Opinion - St Petersburg International Economic Forum

Putin might look invincible but the big challenge is keeping Russians happy

Russian President and Presidential candidate Vladimir Putin delivers a speech at his election headquarters in Moscow, Russia March 18, 2018.
Sergei Chirkov | POOL | Reuters

Russian President Vladimir Putin has become something of a "persona non grata" in the West, but at home he's more popular than ever.

Putin's popularity is something of an enigma given that much of Russia's economic problems are largely to blame on the Kremlin's arguably reckless decisions in recent years. Still, what voters have cared about is that, thanks to their strongman leader, Russia has re-established itself on the world stage as a political and military force to be reckoned with.

The turning point for Putin's leadership was in early 2014, when Russia audaciously reclaimed Crimea from Ukraine, stating that it was carrying out the will of the peninsula's people after a referendum. The vote was deemed illegal and the annexation widely condemned by the West. But at home, Putin's approval rating soared from 69 percent in February that year to 80 percent in March, according to the independent Levada Center. His rating has stayed in the low-to-mid-eighties ever since — an achievement that few leaders can boast.

When Moscow was subject to international condemnation and economic sanctions from the U.S., European Union and others, Russians loved Putin even more because he had put Russia back on the map, and Crimea back in Russia.

Needless to say, international markets saw it differently with a rapid and dramatic slump in the Russian ruble and capital flight ensuing. But even that did little to dampen Russians' enthusiasm for Putin.

Trump: I congratulated Putin on his victory
Trump: I congratulated Putin on his victory

Yes, Russia's military intervention in Syria proved unpopular and petitions were filed when the government made a show of bulldozing tons of "contraband" European cheese, fruit and meat (banned in retaliation for EU sanctions) when it could have been given to the poor. Yet the majority of Russians remained loyal to Putin, buying into an "us versus them" rhetoric and stoically trudged through the two-year recession that followed as oil prices slumped, adding insult to Russia's economic injury.

In March 2018, Putin unsurprisingly won a re-election for a fourth term as president. But strangely enough given the lack of competition, he felt the need to make many grand pledges to the Russian people ahead of the vote, setting himself some big challenges that he now has to fulfill.

He vowed to halve Russia's poverty rate — 20 million of the country's 140 million population lived in poverty, he said — and create "modern, high-paying jobs" and long-term income growth. On top of that, he promised infrastructure improvements to schools and hospitals and affordable housing, vowed to improve life expectancy and enrich the regions, as well as fixing potholes. Some things are universal, it would seem.

Analysts are now asking whether Putin has a magic money tree growing somewhere in the Taynitsky Garden within the Kremlin. Liza Ermolenko, an economist at Barclays Capital, told CNBC that Putin's promises to increase spending on health care and infrastructure alone were equivalent to $162 billion or close to 2 percent of gross domestic product (GDP) per year over the next six years, and that "it remains unclear how this can be financed."

It could mean that Putin might have to make some unpopular choices, like increasing the retirement age and increasing VAT, she said, as well as implementing other structural reforms that could prove unpopular with voters. The potholes might have to wait.