Growth unlikely in the weak Russian economy

Mar 07 2018

On Tuesday, March 6, the Atlantic Council, a Washington-based think-tank, organized a panel discussion on the state of the Russian economy. Panelists discussed sanctions, a perceived brain drain and the absence of meaningful reforms in President Putin’s recent annual address.

The experts speaking at Tuesday’s event included:

Dr. Sergey Aleksashenko, a Senior Fellow, Global Economy and Development, Brookings Institution and Free Russia Foundation expert

Dr. Anders Åslund, a Senior Fellow, Eurasia Center, Atlantic Council

Ms. Elizaveta Osetinskaya, Fellow, Investigative Reporting Program, Graduate School of Journalism, University of California, Berkeley; Founder, The Bell

The discussion began with an overview of the state of the Russian economy by Aleksashenko, who outlined the short and long-term factors that are predicted to limit economic growth to the 1.5-2 percent range over the coming six-year political horizon. The Russian Central Bank has successfully curbed inflation, but in order to do this, it has had to raise interest rates to very high levels, making credit very expensive for businesses and thus leading to weaker growth.

Meanwhile, the Ministry of Finance is seeking to rein in its budget deficit – despite very low national debt – while not raising taxes, as promised by Putin. This is expected to lead to spending cuts, lower investment, frozen wages and pensions, and lower living standards.

In the banking sector, a crisis among banks has prompted the state to take over, with nine out of Russia’s 10 biggest banks currently in state ownership. This means banks “will sooner rely on political motivations rather than economic”, said Aleksashenko .

In addition to these macroeconomic factors, Aleksashenko said stagnation is the result of a poor investment climate depicted by the poor protection of property rights, a lack of rule of law and the clampdown on free media. Thus, businesses are not inclined to invest and this is something that neither the Ministry of Finance nor the central bank can solve.

“This is a political agenda that is in the hands of the president”, said Aleksashenko, adding that supporting rule of law would lead to Putin’s party losing its majority in the parliament. “I don’t foresee him making any progress in the next six years,” he said.

Aleksashenko also mentioned sanctions and demographics as long-term factors of weak growth. The former could lead to a growing technology gap between Russia and the West and the latter – with a shrinking labor force and an increasing number of pensioners – will add pressure on the pension system and the budget, further reducing investment.

The war over living standards

Commenting on Putin’s recent annual address to the Russian parliament, Aslund of the Atlantic Council noted that the words – reforms, sanctions, and Ukraine – were all missing from the speech. “What Putin told us is that he is not going to do reforms whatsoever for his next six-year term”, said Aslund.

Aslund outlined a number of factors harming the Russian economy: Putin’s control of the state, the FSB and the court system, cronyism and the use of state corporations for “personal benefit”.

He pointed to the $26 billion fortune amassed by Gennady Timchenko, Arkady and Boris Rotenberg and Yuri Kovalchuk. Aslund estimated that $40-50 billion leaves Russia annually and Russian individuals keep between $800 billion and $1.3 trillion abroad.

“As long as Russia doesn’t have property rights, about 4-5% of GDP leaves the country each year”, said Aslund. And there is little incentive for Putin and the elites to ensure property rights in Russia if they have property rights abroad, he said, adding that large sums of money are being kept in luxury properties in Miami, New York, and London.

Meanwhile, Aslund said, war has become a distraction for citizens suffering from the declining living standards in Russia. “Russia cannot afford serious wars”, said Aslund, adding that in the era of hybrid wars, there is less need for direct military expenditures. The panelists agreed that if Putin had to choose between military spending and higher living standards, he would choose the first.

On the bright side, Osetinskaya of UC Berkeley said that the technology sector has developed rapidly and despite some negative trends, there is a growing number of entrepreneurs who open small and medium-sized businesses. However, there is also a large brain drain, with many educated people leaving Russia due to a lack of opportunities. “The government and the state don’t address their needs”, said Osetinskaya.

Another trend is that small and medium-sized businesses have sought investment opportunities abroad, whereas the oligarchs’ fortunes are flowing back into Russia due to the sanctions, said Osetinskaya.

by Valeria Jegisman

The experts speaking at Tuesday’s event included:

Dr. Sergey Aleksashenko, a Senior Fellow, Global Economy and Development, Brookings Institution and Free Russia Foundation expert

Dr. Anders Åslund, a Senior Fellow, Eurasia Center, Atlantic Council

Ms. Elizaveta Osetinskaya, Fellow, Investigative Reporting Program, Graduate School of Journalism, University of California, Berkeley; Founder, The Bell

The discussion began with an overview of the state of the Russian economy by Aleksashenko, who outlined the short and long-term factors that are predicted to limit economic growth to the 1.5-2 percent range over the coming six-year political horizon. The Russian Central Bank has successfully curbed inflation, but in order to do this, it has had to raise interest rates to very high levels, making credit very expensive for businesses and thus leading to weaker growth.

Meanwhile, the Ministry of Finance is seeking to rein in its budget deficit – despite very low national debt – while not raising taxes, as promised by Putin. This is expected to lead to spending cuts, lower investment, frozen wages and pensions, and lower living standards.

In the banking sector, a crisis among banks has prompted the state to take over, with nine out of Russia’s 10 biggest banks currently in state ownership. This means banks “will sooner rely on political motivations rather than economic”, said Aleksashenko .

In addition to these macroeconomic factors, Aleksashenko said stagnation is the result of a poor investment climate depicted by the poor protection of property rights, a lack of rule of law and the clampdown on free media. Thus, businesses are not inclined to invest and this is something that neither the Ministry of Finance nor the central bank can solve.

“This is a political agenda that is in the hands of the president”, said Aleksashenko, adding that supporting rule of law would lead to Putin’s party losing its majority in the parliament. “I don’t foresee him making any progress in the next six years,” he said.

Aleksashenko also mentioned sanctions and demographics as long-term factors of weak growth. The former could lead to a growing technology gap between Russia and the West and the latter – with a shrinking labor force and an increasing number of pensioners – will add pressure on the pension system and the budget, further reducing investment.

The war over living standards

Commenting on Putin’s recent annual address to the Russian parliament, Aslund of the Atlantic Council noted that the words – reforms, sanctions, and Ukraine – were all missing from the speech. “What Putin told us is that he is not going to do reforms whatsoever for his next six-year term”, said Aslund.

Aslund outlined a number of factors harming the Russian economy: Putin’s control of the state, the FSB and the court system, cronyism and the use of state corporations for “personal benefit”.

He pointed to the $26 billion fortune amassed by Gennady Timchenko, Arkady and Boris Rotenberg and Yuri Kovalchuk. Aslund estimated that $40-50 billion leaves Russia annually and Russian individuals keep between $800 billion and $1.3 trillion abroad.

“As long as Russia doesn’t have property rights, about 4-5% of GDP leaves the country each year”, said Aslund. And there is little incentive for Putin and the elites to ensure property rights in Russia if they have property rights abroad, he said, adding that large sums of money are being kept in luxury properties in Miami, New York, and London.

Meanwhile, Aslund said, war has become a distraction for citizens suffering from the declining living standards in Russia. “Russia cannot afford serious wars”, said Aslund, adding that in the era of hybrid wars, there is less need for direct military expenditures. The panelists agreed that if Putin had to choose between military spending and higher living standards, he would choose the first.

On the bright side, Osetinskaya of UC Berkeley said that the technology sector has developed rapidly and despite some negative trends, there is a growing number of entrepreneurs who open small and medium-sized businesses. However, there is also a large brain drain, with many educated people leaving Russia due to a lack of opportunities. “The government and the state don’t address their needs”, said Osetinskaya.

Another trend is that small and medium-sized businesses have sought investment opportunities abroad, whereas the oligarchs’ fortunes are flowing back into Russia due to the sanctions, said Osetinskaya.

by Valeria Jegisman

Lukashenka’s Ryanair Hijacking Proves Human Rights is a Global Security Issue

May 24 2021

The forced diversion and landing in Minsk of a May 23, 2021 Ryanair flight en route from Greece to Lithuania, and the subsequent arrest of dissident Roman Protasevich who was aboard the flight, by the illegitimate Lukashenka regime pose an overt political and military challenge to Europe, NATO and the broad global community.  NATO members must respond forcefully by demanding (1) the immediate release of Protasevich and other political prisoners in Belarus, and (2) a prompt transition to a government that represents the will of the people of Belarus. 

The West’s passivity in the face of massive, continuous and growing oppression of the Belarusian people since summer 2020 has emboldened Lukashenka to commit what some European leaders have appropriately termed an act of “state terrorism.”

The West has shown a manifest disposition to appease Putin’s regime —Lukashenka’s sole security guarantor. It has made inappropriate overtures for a Putin-Biden summit and waived  Nord Stream 2 sanctions mandated by Congress. These actions and signals have come against the backdrop of the 2020 Russian constitutional coup, the assassination attempt against Navalny and his subsequent imprisonment on patently bogus charges, the arrests of close to 13,000 Russian activists, and the outlawing of all opposition movements and activities. All this has led Putin and Lukashenka to conclude that they eliminate their political opponents with impunity.  

Today’s state-ordered hijacking of an international passenger airplane—employing intelligence agents aboard the flight,  and accomplished via an advanced fighter-interceptor—to apprehend an exiled activist, underscores that violation of human rights is not only a domestic issue, but a matter of international safety and security.  Western governments unwilling to stand up for the victims of Putin’s and Lukashenka’s regimes are inviting future crimes against their own citizens. 

Absent a meaningful and swift response, the escalation of violence and intensity of international crimes committed  by Lukashenka’s and Putin’s regime will continue, destabilizing the world and discrediting the Western democratic institutions. 

CALL FOR SUBMISSIONS – THE KREMLIN’S INFLUENCE QUARTERLY

May 20 2021

The Free Russia Foundation invites submissions to The Kremlin’s Influence Quarterly, a journal that explores and analyzes manifestations of the malign influence of Putin’s Russia in Europe.

We understand malign influence in the European context as a specific type of influence that directly or indirectly subverts and undermines European values and democratic institutions. We follow the Treaty on European Union in understanding European values that are the following: human dignity, freedom, democracy, equality, the rule of law, and respect for human rights. Democratic institutions are guardians of European values, and among them, we highlight representative political parties; free and fair elections; an impartial justice system; free, independent and pluralistic media; and civil society.

Your contribution to The Kremlin’s Influence Quarterly would focus on one European country from the EU, Eastern Partnership or Western Balkans, and on one particular area where you want to explore Russian malign influence: politics, diplomacy, military domain, business, media, civil society, academia, religion, crime, or law.

Each chapter in The Kremlin’s Influence Quarterly should be around 5 thousand words including footnotes. The Free Russia Foundation offers an honorarium for contributions accepted for publication in the journal.

If you are interested in submitting a chapter, please send us a brief description of your chapter and its title (250 words) to the following e-mail address: info@4freerussia.org. Please put The Kremlin’s Influence Quarterly as a subject line of your message.

Criminal operations by Russia’s GRU worldwide: expert discussion

May 06 2021

Please join Free Russia Foundation for an expert brief and discussion on latest criminal operations conducted by Russia’s GRU worldwide with:

  • Christo Grozev, Bellingcat— the legendary investigator who uncovered the Kremlin’s involvement, perpetrators and timeline of Navalny’s assassination attempt. 
  • Jakub Janda, Director of the European Values Think Tank (the Czech Republic) where he researches Russia’s hostile influence operations in the West
  • Michael Weiss, Director of Special Investigations at Free Russia Foundation where he leads the Lubyanka Files project, which consists of translating and curating KGB training manuals still used in modern Russia for the purposes of educating Vladimir Putin’s spies.

The event will take place on Tuesday, May 11 from 11 am to 12:30pm New York Time (17:00 in Brussels) and include an extensive Q&A with the audience moderated by Ilya Zaslavskiy, Senior Fellow at Free Russia Foundation and head of Underminers.info, a research project on post-Soviet kleptocracy

The event will be broadcast live at: https://www.facebook.com/events/223365735790798/

  • The discussion will cover Russia’s most recent and ongoing covert violent operations, direct political interference, oligarchic penetration with money and influence; 
  • GRU’s structure and approach to conducting operations in Europe
  • Trends and forecasts on how data availability will impact both, the Kremlin’s operations and their investigation by governments and activists; 
  • EU and national European government response and facilitation of operations on their soil; 
  • Recommendations for effective counter to the security and political threats posed by Russian security services. 

YouTube Against Navalny’s Smart Voting

May 06 2021

On May 6, 2020, at least five YouTube channels belonging to key Russian opposition leaders and platforms received notifications from YouTube that some of their content had been removed due to its being qualified as “spam, deceptive practices and scams”. 

They included: 

Ilya Yashin (343k YouTube subscribers)

Vladimir Milov (218k YouTube subscribers) 

Leonid Volkov (117k YouTube subscribers)

Novaya Gazeta (277k YouTube Subscribers) 

Sota Vision (248k YouTube Subscribers)

Most likely, there are other Russian pro-democracy channels that have received similar notifications at the same time, and we are putting together the list of all affected by this censorship campaign. 

The identical letters received from YouTube by the five account holders stated:

“Our team has reviewed your content, and, unfortunately, we think it violates our spam, deceptive practices and scams policy. We’ve removed the following content from YouTube:

URL: https://votesmart.appspot.com/

YouTube has removed urls from descriptions of videos posted on these accounts that linked to Alexey Navalny’s Smart Voting website (votesmart.appspot.com).

By doing this, and to our great shock and disbelief, YouTube has acted to enforce the Kremlin’s policies by qualifying Alexey Navalny’s Smart Voting system and its website as “spam, deceptive practices and scams”. 

This action has not only technically disrupted communication for the Russian civil society which is now under a deadly siege by Putin’s regime, but it has rendered a serious and lasting damage to its reputation and legitimacy of Smart Voting approach. 

In reality, Smart Voting system is not a spam, scam or a “deceptive practice”, but instead it’s a fully legitimate system of choosing and supporting candidates in Russian elections who have a chance of winning against the ruling “United Russia” party candidates. There’s absolutely nothing illegal, deceptive or fraudulent about the Smart Voting or any materials on its website.

We don’t know the reasons behind such YouTube actions, but they are an unacceptable suppression of a constitutionally guaranteed freedom of the Russian people and help the Kremlin’s suppression of civil rights and freedoms by banning the Smart Voting system and not allowing free political competition with the ruling “United Russia” party. 

This is an extremely dangerous precedent in an environment where opposition activities in Russia are being literally outlawed;  key opposition figures are jailed, exiled, arrested and attacked with criminal investigations; independent election campaigning is prohibited; and social media networks remain among the very few channels still available to the Russian opposition to communicate with the ordinary Russians.

We demand a  swift and decisive action on this matter from the international community, to make sure that YouTube corrects its stance toward Russian opposition channels, and ensures that such suppression of peaceful, legal  pro-democracy voices does not happen again. 

FRF Lauds New US Sanctions Targeting the Kremlin’s Perpetrators in Crimea, Calls for Their Expansion

Apr 15 2021

On April 15, 2021,  President Biden signed new sanctions against a number of officials and agents of the Russian Federation in connection with malign international activities conducted by the Russian government.

The list of individuals sanctioned by the new law includes Leonid Mikhalyuk, director of the Federal Security Service in the Russian-occupied Crimea.

A report issued by Free Russia Foundation, Media Initiative for Human Rights and Ukrainian Helsinki Human Rights Union in December 202, identified 16 officials from Russian law enforcement and security agencies as well as the judiciary operating on the territory of the Ukrainian Crimean Peninsula currently occupied by the Russian Federation. These individuals have been either directly involved or have overseen political persecution of three prominent Crimean human rights defenders – Emir-Usein Kuku, Sever Mustafayev and Emil Kurbedinov.

Leonid Mikhailiuk is one of these officials. He has been directly involved and directed the repressive campaign in the occupied Crimea, including persecution of innocent people on terrorism charges and massive illegal searches. The persecution of Server Mustafayev was conducted under his supervision. As the head of the FSB branch in Crimea, he is in charge of its operation and all operatives working on politically motivated cases are his subordinates. 

Within the extremely centralized system of the Russian security services, Mikhailiuk is clearly at the top rank of organized political persecution and human rights violations.

Free Russia Foundation welcomes the new sanctions and hopes that all other individuals identified in the report will also be held accountable.