Buying time
Zelenskyy accuses Putin of dragging out the war
Hello from the Bear Market Brief.
This week in the news:
President Putin and President Trump had a two-hour phone call on Monday, with little meaningful progress toward peace negotiations.
The State Duma adopted a law that redefines the borders of single-mandate districts for federal legislative elections, creating new districts in the partially occupied Ukrainian regions.
A Russian-Chinese investment forum in Khabarovsk aimed to highlight the close economic ties between the two countries.
— Sara Ashbaugh, Editor in Chief
Trump-Putin phone call
After a two-hour phone call with President Putin on Monday, President Trump signaled that the two leaders were making progress toward ending the war in Ukraine. “Russia and Ukraine will immediately start negotiations toward a Ceasefire and, more importantly, an END to the War,” Trump posted on Truth Social, ending the post with, “Let the process begin!” Russian officials seemed more cautious, however. “It was very informative and very open and overall, in my opinion, very useful,” Putin told Russian media after the call, but he still rejected the unconditional 30-day ceasefire proposed by the U.S., Europe, and Ukraine. Instead, Putin said that Russia was ready to work on a memorandum for “a possible future peace agreement,” but more compromises were still needed.
Recently, Trump has expressed growing frustration about the lack of progress toward ending the war, even threatening to drop out of the peace process altogether. Russia and Ukraine engaged in direct talks last week in Istanbul for the first time since 2022, but no major breakthroughs were reached. This may have been due in part to Putin’s decision not to attend, despite Trump’s offer to meet him there. After meeting with President Zelenskyy in Rome last month, Trump hinted that he may be losing faith in Putin’s desire to negotiate. “It makes me think that maybe he doesn’t want to stop the war, he’s just tapping me along,” Trump posted on Truth Social in late April. Trump expressed his doubts again during a White House press briefing on Monday, saying that the U.S. would still facilitate the talks but that he has a “red line” in his mind for when he will step away. Ukraine has urged the U.S. to stay actively involved, emphasizing that it is important for its allies to keep the pressure up on Russia. “It is crucial for all of us that the United States does not distance itself from the talks and the pursuit of peace, because the only one who benefits from that is Putin,” Zelenskyy said. European Commission President Ursula von der Leyen echoed this, thanking Trump for his “tireless efforts” to end the war and adding, “It's important that the U.S. stays engaged.”
Trump talked with Zelenskyy and von der Leyen right after his conversation with Putin, in a call that also included the leaders of France, Italy, Germany, and Finland. Shortly afterwards, Zelenskyy slammed Putin on social media, writing, “It is obvious that Russia is trying to buy time in order to continue its war and occupation.” He also promised “tough consequences” if an agreement isn’t reached soon. Meanwhile, the EU and the UK announced new sanctions against Russia on Tuesday. According to a statement by the British Foreign Office, their sanctions target “entities supporting Russia’s military machine, energy exports, and information war, as well as financial institutions helping to fund Putin’s invasion of Ukraine.” EU Foreign Policy Chief Kaja Kallas said that the EU has approved sanctions targeting 189 ships from Russia’s so-called “shadow fleet,” as well as asset freezes and travel bans for several Russian officials and companies. “The longer Russia wages war, the tougher our response,” Kallas said.
— Sara Ashbaugh
President Putin visited the Kursk oblast on Tuesday for the first time since Russian forces reclaimed the region. In August 2024, Ukraine conducted a surprise incursion into Kursk, capturing approximately 500 square miles of territory and displacing more than 150,000 local residents. In late April, Russian forces reported that they had retaken the region, with Putin calling it a “complete defeat of our enemy.” According to the General Staff of Ukraine's Armed Forces, however, fighting in the area is ongoing. During his visit this week, Putin met with local officials, including acting governor Alexander Khinshtein, and toured the Kursk II nuclear power plant. (photo: Kremlin.ru / Handout via Reuters)
How the war is affecting electoral preparations
This week, the State Duma adopted in the third reading a law amending electoral legislation, which, among other things, redefines the borders of single-mandate districts (SMDs) for federal legislative elections. These districts, in which half of the Duma’s 450 seats are allocated, have been essential for engineering United Russia’s supermajorities (even before more overt forms of coerced voting and electoral falsification became used as widely as they have in recent years), as seats are allocated according to the first-past-the-post principle. This benefits a strong governing party against a fragmented opposition. The governing party has consistently won the vast majority of these mandates since their creation. Additionally, regional SMDs are designed to include both urban and rural areas, thereby splitting up city votes and mixing them with votes cast in rural settlements (which the ruling party usually has an easier time controlling).
The latest redistricting takes place as the Kremlin is eager to integrate the occupied Ukrainian territories deeper into Russia’s political system. Altogether, the law will form seven SMDs in the four partially occupied regions (three in the occupied Donetsk, two in the Luhansk, and one each in the Kherson and Zaporizhia regions), to the detriment of Russian regions, ten of which will lose one SMD each. Moscow, the Moscow Region, and the Krasnodar Territory will also gain one SMD each, due to the growth of the populations of these regions. Apart from the fact that staging “elections” in the occupied territories will likely affect the international legitimacy of the new Duma (albeit deputies have been elected from the occupied Crimea since 2016), the redistricting may also lead to some tensions domestically, as sitting deputies will have to give up their seats due to the scrapping of their SMD.
Parallel to the redistricting and other changes in electoral legislation that reduce the number of possible by-elections between two federal votes and limit the electoral rights of Russians living abroad, the war is also impacting the selection of candidates. Alexander Sidyakin, head of the Executive Committee of the United Russia Party, said that the party’s desired “quota” for war participant candidates for this year’s regional and municipal elections is 10%. This is likely to become a desired norm for next year’s federal legislative election as well. The party’s “primaries” take place this week, with 940 war participants running (albeit many of them are party officials with nominal war experience) out of more than 21,000 potential candidates, requiring them to be heavily overrepresented among winners. Internal disagreements have prevented this in the two previous years in several regions. Regional party elites have mostly preferred relegating war participants to toothless municipal or unelected positions to show their commitment to Putin’s declared goal of creating a “new elite.”
— Andras Toth-Czifra
New satellite images published by The New York Times on Monday show Russian military buildup near the Finnish border. This is not entirely unexpected; after Finland joined NATO in 2023, Russia promised to strengthen its military capacity along the countries’ 835-mile shared border. While Russia seems focused on developing military infrastructure for now, Finnish authorities expect troops to follow after the war in Ukraine ends. “The increase of military force in our nearby areas will happen after the fighting in Ukraine quiets down,” said Janne Kuusela, Director General of the Defense Policy Department for Finland’s Ministry of Defense. (photo: Planet Labs)
Chinese-Russian economic links: Theater and reality
A Russian-Chinese investment forum was held in Khabarovsk on May 19-20. The event was praised by the Russian pro-government press as a proof of the tight economic cooperation between the two countries. State-run media emphasized that 34 agreements worth more than 100 billion rubles were signed at the forum by participants, including one about a gas liquefaction plant, as Russia is looking to increase its energy exports to East Asian markets. Chinese participants highlighted that, in 2024, the number of Russian companies with Chinese capital had grown 2.5-fold.
In spite of the upbeat commentary, however, the economic relationship between China and Russia is far from trouble-free. An analytic paper by Heli Simola of the Bank of Finland this week showed that, while trade between the two countries did grow during the full-scale war and Russia has become dependent on Chinese markets (about 50% of Russia’s foreign trade now takes place with China), the volume of Chinese investments has remained low. In fact, Russia’s share in China’s cumulative outward FDI has continued to drop during the war. This is a result of China’s strong negotiating position and reservations about investing in Russian assets due to sanctions exposure and the degradation of property rights—although, as China experts pointed out to The Bell, due to chain ownership, the actual volume of Chinese investments might be higher.
The past weeks have also seen several developments involving Chinese companies present in Russia. In the Republic of Tuva, the regional government had to intervene to stop the Chinese-owned Lusin mining company, one of the region’s largest employers, from shutting down the Kyzyl-Tashtygsky mining and processing plant. The conflict arose due to the refusal of Chinese banks to work with sanctioned entities in Russia and occurred after the Prosecution accused the company of wage discrimination between Chinese and Russian workers. In the Tomsk Region, the authorities are demanding 600 million rubles in fines from a Chinese timber company for soil pollution. Last month, a Chinese-Russian businessman was accused of illegal campaign donations in the Novosibirsk Region.
Russia continues to rely heavily on economic cooperation with China, not only to circumvent sanctions, but also to help finance key infrastructure projects and provide export markets for Russian commodities (e.g. coal), even if some of this is based on wishful thinking. The above developments highlight both China’s growing clout and the frictions it causes.
— Andras Toth-Czifra
Report in Short: The War’s Impact on Russia’s Regional Power Dynamics
This week on Report in Short, Aaron Schwartzbaum speaks with András Tóth-Czifra about his recent report, “The Kremlin’s Balancing Act: The War’s Impact On Regional Power Dynamics.” In the report, Tóth-Czifra explains the shift of government control, highlights instances of pushback, and identifies limitations on the Kremlin's strategy going forward.
Quickfire: Regions
After months of abortive attempts, the regional legislature of the Republic of Khakassia overrode Governor Valentin Konovalov’s veto on a regional law that will curb the governor's rights to cut the funding of municipalities. The legislature’s members from the ruling United Russia Party and the Liberal Democratic Party supported the decision, which ties funding cuts to legislative approval. The decision is a key victory for the Kremlin in Khakassia, where residents and local elites snubbed a gubernatorial candidate supported by United Russia in 2023. While United Russia was able to get a supermajority in the regional legislature to oppose the communist Konovalov by using electoral engineering, the outcome of the debate on the law was questionable. It required the ruling party to court or coerce local leaders and appeal to the principle of self-governance, which is contrary to the Kremlin's recent local public administration reform. The governor, meanwhile, based his argument on Russia’s federal budget code.
Novatek’s flagship liquefied natural gas project “Arctic LNG 2” started production at its second production line or “train,” despite U.S. and EU sanctions that have caused severe delays for the project and called its future in question. Sanctions have also prevented Novatek from making sales, causing it to shut down the first production train in October 2024, making the targeted measures one of the most effective examples of sanctions during Russia’s war against Ukraine. Reuters claimed that Novatek was working with lobbyists to improve the prospects of the project with the Trump administration. Meanwhile, the European Union sanctioned three vessels owned by the Tokyo-based Mitsui Osk Lines. These vessels have been used to move gas from Novatek’s other major LNG project in the Arctic, Yamal LNG, after an earlier ban on transshipments of Russian LNG at European ports.
The state-owned oil company Rosneft acquired Russia’s largest deposit of rare earth metals. The deposit, called Tomtor, is located in the Far Eastern Republic of Sakha (Yakutia). The company’s takeover of the deposit’s operation comes shortly after Putin had criticized the previous owner for a lack of progress in developing it. Also this week, Alexey Chekunkov, the federal government’s Minister for the Development of the Far East and the Arctic, announced the creation of an industrial cluster in the Murmansk Region for the deep processing of rare metals and rare earth metals such as cerium, lanthanum, and neodymium. Earlier this year, the federal government announced similar plans in Siberia, and Russia is also making efforts to extract rare earth metals in the occupied Ukrainian territories. The federal government made the development of the sector a clear priority this year, both to develop domestic industries relying on these minerals and to increase Russia’s leverage in international trade.
— Andras Toth-Czifra