A growing number of Russians recall their transition to democracy in the 1990s with a combination of fear and contempt, associating political liberalization with economic chaos and a new form of political repression. As a result, many Russian citizens are far more skeptical of the future of democracy in their country than residents of many western nations. A recent Pew survey found that only half of Russians approve of the transition from communism to a democratic form government; the Russian Communist party placed a strong second in the last round of elections. Russia’s political performance over the past two decades and its current status raise questions about just how successful the Russian version of ‘democracy’ will be in the coming decade.

Vladimir Putin’s previous popularity relied on the perception that he was the strong leader that Russia needed to deliver itself from the chaos of the 1990s. Since Mr. Putin assumed power in 1999, the Russian economy grew between 4.7 and 10% per year for 10 years. Unlike Mr. Yeltsin, Mr. Putin also resembles the archetypal Russian leader: strong, masculine, and cunning. He has proven adept at capitalizing on the strong nostalgia still present for the supremacy of Soviet-era Russia, and has used nationalism as a tool to promote his own political supremacy. Despite the recent economic crisis, the active persecution of his political rivals, and what has proven to be a controversial decision to reclaim the Russian Presidency, Putin remains admired by many. According to the latest December 2011 poll, more than half of Russians still approve of his leadership.

Mr. Putin and his party seem safe for the moment, although his popularity has declined recently from 86 percent in 2007 to 51 percent on December 11th of this year. The momentum certainly seems to be against Mr. Putin—any crackdown on the opposition will only erode his popularity further. This is undoubtedly why Dmitry Medvedev called for political reforms last weekend, a move almost certainly meant to placate protestors and act as counterweight to some of Mr. Putin’s more insensitive remarks. Yet despite his eroding popularity and the momentum of the opposition, Mr. Putin retains considerable support, and he is likely to win the upcoming March 2012 presidential elections. However, these elections will be more challenging than United Russia and Mr. Putin had wanted, and they will almost certainly be followed by more protests.

Medium-Term Economic Threats

Although some comfort may be derived from the notion that Russia’s near and medium-term political future is at least predictable and likely stable, Russia’s economic outlook for the remainder of this decade is a concern. Like most other economies, the Russian economy contracted over the past three years. Although it staged a partial recovery,  sustainable growth is likely to be weaker over the coming decade given the economy’s heavy dependence on oil and natural gas, which constitute a quarter of its GDP and more than two thirds of its exports. Russia’s overreliance on the energy sector has prompted some financial firms to reduce the country’s near and medium-term growth projections. Russia’s failure to upgrade and maintain its energy infrastructure, in combination with growing unease on the part of foreign investors in the sector, raises question about how effectively Russia will be able to maintain its energy investment and export capability.

Many also fear that Russia’s massive energy reserves could ultimately lead to a ‘resource curse’ that could manifest itself in several ways. First, energy exports may lead to ‘Dutch Disease’ by putting upward pressure on the Ruble, causing Russian exports to become more expensive. It takes a considerable amount of time for the prices of these exports to adjust downwards to compensate for this upward pressure. This is because the prices of wages and rents are sticky and will not respond quickly to an appreciation. As a result, Russian exports become harder to sell in international markets, while Russians buy more imported goods, which makes the development of a non-energy export sector more difficult and increases the country’s reliance on its energy sector.

The second way the resource curse may manifest itself is through corruption of the political system. Some would argue this is well under way. Political scientists believe that large energy reserves increase gains to those who control the political system, with political competition becoming a race for resources, inevitably leading to the ‘politics of patronage’. In this environment, the political winners are more likely to dole out state largesse to political allies rather than using these resources to benefit the nation as a whole. Russia’s oligarchs are in many respects a manifestation of the resource curse.

The final symptom of the resource curse is that the national economy becomes insalubriously linked to fluctuations in world energy prices. This is of particular concern to Russia as oil and gas markets may grow more volatile in the future. When volatility penetrates a national economy, businesses and policy makers have a difficult time making long-term plans, as they can never be certain that their revenue stream will remain relatively constant over any given period of time.

Also, the newer natural gas fracking technologies increasingly being employed in Canada and the United States have the potential to dramatically increase the world supply of natural gas. Indeed, there are some who claim that North America possesses the energy equivalent in natural gas to Saudi Arabia’s oil. These new gas reserves pose a serious threat to the Russian gas industry, and by definition, the national economy. The threat of declining energy prices is not lost on Russia’s leaders, recalling that the former Soviet Union fell during a period when oil prices were abnormally low.

The chief source of Mr. Putin’s previous popularity is that he was able to bring Russia strong economic growth, in stark contrast to the government of Mr. Yeltsin. If Mr. Putin and the United Russia party are unable to continue to deliver this growth over the coming decade, they could lose the popular legitimacy that has allowed them to govern. Moreover, the resulting decline in living standards and rise is disaffection among much of the country’s population could make Russia ripe for its own version of an Arab Spring.

Demographic Change

The second medium-term challenge facing Russia is that of demographic change. There has been much made lately of the precipitous decline in Russia’s population. However, we see this issue as gradually subsiding. To be sure, Russia still has a shrinking population, yet the country has, for a variety of reasons, been able to slow the decline. Instead of focusing on Russia’s population totals, this essay focuses on the changing composition of the country’s people. Specifically, there are at least three demographic changes that will affect the country’s politics over the coming decade: the rise of the Russian middle class, the coming of age of Russia’s young, and the decline of Russian emigration.

A recent Los Angeles Times story reported that 20% of Russians contemplate moving abroad, while as many as 150,000 leave the country every year. This emigration has proven incredibly costly to Russia as many of its emigrants are highly intelligent engineers, mathematicians, and computer scientists. Indeed, Google co-founder Sergei Brin immigrated to the United States from Russia when he was child. However, Russia’s over population decline seems to have subsided. The country’s fertility rate has climbed from 1.2 births per woman in 1999 to 1.5 births per woman a decade later. Additionally, life expectancy has increased from 65 at the turn of the millennium to 69 in 2009. These numbers suggest that Russia has made an impressive turnaround over the last ten years. Many observers have also failed to note that Russian emigration is also slowing. According to Russia’s statistic service, almost a quarter million Russians left the country in 1997; however, that number dropped to below 35,000 in 2010. Moreover, Russia has seen an influx of migrants into the country, mostly from Central Asia and Eastern Europe. In fact, almost 200,000 migrants entered the country in 2010.

In some ways, this slowing population decline is an achievement Mr. Putin should be proud of. However, it also may be pose a threat to his leadership. In the past, Russians dissatisfied with the state of the country could simply vote with their feet and leave. Now that more people are choosing to stay, they may feel they have more of a stake in the country and, be less tolerant of abuses of power. As a consequence, they may be more likely to take action against perceived injustices perpetrated by the ruling party.

As Russia has slowed its steep population decline, the size of its middle class has also increased. A broader and deeper civil society, including thousands of NGOs, has also started to flourish in the country. While a burgeoning middle class and a robust civil society are undoubtedly good for the country as a whole, they may prove a detriment to the nation’s ruling autocrats. The connection between a large middle class and democratic government has been investigated since the time of Aristotle. Moreover, civil society organizations can be quickly transformed into vehicles for the opposition. In a recent article on the Russian protests, Fareed Zakaria pointed out that both Tunisia and Egypt saw robust economic growth and a growing middle class prior to their revolutions. The question remains whether the middle classes and civil society organizations will play a similar role Russia.

In the future, Mr. Putin and United Russia are likely to find that support for their government will be split along generational lines. Polls show that nostalgia for the Soviet era and memories of the 1990s are much weaker among the young, for obvious reasons. These surveys reveal that liberal democratic principles are far more popular among the young than the old. We can expect, therefore, that the younger generation of Russians will grow less tolerant of Putin’s ‘managed democracy’, and that, as the country ages, Russian autocrats will find they have less popular support and a more difficult time governing.

Looking Forward

Although Mr. Putin is in a precarious position, he is likely to prove triumphant in the Presidential elections next spring. This contest will prove closer than Mr. Putin expected and he will probably feel obliged, at least to some degree, to engage in another round of vote rigging, opposition intimidation, and fraud. Regardless of the extent of his electoral shenanigans, there will be large demonstrations in the wake of Mr. Putin’s victory, as many people will question the validity of the election’s outcome. If Mr. Putin reacts too rashly to these demonstrations, he could further alienate himself from the people and his base of power. If, on the other hand, he addresses the situation deftly and provides some concessions, he should be able to hold on to power for the medium-term. Nevertheless, Mr. Putin faces serious challenges over the longer haul. The precariousness of the Russian economy and the changing demographics of the country serve as omens to Russia’s leadership. A weaker, yet more volatile economy, a burgeoning middle class, and a more democratically inclined generation of young people will gradually chip away at the legitimacy of the nation’s rulers.

Beyond this, Russia must find a way to change the growing perception that perhaps it no longer matters on the global stage, and that it was misplaced to be included in the BRIC designation. The combination of a stifling political arena, energy-dependent economy and declining population does indeed raise questions about whether Russia deserves to be in the same company as Brazil, China, and India. Indonesia, South Africa, or Turkey seem more appropriate members of the club. To avoid irrelevance, Mr. Putin will need to demonstrate that he not only has the fortitude, but the common sense to adapt his leadership style to accommodate the rapidly shifting landscape inside and around Mother Russia.