As Vladimir Putin nurses a rare electoral hangover, he will want to forget a recent incident that opened up the first crack in his once unassailable cult of personality. Sharply dressed in a blue suit, the diminutive Russian prime minister clambered into a boxing ring in Moscow a few weeks ago to congratulate a Russian martial arts fighter on savagely beating his American opponent.

Putin, who has a black belt in judo, loves a good fight himself and the symbolism of Russia defeating its old Cold War enemy must have appealed to him. But instead of being given the hero treatment he has revelled in for the last decade, the crowd began to boo, jeer and whistle.

"Go away!" one man could be heard shouting. VVP, as he is affectionately known, appeared thrown for a second, but swiftly recovered his composure. His silken spokesman was quick to claim that the booing was directed at the defeated American fighter.

Alexei Navalny, a prominent opposition blogger, had a different explanation. He said the unprecedented public humiliation of Putin was "the end of an era". Alexander Rubtsov, a journalist at the liberal Novaya Gazeta newspaper, agreed. "That was the moment Putin's Teflon charisma began to peel away. For now it is only peeling off in pieces, but it is a serious problem: in real life people throw away such frying pans. In politics, such defective goods are still used for a while even though everyone knows they are beyond repair."

Less than a month after the famous booing incident, Putin, who has made it clear he is determined to return to the presidency for a third controversial term next year, is digesting an embarrassing electoral setback. His ruling United Russia party may have won the parliamentary election but it saw its vote collapse by almost 15 per cent and, if international observers are to be believed, the real number of votes was probably much lower.

To compound the insult, thousands last week took to the streets of Moscow in one of the biggest demonstrations against Putin in recent years. For Putin, the election was personal. It was the first chance that ordinary Russians had been given to express their opinion since he announced he planned to swap jobs with President Dmitry Medvedev and contest a presidential election in March.

Used to adulation

Now 59 and continuously in power as either president or prime minister since 2000, Putin is not used to public rebukes. On the contrary, he is accustomed to being lauded in the style of a latter day Kremlin prince.

Not a day goes by without state TV showing a fawning report about Putin stripped to the waist fishing and hunting, a stoic Putin swimming in an icy river, or a sensitive Putin listening to impoverished pensioners.

Opinion polls duly show that the former KGB spy is easily the most popular politician in Russia. Nobody knows how beloved he would be without the mighty Kremlin propaganda machine behind him but even his critics concede he would be praised by ordinary Russians who credit him with restoring national pride after the anarchic 1990s and for presiding over a dramatic rise in living standards, at least for some.

So why has the Putin show suddenly stuttered? The Russian economy itself is in pretty good shape, especially when compared to many of the debt-laden European Union states.

The Kremlin is hoarding the world's third-largest foreign currency reserves, Russia is easily the world's biggest energy exporter, and the former economic basket case is not running a budget deficit at all. Oil and gas prices, which account for about 50 per cent of exports, have remained high and the Kremlin has been taking advantage of the windfall to spend big, and in populist style, on higher pensions, on its creaky armed forces, on new roads, new schools and new hospitals.

Roland Nash, a senior partner at Verno Capital, an investment firm, says part of the Kremlin's problem was that the consumer boom it presided over has fizzled out. "Between 1999 and 2007 Russia went through one of the biggest booms in the world," he says. "Average living standards rose from Indian to Polish levels and the economy was growing at an average of seven per cent a year."

But in 2008, amid a deepening global financial crisis, the Russian economy stalled, meaning that the country's nascent middle class started to feel the squeeze, too.

That discontent has been fuelled by a perception that United Russia is, in the words of Navalny, little more than "the party of thieves and swindlers". With corruption rife and, thanks to the internet, now widely publicised, there is a sense that party officials have become too greedy, even by Russian standards, while ordinary people have been left to fend for themselves in difficult times.

Sense of hopelessness

With Putin being likened to the famously inert Soviet leader Leonid Brezhnev, who presided over a period of lifeless stagnation, there is a sense in some circles of hopelessness, which has sparked talk of an exodus.

Sergei Stepashin, head of Russia's national audit chamber, stirred that debate when he disclosed that roughly 1.25 million Russians had left the country in the past 10 years.

Opinion polls show that many young, educated Russians who have become disenchanted with the glacial pace of change at home are indeed keen to emigrate. That is bad news for the world's largest country by area, which is fighting an uphill battle to prevent its population of 142 million shrinking.

Part of the problem is that the Kremlin has done such a thorough job in silencing dissent while talking up Putin, that ordinary Russians do not see any alternative to him and his allies. The liberal Yabloko party failed to win enough votes to make it into the new parliament, while the anti-Kremlin PARNAS party, which includes a clutch of bright, charismatic liberals, was banned from even taking part in the election on a technicality.

Failing a major upset, Putin will easily win back the presidency in March, and will be entitled to serve two six-year, back-to-back terms that could see him stay in the Kremlin until 2024, when he would be 71.

But people familiar with the machinations of the Kremlin say that it is getting extremely nervous about the possibility of social unrest if it fails to quell the growing sense of popular dissatisfaction in the next year or two.

"People have understood that the king has no clothes," said Boris Nemtsov, one of the main opposition leaders. Putin's only option, he said, was to reform and finally allow real political competition.

"If he does not want to turn into someone who is booed from Kamchatka to Kaliningrad, he will have to organise an honest presidential election, register opposition candidates, and fight a real campaign."

— The Telegraph Group Ltd, London 2011