Slip 'n slide
The ruble slides to its lowest level against the dollar since the invasion of Ukraine
Hello from the Bear Market Brief, and Happy Thanksgiving!
This week in the news:
The ruble fell to its lowest level against the dollar since March 2022, reaching 113 rubles per dollar on Forex exchange markets.
The legal cases against Nikita Zhuravel and Ivan Shukshin highlight ongoing political repression in Russia.
U.S. president-elect Donald Trump nominated loyal supporter Lt. Gen. Keith Kellogg as special envoy to Russia and Ukraine.
According to a new investigation, Ukraine transferred 10 strategic aircrafts to Russia in 1999, some of which are still used by the Russian military today.
— Sara Ashbaugh, Editor in Chief
Ruble slide
The ruble weakened to over 113 against the U.S. dollar on Forex exchange markets on Wednesday, up from around 100 a week prior. Since the ruble is not traded on the Moscow Exchange, only the interbank market, analysts said that the actual exchange rate—based on the ruble-yuan rate on the exchange—is closer to 108, but the currency’s weakening is clear. This is also the weakest that the ruble has been since the early days of the full-scale invasion of Ukraine, which caused a panic on the market.
This time, the slide began around the announcement of blocking sanctions against Gazprombank, a major bank handling energy trade. It was one of the few big Russian banks that, up until last week, still had access to international financial markets, as well as the offices of key Russian banks in India and China that have handled important trade-related transactions. Other contributing factors that have likely exacerbated the run on hard currency include higher import-related payments, higher government spending, and the U.S. election.
The Russian government has claimed that the ruble’s slide will not affect Russian citizens, but this is not true. While it is unclear where the slide will stop, a weaker national currency will likely contribute to already-accelerating inflation, which the Central Bank has few remaining tools to fight. The Bank announced that it will stop buying foreign currency for its reserves, but it is unlikely that this alone will temper the market. Major employers and the Finance Ministry have already complained about the recent key rate hike to a record-high 21%. Accelerating inflation would likely mean that the Bank would not be able to carry out its planned rate decreases in 2025, and it may, as an Alfa Bank analysis speculated, even consider raising the rate further. An alternative option would see the government forcing exporters to once again sell their hard currency for rubles—this, however, could disrupt their own activities, and given that exporters have faced problems with repatriating foreign earnings this year, it is not an attractive option. It is clear, however, that the exchange rate will ultimately also be influenced by whether Russia finds workarounds for international payments.
Reacting to the inflationary pressure this week, the federal government allowed regions to enter into agreements with suppliers and retailers to stabilize the prices of any product, not only essential foodstuffs. So far, more than 30 regions have signed such agreements to restrain food inflation, which has grown faster than inflation as a whole.
— Andras Toth-Czifra
War critic and former Moscow city councilor Alexei Gorinov was sentenced to a further three years in prison on Friday for “justifying terrorism.” Gorinov is already serving a seven-year sentence for publicly criticizing the war during a Moscow city council meeting in 2022. The trial this week alleged that Gorinov was overheard by fellow inmates justifying the actions of Ukrainian military units, a charge that he denies. He can be seen here in the defendant’s cage holding a sign that reads, “Stop killing, stop the war.” “I’m for peace, and you love war,” he said to the judge following his verdict. According to his lawyer, Gorinov will serve a combined eight years for spreading war fakes and justifying terrorism. (photo: SOTAvision / Telegram)
Opposition crackdowns
Several significant cases of political repression pursued by legal means moved ahead in Russia this week, also highlighting trends in targeting and tactics.
A court in Volgograd sentenced Nikita Zhuravel, a 20-year-old man, to 13.5 years in prison for high treason, alleging that he sent footage of military equipment being transported to the Security Service of Ukraine. Zhuravel is already serving a 3.5-year sentence for “hooliganism” for burning a Koran. Even though this also happened in Volgograd, the earlier sentence was passed by a court in Chechnya, where Zhuravel was transferred under unclear circumstances. There he was beaten in custody by one of the sons of Ramzan Kadyrov, Chechnya’s head, who also shared a video of the beating online. The younger Kadyrov was then decorated by the heads of several predominantly-Muslim regions of Russia. The human rights group Memorial regards Zhuravel as a political prisoner. The case draws attention both to the increasingly broad understanding of “treason” by the authorities in wartime Russia and to the lawlessness associated with detention and prosecution, especially by the untouchable Kadyrov clan.
The Interior Ministry’s database of wanted persons now includes Ivan Shukshin, a renowned analyst of electoral fraud. Shukshin’s analyses, based on comparing granular electoral data from across the country, have shown the growing amount of fraud associated with elections in Russia. This includes this year’s presidential election, where Shukshin claimed that at least 22 million of the 76 million votes registered for Putin were falsified. Although Shukshin is not in Russia anymore, his designation as a wanted criminal (on unknown charges) potentially establishes him as a target of malicious actors abroad. It also shows the growing sensitivity of the authorities towards any research that questions Putin’s popular support.
The crackdown on opposition politicians who are labeled “foreign agents” also continued, even after all of them who still held an elected position were recently deprived of their mandates. Lev Shlosberg, the head of the liberal Yabloko party in the Pskov Region, was briefly detained at his city’s airport upon his return from Moscow on November 23. The authorities have previously performed searches in Shlosberg’s apartment. The politician, who has also criticized the war in Ukraine, has repeatedly refused to display the lengthy text that “foreign agents” are forced to attach to everything they publish. Meanwhile in Novosibirsk, two independent city council deputies—who were also recently deprived of their mandates due to their “foreign agent” designation—were summoned to the Investigative Committee for questioning in an unknown case.
In both cases, it appears that the authorities are gradually increasing the use of intimidating tactics to force local opposition personalities of varying political convictions into compliance. Security forces have reportedly also used similar tactics in recent weeks against labor unions and activists in several Russian cities who supported Anatoly Bannykh, a Chelyabinsk union leader who was detained days before a planned strike.
— Andras Toth-Czifra
Trump nominates Keith Kellogg for Ukraine peace envoy
On Wednesday, U.S. president-elect Donald Trump appointed retired Lt. Gen. Keith Kellogg, former Chief of Staff of the National Security Council, as a special envoy to Ukraine and Russia. Kellogg’s role will involve leading negotiations aimed at ending the ongoing war. Kellogg has a history of defending Trump’s controversial actions, including his 2019 call to Ukrainian President Volodymyr Zelenskyy and his private urging of Vice President Pence to reject the 2020 election results. When Pence distanced himself from Trump, Kellogg publicly condemned his actions.
Kellogg seems generally pragmatic about the conflict, viewing Russian President Vladimir Putin as an unreliable negotiating partner. He recognizes that supporting Ukraine’s security aligns with U.S. national interests. In an April 2024 article, Kellogg called for a ceasefire and a negotiated settlement after which the U.S. would continue to arm Ukraine and bolster its defenses to prevent further Russian advances. Kellogg’s plan includes a provision for cutting off military aid to Ukraine if it refuses to engage in peace talks, while warning Moscow that any refusal to negotiate would result in increased U.S. support for Kyiv. He also suggested postponing Ukraine’s NATO membership as part of the peace process. The proposed peace talks would aim to freeze the front lines, effectively halting the conflict.
Additionally, Kellogg proposed withdrawing collective defense guarantees under Article 5 of the Washington Treaty from NATO member states that fail to spend at least 2% of their GDP on defense.
— Lisa Noskova
Ukraine’s Security Service (SBU) displayed fragments of the Russian ballistic missile used to attack Dnipro last week. AFP journalists were able to view and photograph the fragments at an undisclosed location on Sunday. The SBU did not name the missile on display, but told journalists it was a type they had not seen before. Following last Thursday’s strike, Putin said that Russia used the new Oreshnik hypersonic intermediate-range ballistic missile (IRBM) to hit Dnipro. The attack came in response to Ukraine’s use of American ATACMS and British Storm Shadow missiles to strike targets inside of Russia for the first time. (photo: Roman Pilipey / AFP)
Russia is using bombers it received from Kyiv in 1999 to attack Ukraine
The Russian military is currently using Ukrainian strategic bombers that Kyiv transferred to Moscow in 1999 under an agreement between the two governments to settle Ukraine’s gas debt to Russia. Journalists from Radio Free Europe/Radio Liberty uncovered this information through an analysis of aircraft serial numbers, the 1999 agreement found in the archives, data from international aviation registries, and a comparison with the bomber serial numbers now in use by Russia, as confirmed by Ukraine’s Main Directorate of Intelligence.
In total, the investigation identified 10 Ukrainian strategic aircrafts transferred to Russia, including seven Tu-160 bombers and three Tu-95MS bombers. At least six of the Tu-160 bombers remain in active service with the Russian military. The investigation also traced the identities of the Russian pilots assigned to operate these transferred bombers, who are now linked by Ukrainian intelligence to the large-scale missile strikes on Ukraine.
The agreement, signed in Yalta in 1999 between the Ukrainian Cabinet of Ministers (then led by Valeriy Pustovoytenko) and the Russian government under Vladimir Putin, saw Kyiv transfer eight Tu-160 heavy bombers, three Tu-95MS bombers, and 575 Kh-55 cruise missiles to Moscow. In return, Russia settled Ukraine’s gas debt, valued at $275 million—the supposed equivalent of the transferred equipment’s worth. The Kh-55 missiles, which were also part of the transfer, have since been used in attacks on Ukraine, as an earlier Radio Free Europe/Radio Liberty investigation revealed.
The investigation further found that the transfer of these aircraft and missiles occurred without the approval of Ukraine’s Parliament, the Verkhovna Rada. Additionally, the weaponry was significantly undervalued—by a factor of ten—according to the findings of the Temporary Investigative Commission of the Verkhovna Rada. This commission was established to investigate corruption within the Ukrainian Armed Forces, which led to the erosion of the country’s defense capabilities between 2004 and 2017.
Leonid Kuchma, Ukraine’s president at the time of the agreement, remarked that even if the strategic bombers had remained in Ukraine’s arsenal, they would not have substantially improved the country’s ability to defend against Russia.
— Lisa Noskova
On the podcast
Between a Russian offensive and the reelection of Donald Trump, the war in Ukraine hangs in the balance. Janis Kluge joins host Aaron Schwartzbaum to explore how we got here and what might happen next.
Quickfire: Regions
President Vladimir Putin approved a new list of key performance indicators (KPIs). These are the indicators based on which Russian governors are judged in Russia’s corporate-style public administration system. At the top of the list is “trust in the authorities” (including the president, who is mentioned at the first place). However, indicators 2-4 have to do with population retention, fertility rates, and life expectancy. Indicator 7, which falls right above the quality of education, obliges governors to ensure that returning war participants have access to health care, training, and jobs. “Patriotic education” gets a mention under number 11. The growth of real incomes (number 18) and the growth of investments beyond federally financed infrastructure projects (number 19) are lower on the list. The inclusion of raising population rates—a recent political fad—and the care for former war participants—an important and potentially risky political issue for the authorities—is not surprising. However, while they are expected to increase population numbers, governors also need to recruit young men for the war, reallocate social expenditures to benefit war participants, finance occupied territories, and contain migration.
The Far Eastern city of Yakutsk is one step closer to scrapping direct mayoral elections after a majority in the city council, consisting of United Russia deputies, adopted a corresponding law this week. The regional legislature needs to sign off on the change, after which Yakutsk will adopt the new law stipulating the procedure for selecting its next mayor: by the city council from candidates vetted by a so-called “competitive committee” dominated by the appointees of the region’s governor. The city’s former mayor, Sardana Avksentieva, spoke against the bill at the city council meeting, albeit the local authorities tried to prevent her from doing so. Avksentieva was elected in 2018 as an opposition politician but was forced to resign two years later, and she has since become a politician of national stature. A protest against the new law drew a few dozen people and ended with the arrest of the head of the local chapter of the liberal Yabloko party. After the abolishment of direct mayoral elections in Yakutsk, only three regional capitals—Khabarovsk, Abakan (Khakassia), and Anadyr (Chukotka)—will directly elect their mayors. It is likely that a municipal reform currently being discussed in the State Duma will eventually force them to give up this right.
On November 22, Bloomberg reported that sanctions had likely forced Novatek to mothball its construction yard of liquefied natural gas (LNG) modules at Belokamenka in the Murmansk Region. The plant had been creating so-called LNG trains for Novatek’s Arctic LNG 2 project, but that project is subject to international sanctions and halted production in October. Now, it has no prospects to export the planned amount of LNG and its storage facilities are full. The apparent shutdown of the Belokamenka facility suggests that further LNG production projects that might have benefited from the factory may also suffer delays.
— Andras Toth-Czifra