Russia Update: Ruble Sinks to Lowest Rate Since 1998

Debates have raged about what the significance is of the slight increase in Russia’s birth rate over its death rate, but there are still powerful factors causing early deaths for Russians that will continue to have an impact on demographics.

In June, the now-defunct Moscow News reported,

All major negative demographic trends — including alcohol poisoning
deaths, murder and suicide — have been receding in Russia in the last
five years, with life expectancy reaching an all-time high of 71 years
in 2013, according to the Health Ministry, up from 67 in 2007. Russia’s birth rate of 1.7 children per woman surpassed the European Union’s average of 1.6 in 2012.

But these developments are far from stable, and not the whole story, as Moscow News explained:

 

Anatoly Vishnevsky, director of the Demography Institute
at the Higher School of Economics, warned that Russia’s recent
population growth is not sustainable, as the next few generations
of potential mothers will be those born after the collapse of the Soviet
Union, when fewer children were already being born.

“In 2019 there will only be 12.9 million women of the most
active maternity age of between 20 to 35, while in 2013 there were 17.2
million, so of course there will be fewer children in the future,” he
said in emailed comments. 

Most importantly, the negative factors are not dropping fast enough.

There’s the drug epidemic in which at least 100,000 people still lose their lives every year, 30,000 of them from heroin according to official statistics — which may be under-estimated.  There are an estimated 8.5 million illegal drug users.

RIA Novosti recently reported a thousand people had suffered poisoning from a drug called “spice” this year, and at least 25 died.

And alcoholism is killing half a million Russians a year, news.ru reported.

On December 1, Rospotrebnadzor, the Russian consumer agency, published this statistic on their website (translated by The Interpreter):

The growth in the use of beer and low-alcohol drinks is happening at the expense of teenagers and women of child-bearing age. This to no large extent is fostering the lowering of the average life expectancy and the growth of the indicator of premature mortality in the population…Alcoholism at a young age is formed as a consequence of taking beer or low-alcohol drinks.

Russian officials want to limit the time and place of alcohol sales by 2020 to make liquor less accessible.

According to the World Health Organization (WHO), every year more than 3 million people die of alcohol abuse. That means Russia is contributing a large percentage of the world’s deaths.

As for AIDS, Russia won’t supply statistics for how many Russians have died of the disease to UNAIDS — the figures are blank. Doctors have reported that AIDS deaths have increased, with 22,000 reported in 2013, versus 20,000 in 2012, according to an AFP report.

At least 1.8 million are said to be HIV positive, a figure fueled by the refusal of Russia to enable harm-reduction programs for addicts and cooperate with international programs to help prevent AIDS among drug issuers and sex workers, says the Daily Beast.

So while Russia is artificially adding to its population by forcibly annexing the Crimea, and the financial incentives for families to have children may continue to work, there are also grave factors of instability at work.

Hard-line Russian parliamentarians are preparing a draft amendment to the Constitution that would make it possible for Russia to have an official state ideology once again, despite a ban on such state interference in effect in the last years of the Soviet Union, slon.ru reported.

Yevgeny Fyodorov, a deputy from United Russia, who is also the leader of the ultranationalist National Liberation Front (NOD), and Sergei Katasonov, from the ill-named Liberal Democratic Party of Russia headed by Vladimir Zhirinovsky, have prepared a draft amendment to Art. 13, which prohibits a state ideology in Russia. Katasonov made the following comment to slon.ru (translation by The Interpreter):

Today our Constitution prohibits any ideology — we believe that is incorrect. The experience of other countries illustrates that it is normal when a state ideology is officially established, based on patriotism and the defense of citizens.

Even before the collapse of the Soviet Union, on December 13, 1989, physicist Andrei Sakharov had a strenuous debate with Soviet President Mikhail Gorbachev in parliament about the need to remove Article 6, which prescribed “the leading role of the Communist Party.” Art. 6 had been used to essentially ban all other parties or groups of any kind. Gorbachev was annoyed and said it would be a “serious mistake” to remove communism’s supremacy. Sakharov waved a sheaf of telegrams showing support for abolition of the article. Gorbachev cut off Sakharov’s microphone, and he died of a heart attack the next day.

The Wikipedia article on Art. 6 erroneously attributes the drive to remove Art. 6 to Gorbachev, but in fact he opposed it. The opposition’s first motion in the Soviet parliament failed in a vote of 1,139 to 839, with 56 abstentions. With continued demands by Baltic and other parliamentarians, the motion ultimately passed in March 1990 when Gorbachev was trying to hang on to power by creating a multi-party system.

After the fall of the USSR, following the the White House crisis and the constitutional referendum, the new Russian parliament incorporated a similar article in the Constitution to prevent the recurrence of a one-party government.

So the ultraconservative deputies today are now trying to undo the last of the reforms made 24 years ago —  the kind of rollback which has been the hallmark of Putin’s rule since 2000.

The deputies have not specified when their draft will be ready, slon.ru reports, and Fyodorov was not available for comment.

But back in November 2013, he proposed removing Art. 13, chapter 1, part 2, which says “No ideology may be established as a state or compulsive one.”

At the time, presidential press secretary Dmitry Peskov said that Putin did not propose changing the constitution, which doesn’t specify an ideology, but nevertheless, there was a “search for a national idea.”

Now evidently the hardliners feel the climate is right to push for the restoration of state ideology again.

Members of Fyodorov’s ultranationalist NOD were involved in harassing people who attended a lecture on Maidan yesterday in Moscow, where 25 people were detained by riot police.

Fyodorov also publicly supported two members of his group who worked as reporters for the Russian-backed separatist website Icorpus.ru who went missing last summer and were found dead with Russian state media photographer Andrei Stenin.

— Catherine A. Fitzpatrick

In an editorial yesterday December 2, the Russian business daily Vedomosti says that Russia’s deep economic problems come from Vladimir Putin’s inability to accept his mistakes.

The newspaper recounts that, in his interviews, Putin has claimed
that Russia’s government revenue increases as the ruble falls.
Russia’s economy relies heavily on mineral exports, so, according to
Putin, the cheaper the ruble, the more money the government can raise
from oil dollars.

“It feels awkward to remind [him] of inflation,
purchasing power, and other such things,” writes Andrey Sinitsyn, the
author of the piece. He continues by saying that if the government were to
follow Putin’s line of thought to its logical conclusion, Russia would
end up like Zimbabwe, whose currency depreciated so much that the
government had to officially replace it with the US dollar.

Robert Mugabe has been leading Zimbabwe since 1980. To stay in power,
all he has to do is “control the export of resources and finance the
security apparatus” – much like Putin has been doing for the past 14
years. Russia is not quite like Zimbabwe yet, but it has “already
started moving in that direction,” says Sinitsyn.

Sinitsyn says that the main problem of Russian leaders is their inability to recognize their mistakes.

“The Russian economy is
ill, and the ruble’s value … screams of that illness.” By refusing to
accept the necessary treatments and staying in denial, the government
makes that illness worse.

It would be sensible of Putin and his people to fix their mistakes,
but doing so would involve accepting that they made them in the first
place. Putin has held power for 14 years, and he can blame Russia’s
economic illness on no one but himself. “Accepting … his actions or
inaction … can significantly diminish the people’s trust,” says Sinitsyn.

Putin needs the weak ruble because he needs the “populist spending”
to maintain his approval rate. Sinitsyn exposes Putin’s dilemma: by
stopping that spending, he has to accept his mistakes and face the
people’s anger. By continuing, he will further weaken the ruble and the
economy. Sinitsyn concludes that “the citizens will suffer in either of
those cases, but in the latter, [Putin’s] mistakes will continue.”

— Anton Melnikov

The price of oil, which has been falling in recent weeks and impacting Russia’s economy, is up slightly today, with Bloomberg reporting Brent at 71.07 and WTI at 67.68.

The value of the ruble against foreign currencies has bounced back slightly from record lows with the ruble sinking to 54.91 rubles against the US dollar this morning and firming up to 52.79 at 09:51 GMT. Bloomberg’s last update put the ruble at 53.04 to one dollar and 65.53 to one Euro.

The interventions made by the Bank of Russia have not helped, reports the Wall Street Journal.

The central bank let the ruble float freely from Nov. 10 and eliminated regular interventions after spending nearly $30 billion of its reserves did little to stop the ruble’s decline. But the central bank has repeatedly said it reserved the right to carry out sudden interventions at any level to ensure financial stability and avoid panic. On Wednesday, it revealed that it had sold $700 million earlier in the week in defense of the ruble, which has been hitting record lows daily.

The central bank’s latest move back into the market, however, supported the ruble only briefly. The dollar quickly pushed back up to 54.

“The ruble situation is looking quite ugly,” said Luis Saenz, head of equity and derivatives sales and trading at BCS Financial Group.

Alpha Bank is predicting that if the price of oil is at $70, the dollar could get to 48 rubles in 2014, TASS reported.But if oil drops as low as $40 a barrel, the ruble could go to 56 per dollar.

Or worse.

These series of charts in a Bloomberg story titled “6 Charts that Illustrate Vladimir Putin’s World of Pain” sum it up well, which a recession predicted by both Russian and Western economists given the drop in GDP:

The ruble has collapsed — the drop has been the worst since 1998: