Closing the circle
Russian troops attempt to encircle Ukrainian forces in Pokrovsk
This week in the news:
Russian troops are attempting to encircle Ukrainian forces in the frontline city of Pokrovsk, a key transport hub in the Donetsk region.
An increase in the “recycling fee” for the registration of imported cars will take effect on December 1, despite protests in Far Eastern and Siberian regions.
In response to pressure from small businesses, the Russian government has agreed to gradually lower the income threshold for paying VAT over the next three years.
— Sara Ashbaugh, Editor in Chief
The fight for Pokrovsk
President Zelenskyy visited troops near the frontline city of Pokrovsk this week, where Ukrainian forces are increasingly at risk of being surrounded. The battle for the city, a key logistics and transport hub in the Donetsk region, has been going on for over a year. According to Zelenskyy, Russia has amassed more than 150,000 troops in the area. Over the past few weeks, hundreds of Russian soldiers have infiltrated Pokrovsk in an attempt to overwhelm the Ukrainian position. It is not clear to what extent Ukrainian defenders have been able to repel the Russian attacks; on Tuesday, Russia said it was “tightening the encirclement around the enemy,” while Ukraine insists that it still maintains an “active resistance” and its forces are not yet surrounded. According to DeepState, a Ukrainian battlefield monitoring group, Pokrovsk remains a contested “grey” zone. During his visit to the area, Zelenskyy posted photos from a command post in the Dobropillia sector, about 12 miles from Pokrovsk. “I am grateful to the warriors for defending Ukraine and our territorial integrity,” he posted on X, “This is our country, this is our East, and we will certainly do our utmost to keep it Ukrainian.”
Capturing Pokrovsk would be a propaganda win for the Kremlin. It would also make other towns in the Donetsk region more accessible to Russian forces; the Russian media has nicknamed Pokrovsk “the gateway to Donetsk.” This includes an area that the Institute for the Study of War described as Ukraine’s “fortress belt” (encompassing the cities of Kramatorsk, Slovyansk, Kostyantynivka, and Druzhkivka), where Ukraine has established “significant defense industrial and defensive infrastructure.” For Russia, trying to take these cities would be in line with President Putin’s stated goal of controlling the entire Donbas region, of which Russia currently controls approximately 90%. This could take a long time, however, as Russia’s progress on the frontlines has been slow and the other towns in the region are heavily fortified. Meanwhile, Russia has continued to attack Ukraine’s energy infrastructure, affecting access to power and heat as the colder winter months approach.
Ukraine has continued to attack Russian energy infrastructure as well. On Thursday, a Ukrainian drone strike in the Volgograd region reportedly hit a Lukoil refinery, causing an explosion. The Ukrainian General Staff posted about the attack on Facebook, noting that Lukoil’s Volgograd refinery is responsible for 5.6% of Russia’s total refining capacity. According to reporting by Reuters, the plant was forced to halt operations after the strike. Its primary processing unit and one of its hydrocrackers were damaged during the attack, three anonymous sources said. Volgograd Governor Andrei Bocharov confirmed a “massive drone attack” on the region, but did not mention the oil refinery. Ukraine has been targeting Russian energy infrastructure more frequently as part of its ongoing efforts to disrupt Russia’s fossil fuel exports, which help fund the war. According to the head of the Security Service of Ukraine, Lieutenant General Vasyl Maliuk, Ukraine has carried out more than 160 successful strikes on Russian oil facilities so far this year.
— Sara Ashbaugh
A Ukrainian court sentenced Russian soldier Dmitry Kurashov, pictured here, to life in prison on Thursday. Kurashov was found guilty of executing Ukrainian soldier Vitalii Hodniuk after Hodniuk had surrendered, which is a war crime. According to the Ukrainian National Police, Kurashov shot Hodniuk point-blank with an AK-47 on January 6, 2024. Kurashov’s unit was later captured by Ukrainian forces. His lawyer, Anna Karpenko, argued that her client was only acting on orders from his commanders not to take any prisoners. Kurashov’s case is not unique; according to the Ukrainian Prosecutor General’s Office, at least 322 Ukrainian servicemen have been illegally executed by Russian forces since the start of the war. (photo: BBC)
A helping hand to the Russian car industry
The federal government decreed that a decision raising the so-called recycling fee for the registration of imported cars will take effect on December 1. The government modified the rules so that the fee will depend on engine type and capacity, and cars with engines under 160 horsepower imported for personal use will still be subject to a preferential rate. For all other cars, the fee will rise. The earlier decision to raise the fee led to protests, especially in Far Eastern and Siberian regions whose residents depend on imported cars. The authorities blocked a protest in the city of Novosibirsk that was announced after last week’s decision.
According to Deputy Prime Minister Denis Manturov, the unpopular measure is necessary to ensure that domestic production remains more profitable than imports. However, unlike industry analysts, Manturov does not expect car prices to rise substantially, pointing out that importers have ramped up imports to stock up over the past months.
Also this week, authorities in Samara exempted AvtoVAZ, a major automaker based in the region, from paying corporate income taxes until the end of 2028 (when the company projects being profitable again) thereby also foregoing its tax income in the regional budget. AvtoVAZ switched to a four-day workweek in September in an attempt to cut costs and prevent layoffs.
Russia’s car manufacturing industry suffered a collapse following the full-scale invasion of Ukraine as Western carmakers pulled out of the country. Non-western, primarily Chinese carmakers took over Russian plants, but the recovery of the sector has been limited. Meanwhile, imports from China also grew in 2023 and 2024. The federal government expects both that the ailing industry will get a boost from the recently adopted changes and that the higher recycling fee will further increase federal fiscal receipts.
— Andras Toth-Czifra
Russians celebrated National Unity Day on November 4 with public events across the country. One such event, in Vologda, included the unveiling of a new statue of Ivan the Terrible erected in the city’s Kremlin Square. The monument was commissioned at the initiative of Vologda Governor Georgy Filimonov, who called the infamous tsar a “cultural and symbolic marker of Vologda,” and a “conqueror-king in the best sense of the word.” Last year, Filimonov installed a monument to Soviet dictator Joseph Stalin in Vologda, near a house where Stalin briefly lived. Although Filimonov claimed that the statue was inspired by “appeals from the public,” it also faced backlash from local residents. (photo: Daniil Zinchenko / TASS / ZUMA Press / Scanpix / LETA)
Recession expectations impact debates
In order to ease the pressure on small enterprises, the Russian government will only gradually lower the income threshold for paying VAT, according to Prime Minister Mikhail Mishustin. Instead of dropping the threshold to 10 million rubles next year, it will be lowered to 20 million in 2026, 15 million in 2027, and 10 million in 2028, with a moratorium on fines for first-time offenders. The decision on one of the most controversial parts of the Russian government’s recently adopted tax proposals comes after criticism from employers.
The reviewed tax proposal is a relatively small concession. The rate of VAT will still rise from 20% to 22% next year—part of the government’s delicate balancing act between the dual needs of increasing federal fiscal receipts (that can be spent on consistently high expenditures on the war) and maintaining economic growth after early signs of economic slowdown. Confirming trends already visible in Russia’s own industrial production statistics, this week’s S&P Purchasing Manager Index also showed increasingly negative expectations in manufacturing sectors, with the index recorded at its lowest since May 2022.
Following the 0.1-point increase in the unemployment rate recorded in September (from 2.1% to 2.2%) and increasingly frequent talks about the Russian economy potentially sliding into recession next year, Central Bank Governor Elvira Nabiullina told the State Duma last week that she would like to see more caution about such predictions. According to her, the Central Bank does not see a significant increase in unemployment or a slide in real wages, which would be the markers of recession. However, Nabiullina also said that the Central Bank would continue to cut its key rate gradually until the end of 2026 and would only consider doing it quicker if it saw labor productivity grow. Otherwise, the Central Bank sees gradual rate cuts as the way to stir the Russian economy back to a sustainable growth path without boosting inflation—another important goal for the Russian government, especially considering the 2026 State Duma election.
— Andras Toth-Czifra
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Quickfire: Regions
Vladimir Putin appointed Vitaly Korolyov, the deputy head of the Federal Anti-Monopoly Service (FAS), to head the Tver Region located between Moscow and St. Petersburg. Putin appointed the region’s former governor, Igor Rudenya, as Presidential Plenipotentiary to the Northwestern Federal District last month. Putin took an uncharacteristically long time, more than a month, to appoint the new governor, suggesting that the Kremlin was weighing several factors (including, potentially, whether to appoint another official with “war participant” credentials). Korolyov, a career technocrat, is the third governor recently appointed from the ranks of the Federal Anti-Monopoly Service. He is seen as a competent technocrat with no personal links to the region—the most common type of governor appointed over the past decade (in spite of a series of recent appointments that saw officials with local roots confirmed).
Authorities in the Sverdlovsk Region are prosecuting a young man under recently adopted legislation that forbids searching for “extremist material.” According to his lawyer, the man was reported to the Federal Security Service (FSB) by his internet service provider after looking at information online about the Azov Brigade and the Russian Volunteer Corps, armed groups fighting on the side of Ukraine. Since the adoption of the law in July this year, questions have arisen regarding its implementation, as its text offers little clarity on what counts as “searching for extremist material.” There are also questions surrounding how closely and where this would be monitored, with even some pro-Kremlin figures speaking up against the law. It is not unlikely that the case, which is being pursued in a region with an infamously active branch of the FSB, is aimed to create a precedent. In situations where it is improbable that the authorities would have the ability or the capacity to pursue each violation of a newly codified norm, they have often resorted to a handful of publicized and harshly prosecuted cases to set an example.
Several regions and cities are discussing a revamp of their elections. In the Vologda Region, Governor Georgy Filimonov reportedly wants to cut the number of deputies elected to the regional legislature on party lists in favor of single-mandate districts. The Kursk Region’s legislature, meanwhile, adopted a redistricting plan due to internal migration triggered by Ukraine’s incursion into the territory in 2024, which also adds a single-mandate district and takes away a mandate allocated by proportional representation. Such changes, which have been gradually rolled out over the past decade, have traditionally benefited the United Russia party, as single-mandate districts awarding seats in a first-past-the-post system distort proportionality in favor of a dominant party in the face of a divided opposition. This allows the party to maintain legislative superiority even when its mobilizing potential is weaker. Regions are also continuing to roll out legislative changes triggered by the Kremlin’s municipal reform. Over the past week, the city of Novgorod and the Altai Territory changed their rules for electing mayors, giving the governor exclusive rights to propose candidates. Attempts to introduce severe limitations on local governments and to scrap village councils have led to backlash in many, mostly Siberian and Far Eastern, regions.
— Andras Toth-Czifra