Weekly 24 October 2020

Biden and Russia

Hello! This week our top story is an analysis of what Russia can expect if Joe Biden wins the U.S. presidential election next month. We also look at the likely next career move for 1990s privatization tsar Anatoly Chubais, and the launch of VTimes, a new, independent business media outlet run by journalists who resigned their former jobs because of censorship.

What will a Joe Biden victory mean for Russia?

Once again, the Russian political elite is closely following the twists and turns of a U.S. presidential election campaign. And it looks very much like President Vladimir Putin is preparing for a Biden victory. At the start of October, Putin praised Biden’s statements on nuclear disarmament. But there is broader unhappiness in Moscow with Biden, who told opposition activists in Moscow in 2011 that Putin should not seek another presidential term.

  • No previous U.S. president has anything to match Biden’s long history of relations with Russia. He first came to Moscow in 1979 as head of a delegation from Congress to meet Soviet Foreign Minister Andrei Gromyko. The talks were part of the negotiations for the second Strategic Arms Limitation Treaty (SALT-2), signed later that year. The agreement is a distant ancestor of the current START-3 treaty, which expires in February 2021.
  • Almost 30 years later, as Barack Obama’s vice-president, Biden advocated greater economic ties with Russia (just as he promoted détente with the Soviet Union in the 1970s). Although it was then-Secretary of State Hillary Clinton who presented the much-derided ‘reset’ button to Foreign Minister Sergei Lavrov in 2009, it was Biden who made the first major speech about the need for an improvement of U.S.-Russian relations earlier the same year.
  • In 2011, when a reset still seemed possible, Biden came to Moscow and met then-President Dmitry Medvedev and Putin. He also had a meeting with Russian opposition figures, who he told: “If I were in Putin’s place, I wouldn’t stand for a third term [as president]”. That seemingly innocuous remark apparently still rankles in the Kremlin, according to a recent Bloomberg report. Then, between 2014 and 2016, Biden headed up U.S. foreign policy in Ukraine — a perennial sore point for Moscow — and was an advocate for tougher sanctions against Russia.
  • Putin has just once commented on the prospect of a Biden victory — the day after the first presidential debate. Unsurprisingly, he was cautious. On the one hand, he said he “greatly appreciated” Biden’s words on the extension of the START-3 treaty, currently mired in difficult negotiations with the Trump administration. On the other hand, he also said Biden’s campaign speeches showed a “sharp anti-Russian rhetoric.”
  • The Bell interviewed analysts in both the U.S. and in Russia — including Atlantic Council experts Anders Aslund and Brian O’Toole, former U.S. ambassador to Russia Michael McFaul, Kennan Institute director Matthew Rojansky, and head of the Russian Council for International Affairs, Andrey Kortunov. All agreed a Biden presidency would not bring a new reset. Biden’s policy on Russia will be tough and the subject of human rights, always difficult for the Kremlin, will be high on the agenda. Most experts anticipate more sanctions, although it’s unclear what exactly these might include.
  • Russia-based analysts are certain Moscow will not make the first move in any thaw in relations. One said Russia’s view is: “If you impose sanctions, it’s up to you to lift them.”
  • Nevertheless, the U.S. and Russia have three areas for discussion. The first is nuclear disarmament – the START-3 treaty, which expires just a month after the inauguration of the next U.S. president. Talks about extending the current deal have reached a deadlock. The second issue involves bringing the U.S. back to the table in negotiations over Iran’s nuclear program after Trump walked away — it will be almost impossible to resolve this without Russia. And the third issue is the Paris Agreement on climate change and its regulations on carbon dioxide emissions. Trump withdrew from the agreement in 2017, whereas Russia — albeit with some caveats — ratified it a year later.

Why the world should care

The consensus prediction has been that a Biden presidency will see a rapid deterioration in U.S.-Russia ties. This is still very likely. But there are also several points of possible cooperation — and Biden has a long history of seeking constructive relations with Moscow.

Frozen out? Chubais set for Arctic posting

Rumors about the possible departure of political veteran Anatoly Chubais from his post as head of state technology firm Rusnano rippled through the business world this week. The architect of Russia’s controversial 1990s privatization program, Chubais was also a powerful Yeltsin-era politician and a key figure in engineering Vladimir Putin’s rise to power. For the last decade, he has been in charge of Rusnano, both an honorable sinecure for an old ally and a role that involves managing $5 billion of state investment.

  • Chubais could be pushed out as part of proposed reforms of Russia’s state-run development agencies, business news website RBC reported Wednesday. According to two RBC sources, Chubais has already been invited to “take charge of the Arctic”. But the position of an ‘Arctic tsar’ — which does not at present exist — sounds a lot like a demotion (all the significant state-run projects in the Arctic are handled by oil giant Rosneft or state atomic corporation Rosatom).
  • An acquaintance of Chubais confirmed to The Bell this week that Chubais could leave Rusnano amid a restructuring. And a prominent businessman told us that Chubais had recently asked Putin to allow him to retire.
  • Chubais himself is not giving anything away. In response to the RBC story, he joked on Facebook that “although I love off-road driving in the tundra, that’s no reason to make me boss of the Arctic”. He did not answer direct questions about his future. Sources from Chubais’ circle later told The Bell that no final decisions have been made about the future of any state development agencies, including Rusnano.
  • There are dozens of state development agencies in Russia competing for taxpayer rubles. The two most influential are Vneshekonombank (VEB), headed by former deputy prime minister Igor Shuvalov, and the Russian Direct Investment Fund (RDIF) under Kirill Dmitriev, an influential investment banker. Another — the Skolkovo Foundation — was a favorite of ex-president Dmitry Medvedev but lost influence along with its patron. There are similar, albeit smaller, development agencies for different sectors, including venture capital, small business, exports, and housing services. RBC’s sources said that many of these outfits could now be brought together under the umbrella of VEB or RDIF.
  • Rusnano was created in 2007 as a company for Chubais to head — he had just finished  10 years at state energy monopoly RAO UES, which ended up being privatized and disbanded. At the time, nanotechnology was the ‘next big thing’ (like blockchain and cryptocurrency in 2018) and more than $4 billion was earmarked for its development. In 2017, the corporation announced its portfolio and income from assets was worth more than the $10 billion it had received from the state since it was set-up. But much of the company’s investments at this point were in alternative energy, medicine and electronics — nanotechnology having long fallen out of fashion. Russia’s Audit Chamber alleged in 2016 that half of all the projects backed by Rusnano ended in failure.
  • For many years, Chubais was the most influential liberal figure in the government. In the 1990s, he designed the privatization of Russia’s vast state enterprises, and served as head of Yeltsin’s presidential administration. In 1997, it was Chubais who invited Putin to work at the Kremlin (both men grew up in St. Petersburg) and in 1999 he supported Putin as Yeltsin’s successor as president.
  • Thanks to his role in elevating Putin to the top job in Russian politics, Chubais is one of the few ‘figures from the 1990s’ who has not been pushed aside. He’s seen as unsinkable. But he has many enemies, including Kremlin hawks and security officials who resent his political record and liberal views. In recent years, criminal cases have been opened against several of his past and present associates. In 2015, Chubais’ close ally, Leonid Melamed, a senior manager at Rusnano, was accused of embezzlement and spent almost three years under house arrest. In 2019, billionaire Mikhail Abyzov, Chubais’ deputy in the early 2000s, was arrested — he faces up to 20 years in jail.

Why the world should care

The departure of Chubais would be a symbolic – but highly significant – defeat for Russia’s much-diminished bloc of liberal-minded officials. The only surviving member of this clan still in government is Alexei Kudrin, another man who helped launch Putin’s career.

Journalists from censored paper launch independent rival

Russia’s most authoritative business newspaper, Vedomosti, came under heavy censorship this summer when it was bought by an owner linked to state-owned oil giant Rosneft. But former editors at Vedomosti are fighting back, and this week they launched VTimes — a new, independent business publication that plans to grow using crowdfunding.

  • VTimes started work at the end of July, but the full site went live Tuesday. The media start-up was founded by four deputy editors from Vedomosti, who worked for many years at the paper and helped shape its editorial policy. Several other Vedomosti journalists who lost their jobs following the takeover (or who quit) are also part of the project.
  • Vedomosti was set-up in 1999 as a Russian analogue to international business publications like The Financial Times and the Wall Street Journal (it has the same salmon-pink paper as The Financial Times), and quickly became the political and economic elite’s newspaper of choice. But its foreign owners had to sell in 2014 when Russia banned foreigners from owning media organizations, and the newspaper passed to Demyan Kudryavtsev, a former partner of ex-Kremlin kingmaker Boris Berezovsky. In collaboration with other independent media outlets, The Bell reported this summer that Kudryavtsev’s shares were pledged to a bank owned by Rosneft as collateral on a €26 million loan. Earlier this year, Kudryavtsev sold the paper to a little-known publishing house from Yekaterinburg and Andrei Shmarov was appointed editor-in-chief. Shmarov is reckoned to be the protégé of Rosneft press secretary Mikhail Leontiev and, after several instances of censorship, almost all the old editorial team resigned.
  • VTimes is trying to capitalize on the reputation of the original Vedomosti. It has acquired the right to reproduce articles from The Financial Times, and signed up some of Vedomosti’s popular columnists (including Chicago University professor Konstantin Sonin and the former chief economist at the European Bank for Reconstruction and Development, Sergei Guriev). But it is also offering something of a face lift on the old title, with a more up-to-date focus on ecological and social issues.
  • The money to launch VTimes has come from private donations, according to founder Alexander Gubsky. This is not hard to believe — Vedomosti was popular among wealthy businessmen who have a selfish interest in backing a high-quality business media outlet. VTimes plans to make its money via advertising, but is also pursuing an active crowdfunding campaign. This got a mixed response among journalists: a business publication that asks for donations from readers is highly unusual. There are currently no plans to introduce a paid subscription service.

Why the world should care

If you follow news from Russia and read Russian, VTimes is a must. It’s too early to say whether the original Vedomosti can be totally disregarded, but there is no way it can now be trusted