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Russian Markets: Facing Angry Middle Class Protesters, Putin Shows He Gets It...a Little

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If he ignores or stifles their cri de coeur, the supreme leader could face a real explosion next time commodities prices sink and economic distress compounds civic outrage.

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The Moscow public relations manager has her tickets booked to go snowboarding in the Alps over the winter holiday. But first she plans to attend the next protest rally against forged parliamentary results, scheduled for this Saturday, December 24. (That's not Christmas Eve for Russians, who celebrate by the Slavic calendar on January 7.)

Not every one of the 50,000 or so who joined Moscow's December 10 protest -- by far the biggest of the post-Soviet period -- will be spending New Year's in Kitzbuhel. But the PR executive is emblematic of a newly sprung movement that has surprised both itself and Russia's political masters in the Kremlin. All indications are that the people who are doing best in Prime Minister Vladimir Putin's Russia are the ones most disgruntled with its grounds rules -- or at least most vocal about it.

That paradox presents Putin with both opportunity and a dilemma. Opportunity stems from the fact that the Moscow marches are not escalating into Tahrir Square any time soon, barring some violent blunder by the police. The spirit is closer to the vague, though not trivial, complaints of Occupy Wall Street. Except the Moscow protestors are too busy getting ahead to occupy anything for more than a few hours on a weekend.

Another stroke of luck for Putin is that the protest movement -- not even a movement yet, really -- has no leader, thanks to the serial failure of liberal politicians over the last two decades. (See Russian Spring? Don't Hold Your Breath.) The restless middle class is ripe for co-opting, most realistically by Putin himself if he could attune his old-school KGB spirit to its psychic wavelength. President Dmitry Medvedev, until lately the self-styled champion of "modernization," is out of the running. His meek transformation back into a party hack has wrecked his credibility within and without the power elite.

Putin's dilemma is that the toolkit he understands for diffusing discontent, raising pensions and propping up failing factories won't work for the new crowd, whose spiritual grievances go to the heart of his vaunted "power vertical." As the protesting and jet-setting PR manager put it, "I don't want them to just tell me who the new president is without asking my opinion."

In the busy week that followed the December 10 rally, Putin showed some willingness to adapt to changed circumstances. First of all, he let the gathering go forward, parting with his past policy of sending riot police to bust up any political assembly. This time interior ministry troops stood pacifically by while marchers presented them with flowers.

Putin sanctioned billionaire Mikhail Prokhorov (known on our shores as the somewhat eccentric owner of the New Jersey Nets) as a presidential competitor who could potentially magnetize some of the urban bourgeoisie. Putin also pulled the most respected figure in his inner circle, former finance minister Alexei Kudrin, off the bottom of the political deck, saying that "such people will be needed in current and future governments." Speculation began to swirl that Kudrin might come back to oust Medvedev as prime minister after Putin's presumed return as president next March, or alternatively try to organize a viable center-right opposition.

Yet Putin's performance on a live TV call-in show last week, an annual event that fortuitously followed the election uproar, showed that his attitude adjustment still has some way to go. He did at one point praise the "fresh faces" among the protestors, commenting, "If this is the result of Putinism, I am pleased." But what seems to have stuck was his bizarre confusion of the white ribbons marchers wore with condoms (Think George Bush Sr. not recognizing barcode scanners in the supermarket, only much more insulting.) Nor could Putin refrain from his old wheeze of insisting that at least some rally attendees were in the pay of foreign powers bent on destabilizing Russia.

So what happens now? The ball is in the protestors' court. They need to muster another big crowd this weekend to maintain credibility. Then, under the best scenario, Putin will call off the ballot stuffers for the presidential election on March 4. He is thought to crave the absolute majority necessary to win in the first round. But he now has more to gain with an honest victory in a run-off against Communist leader Gennady Zyuganov, the most likely runner-up.

Such a contest would remind the progressive electorate that Putin is not the worst thing that could happen to them. Next Putin could appoint Kudrin, or perhaps liberal deputy prime minister Igor Shuvalov, as premier with a mandate to prune bureaucracy, sell off state companies, and continue Medvedev's useful overhaul of the police and prosecutorial high commands.

Plenty can happen to upset this happy progression, of course, and probably will to some extent. But Putin and his retainers at least show signs of grasping the key lessons of December 10. First, this is not Tsarist Russia, where the Westernized intelligentsia was an isolated sliver of the population. Three out of four Russians live in cities these days, and the government itself classifies one-third of the country as middle class, something authorities are happy to boast about in other contexts. Second, most of those 50,000 protestors are exactly the people Putin needs to fulfill Russia's centuries-old dream of holding its head proudly among the world's most advanced nations.

If he ignores or stifles their cri de coeur, the supreme leader could face a real explosion next time commodities prices sink and economic distress compounds civic outrage. At best, he will accelerate the current flight of capital, talent and enthusiasm from Russia, sawing the floor out slowly from underneath the country's best hopes. Your choice, Mr. Putin.
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