The Russian economic is suffering under a pressure of a large-scale lockdown imposed by the government to contain the COVID-19 outbreak and turbulence on the global energy market.
On April 13. Head of Russia’s Accounts Chamber Alexei Kudrin said that the number of unemployed in Russia due to coronavirus could triple in 2020 temporarily increasing from 2.5 mln to 8 mln people.
“According to the forecast for this crisis, which has now started in Russia, the number of unemployed for a certain period will increase from 2.5 to about 8 million, possibly by the end of the year,” he said in an interview with the RBC TV channel. “Then there will be a restart [of the economy], growth in demand and consumption, the number of unemployed will become less, small and medium-sized businesses will resume work.”
Kudrin noted that now the demand for some types of services has completely disappeared (restaurant services, entertainment, sport etc) adding that about 30% of employees of such companies are now sent on unpaid leave. However, if the situation continues, he said, they can be fired.
Earlier in April, the head of the Accounts Chamber warned that under a pessimistic scenario, Russia’s GDP could fall by 8% in the same way as in 2009.
Now he says that the government’s decision to reserve 1.4 trillion rubles, or about 1.3% of the GDP, to fight the crisis is not enough. Kudrin noted that the reserved amount should be up to 7% of the GDP.
“The Federal authorities estimate missed revenue from oil and non-oil sources at about 3 to 4 trillion rubles depending on the scenario,” Kudrin told RBC broadcaster, adding that the average oil price of $20 per barrel would mean the loss of 4 trillion rubles for the budget, while $25 per barrel would lead to a loss of 3 trillion rubles.
“We need to have 4 trillion [rubles] in reserve to replace the loss of revenue and fulfill budgetary obligations in full on the federal level, in pension fund and across the Russian regions,” Kudrin said, adding that 2 or 3 trillion rubles would be needed to support business.
The financial support program for citizens and businesses is also facing apparent difficulties. On April 10, Central Bank Governor Elvira Nabiullina said that banks are failing to approve the majority of appeals for financial support, including cheap loans and repayment holidays. She called on banks to increase approval rates for those applying under government-backed initiatives.
According to the Central Bank, 900 companies have applied for a total of 6 billion rubles ($81 million) in interest-free loans to cover staff salaries. As of April 10, only 76 million rubles ($1 million) were approved – this is slightly more than 1% of the amount applied for. Moreover, Russia’s largest banks have rejected 85% of applications for an emergency loan restructure.
Earlier, the government ordered banks to offer a 6-month break in repayments to borrowers who see their income fall by 30% or more. However, lenders rejected 65,000 of the 76,000 requests they received, even as the number of appeals more than doubled.
Individuals that lost their work due to the COVID-19 lockdown also face difficulties with receiving proposed social compensations. For example, residents of Moscow, the most developed city in Russia, face troubles with registering and requesting a regional social compensation of up to 19,500 rubles (~265 USD – this is the maximum possible compensation) via a special website: https://czn.mos.ru/. In fact, the website does not work because of an increase of visitors and requests.
Moreover, a good part of Moscow residents that is in need of such a compensation cannot get it because they don’t fit the formal requirements. The compensation is proposed only for persons who have a permanent registration in Moscow and officially worked 60 days in 2019. A large part of people living in Moscow does have only a temporary registration or even does not have a registration in the city.
The situation in Russia as of April 13 demonstrates that there is no ‘explosive growth’ of COVID-19 cases or COVID-19-related deaths. Despite this, the entire country remains in the state of lockdown:
The mandatory lockdown (ironically called the ‘self-isolation regime’) introduced in Moscow, Tatarstan, Crimea and several other Russian regions was imposed in the violation of the Russian Constitution, without the introduction of the state of emergency. This situation allowed regional authorities to limit the citizens’ freedom of movement and, in some cases, put their in conditions similar to the home arrest.
A digital pass system with QR codes, personal data collection and further restrictions of residents’ freedom of movement (for example, it allows only 2 personal trips per week only) was introduced in Moscow on April 13. By today, this move has no legal ground in the system of the federal legislation. It violates the federal law about personal data and several articles of the Constitution. De-facto actions of local authorities are a non-motivated intervention into the personal data protection law.
If the restriction of the right to movement got its legal basis via the introduction of changes into the existing federal legislative system by the Parliament on April 1, 2020, the current interference into the personal data of citizens has no legislative basis.
Surely, quarantine measures are needed and effective to contain the COVID-19 outbreak, but they do not require the intervention into the personal life and personal data of citizens. An interesting example is France, where citizens should produce a form (document) justifying their reason to be outside. If a citizen violates the quarantine regime, he bears a serious administrative liability.
No country around the world, even China, that introduced same system, did this step without compliance with the existing legislative system. Usually, states introduce the Emergency situation regime in separate regions as In China (Wuhan) and Germany (Bavaria) or in the entire country. Russia has not made it yet.
This behavior is not something new for the team of Moscow mayor Sergey Sobyanin. Earlier, regional authorities repeatedly made comments on the situation across the city and the scale of violations of the regime of self-isolation based on mobile operators’ billing. Under the Russian law, only law enforcement agencies have a right to get and use such data during their search activities.
The last but not least, the digital pass system introduced in Moscow was not working as of April 13 morning. The Sobyanin team, which is proud by this ‘security innovation’, blamed DDOS and bot attacks for this. For example, authorities are blaiming some ‘criminals’ operating through the Russian-language meme website ‘Joyreactor’.
Another side of the story is that the lockdown measures and pass systems could led to the growth of street criminal. Thousands of gastarbeiters that have no savings, registration in Moscow, and cannot officially get digital passes, work and move across the city remain on the streets. Even the Russian President’s spokesman, Dmitry Peskov, confirmed this fact. However, Peskov said, there is no need to ‘dramatize’ the situation.
When the Sobyanin team started introducing strict lockdown measures in Moscow under the pretext of the COVID-19 threat, many thought that the city’s mayor was seeking to solidify his political power and strengthen positions in the never-ending political struggle for power. However, now it becomes clear that Sobyanin was wrong if he thought that he would be able to increase his political popularity as the ‘savior’ of the nation from the COVID-19 pandemic. The recent actions of Moscow authorities already significantly undermined the popularity of Sobyanin among the city’s residents. An overview of Russian social media, including Facebook and other platforms, demonstrates a low level of support to Moscow authorities in Moscow, the Moscow region and across the entire country.
The main issue is that approaches employed in Moscow intentionally or unintentionally undermine the position of Russia as a center of power on the international scene. In own turn, the weakening of Russia undermines the international stability and destroys the chances of the young and weak multipolar international system to born and become the dominating model of the international relations.