Financially rattled Russians get show of resolve by Putin

In a nationally televised show of unruffled resolve, Russian Prime Minister Vladimir Putin vowed Thursday to protect an increasingly anxious country from a return to economic chaos.

Putin used a congress of his ruling United Russia party to expound on the country’s financial well-being, cutting an image of a strong, self-assured and focused leader. But behind his determination to maintain a smooth front lurks an uncomfortable truth: Pressure on the Russian government, and on Putin himself, is growing by the day. Today’s financial uncertainty is widely regarded as the first serious challenge to Putin’s dominance in Russia.

The profound importance of economic stability to Russia’s financially traumatized populace is difficult to overstate. People still have fresh memories of the ruble devaluation of 1998, which sparked a run on banks and emptied shelves at grocery stores. One of the chief selling points for Putin, who came to power as president in 2000, has always been his image as a guarantor of prosperity and economic stability.

These days, however, more and more Russians are feeling the pinch. One after the next, smaller banks have been shuttered. Layoffs are roiling companies around the country. The ruble has slipped steadily against the dollar in recent weeks, leaving many Russians so rattled that they are converting their savings to other currencies -- or removing them from banks altogether.

The crisis goes straight to Putin’s Achilles’ heel, raising the long-muttered question of whether it was keen policy or simply record-breaking oil prices that allowed him to preside over a period of growth and prosperity.

“We will do our best to prevent a recurrence of the past meltdown in our country,” Putin said Thursday.

“We are doing everything possible in order to protect the deposits of our citizens and to secure the legal interests of those who invested their own money in housing construction, so that there are no more shocks of 1991 and 1998,” he added.

The government has repeatedly vowed to avoid a ruble devaluation, and Putin repeated that promise Thursday. In fact, the prime minister suggested creating a financial center in Russia and growing the ruble into a regional currency.

But when it comes to their pocketbooks, Russians are hard to placate; they’ve received promises in the past and wound up losing their savings.

In his speech, Putin appeared eager to neutralize those fears by naming and dismissing them. He offered sweeping promises to “pursue the monetary policy prudently, maintain a predictable rate of the national currency, consistently fight inflation and secure the fulfillment of social obligations.”

There was a time when Russia’s leader could afford to make big promises. With oil booming up to $147 a barrel last summer, Russia luxuriated in a budget surplus and stockpiled one of the world’s richest reserves. The Kremlin is used to having money to spare.

But the government has been dipping deep into its reserves as it tries to stabilize a free-falling economy. The reserves dwindled more than $20 billion last week alone, to $453.5 billion.

While Putin was seeking to calm Russians’ fears through state-run television, his finance minister warned reporters that the budget would probably slip into the red next year. The deficit could be the equivalent of 1% of gross domestic product, Alexei Kudrin said.

Criticism was already stirring among political opponents of Putin, who still dominates in Russia despite having been replaced as president early this year by Dmitry Medvedev.

Communist Party leader Gennady Zyuganov told the Interfax news agency that the cash distributed by the government to big banks has failed to help the real economy or trickle down to street level.

“This is a glaring example of the absence of effective control over the banking community on the part of the executive,” he said. “The fact itself that the prime minister . . . devoted his report at the congress entirely to ways of steering the country out of crisis attests to enormous difficulties the Russian economy and financial sector are currently facing.”

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megan.stack@latimes.com