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Russia’s Economic Crisis: Can Putin Save Russia and Himself?

Falling Price of Oil Sends Russia Into Economic Crisis 2:00

Runs on the bank. Hyperinflation. Russia's currency — the ruble — in free fall. It may sound like today’s Russia, but these were also the symptoms of its 1998 economic meltdown. That crisis eventually forced Russian President Boris Yeltsin out of power, and put Vladimir Putin, a shy and relatively unknown KGB official, in his place.

NEWS ANALYSIS

No one believed Putin would survive more than a few months in the Kremlin. But ‘Putinism’ — a mix of authoritarian rule and economic prosperity based on vast oil and natural gas reserves — has kept its namesake popular and in power for 15 years.

Putin now faces another major economic crisis that, left unresolved, could threaten his hold on power.

"If [the] crisis will deepen, which most likely it will do, and if it will be quite prolonged, then of course sooner or later it will have an impact on [his] popularity," said Fyodor Lukyanov, editor of "Russia in Global Affairs."

"Everybody wants to protect themselves so that what happened in the 1990s won’t repeat itself."

This time, the planets are not aligning behind the Russian leader. The price of oil has plummeted, shrinking Putin’s budget and eviscerating the ruble. Financial sanctions, imposed by the U.S. and European Union, are blocking his access to Western banks and thus the funds he needs to restart his economy. Worst of all for Putin, this time his die-hard supporters are hurting.

Ruslan Nekrilov and Elena Skukova live in a small but comfortable apartment in a middle-class Moscow suburb. Both worked for state-owned companies and voted for Putin in the last election. But within just months, the couple says, they’ve seen food prices skyrocket by as much as 40 percent.

Falling Price of Oil Sends Russia Into Economic Crisis 2:00

When they shop, the couple never buy more than a few items and have decided to grow more food in their garden to offset the rampant inflation that eats up their rubles. "We are now living from hand to mouth," 37-year-old Nekrilov said.

Skukova, who recently lost her job as a logistics planner, agreed. "Like millions of Russians, we live on credit. We have a car loan, lots of debts. But we can’t pay off any of them now," the 40-year-old said.

They are just two faces of a growing economic malaise sweeping across Russia, even as Putin tries to project confidence and calm his electorate’s nerves, insisting that Russia will emerge stronger from this crisis within two years.

Others are also feeling the brunt of the economic slump. The lines of unemployed workers who line up for a free bowl of soup at outdoor kitchens are growing. Families wait for hours outside banks to empty their accounts before buying anything of value — electronics, furniture — before prices soar even higher.

"Everybody wants to protect themselves so that what happened in the 1990s won’t repeat itself," said Moscow resident Alyona Karuntseva at the checkout of one IKEA store.

Putin Talks Economy, Love and Holiday Cheer at Press Conference 0:41

Many Russians are adapting. Nekrilov and Skukova now shop at less expensive local markets and are replacing imported goods — mostly banned by the government in retaliation against Western sanctions — with products like Russian salmon or cheese. Kasha, or buckwheat — an old Soviet favorite — has made a comeback on Russian dining tables, sometimes replacing all other courses.

Larisa, a 60-year-old pensioner who declined to give her family name, is one of many who have cut back on one of their most cherished perks: foreign travel. "We used to take vacation abroad, like in Spain, but it’s just too expensive now," she said.

Even as Russia sinks back into recession for the first time in six years, Putin remains popular with an approval rating surpassing 80 percent, according to a recent Associated Press-National Opinion Research Center poll.

Nekrilov would still vote for him. "I blame America for this situation," he said. "They want to conquer the world and be Number 1!"

Some Kremlin-watchers would bet that Putin still has enough political capital — and foreign reserves — to ride out this storm if he can maintain his control over the Russian media and hammer home his message that Russia is under attack.

"There are American bases all over the world and you're trying to say that we're being aggressive," Putin said in a defense of Russia's defiance of NATO and the West during his annual live televised news conference on Dec. 18. "Our budget is $50 billion — the Pentagon budget is 10 times higher."

"Maybe our bear should sit quietly, not chasing any piglets around, but just eating honey and berries. Maybe they should just leave him alone? They will not," he added. "They are trying to put it on a chain. And as soon as they do it they will tear his teeth and claws out."

Putin Asked if Economic Crisis 'Is Price to Pay for Crimea?' 1:09

Former U.S. Ambassador to Russia Michael McFaul says this siege mentality is part of a narrative Putin has adopted for at least the past couple of years. "That the West is out to get Russia, that the White House wants to bring about regime change inside Russia, and that he, Putin, is defending Russia against these external enemies."

According to McFaul, this is why Russia is flexing its muscles, with Putin launching war games on the borders with Ukraine and the Baltics, and sending fighter jet patrols inside NATO air space in numbers unseen since the end of the Cold War. "He’s sending a signal, he’s testing the NATO alliance, and I think in very dangerous ways," McFaul said.

In the meantime, Putin has sought the quick fix by raising interest rates to a 17 percent to stabilize the ruble — so far unsuccessfully — and calling on his government to freeze the price of vodka. That might buy him some time. But how long?