Putin – Committee for Russian Economic Freedom

August 17, 2016September 9, 2018

A Mortgage from Putin

German Gref (right) and Vladimir Putin / Photo by rieltor-89.ru

Vladimir Putin rarely acts as an advertising agent, but the current economic crisis and the fear of political instability it provokes are forcing the president to recur to unorthodox methods of state support for key segments of business on which the regime’s financials are based. During his meeting with the head of Sberbank—Russia’s major bank, 51 percent of which is owned by the state—Putin suggested that Russian citizens should take out mortgages without waiting for interest rates to go down.

There could be many reasons for such promotional activity, the chief among them being a slowdown in nominal wage growth, an upturn in inflation since July, and a rise in the unemployment rate. These factors are already affecting the banking sector and could potentially lead to a balance-of-payments crisis, the holding back of wages and pensions, and other systemic problems. Analyzing Putin’s aforementioned statement, Russian economist Sergei Aleksashenko notes that while the numbers of mortgage loans have been increasing, their amounts have been steadily diminishing.

As of the summer of 2016, the growth of Russia’s mortgage market has been mostly caused by measures of state support, the repeal of which, according to the Russian Finance Ministry, will inevitably lead to an increase in mortgage rates and a lower demand for mortgage loans. Essentially, Sberbank is the only bank that shows decent mortgage figures, whereas such key players in the Russian banking sector as VTB24, Gazprombank and Rosselkhozbank, not to mention smaller banks, demonstrate an almost two-fold decrease in the volume of mortgage loans. Read More “A Mortgage from Putin”

July 13, 2016September 9, 2018

The Russian Orthodox Church during the Tsar (President) Putin’s era

The newly established authoritarian regime in Russia has chosen to make the promotion of spirituality that is being served up as an intrinsic part of Russian culture and self-identification of the Russian nation as one of its priorities. It is obvious however that the regime’s real purpose consists in using this simple method to force its nationalist and patriotic rhetoric onto the population by glorifying the county’s past successes and inspiring pride in the “centuries-long history of the Russian empire” which in its turn allows the regime to draw the population’s attention away from the authorities’ lack of competence in governing the country and to cover up the most flagrant corruption by top Russian officials.

Responsible for spirituality, the Russian Orthodox Church (ROC) is formally separated from state institutions that, according to the law, are supposed to be secular by nature. However, ROC enjoys a number of economic advantages that have been granted to the Church during the Putin’s era. Thus, for example, it is impossible to use standards methods to calculate its “market capitalization” because legally, ROC is divided into more than 30,000 different organizations and since the mid-1990s it has not been disclosing either its gross budget or expenses. According to certain estimates, ROC’s income possibly reaches 5.6 billion rubles (or around $87 million) a year, without including federal funds that are being allocated annually to ROC and structures close to it which amount to another 3.5 billion rubles (or about $54 million). This does not seem such a large sum for a Church with more than 50 million faithful, does it?

However, this is only a part of the Church’s budget that different sources or ROC representatives themselves disclose from time to time in their statements. Read More “The Russian Orthodox Church during the Tsar (President) Putin’s era”

June 23, 2016September 9, 2018

Putin, Roldugin, Shamalov, Patrushev and the Rest of Homeowners

Apartment building in Moscow / Photo by apb1.ru

The widely known problems in Russia’s housing and communal services sector are not new. The entire sector is slowly but steadily deteriorating. This is no surprise since the average age of the Russian housing stock exceeds 40 years. Several tragedies happened over the last year. A residential building partially collapsed in Mezhdurechensk; household gas explosions occurred in Omsk, Perm, Yaroslavl and Volgograd; a bridge collapsed in Vladivostok; cars regularly get stuck in potholes as pavement collapses. Well-known Russian blogger Ilya Varlamov has repeatedly supplied evidence of dire housing conditions of ordinary Russians.

The federal authorities do not at all seem concerned about this situation. In 2016, federal allocations for the repair and replacement of utility lines as well as for the upgrading of the housing stock will amount to around 75 billion rubles or about half of the obviously ill-gotten $2 billion belonging to Putin’s close friend violinist Roldugin. There are plans to further cut federal spending on the housing and communal services sector in 2017 to more than half its 2016 amount.

In fact, why should Russia’s budget be spent on housing around 85 percent of which is privately owned? On the other hand, despite the mass privatization of apartments in the 1990s, public spaces and communal services of most apartment buildings such as entrance halls, courtyards, stairs, gas, electrical and plumbing have not been privatized and remain the responsibility of municipalities. The budget situation on the local level is obviously much worse than on the federal one. Read More “Putin, Roldugin, Shamalov, Patrushev and the Rest of Homeowners”

June 16, 2016September 9, 2018

Putin’s Regime Thumbs its Nose

Russian Prime Minister Dmitri Medvedev during a visit to Crimea. Photo by A. Pupysheva / kafanews.ru — Russian Prime Minister Dmitri Medvedev during a visit to Crimea. Photo by A. Pupysheva / kafanews.com

On May 23, during a visit to Crimea, Russian Prime Minister Dmitri Medvedev made a fool of himself with a cynical and provocative phrase that quickly became one of the most popular hits on Russian Internet. Answering the question from an elderly lady about why pensions are not being raised, Medvedev, without so much as a thought, retorted: “There’s simply no money. If we find the money, we will raise pensions. You hold on here, I wish you all the best, good spirits and good health.” But the money is lacking not only for pensioners: all those who had for years depended on the needle of “Putinomics” are experiencing problems.

Russia’s largest car manufacturer, AvtoVAZ, is once again finding itself in a difficult situation: beginning on June 6, its workers were transferred from a four-day to a three-day week; layoffs of between 5,000 and 8,000 people are expected. According to AvtoVAZ’s report, the company’s debt arrears of more than 45 days after the first quarter of 2016 has reached 25.3 billion rubles—3.8 times greater than during the same period of 2015. The company’s total debt to suppliers and contractors during the same period amounted to 66.5 billion rubles (including arrears of 25.3 billion.) After the first quarter of 2016, the company’s net loss has increased 48 times, reaching 8.6 billion rubles. To cover its losses, AvtoVAZ will ask its French partner, Renault-Nissan, for a loan of 20 billion rubles. If it is unable to pay that loan back, AvtoVAZ will have to pay with its shares and assets. Read More “Putin’s Regime Thumbs its Nose”

June 8, 2016September 9, 2018

Foreign Trade: An Unlearned Lesson

In 2013, Russia’s external turnover reached its highest level in modern history, amounting to the hefty $864.6 billion. Oil prices that from 2011 to 2014 constantly exceeded $100 per barrel had no small share in this. Thanks to this situation, such notions as budget deficit and state debt have become part of the history (albeit recent) of the 1990s that is being actively rewritten on Putin’s initiative.

Satisfied and content, Russian citizens – not everyone, but certainly the majority – came to believe that their financial stability was secure and demanded that the Kremlin come up with something more entertaining than the long-familiar reality TV shows, such as Dom 2 and Let Them Talk. Having tamed Siberian tigers and flown with Siberian white cranes, Putin responded to popular yearning for something better than TV fencing by treating his loyal people with the Sochi Olympics, and then the annexation of Crimea and the war in Donbass.

However, Russia’s foreign partners did not particularly like such reality shows and responded to them by introducing economic sanctions. Furthermore, the historic cycle of high oil prices came to an end, and in the summer of 2014 oil prices plummeted. That same year, Russia’s external trade decreased by around 7 percent, and in 2015, the country’s foreign trade dropped by 33 percent year-on-year from 2014. Statistical data for the first quarter of 2016 shows that this decrease will continue, since foreign trade is falling by more than 25 percent compared to last year. Consequently, in less than three years, the drop reached 65 percent.

The export and import patterns Read More “Foreign Trade: An Unlearned Lesson”

May 25, 2016September 9, 2018

The Privatization of Bashneft: An Exercise in Futility

Photo by Bashneft — Photo by Oil Company “Bashneft”

The Kremlin finally decided to approve the privatization of Russia’s major oil company Bashneft that had belonged to privately-owned AFK Sistema until its shares have recently been literally robbed while its owner Vladimir Yevtushenkov was being held under house arrest. Bashneft shares that used to belong to Yevtushenkov have been returned to the state, and the government now hopes that the sale of Bashneft will bring the much-needed money to replenish the Russian budget. However, the way the Russian authorities are preparing the sale of this valuable oil asset makes one think of yet another shady transaction.

On May 16, President Putin excluded 50 percent plus one share of Bashneft from the list of strategically important companies thus paving the way for the sale of the state’s majority stake. Today, the Russian Federation owns 60.16 percent of Bashneft’s voting shares (or 50.08 percent of its authorized capital). The regional government of the Republic of Bashkortostan, which is a federal subject of the Russian Federation, owns an additional 25.79 percent of the company’s voting shares (or 25 percent of its authorized capital).

The first question that comes to mind: What exactly is being sold? The Russian Federation is currently considering whether to sell a stake of 25, 50 or 75 percent together with the stake of the Republic of Bashkortostan. The regional government of Bashkortostan, however, does not support the idea of selling its stake in the company. The republic expects to at least keep the blocking stake (25 percent plus one share) in Read More “The Privatization of Bashneft: An Exercise in Futility”

May 11, 2016September 9, 2018

Kremlin Imitators: Putin, Medvedev, and Kudrin Who Joined Them

Alexey Kudrin and Dmitry Medvedev / Photo by postsovet.ru

It appears that the Russian authorities have once again turned to their favorite pastime of successfully imitating reforms. After two years of fighting first in Ukraine and then in Syria, Vladimir Putin decided to address the crisis in the country. The elections are close at hand, while the economic situation in the country has been steadily deteriorating for the last two years, and the population is being increasingly affected by it. The quasi-patriotic rhetoric and the “Krym nash” (Crimea is ours) slogan cannot save the government’s poll standings from slumping anymore. Putin decided he needed a program and appointed his loyal colleague and former Finance Minister Kudrin his main “reformer”. However, in 16 years in power, Putin has never successfully implemented any major structural reform. Thus, this new seemingly liberal initiative will be nothing more than yet another step in the process of appropriation of state resources and unsystematic campaigning.

It is obvious that there can be no successful structural reforms in Russian under the Putin regime if only because reformers have no real authority regardless of the informal status granted to them by Putin. Created in 2012, the Economic Council under the Russian President has until now stayed dormant. Putin’s St Petersburg friend, Alexei Kudrin Read More “Kremlin Imitators: Putin, Medvedev, and Kudrin Who Joined Them”

May 4, 2016September 9, 2018

Endangered Species of Business

Vladimir Putin. Photo by Alexey Druzhinin / "RIA Novosti" — Vladimir Putin. Photo by Alexey Druzhinin / “RIA Novosti”

During a recent meeting on the improvement of the government procurement system, Prime Minister Medvedev declared that it was imperative to involve small and medium-size businesses in this process. One month later, the Ministry of Economic Development came up with draft legislative amendments that are supposed to facilitate the conditions for participation in the process of government procurement for small-size enterprises by dispensing them from the required provision of collateral. It is as yet unclear whether this measure will be effective, since specialists already point to the insufficient and inaccurate character of the proposed changes.

Concern for small and medium-size businesses is one of the favorite topics for both Medvedev and Putin. However, despite the annoyingly regular promises of support, small companies continue to experience difficulties.

The share of small and medium-size enterprises in the country’s GDP is a key indicator of Russia’s economic health. According to official estimates, in Russia it amounts to 20 percent. According to entrepreneurs themselves, however, it only reaches 3 percent. In comparison, in the United States, the share of small businesses in the country’s GDP amounts to around 60 percent, and in some European countries it reaches 80 percent.

In 2014, more than half of all small enterprises recorded a decrease in financial stability, and more than half of entrepreneurs declared that business conditions had deteriorated. Over the past year the tendency has not changed, Read More “Endangered Species of Business”

March 23, 2016September 9, 2018

Doctors of Science in Corruption

“Education reform” / Picture by comm-art.ru

The population’s educational attainment is commonly considered as a key indicator of the country’s investment attractiveness. When in the early 1990s, Russia opened its domestic market for foreign investment, its population’s universal literacy and a considerably higher percentage of college-educated specialists than in other BRICS countries, that is in China, India, Brazil and South Africa, was seen as an important competitive advantage.

Unfortunately, Putin came to power at the exact moment when the country’s protective layer of quality education, that had been built over the previous years and was worn down considerably by a drastic transition to a market economy, demanded government attention financing and reform. Although prior to 2000 corruption had already blossomed in Russian universities, the country’s secondary and higher education system has been completely destroyed over the following 16 years. It was replaced by a new system, built under the national leader’s supervision, in which graduates’ actual level of knowledge does not matter since it is much more important for government employees to know how to please their superiors and how to take and give bribes.

Today, corruption calls the shots in science and education. Thus, according to the Dissernet project, plagiarism in dissertations of Russian officials has become a mass phenomenon affecting all three branches of power: extensive copying of sections of text from a source without quotation marks or proper citation has been found in dissertations belonging to Read More “Doctors of Science in Corruption”

March 16, 2016September 9, 2018

Tag: Putin