President Petro Poroshenko and made clear that there would be no softening of Russia's stand on the return of Ukrainian territories held by pro-Russian rebels in the country's east. The Kremlin would still want a high degree of autonomy for these regions -- meaning close ties with Moscow -- as well as a full amnesty for the rebels, in exchange for Ukrainian control of the eastern border with Russia. Putin doesn't care that it would be hard, perhaps impossible, for Poroshenko to push this through a parliament he doesn't fully control: He wants nothing short of a full victory.

In Syria, President Bashar Assad's troops are close to retaking Aleppo, once the country's most populous city. Russian airstrikes have allowed Assad's tired and depleted troops to go on the offensive, and after months of insignificant advances, a big success may be in reach: The Assad army has cut off rebel supply lines with Turkey and is close to encircling the gutted city. Tens of thousands of people are fleeing to Turkey to escape Russian bombs, yet the territory controlled by the regime is expanding. The United Nations suspended the Geneva peace talks on Syria just two days after they began once it became clear that the Assad side was playing for time, hoping for military victories to strengthen its hand. The talks are scheduled to restart on Feb. 25, but even if they do, Assad may be in a much stronger position. Putin seemingly has no fear of a military reversal even though he has been unwilling to send ground troops to Syria. Nor is he afraid of getting mired in Syria the way the Soviet Union got stuck in Afghanistan in the 1980s.

The involvement in Syria is not costing Putin much financially or in casualties. Yet it puts Russia on the edge of another major confrontation with the West. Recently, a Russian warplane intruded into Turkish airspace again for the first time since the Turkish air force downed a Russian aircraft in November, setting off a major confrontation between the two countries.

On the economic front, Putin is faced with the need to find money for the vast spending programs that have funded his support base and gigantic security apparatus. Ministers responsible for the economy are pushing for large-scale privatization. It's a last-resort proposal in a bear market, but sell-offs, if handled right, could make the economy more open and give private initiative a chance after a decade of tightening controls and the enrichment of a tight circle of Putin friends. Putin, however, has made clear that if privatization is allowed to take place, it will be on his terms. On Monday, he named six conditions. Two of these are critical. The government, Putin said, must keep controlling stakes in "systemic" companies, and the new owners must be "in the Russian jurisdiction" and paying with their own money, not loans from state banks (pretty much the only ones capable of funding large privatizations today.)

This essentially means that Putin wants the Russian businesses to repatriate capital from offshore havens to pay for stakes in companies that will remain under government control. According to Economy Minister Alexei Ulyukayev, the oil companies Rosneft and Bashneft and the diamond producer Alrosa are at the top of the sell-off list for 2016. Rosneft and Bashneft are, for a big part, made up of assets expropriated from private owners -- the billionaires Mikhail Khodorkovsky and Vladimir Yevtushenkov -- under Putin. Now others like them are expected to pay up in exchange for zero control and a risk of expropriation. It's difficult to see who except Putin's friends might agree to these terms. If the privatizations occur, they will only strengthen the merger of government and business that has been Putin's economic signature -- and the Russian economy's curse.

So Putin is not prepared to compromise on anything, though he must know that Russians are getting restless. According to the Levada Center, the last major independent Russian pollster, Putin's own approval rating, at 82 percent, isn't all that far off its June 2015 all-time peak of 89 percent. (There are doubts about whether respondents answer questions about Putin honestly.)  The approval ratings of the government, the parliament and the regional governors are down more sharply:

Only Putin is Teflon
Approval ratings for key elements of the Russian political system
 
Source: Levada Center

Besides, a growing number of Russians -- 34 percent compared with 22 percent in June 2015 -- say they believe the country is headed for a dead end. That should be troubling ahead of parliamentary elections scheduled for September, even if, as has been customary under Putin, the vote is likely to be will be heavily doctored.

It takes either a desperate risk-taker or a master of counterintuitive calculation to push on so stubbornly under such adverse conditions. I think the former is the better explanation.

In "First Person," a 2000 book that contains the only set of candid interviews Putin has given, the Russian leader provided an insight into his behavior. He described how, when he was still a student, he and his judo coach were driving in Putin's tin-can Zaporozhets car to a training base near Leningrad:

There was a truck loaded with hay going in thee opposite direction. I had my window open, and the hay smelled so nice. When I came level with the truck at a turn, I stuck my hand out for the hay. The vehicles were very close to each other, and then suddenly my steering wheel spun and we were pulled toward the truck's rear wheel. I turned sharply the other way. The hapless Zaporozhets bucked on two wheels, and I practically lost control. We were about to end up in a ditch, but luckily we landed on four wheels again. My coach just sat there very still, he didn't say a word. Only when we drove up to the hotel, he got out of the car, looked at me and said, 'You're taking risks." Then he walked on without further comment. Sometimes one does these totally inexplicable things. What did I want with that truck? It must have been that nice hay smell.

In a way, Putin is still sticking his hand to grab something that smells nice to him, disregarding the risk of driving off the road. Only now he he is steering a huge country, not a rattling Zaporozhets.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor responsible for this story:
Max Berley at mberley@bloomberg.net