March upswell

A number of important statements were made last week that indicate that Western sanctions are forcing the regime to reckon with growing complexities and seek solutions to new problems. Meanwhile, serious scandals have arisen within the oppositionist camp.

Rosfinmonitoring

Last week, Putin met with Rosfinmonitoring head Yuri Chikhanchin. Chikhanchin is a political veteran on the same level as Nikolai Patrushev and Alexander Bortnikov. He has been in charge of Rosfinmonitoring for a decade and a half – since the beginning of Putin’s third term. Financial intelligence is a small agency (about 1,000 people, half of whom work for the central office and the other half for the federal districts and regions annexed from Ukraine) and hermetically sealed. Over the years, it has very much helped the state to establish increasingly tight control over the oligarchs, business and elites in general. The importance of Rosfinmonitoring is evidenced, for example, by the fact that Putin appointed Chikhanchin’s predecessor Viktor Zubkov as prime minister in 2007-08, during the transition to Dmitri Medvedev’s presidency.

Amid the Western sanctions, the role of Rosfinmonitoring has only grown. In August 2022, the agency’s staff was increased, while it was tasked with a new function – to inform the Central Bank whether Russian banks may provide, at the request of the competent foreign authorities, information about clients, their operations, ultimate beneficiaries and beneficiaries. This applies, among other situations, to court requests.

Since 2021, Chikhanchin has annually had his term of federal state civil service extended by presidential decree (70 years is the age limit for high-ranking civil servants by law). His current term of service is through June 17, 2023. Chikhanchin’s forty-year-old son, Andrei, is a top manager at Aeroflot and was recently considered for the CEO job.

At the meeting with Putin, Chikhanchin spoke about the creation of a “financial security belt” for the distribution and use of budget funds. He also noted that thanks to the tightening of control over the implementation of state defense procurement, shadow flows had decreased, despite an increase in the number of firms fulfilling orders by a third. “I have to say that where there is a budget, there is always a criminal,” Chikhanchin said, to which the president replied: “No matter what, crooks are everywhere.”

There is every reason to believe that the situation with foreign accounts of big Russian companies was also discussed at the meeting, though it was not in the official transcript. Recall that in his February address to the Federal Assembly, Putin said: “big business in Russia controls strategic enterprises with thousands of workers that determine the socioeconomic well-being of many regions and, hence, the overall state of affairs. So, whenever leaders or owners of such businesses become dependent on governments that adopt policies that are unfriendly to Russia, this poses a great threat to us, a danger to our country. This is an untenable situation… Russian capital, the money earned here, must be put to work for the country, for our national development.”

Sanctions are nothing to us

On March 6, the Ministry of Finance reported a January-February budget deficit of RUB 2.581 trillion, versus a planned full-year deficit of RUB 2.925 trillion.

Meanwhile, amid the economic and geopolitical headwinds due to conflict in Ukraine, Minister of Agriculture Dmitri Patrushev gave a long interview about the growth of agricultural production in Russia, followed a day later, on March 9, by a long article about the failure of US sanctions policy, written by Russia’s ambassador to the US Anatoly Antonov, perhaps the most well-known Russian diplomat after Sergei Lavrov and formerly the chief negotiator with Washington on security and disarmament issues.

The overarching tone of both Patrushev and Antonov was “everything is nothing to us,” although that looked less than convincing against the backdrop of the Ministry of Finance’s statement that almost the entire penciled-in 2023 deficit was hit in the first two months of the year. Still, both materials deserve attention.

Patrushev’s answers to the interviewer’s rather serious and detailed questions reveal several weak points in Russian agriculture – a point of pride for Putin – amid sanctions. One of them is so-called self-sufficiency, meaning the production of food volumes sufficient to feed the country. It is conceived as a guarantee of food security, which the authorities, led by Nikolai Patrushev, have tried to boost for many years. Judging by the interview with Dmitri Patrushev, self-sufficiency remains unattainable without a steady import of seeds and agricultural equipment from the West. While Russia supplies 70-90% or more of the seeds it needs for basic grain crops, it is only 9% for potatoes and 3% for sugar beets.

Patrushev also spoke about the difficulties with imported agricultural equipment, as well as supplies of components and spare parts, which farmers still use and need in large quantities. On the subject of grain exports, Patrushev noted problems with bank settlement, transportation and the availability of ships, concluding: “We don’t see any special benefits from the grain deal, only promises.” Recall that the deal ensuring an export corridor for grain from the southern ports of Ukraine expires on March 18, while negotiations to extend it have stalled. Complicating factors include a sharp rise in grain stocks amid a record harvest and minimal exports at the beginning of the season.

Antonov nicely complemented Patrushev: if the latter painted a picture of agriculture developing generally effectively – though not without bumps in the road – then the former painted one of the issues the West is facing due to its sanctions against Russia, further denouncing the self-interest and gross miscalculations in the strategy chosen by Washington. “Despite the pessimistic forecasts,” writes Antonov, “the Russian economy has withstood this (without exaggeration) unprecedented and comprehensive onslaught” and is preparing to move forward “with the development of infrastructure, manufacturing and domestic tourism.” The conclusion offered at the end: “Sanctions are a failed hard power instrument. The tectonic changes that the current geopolitical situation has effected essentially confirm the thesis about the gradual, but inevitable emergence of a new, more just and polycentric world order based on the economic independence of states, where there is no place for the dictates of one center of power.”

It seems that Antonov’s article – in which he is speaking more as a shadow foreign minister echoing Lavrov – is addressed not so much to the US as to Russia and the world community. And of course to the reader in chief, whose own theses are being reflected and creatively developed by the former diplomat.

Conflict among Russian oppositionists

The conflict, which began with a new investigation by Alexei Navalny’s Anti-Corruption Foundation (FBK) about journalists who received money from the Moscow mayor’s office, erupted over accusations made by FBK against Alexei Venediktov, the former head of Echo of Moscow (before it was forced to close in March 2022). FBK alleged that Venediktov had taken money from government officials.

Venediktov, in turn, published a letter signed by FBK head Leonid Volkov to the European Commission calling for the sanctions against Alfa Group co-owners Mikhail Fridman, Petr Aven, Alexei Kuzmichev and German Khan to be lifted. Volkov called the signing the petition without the knowledge of his colleagues a big political mistake and “decided to take a break with his public civil and political activities.”

The scandal engulfed a number of prominent Russian opposition figures, which, as it emerged, had also signed the letter. They include co-founders of TV Rain Natalya Sindeeva and Vera Krichevskaya; former Deputy Prime Minister Alfred Kokh; politician Leonid Gozman; journalists Sergei Parkhomenko and Leonid Parfyonov; businessman Yevgeny Chichvarkin; and economist Vladislav Inozemtsev.

Each of the signatories had their own reasons, yet there was no clear explanation why the sanctions should be lifted specifically from the co-owners of Alfa. Nevertheless, with the bloody war ongoing and amid another terrible Russian missile attack on Ukraine, social networks and media were filled with mutual accusations between opponents of the Putin regime about past sins.

The ordeal has not only dealt a big blow to the reputation of FBK – which failed to find a new niche for itself in the struggle against the regime following the arrest of Navalny and especially after the start of the war. It also shows the disunity and lack of positive consolidating projects for the exiled Russian opposition. Finally, it has raised an important question about the point and effectiveness of personal sanctions against businesspeople of Russian origin.