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Russian ruble in record fall: January 21 marked the weakest exchange rate for the Russian ruble since 1998. Devalued by 60% since 2014, the Russian currency has continued to track oil prices downward. The crash on January 21 stirred uneasiness among the Russian Central Bank administration. The Central Bank convened a meeting of bankers to discuss additional measures of support to the banking system, while head of the Central Bank Elvira Nabiulina cancelled her trip to Davos. Experts attribute the January plunge to the falling oil prices, the usual increase in demand for currency following dividend payments at the beginning of the year, and the temporary closure of currency sales by a few big players. Russian billionaire and aluminum tycoon Oleg Deripaska openly accused the Central Bank of following the ‘do-nothing’ strategy and claimed that 2016 would be the last year in which the Russian state can support the producers. The situation, nevertheless, has not gone awry enough to repeat the 2014 panic and bank runs. Although the weakening ruble may boost exports of metallurgical, chemical, and agricultural industries, the associated increase in inflation (at the rate of 1 point per each 10 percent of devaluation), stagnating or falling real income, and the negative impact on other industries may also aggravate the precariousness of the situation.
Russian government launches budget sequestration and anti-crisis plan: Lower than forecast oil prices motivated further belt-tightening in Russia, with the government launching the budget sequestration process. Calculated for the $50 Brent oil mark and 63 Ruble per dollar rate, the 2016 budget is underperforming in revenue under the current $28-33 per barrel and 78-80 RUB per dollar realities. The government is hence to cut expenditures by 10 percent. Head of Sberbank German Gref announced that his organization is developing a stress scenario based on the $25 oil price forecast. Minister of Finance of Russia Anton Siluanov warned against repeating the mistakes of the 1998-1999 crisis and called for adjustments in the budget to avoid a debilitating surge of inflation. On January 27, the Russian government announced a $ 35 billion (2.3 trillion Russian ruble) anti-crisis plan that was developed by the Ministry of Economic Development in order to promote economic growth, support individual industries, and enable the government to take measures to maintain stability. The largest single item is a 1 trillion ruble program for the recapitalization of banks which, however, is simply a reference back to money already allocated and funded from the previous federal budget. Therefore, genuine fresh money allocation is considerably lower than the announced figure. Around a fourth of the suggested measures concern support to small and medium-sized businesses. The real potential impact of the plan has already attracted skepticism. The plan will ease the situation in the short-run, but without structural reforms and improvements in the investment climate, economic stability in Russia is unlikely. The selectivity and narrowness of the suggested measures is seen as unlikely to prevent some corporate and bank defaults. And the exact sources of the funding remain vague. The announced 10 percent cuts to the budget will not encompass defense and social spending, agriculture expenditures, or international obligations (see the infographics by RIA for a detailed breakdown). The Ministry of Finance has already refused to finance a significant number of proposed measures, taking into consideration the 10 percent budget sequestration and citing 600 bln ruble as the true cost of the remaining necessary measures.
Humanitarian operation in Syria, speculations about second air base: The operation in Syria remains central to the public communication strategy of Russian authorities. In his traditional New Year’s address - broadcast in the last few minutes of 2015 and watched by millions - Putin emphasized the important role of the Russian military in combating international terrorism away from home. On the day of the Orthodox Christmas, Head of Russian Orthodox Church Patriarch Kirill gave an interview to a Russian TV station where he expressed his support to the operation in Syria and called it a ‘defensive’ and ‘just’ war. Meanwhile, Western media published a new wave of speculation regarding Russian intentions to establish a new air base in Syria in Qamishli, a city in an area along the border with Turkey controlled by Syrian Kurds. The aim of the increased activity of the Russian military and engineers in the vicinity are ‘puzzling’ to US officials. Analysts speculate that Russia is trying to annoy Turkey and the US. By placing its forces in a region controlled by Syrian Kurds, Russian views will now need to be considered in the case of a land operation launched by the US or Turkey. Turkey also worries that Russia intends to support the separatist-minded Kurdistan Workers’ Party (PKK) that has been engaged in an armed struggle against the Turkish state. A possible attack by Turkey on the Kurdish-occupied area would then also be considered an attack against Russia. The Russian Ministry of Defense denied the allegations and announced a humanitarian operation in Syria. The statement was followed by the delivering of 22 tons of humanitarian aid to the eastern Syrian city Deir al-Zor - currently sieged by ISIS. The Kremlin also denied alleged leaks that proclaimed Putin had asked Bashar al-Asad to step down. Still facing long-standing accusations of targeting anti-Asad rebels and civilians, the Russian Ministry of Defense expressed its intention to publish reports on the attacks carried out by the USA and Western coalition. The RBC published an investigation into the location of Russia’s strikes. According to RBC, the rebels who Russia claims to support are either minor or unknown or deny receiving any assistance from the Russian forces (see the maps of the areas of Russian strikes here and here). Russia made public the treaty apparently concluded between Russian and Syria in August 25 regarding the deployment of the Russian air force in Syria. According to the agreement, Russia can operate its airbase in Syria ‘indefinitely’ and ‘free of charge’ (more on the timing and details of the treaty as well as history of military cooperation between Russia and Syria here).
Putin mentioned in the report on Litvinenko’s assassination: The final report of a lengthy and legally non-binding public inquiry into the death of former KGB agent turned Putin’s foe Alexander Litvinenko in London in 2006 was released on 21 January. According to the report, Litvinenko was poisoned with a highly toxic and rare isotope, polonium 210 by Andrei Lugovoi, ex-KGB agent and now Russian MP, and Dmitry Kovtun, Russian businessman and ex-KGB agent. The report asserts that Putin ‘probably’ approved the killing due to his ‘antagonistic’ relations with Litvinenko. The Russian Ministry of Foreign Affairs called the report biased, lacking in objectivity, ‘politicised’, ‘extremely intransparent’, and ‘conducted to fit a certain pre-defined outcome’. Putin’s press secretary Dmitry Peskov emphasized that the report was based on ‘some secret’ or ‘selective’ statements and lacked any real evidence. Although the British government did not go any further than demanding the Kremlin to respond to the questions raised by the report, restating its request to extradite and freeze the assets of Lugovoi and Kovtun, and summoning the Russian Ambassador, the Russian side warned of the inevitable worsening of the already sour relations between Russian and Great Britain. Russia declined extradition on the grounds of insufficient evidence.
ICC takes on South Ossetia, Russia appeals ECtHR decision: The International Criminal Court will investigate alleged war crimes that might have been committed during the 2008 war between Russia and Georgia. The Russian MFA is disappointed by the decision of the ICC to open a full-scale investigation, which will be the first ICC inquiry into allegations against Russia. The MFA asserted that Russia will ‘reconsider its attitude’ towards the ICC as it had previously cooperated with the organization in delivering large volumes from the Russian criminal investigation of crimes committed by the Saakashvili government against local residents and Russian peacekeepers. Russia has not ratified the Rome Statute and consequently is not bound by any legal obligation to cooperate or comply with ICC decisions. Although analysts expect the general tone of the investigation to be anti-Russian, available documents also point to violations of international law by the Georgian forces. Russia had an eventful January also in other international legal institutions. In a follow-up to the new law allowing the Russian Constitutional Court to recognize decisions of the European Court of Human Rights as contradictory to the Russian Constitution and unenforceable, Russia appealed an ECtHR’s ruling which decided in favor of three participants of the riots on Bolotnaya square in Moscow. According to lawyers, Russia is likely to appeal all the subsequent decisions as well. An unexpected victory was celebrated by Russia in another well-publicized international case – seizure of the assets of the now defunct oil company Yukos. The Swedish appeals court upheld the Russian appeal against the 2012 decision of the Stockholm arbitration tribunal that forced Russia to compensate Spanish shareholders for the seizure of the assets.
Kadyrov on an uninhibited rise: Chechnya’s leader Ramzan Kadyrov put himself in the spotlight again with his most recent round of uninhibited – this time verbal – assaults. Accused of numerous human rights violations, corruption, and links to various murders, Kadyrov rarely misses an opportunity to attack the opposition. An outlandish aficionado of Instagram and an avid supporter of Putin, Kadyrov has repeatedly accused the opposition of undermining the Russian state. In the most recent Instagram rant, he called liberals ‘vile jackels’, ‘traitors’ ‘who have nothing sacred’, and ‘enemies of the people’, which refers to the Stalin-era and the corresponding treatment. He also offered VIP spots in psychiatric hospitals to the ‘Western lackeys’. The verbal assaults might, however, get out of control and start to worry even the Kremlin. A recent video depicts Russia’s former Prime Minister Mikhail Kasyanov in the crosshair of a sniper rifle. The commentary says, ‘Kasyanov is in Strasbourg to get money for the opposition. Whoever still doesn’t get it, will get it’. The Presidential Council for Human Rights promised to examine Kadyrov’s statements and determine if it should be rendered extremist. The Council and those lost in Kadyrov’s ‘dramatic diction’ might meanwhile find helpful Meduza’s ‘short guide to the Chechen ruler’s frightening depiction of these dastardly villains who seek to undermine the Nation That Rose From Its Knees’.
Edited by Alena Kudzko, Central European Policy Institute