Over the last two years, there has been no shortage of predictions that the regime of Russian President Vladimir Putin would soon collapse under the crushing weight of falling oil prices and Western sanctions. After all, Russia’s economy was weak even before the start of the pro-democracy demonstrations in Ukraine in 2013. The annexation of Crimea in early 2014 and the conflict with the West that followed might have boosted Putin’s popularity at home, but as the argument goes, it dug the country into an even deeper financial hole. Without sound structural reforms to promote investment and growth, the roof would simply cave in under widespread protests, and soon.
But this reading is fundamentally flawed. The real threat to Putin’s hold on power does not arise from societal discontent, whether it’s from Moscow’s and St. Petersburg’s so-called creative class or the lower class, which has been further impoverished by the economic downturn. Instead, the current Russian government survives because it has successfully placated the elites who have become fabulously rich and powerful thanks to Putin’s crony capitalism. This group of insiders either knew Putin during his early political career in St. Petersburg or worked in the “force structures” (known as the siloviki) within the army, police, or Federal Security Service, the successor to the KGB. Over the last decade, they have amassed incredible fortunes, benefiting from the nationalization of oil and gas companies such as Yukos in 2004 as well as insider deals, such as providing banking and other services to the government.
This transfer of wealth into the hands of such a small group of elites has created a system of mutual dependence with Putin: he orchestrated their rise but cannot rule the country or sustain economic growth without their backing. The drying up of oil revenue and restricted access to the West threatened to upend this relationship and shake these elites’ support for the current government. In 2015, the crisis turned nearly two dozen billionaires into