Digest
Nikolai Petrov’s weekly bulletin
February 20-24, 2023
Nikolai Petrov
Independent scholar
A short summary of the most important political developments by Nikolai Petrov.
Russia after a year of war: A look from the inside
The presidential address that took place on February 21 was a long time coming. In 2022, it was skipped, as was Putin’s traditional big press conference and Direct Line call-in show.
Two other important stories from last week are the evolution in relations between government and business, as well as preparations for the 2023-24 elections.
The presidential address represents a kind of focal point for political trends, as well as a mirror that allows a glimpse into which sentiments in society the Kremlin wants to play on.
On the eve of Putin’s address, Rosstat surprised experts and, as it were, pleased Putin with a low figure for the estimated decline in GDP in 2022, at 2.1%, better than all recent estimates: the Ministry of Economic Development forecast a 2.9% contraction, while the Central Bank put the decline at 2.5% earlier this month. Prime Minister Mikhail Mishustin personally reported the “victorious” Rosstat estimate to Putin at the last moment.
State polling agency VTsIOM also pleased Putin: its data showed the president’s approval rating had jumped 15 percentage points in 2022, with the vast majority of respondents judging the results of the special operation so far as “significant for the country,” even though the pollsters had not specified what exactly those results were.
A couple of days before the address, a second test of the new Sarmat ICBM was carried out, though it ended in failure (the Foreign Ministry tried rather clumsily to refute reports of the failed test).
The presidential address was longer than usual. Nevertheless, despite the ongoing conflict, it looked routine. Everything went like a Soviet-era meeting of party and state functionaries. The faces of the audience – not only deputies, governors and other high officials, but also actors and showmen – expressed tension and boredom. Putin himself also seemed bored, speaking with feeling only about enemies and the businessmen who had lost their property and money: “Trust me, not a single ordinary citizen in our country felt sorry for those who lost their assets in foreign banks, lost their yachts or palaces abroad, and so on. In their conversations around the kitchen table, people have all recalled the privatization of the 1990s, when enterprises that had been built by our entire nation were sold for next to nothing and the so-called new elites flaunted their lavish lifestyle.”
The address was divided into five parts: a litany of the intrigues perpetrated by the malicious and sinful West; a report on the successes of Russia’s economy and governance; an update on the assistance already provided by the state to those in need and Putin’s orders for further support; an account of how the integration of the four annexed Ukrainian regions into Russia is going; and, finally, the announcement of Russia’s halting participation in the New START treaty (though it clarified it was not withdrawing). All this was sprinkled with boilerplate praise for the Russian people, who were said to “have always been distinguished by their generosity, magnanimity, mercy and compassion.” “Russia, as a country,” Putin stressed, “fully reflects these traits.”
Note that the nuclear weapon theme, which was downplayed in the address due to the failed Sarmat test, was taken up in Putin’s congratulations message for Defender of the Fatherland Day on February 23, where he spoke about strengthening the nuclear triad this year, including putting the first Sarmat launchers with the new heavy missile on combat duty, and mentioned other advanced weapons.
The messages were the following. For the domestic audience: everything is fine in the country; the economy has entered a new cycle of growth; the state is taking care of its citizens. For the foreign audience: the more long-range Western weapons systems are given to Ukraine, the further Russia will be forced to push back the threat from its borders. Of course, there was also the noisy announcement, addressed to the West, that Russia was suspending its participation in New START. For greater effect, the next day after the address the relevant documents were approved by the Duma and Federation Council.
The state and business
Besides Putin’s populist phrase that no one is going to feel bad for those who moved money to the West, there were a couple other developments related to business last week. On the one hand, the negotiations between the government and business on “voluntary” contributions to the budget out of 2022 earnings, which has been going on since the beginning of February, seem to be wrapping up. The raise for the leaky Russian budget has already been confirmed as a mandatory “windfall tax” from all large companies, with the exception of the oil and gas sector, in the amount of RUB300 billion. Still, questions remain over the calculation mechanism, the time frame for the collection, the accounting for capital investments made by businesses, etc.
On the other hand, a bill was sent by the government to the Duma on softening penalties for tax violations, which Putin spoke about at a pre-war meeting with medium business association Delovaya Rossiya and mentioned in passing in his address. The key thing in the bill is proposed amendments to the Code of Criminal Procedure that prescribe to not initiate a criminal case or to stop prosecution in an already initiated case if the accused pays all arrears, penalties and fines. The maximum prison sentence would be reduced for the main articles used in tax cases: for tax evasion (Article 199 of the Criminal Code) from six to five years, and for concealment of funds (199.2 of the Criminal Code) from seven to five years. This would classify such crimes as “medium-gravity,” entailing a reduction in the statute of limitations for them from 10 to six years. These amendments were under review by the government since last April due to disagreements between the Ministry of Finance and the Investigative Committee. In the end, fiscal considerations seem to have outweighed the desire to keep business over a barrel.
Elections
In his address, Putin made it clear that “elections to local and regional government bodies next September and the presidential elections in 2024 will take place in strict accordance with the law and observance of all democratic, constitutional provisions.” This wording probably means that the authorities have some doubts or disagreements over that. However, unlike last year, they have not been aired publicly.
The day after the presidential address, at a government meeting Prime Minister Mishustin announced large-scale (and expensive) plans intended to create a sense of socio-economic well-being and steady development ahead of the elections. Besides hefty social payments for the four annexed regions, the plans involve providing regions this year with interest-free Treasury loans to implement the national projects set for 2024. The priority goals are “the modernization of primary health care and social infrastructure, integrated development of rural areas, resettlement of dilapidated housing residents, and a number of other popular initiatives.” An additional RUB50 billion is to be allocated to upgrade public transport. Note that these gestures are being made as the hole in the budget is widening and government is trying to close it.
Meanwhile, the Kremlin’s political block is seeking to increase its control over the elections and, if possible, minimize them. This week, the Novosibirsk Region parliament canceled direct elections of mayors for the city of Novosibirsk and the naukograd of Koltsovo. Instead, so-called “competitive procedures” will be instituted. United Russia and LDPR representatives backed the move, while the KPRF and New People party factions opposed it. It’s not that the Kremlin is disgruntled with the absolutely loyal communist mayor of Novosibirsk, Alexei Lokot (about whom we wrote in our last newsletter); rather, it is that in the wartime economy and politics, it may be necessary to de facto appoint and quickly replace mayors. Such measures – along with a reduction in the party-list component in elections, as is currently being done in regard to the Yekaterinburg City Duma – primitivize the political system, leaving less and less space for political parties, even “decorative” ones.
Russia’s immediate future, as outlined in the presidential address, looks like a frozen present. The main direction of internal policy is primitivization and the elimination of the slightest uncertainty associated with the direct participation of citizens.
The presidential address that took place on February 21 was a long time coming. In 2022, it was skipped, as was Putin’s traditional big press conference and Direct Line call-in show.
Two other important stories from last week are the evolution in relations between government and business, as well as preparations for the 2023-24 elections.
The presidential address represents a kind of focal point for political trends, as well as a mirror that allows a glimpse into which sentiments in society the Kremlin wants to play on.
On the eve of Putin’s address, Rosstat surprised experts and, as it were, pleased Putin with a low figure for the estimated decline in GDP in 2022, at 2.1%, better than all recent estimates: the Ministry of Economic Development forecast a 2.9% contraction, while the Central Bank put the decline at 2.5% earlier this month. Prime Minister Mikhail Mishustin personally reported the “victorious” Rosstat estimate to Putin at the last moment.
State polling agency VTsIOM also pleased Putin: its data showed the president’s approval rating had jumped 15 percentage points in 2022, with the vast majority of respondents judging the results of the special operation so far as “significant for the country,” even though the pollsters had not specified what exactly those results were.
A couple of days before the address, a second test of the new Sarmat ICBM was carried out, though it ended in failure (the Foreign Ministry tried rather clumsily to refute reports of the failed test).
The presidential address was longer than usual. Nevertheless, despite the ongoing conflict, it looked routine. Everything went like a Soviet-era meeting of party and state functionaries. The faces of the audience – not only deputies, governors and other high officials, but also actors and showmen – expressed tension and boredom. Putin himself also seemed bored, speaking with feeling only about enemies and the businessmen who had lost their property and money: “Trust me, not a single ordinary citizen in our country felt sorry for those who lost their assets in foreign banks, lost their yachts or palaces abroad, and so on. In their conversations around the kitchen table, people have all recalled the privatization of the 1990s, when enterprises that had been built by our entire nation were sold for next to nothing and the so-called new elites flaunted their lavish lifestyle.”
The address was divided into five parts: a litany of the intrigues perpetrated by the malicious and sinful West; a report on the successes of Russia’s economy and governance; an update on the assistance already provided by the state to those in need and Putin’s orders for further support; an account of how the integration of the four annexed Ukrainian regions into Russia is going; and, finally, the announcement of Russia’s halting participation in the New START treaty (though it clarified it was not withdrawing). All this was sprinkled with boilerplate praise for the Russian people, who were said to “have always been distinguished by their generosity, magnanimity, mercy and compassion.” “Russia, as a country,” Putin stressed, “fully reflects these traits.”
Note that the nuclear weapon theme, which was downplayed in the address due to the failed Sarmat test, was taken up in Putin’s congratulations message for Defender of the Fatherland Day on February 23, where he spoke about strengthening the nuclear triad this year, including putting the first Sarmat launchers with the new heavy missile on combat duty, and mentioned other advanced weapons.
The messages were the following. For the domestic audience: everything is fine in the country; the economy has entered a new cycle of growth; the state is taking care of its citizens. For the foreign audience: the more long-range Western weapons systems are given to Ukraine, the further Russia will be forced to push back the threat from its borders. Of course, there was also the noisy announcement, addressed to the West, that Russia was suspending its participation in New START. For greater effect, the next day after the address the relevant documents were approved by the Duma and Federation Council.
The state and business
Besides Putin’s populist phrase that no one is going to feel bad for those who moved money to the West, there were a couple other developments related to business last week. On the one hand, the negotiations between the government and business on “voluntary” contributions to the budget out of 2022 earnings, which has been going on since the beginning of February, seem to be wrapping up. The raise for the leaky Russian budget has already been confirmed as a mandatory “windfall tax” from all large companies, with the exception of the oil and gas sector, in the amount of RUB300 billion. Still, questions remain over the calculation mechanism, the time frame for the collection, the accounting for capital investments made by businesses, etc.
On the other hand, a bill was sent by the government to the Duma on softening penalties for tax violations, which Putin spoke about at a pre-war meeting with medium business association Delovaya Rossiya and mentioned in passing in his address. The key thing in the bill is proposed amendments to the Code of Criminal Procedure that prescribe to not initiate a criminal case or to stop prosecution in an already initiated case if the accused pays all arrears, penalties and fines. The maximum prison sentence would be reduced for the main articles used in tax cases: for tax evasion (Article 199 of the Criminal Code) from six to five years, and for concealment of funds (199.2 of the Criminal Code) from seven to five years. This would classify such crimes as “medium-gravity,” entailing a reduction in the statute of limitations for them from 10 to six years. These amendments were under review by the government since last April due to disagreements between the Ministry of Finance and the Investigative Committee. In the end, fiscal considerations seem to have outweighed the desire to keep business over a barrel.
Elections
In his address, Putin made it clear that “elections to local and regional government bodies next September and the presidential elections in 2024 will take place in strict accordance with the law and observance of all democratic, constitutional provisions.” This wording probably means that the authorities have some doubts or disagreements over that. However, unlike last year, they have not been aired publicly.
The day after the presidential address, at a government meeting Prime Minister Mishustin announced large-scale (and expensive) plans intended to create a sense of socio-economic well-being and steady development ahead of the elections. Besides hefty social payments for the four annexed regions, the plans involve providing regions this year with interest-free Treasury loans to implement the national projects set for 2024. The priority goals are “the modernization of primary health care and social infrastructure, integrated development of rural areas, resettlement of dilapidated housing residents, and a number of other popular initiatives.” An additional RUB50 billion is to be allocated to upgrade public transport. Note that these gestures are being made as the hole in the budget is widening and government is trying to close it.
Meanwhile, the Kremlin’s political block is seeking to increase its control over the elections and, if possible, minimize them. This week, the Novosibirsk Region parliament canceled direct elections of mayors for the city of Novosibirsk and the naukograd of Koltsovo. Instead, so-called “competitive procedures” will be instituted. United Russia and LDPR representatives backed the move, while the KPRF and New People party factions opposed it. It’s not that the Kremlin is disgruntled with the absolutely loyal communist mayor of Novosibirsk, Alexei Lokot (about whom we wrote in our last newsletter); rather, it is that in the wartime economy and politics, it may be necessary to de facto appoint and quickly replace mayors. Such measures – along with a reduction in the party-list component in elections, as is currently being done in regard to the Yekaterinburg City Duma – primitivize the political system, leaving less and less space for political parties, even “decorative” ones.
Russia’s immediate future, as outlined in the presidential address, looks like a frozen present. The main direction of internal policy is primitivization and the elimination of the slightest uncertainty associated with the direct participation of citizens.
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