In this week’s roundup, Konstantin von Eggert profiles Andrei Krutskikh and his mission to “reset” Russia’s relationship with the U.S.; Alexei Firsov argues that the public image of Rosneft CEO Igor Sechin may be outdated; Andrei Movchan dissects the Russian financial sector and offers rebooting solutions; Kirill Rogov discusses the Orthodox crusade against the film Mathilda and its larger political implications; and Arnold Khachaturov writes that the Russian government is “saving up” for Crimea by taxing the wider public. If you are interested in receiving this weekly roundup in your mailbox every Friday, let us know at info@imrussia.org.

 

Rosneft CEO Igor Sechin at the Zvezda Shipyard. His public image has recently suffered from public ridiculing in the media following the so-called “sausage basket” incident (see below). Photo: Mikhail Metzel / TASS.

 

New Times: The Politics of Yesterday’s People

  • Russian journalist and political commentator Konstantin von Eggert profiles Andrei Krutskikh, the little-known special presidential envoy on cybersecurity, and explains why his mission to “reset” Russia’s relationship with Washington has failed.
  • Last week, BuzzFeed reported that in March the Kremlin gave the U.S. a document with an offer to reset relations, proposing an April meeting between Krutskikh and his American counterpart. Essentially, if the U.S. ceased to actively support Ukraine and forgot about the annexation of Crimea, Moscow was in turn willing to negotiate on a wide range of issues from Syria to North Korea.
  • Congress, state bureaucrats, and the mass media—including those in support of Trump—all rejected the plan, and a new round of confrontation between the two countries began: new sanctions, diplomatic blows, and appointments of anti-Putin hawks to high governmental positions.
  • Insiders have long understood that Russia’s Minister of Foreign Affairs Sergei Lavrov isn’t the most important actor in the country’s foreign policy—rather, there are a host of other players involved. And the Buzzfeed report shows that Andrei Krutskikh has won Putin’s special trust.
  • The details of the failed Krutskikh mission remain unknown, but why it failed, or rather why it never actually got off the ground, can be said with certainty right away: the Russian plan reflects everything out of order in Russian foreign policy, showing a particular lack of understanding regarding how American politics functions.
  • The Russian leadership continues to fail because of its own cynicism. Without an understanding of trust as a political factor, the Kremlin thought that the Americans would agree to start everything from square one and recognize Putin as the hegemon of the post-Soviet space.
  • The BuzzFeed investigation indirectly proves that Moscow’s entire scheme to assist Trump during his presidential campaign was not built on accurate calculations, but on the notion that the cynical New York developer’s entourage would quickly initiate a business-like dialogue between the two countries.
  • Maybe some saw Trump’s unconventional behavior as a chance to establish that type of relationship, but Trump is in the White House where he has special rules to follow.
  • Von Eggert concludes that the “pragmatism” and “realism” blaring out from the Russian Foreign Ministry only leads to unprofessionalism and outright mistakes.

Новое время, Политика вчерашних людей, Константин Эггерт, 18 сентября 2017 г.

 

Republic: A Lone Viking. How Is Igor Sechin’s Public Image Being Shaped?

  • Alexei Firsov, the head of Platform, a center for social design, discusses how the public image of Rosneft CEO Igor Sechin as an all-powerful Putin favorite may be outdated.
  • While his formal status remains intact, Sechin’s image has recently undergone a serious transformation in light of the changing context of his business interactions and his relationships with the upper echelon of power.
  • What makes up Sechin’s reputation in the first place?
  • Sechin’s activities continue to give rise to opponents, without creating public allies: he rose to his position at Rosneft through a series of abrasive run-ins with high-level businessmen and continued discordant relationships with Gazprom, other companies, and the media, not to mention personal issues with people like former Economic Minister Alexei Ulyukayev.
  • Today, Sechin’s biggest conflicts are with the state and with entrepreneurs. It seems that the more aggressive the expansion of Rosneft and the more active Sechin’s interests, the wider the line of conflict will grow.
  • Sechin is also characteristically solitary. It is possible that he has fallen into his own trap—that is, his exclusivity has created a “Sechin versus all the rest” scenario. In Rosneft’s most recent conflict, no one, including the elite, publicly advocated in his support.
  • Then there is Sechin’s intimacy with the president. While his relationship with Putin is difficult to describe and has its limits, at the very least Sechin enjoys special authority and carte blanche in all matters pertaining to oil.
  • But unlike in previous conflicts involving Sechin, Putin has abstained from any public support for the Rosneft chief in the latest Ulyukayev scandal—maybe to avoid conflict, maybe to search for a compromise, or maybe because he has grown tired of distracting clashes among the elite.
  • A serious factor to take into account when considering the shift in Sechin’s reputation is the story of the sausage basket, which associates him further with high-profile political conflicts. Moreover, Sechin’s emotional reaction to the released audiotapes of his encounter with Ulyukayev suggests that he has lost control over the situation.
  • Firsov concludes that Sechin’s reputation relies on an outdated model. Right now, Sechin needs to realize that the size of a company is less important than the quality of its internal processes and having a top-class team.

Republic, Одинокий викинг. Как формируется публичный образ Игоря Сечина, Алексей Фирсов, 16 сентября 2017 г.

 

RBC: Memories of Russian Banks: How to Reboot an Idle System

  • Andrei Movchan, director of the Economic Policy Program at the Carnegie Moscow Center, looks at the history of the Russian financial sector, defining key problems and outlining recommendations to create a healthier banking system and foster economic growth.
  • Over the past 15 years in Russia, more than 80 percent of banks have failed, and their number continues to decline, as does the health of their bottom lines. Neither the regulators nor the Central Bank were able to prevent or predict these failures.
  • When Russian banks emerged, both the Central Bank and the regulatory system made tax evasion, cash withdrawals, currency exchange, and money laundering much more lucrative than credit. The main task of bank owners was to accumulate funds for the privatization of enterprises.
  • While consolidating the financial sector would have been a proper response, the withdrawal of assets gave owners substantially more revenue than any potential merger.
  • Movchan notes that over time the majority of banks lost the ability to launder money with impunity and currency exchange stopped yielding large revenues, but private banks never fully adapted to better codes of conduct, as a large portion of them still belonged to state banks.
  • Growth was observed in the 2000s, but Russian banks never recovered after the 2008 crisis, and they continue to experience serious problems with revenue and inflation today.
  • According to Movchan, defects in the Russian banking system might already be so great that closing all banks, save a couple dozen, could be the best option. Those remaining would be allowed to remove all fictitious and unsecured assets and present their balance sheets to the public without the risk of losing their licenses.
  • The European banking system can serve as inspiration. The Russian financial sector should motivate the market to separate the credit and debit businesses, stimulating the emergence of non-bank credit institutions and creating a credit marketplace.
  • A sense of risk also needs to be returned to the market and state giants should be divided and sold so that in the future no more than 10 percent of the banking system’s balance rests in the hands of a single owner, particularly when that owner is the state.
  • In conclusion, Movchan writes that without these actions, the Russian banking system will remain bankrupt, only functioning as a facilitator of monetary circulation, a constant source of scandal, and a place of easy enrichment for dishonest businessmen and officials at the expense of taxpayers.

РБК, Памяти российских банков: как перезагрузить неработающую систему, Андрей Мовчан, 18 сентября 2017 г.

 

In Liberty: Mathilda in the Kremlin: From Buffoonery to Terror 

  • Political scientist Kirill Rogov discusses the Orthodox crusade against Alexei Uchitel’s film Mathilda, its ties to Russian Orthodoxy, and its larger implications in the political sphere—specifically in the upcoming presidential elections.  
  • Before the summer, State Duma Deputy Natalia Poklonskaya’s crusade against Mathilda looked mostly buffoonish, but the situation changed when the military-Orthodox organization “Sorok Sorokov” got involved.
  • By late August and early September, Orthodox activists had adopted more radical tactics, seeing the struggle with the film as a real ideological campaign à la the Black Hundreds.
  • Rogov notes that most of the tens of thousands of Russians participating in the annual St. Petersburg procession in honor of the transfer of Alexander Nevsky’s relics from Vladimir to their city were unaware that they had joined the army of opponents to Uchitel’s film.
  • Carrying signs reading “Mathilda—a slap in the face to the Russian people” during a religious procession would not have been possible without the backing of the St. Petersburg mayor’s office. This, the author argues, opened up a political-ideological front.
  • The crusade against the film presents a “different” and “authentic” Russia, one that  defends traditional Orthodox-monarchic values and opposes the sale of what is considered to be a sordid film.
  • Like the scandal surrounding the transfer of St. Isaac’s Cathedral (currently a museum) under the auspices of the Russian Orthodox Church, the protest reveals the silhouette of the “Orthodox party” in the Kremlin, which seeks a place in the forthcoming presidential campaign and in Putin’s fourth presidency.
  • The anti-Mathilda protest is the most prominent success of the “Orthodox party” in the past year and a half, especially considering Putin’s move away from Orthodox-political rhetoric to traditional authoritarian centrism.
  • Political Orthodoxy does not enjoy support in Russia and demand for the Church’s involvement in politics has only decreased since 2000. These anti-Mathilda activists and Poklonskaya’s campaign only reflect a surge of niche fundamentalist neophytes.
  • If anything, Rogov writes, the existence of these two ideologies sets a convenient tone for Putin’s presidential campaign as a centrist. The catch of this “centrism” is that one side is under severe pressure from the state machine, while the other enjoys its broad support.
  • This case also highlights the difference between Navalny’s mass protests against corruption and those of the “Orthodox party.” City hall prohibited—and riot police dispersed—the former, yet organized—and guarded—the latter.

In Liberty, Матильде в Кремле, Кирилл Рогов, 15 сентября 2017 г.

 

Novaya Gazeta: The Government Is Saving Up for Crimea

  • Journalist Arnold Khachaturov discusses Prime Minister Dmitry Medvedev’s August order to the government to allocate 165 billion rubles ($28.5 billion) for infrastructure development in Crimea and Kaliningrad Oblast over the next three years.
  • The author argues that at the moment it looks like the Ministry of Transport and the governments of Crimea, Sevastopol, and Kaliningrad are winning the fight against other ministries and Russian regions for scant federal resources.
  • The funds may come from increased fees from telecommunication providers and excise taxes on gasoline, as well as a decrease in humanitarian support in the Donbass. Due to high delivery costs to Crimea, the possibility of raising electricity tariffs is also being discussed.
  • Overall, the government’s plans to finance the budget have a fragile structure. For example, plans to increase taxes against the backdrop of implementing the so-called Yarovaya package (restrictive counter-terror and public safety measures) estimated at 17 trillion rubles ($294 billion) seem outlandish.
  • Moreover, it looks like even though Crimea—like Kaliningrad—is already a subsidized region, all Russians are now invited to take care of the construction of the Tavrida route for another 135 billion rubles ($2.3 billion).
  • Another issue is gasoline. This year, the cost of gasoline in Russia surpassed that of the U.S. for the first time, but in light of the 2018 elections, the authorities may find it too risky to increase prices.
  • For Khachaturov, two conclusions can be drawn from the current status of state finances:
    • The Ministry of Finance and other agencies are trying to integrate new taxes into the Russian system, even though the current makeup neither contributes to economic development nor reduces inequality.
    • Sharp redistributions right before the drafting of a three-year budget for the State Duma speak to major malfunctions in the budgetary process. Holes in the pockets of the state suggest that the budget will remain the main strategic task of the current government.

Новая Газета, Правительство копит на Крым, Арнольд Хачатуров, 19 сентября 2017 г.

 

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