| MOSCOW, March 26
MOSCOW, March 26 The annexation of Crimea will
only temporarily distract Russians from worrying about the
economy, a respected economist said, suggesting a rally in
President Vladimir Putin's ratings may not last.
The standoff with the United States and the European Union
over the Black Sea region has won Putin support at home but
Western sanctions and capital withdrawals by nervous investors
are expected to damage the economy.
A weaker rouble, leading to inflation, and slower growth may
eventually hurt Russian budgets, and voters could turn on the
ruling elite, Mikhail Dmitriev, of the Moscow-based Centre for
Strategic Research think tank said.
"If there is no economic growth it is likely that the
influence of Crimea and other foreign policy events on political
ratings won't be long-lasting," Dmitriev, who predicted mass
protests against Putin in 2011-2012 said in an interview.
"The population will start to look at politics from the
point of growing economic struggles."
Dmitriev, was beaten and had his laptop stolen by
unidentified people last week. It is unclear whether the attack
was related to his work and sometimes forthright views.
While many Russians are proud of the stance that Putin has
taken on the majority ethnic Russian region, some are wary of
the impact on the economy and recall the financial crisis of
1998 when Russia devalued the rouble and defaulted on its debt.
Inflation soared and shop shelves emptied as Russian stocked
up on essential food items and millions lost their life savings
as banks collapsed. Russians took to the streets in protest and
President Boris Yeltsin fired his prime minister.
However, Dmitriev said it would be a while before Putin's
popularity was affected.
"For now, the situation in Crimea is to the fore and is
shaping the population's political mood," he said. "But when it
comes to long-term preferences, economic conditions are
absolutely dominant and people's attitude towards the Russian
authorities in the end will depend on the economic situation."
On Wednesday, the World Bank warned that the Russian economy
could shrink by 1.8 percent in 2014 and the country could see
record capital outflows of $150 billion if the crisis over
Alexander Rubtsov at the Institute of Philosophy at the
Russian Academy of Sciences says events such as the annexation
of Crimea have "the champagne effect" - a rapid, but short-lived
high which - is often followed by a "hangover".
Putin's approval ratings have soared to a five-year high of
more than 75 percent after Russia hosted the winter Olympics and
since he claimed back Crimea, 60 years after the region was
handed to Ukraine by Soviet leader Nikita Khrushchev.
He dominates the political scene in Russia, and his grip on
power is strengthened by a loyal parliament and pliant media.
His term expires in 2018.
The wave of patriotism and euphoria in the state media have
drowned out news about a weakening economy, where growth fell to
1.3 percent last year from 3.4 percent in 2012.
Most analysts see the economy ministry's forecast for 2.5
percent in 2014 as wildly optimistic.
Shares on the local stock exchange, once seen by some in the
political elite as a centrepiece for Moscow's transformation
into a financial centre to rival New York and London, lost some
$70 billion this month as investors pulled out of Russia.
EU and U.S. visa bans and asset freezes on Russian officials
and businessmen over Crimea have worsened capital flight and
weakened the rouble, which is down 8 percent against the dollar
this year putting pressure on consumer price inflation.
"If problems with Russian exports arise it may create
difficulties over serving corporate debt, put additional
negative pressure on the rouble," said Dmitriev, a former first
deputy economy minister under Putin.
The external debt of Russian corporations stands at more
than $650 billion, according to the central bank, making firms
and the Western financial system closely interconnected but
still leaving a room for a spike in borrowing costs.
Last week, Fitch ratings agency revised Russia's outlook to
negative, warning that foreign investors may be reluctant to
lend to Russia with the economy slowing further and the private
sector requiring support.
Russian gold and foreign exchange reserves stood at $493.2
billion last week, down $16.4 billion since end-2013, mostly due
to the central bank's market interventions to curb the rouble's
"In theory, if further developments in Ukraine are
accompanied by military confrontation ... Russia may face a
serious worsening in external trade conditions and investments,
leading to an economic crisis which may be accompanied with a no
less serious sequel in terms of domestic political situation,"
(Writing by Katya Golubkova; editing by Anna Willard)