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Sabotaging of the sinister Promises: The Russian Model of Economic Optimism

Sabotaging of the sinister Promises: The Russian Model of Economic Optimism

The final monitoring release for January-February 2020

(The material was prepared within the framework of the analytical project "Dynamics of Russia's Political and Economic Space")


A brief overview of the final analytical material will help the reader to identify the major Russian political trends of the first months of the current 2020 year in several directions of state development, marking the canvas of what is going on. First of all, we are talking about changes in foreign economic and political conditions (Chinese factor, world crisis) and stagnation of the Russian economy; Transformations of Intra-Elite Models and Design of Russian Politics, Their Fragmentation; and, accordingly, the implementation of constitutional reforms as a formalization and reflection of the systemic crisis in the changing political situation.


Keywords: global economic crisis, coronavirus factor, fall of the yuan, fall of the currencies of the post-Soviet countries, monetary policy of the Russian Federation, elites’ transformation, “Rosneft’”, gas production, sale of Sberbank of the Russian Federation, Sechin I., the polarization of the pro-government control of the Russian Federation, power, conflicts of interest, undefined elite groups, the reasons for ratings falling.



The beginning of 2020 is painted with dark colors. January-February demonstrated that this year is likely to add some new problems to the mass of already existing, the causes and sources of which are better be sought not only and not so much inside Russia, but beyond.


Due to the fact, that the filling of the Russian budget is extremely export-oriented. Recently, Rosstat has announced data showing that for the first month of this year, Russia's GDP grew by only 0.5% compared to January 2019. At the same time, we got to know the new record of the net capital outflows from Russia - last year it amounted to $ 76 billion, exceeding 1.9 times the annual antiquity for the same period. In 2019, the pace has increased and ended up at $ 42 billion. Furthermore, foreign investment in the Russian economy have shrank, real incomes continue to fall, and foreign trade, which they have been trying to restore over the last two years, is undoubtedly going down.


"Big-name" financiers also apply to us with unfavorable forecasts, ranging from the renowned Stanley Fisher to the IMF Managing Director, Kristalina Georgieva, whose statement on the global economy in the period of the global economic crisis, similar to the 1932-1939 Great Depression has become the centerpiece of the world's media headlines. What’s to become of this? Analyzing Russian realities, we afford drawing a historical analogy. In our view, Russia is trying to play the role of a "young predator" in this scenario, which was once played by Germany and the USSR. Recalling that, in addition to the global crisis, Germany pushed expansionist politics into the conflict between the economic consequences of the defeat in World War I and the interests of national capital, which was either developing (and the young German capitalist has seen the salvation in the fast-paced conquest of another markets, though older players did not let him in), or the strategy of behavior of the current Russian financial - industrial groups, apparently, has the same motivation, and the same initial conditions as in Germany in the 30's. At least this is how it looks like.


Nevertheless! Unfortunately, there is a big difference between Russian and German. First of all, in the mental desire of the German to obey and follow the rules. In modern Russia, on the contrary, the crisis has deepened the systemic chaos vertically, and the endless redistribution of markets - both domestically and externally - leads not only to the disorientation of potential foreign investors, but also to the sharp polarization of the ruling elites with respect to each other and to their companions.


In addition, the preconditions for the disappointing forecasts in the Russian economy were rather objective economic processes: slowdown in global GDP growth, economic bubbles in the stock markets, especially Asian ones, which Russian players are trying to refocus on, rising tariffs in the course of the trade wars, and, most importantly, a sharp drop in demand and prices for hydrocarbons.


Who, first of all, will suffer from this? Of course, those states whose economy is irrevocably on the resource needle. And 46% of the revenues of the Russian budget system are related to oil and gas, and - 73% - to minerals as such. And this is not taking into account the fees paid by mining companies that are registered in the Russian Federation. According to our data, the amount of such revenues is 10.567 trillion rubles. The calculation methodology is the official indicator of the Ministry of Finance + excise taxes, levies, fees, insurance premiums from the extraction and trade of crude oil and natural gas. In the analysis, the factor of non-accounting of profits from the activities of processing enterprises influences the representativeness.


On the whole, despite some improvements in the official economic indicators of 2019 compared to previous periods, the figures issued by Rosstat do not, in their pessimism, fit into the idealistic picture drawn by Russian analysts. This is particularly comical due to the fact, that that Rosstat's final findings have repeatedly been criticized by most of the players in the global economic analytics market. Comparing the data obtained by Rosstat, the question arises: what caused Dmitry Medvedev's statements that "Russia has adopted and operates a stable and deficit-free budget and low government debt (especially in foreign currency) and inflation provides macroeconomic stability" given a year and a half ago. Moreover, the Prime Minister then said that a new goal was to create a "solid foundation" to ensure the sustainable growth of well-being for everyone, the family and society as a whole. The same opinion is now being circulated by the Russian president.


The analysis of the information field clearly demonstrates the formation in the Russian professional environment of a pro-government group of "economic optimists", whose expert position on the forecast and further state of the Russian economy can be labeled as "waiting." One of the basic arguments of the supporters of this economic model is often based on references to the size of the foreign exchange reserve, which should exceed $ 500 billion, however, hardly anyone can vouch for the real value of this, because of the global crisis and stagnation.


This prelude is directly related to further analysis. The quality of the economic strategy, especially in times of crisis, is often interconnected with the effectiveness of the actions of both economic and political players involved within the model outlined. The information obtained in our study allows us to draw conclusions about the quality of the political decisions that are made. Note that the actions of the imperious Russian FIGs and their heirs in the leadership of the state largely replicate the behavior of the Chinese Big Brother. The explanation is quite simple: the Russian Federation is China's largest borrower. Similarly, the anti-sanction measures to stabilize the Russian economy largely depend on the will of the Chinese government and the financial and credit sector of China's economy. At the heart of this relationship there is not only the wish to obtain new loans, but also the entry of the Russian to new markets under the guise of partners. Though it’s not without a desire to "move" the Chinese . Thus, if, according to official data of the Central Bank of the Russian Federation, the state foreign debt of Russia on January 1st, 2020 amounted to $ 481.5 billion, then, according to various sources, the debt to China is estimated at $ 170-230 billion.


This, in fact, is the debt of the state. The scatter of data is explained by extremely complex searches for open information to calculate a metric. However, experts also point out that, in addition to public debt, there is also a debt from private companies and banks, the aggregate of which may exceed the amount of government debt. Both Russian and international experts agree on one thing: we are dealing with the indirect effect of anti-Russian sanctions.


The situation described above also explains why since the beginning of 2020 the “consequences of sanctions” have been forgotten and the coronavirus is the leitmotif of the agenda. The events in Wuhan have quickly "damaged" the yuan. Even before the epidemic, China was in a severe systemic crisis, the extent of which cannot yet be estimated. And several months before the outbreak of the epidemic, China's major stock exchanges repeatedly collapsed.


Concerning the current stock indices, the mainland China's problematic areas have fallen sharply as a result of this cataclysm: the index of the already weak young Shenzhen Stock Exchange has fallen by 8.45 percent and the more stable Shanghai by 7.72 percent. At the same time, the index of the Hong Kong Stock Exchange, which the Chinese government has long planned to collapse in favor of Shanghai, fell by only 5.3 percent. According to official data of the National Bank of China, the number of securities fell by 10 percent, and the yuan against the US dollar - by 1.5 percent. People's Bank of China has found a typical solution for the stagnant economies - has switched on a printing press and sent an additional 1.2 trillion yuan (in the amount of 156 billion euros) to the financial market in order to prevent panic and ensure the functioning of the market. According to Bloomberg, this is the largest amount since 2004.


Experts expect that the outbreak will have a negative impact on China's economic growth. We will not judge the objectivity of these forecasts. However, they are already saying, its effects can be compared to the global financial crisis of 2008!


First, turning the printing press on has further collapsed the already rapidly declining yuan. And, secondly, statistics in China, as in Russia, raise a lot of doubt as the XIX Congress of the CCP is weighing on it, and central agencies, like regional ones, adjust their data to the party's outline. That is why the losses in the real economy of the PRC are difficult to estimate, as is the scale of the economic crisis that began long before the epidemic.


Conspiracy therapists call the last "the China's excellent special operation to buy shares from Western "sharks" for a penny." This version does not stand up to criticism, given the bubble of "shadow banking", which has become almost the official indicator of the Chinese financial system, and its dynamics can even be found on the official website of the National Bank of China. For example, by activity of non-banking organizations. It will be even more accurate to trace the same data at the regional level and then simply compile regional reporting and compare the result with those of the National Bank. This will not give a complete picture, statistics in China are given to the regions for sale. However, we will have an understanding of the magnitude of the crisis, even in the face of manipulative statistics.


Why do you really need to know this, since it seems to be a matter of the internal Chinese affairs? At least because the shadow banking schemes hold on to three whales: the first - access of big state players to cheap credits, the second - continuity of work of the financial mechanism, with firms - intermediaries, including the third - stable level of national currency. Failure at any level will crash the entire system. That is, it should be remembered that one link should be shaken - the whole pyramid will not only fall on its own, but will also pull its chains. That is, it has broad international implications.


The Chinese National Bank, together with the World Bank and IMF Group, which is under informal Chinese control (China is their largest borrower), is trying to do anything to prevent such consequences. After all, in its schemes has long used the financial sectors of advanced economies. Not to mention the developing and slowly absorbed Chinese "brothers". And, while it is primarily about Asian countries, we are interested in their friends, miserably from the post-Soviet space, led by Russia.


The difference is that as a result of the current cataclysm, the volume of Chinese loans available to Russia and its partners has sharply decreased. This means that the centrifugal movement of Chinese satellites started a year ago will increase dramatically, and we will be able to see the unexpected consequences.


For example, if former friends and partners are seduced by China's long-established foreign mineral markets. With respect to the domestic regions of the PRC, their shadow banking economies and, most likely, regional economies may fall sharply - not to mention the industrialized Wuhan. So when you ask if the coronavirus epidemic is benefiting the economy of China or its partners, we will answer in a clear and precise manner: no! The issue price is too large and does not go against the immediate benefit of stock speculation.


Returning to our main content, let's say that, given the particularities of the political process of neighboring "friendly" China, some administrative decisions of the Russian establishment are, of course, put into a stupor.


To begin with, Goldman Sachs points to Russia's "de-dollarization" flows, which have led to a significant increase in the share of gold and currency reserves in yuan since 2018. Today, $ 69.2 billion of the CBR has been transferred to 464.4 billion yuan. And, at the same time, it is quite apt phrase "the yuan is devalued - the Russian foreign reserves are decreasing." The cumulative loss of Russia's foreign currency reserves for keeping them in yuan for the entire period of de-dollarization has already amounted to $ 11.3 billion (and this without taking into account further possible consequences after the epidemic).


What is the change in priorities in this area of ​​monetary policy? Again, with the Chinese factor. And here it is hardly possible to refer to the low professional level of advisers of the CBR and the Ministry of Finance. You do not argue with objective processes. Under pressure from US and European sanctions (despite the fact that the euro ranks first in the amount of foreign reserves), China "persuaded" the Russian Federation to transfer a significant share of the Russian reserve to the yuan. As a result, losses for the Russian economy are outweighed by losses from US, EU and partner sanctions.


Chessboard

How far the economic situation or the following arguments do have a direct impact on the events that take place (carrying out various institutional reforms, updating the staffing of government structures) - is a question. But! There is a rationality in their formulation.


In the conditions of economic instability, as well as the aggravation of the aggravated power groups, the cleansing of the personnel and the arrival of the previously illuminated figures seems quite appropriate and even traditional. Especially given that the Russian state structures and power political parties are deprived of their subjectivity.


What has happened in the last 15 years after the administrative reform? Gradually, however, the authorities nullified the political status of the governorship institution, abolishing its election. Then, in 2012, something like election came back. But we know how it goes: these are non-competitive elections that resemble a referendum. The sufficiently low legitimacy and voter support of most governors in the regions is very far from the situation in the 1990s, when local leaders could afford real support and control over the regions (and thus, when local FIGs and governors could compete with each other). and the support of the federal center has not always been decisive).

Until recently, most governors were heirs of central power, some of which were controllers of the region, whose informal functions included the implementation of directives of the central government, ensuring a high electoral percentage of the party, and the smooth flow of centripetal financial flows. Against the background of the emerging crisis, regional elites are increasingly perceiving current leaders of the regions as foreigners, guilty of much of their misery. This becomes the basis for the unification of national regions. For now, let the implicit and tacit resistance to the center.

The situation with local government is even worse when it is not the local community but the governor or federal center who dictates who will become the new mayor - that is, the hired manager. Personnel turnover among local government leaders is 2-3 years. This is due to the absence, in most cases, of social support and the involvement of the state authorities in the affairs of local self-government. Which is a gross violation of both the principle of separation and Russia's international obligations.

In fact, two major resources remain in power today: first, it is Putin, whose rating is declining (the latest figures from the VVVGD - 35%), because he, as head of state, is responsible for the entire vertical. And secondly, if not personally Putin, the most rated members of his immediate circle, whether they are partners or opponents. The average voter does not go into these details. For him, the government - regardless of belonging to one or another FIG - is a kind of "collective Putin" who defines and distributes roles within each group member within himself. And, at the same time, there are things hidden from ordinary people's eyes. Once upon a time, a monolithic group of security forces split polarly into something bipolar, with Putin remaining at one pole and his partners, former associates and associates on the threshold of the Forbes list at one end. That is, this Leviathan is so strong that it can not only formulate independent interests, but is able to voice them without fear of consequences.


Thus, at present, we are witnessing FIG's struggle to involve in temporary partnerships those groups of capital that have not yet been oriented or at least do not publicly display their passions. Considering that the crisis, sanctions and potential loss of a major creditor reduces the number of big-ticket supporters of Putin-led FIGs. Moreover, those who were yesterday the hope and support of the Russian leader are now beginning to make claims and demands for damages to the President.


Save money in a savings box

The increased fragmentation of the Russian elites has at least influenced the decision-making on the need for reform and other legislative initiatives.


In the first place is the signing of a federal law that allows individuals who are subject to foreign sanctions not be recognized as tax residents of Russia. That is, it is practically a matter of paying for loyalty for the partners of the presidential FIG. Those who do not run over to their opponents or at least stay out of the fight will receive not only additional compensation but also a promise that the state will close their eyes to their assets abroad.


The amendment to the Tax Code will avoid double taxation for those who own property in the US and Europe and, due to the Western sanctions imposed on them, have to live in Russia, thus becoming tax residents. two countries at once.


Moreover - and this is the most controversial moment - the law gives retroactive effect: those who have been sanctioned by other countries since January 1, 2014, will be able to recover their overpaid taxes for two years, even if they are in the territory of Russia for more than 183 days a year. To do this, an individual must submit to the Federal Tax Service an appropriate statement, attaching to it the documents confirming the tax residence in a foreign country.


Given that this provision will affect practically 75% of Russian big business and 100% of Russian FIG leaders, one can easily understand who this step is aimed at. Another thing is that the Russian treasury is unlikely to be able to bear such a burden. But this is of little concern to anyone. Until. Even the protests of the alleged "opposition" - the Communist Party, Just Russia and the LDPR - are rather prophylactic.


Well, in fact, will not Zyuganov or Zhirinovsky "hang out" with Deripaska ?! And this relative of Yeltsin, whose name does not come from the pages of the foreign press - is one of those with whom the current Kremlin owner links his hopes for a peaceful future.


Another, no less doubtful step of the Russian leadership, is the sale by the Central Bank of the Russian Federation of a controlling stake in the state-owned Sberbank of Russia - the National Welfare Fund (ie the Ministry of Finance of the Russian Federation, the structural unit of which the fund is).


The Central Bank of the Russian Federation, as a regulator of the Russian banking market, historically controls Sberbank (it now has 50% + 1 share capital of the said bank, or 52.3% of ordinary shares). There was talk of a possible transfer of this share to the state, but they did not reach the practical plane. All key figures in the Ministry of Finance and the Russian banking sector have criticized this idea in different years (Sergei Ignatiev, Herman Gref, Igor Shuvalov and others). Once again, the topic returned to the agenda in October 2019, when the issue was raised during a meeting of the State Duma Committee on the Financial Market. The poignancy of what is happening today adds a statement by the President and Chairman of the Board of the Security Council of Russia, Herman Gref, made in late December 2019. Like, with him, as well as with members of the board of the bank this issue was not discussed. It is also interesting that in the scheme of redemption of shares of Sberbank of Russia there appeared some "offer to minority shareholders", which for some reason should be put by the seller (CBR), not the buyer (FND).


The scheme itself, at first glance, looks attractive. The beneficiaries are the Central Bank, whose revenues will increase by more than $ 10 billion, and the FDI, as a large part of the fund's money spent on redemption will return there through the mechanism of transferring profits of the Central Bank of Russia. The latter should be spent on financing the president's social initiatives. This is true of virtually all of Russia's official media space.


However, at the same time, it is silent on the mentioned payments to minority interests, especially foreign ones, most of which are lobbyists of the interests of the ruling Russian elite. The official also tries not to mention that the FND itself will remain a loser, since its funds are invested in an illiquid, essentially, instrument.


State control over the Security Council of Russia is determined by the fact that all the state, the largest in the country are tied to all budgetary, social and infrastructure payments - that is, everything that concerns the majority of the population.


At the same time, the recipients of the dividends for the shares in question will not be future generations, for the purpose of representation and protection of interests of which the FND was created, but the federal budget of the next year. The practice of transferring dividends to the Sberbank package directly to the budget.


An indirect confirmation of our conclusion is that, despite the change of government, the process of selling the stake did not slow down as the situation would require, but rather accelerated. That is, its source was outside the Russian government, rather, on Old Square, in the Presidential Administration.


Another questionable factor is a real and a quite difficult situation within the Security Council. It is logical to assume that an independent international comprehensive audit should first be carried out and only then would a sale be conducted. If not, why not?


The authors of the adopted law claim that it is based on the conflict of interests of the Central Bank as a regulator of the market and as a shareholder of Sberbank. The Chairman of the Central Bank of Russia is the Chairman of the Supervisory Board of the Security Council of Russia. Like, that implies the impossibility of full supervision of such a bank. “When the role of the shareholder, the regulator and the supervisory body is combined, there is a certain conflict of interests, which is more difficult to manage, the more complex and large the regulation and economic relations in the financial environment become. The sale by the Bank of Russia of shares of PJSC "Sberbank of Russia" will allow to raise the issue of such conflict of interest and the regulator's equanimity from the participants of the financial market ", - said in a joint statement of the Central Bank and the Ministry of Finance of the Russian Federation.


The statement further states: “… Due to the unique conditions of the future agreement, the bill provides for the application of the federal law“ On Joint Stock Companies ”concerning the submission of a mandatory offer to minority shareholders to buy back shares. The bill stipulates that such an offer will be made by the Bank of Russia on a one-off basis when selling the first part of a block of shares at a price similar to the purchase price. " At the same time, according to analysts of the Moscow Stock Exchange, the offer price will be much lower than current market quotes, which is unlikely to be of interest to investors, first. And, secondly, the length of the process by 2022 raises more questions than answers.


On February 1st, according to official figures, the volume of liquid assets of the FND amounted to $ 98.3 billion (5.5% of GDP). By the end of 2020, the Ministry of Finance forecasts this figure at 9.6 trillion rubles, or 8.5% of projected GDP (the question is, where are these forecasts in view of the deepening crisis ?!). According to the Budget Code, FND funds can be invested when 7% of GDP is reached by its liquid assets. This right should appear in the government this year. Russian Minister of Economy Anton Siluanov said earlier that without affecting monetary policy, one could invest part of the total excess over the limit with the FNB - about 1 trillion rubles in three years, that is 300-350 billion rubles a year. “The block of shares of Sberbank of Russia is purchased at the expense of the FDF in excess of 7% of GDP. And since the FND does not have enough money to buy the whole package at one go, the Agreement is a step-by-step process, ”explained Siluanov at a speech in the DG RF, adding that the redemption of the CB's share in Sberbank“ does not cancel the plans of the Russian government to invest FDF funds in infrastructure projects". This was a surprise to the expert environment with the same question: - where is the money from?


There is also one unfamiliar nuance related to large and / or FDI transactions: they should be included in the budgetary rule under which the CB sells currency daily on the market. According to the Russian Law on the Central Bank, the latter has the right to suspend operations in the event of threats to the financial stability of the state. In connection with the need to sell the package, the Central Bank announced that it would impose restrictions on the sale of foreign currency: "The Bank of Russia will announce the daily volume of foreign currency sales in the domestic market associated with this transaction, and the date of commencement of these sales after determining the value and the date of the agreement."


Why should purely financial transactions be seen as the basis for future political change? Because the whole history of the sale of the package of the largest Russian bank has become a clear testimony that, first, there is no money, and, secondly, they will not be.


So, they either need to be looked for, or the Russian president needs to be provided with ways of painless departure, so that the remnants of his FIGs do not lose power and control over the country. And in this case the financial losses from the competition were minimal. It is clear that, regardless of the timing and results of the sale of the block of shares of the main Russian bank, with the deteriorating financial situation in the country will worsen the situation among its shareholders and depositors. However, this is not the case. Following the sale of the WB, reform of its governance mechanism will begin. By March 18, for example, its supervisory board should be represented.


Unpleasant for management news is that the presence in the NR SB of Russia representatives of the bank will be minimized. In fact, it is about increasing state presence and losing some of the independence. Would Herman Gref, one of the few, be able to object and actively oppose any movement of the package?


Old Square's propaganda channels tried to show some semblance of his joyous meeting with Putin.


But those who know the leader of the Security Council of Russia in person, offer to pay attention to the doomed expression of his face. For the financial circles of the Russian Federation and abroad this is a signal. However, Sberbank's leader has always stood out in the financial environment with his temper. Despite being under sanctions, he did not allow the presence of the Security Council in occupied Crimea. By the way, Gref has long and many times rushed to leave the post - not released. And this is symbolic. Will one of the country's top bankers be able to attract former colleagues, now opponents of the Russian leader, to their ranks? Rather, no. Gref is defiantly apolitical and evenly distant. However, it is unknown how the loss of a certain autonomy of actions can create a miracle.


Something about the consolation carrots

The question remains: how and why, against a backdrop of cataclysms, does the ruling group take such an important and responsible step as constitutional reform? It is clear that many experts consider it the main event of Russian realities at the beginning of the year. Not only do we not consider it and treat what is happening as a simple change of scenery.


Here, for example, Putin's press secretary and deputy head of the Presidential Administration Dmitry Peskov, at one of the briefings, responded to a question by a correspondent of the radio station Echo of Moscow, saying: laws does not reduce its expert level. And the president explained it. The fact is that the majority of the population of our country did not read the Constitution, the citizens do not need it, the citizens, the main thing is that their fundamental rights are guaranteed. But, even if Isinbayeva (Olympic champion, member of the working group) did not read the Constitution before, Isinbayeva is well aware of all the needs and aspirations of Russian sport - the most important direction, in general, in the social life of the country and in state activity, in particular. And besides her, there are representatives of culture, and so on, who can hardly be called legal experts. However, each in its direction is voicing proposals that certainly deserve attention. And how to put it into the already legal form - it will already be possible to decide in the course of the work process with the help of those legal experts who are also represented abundantly in the commission. In no way does this reduce the level of the working group. On the contrary, broad representation makes it a purely working mechanism that covers all areas of our lives. "


Something similar has already happened. In the preparation of the Stalinist, and then - Brezhnev editions of the USSR constitutions. The next step would be to expect national approval of the process. However, this step can be hindered by the actions of former pillars of security forces. After all, there is no guarantee that the results of reforms carried out under one politician will not decide to take advantage of his immediate surroundings by slipping him into any specially created structure for this purpose. Even if you have called the Father of the People or the Leader of the nation.


Let us assume that the very design of the proposed reforms fully explains the aforementioned constitutional reform. Including as a weapon against opponents. For example, in delivering a message to the Federal Assembly on January 15, 2020, Putin proposed to amend the Constitution, which would restrict access to senior government posts to figures who had or had a foreign nationality or residence permit.


"I consider it necessary to impose the following requirements on persons - heads of subjects, senators, deputies, the head of government, his deputies, ministers, judges - they cannot have foreign citizenship or a residence permit," Putin declared, thereby substituting blow most of their environment and create the inability to personally come to power representatives of big business. However, instead of themselves, they traditionally exhibit "talkative heads."


But, on the other hand, few doubt that the masters of the "shadow" schemes of former Putin friends will not be able to take the opportunity to use weapons, which not very wise Putin advisers themselves put into the hands of opponents of the customer and gave the opportunity to clear the battlefield from the current companions - the "Yeltsinoids" and "Kiriyenkovs", who have long dug themselves in the West. What are Putin experts trying to solve in another stroke?


Overall, constitutional reform with an unconstitutional spirit is reminiscent of trying to create a mix of 3 in 1. But nevertheless, how many issues does the reform solve at the same time! In the spirit of the phrase above, it extends the constitutional powers of the President. The preservation and further strengthening of the executive branch requires answers to the question: what are the levers and counterbalances to this? We answer: if they exist, then only formally. In the Russian realities they were not and practically can not be.


The issue of fixing an already existing process - the formalization of the "puppet government", the nomination of "beating boys", on which all economic and strategic losses can be deposed - is very doubtful. Now the prime minister, as well as his deputies and ministers, will be approved by a parliament, the absolute majority of which are representatives of the "party of power".


Passionaries (including major competitors), both within the elite and in society - the reform removes from the front of the stage, or drives it to the stand, or at best, gives them comforting carrots. The question is, how much will the latter agree on such a schedule. Will they themselves be driven into the main Reformer stall? ...


A hare from the magician's cylinder

Who do our experts consider to be the figure capable of defeating and confronting the current Russian leader? First of all, the former friend, partner and neighbor of the suburban cooperative Igor Sechin, now - the head of Rosneft Corporation.


Today, Sechin largely determines the policy of the state. It informally controls most strategic ministries and agencies, prompting the former "any friend of Vladimir" to step up its counter-actions and seek new partners for support.


On the international arena, Sechin is not yet perceived on a par with Putin, though in 2016 he became the only Russian whose Time magazine included one of the world's 100 most influential people. The question is, should Sechin, with his growing resource base in Russian power, be recognized abroad? Most likely, no. However, it is quite comfortable for him to be a "gray cardinal" and to replace himself as a talkative head, as before, the legendary Boris Berezovsky in the Putin case. This experience, although it explains many nuances, however, is also a harbinger of a bitter struggle.


We cannot support various conspiratorial illusions (especially regarding the membership of both former friends in the Russian special services), so we have specifically selected a fact that will make sure that this person really plays an important role in the Russian political process.


For example, we have drawn attention to ongoing Russian activity in Africa. However, at the beginning of the study, we mentioned that Africa is, to a greater extent, controlled by the Chinese. Given this, it is unclear why Putin quarreled with the Chinese, who have already demonstrated their disapproval of the Russia-Africa forum, which took place on October 23, 2019 in Sochi. At the same time, materials with the headlines "Rosneft goes deep into Africa" ​​are constantly found on the network. However, in this information stream, one can also find a direct reference to one of the main stakeholders President Putin is forced to consider.


According to Platts, with reference to the Russian Ministry of Energy's Oil and Gas Department, Rosneft and Italy's Eni have shown interest in bidding for the former R unit (now renamed EG-27) offshore in Equatorial Guinea. These companies are strategic partners for the development of offshore oil fields in the Barents and Black Seas, however, de facto projects have been halted due to sanctions.


In the conditions of limitation of work on the shelf of the Russian Federation, the company adheres to the tactics of partnership with foreign investors outside the country. Another example is Rosneft operating on three gas units in Mozambique. Gazprom is Rosneft's main competitor. It is in Rosneft's interest to push Gazprom out of the domestic market, for example through the bankruptcy of a number of units with further re-privatization. Gazprom, for the most part as the main monopoly-gas producer in the Russian Federation, is informally controlled by Putin.


Accordingly, Sechin's current tactics boil down to extensification - that is, the geographical expansion of the company's presence in various regions of the world. Our experts believe that the link between the activity of the non-state oil campaign led by Sechin and the sharp increase in Putin's interest in this continent is not a coincidence. It is at the moment when Rosneft is under sanctions. At the same time, knowing full well that the vast majority of the continent is under Chinese control. Putin's push into a move that would cause utmost discontent with the Chinese could only be considered or a higher-order threat. We assume that Rosneft's African project is viewed by Putin as a coin to reduce Sechin's power appetites.

And this is just one link in the match chain. Sicin's interest in Africa is plentiful, ranging from the signing of cooperation agreements with Oranto Petroleum Limited (Africa's largest private hydrocarbon exploration and production group) to the creation of a Mozambique consortium. Add to that Rosneft's undisguised interest in major infrastructure such as the Djibouti port, which is one of the key energy transport schemes from East and Central Africa, overseen by China, the United States and Israel for a long time.


In our view, it is unlikely that Russia will be able to compete with the PRC in terms of its degree of influence in Africa, but since the PRC is interested in establishing stability on the continent, it cannot be disturbed by Russian intervention, in many areas - starting with arms sales ((often to different parties in one conflict) - and the Russians rank first in arms sales), finishing with resource projects. We interpret what is happening as Putin's favorite tactic in the form of an impetus to negotiate. In this case, we are talking with the leadership of the PRC. The response of the Chinese is unlikely to please the Russian president: during his visit, Sechin was admitted to China at the highest level (and the Chinese violate subordination in exceptional cases). Although many experts did not pay attention to it, the official tried to shift the accents.


Finally, the cherry on the cake was the decision of The Hague Arbitration Tribunal that the Russian state is obliged to pay former shareholders of Yukos $ 50 billion, for assets that were selected by the state and are now controlled by Rosneft. What can be said about this decision in view of the internal political struggle of the Russian elites? If this was not the case, Putin would have to lobby him. Because it makes Sechin's plans for control of the country much more vulnerable and narrows the field for his maneuvers.


The first and very disappointing scenario for Rosneft's owner is Putin's possible agreement to execute the arbitration award. Then it is logical to predict that the payments will be made at the expense of Rosneft, which includes "squeezed" Yukos assets. This will destroy the financial basis of the Sechin power struggle. But there is another variant of the course of events. Suppose that before threatening to lose most of his fortune, Sechin agrees with a former friend. Putin then points to a proposed amendment to the Russian Constitution for failure to recognize the primacy of international court decisions before Russian court rulings. And refuses to pay. This gives him a leverage to influence his friend and partner. As soon as Sechin tries to get out of control again, he can always be put in place by trying to take back illegally transferred assets. The question is whether the gray cardinal of Russia would agree to such abuse and then happy endings for the Russian leader could not be expected.


This is an indication that for many experts, the nature of the relationship between Putin and Sechin remains a mystery. The unity and struggle of two system-minded special service veterans is hardly predictable. And they do not make it possible to definitively navigate the close circles of both centers of struggle for power, creating a backlash chaos and inability to choose a single winner.

The general point of view of the authors of the material is based on the belief that there is no direct alternative to the existing intra-elite system in the Russian Federation, however, time is flowing, leading to changes in positions and priorities. And these changes in the country of post-authoritarian past and future authoritarianism, to which the Russian Federation is fast approaching, are being reflected directly in the system of public administration.

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