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Analysis: War, economy could weaken Putin’s place as leader

With the Russian military in retreat from around Kyiv and facing condemnation for brutal tactics, harsh political repression at home and the economy buffeted by Western sanctions, adversaries and allies alike are raising the same question about President Vladimir Putin: Can he hold onto power?

The answer: For now, but maybe not forever.

After 22 years in power, Putin has built a powerful phalanx of loyalists who surround him, both in the Russian military and the secret services. He also has significant support among the Russian people, who are steeped in pro-Putin propaganda through the Russian leader’s almost total control of television and other mass communication. Even today, many Russians view his leadership as having delivered greater prestige, prosperity and stability for the country over two decades.

This edifice of protection, the vast wealth Putin controls and the lack of any significant history of palace coups in Russia make either of the obvious means of removing Putin — a military mutiny or a mass popular “color” revolution — almost inconceivable right now.

Yet all strongman states are inherently vulnerable to the unforeseen — especially when they become deaf to the society around them. Just ask Hosni Mubarak.

“For God’s sake, this man cannot remain in power,” declared President Joe Biden of Putin last month in Poland. It was an unscripted but heartfelt comment as the bloodletting in Ukraine has mounted.

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The 69-year-old Putin is up for re-election in 2024, and changes in the Russian constitution conceivably would allow him to remain president until 2036. But the imprisonment of Russia’s best-known opposition figure, Alexei Navalny, is just one sign that Putin is not confident enough of his popularity to submit to an actual democratic test.

While there can be no credible polling in a country now effectively under martial law, the number of Russians informed and courageous enough to protest against the war in Ukraine so far has numbered in the thousands, not the hundreds of thousands.

Tens of thousands of affluent citizens, intellectuals and political critics have abandoned Russia rather than remain under the tight controls Putin has imposed, finding escape in Istanbul, Tbilisi or cities in the West. This brain drain no doubt will hurt Russia in the future. But at the moment, their departure removes a possible nexus of opposition from the society.

Of course, history is unpredictable. Few anticipated the rapid dissolution of the Soviet Union at the end of the 1980s and the beginning of the 1990s. If Russian casualties in Ukraine are as high as has been reported — 15,000 or more dead and three times that wounded in the space of six weeks — those results eventually will begin filtering through the society in spite of official censorship.

Arguably, the USSR’s fate was sealed in 1986 after its then-leader, Mikhail Gorbachev, loosened the Communist Party’s iron grip on information and set sights on the restructuring of the Soviet Union’s stagnating economy in order to better compete with the West. That was the year of the Chernobyl nuclear disaster, when the Politburo — after initially trying to cover up the disaster — was forced to disclose it to the Soviet public. The Soviet war in Afghanistan, meanwhile, had turned into a quagmire, leading to withdrawal in 1988-89.

In 1988, when Polish workers loyal to the independent Solidarity union movement launched a series of strikes in coal mines and shipyards, Gorbachev signaled that he would not intervene in one of the Soviet Union’s key satellite states. Then-Polish leader Gen. Wojciech Jaruzelski, whose 1981 imposition of martial law had led that country nowhere, opted instead to open up talks with the strikers’ leader, Lech Walesa. The result: partly democratic elections.

That in turn set in motion a series of dominoes within the Eastern European countries, with Hungary, Czechoslovakia, East Germany, Bulgaria, Romania and Albania all seeking to escape Soviet dominance and Communist rule. Before long, the fever had spread to the Baltic countries that were part of the Soviet Union itself, and nationalist emotions flared across the union.

Hardliners in Moscow who had seen enough attempted a coup against Gorbachev, but they were too late. That quickly was overturned by the popular outpouring of support led by Boris Yeltsin. On Dec. 31, 1991, both Gorbachev and the Soviet Union had been swept aside when the Soviet Union ended.

Putin, at the time an intelligence agent in East Germany, lived through the events and has drawn appropriate conclusions to maintain control now. Even before the war in Ukraine, he worked to shape public opinion by portraying the Ukrainians as Nazis who threatened Russia. Then, he clamped down on independent media organizations and the few remaining civil society groups.

More recently, he has imposed draconian anti-media laws that ban telling the Russia public anything about the war that conflicts with the Kremlin’s chosen narrative about the “special military operation.” Dissenters and doubters have been branded as scum and gnats, worthy only to be spat out.

Aside from Gorbachev, the sole Soviet leader to be removed was Nikita Khrushchev, whose 11 years in power ended in 1964.

He was forced out by his closest associates in the Communist Party. Disturbed by a series of disastrous economic decisions, a failed initiative to install nuclear weapons in Cuba and the signs that Khrushchev intended to build a cult of personality, fellow members of the Communist Presidium denounced him in a closed meeting while he was away.

When he returned, realizing that he had lost all support, Khrushchev agreed to step aside on fictional grounds of ill health. He soon was rendered a nonperson within the Soviet Union, as his successor Leonid Brezhnev assumed the leadership. But again, Khrushchev’s bloodless removal was unique.

Could something like that happen to Putin as economic conditions worsen, or if the Ukrainian invasion is a disaster for Russia?

Unlike the Soviet Union, there is little in the way of an institutional party structure that could intervene to topple him. Putin has cronies, yes men, and a coterie of “siloviki” — people of power awash in hard-nosed nationalist thinking of the FSB and military — none of whom so far dare to show the least independence from Putin’s Ukraine war “project.”

Yet losses on the battlefield have already led to an apparent paring-down of military goals, angering and disappointing some anti-Ukraine pundits on Russian TV.

While Putin’s coterie has every incentive to stay close for the time being or risk losing privileges and wealth, if the war in Ukraine drags on for months or years, and Putin’s adventure becomes the mammoth disaster that it appears to be so far, it is almost certain that cracks will emerge.

Absent Russia’s total victory over Ukraine, it already is difficult to imagine the world going back to business as usual with Vladimir Putin. He could find himself boxed into a grinding, open-ended conflict on his border and facing a need to impose more and more repression at home to stifle dissent in a population paying the economic consequences of the invasion.

Aging leaders rarely last forever or have the luxury to leave office on their own terms. Whether it is by elections, revolt or an internal mutiny, the long days of Putin’s rule may well be numbered.

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Ukraine army denies claims Lysychansk is ‘encircled’

The Ukrainian army on Saturday rejected claims that Moscow-backed separatists and Russian forces had surrounded the key eastern city of Lysychansk, but said heavy fighting was ongoing on its edges.
“Fighting rages around Lysychansk. (But) luckily the city has not been encircled and is under control of the Ukrainian army,” Ruslan Muzytchuk, a spokesman for the Ukrainian National Guard, said on Ukrainian television, after a separatist spokesman made the allegations earlier in the day.
Capturing the city would allow the Russians to push deeper into the wider eastern region of the Donbas, which has become the focus of their offensive since failing to capture Kyiv after launching their military operation in Ukraine in late February.
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Across the Donets river from Lysychansk, the Russians seized the neighboring city Sievierodonetsk last week.
Andrei Marotchko, a spokesman for the separatist forces, earlier told the TASS news agency: “Today the Luhansk popular militia and Russian forces occupied the last strategic heights, which allows us to confirm that Lysychansk is completely encircled.”
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China adds $45 billion in stimulus to pay for infrastructure projects

China announced another stimulus measure to finance infrastructure projects, part of its push to drive investment and increase employment in the second half of this year as the economy starts to recover from the effects of Covid lockdowns.

The government will raise 300 billion yuan ($44.8 billion) to finance infrastructure projects by selling financial bonds and other methods, the State Council chaired by Premier Li Keqiang decided Wednesday, according to a report by the official Xinhua News Agency.

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Those bonds are usually sold by policy banks. The money will be used to replenish the capital of major projects such as new types of infrastructure, the statement on Thursday said.

These types of financial tools can help expand effective investment, drive employment and facilitate consumption and allow China to stick to its stance of “not flooding the economy with stimulus or over-printing money,” the meeting concluded, adding that this will help banks achieve a better match between their loans and deposits and improve the transmission of monetary policy.

The People’s Bank of China will take the lead to support China Development Bank and Agricultural Development Bank of China to raise the funds via financial bonds, according to a late Friday report by Financial News, a newspaper published by the central bank.

The top economic planner will come up with a list of projects for the investment, in collaboration with other agencies and state-owned enterprises, it said.

Infrastructure projects are a key factor in determining how fast the economy can grow in the remaining six months of this year as other sources of growth such as housing and private consumption are still slowing.

President Xi Jinping pledged last month to strive to meet economic targets for the year, although Beijing’s Covid Zero strategy has caused analysts to cut their forecasts for annual growth to levels far below the official goal of around 5.5 percent.

The announcement lifted the share price of heavy equipment makers in the onshore market. SANY Heavy Industry Co. climbed 4.1 percent on Friday, Zoomlion Heavy Industry Science and Technology Co. gained 4.9 percent and Jiangsu Hengli Hydraulic Co. rose 1.9 percent, while the benchmark CSI 300 Index dipped 0.4 percent.

New Stimulus

The new stimulus can in theory leverage as much as 1.2 trillion yuan in credit from the banking sector and capital markets, based on the government requirement that the money should be at least 20 percent of overall investment, according to Nomura Holdings Inc. economists including Lu Ting.

But its impact in reality could be much smaller, and won’t be enough to plug an estimated 6 trillion yuan funding gap that the government has to fill if it wants to carry out its proactive fiscal policy, they wrote in a note Friday.

Local authorities are under huge financial stress this year due to the cost of Covid controls and tax cuts, as well as a slump in land sales that reduced a key source of revenue.

The new money is in addition to the 800 billion yuan the three policy banks were told in June to lend for infrastructure projects. That loan quota has already been allocated to the policy banks, local newspaper the 21st Century Business Herald reported Friday, citing sources it didn’t identify.

China Development Bank was allowed to boost lending by 400 billion yuan, Agricultural Development Bank of China’s quota for new credit was 300 billion yuan and another 100 billion yuan was assigned to the Export-Import Bank of China, the newspaper reported.

The development banks’ main source of funds is issuing bonds or loans from China’s central bank, although it hasn’t been announced where the money to finance these new loans will come from.

The size of the additional bonds is only a fraction of what the policy banks normally issue in a year. The banks sold a gross amount of 5.5 trillion yuan bonds in the interbank market last year, with a monthly average of 460 billion yuan, according to Bloomberg calculation based on Chinabond and Shanghai Clearing House data. Between January and May this year, they issued 2.3 trillion yuan in bonds.

The State Council, which is China’s cabinet, also vowed to implement a batch of investment projects that are aimed at increasing workers’ income and boosting their consumption.

These projects will have to spend more than 30 percent of central government funding on paying workers, up from 15 percent previously.

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UN condemns protesters’ storming of Libya’s parliament

A senior UN official for Libya on Saturday condemned the storming of the parliament’s headquarters by angry demonstrators as part of protests in several cities against the political class and deteriorating economic conditions.
Hundreds of protesters marched in the streets of the capital Tripoli and other Libyan cities on Friday, with many attacking and setting fire to government buildings, including the House of Representatives in the eastern city of Tobruk.
“The people’s right to peacefully protest should be respected and protected but riots and acts of vandalism such as the storming of the House of Representatives headquarters late yesterday in Tobruk are totally unacceptable,” said Stephanie Williams, the UN special adviser on Libya, on Twitter.
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Friday’s protests came a day after the leaders of the parliament and another legislative chamber based in Tripoli failed to reach an agreement on elections during UN-mediated talks in Geneva. The dispute now centers on the eligibility requirements for candidates, according to the UN.
Libya failed to hold elections in December following challenges including legal disputes, controversial presidential hopefuls and the presence of rogue militias and foreign fighters in the country.
The failure to hold the vote was a major below to international efforts to bring peace to the Mediterranean nation. It has opened a new chapter in its long-running political impasse, with two rival governments now claiming power after tentative steps toward unity in the past year.
The protesters, frustrated from years of chaos and division, have called for the removal of the current political class and elections to be held. They also rallied against dire economic conditions in the oil-rich nation, where prices have risen for fuel and bread and power outages are a regular occurrence.
There were fears that militias across the country could quash the protests as they did in 2020 demonstrations when they opened fire on people protesting dire economic conditions.
Sabadell Jose, the European Union envoy in Libya, called on protesters to “avoid any type of violence.” He said Friday’s demonstrations demonstrated that people want “change through elections and their voices should be heard.”
Libya has been wrecked by conflict since a NATO-backed uprising toppled and killed President Muammar Gaddafi in 2011. The country was then for years split between rival administrations in the east and west, each supported by different militias and foreign governments.
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