Weekly 16 May 2021

Gun control strawman

The most important stories on Russia this week

Hello! This week our top story is a deadly school shooting and the subsequent gun control debate that seems unlikely to reduce the chance of future such incidents. We also look at how the government is eyeing a new tax to boost domestic investment, and how the designation of media outlet VTimes as a ‘foreign agent’ indicates a broad campaign against independent media is underway.

Kazan school shooting sparks gun control debate

Mercifully, school shootings are rare in Russia. But a 19-year-old student went to a school in the city of Kazan with a gun Tuesday and killed nine people, most of them children. President Vladimir Putin immediately called on officials to come up with proposals to tighten the requirements for gun ownership – but Russia’s rules are already among the strictest in the world. The real problem lies elsewhere.

  • Ilnaz Galyaviev, 19, went on a killing spree at his old high school, Gymnasium No.175, in Kazan, the capital of the Republic of Tatarstan. Seven pupils aged between 13 and 15, and two teachers, died. Two of the children fell to their deaths as they tried to leap to safety from a second-floor window. Galyaviev was carrying a cheap semi-automatic rifle that he purchased legally after acquiring a permit on April 28, two weeks before the shooting.
  • While school shootings are not common in Russia, they do occasionally occur. The most recent such incident was in 2018 in Crimea when vocational school student Vladislav Roslyakov, 18, killed 21 people with a semi-automatic rifle. He then shot himself.
  • The Kazan shooter was not killed, and eventually gave himself up. Galyaviev turned out to be from a wealthy family and was unknown to police or social services, although it later emerged he was last year diagnosed with brain atrophy, which can lead to cognitive impairment.
  • The Russian authorities reacted exactly like they did following the 2018 tragedy when Putin demanded officials tighten the rules on weapon sales. Yet it’s easy to show that little was actually done: Rosgvardiya, which is responsible for gun control, proposed several laws, including the introduction of a compulsory annual medical assessment for everyone with a firearms license (at present, these tests take place every three years). That might have helped to prevent the shooting in Kazan. However, it was spiked by the Kremlin which, according to Novaya Gazeta, thought the amendments were too severe. Now, however, things might change. Parliament is currently looking at three new laws on weapon permits.
  • Whatever the political response, tightening gun control laws is unlikely to actually stop school shootings. Russian laws are already very strict, not only in comparison with liberal U.S. gun legislation, but also compared with much of Europe. The problem is the Russian issue of effective implementation — once again the old cliché that the severity of Russian law is compensated by a lack of obligation to comply (at least that’s how expert Alexander Golts put it).
  • Another issue is a lack of psychologists in Russian schools. At present, there is something like one psychologist for every 500 pupils, and independent experts claim this is not enough. So far, though, there has been no official interest in changing the situation.

Why the world should care

The Russian authorities may not blame foreign agents or terrorists for this shooting, but they are still capable of using the tragedy to further their own aims. Vyacheslav Volodin, speaker of the lower house of parliament, for example, suggested it may be a reason to abolish anonymity on the internet.

Russia mulls how to boost inward investment via taxation

Prime Minister Mikhail Mishustin will soon have been in office for 18 months. His government was preoccupied with the pandemic for much of its first year, but now it can return to its main task – making Putin’s long-term goals a reality. One of these goals is an ambitious target to increase inward investment into the Russian economy 70 percent through 2030.

  • While Russia is isolated on the world stage and at risk of further Western sanctions, it’s hard to bet on a rise in foreign investment. Instead, the authorities are hoping to stimulate investment from leading Russian businesses.
  • Mishustin berated businesses for “greed” in a speech to the parliament this week, warning that companies that “aggressively withdraw dividends” could face a progressive income tax.
  • Parliamentary speaker Vyacheslav Volodin approved of both the topic and the rhetoric. “People earn huge sums in our country, then take it away,” he complained. “Nobody learns from what life is telling them and the way sanctions and unfriendly acts by other countries, as a rule, result in the freezing of these assets.” Volodin demanded Mishustin explain what the government was doing “to prevent more chaos when [businessmen] take everything and drain us dry”.
  • In response, Mishustin reccounted how the government is changing or abolishing tax agreements with offshore jurisdictions. Russian companies transferred 4.3 trillion rubles ($58 billion) abroad in 2019 and more than a quarter of that money went to countries where the Ministry of Finance has since closed tax loopholes, he said.
  • Mishustin also mentioned a progressive income tax in reference to Putin’s recent state-of-the-nation address in which he promised to make a decision on “adjusting tax legislation” by the end of 2021. The aim is to ensure that record profits enjoyed by the corporate sector remain in the country and are not spirited overseas. Thus far, it is unclear exactly what kind of adjustment the authorities have in mind. “The president said we need to do something about companies that transfer their profits abroad, so we need to do it. However, nobody seems to understand how,” one official involved in discussions told The Bell at the time.
  • None of the economists or tax lawyers interviewed by The Bell could point to a precedent anywhere in the world for such a progressive income tax based on money transfers abroad, and, even if it could be done, they all doubted that it could lead to a Russian economic miracle.
  • And businesses themselves are in no hurry to share their profits with Putin. “I don’t think it will be hard to get around this,” one top financier told The Bell.

Why the world should care

It makes sense for Putin and Mishustin to go after the profits of Russian companies, and Putin has spoken about the anticipated onset of a commodity ‘supercycle’. Investors in Russia should be aware that the Russian authorities likely have plans for any profit windfall experienced by Russian companies.

Attack on independent media intensifies as VTimes labelled ‘foreign agent’

State pressure on independent media continues to increase. Just three weeks after media outlet Meduza was branded a ‘foreign agent’, business title VTimes received the same designation. VTimes was set up last year by journalists who left top business newspaper Vedomosti when it was bought out by shareholders linked to state-owned oil giant Rosneft. Unlike Meduza, VTimes is a traditional business outlet that rarely reports on politics or human rights issues — and always takes a decidedly neutral line.

  • Business newspaper Vedomosti — the inspiration for VTimes — was partly owned by Western media giants The Financial Times and Dow Jones and acted as a flagbearer for independent journalism in Russia for more than two decades. When it was bought out by almost-unknown publisher Ivan Yeremin in 2020, a blockbuster media investigation (that included The Bell reporters) established Rosneft was actually calling the shots at the newspaper.
  • After the change of owners and the first cases of censorship, almost all of Vedomosti’s editorial team resigned and set up VTimes. Within just six months it established itself as a top-flight website for business news. You can read a summary of its best stories from their first months.
  • VTimes has been clear from the start that they are financed by reader donations. And it’s not hard to guess why they have been successful in raising money this way: the old Vedomosti was essential reading for anyone involved in the Russian business world. As yet, there is no information from VTimes about whether they have other sources of funding. Even RT, the state-backed English-language TV channel that regularly broadcasts revelations about foreign funding for independent media, has yet to make any such claims against VTimes.
  • Officially, the Ministry of Justice has not included VTimes on the list of foreign agents, but, instead, designated Dutch fund Stichting 2 Oktober because it “is the administrator of the VTimes.io domain name”. Stichting 2 Oktober’s director is Dutch media manager Derk Sauer, former owner of the Russian publishing house Independent Media and founder of Vedomosti. His deputy at the fund is Alexander Gubsky, the former deputy editor-in-chief of Vedomosti and a co-founder of VTimes. Gubsky has said that Stichting 2 Oktober helped VTimes register the domain; any other links between the fund and the outlet are unknown.
  • Outlets given the Soviet-era label ‘foreign agent’ are obliged to preface every article and social media post with a paragraph of text detailing their status. It is highly likely that affected publications will see a sharp fall in advertising revenue. When Meduza was branded a foreign agent at the end of April it was reported that advertisers immediately began getting cold feet. The status also makes the work of reporters much harder: some sources are already shying away from speaking to Meduza journalists. Freelance journalists might also be put off writing for a publication with such a controversial reputation.

Why the world should care

Many explained the decision to put Meduza on the list of foreign agents as a one-off intimidation tactic. However, the addition of VTimes to the list suggests this is actually a deliberate decision to ratchet up pressure on independent media as a whole — and that other outlets will likely face a similar fate. If this happens, it means there will be just two options for funding: Western grants and crowdfunding. It’s unlikely that reader contributions will be enough to save all the affected outlets.