Withdrawal woes
Russian forces begin to withdraw from military bases in Syria
Hello from the Bear Market Brief.
This week in the news:
Russia is reportedly negotiating with Syrian opposition groups in hopes of maintaining its military bases in the country.
The Russian business elite offered to invest in the manufacturing of Oreshnik hypersonic missiles.
The Russian Finance Ministry held a federal loan (OFZ) bond auction, generating 953 billion rubles in revenue.
Ukrainian President Volodymyr Zelenskyy met with U.S. President-elect Donald Trump at the reopening of the Notre Dame Cathedral in Paris.
According to The Washington Post, the Ukrainian military supplied Syrian rebels with drones and drone operators to assist in overthrowing Bashar al-Assad.
— Sara Ashbaugh, Editor in Chief
Russian military bases in Syria
Following the overthrow of Russia-supported Syrian dictator Bashar al-Assad by rebel forces on December 8, the fate of the Russian military bases in the country remains uncertain. Despite reporting earlier this week by The Financial Times suggesting that Russia was not evacuating its military bases in Syria, new satellite imagery by Maxar Technologies shows Russia readying heavy transport at the Khmeimim airbase—one of its two key military bases in the region. The other is the Tartus naval base, which provides Russia’s only access point to the Mediterranean Sea. Satellite imagery of Tartus shows that several frigates have left the port, but the ships are still moored several miles off the Syrian coast and there is not yet evidence of a complete withdrawal from the base.
According to Bloomberg, Moscow has been working on an agreement with the Hayat Tahrir al-Sham (HTS) group to maintain its military presence in Syria. On Monday, Kremlin spokesperson Dmitry Peskov said that Russia is taking all “necessary steps to establish contact in Syria with those capable of ensuring the security of military bases,” and added that the safety of the bases was “of utmost importance.” As The Guardian notes, Russian state-run media has recently softened its rhetoric towards HTS, referring to the group as “armed opposition” rather than “terrorists” after the ousting of al-Assad. However, anonymous Russian diplomats told The Moscow Times that a complete Russian military withdrawal from Syria was still likely.
Losing the military bases would be a major blow to Russia’s influence in Africa and the Middle East. The Tartus base allows Russian vessels to conduct military exercises in the Mediterranean without having to return to the Black Sea to be serviced. The base was established by the Soviet Union more than 50 years ago, and currently houses three frigates, two auxiliary craft, and an attack submarine. The Khmeimim airbase is similarly important, serving as a key logistics hub for Russia’s military involvement in Africa. While there appears to be evidence of at least a partial withdrawal of Russian forces from Syria, the extent of the evacuation is not yet known. “Still unclear if this is a complete exit. There are indications and rumors to that effect, but best to wait for the evidence,” Michael Kofman, Senior Fellow at the Carnegie Endowment, posted to X.
The toppling of Bashar al-Assad was also a political blow to Russia, undermining its image as a power-broker in the Middle East. Over the past decade, Moscow’s support for al-Assad helped him maintain his hold on power in Syria in the midst of mass protests and civil war. The Institute for the Study of War (ISW) described al-Assad’s fall as a “strategic political defeat” for Moscow. “Russia's inability or decision to not reinforce Assad's regime…will also hurt Russia's credibility as a reliable and effective security partner throughout the world, which will in turn negatively affect Putin's ability to garner support throughout the world for his desired multipolar world,” the ISW said.
— Sara Ashbaugh
A commissioning ceremony was held this week for the INS Tushil, a Russian-made multi-role stealth-guided missile frigate built for the Indian Navy. Indian Defense Minister Rajnath Singh (second from the right) attended the ceremony at the Yantar Shipyard in Kaliningrad on Monday. “The ship is a proud testament to India’s growing maritime strength and a significant milestone in long-standing bilateral relations with Russia,” Singh posted to X. The vessel is part of a 2016 deal between New Delhi and Moscow that commissioned four stealth frigates for the Indian Navy for $2.5 billion. (photo: Maxim Postoi / TASS)
The Russian business elite and the war
Alexander Shokhin, the head of the Russian Association of Industrialists and Entrepreneurs (RSPP), said that the business sector was happy to invest in the manufacturing of the “Oreshnik” hypersonic missile. The mass production of the weapon was recently announced by Vladimir Putin after Russia hit the Ukrainian city of Dnipro with it last month. Shokhin said that entrepreneurs felt more “at ease” knowing that Russia possessed Oreshnik’s firepower.
However, it seems likely that the head of the business lobby was simply trying to catch the attention of the president by offering support for what seems to be Putin’s new favorite project. A week earlier, Shokhin told state-owned RIA Novosti that RSPP was hoping to have a tete-a-tete with Putin before the end of the year. Officially, the business lobby wants to discuss the position of the ruble with the president, however, it is almost certain that the Russian government’s ongoing nationalization drive would also be on the agenda.
According to publicly available information, Russian authorities nationalized more than 67 companies with a combined revenue of 807.6 billion rubles ($7.7 billion) in 2024. Most of these companies are active in the food and real estate sectors, and their ownership was most often transferred to the state under the pretext of alleged illegal privatization or white-collar crimes. The RSPP has already expressed alarm over the increasingly-shaky protection of property rights. Business owners whose properties were seized by the state have indicated their concern to the Kremlin through lobbying organizations such as RSPP and at events such as the St. Petersburg Economic Forum. In some cases, they have also fought back against these decisions in the courts. Some of these legal challenges (e.g. the “Iset” electronic equipment plant, the Ivanovo Heavy Machine Tool Plant, or the Pokrovsk Agricultural Holding) were successful—at least initially.
At the same time, the government is also transferring assets to well-connected actors. This week, it was revealed that the assets formerly owned by Danone in Russia are now overseen by Ruslan Alisultanov, a former government official from Chechnya. Alisultanov is now the sole owner of Yunimilk, whose subsidiary took control of the assets earlier this year. When the Russian government expropriated the assets, they were overseen by Yakub Zakhariev, the nephew of Chechnya’s leader, Ramzan Kadyrov.
— Andras Toth-Czifra
Shoring up the budget
The Russian Finance Ministry once again held a federal loan (OFZ) bond auction on December 11, placing one trillion rubles worth of variable coupon bonds, generating 953 billion rubles of revenue. This comes a week after a similar bond placement, which generated 957 billion rubles. The OFZs then were bought up by major Russian banks with a yield of over 19%. Last week’s placement was followed by a repo auction by the Central Bank, worth 850 billion rubles, to Russian banks, highlighting how the Central Bank is supporting the government’s debt sales by offering liquidity assistance to the financial sector. The Bank has received growing criticism due to its high interest rate over the past months, as it also endangers investments, but its leaders have insisted that this is the only way to try to mitigate stubbornly high inflation. This week, deputies of the nominally opposition Just Russia party went as far as to present a bill in the State Duma that would allow legislators to call on the president to dismiss the head of the Central Bank and make her responsible for fostering economic growth, among other things.
The Finance Ministry’s total bond placement plan for this year was 4.1 trillion rubles. However, the Central Bank’s high key interest rate has interfered with these plans and called into question the planned borrowing of 3.5 trillion rubles yearly in 2025-2027 as well. In October, the federal government received the right to increase budget spending by 1.5 trillion rubles in the fourth quarter of 2024 without amending the budget and without a comparable rise in fiscal incomes, which suggested that the government was going to have to find alternative financing for the ballooning cost of the war. The government expects the federal deficit to grow to 3.3 trillion rubles by the end of the month.
Even as the 2025 budget and major tax laws have been adopted, the federal government is also looking for further sources to shore up federal finances in the following year. According to the business news site RBC, the government will propose that 25% of road fines should, in the future, be transferred to the federal budget. So far this income has only benefited regional budgets. In 2023, regions collected 120 billion rubles worth of fines altogether, but the Duma is discussing a steep increase of these fines for 2025. At the same time, the legislative assembly of the Transbaikal Territory has proposed increasing the percentage of mineral extraction tax revenues that regions can keep; this would likely increase the income of a handful of regions by 20-24 billion rubles in total, but the government did not support it (and neither did it support previous attempts to shift the distribution of fiscal incomes towards regional budgets).
Also this week, Igor Shuvalov, the head of VEB (a major state-owned investment vehicle), suggested that the bank should be enabled to issue loans for infrastructure projects through its so-called “project financing factory” mechanism, using the 2.5 trillion rubles of pension funds that it manages.
— Andras Toth-Czifra
A Russian missile strike killed at least eight people and injured 22 others in the Ukrainian city of Zaporizhzhia on Tuesday. Ukrainian emergency services are still working to evacuate civilians from the rubble, and the death toll may continue to rise as more victims are found, authorities say. 20 residential buildings and three businesses were hit during the strike—the second Russian missile strike on the city in the past week. During his daily video address on December 10, President Zelenskyy implored allies to provide more aerial defense for Ukraine. “Again and again, we repeat that air defense should save lives, not gather dust in warehouses,” he said. (photo: Reuters)
President Zelenskyy met with U.S. President-elect Trump
On December 7, Volodymyr Zelenskyy met with Donald Trump in Paris, where world leaders gathered to celebrate the reopening of Notre Dame Cathedral. The meeting, hosted by French President Emmanuel Macron, marked the first in-person discussion between Zelenskyy and Trump since the latter’s reelection in November. A Ukrainian official familiar with the matter commented that the tone of the meeting was “warm and friendly.” On the same day, the White House unveiled a new $988 million military assistance package for Ukraine. According to a Pentagon statement, the package includes drones, ammunition for precision HIMARS rocket launchers, and equipment and spare parts for artillery systems, tanks, and armored vehicles.
After the meeting with Trump in France, Ukraine’s leader emphasized the importance of frequent meetings between the two presidents to ensure that Ukraine’s partners hear its positions directly from their Ukrainian counterparts, rather than through a third party. Trump said the Ukrainian leader is ready “to make a deal and stop the madness” and that Russia should do the same after incurring staggering losses in Ukraine. “Too many lives are being so needlessly wasted, too many families destroyed, and if it keeps going, it can turn into something much bigger, and far worse,” Trump wrote on Truth Social. In response, Zelenskyy wrote on X that the war “cannot simply end with a piece of paper and a few signatures,” urging that a ceasefire “without guarantees can be reignited at any moment, as Putin has already done before.”
When it comes to security guarantees, Zelenskyy recently mentioned that he is planning to speak with President Biden about Ukraine’s NATO invitation. On December 3, Ukraine’s Ministry of Foreign Affairs released a statement saying that Ukraine “will not accept any alternatives, surrogates or substitutes for Ukraine’s full membership in NATO.”
— Lisa Noskova
Syrian rebels reportedly received help from Ukraine
On Wednesday, The Washington Post published an article claiming that Ukraine assisted Syrian rebels in their efforts to overthrow Bashar al-Assad. According to the piece, Ukraine sent approximately 20 experienced drone operators and around 150 first-person-view drones to the rebel headquarters in Idlib, Syria four or five weeks ago to assist the Hayat Tahrir al-Sham (HTS) rebel group. Although the alleged assistance from Kyiv played a relatively small role in the efforts to overthrow the Syrian president, it also served as another attempt to target Russian operations abroad.
The article asserts that Ukraine’s assistance to Syrian rebels has been an “open secret,” citing a Kyiv Post piece that was published in June. The article included a link to footage showing attacks on targets that, according to the report, had been struck by Ukrainian-supported rebels inside Syria. It stated that the operation was carried out by a special unit called “Khimik” within Ukraine’s Main Directorate of Intelligence in collaboration with the Syrian opposition.
The Main Directorate of Intelligence declined to comment on the allegations made by the WP article. Russian officials, on the other hand, were generous in providing their opinions on the matter. For instance, Deputy Chairman of the Defense Council of the Russian Duma Yuriy Shvitkin said that “support from the Ukrainian regime for another terrorist organization highlights once again the course of Ukraine’s leadership towards escalating tensions and supporting terrorism in various forms.”
— 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
On December 9, Vladimir Putin issued a decree creating a Presidential Council for the Implementation of Demographic and Family Policies. The Council will be headed by Valentina Matvienko, the Chair of the Federation Council, who will in the future also be responsible for child protection policies. The creation of the new body comes after the adoption of a new set of 21 key performance indicators for governors, four of which have to do with increasing fertility rates and population figures. In November, the State Duma banned “child-free propaganda” and a number of regions adopted legislation this year banning “coercion into abortion.” Matvienko, one of the top politicians who sought to associate themselves with the ultraconservative turn in family policy in recent months, will now likely be in charge of signaling to regions what kinds of policies the Kremlin is expecting of them to raise fertility rates. However, under the current circumstances of war and the prioritization of veterans and the defense industry, it is unlikely that the figures will actually improve.
Several governors held regional call-in shows over the past week in the style of Vladimir Putin, whose yearly interview featuring carefully hand-picked questions from Russian citizens will take place on December 19. One important purpose of the regional shows—which are usually shorter than Putin’s—is to address uncomfortable issues that Putin himself does not necessarily want to talk about. One of the main topics addressed by the regional call-in shows was housing and utilities. This is unsurprising given the state of utility networks, which led to a series of accidents and outages at the beginning of this year, a phenomenon that seems to be repeating in several cities in the current heating season (researcher Stanimir Dobrev has kept track of outages). Another commonly-mentioned issue was the worsening accessibility of health care and medications, as well as public transit, both long-standing problems that were exacerbated by the war—especially as regional and local budgets are unable to offer sufficient salaries. Several governors also tried to give a nod to the Kremlin’s pet issues, such as the integration of returning war participants and raising fertility rates.
Alexander Khinshtein, the ultraconservative Duma deputy who was recently appointed acting governor of the Kursk Region, started his tenure with a series of publicity ops. During these, among other things, he announced that he was ready to sleep in his office but not to move his family to the region. He also dismissed the region’s cabinet of ministers. Khinshtein’s arrival in Kursk coincided with the arrest of Igor Grabin on corruption charges. Grabin was a deputy head of the Corporation for the Development of the region and was responsible for supervising the region’s defensive fortifications prior to the Ukrainian incursion. In spite of this, the governor also told local media that he was not planning to change the regional government substantially or engage in purges, albeit he did hint that he might crack down on certain forms of corrupt practices. Shortly after Khinshtein’s appointment, likely as an attempt to improve the mood of the region’s residents after months of problematic crisis management, the federal government also announced tax deferments for them.
— Andras Toth-Czifra