Putin Criticised for Devoting Oil Windfall to Firepower, Not People

He’s one of the world’s most controversial leaders, and now Putin has landed both himself and his country in the spotlight once again. Despite the fact that Russian oil prices have spiked by almost 80% since their mid-January low, the government is continuing to hold back on social spending. In fact, rather than channel the benefits back to its people, the Kremlin continues to devote the oil windfall to military adventures.

Where’s all the cash going?

Thanks to the oil price spike, Russia was able to boost its international reserves by US$20 billion between January and April. This is coupled with three consecutive months of stabilised 7.3% inflation rates. Together, both create the ideal scenario for an interest rate cut. Yet for Russian citizens, signs of interest rates easing up are nowhere to be seen. The government continues to assert that it’s strapped for cash, as seen demonstrated in May when Crimean Prime Minister Dmitry Medvedev confirmed that pension increases were not on the table.

“We just don’t have the money. If we find money, we’ll do an indexation. You hang on in there. All the best, don’t be sad, stay healthy,” he said.

The denial was particularly controversial, as one of the key drivers of the pro-Russia referendum vote that saw Crimea withdraw from the Ukraine was the promise of access to high Russian pensions.

‘Fortress’ Russia under fire

In the wake of backlash pro-Putin economists have attempted to explain the situation, with newly appointed chief economist of the European Bank for Reconstruction and Development Sergei Guriev maintaining that the Reserve Fund simply isn’t padded out enough to justify increasing spending.  

“The Russian government cannot sharply increase spending,” he claimed in a recent blog post. “Increasing the deficit by 2 percent of GDP would lead to the Reserve Fund’s being exhausted before the end of 2016.”

This is one explanation, yet other critics have accused Russia of extravagantly splashing cash on security and defence. While Russia’s economic output grew by just 5.4% from 2010 to 2015, its defence expenditure budget rose by a huge 75%. In 2016, the nation will spend an enormous 4.6% of its GDP on defence alone. This includes the constant funding of military ventures like the Syria campaign.

Russians start to lose faith

With September parliamentary elections looming, public attitudes towards the Russian government are all-important. And things aren’t looking bright for Putin and his administration. The latest polls reveal that just 42% of voters approve of the current legislators’ work, while support for Putin has dropped to 80%, representing the lowest level since March 2014.  

Russia may be under fire for prioritising guns over people, but it does continue to contribute to the global science landscape. For more information on the latest lab equipment developments, ‘What the Flexible Temperature Control of a New Viscometer Can Do for You’ shines the spotlight on the advanced SVM™ 3001 model, and the key advantages the flexible thermostat offers to operators.