The Kremlin Goes to Prom(svyazbank)
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Promsvyazbank to become key defense lender
Kommersant reports that Promsvyazbank (PSB) will be converted into a defense sector lender that will facilitate state arms orders. The selection of PSB comes unexpected to many, with subsidiary institutions of Vnesheconombank (VEB) and Rostec thought of as more likely candidates. PSB currently sits under the control of the Bank of Russia (CBR) after it was placed under administration and ultimately nationalized through the Banking Sector Consolidation Fund (FKBS) on December 15th. To note, its former owner, Dmitri Ananyev, fled Russia after the bank's takeover amidst accusations of corruption. More recently, it was announced that Pyotr Fradkov, son of former foreign intelligence (SVR) head and prominent silovik Mikhail Fradkov, will be named head of the new PSB.
CONTEXT: Russia has long relied on its state banks to help finance arms purchases, notably paying back a 700 billion ruble advance in late 2016. With new US sanctions on the horizon, however, a number of financial institutions (reportedly Sberbank) began to squirm over doing further defense business, fearing getting blacklisted. Making a new institution solves that problem.
Snapshot: Some unbearably bad news
Making news this week was a move by Culture Minister Vladimir Medinsky to delay the Russian release of Paddington 2 in order to 'protect local cinema.' All of the previously scheduled January showings were subsequently cancelled.
Weekly Wrap-Up with Aaron Schwartzbaum
A look ahead at 2018
I'd like to do something a bit different from usual today, namely, offer some thoughts on the big events and risks I'll be following this year. Broadly speaking about 2018, Putin's plate as far as political challenges go is far more domestic in nature. Yes, there are still risks in terms of international relations, but the age of Russia's foreign policy being its domestic policy is rapidly coming to a close. In rough chronological order:
New US Sanctions: The list of individuals and organizations 'close to the state' is due January 29th. Note that new sanctions do not necessarily drop on that date - the Trump Administration has tended not to rush on these measures - but the new limitations and Russia's reaction do matter (see the article #1 if you don't believe me). Russia doesn't have the same leverage the US does on financial markets, so its leadership will have to find another response.
The Election: Putin is going to win. But the big question is whether he gets the turnout he wants. I'm not convinced he does, making the creation of a real domestic agenda all the more pressing.
The New Cabinet: Putin's choices about his new cabinet are in a way more interesting than the election itself. The Russia analysis world spends a lot of time guessing which camps/political forces/individuals are gaining or losing influence, and now, Putin will (in effect) tell us(!). The big question remains whether Medvedev stays around.
The OPEC Rollback: Getting OPEC and Russia to agree to supply cuts was tricky. Rolling back that agreement may prove even harder. We'll find out two important things by summer: just how much do US producers ramp up when oil is at nearly $70 per barrel. And can oil prices remain above $60 (or even $50) in unconstrained market conditions. The answers to both have major implications for Russia.
Security Stuff: First, a reminder that US and and Russian forces are operating in close proximity in Syria. Despite deconfliction measures, accidents are possible - especially given the number of players involved. Second, how does the on-thin-ice Intermediate Nuclear Forces Agreement (INF) develop? This may be a place Russia reacts to more US sanctions. Third, as far as Russia's neighbors go, I see little interest in escalating things in Ukraine. And beyond that, for any trouble elsewhere, Nazarbayev and/or Lukashenko would have to kick the bucket or step down.
Data Point: Goldman Sachs' optimistic 2018 GDP growth forecast
3.3%
Oligarchs
Suleiman Kerimov allowed to return to Russia for weekend
Billionaire and Senator Suleiman Kerimov, currently under house arrest in France, has received permission from authorities in Nice to return to Russia for three days. The businessman was arrested when he arrived in France on November 20th, accused of money laundering and tax avoidance. Sources indicate he may have illegally moved up to 750 million Euro into the country. The arrest ruffled feathers in Moscow, with Dmitri Peskov claiming that as a senator, Kerimov should enjoy diplomatic immunity. More recently, a major deal between Polyus Gold, owned by Kerimov, fell through, possibly because of his ongoing legal troubles.
BIGGER PICTURE: He's not coming back to France, is he?
Chart: Oil Prices (Rubles)
OPINION AND ANALYSIS
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