Crisis spares Russia's 'average Joe'
But the 25 richest Russians listed by Forbes have lost a combined $230 billion – a possible opportunity for the Kremlin to bolster conservative business allies.
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"Everybody is losing money, but the further they are from the state the more businesses are losing," says Mikhail Delyagin, scientific director of Moscow's independent Institute of Globalization Problems.Skip to next paragraph
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The global meltdown will have minimal impact on the country's real economy that, two decades after communism's collapse, has yet to fully integrate with world markets. According to a report prepared by Alfa Bank, a leading Russian financial institution, the country's entire banking sector has assets totaling 60 percent of gross domestic product, and just 3 percent of those are vested in mortgages.
The average Russian has little consumer debt and no exposure to the stock market via pension plans. The stock market is "totally speculative and not a place where most Russians would ever choose to put their money," says Sergei Glazyev, director of the independent Institute of New Economy in Moscow.
Earlier this month, the International Monetary Fund estimated that Russia will clock 7 percent economic growth this year, but that will sink to 5.5 percent in 2009. The government's budgetary surpluses will swiftly erode if global prices for oil – that account for 67 percent of the country's export revenues – sinks below $70 per barrel for an extended period.
But pain is reaching Russia's equivalent of Main Street. Last week Russia's auto giant, KamAZ, slowed to a four-day workweek, the huge Magnitogorsk steel works has slashed production by 25 percent, and other major Russian companies are showing signs of slowing down.
Though many affluent Muscovites say they're not hurting yet, a number of the city's giant shopping malls, luxury boutiques, and car dealers are much less crowded than usual.
After nearly a decade of booming real estate markets, Moscow's powerful mayor, Yury Luzhkov, last week announced a surprise $2 billion aid package for leading local property developers.
Social protest, which Mr. Putin appeared to banish, could return amid worsening conditions. "If oil prices continue to drop, there could be political unrest because all this prosperity and self-assurance we have seen [under Putin] will disappear," says Marshall Goldman of Harvard University's Davis Center for Russian and Eurasian Studies.
When Putin came to power eight years ago, he dealt harshly with big business "oligarchs," and vowed to eliminate them "as a class." Most tycoons were left alone as long as they showed political obedience, but as recently as July trouble was flaring again between now-Prime Minister Putin and the Russian coal and steel giant Mechel.
The 25 richest Russians listed by Forbes have lost a combined $230 billion in the financial meltdown. Aside from Mr. Deripaska, another big loser is Roman Abramovich, famous for buying the British Chelsea Football Club, who is reportedly down $20 billion.
"Russia's vulnerability to the storm blowing through world markets will force the authorities to be pragmatic," says Yevgeny Gavrilenkov, an expert with Troika Dialog, a Moscow-based investment bank. "But it's understood that the state will first support its own companies. In Russia, the state is a megaoligarch."