This week, Russian people learned that the imminent pension reform—one of the most sensitive but necessary social reforms in the country—is finally upon them. Two other important stories to watch: preparations for the summit between Donald Trump and Vladimir Putin, which may take place in July in Vienna, and the potential elevation of the role of the State Council as Putin’s power platform for the post-2024 period.

 

 June 19, 2018: Russian people protesting against the pension reform. Photo: URA.RU | TASS.

 

  1. The Imminent Pension Reform

The story: On June 14, Prime Minister Dmitry Medvedev submitted a bill to the State Duma on pension reform. The government will incrementally raise the retirement age, beginning in 2019. By 2028, the retirement age for men will be 65 years old and by 2034, the retirement age for women will be 63 years old. The age for receiving social pensions will also be raised. Thanks to the reform, the government will be able to increase pensions by almost 1,000 rubles per year. [Kommersant]

Details:

  • In addition to the retirement age, the government has increased the value-added tax rate from 18% to 20% starting in 2019 and increased budget investments to 0.5% of GDP. But inflation, unemployment, and GDP will remain practically unchanged.
  • Citizens are encouraged to wait for an economic boom and to retire later, though the main task of the economic reforms is to ensure a higher base level of GDP growth in the mid-2020s. [Kommersant]
  • The Kremlin is concerned that the reforms will precipitate protests. Depending on the severity of the popular reaction, the authorities may even mitigate the parameters of the reform, perhaps elongating the transition period to soften and calm the public. [Vedomosti]
  • More than 1.5 million Russians signed an Internet petition against raising the retirement age, and Press Secretary Dmitry Peskov is working to disassociate Putin from the reforms, saying the president has not participated in drafting them. [Vedomosti]

What the experts say:

  • Evgeny Gontmakher, economist: Most important to watch is the haste with which the government makes crucial decisions. In developed countries, it is customary to warn the population about raising the retirement age so that people can adapt and prepare for the new situation. This is a sharp departure for Russia, where the retirement age has not changed since the 1930s.
  • Anton Tabakh, economist: The government has chosen the easiest way to act when it comes to pensions, but that does not make the system more balanced in the long run—not least because average life expectancy is growing by about six months each year. [Novaya Gazeta]
  • Political scientists at the St. Petersburg Policy Foundation consider the pension reform a compromise by the authorities. Though the government has been unwilling to upset society, social protest as a tradition is largely lost in Russia. [New Times]
  • Boris Makarenko, Center of Political Technologies:Raising the retirement age is not about winning future elections, but about pragmatism. Still, with at least 82% of Russians against the measure, the government will have to work to regain trust.
  • It can do this by following through on its promises connected to the pension reform: increasing annual pensions by 1,000 rubles, preserving all privileges held by pensioners, protecting the labor rights of workers before they retire, and combating age discrimination.
  • If Russians over 50 are able to work and be healthy, raising the retirement age will not be perceived so much as punishment, but as an opportunity to lead a dignified life. [RBC]

More protests on the horizon? Trade union representatives are encouraging their members to hold rallies, marches, and pickets against raising the retirement age.

  • Mikhail Shmakov, Chairman of the Federation of Independent Trade Unions of Russia, has suggested bringing their position to the heads of regional governments, State Duma deputies, and members of the Federal Council.
  • On June 19, Sergei Mitrokhin, the head of the Yabloko Party’s Moscow branch, was detained after picketing near the State Duma building. [New Times]

 

  1. Putin-Trump Summit

The story: Despite new rounds of U.S. sanctions on Russian companies and individuals, it is likely that Putin and Trump will meet this July for a long-awaited summit. Trump allegedly demanded a meeting with Putin after the APEC summit in Vietnam in 2017, but was dissuaded by his then advisors, Rex Tillerson and H.R. McMaster.

Experts weigh in:

  • Vladimir Frolov: Trump believes his meeting with Kim Jong-un in Singapore has eliminated the biggest barrier to a summit with the Russian president. Putin, for his part, continues to compliment the American president, most recently on “Direct Line”—he also proposed a meeting in neutral Vienna when Trump will be in Europe for the NATO summit in Brussels this July.
  • For the meeting to be productive, Trump needs some symbolic success that demonstrates that rapprochement with Putin removes threats to the U.S. and to the world at large. This was guaranteed at his meeting with Kim with their mutual rejection of imminent nuclear war.
  • Many in Moscow now believe that rushing to a Russian-American summit is counterproductive. Instead, “strategic patience” is advised—if anything because of Trump’s mercurial temperament, which makes it difficult to broker agreements that can be nullified with a tweet.
  • The best case scenario of a summit would be a declaration of the intention to resume full-scale dialogue. Putin himself has said that, most importantly, concrete issues should be discussed in the meeting, but has yet to outline what these might be.
  • It won’t be enough for the Kremlin to relay empty statements about the joint fight against terrorism, cyber threats, and mutual non-interference in elections given the very real problems in Ukraine and Syria. Even if Putin and Trump hit it off, the U.S. president cannot rescind U.S. sanctionson Russia, which would require Moscow to restore Ukrainian sovereignty in the Donbas.
  • Still, a positive step could begin to defuse a tense atmosphere, not least because Trump understands international affairs through the lens of personal relations. The fact that Trump continues to defy his advisors’ recommendations may actually work out for him, because it means he is willing to take risks that his predecessors have not. [Republic]

 

  1. After 2024 

The scoop: Alexander Kharichev, who is currently deputy head of the Presidential Administration’s Domestic Policy Department, is rumored to be set to become head of the Presidential Directorate for Supporting Activities of the State Council. [RBC]

What it means:

  • Kharichev is a close associate of Sergei Kiriyenko, Vladimir Putin’s First Deputy Chief of Staff—the two used to work together at Rosatom, the state nuclear energy corporation, when Kiriyenko served as its CEO.
  • Kiriyenko, who oversaw Putin’s re-election campaign, has expanded his influence in the re-appointed Presidential Administration. Alongside his supervision of domestic policy and management of public projects, he was given two additional briefs: control over the Presidential Directorate for Supporting Activities of the State Council and development of information technologies and e-democracy.
  • Kiriyenko is clearly bringing his people to the key positions in the administration to strengthen his power and influence. [Vedomosti]

Why it matters:

  • Putin’s decision to restructure his administration is a sign of things to come. The move means that he is likely not planning to run in future elections (and amend the Constitution), but is looking for alternative options to remain the country’s leader. One way is through elevating the role of the State Council. [New Times]
  • Some observers note that the State Council can be emboldened to become the key body of the Russian state with Putin as its leader. [Meduza]
  • The State Council was created in 2000 as part of Putin’s administration reform. It is currently an advisory body with no real powers. It is not mentioned in the Constitution and is regulated through decrees issued by the Russian President, who also chairs the Council. [Full information on the State Council in its current form is available here]
  • This is not the first time this option has been floated in the media. Back in 2016, political commentator Valery Solovey claimed that Putin may not run in 2018 and instead would become head of the State Council, whose powers will be significantly expanded. [Ekho Moskvy]

 

Other stories that mattered this week (in Russian):

  • The New Middle Ages and Russia as a Global Guerilla Fighter”: Maxim Trudolyubov analyzes Moscow’s military strategy in response to a recent article by Michael Koffman titled “Raiding and International Brigandry: Russia's Strategy for Great Power Competition.” [Republic]
  • Who Is Shkolov? What Is the Shkolov Group?”: Andrei Pertsev details the mystery surrounding Yevgeny Shkolov and the so-called “Shkolov Group” (a popular term among Kremlinologists) and explains why he was fired from the Presidential Administration. [Meduza]
  • New Wings: Igor Shuvalov’s Family Turns Out to Own $70 Million Jet”: Forbes Russia discovered that Russia’s former Vice Prime Minister owns a Gulfstream G650, known as “the biggest, fastest, and overall best private jet money can buy.” In 2016, Alexei Navalny reported that the Shuvalov family used another undeclared $62 million private jet to transport their corgis to international dog shows.

 

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