Dear BWR Subscribers,
“Barbershop Whispers….Russia” begins with “My Takeaways” on the main topic, followed by the main topic discussion. The last two sections of “Barbershop Whispers…Russia” are “Follow-ups” regarding previous publications and “Quick Bites” briefly addressing emerging events.
In last week's BWR, I discussed Russian LNG export markets, including manufacturing, logistics, and new market challenges.
In this week’s BWR, I will first discuss Russia’s presidential plebiscite results, what the new Putin government might look like, and what is next. I will then discuss in an expanded Quick Bites, the developing Crocus Center terrorist attack in Moscow. We have not seen an attack like this since 2002, the Nord-Ost siege. The US government acted on its Duty to Warn, but Putin chose to ignore the warning and lambast the US for provocating fear and civil instability.
Takeaways:
“ELECTIONS”: Putin won the plebiscite with 87.3% approval and 77.4% voter turnout. This is a win for the banana republic books. Elections in Russia are nothing more than a box-ticking exercise in confirming autocratic rule.
GOVERNMENT RESHUFFLE: Putin is expected to replace some aging ministers and industry leaders with younger-generation politicians. This younger generation includes the sons of Kremlin insiders but also Sergei Kiriyenko, AKA “Kinder Surprise.”
WAR ON UKRAINE: Putin is likely to call another mobilization sooner rather than later in preparation for a summer offensive. Weakening political will, as demonstrated by the American Republican Party’s reluctance to approve additional military assistance to Ukraine, encourages Putin to continue and ramp up his war on Ukraine.
Presidential Plebiscite
Russia’s Central Election Commission (CEC) declared Putin the winner of the 2024 “presidential election,” which was, in reality, a plebiscite. Out of 86.20M votes, Putin received 87.3%, and voter turnout was 77.4%. While this is not the resounding 97.7% approval and 95.22% turnout Kazakh President Nursultan Nazarbaev received in 2015, it falls into the same category of hyperactive ballot-box stuffing. None approved “presidential candidates" received more than 5% approval.
Novaya Gazeta Europe (NGE), a Kremlin-labeled “Foreign Agent” and respected exiled Russian news platform, estimates at least 22M fraudulent ballots — nearly 30% of the total — were cast in favor of Putin. NGE calculated this number based on the Shpilkin method, a methodology developed by the Russian mathematician Sergei Shpilkin to detect statistical anomalies in elections.
The three-day event was marked by protests across Russia, in which voters poured liquid dyes into ballot boxes or lit polling booths on fire. Thousands of Russians acted on Yulia Navalnaya’s call for the “Noon Against Putin” protest. At noon on the last day of polling, long queues formed at polling stations in many Russian cities, including Moscow and St. Petersburg, and Russian embassies in Europe.
The protesters queued for an hour or so, then left or voted for any other candidates. This protest served the opposition well because it mitigated the chances of a violent Kremlin crackdown on protesters—violently arresting citizens queueing to vote would not look good—and it gave protesters comfort to see they were not alone in their opposition to Putin.
By the end of Putin’s new six-year term, he will have been in power longer than Josef Stalin, and he will still be eligible to run for another six-year term.
Government Reshuffle
For months leading up to the plebiscite, there has been talk about what the new Putin government will look like and what policies will take priority. The formality of the resignations of ministers and other presidential appointees will occur in May as Putin takes the reigns for his fifth term in office. It is expected that most will be reappointed to their positions; however, there may be some minor changes along generational lines as well as the pensioning off of a few aging ministers.
Technocrats such as Mikhail Mishustin (prime minister), Anton Siluanov (finance minister), and Elvira Nabiullina, head of the Central Bank of Russia (CBR), are expected to remain in their positions. They have been critical to managing Russia through Western sanctions, and Putin relies on them to manage the day-to-day business of government and the economy.
Foreign Minister Sergei Lavrov, the longest-serving foreign minister since the Tsarist era, has long sought to retire and may be granted his wish. A leading candidate to replace Lavrov is rumored to be Deputy Minister of Foreign Affairs Sergei Alexeevich Ryabkov. He is a seasoned 63-year-old diplomat, with a previous posting in the US and responsibilities ranging from Latin America to nuclear arms negotiations and Iran.
Several children of Putin’s close friends and Kremlin officials have taken on positions in government and business over the years. Boris Kovalchuk, 46, is the son of long-time Putin friend Yuri Kovalchuk who is also the largest shareholder of Bank Rossiya, recently resigned as CEO of Inter RAO UES, Russia’s largest utility, a position he has held for the past 15 years. There was speculation that he might be appointed CEO of Gazprom, Rosneft, or possibly Minister of Energy (a position currently held by 72 yr—old Nikolai Shulginov). However, Boris Kovalchuk was appointed Deputy Head of the Presidential Control Directorate this past week. It is unlikely he will replace Sechin or Miller anytime soon. These are two powerful and trusted Putin allies with plenty of shelf life.
Another heir to the Kremlin circle, who entered the government in 2018, is Dmitri Patrushev, the son of Nikolai Patrushev, the powerful Security Council Secretary and muse to Putin. Dmitri is currently the Minister of Agriculture. There is talk of Dmitri receiving a deputy prime minister without portfolio position.
The most curious rumored change is Sergei Kiriyenko's promotion to deputy prime minister from his current position as first deputy chief of the Presidential Administration.
Kiriyenko studied and began his business career in Nizhny Novgorod, where he met Boris Nemtsov. He was a close associate of Nemtsov and one of the few government officials to attend Nemtsov’s funeral after he was gunned down next to the Kremlin in 2015.
In the 90s, Kiriyenko founded a bank, Guaranti, in Nizhny Novgorod. Like many businessmen in Nizhny Novgorod at the time, he was interested in Scientology. I recall visiting Guaranti Bank and seeing Hubbard College diplomas in the names of employees on the wall.
In April 1998, President Boris Yeltsin named Kiriyenko prime minister. Because of his young age and the surprise appointment to the top job, he was nicknamed 'Kinder Surprise.' He was not well known and had been brought into the federal government by Nemtsov, who was rumored to be Yeltsin’s choice to succeed him as president. Kiriyenko’s term was cut short by his resignation after Russia defaulted on its foreign bonds in August 1998. However, he was in office long enough to appoint one Vladimir Putin as Director of the Federal Security Service (FSB).
Putin later appointed Kiriyenko to senior government positions, such as plenipotentiary representative in the Volga region, head of Rosatom, and later in 2016, deputy chief of the presidential administration responsible for domestic politics — essentially Russia’s chief ideologue.
Kiriyenko is the principal architect of late Putinism. His portfolio includes creating the new elite through the Leaders of Russia program, administering Russian-occupied territories, and serving as chief political technologist. Through this portfolio, he has developed a diverse network of resource-rich contacts.
He is an ambitious politician capable of navigating the snake pit of Russian politics. Watch this space.
What’s Next?
With the election behind him, Putin feels empowered “by the people”. He will ramp up the war machine sooner rather than later, starting with a new mobilization in preparation for a summer offensive. As we go to press, reports mention the potential mobilization of 300,000 new troops to mount a siege of Kharkiv, the largest city in non-occupied eastern Ukraine.
The military-industrial sector will continue to operate at full capacity to fulfill the war's needs and, in the process, ensure full employment (albeit at the cost of higher inflation).
Putin is taking advantage of the American political disarray created by Donald Trump and the Republican Party over continued aid to Ukraine. He is counting on weakening Western will and Trump’s possible return to the White House.
Follow-ups & Quick Bites:
Follow-ups:
No follow-ups this week
Quick Bites
Terrorist Attack in Moscow - The Biggest Attack Since 2002
Islamic State – Khorasan (ISIS-K) has claimed responsibility for the deadly terrorist attack at the Crocus Center concert hall outside of Moscow that has killed 115 people and counting as of the publication time of this BWR newsletter.
This is the biggest terrorist attack in Russia since the 2002 Nord-Ost siege in Moscow, in which 40 terrorists died, as well as 132 hostages.
Four armed terrorists began their simultaneous attack outside and inside the concert hall minutes before the Soviet-era band PikNik took to the stage. Terrorists also poured flammable liquids onto the seats and lit the large concert hall on fire, resulting in a portion of the roof caving into the large entertainment complex.
Russian security services announced that they have arrested eleven people associated with the attack and the four shooters who were apprehended on the highway near the Russian city Bryansk.
The US government had privately warned Moscow, acting on its Duty to Warn policy, of an imminent terrorist attack several weeks ago before the US Embassy in Moscow issued a security alert on 7 March, which stated:
“We are monitoring reports that extremists have imminent plans to target large gatherings in Moscow, to include concerts.”
In response to the US warnings, Putin addressed senior security service officials this past Tuesday (19 March) and called the US warning a provocation:
"…Recent provocative statements by a number of official Western structures about the possibility of terrorist attacks in Russia...resembles outright blackmail and an intention to intimidate and destabilize our society."
This is an embarrassing security lapse and an intelligence failure on the part of the Kremlin and the security services. It also comes a week after Putin received 87.2% approval in the staged presidential “election”. It further tarnishes Putin’s social contract with the Russian people—safety and a better standard of living.
The Kremlin claims all terrorists have been captured, and if this is, in fact, the case, it is an unusual benefit to the investigators. One of the captured terrorists was interviewed on Russian television and claimed that he was recruited online to carry out the attack for a fee.
In an address to the nation yesterday (23 March), Putin claimed the apprehended shooters were headed to the Ukrainian border where they had an “open window of escape”.
The Kremlin is struggling with a narrative to explain how this happened. Over the past few months, the Kremlin has gloated about foiling several Islamic terrorist operations in Russia. In early March, the Federal Security Service (FSB) said it had killed Islamic State militants who were planning an attack on a Moscow synagogue. The Crocus Center attack happened after American warnings of such an event.
Putin will not accept blame for this intelligence failure. The Kremlin is trying to deflect the blame away from Putin and onto Ukraine. This will be used to add justification for a new upcoming mobilization for the war against Ukraine.
The Kremlin controls the media and will formulate a narrative that places blame on Ukraine. Russian media has been instructed to emphasize possible “traces” of Ukrainian involvement in their reporting of the attack.
The Ukrainian government has categorically denied any connection to the attack.
Washington Pressures Austria's Raiffeisen to Drop Russian Deal
Raiffeisen intends to swap its stake in the Russian banking operation for a 27.8% stake in Strabag SE, an Austrian-based construction group. The mechanics of that swap aren't clear, but it's intended that Raiffeisen's Russia would transfer the stake as a dividend-in-kind to the Austrian parent. If the deal goes through, Raiffeisen would extract €1.5B from its Russian operations.
The problem is Oleg Deripaska. Washington has long had issues with Deripaska—from the FBI to the State Department—and he is probably the most disliked Russian Oilgarch.
He owns the Strabag through a holding company called Rasperia. On the same day Strabag announced the intended swap, it also announced that Rasperia had been taken over by another Moscow-registered holding company, AO Iliadis.
Vol 2, No 15 - BWR 24.03.2024
Thank you for reading “Barbershop Whispers....Russia” written by Adam A Blanco! “Barbershop Whispers…Russia” is a product of e8Q Technologies, a consultancy with insights on all things Eurasia. Subscribe for free to receive new posts.