Sweet 16
16 candidates have applied to run in Russia's 2024 presidential election
Hello from the Bear Market Brief. BMB Russia will take a short break for the holidays and will resume in the new year. Happy Holidays!
This week in the news:
16 candidates have applied to run in Russia’s 2024 presidential election, including Vladimir Putin.
The EU adopted its 12th sanctions package against Russia, targeting the diamond industry.
The Kremlin seized control of German Wintershall Dea’s and Austrian OMV’s shares of Severneftegazprom.
Ukraine has been forced to scale down some of its military operations due to decreased aid from the West.
Putin’s election show
16 people have announced their intention to run in Russia’s presidential election scheduled for March 2024, according to the Central Electoral Commission. One of them is of course Vladimir Putin, who, after announcing his candidacy in a rather off-handed manner two weeks ago, was formally anointed by a handpicked group of celebrities and politicians over the past week. The first person who will likely be on the ballot (apart from Putin), is Leonid Slutsky, the head of the Liberal Democratic Party. He took over from Vladimir Zhirinovsky after his death last year. Slutsky, who is (quite paradoxically) a pro-Putin candidate, is known for his complete lack of charisma and for having been the long-time head of the Russian delegation in the Parliamentary Assembly of the Council of Europe (PACE). He was the Kremlin’s main fixer in the organization at a time when the Russian government was effectively blackmailing it. He also stands accused of sexual abuse by several female journalists.
The Communist Party has not chosen its presidential candidate yet. Potential candidates that have been mentioned in the Russian press include Valentin Konovalov, the governor of Khakassia who successfully beat a challenge by a Kremlin-backed politician earlier this year (and whom Moscow would likely be happy to see resign to be a presidential “also-ran”), former Irkutsk Governor Sergey Levchenko, and Nikolay Kharitonov, the head of the State Duma’s committee on the development of the Arctic and the Far East. Kharitonov would be the safest choice, at least from the point of view of the authorities.
The independent news outlet Novaya Gazeta spotted that, as of December 21, the only presidential candidate aside from Putin whose name was displayed in the Gosuslugi government services system (used for online voting in most regions where this option is available) is Yekaterina Duntsova, a former journalist and local councilor from the Tver Region. Duntsova recently announced her campaign on an anti-war ticket. Her “initiative group” held a meeting last week to endorse her candidacy, and electricity was reportedly cut in the venue. Earlier, she was interrogated by the Tver Prosecutor’s Office about her position on the war. While it is unlikely that Duntsova will be allowed to run in the election, it cannot be ruled out that the authorities are tolerating her campaign for the time being in order to signal to the Russian population that they are aware of the dissatisfaction generated by the war. This is similar to how the editors of Putin’s call-in show allowed critical text messages to appear on screen, but Putin did not engage with them.
The Central Electoral Commission also announced this week that online voting will be enabled in a total of 27 regions in addition to occupied Crimea. Along with Moscow (which was the first region to introduce online voting and continues to have its own separate system), online voting will be available in several regions that have seen relatively pluralistic politics or protest movements over the past few years (e.g. Novosibirsk, Tomsk, and Yaroslavl) and where turnout has been low (e.g. Karelia and Vladimir). Notably, regions where local political elites have preserved a degree of independence from Moscow (e.g. Khakassia and Tatarstan) will not vote online. Over the past two years, online voting has allowed authorities to reduce the costs of mobilizing regime supporters, putting pressure on voters, and to make independent oversight over elections significantly more difficult.
— Andras Toth-Czifra
Putin’s 2024 campaign headquarters opened this week in the Gostiny Dvor shopping center in Moscow, pictured here. It was announced that actor Vladimir Mashkov, doctor Marina Lysenko, and Lieutenant Colonel Artyom Zhoga will serve as the headquarter’s co-chairs. Mashkov is the artistic director of the Tabakov Theater, Lysenko received awards for her medical work during the pandemic, and Zhoga is the Speaker of the Parliament of the Donetsk People's Republic. Although the three co-chairs are new, according to Vedomosti, key members of Putin’s 2018 campaign will still be working on the race behind the scenes. (photo: O. Bragina (CC BY-SA 3.0))
New EU sanctions
The EU adopted its 12th sanctions package against Russia this week. According to the European Council, these sanctions target “high-value sectors” of the Russian economy in order to weaken Russia’s ability to wage war in Ukraine. They include a new prohibition on the import, purchase, or transfer of natural or synthetic diamonds from Russia. Diamond sales are an important source of Russian revenue, bringing in an estimated $4-5 billion every year. Diamonds aren’t the only sector targeted in the latest round of sanctions; EU countries are also prohibited from importing other goods that generate significant revenue for Russia (such as pig iron and spiegeleisen, copper wires, aluminum wires, foil, tubes, and pipes). The new sanctions package also includes tighter enforcement rules for the EU’s oil price cap and adds 29 entities to the list of businesses supporting Russia’s military (making them subject to further export restrictions).
Meanwhile, an EU court dismissed Russian businessman Roman Abramovich’s challenge to the war-related sanctions against him. Abramovich was included on the EU’s sanctions list in March 2022 for his alleged ties to President Putin and his role as a majority shareholder of the steel company Evraz. Abramovich, who holds Russian, Israeli, and Portuguese citizenship, sued on the basis that his Russian affiliation was not sufficient to sanction him. He also demanded 1 million euros ($1.1 million) in compensation for damages to his reputation. The General Court of the European Union dismissed his claim, saying that Abramovich failed to prove that his inclusion on the list was unlawful.
— Sara Ashbaugh
Winter Shall Come
Russian authorities have continued seizing assets of foreign companies. This week, a presidential decree transferred the stakes of German Wintershall Dea and Austrian OMV in Severneftegazprom, a joint venture with Gazprom which operates an oil and gas field in Western Siberia, to a newly-created Russian LLC. The two EU-based companies together owned almost 60% of Severneftegazprom. As with previous acts of nationalization, Putin’s decree referred to Russia’s vaguely-defined “economic security” and “national interests,” underlining that the seizure is essentially a response to Western sanctions against Russia and the planned or ongoing seizure of Russian assets in the West. Shortly after Putin’s decree, Germany’s federal prosecutor announced that it had filed a motion to seize 720 million euros ($794 million) worth of Russian assets in the country.
In response to the decree, OMV said that it plans to take steps to defend its rights, but it is unclear how it will do so. The Kremlin does not regard the decree as a seizure of assets because the EU-based companies will theoretically be compensated. However, the Kremlin will decide the amount of compensation, which will then be transferred to a specialized account in Russia. It would also not be the first time during Putin’s presidency that the authorities forced a foreign company to sell out to a Russian partner. However, this transfer does represent an escalation of the Kremlin’s tactics. It is also likely not going to be the last. Еarlier this month, Taimuraz Bolloev, who was appointed head of Baltika brewery after the authorities took control of the company, suggested that the state should formally nationalize the company.
— Andras Toth-Czifra
Russian government officials spoke out against a high-profile party that took place Wednesday night at Mutabor, a popular Moscow nightclub. The “almost naked” party was hosted by media personality Nastya Ivleeva and attended by stars such as actress and singer Lolita Milyavskaya and TV host Ksenia Sobchak. Ivleeva, Milyavskaya, and Sobchak are pictured here at the party. State Duma lawmakers Dmitry Gusev, Maria Butina, and Nina Ostanina all spoke out against the gathering for not aligning with Russian conservative values, even urging the police to investigate. (photo: Nastya Ivleeva / Instagram)
Ukraine scales down military operations
According to Reuters, General Oleksandr Tarnavskyi said that Ukrainian troops have scaled back some operations due to artillery shortages resulting from a decrease in foreign aid. Specifically, Ukrainian forces are lacking artillery shells, including 122 mm and 152 mm rounds. General Tarnavskyi led the Kherson counteroffensive in November 2022, and now he is heavily involved in defending Avdiivka, which Russia has been trying to seize for months. Tarnavskyi’s announcement comes as U.S. aid for Ukraine remains stuck in Congress due to disagreements about border security provisions. Meanwhile, the EU’s 50 billion euros ($55 billion) in funding for Ukraine has been blocked by Hungary.
“The volumes [of artillery shells] that we have today are not sufficient, given our needs. So, we are redistributing,” General Tarnavskyi said, explaining that the military is scaling down some of its operations. He clarified that the Armed Forces of Ukraine has switched to defending some of its positions on the southeastern front while still trying to advance in other areas. In addition, the preparation of reserves for further large-scale counteroffensive actions continues. Tarnavskyi noted that the Russian military also has problems with ammunition shortages but did not provide any details on the matter.
The EU previously pledged to deliver 1 million shells to Ukraine by Spring 2024, of which 480,000 shells have already been delivered. However, there are still concerns that the spring deadline will not be met.
— Lisa Noskova
On the Podcast
Almost two years after Russia’s full-scale invasion, the Bear Market Brief investigates how we got here in the first place. What does theory say about Vladimir Putin’s decision making? Seva Gunitsky joins to discuss.
Quickfire: Regions
Yury Trutnev, the President’s Far East plenipotentiary, took part in a meeting of an intergovernmental commission focusing on the development of Russia’s Far East and Northeastern China this week. During the meeting, Trutnev said that cargo transit via the Northern Sea Route will be 36 million tons in 2023, but Russia is planning to increase this to 50 million tons in 2024. This would be a significant jump considering that this year’s levels are only slightly higher than the 34 million tons registered in 2022 and 2021. The government regards the route as a significant new transit corridor, the development of which will help Russia’s trade pivot to Asia. However, its development has been hindered by a lack of ice-class vessels to ensure year-round navigability, scarce coastline infrastructure, and questionable profitability apart from energy exports to Chinese markets.
According to the website of Moscow’s Sheremetyevo Airport, a domestic flight is scheduled to land at the airport of Krasnodar in Southern Russia on December 25. This would be the first time since the invasion of Ukraine that a civilian flight landed at the Krasnodar airport, apart from a test flight executed on December 15. The reopening of the airport (which, along with several other airports in southern Russia, has been closed for almost two years) would fit the Russian government’s preferred narrative about domestic normalcy in spite of the war. However, on December 18, two of Moscow’s airports and the airport of Kaluga had to be shut down due to drone attacks.
Maxim Sokolov, the head of AvtoVAZ, Russia’s biggest car producer, said that his company will need further assistance from the Russian state to compete with Chinese producers. Chinese automakers achieved a dominant position on the Russian market through fire-sale takeovers of shares in car production facilities. This was possible due to the collapse of the Russian automotive industry triggered by Russia’s war in Ukraine. As a result, prices of Russian-made cars have gone up by 40% since the war began. While Putin acknowledged this in his call-in show earlier this month, there is little that the Russian government can do about the situation. Western partners are not returning to Russia anytime soon and the subsidization of the domestic car industry is currently not a priority for the government.
— Andras Toth-Czifra
Quickfire: Ukraine
On Sunday, the Security Service of Ukraine (SBU) opened a criminal investigation into the discovery of a listening device in one of the potential offices of the Commander-in-Chief of the Armed Forces of Ukraine, Valery Zaluzhny. On Monday, General Zaluzhny commented that a wiretap was found in one of the “several places” where he worked. “This is the room I was supposed to use today,” he told journalists. Ukraine’s Commander-in Chief also said that the room in which the device was found had not been used in a while, and it was unlikely that any state secrets were captured by it.
Nine people, including four children, were injured during a Russian drone attack on Kherson on Tuesday evening. Kherson was not the only city targeted; Ukrainian officials also reported attempted strikes on Kyiv and Kharkiv, among other places. Russia seems to have increased its aerial attacks on Ukrainian cities as the West’s support for Ukraine has declined. Crucial military aid from the U.S. is currently tied up in Congress, and American lawmakers have said that they will not reach an agreement before the new year. Ukrainian President Zelensky, however, remains optimistic that the aid will eventually come through. “I am confident that the United States will not betray us," he said.
— Lisa Noskova & Sara Ashbaugh