Putin seeks to reassert his authority, but the killing reeks of desperation
MNCs should prepare for more erratic and unpredictable policymaking in Russia amid a clear trend of intensifying repression of society, including both foreign and domestic businesses and investors themselves. Moreover, the macroeconomic environment will continue to deteriorate as repression picks up and the economy is further diverted toward the defense sector. These factors will weigh severely on private investment—as well as public investment in non-defense areas—as business and consumer moods worsen amid greater fear, less predictability in society and governance, and a falling ruble from increased imports for the defense industry.
Overview
- The Russian government confirmed following forensic testing that Wagner leaders Yevgeny Prigozhin and Dmitriy Utkin were among 10 people killed when their plane was blown up in the air in Russia, some 300 km north of Moscow en route to St. Petersburg.
- Speculation has arisen whether the explosion arose from a bomb on board or air-missile defense, while the Russian government has not yet proposed any explanation for the crash.
- On the same day as the crash, Russian President Vladimir Putin fired the head of Russia’s Aerospace Forces, Sergey Surovikin, who had been commander of forces in Ukraine at the end of last year and an ally of Prigozhin.
- Moscow is suing Andrei Melnichenko, Russia’s wealthiest businessman operating in the coal and fertilizer sectors, for “corrupt collusion” in a deal to buy a Siberian power plant operator, which the government claimed is now up for nationalization.
- Far-right nationalist hardliner and military veteran Igor Girkin was arrested in July, having long criticized the Russian leadership’s incompetence in the war and recently called Putin a “lowlife” and “cowardly bum.”
Our View
Prigozhin was a dead man walking since his failed mutiny in late June, so this incident comes as no surprise. The killing was assuredly ordered directly by Putin, and the mass spectacle of the murder was part of the plan: to signal to the Russian elite of Putin’s reasserted authority following the display of his very public weakness after Wagner’s mutiny. For Putin, this only provides a temporary re-assertion of his control but in no way rectifies the long-term damage to his power. Far from a demonstration of strength, rather it exposes the further weakening of Putin’s regime, reflecting the desperation and fear Putin feels. Prigozhin was Putin’s creation, yet Putin was still unable to control him and feared his existence, demanding the need to kill him instead. Meanwhile, additional political pressures from the war and sanctions will accrue that will bring about another crisis in Moscow at some point.
Problematic for Putin, he has increasingly isolated himself, undermining the support of hardliners he will have to rely on in the future, while also destroying the old social contract with the rest of his elites, reverting solely to fear and violence to sustain his dying regime. The earlier informal, unspoken rules of the system are no longer relevant, indicating a new dynamic going forward defined by rule via fear and arbitrary violence. This will ensure more erratic and chaotic governance, particularly as Putin loyalists will now have free rein to settle old scores and repress overtly to remind the nation who is in charge.
Related to the War in Ukraine, Putin has now made it abundantly clear that there will be no tolerance for any criticism of the war, while also preferring loyalty over competence and effectiveness. Wagner troops were the most effective fighters on the Russian side, who achieved the only discernible victory in the past year in seizing Bakhmut, while Surovikin was among Russia’s more competent generals. Removing these actors from the war and rewarding incompetence instead will continue to ensure Russia’s poor results on the battlefield.
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