The outgoing year will be remembered for Russia’s annexation of Crimea, President Vladimir Putin’s unprecedented high rating in public opinion polls and the beginning of a severe economic recession

A crow sits on a sculpture of double-headed eagle, Russia's State Emblem in St.Petersburg, Russia, Thursday, Dec. 4, 2014. Photo: AP

The year 2014 marked a turning point for Russia. The country entered the year expecting great future triumphs – the Winter Olympics lay ahead, forecasts called for positive economic growth, and international summits were in the works. What actually happened was something no experts could have predicted. As the situation in Ukraine unraveled and relations with the West entered a new era of confrontation, the domestic agenda became almost entirely dictated by external factors.

The Sochi Olympics as a symbol of triumph

Of course, the year started off well with the Winter Olympics in Sochi. The country’s leadership had set ambitious objectives, not only to hold the games at the highest professional level, but also to top the medal table. And it all came off as planned – the Russian team ended the games as number one with 33 medals, significantly ahead of Norway (26) and Canada (25).

“The holding of the Olympics was, of course, a great achievement,” says Vyacheslav Smirnov, Director at the Institute of Political Sociology. “During the games, people emotionally cheered on their national team.”

Moreover, though not everyone supported the Games, with some considering them a waste of money, the Olympics were supported and encouraged by the elites, civil servants, and journalists; that is, those who had been loyal government supporters all along. However, says Smirnov, a sporting event can bring only a short-term positive effect, just like a successful theatrical production. The importance of the Sochi Olympics was overshadowed by subsequent events in Crimea – in comparison with the annexation of the peninsula, the Olympics became an ordinary event, like some minor inter-district championship.

The annexation of Crimea: the first link in the chain

March was the turning point. After mass demonstrations and violent unrest in Kiev prompted Ukrainian President Viktor Yanukovych to flee to Russia and ushered in a new temporary government with a strongly nationalist character, Crimea was isolated and seized by Russian soldiers wearing unmarked uniforms. The peninsula’s new administration then announced its desire to seek autonomy from Kiev.

In a referendum widely seen as illegal outside Russia, the vast majority of residents of Crimea and Sevastopol voted in favor of joining Russia, an event which took place at the end of March. The “reunion” (as it is called by Russia) or annexation (as it is referred to by the U.S., most European countries and various other nations) was the main event of 2014 – and the first link in the chain of events that followed.

Russia was seized with patriotic fervor, with Vladimir Putin’s public opinion poll ratings hitting record highs all year long. This process was only accelerated by the subsequent sanctions imposed against Russia and the country’s retaliatory measures – banning the import of products from the United States, European Union and other countries that initiated the sanctions.

At the beginning of the year, Putin’s approval rating was just below 60 percent. In early March, this figure rose to 68 percent, and by the end of the month, after the annexation of Crimea, it soared to almost 84 percent. A historical record was set in October – 89.7 percent. By the end of December, almost 87 percent of Russians approved of the performance of their president (based on data from the Russian Public Opinion Research Center).

President Putin’s influence was highly rated abroad as well. According to the French news agency Agence France-Presse (AFP), the Russian leader topped the list of the most important and influential people in 2014. The American magazine Forbes also named Putin as Most Powerful Leader in the World.

“We are seeing a phenomenon known as the ‘Russian Spring,’ which is changing the attitudes of elites and society,” explains Dmitry Orlov, general director of the Agency for Political and Economic Communications. “After Crimea, there was a closing of ranks around Vladimir Putin and a fairly long-term growth and stabilization of his public opinion poll ratings.” Orlov predicts that in view of the current economic recession, the coming year will see Putin’s ratings fall to around 60 percent, but there will be no drop in the level of public confidence in the government.

The most important internal decision was also dictated from the outside – the policy of import substitution, which became a project to develop independence from imports. Russian Deputy Prime Minister Dmitry Rogozin, responsible for the defense sector, where the need to replace imports is being felt most acutely, has said the country will not abandon this path, even if the sanctions are reviewed and canceled. While thus far no exact figures have been announced, authorities at all levels – from regional to the highest federal organs – are reporting that this process is being actively implemented.

A package of laws and decisions aimed at ensuring the information security of the country was also implemented. At the presidential level, meetings were held on how to protect the Russian segment of the internet from external influences. Starting in September 2015, data on Russian citizens will be stored only on servers located in Russia. Meanwhile, the participation of foreigners in Russian mass media has been limited (foreign companies may own no more than a 25 percent share in Russian media firms in 2016).

Rotation of governors

In 2014, there was a major rotation of governors. Following regional elections in September, 30 of the country’s 86 regional leaders were replaced. Most of the heads of the Russian constituent entities, who were appointed under the old scheme through a parliamentary vote based on the recommendations of the president, resigned early to obtain a “vote of confidence” from the people. Candidates from the United Russia Party emerged victorious in a campaign that the Kremlin described as unprecedented in terms of its transparency and competitiveness.

According to Orlov, the new regional governor corps is more effective than the previous one: The governors now enjoy high credibility, and so the early elections project is well justified. “The majority of governors are effective managers, which will have a beneficial influence on the development of their territories,” says Orlov.

Devaluation of the ruble and the spectre of recession

Russia will be meeting the New Year on the threshold of a new economic recession, the scale of which few dare to predict. While at the beginning of December the word “devaluation” caused a storm of negativity among ordinary people and authorities alike, by the end of the month, the situation had already become considered as normal.

According to Sergej Sumlenny, a sanctions expert at the Russia Consulting Company, the recession is not only due to the sanctions – the preconditions for this existed prior to their imposition. In the fall of 2013, experts and politicians were already making comments on the possibility of a recession hitting Russia.

“The sanctions and falling oil prices thus only exacerbated the coming recession,” says Sumlenny, who argues that though the fundamental reasons for the downturn are many, “the most important is that the modernization of the economy had not been carried out.” He adds that Russia has not modernized its vocational education system, and thus the economy is suffering from very low productivity.

Sumlenny points out that the production of the same goods by a German company in Germany and in Russia – based on unit price – is more expensive in Russia, despite the apparent lower cost of labor in Russia. “Devaluation is a very important topic for all European companies operating in Russia. Many of them are importers of goods that are produced in the EU,” he says.

Orlov predicts that the recession and falling living standards will be most felt by Russians in the third quarter of 2015. The response of the authorities to the dramatic collapse of the ruble (the reasons for which are being given as sanctions and falling oil prices), though late in coming, has been convincing, he says.

Furthermore, he argues, the boosting of the interest rate to 17 percent will block currency speculators, and social benefits for pensioners and citizens in need will be indexed to the rate of inflation. Thanks to this devaluation, Orlov explains, the Russian budget has received over 1 trillion rubles ($20 billion) more than forecasted – thus putting it in a surplus position.

The state therefore has enough currency resources and gold reserves to compensate for the recession. Curiously enough, for the time being most of the population is not placing the blame for this recession on the government. Demands for the resignation of the government – a classic sign of times of recession – have also been remarkably low-key.

The voice of the opposition has been muted as well, which of course is quite logical in the context of Russians’ unprecedented support for the current government. Everything may change in the coming year: Someone will have to serve as a scapegoat for public discontent.

Summing up the year in his major press conference on Dec. 18, President Vladimir Putin stated that the country would need two years to recover from this recession.

“We will make it through this period of difficulties, and of course, come out of this situation, and in a stronger position – within the country, and in the world economy, and in the international arena,” promised the Russian leader.