Author Topic: Russia  (Read 71825 times)

Crafty_Dog

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Stratfor: Russia and Putin forever?
« Reply #150 on: March 31, 2020, 10:39:04 AM »
The Big Picture
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At the direction of President Vladimir Putin, the Russian State Duma is amending the country’s constitution by limiting the role of the presidency, while making different Russian branches of government more reliant on each other in an attempt to limit disruption and factional competition at the time of an actual succession. But with a constitutional amendment that would allow Putin to run for another two terms, the Kremlin is also trying to delay that inevitable transition as much as possible. 
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Russia's Internal Struggle

The Kremlin’s efforts to extend President Vladimir Putin’s 20-year presidency will enable Moscow to sustain the policies that have seen Russia reclaim its great power status, while postponing the political and socio-economic instability that could result from transitioning to a new leader. Prolonging Putin’s tenure, however, will introduce greater long-term political challenges as he ages and risks a potential health emergency while in office. But even without such a crisis, postponing a succession until 2036 will still set Russia’s political elite up for having to deal with a transition of power at a time when popular pressures will be mounting over severe economic hardships.

A New Constitution, and New Terms for Putin

On March 10, Russia’s legislature approved an amendment that would reset the count of presidential terms served prior to the introduction of the new constitution. The change will enable Putin to stand for reelection in the 2024 presidential elections, increasing his ability to serve two additional six-year terms.

The amendments will be offered for approval in a popular vote (which was initially scheduled for April 22, but has since been indefinitely postponed due to COVID-19 lockdown measures). Approval is legally binding and would immediately alter constitutional provisions. But he Kremlin’s tight containment of opposition activity  — and the fact that a referendum is not technically required to approve the amendments despite the veil of popular endorsement it’d provide — mean that the constitutional changes will pass one way or another.
 
Despite keeping Putin in power for longer, the new constitution will also erect limitations and balances between the different governing bodies of Russia in an effort to reduce the executive power of Putin’s eventual successor. These amendments include a stricter observation of presidential term limits, meaning future Russian presidents will only be able to serve two terms total in their lifetime. They also shift the responsibility for appointing certain cabinet positions — primarily those dealing with Russia’s economy — to the Russian State Duma rather than the presidency, which will maintain the right to appoint security- and foreign policy-related ministries. This separation of responsibilities will force the different branches of government to actively cooperate to access Russia’s resources of power.

What 12 More Years Could Bring

Putin has remained vague about his intentions, though he is widely expected to seek reelection under the new rules. With no clear designated successor, he is likely to seek another term to groom his replacement. If he is unable to find a fitting successor over those four years, there’s a good chance Putin may well run again in 2030.

His likely reelection would foster stability in Russia’s state-led economy, as Moscow focuses on driving domestic growth, diversification and self-sufficiency. Russia’s foreign policy would also continue to revolve around Putin’s goal to reestablish Russia as a great power.

•   As Russian conventional military power has waned, Putin has prioritized Russia’s nuclear capabilities and deterrence abilities while supporting individual allies around the globe with military and financial assistance. 
•   Moscow has already tried to reduce its dependence on the hydrocarbons sector, placing a greater emphasis on the development of high-tech capabilities, with different state-owned entities spearheading efforts to develop quantum computing and artificial intelligence.
•   Putin’s policies will also continue to lead to potential escalations and standoffs in proxy conflicts in Ukraine, Iran and Syria.
Putin’s age and general health over the next twelve years, however, could risk this strategy. At 67, his focus on physical fitness and apparent robust health has enabled him to reach and likely succeed the average life expectancy for Russian men (which is 68). However, the remaining four years of his current term, combined with the prospect of another twelve years in office, would make him 83 years old at the end of a final term — greatly increasing the risk of a health crisis, or even his death, while in office.

Postponing a succession until 2036 will still set Russia’s political elite up for having to deal with a transition of power at a time of severe economic hardships.

Multiple Axes of Transition

Shifting Russia’s next presidential transition to 2036 risks weakening Kremlin leadership at a time when the country is already expected to face significant economic and demographic crises. By about 2035, Russia will begin experiencing the next significant contraction of the size of its working population, exacerbating the imbalance in social spending and economic potential. Around the same time, Russia’s hydrocarbon production is also expected to have dropped significantly. Russia’s Ministry of Energy is projecting as much as a 40 percent drop in production by 2035, which will severely impact Russia’s government revenue and industrial strength. A succession in 2036 could devolve the centralized authority that Putin has commanded, as well as weaken the consensus and institutional cooperation needed to manage these challenges, by unleashing competition between the country’s different commercial-industrial factions, security organizations and political factions.


DougMacG

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Re: Russia is broke
« Reply #152 on: May 14, 2020, 06:59:44 AM »
https://www.bloomberg.com/news/articles/2020-05-14/russians-running-out-of-money-add-pressure-to-end-virus-lockdown?sref=nXmOg68r

Rest of the world mostly hit harder than US, especially places that relied on oil revenues.

Crafty_Dog

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GPF: For Russia the future is north
« Reply #153 on: June 22, 2020, 03:47:16 AM »
For Russia, the Future Is North
Stabilizing its Arctic regions is becoming a priority for Moscow.
By: Ekaterina Zolotova

The fall of oil prices and the campaign to manage the coronavirus pandemic have taken a toll on Russian finances, perhaps nowhere more so than in the regions of the Arctic. In the Yamalo-Nenets Autonomous District and the Komi Republic alone, regional revenue fell by 60 percent compared with last year. The Krasnoyarsk Territory and Murmansk Region were also significantly affected. And while this is a sign of hard times to come for the people who live there, these oft-overlooked regions, which are among the biggest oil and natural gas producers for a national economy that relies heavily on oil and natural gas, also affect the financial stability of the country writ large. The Kremlin understands as much and, if push comes to shove, will make it a priority to maintain the economic health of the Arctic regions. But given its budgetary shortfalls, it will struggle to do so.

When the Soviet Union collapsed, the Russia it left behind was a much more “northern” country. It lost the fertile lands of Ukraine and Central Asia, and there was only so far it could expand south into the newly formed countries beneath it. And so the Arctic, which constitutes about 20 percent of Russian territory, has become a space in which Moscow can gain leverage and military and economic power.

Indeed, the region is considered by many to be essential to Russia’s becoming a great power again. For centuries, the Arctic was a liability, a natural border that hindered Russian expansion. Now, as climate change melts the ice and as technological development creates more opportunity, it’s an asset, one that can someday be a hub for trade and military activity. More important to Moscow, it’s a resource to mine. About 41 percent of all the Arctic’s oil and gas resources are located in Russian territory. More than 80 percent of Russia’s gas and about 17 percent of its oil is produced here, accounting for about 10 percent of the country’s gross domestic product and about 25 percent of Russia’s exports, and contributing some 15 percent to the government budget. (The Yamalo-Nenets Autonomous District itself accounts for about 43.5 percent of the total resources of the Arctic.) The region is also a potential source of rare earth elements.
 
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The promise of the Arctic has naturally attracted other countries that are now in direct competition with Russia over its potential benefits, including Denmark, Canada, Norway, Iceland, Sweden and the United States. Even countries that don’t directly border the Arctic – especially those in the Asia-Pacific – are showing interest, since the proposed North Sea trade route would significantly reduce the delivery time between Asia and Europe. To get a leg up on the competition, Russia needs a strong military, economic and commercial foundation. To that end, it has been expanding its military bases and its Arctic Fleet and has slowly begun to construct viable ports for the long term. Year-round, in particular winter, navigation cannot be carried out without a fleet of powerful atomic icebreakers, which need ports and other infrastructure. The government in Moscow knows that if it ever wants to establish such a fleet, it needs to start now.

Which is why the Kremlin wants to strengthen the region’s economy by attracting investments and qualified personnel, and by building infrastructure. Oil extraction, and therefore the expansion of Russian influence, requires a constant influx of skilled labor, modern technologies and infrastructure and, of course, the support of the local population. The collapse of the Soviet system had a huge impact on the development of the Arctic – production in Yakutia-Sakha and Chukotka decreased, some mining centers and industrial settlements were completely abandoned, poverty and unemployment rose, and the reduction in northern benefits accelerated the outflow of the population from the region. Regions like Yamal-Nenets and even Murmansk lost about 20-25 percent of their population.

Moscow knows from the experience in the immediate aftermath of the Soviet Union’s collapse that without financial and tax incentives, it will be difficult to keep a skilled population, capable of supporting economic projects in regions with a climate as harsh as that in the Arctic. In Soviet times, the government factored in the “cost of cold,” so sometimes wages in the Arctic were as much as four times higher than in other regions of the Soviet Union. This is why my grandparents moved from central Russia to Murmansk, and indeed, in the 1970s they could afford much more than people from Moscow. But even today, the region, which sports Russia’s highest per capita incomes, continues to attract labor.

It’s a good thing, too, because job vacancies in the region among resource extraction and industrial construction companies are growing. To stimulate labor inflows, the government has introduced the “northern allowance,” a bonus added on to wages. The size of the bonus depends on the region. For example, in the Chukotka Autonomous District, employees receive a bonus of up to 100 percent of their salaries, whereas in Yamalo-Nenets the bonus is 80 percent. This is why some northern regions like Yamalo-Nenets have the country’s highest level of family welfare. An average family with two children in Yamalo-Nenets in 2019 had almost 90,000 rubles ($1,300) left each month after covering the minimum expenses, compared to 55,000 rubles in Chukotka Autonomous District and 52,000 rubles in Nenets Autonomous District. In the region of Moscow, by contrast, the same family would have had about 40,000 rubles left. Average monthly wages in Chukotka and Yamalo-Nenets are also higher than in Moscow and other regions – 109,300 rubles and 102,100 rubles, respectively, compared to 95,000 rubles in Moscow.
 
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The government is trying to attract skilled workers in other sectors besides energy to come to the Arctic areas. For example, Moscow promised a one-time bonus of up to 3 million rubles for medical workers. In addition, the state is trying to attract investment and entrepreneurs by providing tax benefits and other tax advantages. Support is provided for the construction of ports, such as a zero income tax rate for 10 years or zero value-added tax on services for sea transport of export goods and their icebreaking support.

Because of low oil prices, the OPEC+ production cut and the overall economic slowdown, exploration and mining are on the decline, and there’s less investment flowing into the region. If the situation leads to an erosion of salaries or social benefits, people may begin to gradually leave the region, just as they did in the 1990s. But there are limits to how much financial aid Moscow can offer to prop up life in the Arctic, including for political reasons; already there is infighting within the Ministry of Finance, and there’s discontent in other regions, such as the Caucasus, due to insufficient funding. Even within the Arctic itself there is a rivalry between regions over funding.

To streamline its support policies and minimize dissatisfaction, the Kremlin has been considering optimizing the Arctic space and is striving to create an Arctic federal district. Yet this idea, too, sparked a backlash. The region is very divided in terms of population and wealth, and different regions have different opinions on ideal economic strategies and ecological questions. The indigenous population is dissatisfied with the activities of large Russian energy companies that often cause the destruction of their indigenous environment. Moreover, the ruling United Russia party is not strong in all the Arctic regions. The Kremlin tried to merge the Arkhangelsk Region with the Nenets Autonomous District last month, during the height of the country’s coronavirus outbreak, but was forced to back down in the face of local protests.

The slump in oil prices and the broader economic downturn will damage Russia’s efforts to develop the Arctic. Without financial
incentives and development, critical investment and specialists could even begin to move out of the region. This could put Russia at a disadvantage in the international race for influence in the Arctic. The Kremlin will make significant efforts to prevent this outcome and keep up the pace of economic development in its Arctic regions.

Crafty_Dog

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GPF: Russia considers new economic model
« Reply #154 on: December 02, 2020, 10:13:05 AM »
Russia Considers a New Economic Model
Moscow’s tone about the future of the economy has changed.
By: Ekaterina Zolotova

The flaws in Russia’s economy might be too deep to gloss over. At an annual civil forum in Moscow on Saturday, Alexei Kudrin, the chairman of Russia’s Accounts Chamber and finance minister from 2000 to 2011, spoke rather pessimistically about the Russian economy. He predicted a drop in economic output this year of 4.5 percent, a significant fall in living standards and that 1 million more people will slide into poverty. It’s no secret that the Russian economy is under serious stress – made worse by the coronavirus pandemic – but Kudrin’s remarks were unusual for a government that has been promoting the rehabilitation of Russia’s economy by 2022. Given the unavoidable economic difficulties ahead, the Kremlin appears to be changing tone and priming the public for more hardship – and potentially a massive economic transformation.

From Bad to Worse

At the forum, Kudrin said Russia needed a new economic model, and it’s hard to argue with that. Oil remains the backbone of the Russian economy. Approximately half its exports are of mineral resources (mostly natural gas and oil), and oil and gas revenues make up about 30 percent  of its federal budget (and that’s excluding tax revenues from oil and gas giants like Rosneft and Gazprom). The pandemic, however, has cratered economic activity, and thus demand for energy, and OPEC+ members including Russia agreed to cap production for the time being. In these circumstances, it is difficult for an economy that depends on energy exports to remain afloat. And even after demand recovers, Kudrin said he believes oil consumption will start to decline from its peak in the next 5-10 years, forcing Russia in the 2030s to shift away from oil exports.

One significant challenge is finding an effective economic model that can ensure Moscow’s continued control of its vast territory and far-flung regions. Today, the Kremlin maintains control using not only the security apparatus and political institutions but also the redistribution of budget revenues between regions. These revenues, however, depend on the oil and gas industry. Beyond its own borders, Moscow has offered neighbors discounted energy in exchange for greater regional influence and security, defending itself and its sphere from encroachment by China in the east, Turkey in the south and Europe in the west. But as the role of oil and gas in the Russian economy declines, the Kremlin will need its new economic model to serve a similar purpose with respect to building and maintaining allied relations with its neighbors.

During his speech at the civil forum, Kudrin suggested that what Russia’s economy needs is “revolutionary deregulation.” He recommended a model he called NEP 2.0 to encourage entrepreneurship, a reference to Lenin’s New Economic Policy of the 1920s following Russia’s Civil War. Under the original NEP, the Soviet Union temporarily turned toward state capitalism and away from extreme centralization – with noticeable success. By 1928, the national income had surpassed prewar levels and the material situation of citizens of all stripes had grown more stable. But when Stalin took power that same year he abandoned the NEP, whose legacy remains controversial in Russia to this day.


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The situation in Russia in 2020 isn’t even close to as bad as it was in 1921, but it’s going to get worse. Kudrin, after touting Russia’s victory over extreme poverty, said COVID-19 would by the end of the year force another 1 million Russians into destitution. In the second quarter of 2020, Russians’ real disposable income fell by more than 8 percent, and it dropped by another 4.8 percent in the third quarter. Leaders in Moscow apparently see the COVID-19 recession as an opportunity to implement transformational change.

A New Model

The Kremlin could, for example, claim that raising living standards and rescuing private small and medium-sized enterprises at this time will be too difficult, given the current extraordinary challenges, and save what’s left of its public funds for future use. Indeed, though Moscow has said it’s prepared to help stimulate the economy, it has been hesitant to pile more stimulus on top of its initial efforts to aid Russian businesses. In this way, it’s leaving the economic recovery in the hands of the Russian people. It believes that the economy will continue to chug along, while the state continues to manage key sectors including much of heavy industry and transport. (During the lockdown, the public sector appeared more stable than the private sector, so state-owned enterprises could also use this as an opportunity to dominate the market even more than they had before.)

Though Russia still has substantial reserves in its national wealth fund – roughly 13 trillion rubles ($170 billion) – it’s not in any hurry to spend them to prop up large Russian corporations. It sees relying on SMEs as a better method of stimulating economic recovery, in part because they don’t require the same level of financial support that large firms do, and in part because individual SME owners can’t challenge the Kremlin the same way powerful oligarchs who control massive Russian corporations can. So by allowing SMEs to take on the bulk of the responsibility for economic recovery, the Kremlin ensures that its own influence in the regions outside of the capital isn’t overrun by other wealthy interests.

Moscow is also using this time – while many countries’ economies are stalled by the pandemic, and while the United States is preoccupied with the presidential transition – as an opportunity to improve relations with the western buffer states and increase its influence among its neighbors. After negotiating a peace deal between Azerbaijan and Armenia over the Nagorno-Karabakh conflict, Russia secured a long-term presence in the South Caucasus by including in the deal a Russian peacekeeping force that will monitor the cease-fire. To its west, Russia saw President Alexander Lukashenko elected to another term in Belarus in August, and since the disputed election, he has been looking to Moscow for even more support and cooperation. Meanwhile, the conflict in eastern Ukraine remains frozen, which suits the Kremlin just fine.

One of Moscow’s key tools of projecting influence in the post-Soviet states is the Eurasian Economic Union. The head of the group’s executive body, the Eurasian Commission, said this week that the bloc was moving into a new phase of integration and ready to build projects worth $200 billion. A long-awaited draft agreement on gas prices and tariffs on gas transport – which will essentially create a common market for natural gas – is expected next year. (Members are still divided on this issue, however, meaning an agreement may be hard to come by. Belarus and Russia will therefore continue to negotiate between themselves while they await a broader deal.) In addition, Russia is spending millions to support external economies, even while its own economy struggles. It provides Kyrgyzstan, for example, millions of dollars’ worth of financial assistance. It is also considering financing the second stage of a project to increase production of hydrocarbons in Uzbekistan and has provided the country with loans worth $650 million. And it has also issued Belarus $1.5 billion in loans.

In the short term, the Russian economy will survive. In the long term, it will need substantial changes. It continues to depend too much on profits from oil and gas exports, which were previously used as an instrument of influence and control for the state. It now needs to look for new tools with which to maintain state power at the lowest possible cost. While the pandemic has presented many countries with enormous challenges, it may also present Russia with an opportunity to conduct an experiment in economic reform. And if the experiment succeeds, it could help the Kremlin fulfill both of its key imperatives: to preserve the unity and power of the state, and strengthen its power within the broader region.

Crafty_Dog

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GPF: Russian Far East
« Reply #156 on: February 22, 2021, 08:54:36 PM »
Brief: Competition Over Russia’s Far East
The remote district is quickly becoming more strategically important to Russia – and thus to the region.
By: Geopolitical Futures

Background: The Russian Far East is the largest federal district in Russia and the farthest from Moscow. And because of its energy resources and access to the Pacific Ocean, it is quickly becoming more strategically important to Russia – and thus to the region.

What Happened: Several meetings are worth noting. On Feb. 20, the head of Russia’s Corporation for the Development of the Far East and the Arctic met with India’s ambassador to Russia to discuss regional development. They pledged to continue negotiations over a plan for India to supply the area with coal. A few days earlier, after meeting with Russian Foreign Minister Sergei Lavrov, India’s deputy foreign minister visited the Russian Diplomatic Academy, where he made clear that one of the goals of his trip was to enhance economic cooperation with the Far East. This is in addition to discussions Russia held with India (and Japan) some two weeks ago over economic, investment, scientific and technical cooperation in the region.

Bottom Line: Financial constraints have kept Moscow from developing the Far East as much as it would like. Instead, China is the district’s most important investor and trade partner. China is also, however, a regional competitor of India, which is clearly trying to compete with and undermine the influence of China in the region. To that end, it is finally implementing the “Act Far East” policy Prime Minister Narendra Modi announced in Vladivostok in 2019 – a policy meant in no small part to counterbalance Beijing. As for Russia, developing the Far East, even with foreign partners, generally serves Moscow’s purposes. China is much less happy with the competition.