Another spring of war begins. Repressions and fading geopolitical ambitions
In late February-early March, the security agencies – the FSB, Ministry of Internal Affairs, Prosecutor General’s Office, etc. – usually report on their activities the previous year, and as a rule, Putin attends the expanded board meetings where the reports are given. On February 28, at the expanded meeting of the FSB Board, Putin demanded
“to expose and curb the illegal activity of those who are trying to divide and weaken our society by using separatism, nationalism, neo-Nazism and xenophobia as their weapons. These weapons have always been used against our country – and recently, of course, the attempts to bring all this scum to our land have particularly intensified.”Repressions
The nonprofit SOVA Center released its annual report
on inappropriate enforcement of Russian anti-extremist legislation, which dealt with the same things that Putin spoke about at the FSB – just from the other side. It counted 130 convictions for participation in extremist and terrorist organizations against 264 people in 2022, up 50% versus 2021.
The well-known “Network” (Set’) case
is an example of how the repressive machine falsifies criminal cases to uncover “terrorist organizations.” Recall that back in February 2020, seven defendants from Penza confessed under torture that they had created a terrorist organization and received sentences ranging from six to 18 years.
Now, Azat Miftakhov, an anarchist and former Moscow State University graduate student, has been linked to Network. In January 2021, Miftakhov was sentenced
to six years in prison for breaking a window (there was no proof even of that) at a United Russia party office. In September 2023, he was due to be released, but now he faces a new charge
–involvement in the Moscow cell of “Network,” as the defendants in the case seem to have been pressured to give testimony against him.Not the war
On February 28, the government held a strategy session to review the implementation of national projects and state programs in 2022 (as always, there was only a very general report
released to the public). Moving forward, a series of discussions should be held at the highest levels of the government on the outlook for economic development given the existing and potential external challenges.
Some regional developments that were not related to the war were finally deemed significant enough and reached the federal level. In Moscow, Putin – remotely – took part in the opening of the Moscow Metro’s Big Circle Line
, the construction of which began back in the 1960s and was resumed under Sobyanin. Meanwhile, Krasnoyarsk hosted the 19th Krasnoyarsk Economic Forum, one of the more notable, along with those in St Petersburg, Sochi and Vladivostok. Note Moscow Mayor Sergei Sobyanin and Krasnoyarsk Region head Alexander Uss are facing reelection in September, and while Putin basically threw his support
behind Sobyanin at their recent meeting, Uss’ reelection, according to experts, is far from a lock.State business relations
Oleg Deripaska, part owner of Rusal and EN+ Group, sharply criticized
the government’s economic policy at the Krasnoyarsk Economic Forum: “State capitalism […] is a road to nowhere. I look with horror at this [budget] money spent last year, clearly wasted. I used to think it was in the billions, but now I see the count is already in the trillions. Only the market core of the economy, only things that are determined by competition [will help the country].” In addition, he proposed halving the number of bureaucrats and law enforcement officials. The reason for Deripaska's audacity is that he has found himself in dire straits: his assets in Ukraine have been nationalized
, while on February 28 the US introduced sanctions on the Russian aluminum industry, threatening Deripaska's main asset
. Arguably, the combination of his desperate situation and his special relationship with Putin could explain his angry criticism of the government. (Note that Deripaska, who has assets in both Russia and Ukraine, has publicly taken an antiwar stance and been reprimanded for it by the Kremlin, recently even having his $1 billion hotel
in Sochi seized).
Another important story concerning government-business relations has been the “windfall tax” proposed by the government. Preliminary discussions
have been going on for three weeks. The “contributions” are seen as one of the measures to plug the budget deficit, expected this year to run to RUB 3 trillion, though it was already RUB 1.5 trillion in January. According to some estimates
, it could hit RUB 6 trillion by year-end, meaning the RUB 300 billion that Finance Minister Anton Siluanov talked in February
about getting from companies would be only 5% of the deficit. The one-off contributions to help the budget must be agreed before March 16, when Putin is scheduled to attend a Russian Union of Industrialists and Entrepreneurs congress.
At the same time, both foreign and local observers have reported a sharp increase in business activity in Russia: in February, the S&P Global Russia manufacturing PMI came in at 53.6 points, the highest reading since 2017, while Rosstat also recorded an activity uptick in both the extractive and manufacturing sectors.
The reason that industry has begun to bounce back and refill warehouses with finished products could be that it is counting on government demand
amid higher budget spending (even at the cost of a record deficit). The government is pumping money into the economy as part of import substitution (in particular, for the military purposes), while export orders are declining.Arctic strategyAt the very end of February, Putin amended
the Strategy for Developing the Arctic Zone of Russia, which had been approved just two years ago. Though this did not attract much attention, the changes demonstrate the effectiveness of the sanctions put in place against Russia, as well as the Kremlin’s awareness of that.
There were two fundamental changes: instead of two Leader nuclear-powered icebreakers, the most powerful in the world, only one is planned to be built now; in addition, the planned building and development of a satellite constellation in highly elliptical orbits, which was supposed to be made with domestic equipment and provide satellite communications in the waters of the Northern Sea Route (NSR), was canceled.
In October 2018, Deputy Prime Minister Yuri Borisov announced
the project to build the completely new Leader nuclear-powered icebreakers. Three were supposed to be built, and, according to Borisov, the financing had been secured. They were supposed to ensure the transportation of commodities to Asia-Pacific markets, since for 6-7 months of the year ships cannot sail the NSR. The icebreakers were also to be also used for the needs of the Ministry of Defense.
The state contract for the construction of the flagship icebreaker was signed
in April 2020 with the Zvezda Shipbuilding Complex near Vladivostok, owned by Rosneft, Rosneftegaz and Gazprombank. The price tag was about USD 2 billion. By the time the flagship was to be commissioned in 2027, construction of the two other vessels should have already started. The Leaders were supposed to spearhead the development of the NSR and the Arctic as a whole.
Approved back in the fall of 2020, the Arctic strategy offered grandiose plans for year-round navigation of the NSR to the east and entailed an increase in cargo traffic to up to 80 million tons per year, for a doubling by 2030. However, even then it was clear that there was neither the shipbuilding capacity nor (moreover) the highly qualified personnel needed for the simultaneous construction of three unique icebreakers in the country, so the target was reduced to two ships. Now, only one remains in the plans – not enough for year-round full operation of the NSR.
Another problem is imports. The share of imported equipment
for the nuclear icebreakers is 15-20% in value terms, and it is not standard parts, but unique systems that were supposed to be ordered from the West and South Korea.
The two stories considered above – the icebreakers and one-off collection from business – underscore the difficult situation in which the Russian leadership now finds itself, having launched a war against the West called a special operation. The government is already feeling a crunch for money, which is why, in the words of Deripaska
, “they have begun to shake down business.” Still, even if the government somehow copes with the deficit, then industry is bound, amid the isolation of the economy, to fall behind, inevitably forcing Russia to radically curb its geopolitical ambitions.