The Russia watching world is ablaze trying to find out where Putin is and why he’s disappeared. The New York Post quotes Swiss media saying that his mistress gave birth to a baby girl last week, which the Kremlin is vehemently denying. Others are wondering if Putin is in poor health and taking a page from North Korean dictator King Jong Un and discreetly receiving medical treatment.
Most Westerners don’t care about Putin’s health, however governments and businesses must pay attention because it could cause additional economic, social, or international distress. Autocratic countries, like Russia and North Korea, are invested heavily in stability and will do almost anything to maintain control. They know that the slightest weakness could embolden the opposition, create new rivals or cause the house of cards to collapse. Here are three potential problems for businesses if there is a reduction in Putin’s control.
- Internal Unrest: A power vacuum in Russia could cause the economy to tank further and cause social unrest. U.S. or European businesses operating in Russia could find themselves targeted by nationalists or in the middle of increasingly violent protests. This also has the potential to make Russian based suppliers less reliable and could cause unfilled or late orders, causing millions of dollars in lost revenue.
- Near Abroad Tension: Near Abroad neighbors are always looking for ways to distance themselves from the Russian bear and could capitalize on a Putin malady. While this may improve the business climate for U.S. and European companies in the near-term, by increasing trade with Belarus, Tajikistan, or Armenia, the risk of a military intervention by Russia to control its sphere of influence will increase. Russia has expended a vast amount of resources to create the conditions for a renewed Russian empire and will not easily let this go. In 2011, Russian used the 201st Motorized Rifle Brigade, posted in Dushanbe, Tajikistan, to quell unrest and helping the Tajik central government stay in power.
- Conflict with the West: Russian polling and political statements indicate nationalism is on the rise in Russia. If Putin suddenly leaves the political stage, his successor may not be as adept at manipulating and controlling this mood and instead be swept up in the fervor. That could cause an increase in targeting of Western business interests while also causing additional foreign relations confrontations. This conflict causes fear in the markets, raises prices on commodities, and the diverting of budget funds to defense and away from social and business support.
While I don’t think there is something seriously wrong with Putin, and I lean towards the new baby theory, highly centralized regimes always run the risk of catastrophic failure if a power vacuum ensues. While risk is always present, monitoring and understanding the political ramifications can help businesses maintain financial security.
Here are links to some of the recent articles on Putin’s disappearance:
http://nypost.com/2015/03/15/swiss-media-reveals-more-about-putins-girlfriend-baby/
http://www.huffingtonpost.com/2015/03/15/vladimir-putin-missing_n_6873446.html
http://www.chicagotribune.com/news/sns-wp-blm-news-bc-putin-comment12-20150312-story.html
North Star Research, LLC 