The Kremlin strikes back. Too many revenues. Taking control over the buffer. Go home!

February 4, 2022

The Kremlin strikes back

Two weeks ago, TIME magazine published “The Man Putin Fears” with a vivid illustration on the cover. Ten days later, the documentary Navalny, produced by CNN and HBO MAX, won the Special Jury Prize and the Audience Award at the Sundance Film Festival. It would have been strange if the Kremlin had missed these blows in its struggle with Russia’s leading opposition politician. So this response didn’t surprise anyone with its content: Alexei Navalny is facing a new conviction.

The court in Moscow received a criminal case against Navalny in which, “to save procedural time,” two charges were combined: fraud and contempt of court. 

The fraud case was initiated in late 2020. The investigation alleges that Navalny stole and spent on his personal needs more than 60% of the funds donated to his organizations. The second episode concerns the insult of Judge Vera Akimova, who considered Navalny’s accusation of slandering World War II veteran Ignat Artemenko. Navalny accused the judge of bias during the trial and received more than 10 reprimands. During the trial, Akimova said that she would send the materials of the completed hearing to the Moscow Investigative Committee to verify Navalny’s “insulting remarks” about the participants in the trial.

Navalny’s lawyers said they were not allowed to see the indictment, and that the opposition politician could face up to 10 years in prison. In addition, they said, only a few episodes of the fraud case were singled out, allowing investigators to press new charges later.

The Kremlin’s timing for its strike is perfect. On the one hand, the West is now focused on the Russian [mythical, in my view] military threat to Ukraine, and the topics of human rights and civil liberties in Russia have disappeared from the agenda entirely. On the other hand, the pandemic and epidemiological restrictions allow the Russian authorities to make the process as close to the public as possible.

Few people in Russia have optimistic hopes that Navalny will be acquitted. This is all too like what happened to Mikhail Khodorkovsky and Platon Lebedev, who were sentenced a second time in 2010 after being convicted five years earlier. President Putin pardoned Khodorkovsky in late 2013 after he spent more than 10 years in prison. Khodorkovsky has been living abroad ever since. The Russian Investigative Committee opened another case against him and put him on the federal wanted list a year later. Platon Lebedev spent more than 11.5 years in prison and was released after the Supreme Court reduced his sentence. Lebedev lives in Russia and cannot leave it because he has not paid a fine of 17 billion rubles ($225 million) imposed by a court in 2005.

What could change Alexei Navalny’s fate? Or the millions of Russians who will go out and demand his release? Or the Western politicians who will come to Moscow to attend the court sessions and every time they meet/talk to Putin, demand that the persecution of the Russian opposition leader be stopped? I don’t know about you, but I find both unbelievable. Alas... 

“That’s all I can tell you”

Vladimir Putin keeps his plans and intentions secret even from his inner circle. On Wednesday, Putin’s spokesman Dmitry Peskov insisted that no meeting with Chechen President Ramzan Kadyrov was scheduled or planned. But on the evening of the same day, Kadyrov’s press service announced that a meeting of the two had taken place. And on Thursday morning, Kadyrov himself said that “yesterday a perfect meeting did take place. The President, as always, supported us. There were acute issues in which we needed the personal involvement of the President.”

It’s not just his plans that Putin keeps secret from his spokesman. It seems he has told him almost nothing about the contents of his meeting with the leader of Chechnya. Dmitry Peskov answered journalists’ questions briefly, without giving any details.

“Kadyrov came with specific topics on economic projects; they were discussed. Among other things, topics related to the work of law enforcement agencies were touched upon. That’s all I can tell you about this meeting.”

When asked if the fate of Judge Saidi Yangulbayev’s family was discussed during the meeting, Peskov replied: “I gave as much detail as I could about that conversation. I have nothing more to add.”

Meanwhile, the Chechen Collegium of Judges stripped Saidi Yangulbayev of his status as a retired judge and the immunity he enjoyed, making him non-defended. Yangulbayev believes this decision is illegal. “There is no reason to terminate this status. The law states that. It can be done only if I receive citizenship or a residence permit in another state. We are appealing this decision in the Higher Qualification Collegium of Judges of Russia.”

Asked by journalists how the Kremlin assesses the situation in Chechnya and whether the situation is under control, Peskov said: “I disagree that the situation there is out of control. It is a subject of the Russian Federation. I have nothing more to add.”

Asked to clarify whether events in Chechnya are taking place with the consent of the federal center, Peskov replied, “You cannot say that. Each region has its own agenda.”

This story confirms the fragility of Vladimir Putin’s political system in the country. He is its architect and acts as checks and balances. He decides on all appointments and restricts the possibilities for horizontal dialogue, acting as an arbitrator in resolving conflicts. Such a system is sustainable unless its leader retains the strength for day-to-day operations. With time, his grip will inevitably begin to weaken, and after he leaves, the created structure will rapidly start to collapse because no one else knows how it is built and how it can be maintained in balance. 

Too many revenues

The Russian Finance Ministry said it expects to receive almost 710 billion rubles ($9.3 bln) of additional oil and gas revenues in February, which will be used to buy gold and foreign currency under the budget rule, and then transferred to the Sovereign Wealth Fund. These revenues appear because the current level of global oil prices is significantly higher than the $44/bbl budgeted for the expenditure ceiling. Monthly federal budget expenditures amount to about 2 trillion rubles.

As of January 1, 2022, the volume of the NWF amounted to 13.6 trillion rubles, or 11.7% of GDP, projected for 2021, or $182.6 billion. Of which 62% were invested in liquid financial assets. The cumulative income from the placement of the Fund in 2021 amounted to 257.3 billion rubles or $3.5 billion USD.

Avarice vs. imbecility

Russian Olympic and Paralympic gold medal champions at the Beijing Olympics will get Br4 million each; silver medalists, Br2.5 million; bronze medalists, Br1.7 million, the Russian government decided in August last year. 

The amount of remuneration for Olympians had remained unchanged since 2012 when the amounts of pay were converted into rubles. Before the 2008 Olympics in Beijing, awards were more than doubled, amounting to 100,000, 60,000, and 40,000 euros. The London prizes set in rubles, considering the ruble exchange rate, were at the same level. But ... since the beginning of 2012, the ruble has depreciated against the euro and the dollar by 52% and 58%, and the accumulated consumer inflation during this time was 90%. As a result, the real value of government payments has declined by a factor of two.  

I am far from thinking that remuneration is a crucial incentive for athletes. Still, I cannot find a rational explanation for the stinginess of the Russian government: The number of Olympic medalists is in the dozens, the accumulated fiscal reserves of the government are astounding and continue to grow (see above). Is it just plain imbecility? 

Taking control over the buffer

Russian Defense Minister Sergei Shoigu arrived in Belarus to check the readiness of troops for the Union Resolve 2022 exercise, which will begin in a week, and at a meeting with Belarusian President Alexander Lukashenko said the military partnership between the two countries is strengthening.

“We have more than 20 events ahead of us for this year. And if in this exercise we moved troops from the East here, to the western borders of the Commonwealth, the exercise ‘East-2022,’ they will be in the East. And by your decision, the ministry of defence, the armed forces of Belarus will take part in this exercise, a large contingent. Now they will have to move 10,000 kilometers there.”

After signing the agreement on military cooperation between the two countries, the process of actually merging the armed forces of the two countries began. This process is essential for Russia because it allows control of the entire buffer zone between NATO (Poland) and Russia. Meanwhile, Lukashenko continues to believe having his own army.

The order was not canceled

Although the Ministry of Agriculture claims that the sugar beet harvest will ensure a sufficient supply of sugar on the Russian market, no one has canceled the order given by Vladimir Putin to control the changes in sugar prices. Therefore, the order should be fulfilled.

For this purpose, the Federal Antimonopoly Service (FAS) recommended sugar producers adjust the trade and marketing policy, publicly fix the price of sugar supplied to retailers, require distributors to set the maximum trade margins, and ban the resale of sugar to third parties. In addition, FAS proposed terminating the contracts with distributors who will not comply with these requirements.

Non-obvious deal

The soaring gas prices in Europe made the production of nitrogen fertilizers unprofitable for many companies. Some stopped production, hoping for a change in the situation on the gas market. And some decided to sell their assets without counting on any improvement. 

For instance, Borealis, a company controlled by the Austrian oil and gas company OMV with a long history of commercial relations with Gazprom, decided to do so. Borealis chose to sell its five production facilities in Europe and its entire sales and distribution network for nitrogen fertilizers and liquid nitrogen. The buyer is EuroChem Group, owned by one of Russia’s richest men, Andrey Melnichenko. Experts estimate that the assets will be sold for about half of what their value was a year ago. The deal is expected to close in the second half of this year.

Melnichenko is also the owner of SUEK, one of the largest coal producers in Russia and thermal power generation in southern Siberia. SUEK and Eurochem do not possess gas deposits in Russia, so they cannot count on getting cheaper gas for the production facilities they acquire and thus creating a sustainable business. However, Melnichenko may have non-public agreements with Gazprom, which can get a loyal end-user in the vital European market.

No masks!

Russian presidential spokesman Dmitry Peskov has implicitly confirmed that Vladimir Putin does not use medical masks during the COVID pandemic. “Appropriate precautions are being taken around the President—this is not a secret. Those persons who meet the President are tested repeatedly; some of them have to sit in quarantine for several days. So, of course, the President does not wear a mask at certain moments, especially when it comes to public appearances.”

It should be noted that Vladimir Putin did not wear a mask, not only during public speeches but also during working meetings. The first and last time the Russian President used coronavirus protection was on March 24, 2020, during a visit to an infectious disease ward at a hospital in Moscow. At that time, he wore the TyChem 2000C suit of the American company DuPont, designed for protection against high concentrations of inorganic acids and alkalis at pressures up to 2 bar.

Go home!

The response of the Russian authorities to the banning of RT DE was swift. The Russian authorities decided not to involve the national media regulator in the hybrid war but instead chose to strike with canons of the main caliber. The Russian Foreign Ministry terminated the accreditation in Russia of Deutsche Welle, a media company with the status of a state-owned company. The broadcasting of DW will be stopped, the bureau will be closed, and the journalists will be deprived of their accreditation. In addition, the Foreign Ministry turned to the Justice Ministry and initiated the procedure for giving DW the status of a foreign agent. 

To ensure that no one has any doubts, the Foreign Ministry said that the measures against Deutsche Welle are only the first step. The Ministry asked the German media outlets accredited in Russia (24 of them in total) to provide information on their budget financing. According to rumors, they could be sanctioned as early as next week. 

Once again, I must repeat that I saw all this many years ago in the Soviet Union. Back then, Deutsche Welle, the BBC, Voice of America, and Radio Liberty were not legally allowed to broadcast in the USSR and ran their programs on shortwave. Public demand for radio sets capable of receiving such broadcasts was enormous, and the permanent jamming of the broadcasting only boosted the population’s interest in information about life in the country and the world.

Today, those same radio stations are again becoming the Kremlin’s main enemies in the struggle for minds and hearts. Over the years, the Kremlin has learned a lot and achieved great success in this battle. Now it’s time to see if its opponents have learned anything.