Russia-Ukraine War | What makes Putin so popular and why his popularity can hit your wallet

Russian President Vladimir Putin (File Photo)

In the 1990s, the former Russian President Boris Yeltsin put the country on a speedway to free market and pro-democracy reforms. A supporter of the Soviet Union leader Mikhail Gorbachev’s glasnost and perestroika (openness and restructuring) policies, Yeltsin had been handed over the reins of post-Soviet Russia.

But his economic reforms became disastrous. It led to high corruption, the accumulation of wealth with a few and a harder life for ordinary citizens. 

At Nomura Investment Forum Asia, the research institute’s chief economist Richard Koo presented data to show how per capita GDP fell under these reforms. But more importantly, it showed how incomes improved dramatically under the current Russian President Vladimir Putin. 

Also read: How the world is paying for Putin's war

Per capita GDP that had fallen by around two-third under Yeltsin, rose by 12x under Putin.

Putin's popularity is one of the reasons why Russia can afford to prolong the war, which has had a significant inflationary effect, according to Koo. The other reasons are Ukraine's willingness to keep fighting and the West's tough political stand.

According to an IMF blog, "Impacts (from the war) will flow through three main channels. One, higher prices for commodities like food and energy will push up inflation further, in turn eroding the value of incomes and weighing on demand. Two, neighbouring economies in particular will grapple with disrupted trade, supply chains, and remittances as well as an historic surge in refugee flows. And three, reduced business confidence and higher investor uncertainty will weigh on asset prices, tightening financial conditions and potentially spurring capital outflows from emerging markets."

Per capita GDP growth (in $, indicated in the red line) rose dramatically after Putin became acting president. The grey line shows the per capita GDP growth in Ukraine, which has been comparatively much lower.

The economic and political reform under Yeltsin seem to have eroded the average Russia’s faith in western intervention. “The impression that the average Russian got from that experience was a very negative one. They originally had great hope for better lives and freer lives, but they ended up with a per capita GDP of $1331. Russia became one of the poorest countries in the world,” said Koo.

Putin took over and introduced reforms such as cutting taxes, removing barriers to doing business and introducing land-ownership reforms. It boosted the economy. He was helped in no small measure by the increase in price of oil, which is a key export for the country.

“That’s where Putin’s support comes from… he is a kind of national saviour,” said Koo.

The economy has faced challenges under Putin’s regime. For example, he nationalised sectors and was set to particularly target companies of political rivals. After 2013, the above graph shows how the per capita GDP declined following the Crimean invasion. This happened because the western sanctions then had a significant impact. But according to Koo, Putin was able to placate his voting public saying that they have won back an integral part of Russia. 

Under Putin's leadership, the country felt the impact of the Global Financial Crisis much harder than others. It has had less GDP per capita than others and has tackled with higher levels of inflation. Nonetheless, it has still delivered better living standards under the current president.