Rolling out the red carpet
Putin is welcomed to Pyongyang with gifts and grand gestures
Hello from the Bear Market Brief.
This week in the news:
President Putin and Supreme Leader Kim Jong Un signed a mutual defense agreement during Putin’s visit to North Korea, sparking concern from the international community.
The EU released the details of its 14th sanctions package against Russia, further targeting Russia’s Arctic energy projects.
Representatives from more than 100 countries discussed their concerns about the war in Ukraine at a peace summit in Switzerland.
Putin appointed three new deputy defense ministers, including his first cousin once removed, Anna Tsivilyova.
— Sara Ashbaugh, Editor in Chief
Putin visits North Korea
President Putin visited North Korea this week for the first time in over two decades. The Kremlin confirmed the long-anticipated trip on Monday, when it announced that Putin would make a “friendly state visit” to Pyongyang on June 18-19. Russia and North Korea have become increasingly close since Russia’s invasion of Ukraine, often publicly praising their growing ties. Ahead of his visit, Putin wrote an article for North Korean state media titled “Russia and the DPRK: traditions of friendship and cooperation through the years.” “We highly appreciate the DPRK firmly supporting the Russian special military operation being conducted in Ukraine,” he wrote.
North Korean Supreme Leader Kim Jong Un personally invited Putin to Pyongyang during his rare foreign visit to Russia’s Far East last September. This visit created international concern about a weapons deal between the two countries. Experts speculated that Russia may trade military technology or food aid to North Korea in exchange for sorely-needed munitions, despite a UN prohibition on arms deals with North Korea. Shortly after Kim’s visit, Western sources reported that Russia was using North Korean military supplies on the battlefield in Ukraine. North Korea, however, denied supplying weapons to Russia.
The culmination of Putin’s visit to Pyongyang was a mutual defense agreement between Russia and North Korea. The document closely echoes language used in the “Treaty of Friendship, Cooperation, and Mutual Assistance” between the USSR and North Korea in 1961, promising mutual assistance in the case of aggression against one of the parties. “It is really a breakthrough document,” Putin said at the press conference on Wednesday, adding that Russia “does not exclude military-technical cooperation with the DPRK in accordance with the signed document.” Kim called the agreement “exclusively peace-loving and defensive in nature,” but also declared “full support” for Russia’s war in Ukraine. It is unclear how the agreement may change North Korea’s engagement in the war.
The international community reacted with alarm. U.S. State Department spokesperson Matthew Miller called the possibility that Russia may supply weapons to North Korea “incredibly concerning.” South Korea promptly summoned Russian Ambassador Georgy Zinoviev to Seoul. “Violating Security Council resolutions and supporting North Korea will harm our security and inevitably have a negative impact on Korea-Russia relations,” South Korean First Vice Minister Kim Hong-kyun said. South Korea also announced that it would reconsider its position on sending arms to Ukraine, a move that Putin said would be “a very big mistake.”
— Sara Ashbaugh
Putin arrived in Pyongyang early Wednesday morning to gifts and fanfare. Kim Jong Un greeted him personally at the airport with a red carpet welcome, and later the pair went to a grand military parade at Kim Il Sung Square. Thousands attended the ceremony, waving balloons and Russian flags. Afterwards, the two state leaders reportedly exchanged lavish gifts, with Putin gifting Kim a luxury Aurus limousine, a Russian tea set, and an admiral’s dirk. (photo: Sputnik / Getty Images)
New EU Sanctions
European Union member states agreed on the details of the EU’s 14th sanctions package against Russia this week. The most notable feature of the package is that it includes the EU’s first sanctions against Russian gas trade. However, the sanctions do not target remaining European gas purchases from Russia, including liquefied natural gas (LNG) imports, which rose in the EU even as Russia cut off Gazprom from most of its European export markets.
The EU is banning the transshipment of Russian LNG—complicating Russian exports to Asia—as well as investment into and servicing of Russia’s three new Arctic and Baltic LNG projects. These sanctions complement recent restrictions announced by the U.S. Government that target Russia’s Arctic energy projects, ultimately trying to stifle these developments to limit Russia’s pivot to Asian energy markets. The EU transshipment sanctions target shipments worth more than 3.4 billion euros ($3.6 billion) annually, even though this is only a small fraction of Russia’s current LNG exports.
The EU is also adding more companies to its sanctions list (including in third countries that have served as intermediaries); expanding export controls on machinery, chemical goods, and electronics; sanctioning vessels in Russia’s shadow fleet that are used to transfer oil to circumvent the G7 oil price cap; and forbidding EU firms operating outside of Russia from connecting to SPFS, Russia’s equivalent of the SWIFT financial transfer system. However, Germany managed to negotiate a postponement for a provision affecting companies whose civilian products are imported to Russia (currently a so-called “no Russia” clause only covers military and dual-use goods).
The sanctions will need to be adopted formally by the European Council, and therefore they may still change. Given the uncertainties regarding the outcome of the upcoming French legislative election scheduled for June 30—in which the pro-Kremlin National Rally may win an opportunity to form France’s next government—the above sanctions package may be the last relatively ambitious push from the EU for a while.
— Andras Toth-Czifra
Peace summit in Switzerland: key outcomes
On June 15-16, the governments of Ukraine and Switzerland hosted a peace summit in Bürgenstock, Switzerland to discuss possible paths toward peace and other key concerns related to Russia’s ongoing war against Ukraine. The event brought together leaders of 101 countries and international organizations. The summit resulted in a joint communique, signed by 79 states and 6 international organizations (as of June 19, 2024). Notably, the document did not receive broad support from the Global South, with only 6 South American countries, 10 African countries, and 8 Asian countries joining the declaration.
The signatories agreed on their positions on three issues. First, the document states that Ukrainian nuclear power plants, including the Zaporizhzhia Nuclear Power Plant, must return to Ukraine’s full sovereign control. Second, the communique signatories concurred that attacks on merchant ships are unacceptable, and that Ukraine should have access to ports in the Black and Azov Seas to export its agricultural products to other nations. Lastly, the document says that all prisoners of war and Ukrainian civilians, including children, must be returned to Ukraine.
Following the Summit, Deputy Head of the Office of the President of Ukraine Ihor Zhovkva announced that Ukraine will organize a series of events for ministers and advisors to delve into the specifics of each point agreed upon at the Summit. He added that a number of countries expressed their readiness to organize these follow-up meetings, including France, Czechia, Turkey, Kenya, Saudi Arabia, the United States, Norway, Poland, Canada, Qatar, Chile, Finland, the Netherlands, Germany, and the United Kingdom. “After that, we will take part in a second summit, which must lay the foundations of a long-lasting and just peace,” Zhovkva said.
Prior to the Summit, Putin laid out his own peace plan for Ukraine. He stated that for Russia to cease its attacks and start negotiations, Ukraine must withdraw its forces from all regions claimed by Russia and renounce any ambitions to join NATO. Additionally, according to the Kremlin, a peace agreement must include international recognition of Russia’s claims to the Ukrainian regions of Donetsk, Luhansk, Kherson, Zaporizhzhia, and Crimea, as well as the lifting of all sanctions imposed against Russia. Putin’s statement was immediately condemned by Ukraine and many of the participants at the Switzerland summit as an “ultimatum” intended to disrupt the global event.
— Lisa Noskova
Representatives from more than 100 countries and organizations gathered in Switzerland for the Peace in Ukraine Summit. The Summit resulted in a joint communique outlining three principles for the war in Ukraine, which was supported by the majority of the countries in attendance. Several declined to sign the document, however, including Saudi Arabia, India, South Africa, Mexico, and the United Arab Emirates. Russia was not invited to the event and China declined to attend. (photo: president.gov.ua)
Family business at the Defense Ministry
On June 17, Vladimir Putin continued the changes in the federal government by dismissing four deputy defense ministers and appointing three new ones. One of the three is Anna Tsivilyova, who, according to press investigations, is the daughter of one of Putin’s cousins. Her husband, Sergey Tsivilyov, was recently appointed to serve as Energy Minister in the federal government after having served as the governor of the coal-rich Kemerovo Region. There, according to local rumors, his wife was not simply a bystander but an active participant in regional governance, in addition to commanding her own business interests. For the past year, Tsivilyova was overseeing various initiatives regarding returning war participants. Another new deputy defense minister is Pavel Fradkov, the son of Mihail Fradkov (a former Putin-era prime minister) and the brother of Pyotr Fradkov (the head of Promsvyazbank, which was turned into the bank of the defense industrial sector over the past years). The third new deputy minister is Leonid Gornin, who had been the First Deputy Finance Minister and who will now hold the same position in the Defense Ministry.
Apart from removing some of the last officials associated with ex-minister Sergei Shoigu, the appointments also continue the creeping trend of relatives and close associates of Putin and of other powerful officials or members of the business elite taking positions at various levels of the government. Earlier this year, Dmitry Patrushev, the son of former Security Council Secretary Nikolay Patrushev, was promoted to Deputy Prime Minister, while Boris Kovalchuk, the son of Yury Kovalchuk, a financier, media mogul, and close Putin associate, was appointed to head the Accounts Chamber. Putin’s alleged daughters, Katerina Tikhonova and Maria Vorontsova, attended this year’s St. Petersburg Economic Forum. Putin’s former bodyguard Alexei Dyumin was recently promoted to head the State Council (an important deliberative body), given a role in supervising defense procurements as a presidential aide, and made a member of the supervisory board of Rostec (a state defense conglomerate).
On one hand, this type of dynastic appointment is another example of Russia coming to resemble the region of Chechnya, where such appointments have become increasingly commonplace under the rule of the Kadyrov family. However, it is also notable that, by placing close associates of himself and his allies into key positions at the Defense Ministry, Putin may also be limiting the freedom of newly-appointed Defense Minister Andrei Belousov to act (albeit Oleg Savelyev, who was appointed as Belousov’s deputy in May, is regarded as his ally, and Gornin has a reputation as an efficient technocrat). Given the priority that war-related spending currently enjoys (of any sort, not just the spending supervised by the Defense Ministry), and that spending amounting to more than 6% of GDP is overseen by the Defense Ministry, it is not surprising that the President’s allies would try to get closer to the action.
— Andras Toth-Czifra
On the podcast
Russia has taken an increasingly authoritarian turn over the last decade, but is its political system fascist? Marlene Laruelle and Julian Waller join to discuss the blurry lines between politics, ideology, and terminology.
Quickfire: Regions
On June 16, Islamic State militants held at a detention center in Rostov took two prison guards hostage and demanded safe passage. Instead, Russian security forces stormed the detention center and killed the hostage-takers. Later it emerged that the detention center was overcrowded and seriously understaffed, with 30% fewer personnel than prescribed. However, this had not come up in earlier inspections of the facility. This is to a large extent likely due to the fact that prison guard salaries are between 24,000 and 26,000 rubles ($269.72-$292.19) per month, about half of the average income of Rostov Region residents, while those who sign up to participate in the war in Ukraine receive 700,000 rubles ($7,866.70) as a one-time payment and six-figure monthly salaries. Regions have also faced an acute shortage of police personnel over the past year for similar reasons (and during the COVID-19 pandemic, health care personnel migrated to cities where they could expect significantly better pay).
Before his trip to North Korea, Vladimir Putin traveled to several Far Eastern regions to highlight the heightened importance of the infrastructurally underdeveloped regions due to Russia’s forced pivot to Eastern markets. The projects discussed during Putin’s visit serve to improve sagging trade cooperation with China, and include granting Chinese vessels access to the Tumen River on the border of Russia, China, and North Korea; a new border crossing point between Russia and China in the Transbaikal Territory; and the opening of a representative office of Siberian regions in Beijing. Putin also raised the necessity of building a bridge between the island region of Sakhalin and the Russian mainland—a project that has been on the agenda since 2018. In April 2024, Sakhalin Governor Valery Limarenko estimated the cost at around 600 billion rubles ($6.7 billion), most of which would have to come from the federal budget. However, the prioritization of construction projects in the occupied territories of Ukraine suggests potential further delays.
Anastasia Udaltsova, a Communist deputy of the State Duma, raised the possibility of banning migrant workers from driving taxis at the federal level. The proposal comes after a series of Russian cities and regions introduced such bans following the Crocus City Hall terrorist attack in March. Legislative amendments introduced in 2023 already prohibit foreign citizens from working in the transportation sector. However, banning migrant workers from various areas of activity could also exacerbate Russia’s existing labor shortages. Even though several regions have adopted such bans, it is not fully certain that the State Duma will elevate this to federal policy if the measure is considered to be too disruptive (as was the case with abortion bans). Such measures are often tested first at the regional level.
As part of a tax reform that was adopted by the State Duma in its first reading this week, the government is proposing a limit on the amount of budgetary expenditures that regions can allocate to finance public-private-partnership (ppp) projects at 10% of regions’ own revenues (before federal transfers), with added restrictions on regional debt. The reform would also allow regions to implement similar restrictions on municipalities. The move suggests that the federal government is concerned about tighter regional and municipal finances in general and regional governments using inefficient ppp and concession deals to favor local allies. However, it could also limit regions’ abilities to meet investment goals in various sectors, which rely heavily on successfully drawing in private capital.
— Andras Toth-Czifra