President Vladimir Putin's popularity has hit a three year high.
In a poll conducted by the Russian Public Opinion Research Center (VTsIOM) last week, Putin's popularity level in Russia has reached 71.6 percent. That's a 9.7 percent increase since mid-February, which seems quite obviously linked to the Russian president's handling of Ukraine and the Sochi Olympics. As Ria Novosti notes, it means that Putin's popularity levels are now at a three-year high.
You might want to put that down to the fact that the VTsIOM is state-run, but that argument doesn't really hold. The Levada Center, a well-respected independent polling center, has also found that Putin had a 72 percent approval rating, up 7 points from January and a recent record. To put that in context on a world stage, U.S. president Barack Obama is currently at 43 percent, according to Gallup, while 79 percent of the French say they don't approve of Francois Hollande's presidency. Putin isn't just popular, he's extraordinarily popular.
The question is, how well can he sustain his popularity? George Bush I had popularity levels of nearly 90% following the first Gulf War, only to be bounced out of office by Bill Clinton. Bush II also had stratospheric popularity in 2003, only to barely win reelection in the middle of two wars and to plummet to the lowest popularity levels any President has had since Richard Nixon. With the flight of capital out of his country and out of Crimea in particular, it is only a matter of time before Putin's popularity takes the same road. After all, no President who can't give his people bread and circuses will be popular for very long, no matter how principled or charismatic he is.
It is a misconception that Putin is a madman. People who have dealt with him, like George Bush II, know he is anything but. Bush II has taken up art after leaving the White House and it is really interesting to see how he portrays the leaders he dealt with over the years. Bush's picture of Putin shows him as much older than he actually is, steel-eyed, and resolute. However, it is not like President Putin doesn't make mistakes, sometimes with potentially catastrophic consequences. President Putin's first term coincided with astronomical economic growth.
Under the presidency of Vladimir Putin Russia's economy saw the nominal Gross Domestic Product (GDP) double, climbing from 22nd to 11th largest in the world. The economy made real gains of an average 7% per year ( 1999: 6.5%, 2000: 10%, 2001: 5.7%, 2002: 4.9%, 2003: 7.3%, 2004: 7.2%, 2005: 6.4%, 2006: 8.2%, 2007: 8.5%, 2008: 5.2% ), making it the 6th largest economy in the world in GDP(PPP). In 2007, Russia's GDP exceeded that of 1990, meaning it has overcome the devastating consequences of the recession in the 1990s.
During Putin's eight years in office, the industry grew by 75%, investments increased by 125%, and agricultural production and construction increased as well. Real incomes more than doubled and the average salary increased eightfold from $80 to $640. The volume of consumer credit between 2000–2006 increased 45 times, and during that same time period, the middle class grew from 8 million to 55 million, an increase of 7 times. The number of people living below the poverty line also decreased from 30% in 2000 to 14% in 2008.
This underscores one of the reasons why Putin became popular in the first place; people always tend to credit the person in power for how well times have become.
But much of that was due to Western investment.
Russian oligarchs, banks and corporations have been borrowing heavily from the West, underscoring the risks for both sides in escalating the Ukraine crisis.
According to Russia's central bank, total foreign debt stood at $732 billion at the end of 2013, up by nearly $200 billion over two years -- and $160 billion of that was new borrowing by Russian businesses and banks.
Putin is a highly principled man concerned with what he sees as the decadence of the West. But yank the rug out from under what made Russia's standard of living rise, and watch his popularity plummet in a few years. The capital flight from Russia has already begun.
McDonalds recently announced it was pulling out of Crimea.
Raiffeisen Bank, a banking corporation that does a lot of business in Eastern Europe, also announced it was pulling out. And Putin can't even get his own bankers to do business in Crimea because they are afraid of consequences and loss of business relationships in the West.
And on top of that, Ukrainian banks that have long done business there are now pulling billions of dollars out of Crimea.
Privatbank, Ukraine's biggest bank that had the largest banking services network in Crimea, closed all of its 339 branches last month. The bank had invested more than $300 million in the region and had $700 million in issued credits.
According to estimates by the National Bank of Ukraine, there had been 1,022 branches of more than 20 Ukrainian banks working in Crimea before the annexation, with assets and liabilities worth 20 billion to 22 billion hryvna ($1.7 billion to $1.9 billion).
The Kremlin has been talking about making Crimea a showcase similar to Singapore. Recently, for instance, they announced plans to resurrect a movie theater that had done a lot of films during the days of the USSR. But first, they've got to take care of the basics such as giving its people a place to bank. Where are the people going to put their money if they can't go to the bank? This is going to create crime as there will always be the risk that someone is going to rob you of all your wealth.
There are only two working banks in Crimea right now.
The Chernomorsky Bank of Development and Reconstruction is one of two independent banks that have been operating in Crimea. Last month the National Bank of Ukraine banned its banks from conducting any transactions with the bank.
Putin has been singing the popular country tune, "Take this job and shove it" to the Western investors who helped prop him up in the first place.
But the more the capital flight continues and the less popular he gets, he'll wish that he had sang a different tune.