A year of turbulence
Celebrate the “yolka”
From ISIS attacks to the ruble’s nosedive — how Russia experienced 2015
Russian children ring in the new year with special performances
ALEXNDR ELISTRATOV / TASS
The New York Times Wednesday, December 16, 2015
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NEWS IN BRIEF
Global Warming After the deal in Paris, Russia faces the challenge of meeting its pledge
Russia denies plans to increase airbases in Syria
Moscow Signs on for Greener Future Russia has set an example for the world in combating greenhouse gases, but the country’s continued reliance on energy extraction and Soviet infrastructure means that much remains to be done. WOODROW CLARK, DIMITRI ELKIN SPECIAL TO RBTH
The UN climate conference in Paris went into overtime, but with the text of the agreement finally ready, the summit looks like a success. Against the odds, leaders of 195 countries now seem to be on the verge of reaching a unanimous agreement to combat climate change. Russia played a constructive role in the Paris process, and it can claim its share of the credit in COP21’s eventual success. For Russian President Vladimir Putin, who attended the summit, its positive outcome should give the sense of, if not accomplishment, then at least some geopolitical relief. For the first time in nearly two years, Russia was not singled out as a unique threat to the world order, and meetings in Paris between Putin and U.S. President Barack Obama, and with British Prime Minister David Cameron, indicated that Russia may have found some common ground with the West on the issues of terrorism and climate change.
Putin’s address delivered at the start of the summit was short — five minutes — but to the point. “Climate change is one of the greatest threats humanity is facing,”he said, noting that improving energy efficiency and reducing greenhouse gas emissions is an important priority for Russia. From 2000 to 2012, Russia reduced its energy consumption by 33.4 percent. An additional reduction of 13.5 percent is projected by 2020. Putin noted that Russia went above and beyond its obligations under the Kyoto Protocol to reduce greenhouse gases. The amount of additional greenhouse gas savings by Russia is equivalent to the global greenhouse gas output over the course of one year, he said.
Successes and failures During the 2000s, Russia adopted a new energy policy that required the reduction of greenhouse gases. During the same period, Russia doubled its GDP. These numbers show that economic development and environmental conscienciousness do not have to be mutually exclusive. Russia’s progress is impressive, but it should be noted that it was achieved, in part, because Russia started with a very low base. Endowed with the Soviet’s industrial assets, Russia’s economy is still one
of the most energy-intensive. According to Moscow State University economist Pyotr Kiryushin, in 2012 Russia used twice as much energy per dollar of GDP than the U.S. In part, Russia’s high energy consumption is explained by its location. But other major factors include outdated Soviet technology and energy subsidies that encourage overuse of fossil fuels. Not surprisingly, the major contributor to greenhouse gases is the fossil fuel industry itself. In 2009, oil and gas extraction was responsible for 50.4 percent of all industrial pollution in Russia. Some progress has been made in many sectors of the Russian economy. Examples of improvements are numerous, but two cases are worth noting. Russian electricity-generating stations are increasingly using natural gas instead of coal and oil, and Russian automakers, including the Kamaz truck manufacturer, have adopted stringent European emission standards for their engines.
No resting on laurels For Russia, achieving future progress will be more difficult, as the low-hanging fruit has already been collected and further progress will require investment. During the postSoviet period, Russia still enjoyed the Soviet industrial dowry, which
Media reports alleging that Russia is planning to increase the number of its airbases in Syria are untrue, according to Viktor Ozerov, head of the defense and security committee in the Federation Council, the upper house of Russia’s parliament. “As far as I know, it’s not so,” Ozerov told Russian news agency Interfax when asked whether such reports were true. A number of media outlets reported earlier that Russia planned to increase the number of its airbases in Syria, in particular, by expanding an airbase in the Homs region for deploying fighters, and using another, at Al Tayas, for its helicopters. “We can talk about increasing the number of our planes rather than about expanding our military bases today,”Ozerov said.“Our Western partners are again trying to foment tensions. There is the impression that they are striking terrorists with one hand, and are eager to do all they can with the other so as to compromise Russia.”
is now nearly fully utilized. Improving energy efficiency and conservation further will require capital investment. Some improvement may come from disruptive technological innovation. During his speech, Putin mentioned one such potential technology: nanotubes based on the Nobel-prize winning discovery of graphene material by Russian scientists. Graphene nanotubes act as an additive that improves the qualities of basic materials ranging from aluminum to rubber, increasing their durability, and consequently reducing waste. Even if nanotube technology lives up to its stated potential, to fully benefit from technological progress, Russia needs cooperation with the West. It will be difficult for Russia to combat climate change alone without access to Western capital and technology, both of which are now out of reach due to sanctions. Russia has plenty at stake. Global warming may bring occasional benefits for the country, such as access to the Northern Sea Route through the Arctic, but those benefits do not seem worth the risk of eroding shorelines and the other ills that come with a warming climate. The impact on permafrost areas that account for 60 percent of Russia’s territory could be catastrophic.
Soros Foundation called “undesirable” under law
The Russian Prosecutor General’s Office has recognized as“undesirable”several foreign N.G.O.s, including the Open Society Foundation and the Open Society Assistance Foundation in Russia. “It was found that the activity of the Open Society Foundation and the Open Society Institute Assistance Foundation pose a threat to the foundations of the Russian constitutional system and security of the state,” said Prosecutor General’s Office spokesperson Marina Gridneva. The Open Society Foundation is an international charity founded by financier and philanthropist George Soros. The foundation has offices in more than 30 countries. All Soros foundation affiliates stopped their activity in Russia in 2003. Lyudmila Alexeyeva, human rights activist and head of the Moscow Helsinki Group, said she regrets the decision.“I don’t only regret that. It seems unfair to me,” Alexeyeva said. “Soros has done a lot of good for our country.”
Graphene biosensors to help in ﬁght against doping
Moscow scientists have created graphene-based biosensor chips that will make drug tests faster and cheaper. Researchers at the Moscow Institute of Physics and Technology have substituted the connecting layers in the chips that are currently used both to test the effectiveness of medicine as and to test for evidence of doping with a thin film made of graphene plates, which increases their sensitivity. Scientists say that using this method will reduce the time needed for conducting analyses from days to minutes. The technology is currently being patented in the U.S.
ONLY AT RBTH.COM
A polar bear gazes out at the Arctic Ocean from his perch on an iceberg. The warming of the Arctic has made life difficult for these northern bears, increasing the distances they must swim between icebergs and isolating them from their food supply.
In the spotlight: A splendid view of the polar lights in Karelia RBTH.COM/549155
RUSSIA BEYOND THE HEADLINES
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KEY EVENTS OF 2015 THAT WILL LOOM LARGE IN THE NEW YEAR
YEAR IN REVIEW FOREIGN POLICY
RUSSIA FACED A NUMBER OF CHALLENGES, BOTH FOREIGN AND DOMESTIC THIS YEAR. FROM THE ONGOING CONFLICT FROM THE COMPLETE UNRAVELING OF SYRIA TO PROTESTING LONG-HAUL TRUCKERS, MANY ISSUES THAT DOMINATED THE HEADLINES REMAIN UNRESOLVED. HERE IS A LOOK AT A FEW OF THOSE LIKELY TO RETURN TO THE FOREFRONT IN 2016
© DMITRY VINOGRADOV / RIA NOVOSTI
IN UKRAINE TO THE ASSASSINATION OF BORIS NEMTSOV,
The move by Russia to start operations against Islamic radicals in Syria at the end of September came as a surprise to most of the international community. For many experts the reasons behind the bombing campaign remain unclear even several months into the operation. Some of the reasons offered are: • The failure of the coalition forces led by the United States to stop the war; • A desire to protect its military interests, including the country’s only Mediterranean naval base at Tartus; • Fear that a no-fly zone would be imposed over Syria as was done in Libya; • Concern about the radicalization of Muslims in the restive North Caucasus; • A desire to be seen as a major player in the Middle East. The consensus, however, is that Russia acted because the Syrian military forces were facing the possibility of being overrun by rebel groups.
“It is clear that [Syrian President Bashar al-Assad] was under great pressure,”Dmitry Evstafiev, an expert and member of the executive board of the PIR Center think tank, told RBTH. The Russian political establishment believed that Assad’s defeat in Syria would cause an uptick in the actions of radical Islamic terrorists, who could move into Afghanistan, Tajikistan or any of the other majorityMuslim countries along Russia’s borders as well as Muslim republics within Russia itself. With Russian military aid, the Syrian military now has the upper hand, and Assad’s forces are making significant gains against the rebels. “There has been substantial progress in the southern provinces, in the greater Damascus area. Once again, the principal, in strategic terms, territory around Aleppo has come under the president’s control,” Evstafiev said. The current phase of Russia’s
military campaign is likely to last at least until January in approximately the same format, with the possibility of a slight strengthening of the Russian military presence. After January, the sandstorm season will begin, which will hamper aviation, and the military campaign, if it continues, will likely involve different tactics. This prospective downtime could be used to intensify discussions over the country’s political future, according to Andrei Kortunov, head of the Russian International Affairs Council. A political settlement will depend on the position of many other players in the region — the Gulf States, Iran and Turkey, as well as the United States and the E.U. Whether or not Russia’s military campaign has been effective is up for debate, but the move inserted Russia into the center of the negotiation process and has made the country once again a force in the Middle East.
Bombing Begins in Syria
1. Vladimir Putin shakes hands with Petro Poroshenko during a meeting in Minsk on Feb. 11, 2015; 2. Pilots at Russia’s naval base in Tartus, Syria; 3. The black box of a Russian SU24 fighter jet shot down Nov. 24 by the Turkish air force; 4. A woman at a memorial for slain politician Boris Nemtsov holds his portrait; 5. Amur tigers at the zoo in Yalta, Crimea. Both died from cold during the peninsula’s blackout; 6. A Transaero employee.
Moscow, Ankara Face Off Over Jet On Nov. 24, the Turkish air force shot down a Russian jet conducting flyovers as part of Russia’s military operations in Syria.Turkish officials say that the jet violated their airspace and it was repeatedly warned to retreat before the shooting. Russia, for its part, says that the jet was in Syrian territory and received no such messages. The fallout from the incident has been severe, with Russia imposing bans on food imports from Turkey and canceling sales of package tours to popular Turkish resorts. It will be very difficult to restore the level of cooperation that Turkey had with Russia before the incident, according to Leonid Isayev, a specialist in conflict monitoring, noting that the two countries had a wary partnership that was built with“considerable
effort” during the early 2000s. “Putin’s harsh statements, which provoked rather harsh remarks from the Turks, is capable of burning bridges for years,”said Isayev, referring to the Russian president’s statement the day of the incident that the move was a “shot in the back” by Turkey. The standoff between Russia and Turkey is ultimately not favorable for either country or NATO, of which Turkey is a member. The Russian media made much of Turkey’s ties with the Atlantic Alliance in the days after the jet was shot down, with pundits talking about prospects of an armed conflict between Russia and the bloc as a whole. So far, however, Moscow has chosen an economic response rather than a military one. As of Jan. 1, 2016, Russian companies will no longer be able to hire
Turkish nationals and visa-free travel between the two countries will be suspended. In addition, the authorities have announced plans to ban the use of Turkish subcontractors to implement state orders; however, the government has yet to decide which specific industries will be affected by these restrictions before they can be enacted. According to the official Russian statistics agency, Rosstat, Turkey is Russia’s fifth-largest trading partner. In 2014, trade between the two countries amounted to $31 billion, and in the first nine months of 2015, to $18.1 billion. Most of these amounts are made up of Russian exports: In 2015, Turkish imports stood at slightly over $3 billion. At the end of 2015, trade between the two countries was expected to reach
$23–25 billion, with Russian exports totalling some $20 billion and imports a mere $4–5 billion, according to Alexander Knobel, head of international trade studies at the Russian Presidential Academy of National Economy and Public Administration. Turkish Vice Premier Mehmet Simsek has estimated Ankara’s losses from its current tensions with Russia at $9 billion a year. He predicts that in the worst-case scenario, Russian sanctions will cost Turkey 0.4 percent of its G.D.P. For both Moscow and Ankara it will now be difficult to retreat, said Andrei Kortunov of the Russian International Affairs Council.“Maybe the relations will become more relaxed, but they will never be restored to same format as they were before this incident,” Kortunov said.
Ukraine Calmer After Minsk II Although the crisis in Syria bumped eastern Ukraine from the headlines, the ongoing conflict there dominated Russia’s foreign policy for the first half of the year. On Feb. 12, after hours of marathon negotiations in the Belarusian capital, Minsk, the leaders of France, Germany, Russia and Ukraine agreed on the basic steps that all hoped would lead to the start of a real peace process in the Donbass.The agreement was known as Minsk II. In spite of the agreement, sporadic fighting has continued throughout the year, as have multiparty talks. Alexander Khramchikhin, deputy director of the Institute of Political and Military Analysis, a Moscow-based N.G.O, believes that the current form of the conflict, with fighting on a reduced scale, is a consequence of the influence that other players have exercised on the sidelines. In his view, there is no further escalation because “no one wants to start [a full-scale offensive] first.” According to Dmitry Danilov, director of the European Security Department at the Russian Academy of Sciences’ Institute of Europe, there are still grounds for moderate optimism for a peaceful solution to the conflict, despite the ongoing announcements
of skirmishes and shooting, because all sides are continuing to negotiate to reach a lasting peace settlement. Danilov is also positive about the work of control mechanisms in the conflict zone, such as the OSCE mission and the control commission, which includes Russian and Ukrainian representatives. At the end of October, the OSCE expanded its mission in the breakaway regions of Lugansk and Donetsk with the support of rebel leaders.“The issue of bases is being coordinated,”Denis Pushilin, the Minsk negotiations representative for the Donetsk People’s Republic, told reporters. Also in October, negotiators won a key victory when the Donetsk and Lugansk People’s Republics agreed to postpone regional elections from early October until February. The desire of the groups to hold elections independent of Ukraine’s general elections had impeded the complete implementation of the Minsk II agreement, which stated that elections must be held in accordance with Ukrainian law. The election process will be a test of the commitment of all sides to Minsk II and a lasting peace in the region.
Iran Comes in From the Cold With Nuclear Deal On July 14 in Vienna the P5+1 group of international negotiators — the U.S., Russia, China, the U.K. and France, plus Germany — and Iran reached an agreement on the gradual cancelation of international sanctions imposed on Iran in exchange for major restrictions on Tehran’s nuclear program.The deal was not unexpected. Nevertheless, on the day it was signed, Russian President Vladimir Putin said “today the world has breathed a sigh of great relief.”
Russian Foreign Minister Sergei Lavrov announced that Russia would actively participate in the implementation of the agreement. Iran’s enriched uranium will be shipped to Russia in exchange for supplies of natural uranium. Russia will also participate in the conversion of Iran’s enriching enterprise, Fordow. Radjab Safarov, director of the Russian Center for Modern Iran Studies, explained that besides energy, the cancellation of the
sanctions would give Russian companies a series of opportunities in Iran in the fields of chemical industry, information technology, railroad construction and several other sectors of the economy. Cooperation in the militarytechnical sphere holds significant potential for the two countries, a fact testified to by a deal already in place to sell Iran a series of Russian S-300 antiaircraft systems. According to media re-
ports, the value of potential contracts in the military-technical sphere ranges from $20–70 billion. “Russia needs Iran as a serious partner,” said independent analyst DmitryYevstafiev.“First and foremost, Iran is seen in Russia as an economic partner. Iran’s ideological foundation for us is still too exotic for forming a political partnership,” he said. Besides the sheer trade contracts, said Yevstafiev, Iran also
has an important logistics role. Russia is very interested in the North-South transportation corridor from Europe to Asia. Cargo from India and other Southern Asian countries can be shipped along this route through Iran and Russia to northern and southern European countries. “Iran is fundamentally important for Russia in terms of forming a multidirectional foreign and foreign-economic policy,” said Yevstafiev.
Nevertheless, the agreement is still in early stages, said Andrei Baklitsky, an expert with the PIR Center for Policy Studies. ““I would not say it is an ‘end’ per se, it is a big step forward, paving the way to the final closure. If we look at the text of the agreement, some issues will be fully closed in 10 years and some even in 15 years. We are still at the initial stage, not even in the implementation phase,” Bakalitsky said.
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Nemtsov’s Murder Shocks the Nation
Opposition leader and former Russian first deputy Prime Minister Boris Nemtsov was killed in central Moscow on Feb. 27. He was 55. According to Russia’s Investigative Committee, Nemtsov was walking along the Bolshoy Moskvoretsky Bridge near the Kremlin a little after 11 p.m. when a white car pulled alongside him and fired a number of shots at point-blank range, hitting him in the back. Five men from Chechnya were arrested in connection with the murder, and arguments were made that the incident had religious motives, as Nemtsov had made some disparaging comments about Islam in the wake of the January attacks on the editorial offices of Charlie Hebdo in Paris. Nemtsov’s allies instead linked the murder to a report he was working on documenting evidence of Russia’s alleged involvement in the civil war in eastern Ukraine, including financing of the rebel movement and provision of weapons and soldiers under the guise of “volunteers.” The report, entitled Putin.War, was later published by Nemtsov
supporters led by Ilya Yashin. The five suspects remain in custody in Moscow and the investigation is ongoing. In September, a representative of Nemtsov’s family asked that the case be investigated as “an attempt on the life of a statesman,” a separate article in the Russian criminal code from murder. A native of Sochi, Nemtsov rose to prominence in the 1990s, first as governor of Russia’s third largest city, Nizhny Novogorod and later as first deputy prime minister in the administration of Boris Yeltsin. He was one of the most prominent members of Russia’s liberal opposition. In 1999, Nemtsov founded the political party the Union of Right Forces (SPS). After the SPS party split, Nemtsov worked with other opposition movements and parties. He was active in the protests against electoral fraud in the winter of 2011-2012 and was a member of the coordinating committee of the current Russian opposition movement. Since 2012 Nemtsov had been a co-chair of the Republican Party of Russia — People’s Freedom Party.
Second-Largest Airline Goes Broke
Blackout Sign of Problems in Crimea The solemn inauguration of the so-called “energy bridge” along the bottom of the Kerch Strait between Krasnodar Territory and Crimea on Dec. 2 was a joyous occasion for local residents, who had been living without power for more than a week after Ukrainian nationalists sabotaged pylons carrying power lines to the peninsula from Ukraine’s Kherson Region. However, for many the “energy bridge” still has only symbolic significance. The power line provides only 200MW of the 500MW Crimea needs from outside sources. After two additional circuits come online next May, Russia will supply all the power needed by the peninsula.
the peninsula, only 10 have autonomous power supply sources. Local authorities were forced to supply power only to critical facilities such as hospitals while other consumers were switched to rolling blackouts. The government had to immediately transfer a large number of diesel generators onto the peninsula and speed up work on the “energy bridge,”which consists of an electricity cable from the southern Russian city of Kuban to Crimea. Many local residents and officials questioned why the cable had not been laid earlier, as Crimea has been part of Russia already a year and a half. According to Russian Energy Minister Alexander Novak, the prob-
The Crimean electricity network was completely shut down in the early hours of Nov. 22 after a group of Ukrainian and Crimean Tatar activists opposed to Russian rule in the region blew up the power lines going to Crimea from Ukraine, plunging the peninsula into darkness. At that moment, in accordance with an agreement signed with Russia, Ukraine was supplying up to 80 percent of all the energy consumed by Crimea. Surprisingly, considering the tensions between Ukraine and Russia, the incident took the Crimean authorities by surprise. According to Russian Deputy Energy Minister Andrei Cherezov, out of the 94 supermarkets on
lem was that the difficulties of laying the cable along the bottom of the Kerch Strait, but that Russia does not produce cables of the length needed, and most of Russia’s foreign partners refused to supply the cable as a result of sanctions. In the end the cable was bought from China, but the ship carrying it from Shanghai arrived only on Oct. 11. The incident raised questions about Russia’s ability to support the region, particularly securing its water supply. On April 26, 2014, Ukraine blocked the locks of the North Crimean Canal, which channeled water from the Dnieper River to Crimea. Since that time Moscow has provided only temporary solutions.
Russian Truckers Protest Against Tolls ANTON VIRGUN / TASS
As of Nov. 15, new tolls have been introduced on major intercity highways in Russia. The toll collection system, called Platon, applies to trucks weighing over 12 tons using federal highways and charges 3.73 rubles ($0.06) per kilometer. Even before Platon came into effect, long-haul drivers began protesting against the new levy, arguing it would cut into already slim profit margins.Trucks moved along federal highways at minimal speed, causing massive traffic jams. The authorities responded to the protest by lowering the toll for the first three-and-a-half months to 1.53 rubles ($0.02) per kilometer, and by considerably reducing the penalty for non-payment. Initially,
Long-haul truck drivers rallied against the toll system Platon.
the penalty for companies was 450,000 rubles ($6,500) for the first non-payment and 1 million rubles ($14,000) for repeat non-payment. The penalty was reduced for indi-
viduals and companies alike to 5,000 rubles ($70) for the first offense, and 10,000 rubles ($140) for repeat non-payment. Despite the concessions made by the authorities, the truckers have continued their protest. Activists from the regions have more than once announced their intention to come to Moscow and stage the main protest there by blocking traffic along the Moscow ring road. On Dec. 4, several groups of protesters appeared on roads leading to Moscow, although the protest ended up peacefully on Dec 7. The authorities have indicated that they won’t cancel or suspend the Platon system. In an interview with the business daily RBK, the
head of federal road agency Rosavtodor, Roman Starovoit, insisted that an absolute majority of long-haul drivers did not object to the new levy and that the protest involved no more than 1 percent of all truckers in Russia. According to Starovoit, more than two-thirds of all 12-ton trucks have already registered with the system. It would be an overstatement to say that the truckers’ protest has received considerable support beyond the relevant professional community, although the participants in the actions say that ordinary people are supporting them, offering to put them up for the night and bringing hot food and drinks.
© MAXIM BLINOV / RIA NOVOSTI
In September, the press reported that Russia’s second-largest airline, Transaero, was so debtladen that it couldn’t afford to refuel its planes. Initially the government’s transportation management agencies decided to allow the country’s flagship carrier, Aeroflot, to aquire a 75 percent stake in Transaero to save the company, but Transaero shareholders were unable to consolidate a large enough block of shares and the deal fell through. Later, a major shareholder in Russia’s third-largest carrier, S7 Airlines, agreed to buy 51 percent of Transaero, but then backed out of the deal. At the moment, the company seems headed for bankruptcy, as it has nothing left to offer potential buyers. Transaero has been banned from flying or selling tickets and its major international routes have been taken over by Aeroflot. Anna Bazoyeva, an analyst at investment company UFS, believes that bankruptcy, while the likely path forward, sets a bad precedent. “This example will once again remind businesses that aggressive growth based on borrowed money is a road leading to nowhere,”she said, adding that
while financial institutions like banks and leasing companies would be affected the most by the bankruptcy, it would also hurt Transaero shareholders, who are mainly private individuals. Passengers will also suffer, according to Dmitry Baranov, an expert at Finam Management. “The company’s bankruptcy will not benefit anyone, including its creditors, and many populated areas will not have good transportation accessibility,” Baranov said. Until recently, Transaero operated flights to 260 destinations and accounted for 14 percent of the domestic aviation market. From January to July this year, 7.5 million passengers flew with Transaero. The company’s finances had weakened due to the recession and sharp devaluation of the ruble, which have depressed demand for travel and raised the cost of airplane leasing agreements, which are often denominated in dollars. Transaero’s 260 million ruble debt includes 150 billion rubles ($2.4 billion) owed in leasing obligations and 20 billion rubles ($325 million) owed to airport management and fuel companies.
Read, Watch and Listen to RBTH’s weekly analytical program, featuring three of the most recent high-profile developments in international affairs.
ENGAGING THE WEST
Texts for the special report prepared by Alexei Timofeychev, Igor Rozin.
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Russian GDP growth in %
YEAR IN REVIEW ECONOMY AFTER MONTHS OF UNPRECEDENTED TURMOIL, THE RUBLE HAS
STABLIZED AND THE COUNTRY IS SHOWING SIGNS OF GROWTH, BUT IT’S TOO SOON TO DECLARE A RECOVERY
NO MORE BUSINESS AS USUAL
Main Expenditures in Russia's Federal Budget 2015
2016 NATIONAL SECURITY
Growth in Domestic Food Production 8
7 6 5
The Russian economy managed not to go into a tailspin in 2015 thanks in part to action by the Central Bank, but low oil prices make it harder for the country to claw its way out of recession. DARIA LITVINOVA SPECIAL TO RBTH
In the wake of sharply declining oil prices, a currency that has almost halved in value and continued fallout from economic sanctions, many pundits believed that in 2015, Russia might experience a default like it suffered in 1998, when banks collapsed and inflation went through the roof. Those fears were not realized, however. Although Russia’s economy took a beating in 2015, as 2016 comes into sight the economy has started to slowly pick up.“Quarterly evaluations show that the recession, as it is defined, is over,” Alexei Ulyukayev, Russia’s Minister of Economic Development, said at a meeting with European diplomats in Moscow last month. Foreign experts echoed his statement: the credit rating agency Standard & Poor’s (S&P) reported 0.5 percent growth in the third quarter after almost four quarters of decline, and predicted that growth would continue. But Russian analysts remain cautious, warning that the crisis is not over yet and that there’s a long road ahead for the economy to get back to where it was in the late 2000s.
Rough time for the ruble Currency difficulties began in De-
cember 2014, the second “Black Tuesday”in the country’s history, when the ruble fell 41 percent against the dollar and 34 percent against the euro. The Central Bank of Russia reacted quickly — and, at the time, controversially — by raising its key interest rate to 17 percent from 10.5 percent, eliciting outrage from politicians and businessmen. Mikhail Leontyev, spokesman for oil giant Rosneft, said at the time that the regulator “shot dead the Russian economy to spare its suffering.” Within a couple of months, however, currency rates had sta-
The damage the economic storm has done is obvious, according to a World Bank report. bilized — although with oil prices hovering between $40–$50 a barrel, the ruble’s exchange rates vis-à-vis the euro and dollar stubbornly remained almost twice those of mid-2014. The euro was worth 70 rubles compared with 46, and the dollar more than 60 rubles instead of 35. Yet it didn’t get worse, thanks to the Central Bank’s policy, according to Alexander Abramov, an investment expert at Moscow’s Higher School of Economics.“The bank acted vigorously, and the fact that we have a relatively stable currency rate and a moderate inflation rate we can credit
to them,” he said.
Mortgage slump A weaker ruble prompted rising prices and inflation. Real incomes sank significantly, which led to a drastic drop in demand for bank services. In the first six months of 2015, the residential mortgage market dropped by a total of 40 percent. With the Central Bank withdrawing licences of small banks almost every month, ordinary Russians feared for their savings, and depositors rushed to withdraw cash from their bank accounts.“Default”re-entered the Russian vocabulary. But fears were overstated. When S&P issued its report with positive numbers in November, officials announced that Russia was out of recession. The report reflected a growing confidence that Russia’s fiscal managers had successfully negotiated the crisis. In September, Central Bank head Elvira Nabiullina was even named best head of a central bank in 2015 by Euromoney magazine. According to the magazine, Nabiullina fought the“macroeconomic storm” by implementing “moderate policies”— raising the key interest rate, carrying out measures to strengthen the ruble and giving financial institutions access to additional liquidity — and that this economic“therapy” had worked.
Future challenges It’s too early to judge whether Russia’s economy will continue to grow. The results of the fourth
Sanctions Hit Russian Economy Selectively More than 18 months after sanctions were imposed, the financial sector continues to suffer even while some industries are benefiting. BEN ARIS SPECIAL TO RBTH
Many of the sanctions imposed by Western countries on Russia last year were largely symbolic — but not those imposed on the banking sector. Many of Russia’s biggest banks are specifically named on sanctions lists, and Western banks are banned from offering Russian companies anything more than 30 days’ credit. “In the old days, our business was easy,” said one senior banker who didn’t want to named.“We borrowed long, cheap money from the international markets and lent it short and expensive on the domestic market.” As Russia has failed to establish its own institutional investors, including things like pension and insurance funds, there is no alternative source of longterm credit except for the Cen-
tral Bank of Russia. Although at the moment the Central Bank is sitting on $370 billion — enough to keep the sector liquid — the bank has problems with its exposure. Central bank funds currently make up some 15 percent of all banking liabilities, up fivefold from the 3 percent they made up during the worst of the 2008 global financial crisis. Happily the peak seems to have passed and the Central Bank is now unwinding its position to the banking sector, but it is still not out of the woods. Following an emergency hike in interest rates in December 2014, the cost of capital is impossibly high. Despite five rate cuts this year, interest rates are currently 11 percent and need to move down into single digits before companies can afford to borrow again to make investments. That is not likely to happen until the middle of next year. “The problem is that we won’t lend to the companies that want to borrow from us,” said Herbert Moos, deputy C.E.O. of VTB Bank.
“And the ones we want to lend to don’t want to borrow at these prices.” The lack of lending is weighing heavily on the economy, which contracted by 4.1 percent in the third quarter and is expected to end the year at -3 percent — probably the worst effect sanctions have had.
Tricky accounting The collapse of oil prices and the subsequent devaluation of the ruble were real disasters for Russia. As some two-thirds of both the federal budget and export revenue come from oil exports, the size of Russia’s economy has been more than cut in half in dollar terms. However, a quirk of accounting has meant that the federal budget has automatically corrected to make the pain bearable. The budget assumes oil prices set in dollars to estimate its revenues, but all the spending is fixed in unadjusted rubles. If the price of oil changes, the government is one of the biggest winners from
quarter will not be available for a while yet, and the country remains dependent on oil prices, meaning a breakthrough is only possible if they rise, says Dmitry Miroshnichenko, an expert at the Centre of Development Institute at the Higher School of Economics in Moscow. “If there is no ‘help’ from the outside world, our economy might grow, but this will be much slower than that of the world economy,”Miroshnichenko said.“We’re at the bottom of an abyss and right now we are very slowly crawling out of it.”
Challenges to recovery Yet the damage the economic storm has done is obvious. According to a World Bank report released in late September, the number of Russians living below the poverty line in 2015 reached 14.2 percent, compared to 11.2 percent in 2014. “It is the first significant rise in the number of poor in Russia since 1998–99,” the report said. Former finance minister Alexei Kudrin believes the Russian government needs to tackle structural reforms — such as raising the pension age, cutting public spending and reducing support for state-run companies – if it is to avoid further trouble. Speaking at a roundtable event in March, Kudrin said:“After the crisis, the economy will face stagnation, because there haven’t been any structural reforms. That’s the most serious challenge the president faces.”
the devaluation: its oil tax revenue dollars can buy twice as many rubles to cover unadjusted ruble expenditure. Nevertheless, the fall in the price of oil has badly hurt growth, which reduces the tax revenue.This year the government is expected to run a deficit of 3 percent of G.D.P.
Winners and losers The change in the value of the ruble has virtually wiped out any business that depends on imported goods. For example, although five of the world’s biggest automobile producers have factories in Russia, they still import up to 60 percent of their parts, which are now twice as expensive to local consumers. However, the crisis has been a boon for other sectors. Supermarket chains are expanding at top speed, almost entirely unaffected by the crisis. Likewise, Russian exports are having a bonanza as their domestic ruble costs have been cut in half, but revenues from the international markets in dollars have remained the same. Raw material extractors have also seen profits grow. Leading steel mill Magnitogorsk reported record profits in the third quarter and agricultural giant Rosagro reported record breaking revenues.
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Betting on the future: building continues at the Moscow-City financial hub even as GDP falls.
CHEESE AND CHEESE PRODUCTS
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Agriculture, Financial Sector Adjust to Import Substitution Constantin Gurdgiev ECONOMIC ANALYST
ast January, the Russian government launched an ambitious anti-crisis plan aimed, in part, at diversification of the sources of economic activity. This plan identified 19 key sectors for expanding domestic production, including agribusiness, the militaryindustrial complex, metallurgy and industrial machinery. So far, there have been some limited indications that the plan is working.The key positive supports for the economy in the first half of 2015 came from monetary policy — a sharp devaluation of the ruble and aggressive deployment of national monetary reserves. In the second half of the year, however, demand started to firm up. Growth in agricultural production is broadly positive, albeit weaker than expected in some categories. By early November, the Russian grain harvest was running marginally below that of the the same period in 2014. Still, this year’s harvest is the third strongest since 1990. Encouragingly, over the first nine months of 2015, domestic Russian output of dairy and meat was up, with the largest increases taking place in cheese and related products — rising more than 23 percent year on year by volume. Although, raw milk production was down. Two other areas in which import substitution has shown suc-
cess in 2015 are domestic financial services and the military-industrial complex. Russian banks, asset management and insurance companies are benefiting from large-scale retrenchment by their foreign competitors and from a strong response to the crisis from the Central Bank of Russia. As Western banks and companies cut their activities in the Russian market, core Russian banking groups like Sberbank and VTB are picking up both deposits and commercial assets. This process was aided by the corporate return to internal markets for borrowing. Volumes of debt issued by Russian companies in their main pre-crisis markets for Eurobonds fell eight-fold in 2015 compared to 2014; domestic lending rose 7 percent. Likewise in the military-industrial sector, domestic suppliers were able to take up much of the demand created by the shutting down of imports from Ukraine and NATO countries. Recent estimates from the Ministry of Defense show import substitution covering between 43 and 64 percent of previously imported items used in Russian military equipment manufacturing, far ahead of projections. Still, import substitution requires a multi-year effort and cannot be easily accelerated in response to the crisis. The author is a Russian economist based in Dublin, Ireland. He is a former editor of Business & Finance magazine and a regular panelist on Irish television.
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Middle Class Hurt Most By Ongoing Crisis
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Wealthy Continue to Spend Despite Rising Prices EVA HARTOG SPECIAL TO RBTH
Sparkling Christmas decorations line the shop windows of GUM, central Moscow’s exclusive mall overlooking Red Square. At Louis Vuitton, a middle-aged woman eyes a beige hat with a price tag of 24,100 rubles ($350). “Don’t they have something with a more prominent Louis Vuitton monogram?” she asked the shop assistant. Rich Russians have a reputation for being brand addicts, and even the difficult economic climate hasn’t kept them from their favorite shops. Nonetheless, the country’s luxury retail segment has not had it easy this year. The luxury clothing sector is expected to contract by between 20–25 percent this year to $2.6 billion, down from $3.2 billion last year, according to the Fashion Consulting Group (FCG). While the Kremlin has presented the economic crisis as an opportunity to boost Russian manufacturing, there is no domestic alternative to Western luxury brands such as Chanel or Cartier. As a result, the premium market has had no choice but to continue to import, despite a doubling of costs in ruble terms. Retailers are absorbing some of those costs, hitting their margins. Compared to its mid-market competitors, however, the luxury clothing sector has weathered the storm well: its market share in 2015 remained constant at 10 percent, FCG said. With the buying power of wages down roughly 10 percent over the past year, middle-class Russians on a salary have shunned middle-segment retailers in favor of budget clothing stores. But most wealthy Russians weren’t fussy about the price tag to begin with. A saleswoman at Louis Vuitton said that the shop was quieter than in previous years, but that a loyal core of a dozen or so wealthy customers continued to visit regularly. Even when items were cheaper overseas, they preferred to purchase them in the Moscow shop because of the “comfort of buying at home”, she said. Up to 75 percent of the luxury sector’s turnover traditionally comes from “old” and “new” money — the Russians who were born rich, or those who have climbed the social ladder, says
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Designer labels are still a musthave for Russia’s elite, even if the price tags at luxury retailers have nearly doubled in ruble terms since the start of the crisis.
Members of Moscow’s upper crust are still happy to pay for the best.
Anna Lebsak-Kleymans, C.E.O. of FCG.“Their consumption behavior does not change significantly in times of crisis as the majority have a diversified income, part of which could be in foreign currency.” The luxury clothing sector is suffering from an outflow of sporadic buyers — highly paid professionals and casual customers — but they constitute a minority, Lebsak-Kleymans said. The spending habits of Russia’s elite spreads beyond the country’s borders. Russian spending abroad dropped dramatically this year, with a 41 percent year-on-year drop in September, but Russians still constitute the third-largest group of tax-free shoppers, mainly because rich Russians continue to buy, according to the taxrefund company Global Blue. Russia’s car sector, once one of Europe’s most promising markets, shows a similar trend. The car industry has been among the sectors worst hit by the economic downturn — sales fell by almost 40 percent in 2015, according to figures from the Association of European Businesses. But Porsche, which has its largest Europe-based dealership in Moscow, saw a 26 percent increase in sales in the first three quarters of the year. Toyota sold 6 percent more Lexus-brand cars, and Bentley opened its third dealership in Moscow in the spring, with Russians reportedly figuring strongly in pre-orders for its opulent Bentayga S.U.V., which sells for around $220,000 in the U.S. A further drop in luxury spending seems unlikely; this year has already seen the rich trim the fat off their wish lists. At Moscow’s exclusive TsUM department store, a woman clad in fur insists she has been forced to cut back.“Just down to the essentials,” she said, pointing to three extra-large bags filled with luxury-brand clothes for her six-year-old grandson.
Dining out in nice restaurants, like Moscow’s White Rabbit is a thing of the past for many middle class Russians.
Russia’s nascent middle class, which was growing in the early 2000s, has born the brunt of the economic downturn along with small-business owners.
In 2013, about 18 percent of the population fit this criteria. Today that number is around 13 percent and falling, according to a recent government study on the middle class.
ALEXANDER BRATERSKY SPECIAL TO RBTH
High prices, few customers
They created their wealth in the 1990s, enjoyed the fruits of the oil-rich 2000s and hoped to give their children a better future. They are the Russian middle class, once a rapidly growing segment of society in Moscow and other big Russian cities. Made up of those of both liberal and conservative political bents, these people opened small businesses, bought comfortable foreignbrand sedans and ate out in nice restaurants. Today this middle class, already hit hard during the 2008 global financial crisis, is rapidly shrinking, due to an unstable economic situation, Western sanctions and the Russian government’s own economic policies. “The creative, free, peaceful, nonaggressive, open-minded person feels like a victim today — a sheep who has had the last of her wool removed,”said Irina Khakamada, a liberal politician and a member of the presidential council on human rights, during a meeting of the group in October.
Small- and medium-sized businesses are also disproportionately affected by the economic downturn. Many entrepreneurs who started small businesses a few years ago now find themselves unable to meet rent payments, many of which are still set in euros or dollars, or make any profit selling items imported from abroad. In an interveiw with Russian News Service radio last month, business ombudsman Boris Titov said that the number of mediumsized businesses was down 13 percent from 2014. Olga Promptova, C.E.O. of ddatelier.com, a company that sells lingerie online, said that she feels that harder times are coming: “I see fewer and fewer possibilities for development. People have less money, they are economizing and they rarely go on a shopping spree,” Promptova said. Promptova, an energetic, stylish businesswoman, founded her business in 2007 because she had problems finding lingerie she liked. She said that the fall in the value of the ruble has made the cost of the foreign-made fabrics she uses go up 20–30 percent, increasing the prices of her items, and consequently turning many clients away. “Those were the woman who bought the same products two years ago without thinking much,” she said. Still, there have been some positives, too, since the cost of producing the items in Russia has not grown. “Now we can have a partial win, but this cannot last forever,”Promptova said.“In order to give people the price they want, we have to buy cheaper materials to make cheaper products. But that means producing things of different quality and we don’t want to do that.”
Nowhere to turn The middle class is suffering the most from the country’s current economic downturn. Their purchasing power decreased rapidly as the dollar value of their salaries halved with the collapse of the ruble. A person who worked for a private company and earned a comfortable salary of $3,000 per month before the crisis is now making $1,500. How is the Russian middle class defined? Sociologists say a middle class Russian should have enough income to do the following five things: buy a good quality car, such as a Toyota; take a foreign vacation; pay for their childrens’ educational needs; get a mortgage to buy an apartment; and pay for private insurance.
A particularly Russian middle class While some sociologists say that the middle class existed in the “classless” Soviet society and was made up of doctors, engineers and university professors, others think that the term was not really applicable in Russia until after the fall of the Soviet Union. The concept of the middle class in the Western understanding was really absent from Russia for most of its history. During the imperial and Soviet periods, the role played by
the middle class in questioning authority and its rules was instead filled by the intelligentsia — welleducated people who did not come from the artistocratic classes. They questioned the political establishment from an ideological perspective rather than an economic one. According to this theory, Russia began to develop a Western-style middle class only in the 2000s, when the market economy truly took hold.
A helping hand?
However, Yermakov said that despite some efforts made by officials to help small- and medium-sized businesses, bureaucracy and red tape remain the major source of concern. “Even when the president gives orders not to put extreme pressure on businesses, officials on the ground are doing the opposite and that kills business,” he said. According to Yermakov, only half of Russia’s regions have tax incentives for small business ventures. “Despite the fact that those regions that have done so had an increase in tax collection, many regional officials are afraid to take responsibility to do similar measures. I don’t think they are some kind of saboteurs; they are just people who care less,” he said. A new government agency has recently been set up to help smalland medium-sized businesses.The new Corporation for Small- and Medium-sized Business Development is headed by an energetic pro-business official, Alexander Braverman. His goal is to help businesses get government loans, and to help them work through the red tape associated with government invcentives. Nevertheless, when announcing Braverman’s appointment, Prime Minister Dmitry Medvedev emphasized that there’s only so much the government can do.“The state will never be able to as much as business could do … ”,Medvedev said.
For another Russian businessperson, Boris Akimov, the government’s policy of import substition has been a helping hand. An artist and former editor of the Russian edition of Rolling Stone, Akimov’s company, Lavka-Lavka, sells locally produced produce and meats. “We have an audience that is loyal to us, and there always will be people who want to buy quality farm products,” said Akimov. He added that his business has grown 25 percent since last year, thanks to Russian sanctions that banned imports of most fresh foods from Western countries. To illustrate his business success, Akimov said that his company is opening its own market of farm products at an IKEA-run supermarket near Moscow:“Even a middle-class buyer will be able to afford to shop there,” he said. ViktorYermakov, head of an organization that supports smalland medium-sized businesses, said that import substitution strategies can help these kinds of operations, but they need more government support. “You have to have the best product on the market and in order to increase your quality you need loans,” said Yermakov, noting that there are government programs available that allow business people to take out loans at a rate of 10.5 percent for projects that fit a specific criteria.
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REALPOLITIK MAY TRUMP POSTURING IN RUSSIAN-TURKISH RELATIONS main threat, while Ankara fears the strengthening of the positions of the Kurds and the Alawites, and the defeat of the groups who could be Turkish allies in the region. Now, the tragedy of the Russian jet has complicated relations even further by bringing national pride into the equation. Both Russian PresidentVladimir Putin and Turkish President Erdogan are strong figures who would do almost anything to save face. This added emotional dimension makes the situation even harder to diffuse. But all is not lost. For one thing, both parties already have quite a lot of experience getting out of complex and practically deadlocked situations. For another, any move by either Russia or Turkey against the other will likely have the effect of strengthening some third party — a rebel group, the Western allies, Iran, the Gulf states — and neither Moscow nor Ankara has much interest in that scenario.
Sergei Markedonov SPECIAL TO RBTH
he shooting down of a Russian aircraft by the Turkish air force will be a difficult test for bilateral relations between Moscow and Ankara. Until recently, politicians and experts viewed this relationship as an example of success in improving relations between the historical enemies. Yet, it would be wrong to consider the current situation as something that arose suddenly with the shooting of the jet. Prominent Turkish expert Bulent Aras has described TurkishRussian relations as a “competitive partnership,” and this may indeed be the most accurate characterization. Moscow and Ankara have failed to see eye to eye on most subjects, including the Nagorno-Karabakh conflict between Armenia and Azerbaijan and the question of the breakway Georgian regions of Abkhazia and South Ossetia. In the first instance, Russia sides with Armemia, and Turkey, with Azerbaijan. In the second, Ankara has never questioned Georgia’s territorial integrity, while Russia has provided support to the self-declared republics.
The devil you know
Pragmatism vs. politics For a long time, Russia and Turkey were able to put their differences aside and develop mutually beneficial economic relations. Until recently, it seemed that this pragmatism would continue to overshadow their contradictory views on political subjects. The most recent example of this beneficial relationship was the plan for the Turkish Stream energy pipeline. This project was designed to reduce Russian dependence on Ukraine as a transit point for gas. Russia was also behind the invitation of Turkey, a NATO country, to join the Shanghai Cooperation Organization (SCO) in the status of a dialogue partner. Naturally, this move was not welcomed in Brussels and Wash-
ington, but the relationship between Ankara and these Western capitals was already frayed. Turkish leader Recep Tayyip Erdogan is not a favorite of the European and American political establishments, and Ankara has not beenhappy about Washington’s support of the Kurds in Iraq. Turkey’s position vis-à-vis the Kurds has caused problems with the E.U. as well, with some arguing that Turkey’s actions against the minority group could be a reason to avoid bringing the country futher into the fold. These differences made it easier for Turkey to build relations with Russia, until the Arab Spring of 2011.
For a long time, Russia and Turkey put their differences aside and developed beneficial economic relations.
Both parties already have experience getting out of complex and practically deadlocked situations.
Through the looking glass Revolution in the Arab world While Russian officials saw the events as a dangerous precedent for the bringing down of a legitimate government and a victory for radical Islam at the expense of secular political structures, Turkey viewed the Arab Spring as a chance to once again become
a major player in the region. Turkey made clear its support for the leader of Egypt’s Muslim Brotherhood, Mohamed Morsi, who became president of the country for a short time before being deposed by the military. Ankara also came out strongly in support of Palestine and against
THE REVOLUTION IS POSTPONED. AGAIN much of their savings. Opportunities to travel abroad have been snatched away and imported goods have more or less doubled in price. Inflation stands at around 19 percent and 6 million people are expected to fall out of the middle class, which has been the mainstay of Putin’s personal popularity; the number of Russians living below the poverty line has risen to14 percent.
Bryan MacDonald SPECIAL TO RBTH
or at least the past decade, every year some expert inside or outside of Russia has predicted that the country will erupt in revolution, or at least that it is ripe for “regime change.” Numerous books and articles are published annually specializing in forecasts of imminent doom for the Kremlin. Starting in 2014 analyts began to look for signs of this revolution in the country’s economic troubles. Last year, British Prime Minister, David Cameron, spoke of“turn(ing) the ratchet”onVladimir Putin and suggested that Western sanctions would“permanently”damage Russia’s financial health. This trend only continued in 2015. In January, U.S. President Barack Obama declared the Russian economy “in tatters” and in September, CNN reported that Russia’s economy was “failing.” Just this month, opposition figure Mikhail Khodorkovsky warned that a revolution is “inevitable” in Russia. However, despite the warnings, the country somehow manages to go on.
What revolution? In 2015, there were numerous po-
A different reality
tential triggers for a political breakdown. The murder of prominent opposition voice Boris Nemtsov in central Moscow in January was one. It produced prevailing sadness at the horrible end of this public figure, but little else. Another flashpoint could have been this winter’s protests by long-haul truckers, which have threatened to block major roads across the country. But so far their displeasure has remained confined to a small disruption of traffic on Moscow’s ring road and a very calm meeting with police. The blackout of Crimea might have sparked restlessness on the peninsula, which Russia absorbed last year, but there was hardly a
Israel, involving itself in a conflict it had mostly ignored. Finally, Turkey sided with the U.S. and the E.U. against the regime of Bashar al-Assad in Syria, perhaps the first step towards the incident that brought relations with Russia to a breaking point.
peep of vitriol against Moscow. The publication of documents by newspaper Novaya Gazeta and opposition activist Alexei Navalny accusing Prosecutor General Yuri Chaika’s family of being involved in deep-seated corruption could have caused some rage. Chaika’s son has been linked to the mafia and reportedly owns expensive homes in Switzerland and Greece. The general public, however, seems to accept official reassurances that Chaika himself is not involved in any illegal acts and the investigation is the product of dirty political intrigues. Then there is the currency crisis. Last year, a dollar was worth around 35 rubles; now it’s closer to 70. Many Russians have lost
And yet none of these issues has provoked comprehensive protests or popular resistance to the government. Instead, recent opinon poll data from the analytical Levada Center shows that, rather than hurtling into disarray, Russia is actually pretty stable. More than 80 percent of Russians believe that Russian citizenship is preferable to any other, and two-thirds consider themselves “free’.” Fifty-seven percent hope to see Putin re-elected to another presidential term in 2018. The reasons for such calm are pretty elementary. Firstly, the mixed results of Ukraine’s revolution and the dramatic collapse in living standards there has spooked Russians. They genuinely fear that violent upheaval could lead to a repeat of the chaos of the 1990s. Another problem is the weakness of the liberal opposition.
Even before the shooting down of the plane, these two Eurasian giants saw the Middle East through different lenses.Their positions on Syria are just an extension of these differences. Moscow believes the rise of ISIS and the potential collapse of the secular state — represented by Assad’s government — as the
Sure, the Kremlin makes life tough for its opponents. State TV doesn’t acknowledge them to a great extent and official newspapers largely ignore them. However, the Internet is open, and liberal Dozhd TV and Ekho Moskvy radio allows opposition figures to express their views. But the main obstacle is their lack of unity and the deep fractures in the liberal movement, in addition to a lack of a clear leader and a specific policy platform. Instead, the opposition offers hopes and dreams with no tangible explanations of how they might actually work and who would direct the policies. Furthermore, leading personalities, with the exception of Navalny and a few others, seem to spend more time courting foreign attention than domestic audiences. Then there is Putin’s genuine personal popularity and a belief that, no matter how bad things are presently, Russia has improved immensely during the 15 years that he has been in power. Many Russians who spend time abroad speak of almost entering a parallel universe when they compare Western media coverage of Russia and their own practical experiences at home. Most Russians would never claim their country is perfect by any measure, but they do largely believe that foreign impressions of Russia are far too negative. Without question, these are challenging times in Russia, but the people are already accustomed to upheaval and don’t seem to be panicing. The revolution has been postponed. Again. Bryan MacDonald is a Moscowbased commentator.
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Turkey is well aware that in spite of its dislike for Assad, the destabilization of Syria may rebound into Turkey itself. There is plenty of radical Islamic sentiment in the country, and unrest is growing, as more and more refugees cross the border. Turkey is also well-known as a transit point for fighters traveling to fight with the Islamic State, and these mercenaries could just as easily carry out missions in Turkey. Erdogan will face these challenges no matter what Turkey’s relations with Russia are like, and perhaps Ankara may yet decide that battle isn’t one worth fighting. All this provides faint hope that the parties will find some modus vivendi in this difficult new environment, even if all they agree is to disagree. Sergei Markedonov is an assistant professor of foreign regional studies in the Foreign Policy Department of the Russian State University for the Humanities in Moscow.
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The American Roots of the Soviet Union’s Classic Cars SPECIAL TO RBTH
A strong, powerful vehicle that could hold up well to wear and tear, the Studebaker truck had everything the Soviet Union needed during World War II. It was one of the most popular vehicles supplied by the U.S. under the Lend-Lease program. After the war, the Soviet troops who rode in Studebakers to the battlefield remembered some of the truck’s best attributes. The trademark Studebaker long hood can be seen in many Soviet truck models produced after the war. These features were not just the result of reverse engineering, however. Ford first came to imperial Russia in the early 20th century and returned to the Soviet Union in the 1930s to help with the construction of a car factory — the Gorky Automobile Plant, or GAZ. Many of the trucks produced there were almost exact replicas of Ford A and Ford A A trucks, called GAZ-A and GAZAA. Even though Ford’s cooperation with the Soviets ended during the Great Depression, there were still traces of American design in Soviet car production.
The sincerist form of flattery “The vehicles themselves were derivatives of models designed in Detroit and elsewhere in the West, but adjusted for the Soviet climatic and road conditions,”wrote historian Lewis H. Siegelbaum in “Cars for Comrades: The Life of the Soviet Automobile”, published in 2008. “They included what once had been basic lines in Ford’s repertoire, luxury limousines from General Motors and Packard.” The first Soviet limousine used by high-ranking Communist officials had its roots in the 1932 Buick. The car was made by another Soviet automobile factory known as ZIS, the Russian acronym for Zavod imeni Stalina, or the Stalin Factory. The Soviet dictator was fond
A car for the masses Eventually even regular Soviets had a chance to own an American-inspired vehicle. Mass production of cars began during the tenure of the post-Stalin reformer Nikita Khrushchev. American businessman Frank Orban believes that Khrushchev’s 1959 visit to the United States inspired him to launch the program. “Khrushchev came to the U.S. and learned that the auto industry, which was small in the U.S.S.R., was in fact a major economic engine that developed other industries and created advanced infrastructures. “In particular, road systems,”said Orban, who once sold Soviet cars in the West.
Market data shows that, like their American counterparts, Russian drivers today prefer big spacious cars without extraordinary design elements. Even in Moscow, which has a serious parking problem, large SUVs, like the Toyota Land Cruiser are favorites.
41,917 The GAZ factory made more than 40,000 of the GAZ AA truck. Most of them were used by government agencies as well as the miitary and taxi services.
© S. LIDOV / RIA NOVOSTI
Go big or stay home
1.5mil Between 1970-1992, 1.5 million GAZ 24 cars came off the conveyor belt. It was one of the most popular models for Soviet citizens and the most-produced car at the plant.
94 In 1984, a GAZ 24 cost the equivalent of 94 months’ salary for the avarage Soviet citizen. Even if you had the money, you had to put your name on a list and wait to buy one.
In 1956, the GAZ factory produced its trademark Volga 21, an elegant car whose front resembled the face of a shark. The car took its inspiration from a 1953 Ford and the Mercury Monterey produced in the same year. The Mercury was used as a police cruiser in the U.S. at the time, and the Volga 21 was also the car of choice for police and emergency vehicles. It was the most popular car of the Soviet middle class.
© YURI ABRAMOCHKIN / RIA NOVOSTI
of American cars, which were known for being both well-built and stylish. The U.S.-made Packard was Stalin’s favorite, and he had several models, including a brand-new Packard 12, presented to him by U.S. President Franklin Roosevelt. One of the Packard models from 1942 was used as an inspiration for the ZIS 110, the first Soviet limosine produced after the war. Stalin personally commissioned the car’s design. Although many Soviet automotive engineers were afraid of moving too far from Stalin’s preferences, top car designer Andrei Ostrovtsov incorporated elements of other American models to create the ZIS 110. He considered the Packard an outdated model and took his inspiration from Buick and Cadillac. The car became the favorite automobile of the Communist party elite. The Packard also inspired the design of the other car popular among the party bosses, the GAZ 13 Chaika, or seagull. The car’s hood and front lights gave the impression of wings. This car was a favorite of Soviet leaders from Leonid Brezhnev to Mikhail Gorbachev. Ordinary citizens, resentful of having to wait years to be eligible to buy a cheap Lada model while the elites were driven around in the height of style, mocked the Chaika, and called it the “chlenovoz” literally the “member carrier.”
Although officially car culture was considered bourgeois in the Soviet state, factories turned out enviable vehicles, many based on American designs.
Automobiles Many iconic Soviet vehicles were based on U.S. models
Model Julie Desmond climbs out of the back of a Moskvich 427 at a trade show, circa 1971; cars go through a final check at the GAZ factory, 1986; people get up close with a ZIS 110 at a parade of retro cars, 2000.
A car for the ages A Volga 21 in good condition is still a popular car among collectors. Comedian Jay Leno, known for his love of classic cars, owns a 1966 model.“TheVolga isn’t particularly well-made, but it’s very strong, like bull,”he told Popular Mechanics magazine in 2013. Several years ago, Pyotr Voronkov, who hosts the Ekipazh radio program about cars on Stolitsa FM, was in an accident in-
volving his Volkswagen Tiguan and a Volga 21.“The Volga driver touched me only briefly with his right part, but the upper part of my car cracked like a Champagne glass on the frost, leaving only a small scratch onVolga,”Voronkov said. Russian President Vladimir Putin took U.S. President George W. Bush for a ride in his Volga when the American leader visited Russia in 2005.
At that time, Putin even offered to let Bush drive the white car himself: “He’s giving me a driving lesson,” Bush said jokingly. He might have taken Putin up on the offer had he known about the car’s American roots. “They were brutal, powerful forms of art,”radio hostVoronkov said of the classic American cars. “Today many cars are more comfortable, but they look almost the same.”
Literature Russian literature’s reputation rests on the accomplishments of Tolstoy and Dostoevsky, but the country has more to offer
Contemporary Russian Writers to Watch More and more modern Russian writers are being translated into English, giving Russophile literature lovers something new to explore. PHOEBE TAPLIN © ALEXANDR POLYAKOV / RIA NOVOSTI
SPECIAL TO RBTH
When English-speaking readers talk about Russian novelists, they generally mean Dostoevsky and Tolstoy, Bulgakov and Pasternak. Few read 21st-century Russian writers, but this is their loss. There is no shortage of serious literary fiction coming out of Russia today.
Classic writers such as Pushkin remain popular with foreign audiences.
Apocalyptic sci-fi In Sergei Lukyanenko’s “Night Watch” series, supernatural beings do battle on Moscow’s streets. Andrew Bromfield translated the first book into English in 2006 and it sold millions worldwide, winning an international following. A sixth book, already extensively pre-ordered, is due out next summer. Bromfield also translated Boris Akunin’s successful series of effortlessly elegant whodunits, featuring diplomatturned-detective Erast Fandorin. Part I, set in 19th-century Moscow, London and St. Petersburg, was published in English as“The Winter Queen” in 2003. Dmitry Glukhovsky found an international audience with his “Metro 2033,”a post-apocalyptic underground adventure set in the disused tunnels of the Moscow
sia, and Dutch science-fiction fans find it very interesting as well.” “Metro 2035” came out this year in Russian and will be translated soon.
Published in English in 2011, “Metro 2033” became a European cult favorite, selling nearly two million copies.
metro. Published in English in 2011, it became a European cult favorite, selling nearly two million copies of the printed edition worldwide, with equally large numbers downloading the Russian digital edition. Ksenia Papazova of Glagoslav, a publishing house specializing in translated Russian books, told RBTH that their Dutch translations of Glukhovsky’s fantasy and its sequel“Metro 2034”were consistently among their top bestsellers:“He is very famous in Rus-
Glagoslav’s current bestseller is far more surprising: “Maria Rybakova’s Gnedich”(2015) is a novel-in-verse about a 19th-century poet, Nikolai Gnedich, who translated Homer’s “Iliad.” Papazova believes that interest in contemporary Russian authors is generated by “the reputation of Russian classics”, but knows there is little chance of attracting “the same number of readers as J.K. Rowling did.” Numbers of readers globally are shrinking, she explained, and most Russian fiction is“serious … not meant to enter-
tain but to make the reader think and question themselves, and search for answers.”Papazova sees an important role for publishers in helping this discerning readership discover contemporary masterpieces: “Tolstoy and Dostoevsky do not need any marketing,” she says, “but new authors do!” Allesandro Gallenzi of Alma Books also sees a connection between the easy sales of famous names from the past and the challenge of introducing unknown modern authors. “Our Russian classics program is by far the most successful strand in our list. I believe there is a great appetite for Russian culture and literature among English readers — but the trouble, in my view, is that a lot of Russian contemporary novels are too self-referential and Russocentric. This makes them difficult to export into other languages.” “We have published, successfully, many Russian titles, mostly from the 19th but also from the 20th century (Bulgakov, Bunin, Dovlatov),”Gallenzi said.The only contemporary Russian books Alma has published so far are Dmitry Bykov’s “Living Souls” and Alexander Terekhov’s “The Rat Catcher.”“They both sold reasonably well,” Gallenzi said, but sales were still a fraction of those generated by earlier classics. Terekhov’s gruesome tale of two Muscovite rat catchers exterminating a provincial plague sold
better than Bykov’s grimly comic cycle of imaginary Russian civil wars. Gallenzi surmises: “I think ‘The Rat Catcher’ was more accessible, and its sharp satire more appealing than Bykov’s dystopian novel, which required a certain knowledge of Russian history and culture.” Vladimir Sorokin and Victor Pelevin have also written violent, literary dystopias with some appeal for international readers. “Day of the Oprichnik”was well reviewed, but Amazon reviews suggest general readers struggled with it. Seamus Sweeney from Dublin wrote that he found that
Numbers of readers globally are shrinking and Russian fiction is “serious, not meant to entertain.” “the excess of this dystopian vision rapidly becomes repetitive,” while J. Kevin White, a U.S.-based Pelevin fan, describes Sorokin’s novella as a book with “almost no redeeming features”.
Émigré writers Some of the best-loved“Russian” authors actually write in other languages, like Francophone Andreï Makine, whose novels are often set in his native Russia. British reader Henrietta Challinor said of his work:“For me, Makine
writes with the melancholic soul … of the best Russian writers, but his language is rich with a lightness of touch more akin to the great French writers.” Gary Shteyngart, Keith Gessen and Boris Fishman, all writing in English, join a celebrated tradition of Russian-American fiction dating back at least to Nabokov.Their texts are peppered with Russian literary allusions, like Fishman’s antihero in“A Replacement Life,” Slava Gelman, whose nickname, “Gogol,” reinforces the novel’s echoes of“Dead Souls.”Ukrainian author Andrey Kurkov, who writes in Russian, had an international hit with his novel “Death and the Penguin” when it appeared in George Bird’s 2001 English translation. The dynamic, expanding Pushkin Press has had successes with a couple of Soviet classics. Contemporary writers are represented so far by only one adult novel and one children’s book (Mikhail Elizarov’s “The Librarian” and Anna Starobinets’“Catlantis,”respectively), but there are plans for more. Gesche Ipsen of Pushkin Press told RBTH, “Try us again in a couple of years; hopefully we’ll have more on board.” Papazova sees a chance today to redress Russia’s Soviet-era isolation by promoting authors abroad: “Nowadays we have an opportunity at last to fulfill this mission and to translate the books into English.”
RUSSIA BEYOND THE HEADLINES
MOST READ Russian Children Ask Grandfather Frost to Fulfill
Section sponsored by Rossiyskaya Gazeta, Russia
Their New Year Wishes
Traditions Children’s performances that celebrate the winter holidays once featured Soviet heroes, but today offer Disney princesses
© VLADIMIR AKIMOV / RIA NOVOSTI
The New Year “Yolka”: From Soviet Propaganda to American Fairytales The Soviet government, as part of its drive to make New Year the main winter holiday, established a tradition of children’s holiday shows that continues today. ALEXEI BELYAKOV SPECIAL TO RBTH
Winter Holidays Before the Revolution
A form of propaganda
The scripts of the yolka concerts were imbued with short-term ideological goals and reflected the achievements of the Soviet Union in a way that was accessible to children. For example, the launch of Sputnik 1 in 1957 heralded the beginning of the space period in the performances. But no matter the particular theme of the year, the basic outline was always the same: The forces of evil were trying to prevent children from celebrating the NewYear holiday, but the forces of good would overcome them just before the clock strikes midnight. The forces of good were Grandfather Frost and his helpers, while the forces of evil could be various characters from fairytales and folklore, such as Bag of Bones, Baba Yaga, pirates or robbers. The Kremlin yolka, held at the Palace of Congresses, was the most coveted NewYear party for Soviet children. Only the best students and children with well-connected parents were invited to attend. It was considered to have the most talented performers, the brightest costumes and the best gifts. Children who managed to get invited to this elite party bragged to their classmates about the tasty candy and amazing presents long after the celebration had ended. It’s hard to know what the Kremlin yolka of those days was
In imperial Russia, Christmas was a family holiday, and was celebrated mostly for children. On Christmas Eve, every newspaper carried Christmas stories and poems in which the hero is miraculously saved from danger on Christmas Day. Toy shops displayed dolls, games, toy weapons, doll houses, and toy cars and trains. A novel feature in the 1913 season was an English wireless telegraph for children — the latest technology. Lower-level bureaucrats bought practical jokes to play pranks on their friends, cousins and mothersin-law. For example, a “bottle of perfume” would turn out to contain plain water that spilled all over the intended recipient. There were matches that lit themselves and candy boxes fixed with springs that ejected toy figures when the boxes were opened.
For a long time, New Year’s Day was not a holiday but an ordinary workday. However, Russians who lived in the countryside celebrated St. Basil’s Day on Jan. 1. That saint, the Bishop of Caesarea, was the patron saint of pigs — so, on New Year’s, people all over Russia ate suckling pig. By the beginning of the 20th century, a special New Year’s ritual was established in St. Petersburg, which was then the country’s capital. Jan. 1 was regarded as a time for looking back on the previous year. New Year’s Eve, on the other hand, was a time for celebration. Young people in the city would visit restaurants or clubs to escape St. Petersburg’s miserable weather. Costume balls were staged at the Noble Assembly and the Suvorin Theatre for those more well-to-do ladies and gentlemen.
And yolka shows remain popular. Many performances begin in the last days of December and continue through the official federal holidays, which end this year on Jan. 10. In Moscow, there are countless yolka shows, featuring beloved cartoon and movie characters as well as Grandfather Frost. Disney characters appear along with the Western Santa Claus. There are shows for every taste. The Polytechnic Museum puts on a
yolka involving scientific experiments and Olympic champion ice skater Evgeni Plushenko performs in a yolka on ice,“The Snow King.” This year, there are yolkas featuring the stories of Snow White, Sleeping Beauty and Cinderella as well as the stories of Alexander Pushkin. Ideology may have disappeared from the performances with the collapse of the Soviet Union, but the yolka itself has proved stronger than propaganda.
STANISLAV KRASILNIKOV / TASS
At the end of the 1920s, Russians virtually ceased to celebrate Christmas, at least officially, due to the Soviet government’s official policy of atheism. But to brighten the long, dark nights of midwinter, the Soviets substituted another holiday — New Year. Christmas trees became NewYear trees, and the star at the top went from symbolizing the star of Bethlehem to representing the Soviet star, a cousin of sorts to the ruby stars that crowned the Kremlin. Families gathered together on New Year’s Eve for a festive meal and to wait for a visit from Grandfather Frost, the Russian version of Santa Claus, who wears blue robes and travels in a traditional Russian troika, and his granddaughter, the Snow Maiden. The Soviet authorities sought to promote a culture of the masses, and transformed the family holiday into a public one. National celebrations were organized for adults in houses of culture and in public squares. Meanwhile, the younger set gathered at stadiums, day care centers and even military grounds to celebrate a “yolka” — a holiday concert in which children watched costumed performances, took part in competitions and received gifts.
Thanks in part to these shows, NewYear became the favorite holiday of Soviet children.
Skaters on a rink set up in Red Square during the New Year holidays.
really like, as stories about it rely on the faulty memories of children. One feature of the Kremlin yolka was that parents were not allowed to attend. Upon entering the palace, children were greeted by clowns, bunnies and squirrels, escorted to the coat check, and led in dances — a tradition that has been preserved to this day. After the show, children left the building and were paraded around like luggage on an airport carousel as their parents
picked them out from the crowd.
From Disney to Pushkin Although today religion is back in favor in modern Russia and about 80 percent of the population identifies as Orthodox Christian, the secular New Year holiday remains the main celebration of the Russian winter. Orthodox Christmas, celebrated on Jan. 7, is almost a purely religious affair, unlike the commercialized version in the West.
PRESS FROM THE PAST
Christmas Gifts for the Front and Snow Days RUSSIAN POULTRY CONTEST MOSKOVSKY LISTOK, NOV. 30, 1915
The Russian Pedigree Poultry Contest took place yesterday. The purpose of the contest is to encourage the revival of the Russian breed. The contest was held in the categories of young roosters and hens, old speckled roosters and hens as well as red roosters and hens. The contest featured poultry from the provinces of Ta m b ov, Vya z m a , N i z h ny Novgorod and others. CHRISTMAS GIFTS FOR SOLDIERS ZHIZN ALTAYA, DEC. 1, 1915
Newspapers in the early part of the 20th century played as important a role in informing and entertaining the population of the Russian empire as they did in the United States. In the winter of 1915, the local press promoted care packages for soldiers at the front and reported on the unusual occurrence of snow on the Crimean peninsula. Prepared by Tatiana Shilovskaya
A transport bearing linen and Christmas gifts for soldiers, accompanied by a military officer, is to depart on Dec. 5 directly for the headquarters of His Majesty the Emperor. All residents are invited to join and bring tightly packed loads with lists of the enclosed items, or individual items to be put in boxes. This time, in addition to long underwear and the usual gifts, such as tobacco, paper, pencils, knives
and shoe materials, people are also sending ham, pork fat and side, smoked sausages, cakes, sweets, nuts, seeds, crackers and slices of dried white bread.
Salesmen are sincere now, but this sincerity should be brought to its logical end, and the posters in shop windows should say: “Sale of leftovers at higher prices.”
FROSTS IN THE CRIMEAN SUBTROPICS
MOSKOVSKY LISTOK, DEC. 6, 1915
RUSSKOYE SLOVO, DEC. 2, 1915
Frosts have struck Feodosia.There are sleighs in the city streets that have not been seen for three winters. There is a most severe storm at sea. This morning, snow covered the roofs and trees in Yalta. Laurels and cypress trees under a white shroud present an original picture! LEFTOVERS “SALE” CHERNOZYOM, DEC. 3, 1915
Some stores have a custom to hold a “sale of leftovers” at the beginning of each month. However, it cannot be said that the leftovers are sold at a discount. “Excuse me, I bought this same wool from you much cheaper!” some shopper insists. “It is quite possible ... That’s why we sell it for more money — because little is left.”
ON THE WING An ignorant resident had a very disturbing day yesterday. He walked through the streets and muttered:“My God, my God! Why are there so many fires in Moscow!” Indeed, fire trucks were racing through the streets, with flags waving. But those who took a closer look realized immediately that these firemen were not rushing to a fire. Yesterday and today, the Moscow firefighters are performing their civic duty. This time, they are not extinguishing the “fire of charity,”but igniting it. Moscow is hosting the “Firefighters to Soldiers” charity fundraising campaign. A FOREIGN CHRISTMAS VECHERNEE VREMYA. DEC. 11, 1915
Today the foreigners living in Moscow are celebrating Christ-
mas Eve, celebrating it according to the new style, as they do at home. The many Polish refugees found in Moscow, adhering to their tradition, will also celebrate according to the new style today. They have gathered in separate circles and are going to restaurants in groups to celebrate Christmas Eve. SNOW DAYS CHERNOZYEM. DECEMBER 13, 1915
In the event of frost, red flags are now hung at some crossroads.This is done to inform students that they do not need to go to school on that day. It is not difficult to notice that in most cases the flags are just dirty rags attached to sticks similar to those that demonstrators once used on the streets. Homeowners do not give away their good holiday flags. However, students are rather indifferent to all this. After their studies they walk around the Moscow streets in their cold coats, neither to demonstrate nor to be stylish.
FROM PERSONAL ARCHIVES
WHAT THE RUSSIAN PAPERS WROTE ABOUT IN THE LAST DAYS OF THE EMPIRE
Published on Dec 16, 2015
Published on Dec 16, 2015
In this issue: Moscow signs on for greener future; Middle class hurt most by ongoing crisis; The American roots of the Soviet Union’s classi...