Economic stagnation widens gap between Russian authorities and people

May 25 2018

On Friday, May 18, Free Russia Foundation and Atlantic Council organized an expert panel to discuss the politics and economics of Vladimir Putin’s fourth term as president. Experts expect further economic stagnation, with no structural economic reforms in sight, and discussed the growing gap between the Russian government and citizens.

The panel discussion included experts:

Vladimir Milov, opposition politician, economist, and energy expert and a Free Russia Foundation expert;

Anders Åslund, Senior Fellow, Eurasia Center, Atlantic Council ;

Alina Polyakova, David M. Rubenstein Fellow – Foreign Policy, Brookings Institution; Adjunct Professor of European Studies, Johns Hopkins School of Advanced International Studies.

Moderated by: Ambassador John Herbst, Director, Eurasia Center, Atlantic Council

Inadequate system and stagnation

“Russia is going through the biggest economic crisis since the collapse of the Soviet Union,” said Vladimir Milov yet “the government has no plan on how to address this.”  Living standards in Russia have decreased significantly since 2014 and the economy is dominated by ineffective state monopolies, a low level of entrepreneurship, weak growth levels and an absence of foreign investment, said Milov.

That the system is unsustainable was already clear in 2013 – a year before the war in Ukraine and political sanctions – when economic growth was just about 1 percent despite quite high oil prices at the time, said Milov.  “We built a paternalistic economy of redistribution rather than an economy that encourages private initiative, investment, innovation and increased productivity,” said Milov.

“The inadequacy of the system is understood by pretty much everybody, including a lot of people surrounding Vladimir Putin,” said Milov. Yet there is now “too much power centered around this particular figure,” who is not interested in real economic reforms.

Alina Polyakova said that despite the recent “lofty promises” of the Kremlin to focus on domestic and economic issues, it is unlikely that economic reforms are to be carried out since it “would undermine the regime itself.” “I think there is a linchpin here – for the regime to stay in power, for the Kremlin elite to stay in power, they have to maintain this patrimonial paternal system they have established,” said Polyakova. “If you think about self-preservation, which is the number one priority of Putin’s regime at this moment and for the foreseeable future, why would you do that [pursue economic reforms]?”

Anders Aslund also ruled out the possibility of any significant economic reforms in the near future. With an average of 1 percent growth over the last nine years, Putin didn’t have an economic plan before the elections, mainly running on the issue of Crimea, now in its fourth year of annexation, and after the elections he issued just “one tiny decree” with vague promises of improving the economy, with no concrete numbers, said Aslund.

Russia suffers from a steady capital flight of $30-40 billion a year – about 3% of GDP, with approximately $10-20 billion taken offshore, mainly illegally, by Putin’s cronies, according to Aslund. Russia has very little investment considering the level of its economic development, he said. Many innovators are leaving the country and the sanctions discourage Westerners from lending to Russia, whereas the country’s defense spending has increased from 3.3% of GDP in 2008 to 5.3% in 2017, and this in an economy with almost no economic growth, said Aslund.

And if one looks at the composition of the new government, which is headed by the same prime minister, who is himself suspected of corruption, and surrounded by technocrats mainly from the same inner circles, it is clear that “this is going nowhere,” said Aslund.

He added, “What we can say for sure is that there will be no reforms because Russia is a kleptocracy and it works for its rulers – it doesn’t work for its population.”

Priorities: geopolitics not living standards

While the government is occupied with geopolitics, ordinary Russians are faced with declining living standards. “We have a really huge gap between authorities and the population,” said Milov.

The majority of people support Putin’s current foreign policy initiatives – largely due to pervasive propaganda – but it is not on the list of their priorities, said Milov.  People want the government to re-focus on domestic, social and economic issues, yet this not a priority for the government.

State TV continues to talk about Ukraine, Syria and Trump, said Milov. It says that people “have to suffer” because Russia is doing great geopolitically; people “should be patient” and in some time “things are going to get back to normal by themselves,” said Milov.

People are not given the real economic picture and perspectives, and the voice of the opposition is also unable to reach the majority of the population, said Milov.  Yet people do feel there is a problem

“because of their [empty] pockets” and the opposition is working hard to reach out to them. There is a need to explain to people the link between Russia’s foreign policy and declining living standards.

Milov said that the government has been successful in spreading the message that any alternative to Putin would create “total chaos.”  Also, given the historical experience, Russian people are skeptical of radical changes and are afraid of the unknown, said Milov.

“It is quite difficult to try to change the situation, but it is also very possible and this is something that the opposition has been doing,” said Milov.

Alina Polyakova said that the regime seems to be “nervous and anxious” regarding “its own ability to maintain control,” with the population “becoming more disillusioned with the system.” The previous social contract between the government and people – to provide economic growth in exchange for political rights – seems to have been re-written since 2012 into a new form which stresses Russia’s role as a “great power” and the Russian “people have to pay for this.”  Yet is questionable how long this new contract will be sustainable, said Polyakova.

It is also essential, said Polyakova, to directly link Putin with the government in the eyes of the Russian people. Despite the low level of trust the Russian people have in the government, Putin’s approval ratings remain high as if Putin were somehow “above” the government.

Anders Aslund said that although the regime doesn’t look sustainable, one has to be cautious in assessing the future since Soviet history shows the regime “can last for many years.”

What the West can do though, said Aslund, is to continue to reveal Russian kleptocrats and their hidden money abroad. The West should continue adopting legislation that would reveal the beneficial owners of the anonymous companies offshore that are together estimated to be hiding up to $1 trillion of Russian money.

by Valeria Jegisman

The panel discussion included experts:

Vladimir Milov, opposition politician, economist, and energy expert and a Free Russia Foundation expert;

Anders Åslund, Senior Fellow, Eurasia Center, Atlantic Council ;

Alina Polyakova, David M. Rubenstein Fellow – Foreign Policy, Brookings Institution; Adjunct Professor of European Studies, Johns Hopkins School of Advanced International Studies.

Moderated by: Ambassador John Herbst, Director, Eurasia Center, Atlantic Council

Inadequate system and stagnation

“Russia is going through the biggest economic crisis since the collapse of the Soviet Union,” said Vladimir Milov yet “the government has no plan on how to address this.”  Living standards in Russia have decreased significantly since 2014 and the economy is dominated by ineffective state monopolies, a low level of entrepreneurship, weak growth levels and an absence of foreign investment, said Milov.

That the system is unsustainable was already clear in 2013 – a year before the war in Ukraine and political sanctions – when economic growth was just about 1 percent despite quite high oil prices at the time, said Milov.  “We built a paternalistic economy of redistribution rather than an economy that encourages private initiative, investment, innovation and increased productivity,” said Milov.

“The inadequacy of the system is understood by pretty much everybody, including a lot of people surrounding Vladimir Putin,” said Milov. Yet there is now “too much power centered around this particular figure,” who is not interested in real economic reforms.

Alina Polyakova said that despite the recent “lofty promises” of the Kremlin to focus on domestic and economic issues, it is unlikely that economic reforms are to be carried out since it “would undermine the regime itself.” “I think there is a linchpin here – for the regime to stay in power, for the Kremlin elite to stay in power, they have to maintain this patrimonial paternal system they have established,” said Polyakova. “If you think about self-preservation, which is the number one priority of Putin’s regime at this moment and for the foreseeable future, why would you do that [pursue economic reforms]?”

Anders Aslund also ruled out the possibility of any significant economic reforms in the near future. With an average of 1 percent growth over the last nine years, Putin didn’t have an economic plan before the elections, mainly running on the issue of Crimea, now in its fourth year of annexation, and after the elections he issued just “one tiny decree” with vague promises of improving the economy, with no concrete numbers, said Aslund.

Russia suffers from a steady capital flight of $30-40 billion a year – about 3% of GDP, with approximately $10-20 billion taken offshore, mainly illegally, by Putin’s cronies, according to Aslund. Russia has very little investment considering the level of its economic development, he said. Many innovators are leaving the country and the sanctions discourage Westerners from lending to Russia, whereas the country’s defense spending has increased from 3.3% of GDP in 2008 to 5.3% in 2017, and this in an economy with almost no economic growth, said Aslund.

And if one looks at the composition of the new government, which is headed by the same prime minister, who is himself suspected of corruption, and surrounded by technocrats mainly from the same inner circles, it is clear that “this is going nowhere,” said Aslund.

He added, “What we can say for sure is that there will be no reforms because Russia is a kleptocracy and it works for its rulers – it doesn’t work for its population.”

Priorities: geopolitics not living standards

While the government is occupied with geopolitics, ordinary Russians are faced with declining living standards. “We have a really huge gap between authorities and the population,” said Milov.

The majority of people support Putin’s current foreign policy initiatives – largely due to pervasive propaganda – but it is not on the list of their priorities, said Milov.  People want the government to re-focus on domestic, social and economic issues, yet this not a priority for the government.

State TV continues to talk about Ukraine, Syria and Trump, said Milov. It says that people “have to suffer” because Russia is doing great geopolitically; people “should be patient” and in some time “things are going to get back to normal by themselves,” said Milov.

People are not given the real economic picture and perspectives, and the voice of the opposition is also unable to reach the majority of the population, said Milov.  Yet people do feel there is a problem

“because of their [empty] pockets” and the opposition is working hard to reach out to them. There is a need to explain to people the link between Russia’s foreign policy and declining living standards.

Milov said that the government has been successful in spreading the message that any alternative to Putin would create “total chaos.”  Also, given the historical experience, Russian people are skeptical of radical changes and are afraid of the unknown, said Milov.

“It is quite difficult to try to change the situation, but it is also very possible and this is something that the opposition has been doing,” said Milov.

Alina Polyakova said that the regime seems to be “nervous and anxious” regarding “its own ability to maintain control,” with the population “becoming more disillusioned with the system.” The previous social contract between the government and people – to provide economic growth in exchange for political rights – seems to have been re-written since 2012 into a new form which stresses Russia’s role as a “great power” and the Russian “people have to pay for this.”  Yet is questionable how long this new contract will be sustainable, said Polyakova.

It is also essential, said Polyakova, to directly link Putin with the government in the eyes of the Russian people. Despite the low level of trust the Russian people have in the government, Putin’s approval ratings remain high as if Putin were somehow “above” the government.

Anders Aslund said that although the regime doesn’t look sustainable, one has to be cautious in assessing the future since Soviet history shows the regime “can last for many years.”

What the West can do though, said Aslund, is to continue to reveal Russian kleptocrats and their hidden money abroad. The West should continue adopting legislation that would reveal the beneficial owners of the anonymous companies offshore that are together estimated to be hiding up to $1 trillion of Russian money.

by Valeria Jegisman

Free Russia Foundation Calls for Urgent and Concrete Steps to Stop Putin’s Global Assassination Campaigns

Feb 11 2021

Vladimir Kara-Murza, a prominent Russian pro-democracy advocate, was closely tracked by an FSB assassination squad when he suffered perplexing and near-fatal medical emergencies that sent him into coma in 2015 and 2017, establishes a new investigation by the Bellingcat group

Documents uncovered by Bellingcat show that this is the same assassination squad implicated in the August 2020 assassination attempt on Alexey Navalny and whose member has inadvertently confirmed the operation in a phone call with Navalny.   

Bellingcat has also established the FSB unit’s involvement in the murder of three Russian activists, all of whom died under unusual but similar circumstances. 

Taken together, these independent nongovernment investigations establish the fact of systemic, large-scale extrajudicial assassinations carried out by Putin’s government against its critics inside and outside of Russia, including with chemical weapons banned by the Chemical Weapons Convention. 

Free Russia Foundation calls on the international community to formally investigate and prosecute Putin’s government for these crimes. 

Free Russia Foundation calls on the Biden Administration to direct the FBI to release investigation materials surrounding the assassination attempts against Vladimir Kara-Murza that have been denied to him thus far. 

Free Russia Foundation calls on the international community to articulate measures to compel Russia to free Alexey Navalny from his illegal incarceration where his life remains in dire danger. 

Free Russia Foundation condemns in strongest terms today’s court sentence announced to Alexey Navalny

Feb 02 2021

Continued detention of Navalny is illegal and he must be freed immediately. Suppression of peaceful protests and mass arrests of Russian citizens must stop, and the Kremlin must release all those illegally detained and imprisoned on political motives. Free Russia Foundation calls on the international community, the US and European leadership, to move beyond expressions of concern and articulate a set of meaningful instruments to compel the Kremlin to stop its atrocities.

Free Russia Foundation demands Navalny’s immediate release

Jan 17 2021

On January 17, 2021, Putin’s agents arrested Alexey Navalny as he returned to Russia from Germany where he was treated for a near-deadly poisoning perpetrated by state-directed assassins.

Navalny’s illegal arrest constitutes kidnapping. He is kept incommunicado from his lawyer and family at an unknown location and his life is in danger.

Free Russia Foundation demands his immediate release and an international investigation of crimes committed against him by Putin’s government.

The European Court of Human Rights Recognizes Complaints on Violations in “Ukraine v. Russia” as Admissible

Jan 14 2021

On January 14, 2021, the European Court of Human Rights published its decision on the case “Ukraine v. Russia”. The Grand Chamber of the Court has recognized complaints No. 20958/14 and No. 38334/18 as partially admissible for consideration on the merits. The decision will be followed by a judgment at a later date.

The case concerns the consideration of a violation of the European Convention on Human Rights related to Russia’s systematic administrative practices in Crimea. 

The admissibility of the case is based on the fact that, since 2014, the Russian Federation has exercised effective control over the territory of Crimea, and, accordingly, is fully responsible for compliance with the norms of the European Convention on Human Rights in Crimea. The Court now needs to determine the specific circumstances of the case and establish the facts regarding violations of Articles of the Convention during two periods: from February 27, 2014 to March 18, 2014 (the period of the Russian invasion); and from March 18, 2014 onward (the period during which the Russian Federation has exercised effective control over Crimea).

The Court has established that prima facie it has sufficient evidence of systematic administrative practice concerning the following circumstances:

  • forced rendition and the lack of an effective investigation into such a practice under Article 2; 
  • cruel treatment and unlawful detention under Articles 3 and 5; 
  • extending application of Russian law into Crimea with the result that, as of  February 27, 2014, the courts in Crimea could not be considered to have been “established by law” as defined by Article 6; 
  • automatic imposition of Russian citizenship and unreasonable searches of private dwellings under Article 8; 
  • harassment and intimidation of religious leaders not conforming to the Russian Orthodox faith, arbitrary raids of places of worship and confiscation of religious property under Article 9;
  • suppression of non-Russian media under Article 10; 
  • prohibition of public gatherings and manifestations of support, as well as intimidation and arbitrary detention of organizers of demonstrations under Article 11; 
  • expropriation without compensation of property from civilians and private enterprises under Article 1 of Protocol No. 1;
  • suppression of the Ukrainian language in schools and harassment of Ukrainian-speaking children under Article 2 of Protocol No. 1; 6 
  • restricting freedom of movement between Crimea and mainland Ukraine, resulting from the de facto transformation (by Russia) of the administrative delimitation into a border (between Russia and Ukraine) under Article 2 of Protocol No. 4; and, 
  • discriminating against Crimean Tatars under Article 14, taken in conjunction with Articles 8, 9, 10 and 11 of the Convention and with Article 2 of Protocol No. 4 to the Convention.

Cases between states are the rarest category considered by the ECHR. Almost all cases considered in Strasbourg concern individuals or organizations and involve illegal actions or inaction of the states’ parties to the Convention. However, Art. 33 of this Convention provides that “any High Contracting Party may refer to the Court the question of any alleged violation of the provisions of the Convention and its Protocols by another High Contracting Party.” In the entire history of the ECHR since 1953, there have been only 27 such cases. Two of them are joint cases against Russia, both of which concern the Russian Federation’s aggression on the territory of its neighboring states, Georgia and Ukraine.

New Year’s Blessings to All

Dec 30 2020

While 2020 gave us unprecedented challenges, it created transformative changes in the way we work and communicate. The hours of Zoom calls seemingly brought us all closer together as we got a glimpse into each other’s makeshift home offices along with interruption by kids and the family pets. Remote work also made us appreciate human interactions, in-person events and trips much more!

As 2020 comes to an end, we want to especially thank our supporters who continued to believe in our mission and the value of our hard work, and we hope the coming year brings all of us progress and growth for democracy throughout the world. We’d also like to thank our partners and staff in the U.S. and abroad, and we know how hard everyone has worked under difficult world changes to achieve so many of our objectives this year.

We send our best wishes to all who have stayed in the fight for democratic reforms and for the values of basic human rights. We look forward to a new year with the hope of many positive changes to come.

– Natalia Arno and the Free Russia Foundation team.