FYI.

This story is over 5 years old.

News

Putin Saves an Oligarch, Admits He Has a Lover and Deflects Blame for the Ruble Crisis

The Russian leader used his annual press conference to attribute the ruble's plunge in value to Western persecution over Ukraine and an unlucky "external economic situation."
Image via Reuters

President Vladimir Putin touched on everything from this week's ominous ruble crisis to Russian soldiers in eastern Ukraine to his own love life at his annual December press conference, but offered few convincing solutions.

Instead, he reiterated that Russia has been a victim of persecution by Western governments and an unlucky "external economic situation," a phrase he repeated more than any other, warning of years of financial troubles to come.

Advertisement

What is Putin's grand plan to counter the plummeting ruble and the economic recession forecast for next year? In essence, tighten belts and wait for oil prices to rise back to the high levels of previous fat years, when standards of living shot up and, many would say, the government squandered an opportunity to diversify the energy-dependent economy.

"Our economy will get out of today's situation. How much time will that take? Given the best set of circumstances, I think two years," Putin said. "And, I repeat, after this growth is unavoidable, because the external economic situation will change. As the world economy grows, it will need additional energy resources."

Falling Ruble Sparks Panic Buying Among Russian Shoppers. Read more here.

As Putin began speaking, the ruble strengthened to 58 to the dollar before dropping back down to about 61. It has lost more than 15 percent of its value this week, sparking the worst economic crisis of Putin's nearly 15-year tenure and sending Russians scrambling to put their money into cars, electronics or anything else that might keep its worth better than their currency. This year the ruble's value has more than halved as oil prices fell — benchmark Brent crude on Thursday was down to $62 from about $110 at the beginning of the year — and the United States and European Union adopted sanctions against Russia over its support for separatists in eastern Ukraine. But at the root of Moscow's woes lie structural problems that began shrinking the economy already last year, analysts have said.

Advertisement

Putin said Western sanctions were responsible for "25 to 30 percent" of Russia's economic difficulties and denied that his government's financial policy or actions in Ukraine were to blame. He spoke against drastic measures such as capital controls, reminding the many Russians who tuned in to the live broadcast around the country that Russia had $419 billion in foreign currency reserves — as of the beginning of the year — on which to ride out the crisis.

Asked if Russia was now "paying the price" for its March annexation of Ukraine's Crimean peninsula, Putin argued it was being unfairly punished for finally asserting its sphere of influence against an overbearing West. "Either we want … to be more independent and get through this, or we want them to hang our hide on the wall," he said. "That's our choice. And Crimea doesn't have anything to do with it."

While some had expected that heads might roll after this week's ruble fiasco, Putin said the government and central bank's response had been "adequate" if slightly delayed. An abrupt hike in a key interest rate by the central bank in the small hours of Tuesday morning undermined investor confidence, while state oil champion Rosneft and its subsidiaries have been accused of using a bond issue last week to buy foreign currency, flooding the currency market with rubles. Anger against Rosneft chairman Igor Sechin was palpable, with one journalist asking Putin how much the oligarch's salary was. Putin claimed he didn't even know his own salary, let alone Sechin's, and called his longtime ally an "effective manager."

Advertisement

And although Putin warned that the government would likely be forced to cut expenditures, it won't be the military that will have to tighten its belt, since its budget has been increased to "about $50 billion" in 2015, he said. That's still 10 times less than the Pentagon's budget, he added, arguing that the skyrocketing number of confrontations between Russian and Western military planes this year was simply Russia "more strongly protecting its interests" in the face of US and NATO military bases near its borders and a proposed missile defense system in eastern Europe.

Emergency Interest Rate Hike Fails to Stop Ruble's Freefall as Russia's Economic Crisis Deepens. Read more here.

"I myself sometimes think, maybe the [Russian] bear needs to sit quietly and live off berries and honey, rather than chasing piglets and pigs through the taiga. Maybe they'll leave him in peace? They won't leave him in peace, because they'll always keep trying to chain him up," Putin said in his answer about Crimea. "And as soon as they're able to chain him up, they'll tear out his teeth and his claws. In today's world, those are forces of nuclear deterrence. And as soon as that happens, god forbid, the bear won't be needed, and they'll immediately take over the taiga."

But Putin was less candid about one area of Russian military operations this year when asked by a Ukrainian journalist how many soldiers he had sent into eastern Ukraine and what he would tell the families of those who were killed. "All those who fulfill their duty at the call of their heart or voluntarily take part in a conflict, including that in southeastern Ukraine, are not mercenaries because they don't receive money," Putin said, dodging the question and the abundant evidence pointing to a Russian military intervention in Ukraine in August. It was the Kiev regime engaged in a "punitive operation" in eastern Ukraine, he said, because residents there had opposed the toppling of former president Viktor Yanukovych after months of huge protests, which Putin called an "armed coup."

Advertisement

Among the journalists posing pointed questions was socialite television host Ksenia Sobchak, who asked about the constitutionality of a statement by Ramzan Kadyrov, the head of Russia's Chechnya republic —  where an attack by gunmen in the capital Grozny this month left 10 security officers dead  — that families of accused Islamic militants would be deported and their homes destroyed.  Kadyrov's spokesperson Alvi Karimov was later allowed to ask a question, during which he accused Sobchak of lying.

Sobchak also asked Putin about the aggressive rhetoric of state television — which has led the attack on artists who have spoken out for a united Ukraine — and several questions touched on the Russian leader's recent tirade against "fifth columnists." The president quoted Mikhail Lermontov, arguing that the famous poet had criticized the government but had done so as a "patriot," rather than in the interests of a foreign state.

Although the press conference featured plenty of regional journalists trying to get Putin's attention with signs and stuffed animals, there were fewer questions petitioning the president to deal with unruly local bureaucrats or real estate developers than last year. One journalist from the city of Kirov did manage to ensure the success of a locally made version of the popular fermented drink kvass by asking Putin why big stores wouldn't stock the brand. Putin joked that the Kirov journalist, who was slurring his words, had obviously partaken in his own product, although it later emerged that he was a stroke survivor. Putin's press secretary reportedly apologized to the man afterward.

Advertisement

Nonetheless, Kirov governor Nikita Belykh soon tweeted that "demand was up ten-fold" for Vyatka Kvass, and a representative of a major supermarket said it would be happy to stock it.

But the biggest winner of the day was embattled oligarch Vladimir Yevtushenkov, whose Bashneft oil company, long ago privatized, was seized by the government this month in a controversial court case that shook the business community. After Putin said Yevtushenkov was invited to a meeting with top businessmen later this month, shares in the oligarch's AFK Sistema holding shot up by 110 percent.

Although this year has been the toughest of Putin's tenure, the Russian leader revealed he had managed to find love since splitting with his wife in 2013. Rumors have long connected Putin to a former champion gymnast, but discussing his private life remains largely taboo for the media.

"A European friend of mine, a big boss, said to me recently after all the events of the past year … 'Do you love somebody?'" Putin told a young journalist who asked about his personal life at the behest, she said, of her aunt's friends. "I said, 'Well, yes.' 'Does someone love you?' I said, 'Yes.' … So don't worry, everything is good."

Follow Alec Luhn on Twitter: @ASLuhn