Putin is an information superstar
December 1, 2021
Moscow hosted the “Russia Calling!” investment forum organized by VTB Bank. This forum is held every year, and every year Vladimir Putin speaks there. Here are the most striking theses of today:
I have the right
“Per the Constitution, I have the right to be elected for a new term [even twice: in 2024 and in 2030]. Whether I will do it or not, I have not yet decided for myself. But the very existence of this right stabilizes the internal political situation,” Putin said, noting he did not consider his re-election to be “Russia’s goal.”
In this case, I must agree with Putin. If he declares that he will go to the elections, the bureaucracy will begin to prepare for a new reshuffle on the Kremlin’s chessboard, which occurs at the beginning of each presidential term. If he does not go to the elections, the bureaucracy will begin betting on the sweepstakes, trying to figure out who will be the successor. Putin himself becomes a lame duck in this scenario.
Moreover, Putin never makes decisions long before the formal date. His announcement regarding the elections should happen in the fall of 2023, and by that time a lot could have changed. That’s why: “It’s MY right!”
Ambitious promises
Suppose we are talking about the carbon neutrality of our economy by 2060. In that case, it means that we will consistently, step by step, achieve this... I have every reason to believe that we can achieve these goals earlier if we fulfill everything the way we intended. And we have a whole set of tools targeting to reduce the carbonization of our economy and increase the absorbing capacity of our forests.
There has been a decisive turn in Putin’s position on global climate issues in recent months, as I have already spoken about. This time he speaks of Russia’s readiness for a higher speed of movement. However, it must be understood that Russia will most likely have to fulfill its main promises after he leaves the historical stage.
Drafting a plan is the most important
In the coming weeks, it will become clear how severe the consequences of the new [virus] variant are... I order the Government... to prepare an updated action plan in connection with the risks of the spread of the latest variant of the virus within a week.
At the same time, given the global, transboundary nature of the infection, an effective response to the challenge of the epidemic can only be given together... You can fight effectively only by coordinating the actions of the entire world community. I mean the mutual recognition of vaccines and vaccination certificates, the availability of vaccinations for all regions of the planet, and joint work on new drugs against coronavirus.
I am sure that it is difficult to argue with such a thesis. And the understanding of the joint responsibility, especially of the leaders of the leading, developed countries of the world, will become the basis for more active common actions.
Russian vaccine manufacturers still cannot answer all the questions WHO experts ask them about production technology. This does not allow WHO to recognize the Russian vaccine, which hinders its recognition in many countries. Because of this, for example, Russians cannot travel abroad—certificates of vaccination with Sputnik V do not have international recognition. Putin, once again, is persistently trying to replace the topic of the recognition of the Russian vaccine by the WHO with the topic of mutual recognition of certificates.
As for international cooperation, I should note that Russia makes a minimal contribution to international research: Russia ranks 180th out of 213 in the international database of sequenced virus genomes, conducting and sharing research in about 0.1% of cases of infection.
Investment-led growth
Our long-term priority is to increase the share of infrastructure investments in GDP. We have launched a powerful tool for developing territories—infrastructure budget loans at a rate of 3% for 15 years... Over the next two years, the additional volume of projects using such a tool should exceed half a trillion rubles ($6.7 bln.)... The program of infrastructure budget loans will last at least until 2026.
Until 2024, it is planned to allocate 2.5 trillion rubles ($33.3 bln.)
from the National Welfare Fund. This resource will be invested on a credit basis in major investment projects, primarily in the field of infrastructure, and, of course, will attract additional private investment. In any case, we really hope for it.
The idea of achieving higher economic growth rates (since Vladimir Putin returned to Kremlin for his third term in 2012, the average growth of the Russian economy is 1.2% per year) through increasing public investment has become self-sufficient for Putin. He does not consider alternatives because they are associated with the threat of losing his power. In my opinion, in the absence of the rule of law and property rights protection being in isolation from the Western technologies, it is impossible to speed up the economy. But for Putin’s system, the realization of the principle “law is equal for everybody” is the inevitable beginning of its collapse.
The Russian President believes that his bureaucracy can make grounded and objective decisions about the quality of investment projects that he approves. However, even in his inner circle, many do not believe this. “...under the slogan of development, we already see that some ministries actually bring unprofitable projects and are trying to cover losses of current activities,”—said at the same forum by the Minister of Economy Maxim Reshetnikov.
Households’ resources must be used and protected
The Russian stock market is actively attracting funds from households... This resource should become an essential source of financing for investment projects and work reliably for the households themselves, bringing stable income to those ready to invest in the Russian economy for a long time.
... I propose to think about the co-financing of such savings by the state. At the same time, I would like to emphasize... it is necessary to protect the interests of households and guarantee their savings. In fact, we are talking about a mechanism similar, as I said, to the deposit insurance system. I also ask you to work out this solution. I know that, in general, the Government has a positive attitude towards this, thinks about it, and in principle, we already have some groundwork.
More-than-strange ideas... Co-financing was used in Russia for voluntary pension savings from 2006 to 2014. At that point, the government began the transition from a “pay-as-you-go” system to a funded pension system and wanted to support households’ interest in this transition. But the volume of co-financing of pension savings from the budget was limited to 12,000 rubles a year ($400 at the exchange rate of that time). 2.5 million Russians took part in the program; the total budget expenditures amounted to 60 billion rubles ($2 billion).
If Putin seeks to attract new investors to the stock market with incomes below the average, then probably $400 can be an incentive—60% of the Russian population has a monthly income per person below this level. However, given the poorest low level of financial literacy, the risks of such investments can be very high.
In Russia, household deposits are insured for up to 1,400,000 rubles ($18,600) in one bank. According to the law, the deposit guarantee system should be financed from the deposit bank’s contributions. However, the poor quality of banking supervision led to the bankruptcy of hundreds of banks in 2014-2019, and bank contributions began to run short. In 2017, the Deposit Insurance Agency received a loan from the Bank of Russia of 842 billion rubles to pay off depositors ($14 billion).
Creating a similar insurance system for private investments in the stock market will make the riskiest strategies attractive and require significantly larger budget payments.
However, one should not forget about one more “lesson of the past.” During WWII, the Soviet Union used loans for defense, and then loans for the restoration of the national economy. Although Russia did not have any war, why not push the households’ money in the right direction? Namely, for investments in projects approved by Putin.
Red lines for Putin
Question: You have repeatedly mentioned the existence of “red lines” in relations between Russia and Ukraine. This is, to some extent, also related to the West and NATO. You might like to clarify where are these “lines” and to what effect, in your opinion, can their intersection lead?
The Russian Federation is experiencing some concern because large-scale exercises are held near its borders, including unplanned exercises as occurred recently in the Black Sea when, 20 kilometers from our border, strategic bombers were flying, as is known, on board which are precision weapons, and possibly nuclear weapons. After all, all this creates threats for us.
Now about the “red lines.” They are, to a certain extent, imaginative. Nevertheless, look what happened over the previous 20-plus years: Relations between Russia and the “collective West” in the 1990s were practically cloudless in the early 2000s. Why did they expand NATO to our borders?... In Poland and Romania, missile defense systems are now deployed, and the launchers there—Mk 41—can also be equipped with Tomahawks, strike systems. This creates threats for us.
... In response, we were forced, I want to emphasize this, we’re forced to start developing hypersonic weapons...
You asked about Ukraine: Where are these “red lines”? This is, first, the creation of threats for us, which may come from this territory... I repeat once again: If some kind of offense complexes appear on the part of Ukraine, the flight time to Moscow will be 7-10 minutes, and in the case of the deployment of hypersonic weapons, 5 minutes.
... we have now tested it successfully, and from the beginning of the year, we will put in service a new sea-based hypersonic missile nine Mach-speed. The flight time will be up to those who give orders, also 5 minutes.
In my opinion, Putin’s belligerent rhetoric increasingly reflects the fears with which he has surrounded himself. The creation within the Kremlin of the myth about the Western threat, about the desire of the United States to “bring Russia to its knees” and “grab its resources,” has led Putin and his lieutenants to believe in this myth and perceive it as a reality. NATO’s actions, in turn, demonstrate to the Kremlin that the West is ready to build relations with Russia from a position of strength, which scares Putin even further.
Perhaps he knows about the “Able Archer 83” exercise when planned NATO exercises made the Soviet military and politicians seriously believe that the West was preparing a nuclear attack. Then, in November 1983, planes in Poland and East Germany were immediately loaded with bombs, 70 SS-20 intermediate-range ballistic missiles were put on high alert, and nuclear submarines were sent under the Arctic ice, where they would be undetected by American radar and sonar systems. 10 days the world was on the edge of the nuclear war.
And not only for him
Almost simultaneously with Putin, Russian Foreign Minister Sergei Lavrov and the secretary of the Russian Security Council Nikolai Patrushev spoke safely about Moscow’s fears.
“Significant subdivisions and military equipment of NATO countries, including American and British, are being deployed closer to our borders. In Ukraine itself, on the line of contact in Donbas, more and more forces are accumulating with the support of an increasing number of Western instructors... Heavy weapons, directly prohibited by the Minsk agreements, are used against Donetsk and Luhansk, including drones. And we simply have no right to rule out the possibility that the Kyiv regime will break into a military adventure,” Lavrov said, adding that this poses a direct threat to the security of the Russian Federation.
“Information about this and about the absence of aggressive plans of Russia towards Ukraine was brought by Moscow to Washington’s attention. There were no changes despite appeals to the American side to stop spreading disinformation both in the media and in contacts with European partners. Why all this misinformation is spreading is not yet clear, although it may have been necessary to justify the introduction of additional sanctions against Russia. As for the increased military activity of the United States and its allies in the region, we will continue to closely monitor the actions of NATO and Ukraine troops near our borders,” said Patrushev.
Omicron creates fear
Russia is introducing a two-week quarantine for those entering from countries with a high risk of infection with the new Omicron variant, said Russia’s chief sanitary doctor Anna Popova. She noted that with most countries where Omicron has been detected so far, regular air traffic has not yet resumed, and the quarantine will affect several hundred citizens.
In addition, the validity period of the PCR test will be limited in Russia: Instead of 72 hours, it is valid for 48 hours.
And cancels New Year’s Eve
A week ago, the Governor of St. Petersburg announced massive New Year holidays in the city. It seems, however, that there will be nothing festive on the actual night.
The authorities will not organize the round-the-clock work of the city metro and will not increase the number of transport vehicles on New Year’s Eve, because no mass events are planned on Palace Square, said the acting head of the Committee on Culture of the City Mayor’s Office, Fyodor Boltin. According to him, on December 31, public transport will work as on regular weekends, stopping at about midnight on January 1.
It seems ready for takeoff
The MS-21-300 passenger aircraft has been submitted for testing, Rostec reported.
MS-21 is a family of new Russian narrow-body passenger aircraft, which has been under way since 2006. Initially, it was assumed that the plane would be created in cooperation with foreign companies; in particular, it would be equipped with Pratt & Whitney engines and foreign avionics. The imposition of sanctions against Rostec and many Russian companies forced them to adjust the project and delayed the certification of the base aircraft. The main problem was the U.S. ban on the supply of composite materials to Russia. At present, the plane uses Russian composite materials, developed with scientists from Moscow State University and Rosatom enterprises, and Russian vacuum infusion technology.
In September 2018, the government announced the total cost of creating MS-21: 465 billion rubles ($7.5 billion at the exchange rate of that time), of which about a third was financed from the federal budget. According to official data, the production of the MC-21-300 should start in 2022.
I am going to Europe for a two-day business meeting that will affect my writing of extensive comments. Nevertheless, I promise to send news sets both Thursday and Friday morning.