May 1 marks the end of the first 100 days since Prime Minister Mikhail Mishustin took over at the helm of the Russian government, and if a week is a long time in politics then three months is a geological age. His job has been totally transformed by the double whammy of crises he is now called upon to cope with – the worst since 1998.

The change of government came at a bad time, as Mishustin was still in the middle of setting up his team and focused on a technical task: implementing the 12 national projects, not dealing with an economic meltdown.

As bne IntelliNews reported in “Who’s who in the new Russian government” in January, ministers who performed badly when it came to implementing their policy goals were sacked and a new crop of bureaucrats were installed to take over. Mishustin drew heavily on his former colleagues from the Russian Tax Service, which he ran to great effect for a decade.

These people do not necessarily make the best HR choices when it comes to crisis management. Their skillset has been to fine-tune the machinery of government to make it work more efficiently. The policies now needed are not about squeezing an extra 5% of revenues from VAT payments, but shock actions to put a floor under the collapse of the economy.

The new administration has not been marked by any significant failures, but it has not scored any noticeable successes either. Indeed, as Russia approaches the peak of infection rates – the number of people diagnosed with coronavirus (COVID-19) topped 100,000 with a record one-day increase of 7,933 on May 2 and total deaths of 1,169 – Mishustin himself has caught the virus and had to withdraw to self-isolation just as the long May Day holiday began. Reportedly he was infected by a doctor treating members of the Kremlin elite.

The government has had to shift ground from the slow build of reconstruction to emergency mode. But it has been very cautious indeed.

First, Russian President Vladimir Putin has attempted to distance himself from the emergency and only reluctantly postponed the referendum on changes to the constitution that could extend his time in office by another two terms.

Putin is afraid that the nationwide vote, now slated to happen sometime in the summer, could be turned into a referendum on his success or failure in dealing with the public health crisis. And that could go badly wrong. Consequently, Putin has pushed off responsibility for dealing with the crisis to regional governors, which have put in a mixed showing so far.

But even this political damage control move has already cost Putin politically. More Russians approve of local officials’ coronavirus response efforts than they do of Putin and the federal government's response to the pandemic, according to a newly published survey from independent pollster the Levada Center.

While 50% of the pollster’s respondents said that their governors or mayors were doing their best to deal with the outbreak, 46% said the same of Putin and the government.

Russians' disapproval was nearly evenly split, with 48% disapproving of Putin and the government’s response and 45% expressing dissatisfaction toward the governors and mayors, according to Levada’s results released April 30.

Among Putin's critics, 18% called his measures excessive and 30% said they were insufficient. Among critics of regional leaders, 15% said they had taken excessive steps and 30% said they were not enough.

The decision to pass the buck to the regional governors is a continuation of the growing reliance on governors since the presidential election in 2018, when Putin was returned to office by a landslide. As the federal level political machine, the ruling United Russia party is increasingly ineffectual and at historic levels of unpopularity. Putin turned to the governors to deliver on the vote, but that involved devolving more power to the periphery. The governors have used this increase in responsibility to effect, and have taken some of the credit for the changes that got Putin re-elected and, as bne IntelliNews reported, the regional governors are now almost as popular with the people as Putin himself.

That is a problem for Mishustin, as the government and the Duma remain amongst the most unpopular institutions in Russia. Trust in Putin was already falling in February before the double-headed crisis hit, although his personal popularity remains high.

Mishustin himself is still enjoying the benefit of the doubt amongst the population, as he came to the top job as a relative unknown.

Pollsters posted popularity rankings for the prime minister for the first time in February and found the former head of the tax service made his debut with a 3% trust rating.

That compares with the rating of his predecessor and long-time Putin proxy Dmitry Medvedev, who was widely distrusted by the population with only a 38.9% approval rating according to the state owned pollster, the Russian Public Opinion Research Centre (VTsIOM), just before Mishustin took over.

Presumably Mishustin will be back at work in a fortnight and his absence will not be too big an issue, as the Kremlin has chosen to go slow on the roll-out of an economic stimulation plan, while it waits and sees just how bad things get.

Putin initially suggested a 1.3% of GDP stimulation package, whereas other governments are pledging to spending anything between 5% and 20% of GDP to reboot their economies. More recent announcements have increased that amount to something like 5% but the details are not clear. Much of it is in the form of guarantees and deferred (not cancelled) tax payments or simply re-tasking existing budget spending plans to things like social support.

For the Kremlin one of the key considerations is to preserve the $565bn in reserves it holds and spend as little of the RUB12 trillion ($165bn) in the National Welfare Fund (NWF) as of April 1 as possible, as it is this fund that buy’s Russia impunity from international pressure. So Mishustin's work for the moment is a technical job of reallocating budget funds to where they will be most effectively spent to stymie the collapse of the economy. The practice of quick deregulation as a means of crisis response and prompt, often outside formal rules, solutions to the current difficulties should be something he is good at.

And there is a more harmonic co-operation between the government and the Central Bank of Russia (CBR), which will play an important role in counteracting the negative impact of the crises. Mishustin worked closely with both Finance Minister Anton Siluanov and CBR governor Elvira Nabiullina as head of the tax service, so their fiscal and monetary response should be well considered and implemented in concert.

The CBR has already sold its stake in state-owned retail banking giant Sberbank to the Ministry of Finance, which puts an extra RUB2.14 trillion ($29.1bn) into the state’s war chest. And then the CBR cut 50bp off interest rates to 5.5% on April 24 to give the economy a growth-boosting shot in the arm. At the meeting, Nabiullina made it clear there will be more rate cuts this year.

While the macro-level crisis actions will almost certainly be good – Russia has such a large reserve of cash and the triumvirate of the Tax Service, Ministry of Finance and CBR has proven itself to be very competent – that it will hard to screw up. The really big issue is the Kremlin has no plan to support anything other than the country’s macro-position and big business.

The “vertical power” structure Putin has built means that while the state has good connections with the massive state and privately owned businesses – almost all of which are on the list of 1,151 “strategically important companies” eligible for direct state aid release on April 30 – it has no real connection to the small and medium-sized enterprises (SMEs) and average Russian.

The people and small businesses are in the firing line in this crisis. In the financial crises of the past it was the state-owned enterprises (SOEs) and large enterprises that took most of the damage. But lockdowns kill small shops with little in the way of financial reserves but leave big steel mills relatively unscathed.

The most debilitating part of the 2014 crisis, for example, were the margin calls on big companies that almost forced them into bankruptcy. Russia’s biggest companies had borrowed heavily abroad but used their shares as collateral. When the value of their shares falls below a certain predetermined value the companies have to pay out the difference in cash – a margin call – and they were forced to come up with hundreds of millions of dollars at short notice at a time when the banking system was effectively closed.

One option to deal with this problem is for the Kremlin to pump cash into the economy and put it directly into the pockets of the population by hiking public sector wages. Indeed, the boom years of the noughties was driven by the Kremlin’s circa 10% hike of wages every year for nearly a decade as it decided to use the torrents of inbound petro-cash to close the gap between public and private sector incomes or face the possibility of popular protests resulting from a dual-speed economy. The subsequent consumer binge transformed Russia, doubling the size of the economy, in what was essentially a supply-side boost to growth.

But the Kremlin cannot afford to do that again. Indeed, the entire economic programme Mishustin was hired to implement is driven by a fundamentally different concept: the 12 national projects are a demand-side programme.

The budget spending has been increased by RUB3 trillion from the average of RUB16 trillion of recent years to RUB19.8 trillion for this year, but that extra money is largely tasked to go into things such as infrastructure investment to create economic multipliers that will boost growth. Russia was fundamentally underinvesting prior to the crisis. The national projects are designed to change that. And it is probably the right thing to do, as the supply-side boost is now probably exhausted.

The Kremlin could switch tack and spend cash on wages. Russia’s total wage bill is currently about RUB6 trillion and if the extra RUB4 trillion of spending were all re-tasked to wages that would make a difference, but that would be to completely re-make the Kremlin’s plans for the economy and lead to all sorts of new problems like a massive spike in inflation. But this is not the job that Mishustin was hired to do.

All these problems are being put off for the meantime. The summer dacha season is about to start and coronavirus infection rates should peak in the coming weeks, especially as Moscow, which has half the infections in the whole country, has implemented such a strict stay-at-home regime. Mishustin has time to work out what to do and begin rolling out a more targeted response over the summer.

But the cautious approach by the government means the economic damage will last longer and the biggest long-term consequence is almost certainly to be a fall in investment that will extend and deepen Russia’s economic stagnation. The forecast of the Bank of Russia for the decline in GDP in the second quarter is 8% – this exceeds the scale of the shocks of 2014, 2008 and is comparable to the shock of 1998. And Russia took several years to recover from all those shocks.