Russia: Other Points of View

RUSSIA MACRO-POLITICS: ONE STEP AT A TIME

FINANCIAL ANALYSIS

by Chris Weafer

“Although it is said that faith can move mountains,

experience shows that dynamite works better” 

Anon

Moving up the rankings. The main news last week was the gain in Russia’s ranking in the World Bank’s 2014 Ease of Doing Business survey. Russia is now ranked 92^nd (out of 189 countries) having moved up from 111^th last year (details below). This does not have any immediate impact on the perception of equity risk, on valuations, on earnings growth, nor on the medium-term macroeconomic indicators. It is important because it shows that the government’s commitment to business reforms is starting to yield some results. 

Russia now ranks 10^th best in the world for contract enforcement.  That disposes of a popular mis-conception about the risk of doing business in the country. 

Reform progress since the last elections. Over the past eighteen months we have seen more progress in advancing reforms that ever before. The list includes WTO entry, capital market reforms, anti-corruption legislation and better budget discipline. It can be argued that these changes are still not much more than a drop in the ocean relative to the size of the problem still to be addressed. But at least we now have reform momentum and that’s not something we could have said before the summer of 2012. 

To access the full report, click Download Russia_Briefing_Nov_5_'13 

RUSSIAN FEDERATION SITREP

by Patrick Armstrong

SYRIA. So, thanks to Putin, the US is not, as we speak, bombing away in a dubious cause to the benefit of its enemies. Having read a great deal of the commentary I am struck with the gulf between America’s opinioneers and its citizens. For example, compare this incoherent anti-Putin rant with the more considered comments of its readers. I have seen this almost universally: lots of Americans understand that they would be in another war if not for Putin. However, there remains a considerable pack of people who really, really want to go to war in Syria: here is a Canadian.

PUTINOPHILIA. A side effect of the Syria crisis is an admiration for Putin in the USA. This piece sums up some of it; another; different subject; this one suggests an interesting theory for all his macho activity. More examples at Russia Debate. A lot of it is disgust with Obama, but not all. Altogether an interesting phenomenon. Again the most interesting evidence is in the comments. I am pleased to see Bill Clinton saying Putin keeps his word. I agree after years of observation: he says what he means and means what he says.

IGNORANCE. Not only did Senator McCain think that Pravda would be a suitable place to retort to Putin’s editorial, but he got the wrong Pravda. He’s even more out of touch with reality than previously suspected. A window into the ignorance of the American anti-Russia brigade.

SHOOTS OF DEMOCRACY SURVIVE IN PUTIN'S RUSSIA

By Gordon M. Hahn

Despite Russian President Vladimir Putin’s tightening the reins since returning to the Kremlin, Russia’s September 8th elections show that the shoots of democracy remain alive in Russia.

The elections and some of Putin’s recent statements suggest that he seems to be pulling back from the more excessive aspects of the crackdown. He also may even be allowing greater electoral competition in the more cosmopolitan, pro-democracy urban centers in order to: (1) pressure the pro-Kremlin ‘Yedinaya Rossiya’ (YeR or United Russia) party or to improve its electoral performance, (2) reduce reliance on voter falsification, and (3) let off oppositional steam where the middle or ‘creative class’ is on the rise.

The September election results and the conduct of the campaign proceeded better than might have been expected in many places. To be sure, there were some of the usual dirty tricks, use of the notorious ‘administrative resources’, and other minor oversteps on the authorities’ part. In Voronezh, the pro-Kremlin YeR party may have stolen the mayoral election by falsifying the vote count. But elections for mayoralties in Moscow, Yekaterinburg, Petrozavodsk, and several other areas were conducted with fewer constraints, though apparently not fully free or fair.

RUSSIA MACRO-POLITICS: GOING NOWHERE

FINANCIAL ANALYSIS

by Chris Weafer

"I hope it is not finished yet…I assume that I will continue to be involved in public activities"

President Vladimir Putin*

*The quote is President Putin’s response to a question asking how long he intended staying as president and about his plans after leaving formal office. He was attending the annual Seliger youth camp. His reply is no surprise. Putin clearly intends running for another presidential term in March 2018 and after May 2024, at the age of 72, he is planning a role similar to that of former Minister Mentor Lee Kuan Yew in Singapore. 

People trust Putin but want a change in 2018. A number of opinion polls have been released recently which appear to present a contradictory message concerning how the public view President Putin. But, drilling down, the message could not be clearer; a majority (64%) of people approve of the president today but a growing number (32%) are disappointed with his work in the current term. All of which is consistent with another poll which shows that 55% of people are happy with Putin but do not want him to stand again in March 2018.

The economy is slowly emerging as Putin’s Achilles Heel. If he has any chance of being re-elected in 2018 (and he clearly intends that) then the economy must recover or at least stabilize and a consolidating political opposition figure must not emerge. The former is now the main focus for the Kremlin, especially after the GDP growth figure for the 2^nd Qtr fell well short of expectations and Economy Minister Ulyukayev is openly talking recession risk.

To access the full report, click here  Download Russia_Briefing_August_13_'13

RUSSIAN FEDERATION SITREP

by Patrick Armstrong

Electoral system. In the beginning, the Duma’s 450 seats were chosen half by party list and half by single mandate with a 5% threshold. Then Putin I changed it to all party list and 7% threshold. Putin II has just sent a bill to the Duma to change it back to the original. So what was the point of all that? The new law forbids electoral alliances – obviously another attempt to force like-minded people to unite. But we have 20 years of observational experience that Russian liberals refuse to sink their (small policy but large personality) differences. On a personal note, I was an observer in the 1995 election when 40-some parties ran. The party vote ballot was the size of a newspaper sheet and few voters had a clue. Are we going back to that?

Corruption. Investigations all over the place. Phoney academic degrees; embezzlement at RusHydro; two frauds in the Penitentiary Service; tax evasion at RUSAL; a former Duma Deputy. And not to forget OboronServis: Prosecutor General Chayka says 25 separate cases have been combined, the total cost of which is now said to be over US$400 million. The MoD is target-rich: a general is suspended, a former financial administrator jailed, a possible rotten rations scandal, and a supplier case. And the Olympics appear on the horizon: cost inflations. Sergey Ivanov has said that no one is immune. The Central Bank has weighed in with a statement that illegal money transfers amounted to US$49 billion in 2012 and that every tenth company making settlements through its payment system dodged tax payments in 2012. Obviously these cases have been in preparation for some time and investigators are digging. Definitely a serious campaign.

HOW TO DEMOCRATIZE RUSSIA WITHOUT REVOLUTION

REPRINTS

by Gordon Hahn

this article originally appeared in Moscow Times
December 27, 2012

Gordon Hahn, senior associate at the Center for Strategic and International Studies and adjunct professor at the Monterey Terrorism Research and Education Program at the Monterey Institute of International Studies, is author of "Russia's Islamic Threat" and "Russia's Revolution From Above, 1985-2000."

Opposition leader Boris Nemtsov recently said that the white-ribbon opposition's leadership needs to emphasize to the public that they are engaged in a marathon rather than a sprint in the struggle for democracy in Russia. The remark came after low turnout for the Dec. 15 "Freedom March" in central Moscow.

To be sure, full democratization will not come overnight, but the timeline might not be as long as some think. The more authoritarian Soviet Union came a long way during Perestroika 1.0 in the late 1980s and early 1990s. With that in mind, the struggle during Perestroika 2.0 may be difficult but need not be especially long. Indeed, the opposition may be making things harder than they really are.

RUSSIAN FEDERATION SITREP

by Patrick Armstrong

Opposition vote. The opposition ran an electronic vote to choose their… what? – leaders? most popular figures? coordinators? The results are here (Russian). The top 5 are Navalniy, Bykov, Kasparov, Sobchak and Yashin. What I find striking is, in a supposedly computer-savvy broadly-based movement, that only about 80,000 actually voted out of the 170,000 who registered. One cannot say that the phenomenon is insignificant, but it does not seem to be so very large after all.

Udaltsov. The Investigative Committee has opened a criminal case against Sergey Udaltsov (20^th on the opposition vote) as a result of a TV program which showed a film allegedly of him conspiring to start disturbances. The Committee then claimed that one of his associates had confessed to organising disturbances bankrolled by Givi Targamadze. Said associate promptly declared that the “confession” had been forced out of him by threats. On Friday Udaltsov was formally charged with plotting mass disorder and released on his promise not to leave Moscow. As I said, I could believe he did it or that it’s a government setup.

MORE RUSSIAN ELECTION INTRIGUE

COMMENTARY

by Gordon M. Hahn

This month Russia held a series of gubernatorial, legislative assembly, mayoral, and municipal council elections across the country.  Russian authorities’ at all levels in the United Russia (UR) party continued use of the infamous ‘administrative resources’; that is, using state institutions to give their party and pro-Kremlin candidates an advantage, in addition to some fraud to try to control election outcomes.  Nevertheless, contestation, intrigue, and occasional uncertainty continue to emerge in some of the elections.

All of the UR candidates won in the five gubernatorial elections conducted under the new system of vetting candidates through a ‘municipal filter’ for the first time.  The UR also won all six elections to regional legislative assemblies, taking a majority in five of them.  In North Ossetia, where the UR fell short of a majority (45%), the second place finisher was the Patriots of Russia (PR) party, which is not unfriendly to the Kremlin.  Thus, in a recent meeting with activists from the UR-tied All-Russian National Front (ONF), Putin suggested it seek alliances with like-minded parties, singling out the PR for specific mention (“Vstrecha s aktivom Obshcherossiiskogo narodnogo fronta,” Kremlin.ru, 18 October 2012).  Much of UR’s success was a product of administrative resources and fraud, including the infamous ‘carousels’ which transported groups of voters around to different precincts so they can vote numerous times.

RUSSIAN FEDERATION SITREP

by Patrick Armstrong

Book plug. Please take a look at this: Putin’s New Russia. A number of us have contributed in an effort to counter the continuous outpouring of slipshod and biased reporting on Russia.

Local elections. United Russia dominated; the opposition cried foul. Turnout rather low but better in the five regions electing governors (all five drearily United Russia). But what is the “opposition” anyway? opposed to Putin yes, but agreed on what? See next.

Demos. Another large opposition demo passed off peacefully last month. The opposition is becoming more fragmented by the day; an eyewitness tells me about supernationalists yelling at PARNAS: “Russia without Jews!” and insulting gay rights campaigners; anarchists telling the white ribbon people to take up the black flag of anarchy; Udaltsov’s Red Front calling for Lukashenka to head a Russia-Belarus union; Monarchists calling Nemtsov a Russophobe. As if Nazis, Communists, and Occupy people all shared a stage shouting at each other with the occasional ???? appearing.

Udaltsov. An NTV program ran a film supposedly showing him plotting civic disorder with a Georgian politician: he insists the film is a fake. The Russian Investigative Committee has opened a case. I have nothing intelligent to say: it could be true or it could be a fabrication designed to knock him out.

RUSSIAN FEDERATION WEEKLY SITREP

by Patrick Armstrong

Putin speech. At the St Petersburg Forum. On a recurrent theme, he said that the economy must reduce its dependence on hydrocarbons and that foreign investment was necessary: “This is why we feel that creating an investment climate that is not just favourable, but truly better and more competitive, is a key issue in state policy.” A commissioner for entrepreneurs’ rights, Boris Titov, has been named (he immediately said he would press for pardons for the many in jail for economic crimes – including Khodorkovskiy. I wonder how that will play out). The government will reduce its holdings in state-owned companies. Medvedev received much attention at the start of his presidency for talking about Russia’s “legal nihilism”; well, here’s Putin: “Unfortunately corruption is without exaggeration the biggest threat to our development”. Same team, same program. In fact there are those who think Putin came back as President because only he has the muscle to take on corruption. There is a hint in the speech that he takes the G20 more seriously than the G8. An important speech to read and not read about: making Russia a more attractive place for foreign investment will be a high priority. He’s not naïve: “a fairly difficult and ambitious goal, given our position today”.

Today’s Video. Putin is a believing Christian. I heard that a long time ago and here’s a video collection.