Institute of Modern Russia

Vedomosti: Living Immortality

• Author: philosopher Alexander Rubtsov, head of the Centre for Philosophical Studies of Ideological Processes at the Russian Academy of Sciences.
• Rubtsov discusses New Year’s programming on the Russian TV networks and concludes that in a sense it is the country’s life in miniature as it reflects the general trajectory toward the conservation of every sphere of national life—politics, economy, propaganda, redistribution of administrative resources, or usage of business strategies.
• One can even see the level of Russian innovations, writes Rubtsov sarcastically: who else in the world has such colorful and extraordinary fireworks?
• Rubtsov notes that the overwhelming majority of Russian people watch TV. Even those who hate it still watch it just to scoff.
• Through the TV set people can see into all kinds of corruption schemes employed by the state corporations, the scale of government spending on all sorts of mega-projects and extremely expensive events, including the non-stop New Year entertainment shows.
• The author calls this economic style “beauty [that hits you] right in the face,” which means that everything is very kitsch and superfluous, at least the way it looks. In terms of richness and scale, such New Year programs can be metaphorically compared to the Olympics.
• However, Rubtsov argues that by imposing all this splendor on the audience, the regime is trying to camouflage the dull conservation of content and style. The celebrities don’t change, it’s the same old faces that no longer represent fashionable retro or vintage. Everything looks pretentious; all the clichés are presented as elements of some major universal style.
• One cannot help but draw parallels with Russian politics with its irreplaceable leader, hierarchies, and filters. Russian show business has its own “opposition groups,” its own loyal Young Guard, whose role is to legitimize the show-biz equivalent of the Politburo.
• Rubtsov concludes that this New Year’s TV programming marked the apotheosis of the conservation trend, leaving a vague premonition that a storm is brewing.

Ведомости, Живое бессмертие, Александр Рубцов, 8 января 2017 г.

New Times: Valery Solovey: The Authorities Are Walking on Lava

• New Times’ editor-in-chief Yevgenia Albats interviews Valery Solovey, professor at the Moscow State Institute of International Relations (MGIMO).
• Solovey envisions that 2017 marks the beginning of a serious political crisis in Russia that will last two to three years, and the 2018 presidential elections will be a crucial element of that process.
• According to Solovey, the authorities scrapped two social contracts in the last five years: the first is economic growth at the expense of political participation; the second is restoring Russia’s status as a great power at the expense of living standards.
• People are prepared to suffer if they are given hope, writes Solovey, but when the government says that stagnation will last for a decade, their behavior changes. Solovey argues that even though currently there are no signs of social tension, the authorities “are walking on lava, beneath which is a volcano.”
• 2016 was a turning point: the year when politics penetrated every layer of public and private life; everything became politicized—from art to facebook “likes.” No one feels safe when even ministers can be arrested, and the elites are on edge.
• Solovey argues that the Russian elites have developed “Stockholm syndrome.” They understand that the country is moving in the wrong direction but feel they have to comply because they are part of the system. They hope that oil prices will eventually rise, Putin will make friends with Trump, and everything will return to the 2014 status quo.
• With Navalny’s presidential bid, the Kremlin will have to wait and see what transpires: if nothing major happens in the world or inside Russia, Navalny may get a shot at a presidential run. Solovey believes that under certain circumstances Navalny may even have a pretty good chance of reaching a runoff, which could break the political situation in the country.
• Solovey also speculates that Putin might be having health issues, and he could be still deciding whether to run in 2018 at all. There are several options that the Kremlin may be considering, one of which is creating the position of vice-president specially for Putin. Sergei Kiriyenko would be tasked with overseeing any corresponding constitutional reform.
• As a potential successor Solovey names Dmitry Medvedev, since he is one of a very small number of people that Putin truly trusts. Solovey dismisses Sechin, whose role is to be the “flak-catcher.”
• Besides, Sechin may be busy preparing for a new attack—this time on Lukoil, one of Russia’s largest privately owned oil companies. Rosneft’s acquisition of Lukoil is only a matter of time, concludes Solovey.

New Times, Валерий Соловей: «Власть ходит по лаве», Евгения Альбац, 9 января 2017 г.

Carnegie.ru: Briefly on the Main Issue: Russian Economy 2017

• Author: Andrei Movchan, director of the Economic Policy Program at the Carnegie Moscow Center.
• Movchan argues that due to the “war of delusions,” over the last 25 years the Russian economy has missed a number of unique opportunities for a breakthrough and returned to a state reminiscent of the early 20^th century in terms of its political and economic order.
• One of the key reasons for this is the extremely simplified views of the economic situation and prospects, coupled with naïve and primitive approaches to government and situational analysis.
• In the 21^st century, the Russian economy is suffering from a classic case of Dutch disease aggravated by further centralization of power and property and by the lack of democratic institutions. However, due to high oil prices in the noughties the country accumulated enough reserves to prevent economic collapse today, following the decline of oil prices and international isolation.
• None of Russia’s economic factors or administrative resources either  negatively impacts on the economy or provides growth. Foreign factors, e.g. sanctions, have a small effect, although the Russian authorities use them to justify the country’s economic problems.
• In 2017, one should not expect any surprises from the Russian economy—neither positive, nor negative.
• The banking sector will be the weakest link in the foreseeable future. Plus, there are other “weak spots” that may be prone to catastrophic changes.
• The Russian government deals with these challenges not by implementing reforms, but through preserving the budget deficit at an acceptable level in the short term at the expense of long-term development.
• The government’s key strategy is to gently increase taxation and decrease budgetary commitments. However, Movchan projects that starting in 2019, taxation will accelerate, the government’s internal debt will start to accumulate, and the budget will see limited money creation.
• Later, but not before 2022-2024, the government will likely expand its money creation program, attempt to control trans-border capital movement and prices, and limit currency exchanges.
• Overall, Russia is far from economic collapse and losing governability, but it is slowly moving in that direction. If the authorities avoid dire errors, the country can survive at the margin of safety for at least six to ten years, or more. After that, urgent measures will be required to preserve Russia’s integrity and governability.
• Movchan concludes that, judging by public sentiments, the authorities will likely choose different measures: toughening control, furthering nationalization, closing the economic space, and simplifying the economic structure.

Carnegie, Коротко о главном: российская экономика — 2017, Андрей Мовчан, 29 декабря 2016 г.

Meduza: How many rich people are there in Russia and what do they own?

• Meduza fact-checked Aleksei Navalny’s pre-election manifesto and raised many questions, highlighting a number of errors in the process. Navalny argues back.  
• One of the issues that caused a stir was the following thesis: “Russia is a rich country, but the overwhelming majority of its people are poor. 88 percent of national wealth is owned by 0.1 percent of the population: oligarchs and high-ranking officials. Inequality and injustice have become the fundamental pillars of Russia.”
• Meduza argues that these are erroneous numbers, likely imported from a number of Russian publications based on a report by New World Wealth, a wealth research company.
• The report claims that 62 percent of the country’s wealth is owned by dollar millionaires, and 26 percent by billionaires. Journalists combined the two figures and made 88 percent, but in actual fact billionaires were already included in the number of millionaires.  
• In his recent letter to Meduza, Navalny cites another source: The Global Wealth Report, which is based on the research of Credit Suisse Bank.
• Credit Suisse categorizes the numbers of rich people in any country in various groups: holding 1-5 million dollars, 5-10, 10-50, 50-100, etc. up to 500 million to one billion dollars and higher.  
• Based on the report data Navalny’s team calculated the cumulative wealth of Russian millionaires and billionaires at $980.4 billion. While the cumulative wealth of the Russian population is known to be around $1.13 trillion dollars, the portion of millionaires is calculated to be 87.07 percent.
• In total, people holding no less than a million dollars in Russia can be counted at a little over 79,000, or 0.7% of the adult population.  
• Meduza still doubts this number, arguing that the wealth of Russia’s richest people is unlikely to be distributed evenly. The same Credit Suisse report shows the distribution of combined wealth by each 10 percent from the poorest to the very richest people. These numbers suggest that 89 percent of the combined wealth in Russia belongs to 10% of the Russian population, not 0.7 or 0.1 percent.  
• The report data also shows that 5 percent of the richest Russians hold 84.8 percent of the combined wealth of the country, while 1 percent own 74.5 percent.
• Meduza concludes that the inequality gap in Russia is indeed large—bigger than in any other country that Credit Swiss has analyzed. Nevertheless, the gap is not as big as Navalny claims it to be in his pre-election manifesto.  

Meduza, Так сколько все-таки в России богатых и чем они владеют?, 9 января 2017 г.

RBC: How can Russia respond to Trump’s nuclear initiatives?

• Author: Peter Topychkanov, fellow at Carnegie Moscow Center’s Nonprolifiration Program.
• President-elect Donald Trump has not yet made an official public statement on nuclear weapons. However, Trump caused an uproar at the end of December when he tweeted that America should seriously strengthen and expand its nuclear capabilities until the rest of the world “gets its act together on nuclear weapons.”
• Trump was also quoted to supposedly have said “let there be an arms race”.
• Topychkanov argues that Moscow’s silence in the face of Donald Trump’s radical revelations could signify a new era in the world of nuclear armament.  
• Moscow is likely aware of Trump’s plans, and this restraint in itself could be political posturing. The Kremlin is sending a message to the new U.S. administration: turn away from the current conflict in bilateral relations in the interest of cooperation.  
• U.S.-Russia nuclear cooperation before Trump most recently included the signing of the New START treaty, despite disagreements on control over nuclear weapons, particularly over medium and short-range missiles, as well as anti-missile defense. Still, the two countries often found common ground on nuclear nonproliferation.  
• According to Topychkanov, Trump’s phrase “let there be an arms race” should be taken with caution. The very possibility that the U.S. will strengthen its nuclear arsenal should worry Moscow.  
• It is well-known that Trump is very critical of Iran’s nuclear program, which Moscow supports unquestionably. Another point on which Trump’s stance contrasts with the Moscow line is whether South Korea should have nuclear weapons. The Kremlin contends that neither of the Koreas should have any.
• Recall that in 2014 Putin remarked that both Russia and the U.S. need to continue reducing their nuclear arsenals: “The fewer nuclear weapons in the world, the better.”
• Moscow’s silence on the nuclear weapons issue is unlikely to last long. Soon it will face a choice between three different scenarios:
  • 1. Openly define the “red line” and confirm its adherence to the principles of nuclear control and nonproliferation.
  • 2. Try to mend the disagreement (and the distrust) between Moscow and Washington behind closed doors.
  • 3. Silently agree with Trump’s revelations and move toward tearing up the previous treaties.
• Topychkanov concludes that Moscow is likely to try to bring about the first two options, for the third has potentially apocalyptic consequences.  

РБК, Линии сдерживания: как может ответить Россия на ядерные инициативы Трампа, Павел Топычканов, 10 января 2017 г.

Nathan Andrews helped compile this week's roundup.