Hello from the Bear Market Brief.
This week in the news:
On Tuesday, Vladimir Putin was inaugurated for his fifth term as Russian President.
On Thursday, Moscow celebrated Victory Day with its annual military parade on Red Square.
New U.S. sanctions may further delay Russia’s key Arctic energy project: Novatek’s Arctic LNG 2.
According to the Security Service of Ukraine, its agents uncovered an FSB plot to assassinate President Zelenskyy and other high-ranking Ukrainian officials.
— Sara Ashbaugh, Editor in Chief
Putin’s inauguration and what comes next
On May 7, Vladimir Putin was inaugurated for his fifth term as Russia’s President, 25 years after he first came to power as Prime Minister. Putin’s inauguration speech, held in front of the representatives of Russia’s political and security elite, was mostly unremarkable. The President repeated his now-usual phrases extolling the war and “traditional values” and offered to restore dialogue with the West on Russia’s terms.
With Putin’s inauguration, the government of Mikhail Mishustin also resigned, as is required by Russia’s constitution. However, Putin again nominated Mishustin to the position of Prime Minister. This may be partly because the appointment of a new Prime Minister could have fueled speculation about Putin’s eventual succession, which the President most likely wants to avoid.
The new cabinet will likely be appointed in the coming days and confirmed by the State Duma on May 13-14. Constitutional reform in 2020 significantly strengthened the President’s rights regarding the appointment of the government, and the Duma will simply give its assent. The past months have been full of speculation regarding potential promotions and demotions: personnel changes in high positions have been largely frozen since the 2022 invasion, and many viewed the inauguration as a rare chance to improve their positions in government institutions. A recent corruption case affecting Deputy Defense Minister Timur Ivanov has been widely seen as an attack on the position of Defense Minister Sergei Shoigu. Speculation only intensified after Putin’s meeting last week with former bodyguard and current Tula Governor Alexey Dyumin, who has long been considered a potential candidate for the position (especially since the public part of the discussion prominently featured the war). Mishustin may also push through some changes to the government’s economic bloc. At the time of writing, the new composition of the government has not been announced yet, but RBK’s sources suggest that Kaliningrad Governor Anton Alikhanov could take over the position of Minister of Industry from Denis Manturov, while Agriculture Minister Denis Patrushev—the son of Security Council Secretary Nikolay Patrushev—could become Deputy Prime Minister, taking over portfolios from Viktoria Abramchenko.
Following his inauguration, Putin issued a new set of “development goals” to achieve before 2030—the end of this presidential term—and 2036—the end of the next one. Many of these look like they were taken from a previous set of development goals issued in 2018 for the period concluding in 2024. Sometimes the wording of the benchmarks was slightly changed; for example, the 2018 decree foresaw raising fertility rates to 1.7 before 2024 and the new decree foresees raising it to 1.6 by 2030. Additionally, both texts contain vague commitments to reducing the number of people living in dilapidated housing, even as federal funds allocated to this purpose were cut. Other goals would require significant investments from the budget or state-owned companies to complete, such as the modernization of utility networks or the gasification of 1.6 million households over the next six years (Russia managed to do this for 485,000 houses between when the “social gasification” program started in 2021 and the end of 2023). There are also nods to war participants—whom Putin called Russia’s new elite—and who, according to the decree, should experience a higher level of satisfaction regarding medical services and labor resources.
As long as the war remains an unquestionable political and fiscal priority, it is unlikely that most of these goals are going to be carried out. Previously, Russia has failed to implement earlier post-inauguration presidential decrees even in peacetime. For example, the media outlet Vyorstka reported that only 11 of 83 regions carried out Putin’s 2012 decrees about salary hikes for public employees.
— Andras Toth-Czifra
Moscow’s Victory Day parade took place on May 9 despite unseasonably cold weather. For the first time in decades, it snowed during the event, although the weather did not stop thousands of military personnel and dozens of vehicles from marching across Red Square. “For our military, the weather has never been and is not an obstacle,” Kremlin spokesperson Dmitry Peskov said. (photo: Alexander Nemenov / AFP)
Victory Day in Moscow
On May 9, Muscovites celebrated Victory Day with a traditional military parade in Red Square. This year marked the 79th anniversary of the Soviet victory over Nazi Germany in World War II. According to the Defense Ministry, over 9,000 troops and 60 pieces of military equipment took part in the parade, including one tank: a Soviet T-34. There were also Tiger-M armored vehicles, S-400 Triumph anti-aircraft missile systems, and a Yars intercontinental ballistic missile system. Despite poor weather, the parade ended with a flyover by Russian Su-25BM attack aircrafts, which painted the sky the colors of the Russian flag.
President Putin was in attendance, only two days after his inauguration for his fifth Presidential term. The parade was also attended by the heads of state of nine other countries: Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan, Guinea-Bissau, Cuba, and Laos. The Prime Minister of Armenia and the President of Azerbaijan were invited as well, but declined to attend. Putin gave a speech at the parade, first congratulating soldiers and veterans and then criticizing the West for trying to “distort the truth” about World War II. “Revanchism, abuse of history, and an attempt to justify the current Nazi followers is part of an overall policy of the Western elites to stoke new regional conflicts,” he said. He also discussed the war in Ukraine, portraying it as a continuation of Russia’s fight against Nazis. “We bow our heads to the memory of civilians killed in the neo-Nazis’ barbarian shelling and terrorist acts and our brothers-in-arms who died in the righteous fight against neo-Nazism,” he added. The Kremlin has repeatedly attempted to link the Soviet Union’s fight against Nazis during World War II to the present-day war in Ukraine, even going so far as to claim that Ukraine is run by a “neo-Nazi regime.”
This is the third year that Russia has held Victory Day celebrations amid its full-scale war. Although the parade was in full swing in Moscow, other Russian regions canceled or scaled back their celebrations due to safety concerns. According to the news outlet Agency, fireworks were canceled in 67 regions and at least 21 cities canceled their Victory Day parades. The Immortal Regiment procession—an annual march of the relatives of World War II veterans—was moved online. Even in Moscow, the war in Ukraine loomed over the proceedings; there were enhanced security measures, including additional police officers present at the event.
— Sara Ashbaugh
Gas troubles
Last week, the United States announced a new round of sanctions targeting Russia’s key Arctic energy project, Novatek’s Arctic LNG 2. Sanctions introduced last year have already affected shipments and technology transfer, forcing Novatek to delay the planned launch of shipments after the first production train of the project was completed. It has also delayed the launch of the project’s second train, which may be delivered to another Novatek plant in Murmansk instead. The newest restrictions affect companies involved in the transportation of modules, likely further slowing down the project. The EU is reportedly preparing its own sanctions to ban LNG transshipments, which would further complicate shipments from the plant. Kneecapping Arctic LNG 2 could seriously affect Russia’s plans to triple its LNG production by 2030. It would also affect the planned development of the Northern Sea Route, a transit corridor along Russia’s Arctic coast, which the government regards as a priority. The sanctions against the project represent evolving preventive and reactive thinking in sanctions policy; the importance of Arctic LNG 2 grew after the war impacted Russia’s energy exports.
Meanwhile, the state-owned company Gazprom closed its first year in the red since 1999 last week, when the company announced a loss of 629 billion rubles ($6.8 billion) across its whole business group. The losses are the result of the Russian government abandoning European export markets as part of its efforts to put pressure on EU decision makers. Notably, even as the company’s European exports tanked, its operating costs and capex remained level, contributing to the losses. Energy market analyst Sergey Vakulenko pointed out that the losses came after the Russian government drastically raised Gazprom’s tax burden in response to its bumper 2022 profits (and thus may be an attempt to reduce the company’s tax liabilities). However, the collapse of the company’s gas exports will likely still have repercussions for Gazprom’s domestic investment policy, its domestic gasification program (and potentially its pricing), and may prompt government-assisted takeovers in Gazprom’s favor to help balance the group’s books.
— Andras Toth-Czifra
At least four people died and several others are in critical condition after a bus crashed in St. Petersburg on Friday. According to St. Petersburg police, there were around 20 passengers on the bus when it spun out of control and fell into the Moika River. Video footage shows the bus making an abrupt turn and crashing through the guard railing on the Potseluev Bridge in the city center. The driver, who reportedly “lost control” of the vehicle, was arrested and charged with traffic violations resulting in the death of two or more people. He faces up to seven years in prison if convicted. (photo: Valentin Yegorshin / TASS)
The SBU disrupts a plot to assassinate Zelenskyy
On Tuesday, the Security Service of Ukraine (SBU) reported that it uncovered a network of Russian FSB agents who were preparing to assassinate President Zelenskyy and other high-ranking Ukrainian officials. Zelenskyy’s murder was supposed to become a “gift” for Putin’s inauguration that took place on May 7. According to the SBU, FSB agents were tasked with finding someone close to the presidential guard to take Zelenskyy prisoner and assassinate him.
Two State Security Administration colonels were detained and accused of leaking classified information to Russia. The SBU claimed that three FSB officers were responsible for this operation: Maxim Mishustin, Dmitry Perlin, and Alexey Kornev. In particular, Perlin was the one handling a network of Ukrainian spies. One of the detained Ukrainian accomplices also secretly met with Kornev in Eastern Europe prior to 2022. The SBU reported that it retrieved drones, warheads, and mines from one of the arrested Ukrainian colonels. The members of the alleged network face charges of treason and terrorism.
Reportedly, among other targets was Ukraine’s military intelligence chief Kyrylo Budanov, who was supposed to be assassinated before Orthodox Easter (May 5). A Russian agent was assigned to watch a house used by Budanov, which the Russians were going to hit with a missile strike. Another agent nearby would then attack other people at the site using drones. Lastly, a second missile strike would cover up the evidence of a drone attack, according to details published by the SBU on Telegram.
This would not be the first assassination attempt on Ukraine’s President. Back in November 2023, Zelenskyy said in an interview that he has survived at least five assassination attempts since the start of Russia’s full-scale invasion.
— Lisa Noskova
On the Podcast
The Bear Market Brief goes nuclear! Andrey Baklitskiy dropped by to discuss all Russia's strategic red lines, what the introduction of hypersonic weapons means for global security, and more.
Quickfire: Regions
After a group of prominent individuals labeled by the Russian government as “foreign agents” announced their intention to run for office in this year’s election to the Moscow City Council, the State Duma adopted, in an expedited procedure, legislative amendments prohibiting “foreign agents” from standing for office. It also requires existing “foreign agent” deputies (of whom there are a total of 10 in regional legislatures, including politicians supporting grassroots causes in relatively pluralistic regions and cities, such as Svetlana Kaverzina in Novosibirsk and Viktor Vorobyov in Komi) to secure their removal from the Justice Ministry’s list within 180 days—a near-impossible ask—or face expulsion from the legislative bodies in question. Recently, the Novosibirsk and Tomsk city assemblies deprived independent opposition deputies of their mandates on these grounds. The bill seeks to automate this practice. The decision also bans “foreign agents” from serving as election observers in any capacity, codifying an earlier interpretation by Russia’s Supreme Court. Amendments adopted to Russia’s “foreign agent” legislation over the past years make it possible for the government to label virtually anyone a “foreign agent” at will without the need to prove financial connection to a foreign entity. Labeled individuals and organizations face severe restrictions regarding their work and business activities.
Roman Starovoit, the head of the Kursk Region, banned migrants in the region from working as taxi drivers after 82% of respondents on a Telegram-based survey supported such a move. Days earlier, the Lipetsk Region introduced a similar ban, prohibiting migrant labor in transportation ostensibly to “save jobs for Russians.” According to the media outlet Agency, at least 14 regions have introduced similar bans this year in response to the Crocus City Hall terrorist attack. However, the bans come at a time of record-low unemployment and labor shortages—triggered by the war, state defense orders, and a demographic slump—affecting various sectors, including transportation. In 2023, the salaries of truck drivers doubled and are expected to go up further this year, while regional budgets were forced to increase transit-related expenditures well above inflation.
— Andras Toth-Czifra
Quickfire: Ukraine
The Ukrainian government supported a draft decree by President Zelenskyy that provides for the establishment of a separate armed forces branch dedicated to unmanned systems. Zelenskyy introduced the idea back in February as a part of an effort to boost drone production in the country. The Defense Ministry is now developing a draft law to institutionalize the initiative. According to Strategic Industries Deputy Minister Hanna Hvozdiar, Ukraine currently has the capacity to produce 150,000 drones every month, and may be able to produce 2 million drones by the end of 2024. The new military branch will focus on creating special drone-specific units and systematizing the use of unmanned systems, improving training, increasing production of drones, and fostering innovation.
Ukrainian Prime Minister Denys Shmyhal said that Russia has damaged or destroyed at least 800 heating facilities across the country since the beginning of the full-scale invasion. He added that Ukraine’s power generation capacity has decreased by up to 8 gigawatt-hours, and the country needs nearly $1 billion to restore damages. The Ministry of Energy and Ministry of Infrastructure are already preparing for winter and working on repair schedules for Ukraine’s damaged energy facilities.
— Lisa Noskova