What did Putin do for the economy?

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Russian President Vladimir Putin attends a meeting with U.S. President Joe Biden at Villa La Grange in Geneva, Switzerland June 16, 2021.

Love him or loathe him, there's no doubt that Russian President Vladimir Putin has been instrumental in keeping Russia firmly on the global geopolitical stage during his time in office.

Alternating as both prime minister and president of Russia since late 1999, Putin has been the figurehead of Russia's economy seeking to attract foreign direct investment, boost a variety of industries and to exploit Russia's natural resources, particularly the country's abundance of oil and gas.

Of course it's not all been plain sailing. Russia has been hit by economic misfortunes both of its own making —such as international sanctions placed on key sectors after its 2014 annexation of Crimea from Ukraine and its meddling in the 2016 U.S. election — and some it had no control over, such as the 2008 financial crash, 2014 oil price crash and most recently, the Covid-19 pandemic.

More than 20 years after Putin came to prominence, Russia — a country which spans Europe to Asia and has around 144 million inhabitants — is facing challenges that the Kremlin will have to tackle soon enough.

These range from the more pressing matter of living standards and the specter of inflation that could hit Russian consumers at a time of vulnerability, to longer-term issues such as Russia's transition away from its energy-dependent, export-oriented economy.

Tourists walk along the Red Square in front of St. Basil cathedral in Moscow on November 6, 2020.

CNBC has taken a look at economic data from the Organisation for Economic Co-operation and Development that spans the two decades that Putin has been in power, looking at the country's growth rate, GDP per capita, employment picture and inflation story as well as household disposable income compared to its neighbors in the EU, the wider OECD (which includes 38 countries from around the world) and the U.S.

Russia's economy has undoubtedly grown under Putin, although it took a deeper dive than others after the financial crisis of 2008, as this graph shows.

The recession that Russia entered after the oil price crash of 2014-2016 (when oil prices tumbled from around $114 a barrel to $25 in early 2016) is also evident, as is the pandemic-induced damage to GDP with Russia no more immune to lockdowns, industry shutdowns and slumping oil demand than the rest of the world. Saying that, its decline has not been as pronounced as that seen collectively in the EU or OECD.

The icebreaker Tor (right) at the port of Sabetta in the Kara Sea shoreline on the Yamal Peninsula in the Arctic circle, some 2450 km of Moscow.

This graph below shows Russia's GDP per capita, a core indicator of economic performance and commonly used as a broad measure of average living standards or economic wellbeing.

Rising consumer prices have been a regular bugbear for Russia's economy and inflation has been a key focal point for Russia's central bank in recent years, particularly in the wake of the oil crash when the Russian ruble plummeted in value against the U.S. dollar, increasing inflationary pressures.

Currently, Russia's inflation rate stands at 7.4%, a figure that prompted the central bank to increase interest rates by 25 basis points to 6.75% in September. The bank's inflation target is 4%.

The central bank noted last month that while Russia's economy is "returning to a balanced growth path ... the contribution of persistent factors to inflation remains considerable." In this environment, the balance of risks for inflation is tilted to the upside, the bank said.

A hairdresser wearing protective face mask and gloves styles a clients's hair on October 6, 2021 in Moscow, Russia.

Household disposable incomes were heavily impacted by rampant inflation during the 2014-2016 oil crisis period but the latest available data shows that Russia has recovered when it comes to this indicator, with the annual growth rate in household disposable income, in 2019, standing at a very similar level to the U.S.

Russia performs well in terms of employment indicators, and in fact performs far better than its peers in the EU and OECD, with its employment rate above OECD countries' average and an unemployment rate below the OECD average.

"Flexible labour market legislation, weak unemployment insurance and the ongoing economic recovery reduce unemployment," the OECD said in a 2018 report. Yet Russia scores relatively poorly on job quality indicators, with earnings quality close to the bottom of OECD countries.

Employees at Russia's Mikron plant manufacturing microchips for electronic passports.

It also performs below the OECD average in the main indicators of inclusiveness with the employment gap higher for disadvantaged groups, such as mothers with children, young or older workers, workers with disabilities or non-Russian workers, compared to OECD countries.

— CNBC's Hadley Gamble moderates a panel with Russian President Vladimir Putin and the CEOs of BP, TotalEnergies, ExxonMobil and Daimler at Russian Energy Week. Watch live at 1 p.m. Moscow time/11 a.m. London time on Wednesday, Oct. 13.

Days before he was elected to the Russian presidency in 2000, Vladimir Putin told the BBC that Russia was “part of European culture” and that he “would not rule out” the possibility of it joining Nato.

“I cannot imagine my own country in isolation from Europe and what we often call the civilised world,” said Putin, who was still acting president after Boris Yeltsin’s sudden resignation on New Year’s Eve 1999.

A generation later, as Putin marks the 15th anniversary of acceding to power on 7 May 2000, Russia has changed beyond all recognition from the chaotic, open free-for-all it was under Yeltsin. Internationally it faces isolation, sanctions, a new cold war even. At home, despite economic decline Putin enjoys perhaps the highest popularity rating of any Kremlin leader – an approval rating that topped 86% in February.

Love him or hate him, it’s hard to deny that Putin has made a huge impact on his country and the world.

The “near abroad” just got a little nearer. The Ukrainian conflict has ruptured relations between Russia and the west over the past year, but in fact it is merely the latest example of Putin asserting Russia’s “rights” in its former backyard, known in Russia as “the near abroad”. Those who were surprised by Putin’s annexation of Crimea and the subsequent Russian-fuelled conflict in eastern Ukraine should have remembered: six years earlier he set the mould for the “Putin doctrine” in Georgia. Russia would use troops to protect its interests in a sphere of influence increasingly hemmed in by Nato’s advance. The US blinked first.

The Ukraine gambit has been more risky. Public opinion certainly favoured the Crimean manoeuvre, but in Donetsk and Luhansk, Russians have died.

Sanctions as well as falling oil prices have hurt the Russian economy. Putin has his country on his side, for now, and has achieved his strategic aims, but not without some cost.

Under Yeltsin, Russian pursued a policy of grudging cooperation with Nato. All that changed under Putin. Since his first interview with the BBC, Putin has insisted that Nato’s eastward expansion represents a threat to his country. Now Moscow finally has the military muscle to push back. According to a November report on the rise of close military encounters between Russia and the west, Nato states had scrambled fighter jets to intercept Russian aircraft more than 100 times as of late October, more than three times more than in 2013. The newly aggressive stance has worried Poland and the Baltics, as well as the Nordic countries. Even Sweden and Finland have started musing aloud about joining Nato.

Putin’s position has huge backing in Russia – and plenty of support from those in the west who believe that Nato only exists to deal with the insecurities that its existence creates.

A suspected Russian submarine in the Stockholm archipelago prompted a huge hunt by the Swedish navy in October, and a Scandinavian Airlines plane with 132 passengers taking off from Copenhagen in March nearly collided with a Russian reconnaissance aircraft that had not transmitted its position.

While Putin may have flip-flopped on economic issues, he has consistently moved toward greater consolidation of his own power. In 2004, he signed a law allowing the president to appoint regional governors, a privilege he mostly retains despite reforms prompted by street protests in 2011-12.

Putin’s famous “castling” with Dmitry Medvedev allowed him to return to the presidency in 2012. In the meantime, Russia’s lapdog parliament had passed a law in extending the presidential term from four to six years. Putin has said he won’t rule out running again in 2018, and if he wins, his time in power could surpass that of Leonid Brezhnev – 18 years – and even Joseph Stalin.

Well, not quite a cult. But don’t underestimate how much damage 10 years of Yeltsin, his antics, ailments and slurring on television, did to Russians and their view of themselves. Putin has given them something much more in keeping with the macho spirit of the Russian muzhik: a horse-riding, bare-chested, tiger-wrestling, clean living, straight-talking action man.

At least, that’s what his image makers have done for him. Behind the scenes, who knows? Rumours fly thick and fast about his affection for Botox and his alleged relationship with an Olympic gymnast half his age. These are stories that don’t make the Russian press.

When Putin arrived in office, Russia was just emerging from the disastrous market reforms of the 1990s and the 1998 financial crisis. The new president had no grand economic vision: while he slashed taxes to benefit business, he also renationalised key sectors, starting with the breakup of political foe Mikhail Khodorkovsky’s Yukos oil company in 2003. Nonetheless, unused manufacturing capacity and rising prices for oil, Russia’s main export, helped usher in an era of unprecedented prosperity that Putin is still remembered for, with real disposable income doubling between 1999 and 2006.

The global financial crisis brought this growth crashing to a halt. While oil wealth had stimulated growth, little progress had been made in diversifying the economy or modernising Russia’s industries. Even before oil prices dropped and western sanctions over the Ukraine crisis came into effect in 2014, economists were predicting long-term stagnation.

Although Putin recently called his government’s response to the rouble crisis of late 2014 “optimal”, many blame the central bank’s sudden interest rate rises and a shady bond issue by state oil company Rosneft for sinking the national currency.

As former finance minister Alexei Kudrin reminded Putin during the president’s annual call-in show in April, the 7% annual GDP growth at the end of his first presidential term fell to just 0.6% in 2014, and the country’s economy is expected to enter recession this year. Not a great result for a man whose initials – VVP – stand for GDP in Russian.

Putin took over a country whose population was falling at an alarming rate. Russia – a population of about 150 million people at time of the fall of the Soviet Union – was losing people at a rate of almost a million a year, a combination of a reluctance to procreate and a proclivity, from men at least, to die young.

But the decline gradually bottomed out, and in 2010 the population started growing again. The secret to this reversal was largely economic: as their financial situation improved during Putin’s reign, Russians began having more children. According to the state statistics service, the country now has more than 146 million people, up from 142 million in 2008. Even if you don’t count the 2.2 million people it gained by annexing Crimea, it’s still a positive trend.

But now that the econom ic outlook is uncertain, that trend may be reversing, with births down by 4% in January.

Always a vocal proponent of a multipolar world, Putin has shifted in recent years toward greater economic and military cooperation with Asian countries, whose growing economies are hungry for Russia’s energy and whose governments are less judgmental of its human rights record. Last year, he brokered two huge deals to supply China with gas, one worth $400bn. (First he has to build a pipeline through 2,500 miles of mountains, swamps and seismic hotspots.) Later this month, the two countries will hold joint naval exercises in the Mediterranean Sea. He’s also exporting Russian railroad technology to North Korea, which in the meantime has been opening quasi-slave-labour logging and farming camps in Russia’s far east.

Worsening relations with the European Union, which in December forced Russia to cancel a pipeline to Bulgaria that was already being built, has only sped up its pivot to Asia.

With the imprisonment of oil tycoon Mikhail Khodorkovsky and the assassinations of several prominent opposition voices, Putin’s Russia was already a place where dissent was not particularly welcome.

But the pivotal moment came during the winter of 2011-12. Rolling opposition protests briefly threatened an Arab spring of sorts in Moscow. Putin moved quickly. A slew of criminal cases on dubious charges were opened against anti-corruption campaigner Alexei Navalny and 27 protesters from the May 2012 Bolotnaya Square rally.

Since Putin’s return to the Kremlin in 2012, new laws have raised the fines for those taking part in protests not sanctioned by the authorities to as much as 1m roubles (£13,000) or up to five years of forced labour or prison for repeat violations.

Amid growing patriotic fervour and rhetoric about traitors– Putin suggested in December that opposition members could be part of a “fifth column” undermining the country – the popular opposition movement is all but dead. Symbolically, one of its leading voices, former deputy PM Boris Nemtsov, was assassinated in front of the Kremlin in February. The crime was allegedly committed by security officers loyal to Chechnya’s ruler, Ramzan Kadyrov, who was awarded a medal by Putin shortly afterwards.

In Putin’s third term, authorities have also tightened the screws on non-governmental organisations that receive funding from abroad, whom Putin has previously disparaged as “jackals” and traitors. According to a 2012 law, such groups must label themselves “foreign agents” in their publications and submit to audits, with stiff fines for failure to meet these onerous requirements.

Once an oasis of free speech, the Russian internet is now subject to vague laws that allow the government’s communications watchdog to block sites deemed to publish “extremist” material or content harmful to children. As a result, several major opposition sites were blacklisted in 2013. According to a 2014 law, popular bloggers must now register their true identities with the state and face potential libel suits.

The crackdown has, of course, extended to the Chechen separatists whose destruction (“Should we catch them in a shithouse, we’ll whack them in a shithouse!” he once said) was Putin’s first real claim to leadership fame. His campaign against the Islamic insurgency in the wider North Caucasus region has led to a reduction in violence – but also to a litany of human rights abuses.

Alongside a crackdown on the opposition, NGOs and the internet, Putin’s third term has seen a wave of legislation inspired by his vision of Russia as a bastion of traditional morals. The most egregious example was the 2013 ban on gay propaganda, which LGBT rights activists say has contributed to a rise in homophobic harassment in the country, including vigilante group violence.

Under Putin, the second world war has become a patriotic rallying point, and a 2014 law criminalises the “distortion” of the Soviet Union’s role in the war. Other legislation imposed fines for the use of expletives on television, radio and in films shown in theatres, drawing criticism from musicians and directors.

The charitable view of Putin’s foreign policy is that he stands up to western hegemony and, with China, acts as a balance to the overweening military and political power of the US. If Yeltsin was consistently in America’s pocket, then Putin has been on its back.

However, while the Russian president can plausibly claim to have history on his side in opposing Washington over the Iraq and Afghanistan wars, his stance on Syria and unwavering support for Bashar al-Assad has been open to greater criticism.

It’s not all about opposition. Putin’s diplomats have worked constructively with international allies and adversaries to help bring Iran in from the cold, and – until recently at least – to work at further nuclear arms reductions.

Under Putin, the Anglo-Russian relationship has turned into a paradox: at the same time as official relations hit new, icy depths over espionage and murder, record numbers of Russians and their cash were flooding west – and London was their favourite second home.

Oligarchs parked their kids in swanky schools, listed their companies on the stock market and bought football clubs, some perhaps as an insurance policy, others because it became ultra-fashionable. But London also became a bolthole for the out of favour, home to an entire dissident community of anti-Putinistas, further straining relations between London and Moscow.

The Sochi Winter Olympics in 2014 were a triumph for Putin, who had campaigned aggressively to host the event. Russia won the medal count with 13 golds, and no major security breaches or organisational embarrassments – besides a few unfinished hotel rooms – marred the event. Joined by faded action star Steven Seagal, Putin later presided over a Formula One race held on a course built around the Olympic park, and in 2018, the country will host the Fifa World Cup.

But such state-backed events involving huge construction projects have been a goldmine for crooked officials in Russia. Nemtsov, who had written a scathing report on the preparations for the Sochi Olympics, estimated that $30bn of the record $50bn spent on the games had been lost to corruption. This was in addition to the poor labour conditions and environmental damage reported during pre-Olympic construction. Fifa’s lead investigator quit after the football organisation cleared Russia of allegations of corruption in the World Cup bidding process, accusing it of a “lack of leadership”.

Despite a state campaign against corruption, Putin’s Russia has failed to shake off accusations of being fundamentally dishonest. In 2014, Russia was ranked 136 out of 175 in Transparency International’s corruption perceptions index, down from 127 in 2013 and 133 in 2012. The Organised Crime and Corruption Reporting Project also named Putin its “person of the year” after its investigations found that he had engaged with the mafia to create what it called a “military-industrial-political-criminal” complex to launder money and promote his interests abroad, including in the transfer of weapons to rebels in eastern Ukraine.

Although little information is available on his personal wealth, many expect that Putin himself has benefited from state corruption. Allegations have swirled for years that an extravagant palace being built on the Black Sea coast – reportedly guarded by the presidential secret service and now owned by a Putin confidant – secretly belongs to him and was paid for with embezzled funds.

Putin inherited an army that was not fit for purpose. During his second term, he set out to reform the outdated conscript-based army, a process that only quickened after its unconvincing victory in the Georgian war. Russia now spends a higher percentage of its GDP on defence than the United States, and has allocated a record $81bn in 2015.

While the increased spending and reorganisation has created a force able to react relatively quickly when former Soviet republics get too uppity, new equipment – in particular a new stealth fighter and a next-generation tank – are still on the way. It has not helped that France recently withdrew its offer to sell Russia two Mistral warships.

Even as independent media found themselves on the run, Putin appointed Dmitry Kiselyov, a television presenter known for his anti-American conspiracy theories, head of the state news agency Rossiya Segodnya. In this post, Kiselyov has overseen an expansion of Sputnik News and Russia Today, which peddle the Kremlin’s talking points in foreign languages. While state-backed news outlets are nothing new, the Kremlin’s new propagandistic media have been criticised for their journalistic standards. In November, the UK media regulator Ofcom threatened RT with sanctions over news reports that failed to comply with impartiality rules.