Disorder in Dagestan
Antisemitic riots disrupt flights in a Dagestan airport
Hello from the Bear Market Brief!
This week in the news:
Antisemitic riots disrupted flights in a Dagestan airport, leading to dozens of arrests.
The Central Bank of Russia raised the key rate from 13% to 15% at their Board of Directors meeting last week.
The governor of the Vologda region resigned, possibly hinting at a fall gubernatoropad.
Several U.S. congressmen visited Ukraine and discussed additional aid with President Zelensky.
Antisemitic Riots in Dagestan
On October 29, a mob made up of hundreds of people fueled by antisemitic sentiments paralyzed the international airport of Makhachkala in the capital of Dagestan. The group broke into the airport and tried (unsuccessfully) to attack a plane that was arriving from Tel-Aviv, after rumors spread on social media that the plane carried Israeli citizens. The attackers reportedly also attempted to check the documents of the passengers. Mediazona published a first-hand account by one of the passengers on the plane, and the independent media outlet The Insider published a deep dive into the social media rumors that preceded the riots. The Insider found that several Telegram channels run by exiled influencers were instrumental in fueling the ire of the mob. The role of the (since banned) “Utro Dagestan” Telegram channel, which is supported by Ilya Ponomarev (an exiled opposition deputy who now lives in Ukraine) was particularly notable, because it allowed Russian authorities to make the unsubstantiated claim that the riots were organized by Ukraine. Meduza, meanwhile, found that the channel itself is edited by Abakar Abakarov, a Dagestani emigree.
The riot was the culmination of a series of antisemitic incidents across Russia’s North Caucasian regions. For an analysis of the circumstances that made the riots possible, including the authorities’ tolerance of antisemitism and violence in general and the repression of milder forms of protest, it is worth reading an article on Riddle by FPRI contributor Harold Chambers, who has been following the region closely. Dagestan has seen several unsanctioned protests over the past year, including road closures prompted by persistent problems with public utilities and protests against military mobilization.
The incident prompted responses from political actors on various levels. President Putin gave a speech the day after the riots in which he blamed the United States and Ukraine and announced tighter security measures in the North Caucasus. Sergey Melikov, the head of Dagestan, accused “provocateurs” from outside the Republic of causing the riot by spreading false information. Ramzan Kadyrov, the head of Chechnya, suggested that law enforcement officers should be allowed to shoot participants of “unauthorized” protests who refuse to disperse after warning shots. Kadyrov himself contributed to anti-Israel and antisemitic sentiments in social media posts about the war between Israel and Gaza prior to the riots. It is likely that his recent statements are driven by a desire to appear useful to the government rather than a real determination to prevent violence against Jewish people.
The Investigative Committee arrested more than 80 people and launched an investigation into the riot, which will be coordinated from Moscow. This shows that central authorities want to take firmer control of the situation instead of letting Dagestani authorities handle the issue, likely due to the influence of local actors over these institutions. However, one of the most important takeaways from the riots is the initial paralysis and slow reaction of local, regional, and federal institutions—a phenomenon very reminiscent of how authorities reacted (or rather, failed to react) to Yevgeny Prigozhin’s mutiny in June. Both incidents highlight that the rigid, highly centralized command structure of Russian politics, which is good at dealing with domestic “enemies” designated by the federal government, is often unable to react to unexpected challenges.
— Andras Toth-Czifra
Snapshot
Russian activist band Pussy Riot has released a new music video. The song, called “Swan Lake,” focuses on the impact of the war on Russian and Ukrainian children. The music video was created in collaboration with artist Alisa Gorshenina and uses folktale imagery as a metaphor for the war. In a press release accompanying the song, the band demanded the government stop “poisoning” children’s minds with propaganda and immediately release the Ukrainian children who have been taken to Russia during the war. “Children are the most vulnerable in this war,” they said. Pussy Riot is currently in North America, kicking off their RIOT DAYS tour. (photo: Pussy Riot)
Key Rate Hike
The Central Bank of Russia (CBR) raised the key rate to 15% late last week as an additional measure to curb inflation. The hike was higher than expected—a full 200 basis points above the previous 13% rate. “Current inflationary pressures have significantly increased to a level above the Bank of Russia's expectations,” the Bank said in a statement. As of October 23, annual inflation was at 6.6%, up from 6% in September.
Although demand is growing, supply is still constrained, which has led to accelerated price growth in the Russian economy. Labor shortages are also playing a role; unemployment in Russia has reached a historic low. “Steadily rising domestic demand is increasingly exceeding the capabilities to expand the production of goods and the provision of services,” the CBR said. The budget was also reportedly a “significant factor” in the decision. As Russia pours more resources into its war with Ukraine, the rapid increase in government spending has caused the economy to overheat. Russia’s defense budget has more than tripled over the past year. Western sanctions have also had an effect, driving the value of the ruble down.
These factors, among others, have led to an increased inflation forecast for this year. The CBR now predicts 2023 annual inflation at 7-7.5%, a full percentage point higher than its previous estimate and significantly above the Bank’s 4% target. Returning to 4% next year as planned will require a prolonged period of tight monetary policy. Indeed, CBR head Elvira Nabiullina said that the rate is unlikely to come down anytime soon. At the Bank’s next meeting, scheduled for December 15, the CBR is expected to either maintain the current rate or increase it even further. This is the CBR’s fourth consecutive rate hike. The Bank has increased the rate by 750 basis points in the last six months, including an emergency hike in August when the ruble plummeted and the Kremlin called for tighter monetary policy.
First deputy chairman of the VTB Bank Board of Directors, Dmitry Pyanov, compared the CBR’s rate hike to the Battle of Waterloo. It will “determine the fate” of Russia’s financial and banking sectors, he said, just as “Waterloo determined the fate of Europe.”
— Sara Ashbaugh
‘Tis the Season (Maybe)
The governor of the Vologda Region, Oleg Kuvshinnikov, resigned on October 31. The cause of the resignation is unclear, but Kuvshinnikov, who has been in office since 2011, is the first governor to leave office since a wave of dismissals and resignations in spring 2023. He was replaced by Georgy Filimonov, an official (and former kickboxer) with local roots, who has worked in the Presidential Administration and the regional administration of the Moscow Region. Filimonov is also the son of an acquaintance of Sergey Kirienko, the deputy head of the Presidential Administration and one of the main “curators” of domestic policy for the Kremlin. He is also connected to Putin’s former son-in-law, Kirill Shamaev.
Filimonov partially fits the profile of a “young technocrat,” having served in various federal positions before his appointment to his new position and having links to Kirienko. However, he is also a local, unlike many of the so-called “Varangian” governors—complete outsiders—appointed by the Kremlin over the past decade with increasing frequency to manage regions without links to local elites. He grew up in Cherepovets, where the plant of the region’s main employer, Alexey Mordashov’s Severstal, is located. However, he is not as tightly linked to Severstal as his predecessor, who worked with Mordashov and was the mayor of Cherepovets before being appointed governor.
Kuvshinnikov’s dismissal may just be a one-off, signaling the weakening of Severstal’s influence in domestic politics. However, it is likely that Filimonov will find a modus vivendi with the company—he immediately appointed his predecessor as a senator. The dismissal may also herald a fall “gubernatoropad,” or “season of falling governors.” Traditionally, there are two waves of such dismissals, one in the spring and one in the fall. In the spring, the Kremlin typically gets rid of governors considered to be political liabilities in order to allow their successors to prepare for regional elections in September. The second wave often comes once regional and local elections are over. In 2022, however, likely in a bid to preserve domestic stability, no governor was dismissed in the fall. Thus, it will be interesting to see if any other governors are booted in the coming weeks. Either the Kremlin is feeling more confident about domestic reshuffles, or it considers it too risky from the point of view of domestic politics to keep weak governors in office before 2024.
— Andras Toth-Czifra
Snapshot
The Klyuchevskaya Volcano in Kamchatka released a massive column of ash this week, prompting regional authorities to shut down roads and cancel schools in surrounding towns. Klyuchevskaya is one of the world’s most active volcanoes, and has erupted several dozen times in the last 300 years. The current eruption began on June 23, and this week the column of ash reached more than 14 kilometers above sea level. Experts remain uncertain how long the eruption will continue—Klyuchevskaya could spew ash and lava for several more months. Residents in the village closest to the volcano, Klyuchi, were warned about possible ashfall and mobile communications disruptions. (photo: Volcanological Station of Kamchatka)
U.S. Congressional Delegation Visits Ukraine
On Monday, President Zelensky met with U.S. congressmen James French Hill (R-AR), Michael Quigley (D-IL), and Stephen Lynch (D-MA) in Kyiv. During the meeting, Zelensky and the U.S. lawmakers discussed the continuation of American support for Ukraine. The Ukrainian leader emphasized the importance of President Biden submitting a budget request to Congress for funding assistance to Ukraine that includes provisions for budgetary and military aid.
President Zelensky provided an update on the current situation at the front lines and discussed Ukraine’s urgent military needs with the delegation. He also set out the key directions for U.S. military and security assistance. Then the Ukrainian leader thanked the U.S. officials for their continuous support. “We highly appreciate the fact that the Republican and Democratic parties, the administration of President Joseph Biden, as well as the U.S. Congress, are united in supporting Ukraine. This is indeed a powerful message to the world that we will prevail in our fight for our common values—freedom and democracy," Zelenskyy said during the meeting.
This visit comes after Mike Johnson (R-LA) was elected Speaker of the U.S. House of Representatives last week. Johnson is a skeptic when it comes to aid for Ukraine. On October 29, he said that he would support a standalone bill that includes defense funding for Israel but not for Ukraine. Johnson described what’s happening in Israel as a pressing need and added that there were “lots of things going on around the world” that Congress needs to address, referring to Ukraine.
— Lisa Noskova
On the Podcast
Where does Russian public sentiment on politics and war stand these days? And on a more basic level, how is it measured? Bear Market Brief talked with Isabelle DeSisto of Russia Watcher to learn more!
Quickfire: Regions
The Wagner Group has reportedly started recruiting in the Perm Territory and the Novosibirsk Region (and possibly in other regions) after its recent integration into the National Guard. Unlike in the past, the group is not going to recruit in prisons. The reports came shortly after it became known that Yevgeny Prigozhin’s son, Pavel, is going to be the new head of the group, at least nominally. It is notable that, according to the reports, Wagner was not subordinated to the Defense Ministry, but to the National Guard, and will keep its name and emblem. It appears that the authorities still consider the group a potent recruitment force.
Even though the State Duma halted the adoption of the second part of a public administration reform that would have seen regions assuming significantly greater power over municipalities—many of which would be scrapped as independent entities under the draft—many regions have started implementing elements of the reform in their own right. In the latest example, last week, Roman Busargin, the governor of the Saratov Region, suggested that the regional government should take over the right of municipalities to conduct public procurement procedures (centralized procurement has worked well for health care institutions). Municipalities in most regions already strongly depend on transfers from the regional budget; their powers to allocate money or potentially valuable assets, such as land, have been gradually curbed, leaving them with the oversight of little else than urban sanitation and beautification.
— Andras Toth-Czifra
Quickfire: Ukraine
Change Research and Razom recently conducted a poll assessing Americans’ attitudes towards Russia’s invasion of Ukraine. The survey was conducted online August 10-17, polling 4,190 voters across the U.S. The results show that 63% of respondents support the U.S. continuing military support for Ukraine in next year’s federal budget. Additionally, according to the poll, Americans have strong negative feelings about Putin and Russia, with 68% recognizing Russia’s actions in Ukraine as genocide.
According to President Zelensky, Russia lost at least a brigade of troops trying to capture Avdiivka in the Donetsk Oblast during its latest offensive. “Russia will continue to attempt to occupy the entire Donbas. The occupiers have made several attempts to encircle Avdiivka, but our soldiers have consistently stopped them and pushed them back, inflicting significant losses. In these attempts, the enemy has lost at least one brigade,” the Ukrainian President told U.K. Prime Minister Rishi Sunak in a phone call last week. For several weeks, Russia has been intensifying its attacks on Avdiivka, a front-line town a few kilometers north of temporarily-occupied Donetsk.
— Lisa Noskova