The Wall Street Journal s3

The Wall Street Journal

February 25, 2012

"After Putin"

'Even the Russian leader's allies are now contemplating the once unthinkable: a future without him.'

by Gregory L. White

Since parliamentary elections in December, Moscow's wintry streets have witnessed something not seen in two decades: huge demonstrations against the Kremlin. And while Vladimir Putin may secure another term in next month's elections, time is working against the Russian president, WSJ's Greg White reports.

Well-dressed in the freezing cold and toting their smartphones, the newly energized critics of Vladimir Putin have taken to the streets by the tens of thousands since December, streaming from the offices, classrooms and studios of the new Russia. They wave handmade signs with ironic slogans like "We know you want a third time, but we have a headache," and they wear white ribbons, demanding a political voice and an end to Mr. Putin's rule. Prompted by allegations of widespread fraud in parliamentary elections, they have staged the biggest anti-Kremlin protests in decades. On Sunday they plan to form a human ring around downtown Moscow.

Lately, pro-Putin forces have been gathering in even greater numbers, bedecked with the white, blue and red of the Russian flag. They often arrive from the factories and farms of Russia's heartland, where the taste of prosperity is still new. On Thursday, Mr. Putin himself turned up at his first such rally, telling a vast crowd in Moscow's largest stadium, "Victory will be ours," as he invoked historic Russian triumphs over invaders.

Since Parliamentary elections on Dec. 4, anti-Kremlin protests have filled the streets, including the Dec. 24 demonstration in St. Petersburg pictured here—as have pro-Putin rallies.

Those backers are likely to be enough to return Mr. Putin to the presidency in elections March 4. But the protests are just the visible cracks from much deeper shifts that are eroding the foundation of his support. Russians at the very pinnacle of power in the system that he has built are starting to prepare for the once-unthinkable: life after Putin.

On Feb. 13, for example, Andrei Kostin, the chief executive of one of the biggest state-controlled banks, wrote a commentary for a major business newspaper. Amid the obligatory gushing praise for Mr. Putin and his stewardship came a surprising call: After winning in March, Mr. Kostin suggested, Mr. Putin should promise not to run again.

That may not sound like much of a challenge to the master of the Kremlin, but it is a striking change from just a few months ago. In September, when Mr. Putin announced he was returning to the presidency, switching jobs with Dmitry Medvedev, the only question seemed to be whether Mr. Medvedev would run in 2024 after Mr. Putin served out his next two terms.

"The pro-Putin majority is either already gone or about to disappear," says Mikhail Dmitriev, the director of Moscow's Center for Strategic Research, a think tank set up by the government to help write Mr. Putin's first presidential program. He warns that Mr. Putin isn't likely to serve out his six-year term and should find a reliable successor to take power "sooner rather than later," just as Boris Yeltsin did when he brought in Mr. Putin at the end of 1999.

Mr. Putin and his supporters reject the idea as ludicrous. "Putin can operate at any level of support. All he needs is confidence in himself and the backing of a few key people around him," says one senior campaign official. He and others close to the Kremlin blame the poor performance of Mr. Putin's political party in December's parliamentary elections on a botched campaign. The recent rebound in Mr. Putin's poll numbers confirms that all that was needed was better propaganda, they say. After the election, promised political reforms are expected to take some of the steam out of the protests.

But many insiders aren't so optimistic. "Tectonic changes have now taken place," says one major businessman. "The system will slowly come apart."

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For the moment, the Kremlin seems to have arrested the decline in Mr. Putin's popularity. State TV runs almost daily "documentaries" cataloging his successes in restoring order, rebuilding the economy and facing down all manner of would-be adversaries. The message is clear: There is still no alternative.

"He's counting on the majority, and to this day, the majority of people in Russia depend on the government," says Natalia Zubarevich, a prominent sociologist. But as Russia's economy continues to grow, that share shrinks, and more people join the ranks of a middle class that has outgrown the system that brought their prosperity. Poorer Russians also are beginning to lose confidence, pollsters say.

Mr. Putin still has plenty of cards to play. Opposition leaders are warning the new activists that the struggle could take years. "A lot of people are under the narcotic influence of the revolutionary air," says Vladimir Milov, who leads a pro-democracy party.

When Mr. Putin first came to power in 2000, even many of his present-day critics embraced him as the man to save a Russia reeling from financial crisis and an Islamist rebellion in the south. Mr. Milov served as a deputy energy minister in his first government.

"We had carte blanche for reforms," recalls German Gref, a liberal economist who was a top minister in Mr. Putin's government. The new team cut taxes, eased regulation and rode the economic rebound that followed the huge devaluation of the ruble in 1998. "But then oil prices took off…and the demand for reform fell," he says.

In the political realm, however, the changes only sped up. The Kremlin methodically crushed or co-opted rival power centers—independent media, regional barons, wealthy tycoons. Those who refused to buckle found themselves in jail or self-imposed exile.

Swaggering around the globe with their new fortunes, the wealthier elites in Moscow and St. Petersburg also embraced Mr. Putin's tough-guy image. He was krutoi—the Russian adjective that became the badge of the time, a hard-edge mix of cool and tough.

"We had no way of knowing that the arrival of Putin would coincide with the dismantling of the imperfect democracy" of the Yeltsin era, recalls Mr. Dmitriev, who was a deputy to Mr. Gref in the government until 2004.

Even as Mr. Putin consolidated control, events exposed his system's weaknesses. A string of deadly terror attacks in 2004 was followed by the Orange Revolution in neighboring Ukraine, where mass demonstrations brought a pro-Western president to power over the Moscow-backed candidate. Weeks later, a botched welfare reform at home brought tens of thousands of angry pensioners into the streets.

The Kremlin's response was steady and harsh. Direct elections for regional governors and members of parliament were eliminated. Convinced that the revolution in Ukraine was a CIA-orchestrated plot, the Kremlin cracked down on opposition parties and NGOs. New antiextremism laws made criticizing the government a crime. Police met opposition demonstrations with overwhelming force, jailing many participants. Pro-government youth groups got lavish funding from the Kremlin to help protect against the perceived threat of "Orange" contagion.

New laws allowed the courts to "liquidate" dozens of political parties. Politicians had a choice: lock-step loyalty or "hard opposition," which meant blacklisting from the major state media and exclusion from the political process.

But for the vast majority of Russians, politics was a sideshow. Soaring prices for oil, gas, metals and the country's other big exports had transformed its economy. GDP per capita almost quadrupled from 2003 to 2008. Pensions, welfare and other benefits galloped higher.

The newly flush middle class gobbled up consumer goods at the IKEA shopping malls that popped up around the so-called /millionniki/—the dozen big Russian cities with at least one million residents. They flooded the beach resorts of Turkey and Egypt.

Swaggering around the globe with their new fortunes, the wealthier elites in Moscow and St. Petersburg also embraced Mr. Putin's tough-guy image. He was /krutoi/—the Russian adjective that became the badge of the time, a hard-edge mix of cool and tough.

The global financial crisis in 2008 brought an abrupt end to the party. Destitute tycoons raced to the Kremlin for bailouts. Fearing unrest, the government leaned on big companies not to lay off workers. They slashed wages instead. The value of the ruble plunged.

The Kremlin's billions in subsidies—along with the quick rebound in oil prices—helped to limit the pain of the crisis. But the recovery has been far short of resounding. Economists say that Russia will probably never again see the kind of explosion of wealth experienced in Mr. Putin's first term.

Meanwhile, Mr. Medvedev, whom Mr. Putin had installed as president in 2008 when he himself couldn't run because of term limits, had encouraged some in the middle class with promises to fight corruption and ease pressure on business. But inside the Kremlin, Mr. Medvedev struggled to escape the shadow of his patron, Mr. Putin, who remained the country's supreme leader.

Russian top military officials give a salute to Russian Prime Minister Vladimir Putin, center, before a wreath-laying ceremony at the Tomb of the Unknown Soldier in Moscow, Russia on Thursday.

For his part, Mr. Putin stuck to the political theatrics that had served him well for years. When peat-bog fires blanketed Moscow and other big cities with acrid smoke in 2010, he took the controls of a firefighting plane on national TV. Later that summer, he took a road trip across Siberia behind the wheel of a canary-yellow Lada—a symbol of the outdated car maker bailed out by the Kremlin during the crisis.

But Russian society was changing. Bloggers quickly punctured the public-relations balloon, posting photos of several spare Ladas being carried along in Mr. Putin's motorcade. By then, Russia had become one of the fastest-growing Internet markets in Europe, with some 45 million regular users. Online news and political debate were wide open, in sharp contrast to the traditional media.

Some in the Kremlin began to sense that the old tricks were getting rusty. Stodgy state TV—the Kremlin's main propaganda tool—tried to woo cooler, urban viewers with edgy shows bought from U.S. cable like "Californication."

Yet even the older, more traditionalist voters who had long been the core of the Putin majority were beginning to sour on their onetime hero. Sergei Belanovsky, a researcher at Mr. Dmitriev's think tank, says that he was shocked when his focus groups in the industrial heartland began showing "a lot of angry emotions" about the Kremlin among voters who had long been stolid loyalists.

Still, Kremlin officials saw few signs that the current election cycle would become so contentious.

Mr. Dmitriev and his colleagues at the think tank weren't surprised. They drafted a report last spring warning that falling support for the Kremlin could set off a political earthquake as early as the December parliamentary elections if the authorities didn't take radical steps to open up the system.

Worried that the authorities might shut the center down when he went public, Mr. Dmitriev showed a draft to the head of the center's board, a former government official and still a close Putin ally. "He didn't believe it," Mr. Dmitriev recalls. "He thought that we were getting way ahead of ourselves."

The Kremlin tried to manage the discontent, backing a plan by the billionaire businessman Mikhail Prokhorov to revive a pro-business political party that would help to keep the middle class within the bounds of the system in the December elections. But Mr. Prokhorov chafed against the tight restrictions of his Kremlin minders, who then took the party away.

The real trigger of the public anger that has since shaken the Kremlin was the "/rokirovka/," as it has come to be known. It is the Russian chess term for "castling," and it refers to the September 2011 announcement that Mr. Putin would return to the presidency and make Mr. Medvedev prime minister. The duo's claim that the decision had been made years before but was then concealed only deepened the insult.

The souring support for Mr. Putin was even worse news for his party, United Russia, which had never been much of a hit with the public. In the December vote, allegations of fraud began showing up on the Internet even before polls closed. Suddenly, it was no longer fashionable to think Mr. Putin was /krutoi/.

Initially, the Kremlin's response seemed schizophrenic. Mr. Putin heaped abuse on the demonstrators as effete agents of the U.S. State Department, while aides said that they represented the best of Russian society and should be treated with respect.

By early this year, Mr. Putin's harder line won out. His new campaign manager cited Lenin's famous description of the intelligentsia: "not the brains [of the nation] but the s—." Pro-Kremlin demonstrations have tarred all the critics as foreign agents seeking to spread the "Orange plague" from Ukraine to Russia.

Political consultants are scrambling to give the Kremlin strategies to win back the protesters. The government is pledging to restore some democratic rights that Mr. Putin took away, along with other long-sought reforms. "They expect the middle class could come back to them," says one person close to the campaign. "People have short memories."

Mr. Dmitriev is more skeptical. Though the middle class remains a minority overall, it is politically dominant in Moscow, St. Petersburg and other cities, where polls suggest that Mr. Putin could fail to win even a majority.

"The trend is irreversible," he says.

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