A race to the top
Putin discusses sovereignty at the St. Petersburg International Economic Forum
Hello from the Bear Market Brief.
This week in the news:
The St. Petersburg International Economic Forum began on Wednesday, and President Putin spoke at the Forum’s plenary session.
Leaked polls commissioned by the Russian government suggest that Putin’s approval rating is not as high as the March 2024 presidential election results would suggest.
Andrei Turchak, Secretary General of the United Russia party, was appointed to replace Oleg Khorokhordin as governor of the Altai Republic.
According to The Financial Times, Russian attacks have destroyed more than half of Ukraine’s power generation capacity.
The governments of Ukraine and Switzerland announced a Global Peace Summit to take place in Bürgenstock on June 15-16.
— Sara Ashbaugh, Editor-in-Chief
St. Petersburg International Economic Forum
The 27th annual St. Petersburg International Economic Forum (SPIEF) began this week. The event will take place June 5-8, involving more than 17,000 participants from 136 different countries. Prominent international attendees include the Presidents of Bolivia and Zimbabwe, the Hungarian Foreign Minister, and a delegation from the Taliban government. In addition to the main programming of the event, which includes speeches and panel discussions by economic experts, Russian companies and regional governments set up a variety of eye-catching stands to showcase their technological progress.
The theme for this year’s Forum is “the basis of a multipolar world is the formation of new growth points.” As Russia’s main international economic event, SPIEF provides an important opportunity for foreign investment. At the 2023 SPIEF, more than 900 agreements worth a total of 3.86 trillion rubles ($43.3 billion) were concluded. However, most Western countries have declined to participate for the past few years due to Russia’s invasion of Ukraine. As a result, this year’s theme, programming, and attendees reflect Russia’s pivot toward Asian, African, and South American markets.
On the second day of the event, during a panel discussion about Russia’s national goals, Central Bank of Russia’s (CBR) Governor Elvira Nabiullina spoke about her top three priorities for the Russian economy. She named the development of the capital market, ensuring global openness, and leadership in the technological sphere as the main tasks for the next few years. “Despite the sanctions, we must be integrated into the world economy with those who are ready for it,” she said. Later in the week, the CBR announced its decision to maintain the key rate at 16%, despite the fact that annual inflation is at 8.1% (more than double the CBR’s 4% target). This is the fourth time in a row the CBR has maintained the 16% rate, which was set in December of last year. In its press release, the CBR noted that a significantly longer period of tight monetary policy will be required to reduce inflation compared to what it predicted in April. The CBR also admitted the possibility of a rate hike at its next Board of Directors meeting on July 26.
On Friday, President Putin gave a speech during the Forum’s plenary session. Before his address, a video played criticizing the West’s history of colonialism. During his speech, Putin talked about “a real race between countries to strengthen their sovereignty.” He bragged about Russia’s above-average economic growth and an increase in the use of the ruble for international trade. He also touched on domestic issues, such as state investment in higher education, record-low unemployment, and the growth of Russian brands.
— Sara Ashbaugh
At the St. Petersburg International Economic Forum, the Moscow Region’s display featured a transformer assembled from parts of electric cars jointly produced by Russia and China. The region’s booth also included a robot plumber named Zhenya, which was capable of answering participants’ questions using the YandexGPT 3 language model. (photo: Anton Vaganov / Reuters / Scanpix / LETA)
Regional polling
According to leaked documents seen by the investigative network VSquare and the journalists of Delfi Estonia, one month before the March 2024 presidential election, the Kremlin ordered a public opinion survey to learn about the strength of Vladimir Putin’s support and Russians’ attitudes toward the war in Ukraine. The survey—which did not cover Moscow and the Moscow Region—was conducted by Dialog Regions, an organization affiliated with the Presidential Administration that focuses on monitoring and influencing public opinion. The results are difficult to compare to other publicly available records of support, such as prior electoral results, because these are distorted by heavy rigging. The leaked documents do, however, seem to confirm that Putin’s support is not nearly as uniform or high across Russia as the official results of the March presidential election would suggest. According to the survey, 64% approved of Putin’s activities and his electoral rating was 59% among all voters surveyed. This is in contrast with his official electoral result, which was over 88% at a turnout of 77.4%, that is, the support of 68% of all voters.
In a regional breakdown, interestingly, the proportion of those surveyed who expressed disapproval of Putin’s actions does not seem to correlate significantly with metrics such as food inflation over the past two years (as per Rosstat) or confirmed per-capita military losses (as per Mediazona). The highest negative ratings, according to the survey, were registered in regions such as St. Petersburg (37%), Kirov (28%), Tomsk (28%), Leningrad (27%), Yaroslavl (26%), and Irkutsk (25%). These are regions with relatively pluralistic, urbanized populations, which have traditionally been less keen on supporting the Kremlin, or regions in the country’s Northwest where, on average, political pluralism has been more resilient than across the country.
However, several industrial regions in the Urals—where elections are tightly controlled and usually show strong support for the Kremlin—also expressed higher levels of disapproval. This includes Udmurtia (a major defense industrial center), Bashkortostan (which saw protests against the jailing of a nationalist activist in January), Tatarstan, Nizhny Novgorod, and Mordovia. Voters in these regions were also less likely than average to say that they expected the official results of the election to be credible. This is notable, as it could suggest that voters in some regions reporting consistently high pro-government votes are aware of the discrepancy between the results and their preferences. However, the survey results are difficult to analyze further in the absence of more granular data.
The results also hint at both the importance and the limits of surveys in Russia’s current political climate. While the Presidential Administration remains keen to monitor public opinion regarding Putin and the war in individual regions (even as tighter forms of monitoring public sentiment such as digital surveillance are now available), the results mostly suggest that residents of regions with a comparatively open public life will be readier than others to express their negative opinions as long as doing so could be viewed as dangerous.
— Andras Toth-Czifra
Turchak’s downfall?
Personnel changes in the regions continued with the resignation of Oleg Khorokhordin, the head of the Altai Republic, a small region on Russia’s border with China and Kazakhstan. Khorokhordin’s dismissal had been rumored for a while; the governor had an ongoing conflict with local elites for years, which seemed to risk the implementation of the Kremlin’s policies in the region. Days before his resignation, participants of the war in Ukraine openly demanded his dismissal. His replacement, to the surprise of many, is Andrei Turchak, until now the deputy head of the Federation Council and the Secretary General of the governing United Russia party.
On the one hand, appointing a heavyweight to manage a poor but strategically important region is not in itself unusual. The recent appointment of ex-deputy prosecutor general Dmitry Demeshin to head the Khabarovsk Region likely also served the purpose of establishing firmer control over a key Far Eastern region. In the case of the Altai Republic, its importance is related to Russia’s forced pivot to Asian markets, which has resulted in a number of key infrastructure projects in the region. Some even speculate that it was the financial giant Sber that pushed for a change of the guard. However, for Turchak, the appointment is a clear demotion. He served as the regional governor of the Pskov Region from 2009-2017, during which he was accused by journalist Oleg Kashin of ordering a severe attack on him. In the past two years, however, Turchak seemed to be eagerly pursuing a high federal office, recognizing the political potential of active participation in the subjugation of the Russian-occupied regions in Ukraine. His appointment to the Altai Region suggests that this effort was not successful. Sources of the news outlet Vyorstka speculated that it was indeed a conflict for the resources allocated to the occupied territories that led to Turchak’s demotion.
Another rumor following Turchak’s appointment is that his main task in the region will be to unite the Republic of Altai with the neighboring, much more populous Altai Territory. This has long been on the local political agenda, but has so far faced opposition from local elites. The idea of merging several regions had been recently raised by Valentina Matvienko, the head of the Federation Council, but it is unclear what the Kremlin would gain by merging the two poor regions. Doing so would risk a local backlash similar to what eventually prevented the merger of the Arkhangelsk Region with the Nenets Autonomous District in 2020.
Turchak’s appointment is the most significant change to Russia’s gubernatorial corps that will take place before this year’s regional elections in September under the Kremlin’s ever-tightening control. Putin had earlier endorsed every other governor still in office and up for re-election, and six new regional heads had been appointed. They replaced four governors promoted to the federal government as well as the former heads of the Khanty-Mansi Autonomous District (who will become a senator) and the Samara Region (who was ousted following a series of corruption cases in his entourage and a conflict with a Duma deputy from the region).
— Andras Toth-Czifra
On June 4, mourners gathered at Alexei Navalny’s grave to commemorate what would have been the politician’s 48th birthday. While Muscovites placed flowers and signs on Navalny’s resting place at the Borisov cemetery, a memorial in Berlin marked his birthday as well. His widow, Yulia Navalnaya, attended the service at the Church of St. Mary, as well as a concert held in his honor. Navalnaya spoke at the concert, urging Navalny’s supporters not to give up hope. “Love is stronger than separation, love is stronger than fear, love is stronger than death,” she said. “Happy birthday sweetheart!” she added. (photo: Natalia Kolesnikova / AFP)
Russia has destroyed over half of Ukraine’s power generation capacity
The Financial Times released an article on Wednesday saying that Russia has destroyed over half of Ukraine’s power generation capacity since February 2022. Before the invasion, Ukraine used to generate around 55 gigawatts of electricity. Since then, the capacity has sharply decreased to 20 gigawatts due to Russian attacks on energy infrastructure. During the initial strikes on power infrastructure in the winter of 2022-2023, Russia primarily targeted Ukraine’s electrical distribution grid, which could be repaired relatively quickly. Recently, however, Russia started bombing thermal and hydroelectric power plants, making it more costly for Ukrainian authorities to repair or replace the damaged infrastructure. During the most recent attack on June 1, Russia targeted energy infrastructure sites in five regions of Ukraine and struck two thermal power plants. Experts estimate that if the Ukrainian government does not begin the construction of new thermal power plants now, the country may experience a mass freezing of municipal heating pipes once temperatures drop. “We should prepare for life in the cold and the dark,” an anonymous official told The Financial Times when speaking about the damage caused by recent attacks.
Additionally, Ukraine may face another wave of tariff hikes, according to Borys Dodonov, the head of energy and climate studies at the Kyiv School of Economics. The government has already doubled energy prices starting in June, causing controversy among the public, especially considering the recent news articles in Ukrainian media about the disproportionately high salaries of Ukrenergo board members. In April 2024 alone, four board members of the state energy company received 8,534,299.68 hryvnias (approximately $213,600) in salaries.
The Secretary of Ukraine’s National Security and Defense Council, Oleksandr Lytvynenko, commented that the country plans to create a decentralized energy system relying on mini-power plants. He also mentioned that Ukraine is working to increase the adoption of solar panels and wind turbines. However, this technology requires significant foreign investment, which is challenging given Ukraine’s current risk profile.
— Lisa Noskova
Global Peace Summit in Switzerland: what is known so far?
On June 15-16, the governments of Ukraine and Switzerland will hold a Global Peace Summit in Bürgenstock, Switzerland. The heads of over 160 countries have been invited to participate in this high-level meeting. Russia, however, has not been invited to join. According to Ukraine’s Ministry of Foreign Affairs, the goal of this meeting is to create a vision for sustainable peace in Ukraine and pave the way for lasting stability in the region. In particular, Ukraine aims to secure diplomatic support for its 10-point peace plan introduced in November 2022. Ukraine’s plan includes full withdrawal of the Russian military and accountability for the war crimes committed by Russians, among other provisions. Participants in the Summit will also discuss energy security, the exchange of captives, the return of deported children, and global food security. Russian authorities have dismissed Ukraine’s 10-point peace plan. “We are in any case ready to hold discussions but not on the basis of Zelenskyy's ‘peace formula,’” Russian Foreign Minister Sergei Lavrov said.
According to Ukrainian officials, leaders of 107 states and international organizations have confirmed their participation in the meeting. U.S. President Joe Biden, however, will not attend, as he will be participating in a Hollywood fundraising event that weekend. Instead, Vice President Kamala Harris and National Security Advisor Jake Sullivan will represent the U.S. at the meeting. President Zelenskyy said that Biden’s absence “would only be met by an applause by Putin.”
China declined to attend the Summit because Russia will not be there. “The arrangements for the meeting still fall far short of China’s requests and the general expectations of the international community, making it difficult for China to participate,” Chinese Foreign Ministry spokesperson Mao Ning commented. During Zelenskyy’s visit to Singapore on June 3, the Ukrainian leader said that China was assisting Russia in sabotaging the event by pressuring leaders of other countries not to attend. Mao Ning rejected this accusation, saying, “China believes that all efforts conducive to the peaceful resolution of the crisis should be supported.” Ukraine’s Minister of Foreign Affairs Dmytro Kuleba called Russia’s attempts to disrupt the Summit “systematic and large in scale.” He added that Russia has focused its efforts on Asian, African, and South American countries.
— Lisa Noskova
New Report: Challenging the Kremlin’s Narrative of Stability in Wartime
Quickfire: Regions
Fire season has continued in several Russian regions. The situation currently is the most severe in the Transbaikal Territory, where more than 87,000 hectares (215,000 acres) were burning as of June 5. In neighboring Buryatia, wildfires extended to 38,000 hectares (94,000 acres) as of June 6. In both regions, a state of emergency was declared (along with specific districts of four other Siberian and Far Eastern regions). The task of localizing and putting out fires is made more difficult by a lack of personnel due both to labor shortages and scarce financial resources. To put out fires in the Far East, firefighters have to be flown in from as far as the Northwestern Arkhangelsk Region. At the same time, a federal state of emergency was introduced in 10 agricultural regions due to unusual frosts in May, which have caused experts to reduce forecasts for this year’s wheat harvest by more than 12%.
The mayor of Derbent, a major city in Russia’s Dagestan region, resigned this week. According to press reports, he will soon be followed by the mayor of another major South Russian city, Astrakhan. In the past two weeks, the mayors of three major regional seats in the European part of Russia—Lipetsk, Ivanovo, and Voronezh—were dismissed or resigned. In part, the changes could be seen as the aftershock of recent promotions (or the lack thereof) to the federal government. Lipetsk mayor Yevgenia Uvarkina was appointed deputy governor, former Ivanovo mayor Vladimir Sharypov is now an aide to the region’s governor, and Voronezh’s former mayor Vadim Kstenin will lead the local water corporation. In all of the above cases, the mayors faced accusations of mismanagement or lying, and in Voronezh, the resignation also put the issue of direct mayoral elections on the agenda. Three city deputies—including one from United Russia— are demanding this.
According to The Financial Times, the reason that Russia was unable to agree with China on the planned Power of Siberia 2 gas pipeline during Putin’s recent visit to the country was that the Chinese party demanded a gas price close to Russia’s heavily subsidized domestic prices and was only ready to commit to purchasing a small fraction of the pipeline’s planned capacity. Further delays in the construction of the pipeline do not only exacerbate the impact of Russia’s decoupling from the EU’s gas market, but also put plans to extend gasification to the Siberian and Far Eastern regions into doubt. Russia is also encouraging Chinese banks to extend their activities in Russia, while reports from the St. Petersburg International Economic Forum suggest that the clearing of payments from Russia to China is actually becoming significantly slower.
— Andras Toth-Czifra