Weekly 13 December 2021

Putin-Biden talks

Hello! This week our top story is talks between Putin and Biden and whether there is a real risk of Russia launching an invasion of Ukraine. We also look at why Russia’s biggest real estate listings service decided to ban xenophobic adverts, and the arrest of U.S.-born businessman August Meyer in a long-running dispute with state-owned Sberbank.

Putin and Biden hold video talks as markets shrug off invasion fears

Two hours of talks between Russian President Vladimir Putin and his U.S. counterpart Joe Biden on Tuesday appeared to satisfy the Kremlin. Russian markets took a neutral view of the discussions, remaining unconvinced about the prospect of a direct military conflict with Ukraine.

  • The White House was first to issue a press release after the video summit between Biden and Putin. “President Biden voiced the deep concerns of the United States and our European Allies about Russia’s escalation of forces surrounding Ukraine and made clear that the U.S. and our Allies would respond with strong economic and other measures in the event of military escalation,” the statement read.
  • The Kremlin’s press release was more informative. It noted how the two presidents agreed on “the importance of consistent progress in implementing the agreements reached at the highest level… In this context, the presidents recalled the fact that the two countries were allies during World War II. They emphasised the need to remember the sacrifices made at that time, while this allied relationship must set an example for establishing contacts and working together in today’s reality.”
  • According to the Kremlin version, when Putin spoke about Kyiv’s “destructive nature” and its “provocations”, Biden responded with a comment about the “threatening movements of Russian troops close to the Ukrainian border” and warned of possible sanctions. Putin apparently objected, saying it was NATO “that was undertaking dangerous attempts to gain a foothold on Ukrainian territory”.
  • Russia is eager to secure legally binding guarantees to prevent NATO from expanding eastward, Putin told Biden. But Biden did not offer any promises about NATO expansion, nor about Ukraine’s membership of the alliance, according to Deputy Secretary of State Victoria Nuland and National Security Advisor Jake Sullivan. Sullivan said that the U.S. president warned of sanctions, saying “things that we did not do in 2014, we are prepared to do now” while Nuland promised an invasion of Ukraine would see Russia cut off from the global financial system and bring a halt to the launch of natural gas pipeline Nordstream 2.
  • State department chief Anthony Blinken warned of tougher sanctions last week in the build-up to talks with Russian Foreign Minister Sergei Lavrov. The day before Putin and Biden’s conversation, sources told CNN that these sanctions could include blocking Russia from the SWIFT payment system and banning foreigners from participating in the secondary market for Russian bonds. However, the market remains unconvinced that these sanctions would happen. Such sanctions are only possible if Russia invades Ukraine and that scenario is unlikely, analysts believe.
  • Russia’s Foreign Ministry said Thursday the peace process in Ukraine was “deadlocked” and warned of a possible repeat of the Cuban Missile Crisis. Later that evening, while Biden was talking to Ukrainian President Volodymyr Zelensky, Russian security services reported a Ukrainian vessel was “threatening safe navigation” through the Kerch Straits. But the incident did not lead to anything serious.
  • “The authorities did not push matters forward. And that’s a positive signal,” said political analyst Alexei Makarkin of the Kerch Straits incident. However, Russia is unlikely to remove its troops from the Ukrainian border, according to international relations expert Vladimir Frolov. Their presence is the sole means of pressuring Biden, Frolov said, and it’s expensive to move troops and equipment around.
  • Time is not on Moscow’s side. “In 2014, the Kremlin thought that the majority of the Ukrainian population was sympathetic to a pro-Russian position. There were hopes that ordinary people would rise up against a pro-Western policy. But it became clear that these people no longer exist as a majority group in Ukraine,” Makarkin said. “It’s important to get an agreement on paper now, while at least some of the Ukrainian population still has some support for the Russian position.”
  • Nevertheless, Russia’s greatest wish – a guarantee NATO will not expand further eastward – is not something the U.S. can offer, according to Makarkin. Suitable compromises might include reaching agreement on the non-deployment of missiles or a ban on military exercises near Russian borders, Makarkin suggested.

Why the world should care

The big question is what happens if Russia and the West cannot reach a compromise. Neither side wishes to see war break out, but the longer tensions persist, the greater the risk they will escalate toward a crisis, according to Makarkin. “We’ve already seen this in the past – it’s how the First World War started. Balancing a situation without any clear rules is dangerous. The Kremlin understands this and is now trying to draw those lines,” he said.

 

CIAN bans ‘Slavs only’ ads for rental property

Russia’s largest online real estate service, CIAN, announced Monday it was banning discriminatory listings — a month after its successful U.S. initial public offering (IPO). This means an end to the widespread practice of advertising property “for Slavs only”.

  • CIAN’s new policy is that: “advertising text must not contain direct or indirect discrimination, nor incitement to discrimination based on race or ethnicity (including indicators such as skin color, ethnic or national background, citizenship or religious faith).” Any adverts that do not comply must be edited by Feb. 1 — after that “CIAN reserves the right to independently make the necessary adjustments”.
  • In a statement, CIAN said it was speaking up for “equal opportunities for all users”. But it’s not an unprecedented step: in late November, a similar move was made by the Flats for Friends group on Facebook, which has almost 240,000 users. According to the new rules on Flats for Friends, landlords must include a note that they welcome “renters of all nationalities, origins, genders, ages and sexual preferences”, and also agree to allow pets in their properties. If a landlord decides not to make such a statement, there’s an extra charge of 499 rubles ($6.80).
  • These measures were not met with overwhelming support: angry comments appeared on CIAN’s social media pages; the app’s rating on Google Play and the App Store began to fall; and reviewers complained of ‘Russophobia’ and ‘discrimination against Slavs’. Several users pointed out that the explanation for the ban only referenced the ‘Slavs only’ tag and ignored the almost equally common ‘girls only’ epithet. Other commentators said that the new rules were pointless because xenophobic landlords could still block candidates after viewings or meetings — simply wasting everyone’s time.
  • Discrimination on the Russian real estate market mainly affects people from Central Asia and the Caucasus. But there are different interpretations of “Slavs”: for some, it includes all residents of Russia, Belarus and Ukraine. However, Ukrainians are increasingly excluded due to the political tensions between Moscow and Kyiv.
  • For people of non-Slavic appearance, house-hunting in Russia is a time-consuming and expensive process. Roughly one in six apartment owners in Moscow and Petersburg are only willing to rent to Slavic tenants, and the cheaper the apartment, the greater the likelihood of discrimination, according to analysts at real estate service The Meters. On four popular apartment-search platforms, including CIAN, 17 percent of advertisments included xenophobic tags.
  • CIAN’s own research in March found that only 10 percent of Moscow landlords did not have any criteria for tenants. The most frequent objections were nationality (29 percent) and pet ownership (28 percent).
  • Any landlord who admits to turning down tenants on grounds of nationality or ethnicity is in breach of the Russian constitution. In reality, though, this means little. It’s almost impossible to prove discrimination in a Russian court, reported media outlet Meduza (which has been designated a ‘foreign agent’ by the Russian authorities obliging other publications to identify it as such).
  • Many people believe CIAN’s decision to introduce new rules was linked to its IPO in the U.S. last month, although in comments to several media outlets the company has denied any connection and insisted the changes were long-planned. When CIAN floated in New York and Moscow, it placed at the upper end of its price range and was valued at $1.1 billion. Since then, however, shares in the company have fallen 25 percent. They dropped a further 18 percent last week.

Why the world should care

CIAN’s story shows how a successful IPO in the U.S. may lead to the import of the very ‘Western values’ that so often attract the ire of the Russian authorities. At the same time, the angry reaction to CIAN’s anti-discrimination rules is a reminder that the kind of tolerance that seems obvious in the U.S. may not work in a company’s financial favor in Russia.

 

​​Ex-U.S. citizen turned Russia-cheerleader arrested for fraud

The co-owner of one of Rive Gauche, one of Russia’s biggest cosmetics chains, was arrested Wednesday in St. Petersburg. August Meyer — the former co-owner of now defunct online retail giant Yulmart — was born in San Diego and moved to Russia more than 20 years ago. He has since renounced his U.S. citizenship and expressed support for Putin.

  • Meyer and his wife, Inna Meyer, are suspected of stealing 2.4 billion rubles ($32.6 million) from state-owned bank Sberbank to develop Yulmart shortly before the retailer’s collapse. If found guilty, the two could face up to 10 years in prison. Meyer was remanded in custody Thursday, while his wife was put under house arrest. They both deny the accusations.
  • The Meyers are not the first people to be accused of embezzling funds from Sberbank on the pretext of developing Yulmart. Back in 2017, Dmitry Kostygin – another co-owner of Yulmart and once a friend of Meyer – was arrested on fraud accusations. He was placed under house arrest in 2017, and one year later was bailed for 25 million rubles ($340,500).
  • Yulmart topped Forbes’ ranking of the 20 leading online stores in Russia in 2013, with annual sales of more than $1 billion. Yet, within just three years, the company ran into big financial problems, and Meyer and the other shareholders became embroiled in conflict. The company effectively ceased operations last year. A number of the company’s legal entities are currently going through bankruptcy proceedings.
  • Despite these problems, Meyer was ranked Russia’s 181st richest man by Forbes in 2021 with an estimated fortune of $650 million. Most of these funds came from the sale of his share in hypermarket chain Lenta following a bruising shareholder battle. The rest comprises a 25.5 percent stake in Rive Gauche, a 37.5 percent in cosmetics chain Ulibka Radugi, and a 17 percent share in confectionery producer Lyubimy Krai.
  • Meyer received Russian citizenship in 2015 — and has renounced his U.S. passport (“America is sinking like the Titanic, but Russia has a future,” Meyer said in an interview in 2010). On several occasions, Meyer has publicly talked up Russia’s business climate and praised the authorities. “The perception of Putin in the West does not seem to me to be fair. He’s not some madman who wants to rebuild the Soviet empire,” Meyer said in 2017. Speaking in court, however, he no longer seemed so sure: “What’s this, the Soviet Union in 1931?” Meyer asked Thursday as he tearfully told of investigators’ attempts to hold his wife hostage. According to Meyer, the investigator promised to release his wife if he confessed.

Why the world should care

Considering Sberbank’s long-running conflict with Yulmart shareholders, arresting a foreigner – even if he does have a Russian passport – looks like a tactic to pressure others to pay their debts as quickly as possible. At the same time, this is another signal to foreign investors that it’s not wise to do business in Russia without a reliable patron.