Russian Prime Minister Dmitry Medvedev yesterday faced angry retirees in Crimea, demanding the government index their pensions to inflation. On the news clip embedded in this article, a woman complains to the Prime Minister to about her tough life in the annexed territory:
It is impossible to live in Crimea for this money, prices are insane, our pensions are being incorrectly indexed, we are being insulted [by the authorities], they cannot even index it by 4 percent. What is 8,000 rubles a month ($120)?! You are using us as doormats! We worked for 45 years of our lives!
Medvedev, who is the head of the United Russia party, did not skip a beat:
We don’t index pensions anywhere in Russia. We do not have the money. Once we find the money, we will index your pensions. Cheer up, and all the best to you. I wish you good health.
In fact, by law, this year Russian pension outlays should grow at 4 percent. This is still nevertheless far below last year’s official inflation rate, which clocked in at 11.9 percent. Pensioners who still hold a job, however, are not eligible for indexed increases under the same law.
Earlier in April, Maxim Topilin, the Russian Labor Minister, claimed that “formally, there are no poor pensioners” living in Russia, since extra payouts from regional budgets make the pension amounts get above the official poverty line. The poverty line for the greater Moscow region in 2016 is defined as $186 per month for working people, $127 per month for retirees, and $162 per month for children. In Crimea it is about $15 less for each category. Around Moscow, rents vary depending on location, but even at the low end will eat up most of that budget. A cup of coffee in Starbucks in Moscow costs around $3, a cheesburger in McDonalds is $1, a gallon of gasoline is the same price as in the U.S., around $2.50, pork costs around is $4 per pound.
The irony for Crimean retirees is that the Russian Government decided to freeze contributions to state pension plans for all Russian citizens in 2014, choosing to raid the plans’ accumulated savings accounts to pay current beneficiaries. When Finance Minister Anton Siluanov was asked when this money would be returned to the pensions, he said, “No one has ever intended to give this money back, because this money was spent on Crimea—on anti-crisis measures.” The Russian Government has subsequently frozen contributions to the pension funds twice more since then—in both 2015 and 2016. Earlier in March this year, the Finance Ministry threatened to continue these policies into 2017, saving $65 billion for the budget.
When high oil prices were lining the state’s coffers, an informal social contract arose between Vladimir Putin and the Russian people: in exchange for guaranteed upkeep of a basic social safety net and a slight increase of living standards, the people would forfeit their political rights and not complain. Putin’s perpetual hold on the Kremlin has in large part been linked to the stability of this arrangement.
A State Duma member said that the Russian Parliament would not consider this pension indexation issue before the September elections. As a result, a suggested campaign poster for the United Russia party has since gone viral across the Russian internet, playing off Medvedev’s clumsy pronouncement: “There is no money. But cheer up!”