Deutsche Bank: Putin May Not Have Money Before 2024 Elections

Russia is suffering losses because of oil-and-gas sanctions.

Falling oil and gas revenues bode ill for the Kremlin's traditional handout of money to citizens, which the authorities resort to before major elections to buy the loyalty of the poor electorate.

If spending on the war in Ukraine remains the same, and sanctions against the Russian oil and gas industry remain in place, the ability to hand out money before the presidential election of 2024 "will suffer," analysts at Deutsche Bank warn in a review of Russia, The Moscow Times writes.

According to their estimates, Russia's economy is losing $500 million a day because of the European embargo, discounts on oil and reduced gas supplies to Europe. Oil and gas budget revenues in January and February almost halved, and export duty collections dropped 4-5 times.

The budget, prepared with a deficit of 3 trillion rubles, will lose 1.5-2 trillion rubles in taxes on oil and gas, and another 500 billion rubles will receive less because of too optimistic forecast of the economy, Deutsche say. Ministry of Economic Development predicts a decrease in GDP this year by only 0.8% after a fall of 2.1% - last year.

Although this is unlikely to affect the Kremlin's ability to pay for the war in the coming months, "the economic situation deterioration serves the potential for social discontent ahead of the presidential election scheduled for April 2024," DB writes.

The Kremlin may not be able to solve the crisis with money. DB analysts say that it would be premature to predict a threat to regime stability at this time. Studies show that regime-change requires the participation of elites, above all the power elite.

Handing out money to Russians on the eve of major elections is "typical" for Russia, the bank's experts remind. Thus, the government spent 700 billion rubles in 2021 on the eve of the elections to the Duma. It was lump sum payment to pensioners, security forces and families with children. In 2020, Vladimir Putin announced lump sum payments for children from 3 to 16 years old against the backdrop of the vote to change the Constitution.

Putin, who has zeroed out his terms following the example of African dictators and who has ruled Russia the longest since Josef Stalin, said in his address to the Federal Assembly that the 2024 elections "will be held in strict accordance with the law, respecting all democratic constitutional procedures." Preparations for the election, which mark Putin's fifth term and allow him to remain in power until 2030, have already begun, sources close to the Kremlin told Bloomberg.