Guillotine (Biz go yah)
HAPPENING TODAY
Medvedev proposes the ‘regulatory guillotine’ for business requirements — Anna Nadibaidze covers this week in Telegram channels — officials look into unofficial grain export controls — and top figures discuss regional budgets at the Gaidar Forum.
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Top Story
Medvedev proposes regulatory guillotine for business reqs
NEWS: PM Dmitry Medvedev announced at yesterday’s Gaidar Forum that the government will resume its review of the state’s demands of business using the “regulatory guillotine” mechanism. Within two years, all obsolete requirements and regulations will be abolished.
TAKEAWAY: The regulatory guillotine is a fairly radical move. The government will first inventory all regulations affecting business by February 2020. Each regulation is then reviewed, and those that do not pass muster are eliminated. Medvedev’s announcement came as a surprise, as supervisory reform was effectively suspended after the change of government in May 2018. Business is understandably excited by the announcement. The process will likely remove some 80-year old regulations that bog down operations and cost companies billions. (According to MinEkonomiki, compliance with new requirements introduced in just 2018 cost business over 150 billion rubles, roughly $2.2 billion.) Experts, however, are wary that if conducted improperly, the guillotine will not be as effective as hoped.
CONTEXT:
The Ministry of Economy will lead the reform process.
There are currently 44 government organs engaged in business oversight. Once regulations are reviewed, they will be systematized by business type, rather than departmental affiliation.
Similar reforms have taken place abroad. South Korea reviewed 11,000 regulations in 11 months, abolishing half of them and simplifying 22%. Mexico reviewed 2,000 regulations in nine months, abolishing 54% and simplifying 27%. Vietnam reviewed 5,200 regulations in three years, abolishing 9% and simplifying 77%.
Experts worry that without creating a special structure to implement the regulatory guillotine, the reform will not be carried out properly. As one expert told Kommersant, “do not pour young wine into old bottles.”
Snapshot: 2018 infrastructure spending sets record [RUS]
Russia spent a collective $7.7 billion on infrastructure projects in 2018, led by railway investments. Yet investment as a percentage of GDP has declined, and the status of guarantees for concessionaires remains unclear going forward. (Photo: Maksim Stulov / Vedomosti)
What They're Saying
"The value of certain cryptocurrencies, as is known, fell 5 times. But that, of course, isn't cause to bury them."
- Dmitry Medvedev, on cryptocurrency
The Grapevine with Anna Nadibaidze (@AnnaRNad)
This week in Telegram channels:
Putin does not really care about the Southern Kuril Islands which Russia could give back to Japan. However, a peace treaty with Japan would mean bringing an end to the Second World War, and Putin wants to be remembered in history books as the leader who ended the war.
Sources in the President’s Administration say Sergei Kiriyenko is considering bringing back former Moscow Mayor Yury Luzhkov into politics, most likely as chairman of the Moscow City Duma. Luzhkov himself has denied the rumors, but his entourage says he is pleased with the coverage he has been getting.
The version of a terror attack to explain the gas explosion in Magnitogorsk is still being considered. A source says the attack could be linked to the BRICS and Shanghai Cooperation Organisation Summits taking place in Chelyabinsk in 2020. The results of the investigation are expected this Friday.
After the Ukrainian Orthodox Church became independent, some are discussing a similar scenario for Belarus, especially given recent tensions in relations with Minsk. The Russian Orthodox Church is due to change Belarus’ Patriarchal Exarch in May 2019 in order to expand its influence.
Chart: Gazprom launches e-trading through Dutch TTF [RUS]
Title: Gas prices on TTF since the start of winter (dollars per thousand cubic meters)
Dates: December 2, 2018; December 24, 2018; January 15, 2019
Agriculture
Officials look into unofficial grain export controls
NEWS: The Ministry of Agriculture (MinSelkhoz) has asked that grain exporters informally slow down the pace of grain exports in hopes of holding them around 42 million tons for the season, pushing export figures lower than expected for January thus far.
TAKEAWAY: The push to limit exports is clearly linked to inflation concerns driven by the VAT tax hike among other policies from last year as well as the growing congestion on Russia's rail network. Any export controls would de facto be used to lower domestic prices, though seasonal shortages and pricing issues for the cost of renting rail wagon capacity also pressure prices upwards over the course of the year. This looks funny - after all, agriculture has been touted as a post-sanctions success story - but fits into a broader theme of early January's policymaking in Moscow. Everyone in Moscow is scrambling to contain the damage and prevent a further erosion of public support or at least acceptance of the government.
CONTEXT:
Despite the Ministry's aim of targeting 42 million tons, analysts expect exports to reach 43 million tons or higher for the season.
Exports grew 4.7% year-on-year for the first half of the season, reaching 28.8 million tons.
Vice PM Alexei Gordeev said Monday that Russia needed to export 40 million "plus or minus" two million tons to maintain stability on its domestic grain market.
At the beginning of the harvest season, MinSelkhoz projected the harvest at 100-105 million tons. But Rosstat records 112.9 million tons harvested as of December.
Diplomatic Agenda
Jan. 14: Russian FM Sergei Lavrov met with Japanese FM Taro Kono in Moscow to discuss the necessary conditions for a peace treaty, with no progress as of yet.
Jan. 15: While visiting Moscow, Zimbabwean president Emmerson Mnangagwa expressed hope Russia would ease and simplify the visa regime for Zimbabwean nationals.
Jan. 15: Deputy Ministers from Russia and Syria discussed the formation of a constitutional committee to help end the civil war.
Regions
Top figures discuss regional budgets at Gaidar Forum
NEWS: During a panel at the Gaidar Forum, vice PMs Anton Siluanov and Tatiana Golikova and Duma Budget Committee chairman Andrei Makarov talked with governors and ministers about how regional budgets need to be adjusted in order to accomplish Putin’s May decrees.
ANALYSIS: High-level attention to regional finances means that the regional debt problem has attracted Moscow’s attention and shows the Vice-PMs’ seriousness about carrying out the May decrees (regions are responsible for most May decree programs). This does not change the fact that many of the goals are unrealistic and unachievable, however, and the governors worry they will be held responsible for the programs’ failure. It is telling that Makarov explicitly asked Siluanov and Golikova whether they personally believe in the May decrees-- or whether the hunt is already on for possible scapegoats.
CONTEXT:
Much of the responsibility for actually carrying out the May decrees (60% of the programs) rests on the regions, said Siluanov.
Many regions have dangerously high debt-to-GDP ratios, a problem BMB has covered in the past. Siluanov argued that this problem is being resolved; according to him, the ratio of regional debt to tax revenue decreased from 30-35% to 27% this year.
Maksim Reshetnikov, governor of Perm Krai, said that work on projects will not begin until late this year unless regions begin the process early, before federal money is dispensed. The regions would then bear the risk that the federal money does not appear. Siluanov assured the governors that the money will come.
OTHER STORIES
Wagon Wheels: Russia's railwagon fleet grew 15.5% in 2018, back up to pre-crisis levels. But it won't be enough to handle rising railfreight demands through 2025 without higher efficiency.
Own Golikova: Tatiana Golikova is pushing MinTrud to adopt new standards to assess poverty levels for next year. Expect the numbers to look better . . .
Lay It Down: A Severstal plant has supplied 11,000 tons of large-diameter pipe for a natural gas link between Poland and Slovakia, part of the North-South corridor.
OPINION / ANALYSIS
From FPRI: Janis Kluge takes stock of U.S. sanctions on Russia since the introduction of CAATSA. To make sanctions more effective, the U.S. should get its European allies back on board. [ENG]
From Carnegie.ru: Belarussian analyst Artyom Shraibman examines the union of Russia and Belarus as a solution to the problem of Putin's term limit. He argues such a move could backfire -- it's unclear how the people of either country would respond. [RUS]
Blacklisted Russian oligarch Viktor Vekselberg has been on MIT's board since 2013. After the announcement of sanctions against him last spring, however, the university has scrambled to cut ties with the Russia billionaire. [ENG]
The WSJ editorial board comments on Chuck Schumer’s attempt to be tough on Russia by killing an agreement between the Treasury and the owners of Rusal. [ENG]
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