Worse than before. An ally needs to be under control. The Day of Arrests. А fight among bulldogs under a rug

December 23, 2021

Dec 23, 2021

In memoriam

Dmitry Zimin, the pioneer of mobile communications in Russia and founder of VimpelCom, has passed away at the age of 88. After leaving the company, Dmitry Zimin founded the Dynasty Foundation, which became the largest educational NGO in Russia.

I was constantly struck by his tireless curiosity, his desire to learn something new, and his ability to understand a problem down to the smallest detail.

He was an optimist and believed in a beautiful future for Russia.

Worse than before

The Public Opinion Foundation (POF), close to the Kremlin, has published the results of the traditional December poll on the year’s results for the country. According to the survey, 41% of Russians believe that 2021 was worse than 2020; 14% of respondents share the opposite view.

The survey has been conducted since 1996, and the graph clearly demonstrates the negative assessments trend that has formed in 2008-2011: The share of “negativists” is steadily increasing, while the percentage of “positivists” is steadily decreasing.

Assessment of how the country is going does not differ from respondents’ estimations of the past year for themselves.

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We can breathe out

After an intensive informational offensive combined with outright threats, the Kremlin has (probably) decided to calm down. At least, the tone of Russian Foreign Minister Sergei Lavrov’s statements today was more peaceful.

According to him:

“At the very beginning of next year, the first round of Russian-NATO talks should involve bilateral contacts between our negotiators and the U.S. experts. Their names have already been announced, they are acceptable to both sides, after which we plan to invoke the negotiations to discuss the second document—the draft agreement between Russia and NATO countries— for the foreseeable future, also in January.”

Lavrov reiterated President Putin’s stance, which he declared during talks with the leaders of France and Germany, that Moscow is ready to raise the issue of security guarantees at the OSCE.

The Minister stressed that Russia is ready to consider Washington’s concerns in this area. Russia is open to working on guarantees and will do everything to make Moscow’s position understood.

An ally needs to be under control

Boris Gryzlov may be appointed Russian ambassador to Belarus by the end of the year; his candidacy has already been approved by the State Duma’s profile committee.

Gryzlov is an old political partner of Vladimir Putin and a loyal and trusted representative. From 2001 to 2003, he served as Minister of Internal Affairs (National Police); from 2003 to 2011, he was Speaker of the State Duma. Since December 2015, he has been Russia’s representative to the Trilateral Contact Group on resolving the situation in Donbas.

This appointment suggests that Putin wants a man with whom the Russian President can speak frankly on any topic and who will catch orders and take hints coming from the Kremlin at a glance, next to his only—and highly unpredictable—ally, Alexander Lukashenko.

Most likely, Gryzlov will stop participating in the dialogue around Donbas, but this will not be a problem for Putin. Dmitry Kozak is working on this issue today, an equally loyal and trusted person.

Ineffective policy

Yesterday I talked about the government’s plans to impose an increased duty on grain exports from Russia. Today it has become known that, in addition, the government wants to establish export quotas, allowing no more than 11 million tons of grain to be exported from the country from February 15 to June 30. Exporters consider such a mechanism as ineffective. On the one hand, the established quota is almost one and a half times less than those set in the first half of 2021. On the other hand, this year quotas were distributed pro rata to export in 2020, which led to a sharp decrease in the number of exporters (from 47 companies before quotas were introduced to six-seven in May-June) and non-utilization of the entire potential export volume.

Alexei Gordeev, Vice-Speaker of the State Duma and former Minister of Agriculture (from 1999 to 2009), who created the current system of state support for agriculture, considers the regulation of grain exports a strategic mistake. According to him, the limitation of profitability of grain export from Russia, combined with accelerating inflation, worsens the financial position of agrarians, leading to an increase in world grain prices and, consequently, to decreased demand. According to him, continuing the present policy may reduce grain production in Russia. His recommendations are aimed in the opposite direction of what the government is doing: “I would, for example, now announce that the duties will be canceled, so that farmers will be braver to sow and we will have a big harvest... we should switch from price regulation to support for the poor.”

To promise doesn’t mean to marry

Experts point out that the promised mechanism of using the money received from the grain export duty does not work to support agriculture. According to the Institute for Agricultural Market Studies estimates, the budget received about 56 billion rubles ($800 million) from the grain duties by mid-November. However, the agrarians have received 10 billion rubles so far—and that money still remains in the accounts of regional treasury departments.

The Day of Arrests

One of the arguments used by Vladimir Putin to explain the need to eliminate political competition and build the power vertical in Russia was his desire to limit “the penetration of criminal elements into government.” The vertical has been made, but the desired purity of power has not been achieved. Reports of the arrest of high-ranking officials appear pretty regularly in the news reports. On the one hand, this should be proof that the Kremlin itself is combating law-breaking; on the other hand, the intensity of such newsflow does not decrease, which indicates the futility of such attempts.

Today’s “crime news from the corridors of power” was unusually abundant:

• In Magadan, the head of the regional department of the traffic police was arrested. He is accused of giving an illegal order to subordinates to exempt a citizen who committed an administrative offense in 2019.
• Krasnodar mayor Andrei Alekseenko was detained on suspicion of taking a bribe in 2018 when he was deputy governor of the region—he received a riffle worth 1.6 million rubles ($21,500) for confirming the completion of an apartment building construction, despite the presence of several shortcomings.
• In Krasnoyarsk, Sergei Natarov, Deputy Speaker of the Regional Parliament, a member of the State Duma until last September, was detained. Local media say this is connected to the criminal case of fraud involving his son, Anton Natarov, former advisor to the Krasnoyarsk Governor.
• In Samara, a court authorized the 72-hour detention of Svetlana Ashmarina, the Rector of Samara State Economics University. During this time, the investigation must present materials to the court, based on which a measure of restraint will be chosen. The prosecution speaks of fraud related to contracts for research: According to the investigation, in November 2020, the Rector and her subordinate concluded fictitious contracts for research work for 3.5 million rubles.

А fight among bulldogs under a rug

The struggle of Russian officials for control over budget funds allocated for investment projects has unexpectedly come to the surface. Victoria Abramchenko, Vice Prime Minister in charge of environmental issues, opposed the Ministry of Industry and Trade. The Ministry wants to set up a particular federal project to build nine incinerators (out of the planned 25), implemented by the Rostec State Corporation. The federal budget has allocated 37.55 billion rubles ($500 million) to subsidize this project, and Abramchenko controls their use according to the existing sharing of responsibilities.

The Minister of Industry, Denis Manturov, is a client of Sergei Chemezov, head of Rostec (Putin’s colleague from the 1980s in the GDR), and the transfer to him of control over the use of funds certainly makes life easier for Rostec. Let’s not forget that, according to experts from the Higher School of Economics, more than 20% of budget spending on government procurements is transformed into kickbacks to those who make decisions on the winners of tenders.

An uneasy task

The possibility of using the Northern Sea Route (NSR) to create a new Asia-Europe transport corridor has long been discussed by Russian authorities. Global warming and intensive ice melting in the Arctic turned theory into practice: Russia is intensively developing port infrastructure on the Arctic coast and building an icebreaker fleet, guaranteeing vessel escort among ice and icebergs.

During the Soviet era, the NSR was mainly used to supply Russian settlements in the basins of the Ob, Yenisei, and Lena rivers. The transportation volume was 6.5 million tons. As oil, gas, and coal deposits along the Arctic coast were developed, Russian companies began to use this route to export raw materials. In 2016, the volume of shipments exceeded the Soviet level and amounted to 7.3 million tons. In 2018, the Russian government created a program to expand the capacity of the NSR until 2025, which amounts to 600 billion rubles ($8.5 billion) (not including the Defense Ministry’s spending on military bases and military infrastructure in the region). According to the government’s plans, cargo volume should increase to 80 million tons by the time the program is completed.

In 2021, the cargo volume exceeded 33 million tons (half—export of LNG from Russia, mostly to Europe). According to Russian companies’ plans to expand LNG and oil exports, the cargo volume may grow to 120 million tons by 2023. Russian authorities claim that the use of the Northern Sea Route brings significant time savings (20 days against 33 days across the Indian Ocean and the Suez Canal), but the route carries less than 1.5 million tons of cargo a year. Almost 90% of this is commodities (mainly iron ore) transported from Europe to China. Despite the seemingly very close relations between Russia and China, Chinese companies are in no hurry to explore the new route.

The short period free of ice navigation, without need for icebreaker escorts, and the unpredictable weather conditions are the main obstacles to increasing transit traffic. This was clearly demonstrated at the end of November when 24 ships were stuck in the ice after a sharp cold snap and a thick ice cover formed.

Operator of the NSR, the state corporation Rosatom, proposed to establish stricter rules for issuing permits for shipping during the transitional months—from October to December. According to the draft of this document, Rosatom will get the right to stop ships before they enter the NSR if the ice conditions change. Would it help to increase the transit?