Hello! This week our main story is on why protests in Yekaterinburg over a new church have dominated the political agenda and even elicited a response from President Vladimir Putin. We also look at Gazprom’s oddly generous new dividend policy, give you some of the highlights of a recent interview with prominent Russian economist Sergei Guriev and have short summaries of how a top space scientist resigned while on holiday and a draft bill that would punish anyone who wrote something deemed to have caused new Western sanctions on Russia.
A local protest over church construction gets the Kremlin’s attention
Thousands of people in downtown Yekaterinburg (Russia’s fourth-largest city) have this week been protesting against a new church. Construction would mean destroying a park and felling trees, a huge issue in a city with few green spaces — but there is even more at stake. This is also a protest against the increasing influence of the Orthodox Church and the authorities’ disregard for public opinion. To add further fuel to the fire, the investors behind the project are local tycoons and the church is just one piece of a bigger development that includes luxury apartments and extensive underground parking facilities.
- What happened: The protests began Monday when a fence around the future construction site was installed. Protesters tried to pull down the fence, but were confronted by groups of threatening men, which newspaper Novaya Gazeta reported were members of a local martial arts school owned by Igor Altushkin, the tycoon investing in the project. The police did not stop the sportsmen but, instead, detained several protesters. Later, riot police used force to get demonstrators to leave the park. By Thursday, a total of 60 people had been detained. Some of them were sent to prison for up to 7 days, while the leaders of the protest were questioned.
- The development: From documents, The Bell has learned (Rus) that the new church is just one part of a larger project. This is set to include several residential buildings, a 30-story tower with a fitness center and office space. The tower and the residential buildings will be divided from the church by a motorway, but they will share joint underground parking facilities. The project received the green light from the local authorities last month.
- The official reaction: Usually, the Kremlin ignores such protests. However, this time has been an exception. Commenting on the events in Yekaterinburg, President Vladimir Putin’s spokesman, Dmitry Peskov, said that the police were justified in using force if they were facing “provocations.” Putin himself reacted with a dismissive joke. “Are they godless people?” he asked, adding that “the church should unite people, not divide them.” He also suggested using a local survey to resolve the situation (predictably, the local authorities immediately announced a survey and promised to freeze the construction until it was complete). Meanwhile, the mayor of Yekaterinburg came to the park to talk to the protesters — an unusual step in Russia. But his attempts to mollify the crowd drew shouts of “resign!”
Why the world should care
There are very few examples of local protests in Russia making a national impact. Most significant demonstrations usually take place in Moscow or St. Petersburg, which is why many see the events in Yekaterinburg as a bellwether of a changing protest mood in Russia. From a very local conflict over a new church, this has grown into an iconic confrontation to which the whole country is paying attention.
Dividend hike at Gazprom causes shareholder celebration
Gazprom this week surprised its investors with the announcement of record dividends, sending the company’s share price soaring. The state-owned gas producer reconsidered its dividend policy and increased last year’s payout to $6 billion (16.6 rubles per share), as opposed to the previously-announced $3.8 billion (10.4 rubles per share). But the riddle behind the mysterious generosity was soon solved: it was the result of horse trading with the Ministry of Finance.
- The news came as a shock to the market: Gazprom shares on the Moscow Exchange surged the most in over a decade. The company’s stock closed 16% higher, lifting the company’s market valuation to $69 billion and making it the second most expensive company in Russia after state-owned bank Sberbank.
- The Ministry of Finance has long stated that it expects state-owned companies to pay 50% of their net profit as dividends, and the 2019 budget is based on this calculation even though, in reality, most state-owned companies treat this as a recommendation — not an obligation. Gazprom was one of those companies flouting the Ministry of Finance’s requirements, and even after this week’s announcement it is still only paying 27% of net profit as dividends.
- Gazprom’s change of heart was the result of a tradeoff with the Ministry of Finance, according (Rus) to newspaper Vedomosti. In exchange for Gazprom paying higher dividends, the Ministry has agreed not to increase the company’s tax obligations as it has done in previous years. This is probably not as important for the company as it is for shareholders. Each shareholder (including Gazprom’s top-management) benefits from dividends, whereas it is only the government that wins from higher taxes.
Why the world should care
Gazprom’s sudden generosity illustrates how — sometimes — ordinary shareholders can benefit from the state’s need for money to finance expensive development projects. The only remaining question is whether Gazprom will maintain this new dividend policy, or whether it’s a one-off.
Sergei Guriev on Western sanctions, the Russian economy & emigration
The Bell’s founder, Liza Osetinskaya, recently interviewed Sergei Guriev, chief economist for the EBRD, former head of Moscow’s New Economic School and an ex-advisor to the Russian government. Guriev left Russia 6 years ago amid fears he was about to be targeted in a criminal case. You can watch the whole interview (Rus) on YouTube, but we’ve collected some of the best bits here:
The economy: “The Russian economy is in a swamp — so it can’t fall off a cliff. If you think about it like this, Russian economic management has yielded some big successes, including macroeconomic stability. Our forecast… is that the Russian economy will grow between 1.5 percent and 2 percent if there are no reforms. The second part of this forecast is that there will be no reforms.”
Russian isolationism: “Russia thinks it’s economy can grow rapidly without being integrated into the global economy. But you can’t create anything today in isolation, not least in relatively small economies like Russia’s. We are used to thinking of Russia as a big country, but, from the point of view of economics, Russia is only 2 percent of the world and, with an unfavorable exchange rate, as little as 1.5 percent.”
Western sanctions: “On average, more capital is leaving Russia than arriving. And the difference is enormous: we are talking about tens of billions of dollars every year, whole percents of GDP, which could be invested in Russia but are actually being invested abroad. Everyone who can get their money out has taken it to Europe. They understand that [in Europe] their money is safer than in Russia — even with sanctions.”
The investment climate: “If you invest in a business, you should be able to expect that the profits you make are absolutely in line with your expectations — and independent of your competitors, officials, or people with criminal predilections. And that this [investing] will not end with you having to flee the country or being sent to jail. But when Vladimir Putin talks about the investment climate he is talking about the latter. Unfortunately, judging by the capital outflow from Russia, it appears that businessmen think there is still a huge potential to improve the investment climate.”
Emigration: “I was never an official. The advice that I gave outside public discussions was the same as that which I gave publicly. When I realized that there was a chance I could be sent to prison, I also realized that I didn’t fancy it. I decided that it was time to stop giving advice, or give it from far away.”
Senior official resigns from abroad in Cold War-style thriller
The head of an important research institute making electronic equipment for Russia’s space program has disappeared after resigning on a fake business trip in Europe. It may sound like the plot of a Cold War film, but Kommersant newspaper reported (Rus) that this actually took place last month. Yuri Yaskin apparently fled against the background of a large internal investigation conducted by the FSB and space agency Roscosmos, which had already led to 14 criminal cases. While the audit was underway, Yaskin asked approval for travel to a European country, which he received (employees from sensitive organisations are normally not allowed to leave Russia). Instead of returning home, he sent a letter saying that he was quitting. It’s not clear where he is now, but there are reports he is in Greece.
Russian deputies want to ban people from causing anti-Russian sanctions
A bill prohibiting both journalists and ordinary people from writing anything which that could “lead to new anti-Russian sanctions” has been submitted to the lower chamber of the Russian parliament. It does not specify who will assess whether information led to sanctions or not. However, vagueness has never stopped a law being passed by the Duma. A month ago, two laws came into force: one prohibited so-called fake news, the other banned criticism of public officials. One of the first people to be prosecuted under the latter law was fined $470 after allegedly writing online that: “Putin is an unbelievable fuckwit”.
An insider view, in 5 minutes