Moscow protests fuel Russia’s biggest political crisis in 7 years

Hello! This week our top story is the opposition protests in Moscow that are fueling Russia’s biggest political crisis in almost a decade — Saturday will see yet another large rally. We also have the highlights from an investigation by The Bell into a huge money laundering empire run by top security officials, and unpick why PR managers have been having a field day with huge forest fires tearing through Siberia.  

Moscow protests fuel Russia’s biggest political crisis in 7 years

The disqualification of independent candidates from elections to Moscow city’s legislature has led to the sort of political confrontation not seen since 2012. A protest last weekend set a new post-Soviet record for the number of demonstrators arrested, and another rally is planned for Saturday. The authorities are trying to stop the protests with a crackdown: opposition leaders have been arrested and criminal cases opened against ordinary protesters. The unrest may have far-reaching consequences, not least by boosting the influence of hawks in the Kremlin.  

What happened?

• Moscow will hold elections to its city legislature on September 8. The body has almost no power, but the authorities still blocked independent candidates from participating.
• The obstacles put in front of independent candidates, who are required by law to collect several thousand signatures in support of their campaign, were crude. While most accomplished the difficult task of collecting signatures, the authorities disqualified them all, claiming they used fake signatures. This means about 100,000 potential voters who signed in support of independent candidates now feel disenfranchised.
• On July 20, a rally authorized by the authorities was held in Moscow, and was attended by about 20,000 people. The next rally, on July 27, was unauthorised, but up to 15,000 people turned up. Of these, 1,373 were detained by police (a new post-Soviet record for detentions at a protest) and 77 were injured.

• This week, almost all the protest leaders were handed up to 30-day prison sentences.
• Russia’s Investigative Committee has opened a criminal probe into a “mass riot”: six people have been charged and are facing significant prison sentences. Anyone at the rally could, in theory, be charged.
• More than 20,000 people have already signed up for an August 3 rally on Facebook. While opposition leaders tried to obtain authorization from the authorities, they received a final refusal Friday. This means police will almost certainly break-up the rally, and participants could find themselves facing criminal charges.

Why is a crackdown necessary?

The size of the July 27 was unexpected, according to sources close to the Kremlin, and this is a matter of serious concern for the authorities because of the political context. Not only is an appetite for protest growing across Russia, but President Vladimir Putin’s approval ratings have been falling for a year, and are now at their lowest level since 2011.

• Some experts suggest that an increase in the protest mood has given Moscow’s politicized middle class a sense that victory is within reach.
• All major protests last year were linked to economic issues (in particular against raising the retirement age), or related to local problems (for example, protests against the construction of a church in Yekaterinburg). The protests in Moscow are purely political.
• A successful election-linked protest would be deeply uncomfortable for the authorities ahead of preparations for 2021 parliamentary elections. One plan under discussion for Putin to retain power after presidential elections in 2024 involves expanding the authority of parliament, but this requires keeping tight control over the electoral process.

How will it all end?

• For protestors and their leaders, it is almost certain to end in a series of high-profile criminal cases. In the similar slew of cases resulting from a 2012 confrontation between police and protestors on Bolotnaya Square in Moscow, more than 30 people were tried, with most receiving prison sentences of 2 or 3 years. Protest leader Sergei Udaltsov spent four and a half years in jail.
• The main political victim, however, could turn out to be Moscow Mayor Sergei Sobyanin, whose subordinates have created a national political crisis. Sobyanin is often considered one of Putin’s potential successors, but his star now seems to be fading. At the same time, Sobyanin, who publicly supported a crackdown, is losing the support of Moscow’s middle class — a group he has been courting for many years.
• One of the results of mass protests in Russia is always to strengthen the hand of the security services, who maintain that protestors are inspired by the West and want a revolution. In the wake of the opposition protests in 2011 and 2012, the authorities embraced a new brand of conservative nationalism and one indirect result was the 2014 annexation of Crimea and conflict with the West.
• There could also be consequences for the Kremlin’s 2024 planning (Putin is constitutionally obliged to step down as president in that year). Finding a way to keep Putin in power — rather than seeking a successor — was always the most likely scenario, now it may become inevitable.

A glimpse into the secret banking empire of high-ranking FSB officers

The Bell and investigative journalism website Project published an investigation this week into how high-ranking officers at the Russia’s domestic intelligence agency earned billions of rubles from illegal banking operations. The scheme came to light after the arrest of the former head of the banking department at the Federal Security Service (FSB), Kyrill Cherkalin. Much about the case against him suggests he fell afoul of infighting within the intelligence services.

Cherkalin, and his predecessor, Dmitry Frolov, were arrested in April on bribery charges. During a police search, a record 12 billion rubles ($180 million) was found in Cherkalin’s apartment and other places liked to him and his colleagues. Since then, three bankers from whom Cherkalin allegedly extorted bribes have spoken to The Bell and Project. Their stories show that Cherkalin’s financial empire extended across Russia’s whole banking sector, and that it was turning millions of dollars every year in profit.

• At the heart of the plot was Cherkalin’s division at the FSB’s Department K; one of the most influential departments of the most influential Russian intelligence service. Cherkalin’s division was responsible for overseeing banks, pension funds and insurance companies.
• The investigation shows how FSB officers took a “subscription fee” from bankers involved in money laundering (it is believed most banks outside the country’s top 20 biggest banks are involved in this).
• The routine was as follows: a bank was placed under the control of the FSB by appointing a former FSB officer head of the bank’s security department. From this position, he would control financial flows and make sure the FSB received a cut from all transactions. Separate bribes were required for specific legal violations. The appointee’s second task was to collect information about the market and find new clients.
• Even more could be earned by helping bankers in a tight spot: for the closure of criminal cases, either bankers had to pay (one said he paid $20 million), or hand over control of assets. According to sources, a key partner of Cherkalin and Frolov in this business was Valery Miroshnikov, the deputy head of the Deposit Insurance Agency, which guarantees deposits if banks go bust. You can read background about Miroshnikov here.
• It seems impossible that FSB officials higher up the food chain were unaware of what was going on. One banker told The Bell that FSB deputy head Sergei Smirnov came to meet him with Cherkalin. We could not confirm this.
• Business people with good contacts in the security agencies have linked the arrest of Cherkalin and his alleged accomplices to infighting at the FSB. In 2021, FSB head Alexander Bortnikov will turn 70, and jostling to become his successor is well underway.

Why the world should care

This business empire run by FSB officers is the Russian end of a global money laundering network — at the other end are scandal-hit Western banks like Deutsche Bank and Danske Bank. One major Russian banker described Cherkalin as “brilliant” and the representative of a “business generation” of security officers, adept at making money. It is this generation that is now coming to power within the FSB, an agency that plays a key role in Russian politics.

Disastrous forest fires in Siberia lead to a slew of PR opportunism

A hot summer means fires are raging across Siberia’s forests and currently cover an area about the size of Belgium. This is far smaller than the biggest fires on record, but hasn’t stopped everyone using them for a bit of self-promotion: from Putin to one of Russia’s biggest airlines.

• While 3 million hectares of burning forest is a lot by any measure, it is still not the 8.7 million hectares that was recorded last year. Nevertheless, this year’s forest fires have attracted an unprecedented amount of attention: in the second half of July, Russians wrote over a million posts about them on social media. While the conflagarations are mostly in remote uninhabited areas, smog is affecting several large cities in Siberia.
• The situation was, as usual, made worse by the local authorities: the governor of Krasnoyarsky said that fires in remote areas would not be extinguished because it did not make economic sense. This is strictly true, but his words caused outrage and the Kremlin decided this was an opportunity to look good. Prime Minister Dmitry Medvedev flew to Krasnoyarsk where he criticized officials and promised to support victims, while Putin ordered military aircraft to be sent to put out the fires.
• Public interest in the forest fires may even have been used to divert social media attention from opposition protests. A study (Rus) by news outlet RBC revealed that, ahead of the July 27 rally in Moscow, the number of posts about the Siberian fires on social media almost doubled. State-owned television channels also devoted many hours of airtime to the topic.
• Private companies have been using the hype for their own purposes. This was done best by Russia’s second largest airline, S7, which, until 2006, was known simply as Siberia. The airline announced Thursday that it will transfer 100 rubles from each ticket sold to restore forests, and for the duration of its campaign it will use its old name. The company has updated the website and even emblazoned ‘Siberia’ on one of its aircraft. The campaign will last until enough money is collected to plant 1 million trees. Users liked the idea — it went viral on social media.

Why the world should care

When you read news from Russia, you should remember that the country’s most talented PR managers are either employed in the Kremlin, or work to promote the Kremlin’s interests.