Twenty years ago, a small group of Russian businessmen saved the country from a return to communism. Boris Yeltsin, physically and politically weak, was close to being beaten in the presidential election by Gennady Zyuganov. In the first ballot, Yeltsin led by just 3 per cent. The money and organisation the oligarchs brought to the party put him more than 13 points ahead in the second and decisive vote. Now, in very different circumstances, the oligarchs may need to intervene again.
Russia is in a parlous state. Real incomes have fallen by 10 per cent in just a year. The rouble depreciated 37 per cent and in real terms gross domestic product fell 3.7 per cent, according to World Bank figures. Household incomes and investment fell sharply. The trends have persisted into 2016. Forget the bluster of President Vladimir Putin and the military activities in Ukraine and Syria. What was once a superpower is now a country in decline.
Many nations have suffered from the fall in energy prices over the last two years but few have been more seriously affected than Russia. The reason is its overwhelming dependence on the oil and gas sector, revenues from which account for half the national budget. The effect of the fall in oil prices has been compounded by the loss of both volumes and value in gas sales. Europe is Russia’s primary export market and falling gas demand (down 20 per cent over the last decade) combined with a worldwide surplus of supply has pushed prices down 65 per cent in the last three years.