Weekly 20 June 2020

Putin defends the Soviet Union and proposes new Yalta conference

Hello! This week our top story is Putin’s foray into op-ed writing with a long article on how the Soviet Union wasn’t responsible for the Second World War and why the world needs another Yalta conference. We also look at Russia’s efforts to find a coronavirus vaccine, discussions to scrap the flat-rate income tax, and a wave of resignations at newspaper Vedomosti.

Putin defends the Soviet Union and proposes new Yalta conference

It was a week of articles. President Vladimir Putin wrote a long article about the Second World War while Nikolai Patrushev, the influential head of the Security Council, published a column on how Russian conservative values will save the world. Even former president Dmitry Medvedev took to print to examine the economy (the most boring of all three).

  • Putin pledged to write an article last year after he was offended by a resolution passed by the European Union Parliament in which the USSR was named as one of the countries responsible for the outbreak of the Second World War. Putin was noticeably obsessed with this topic last year — business leaders, deputies, and the leaders of neighboring countries all had to listen to his opinions on the subject.
  • The biggest surprise was where the Kremlin chose to publish the article — U.S. outlet The National Interest, which is owned by second rate conservative think tank Center for the National Interest that was once led by ex-U.S. president Richard Nixon. It is now run by the Soviet-born Dmitry Simes, who has his own show (Rus) on state-owned Channel One. The National Interest often quotes (Rus) Russian state media outlets. More well respected publications would certainly have been prepared to print Putin’s article, but it appears someone convinced Putin that The National Interest is actually influential.
  • Most of Putin’s contentions were unsurprising and difficult to dispute: the USSR did most of the fighting against Germany, sustained most of the losses, and Western countries (including Poland) share responsibility for the outbreak of war. On top of this there were many traditional Soviet talking points justifying Stalin’s decision to reach an agreement with Hitler in the 1938 Molotov-Ribbentrop pact. Only a few arguments were surprising: Putin claimed the Baltic states voluntarily and legally joined the USSR in 1941 (thi is untrue), and aired suspicions that the Allies signed secret deals with Hitler (apparently a nod to conspiracy theories about the 1941 flight of top Nazi Rudolf Hess’s to Scotland).
  • Toward the end of the article, Putin wrote about his favorite, albeit unrealistic, idea of a new ‘Yalta conference’ (like that held at the end of the war). The Russian leader wants Russia, the U.S., the United Kingdom, France and China — the permanent members of the United Nations Security Council — to gather to discuss the key issues facing the world. Moscow has already issued invitations to such a summit.
  • The article (Rus) in Rossiyskaya Gazeta penned by Nikolai Patrushev is far more radical. A former head of the Federal Security Service (FSB) and current head of the powerful Security Council, Patrushev is seen as a leader of Kremlin hawks. The article is a real manifesto for Russian conservatism, and lists Western values “alien to Russian society” that supposedly include gay marriage, use of ‘parent 1 and parent 2’ instead of ‘mum’ and ‘dad’, and “individualism, egoism, a cult of enjoyment, and untrammelled consumption”. Since the Kremlin is currently considering raising taxes on the middle class (see our story below) it was odd that Patrushev accused the West of the “destruction of the middle class”. Patrushev argued that the West’s “anti-values” are currently being forced on Russia via a “hybrid war” and that Russia must struggle to maintain its “cultural and spiritual-moral national sovereignty”.
  • Medvedev’s article (Rus) appeared in Russia in Global Politics, a niche journal about international relations, and is dull in comparison. The former president and prime minister lists the economic shocks caused by the coronavirus and calls on countries to cooperate in a common fight. The turgid prose means it is difficult to read — god forbid Medvedev overshadow Putin or Patrushev.

Why the world should care

It is worth looking through Putin’s article: although the language is formal, the Russian leader was clearly involved with the writing. Just as the piece reveals how Putin sees the world, so Patrushev’s article sheds light on the thinking of Russia’s powerful conservatives.

Is Russia about to develop a coronavirus vaccine?

The Ministry of Health this week approved human trials for two coronavirus vaccines as Russia races to become the first country in the world to launch the industrial production of a coronavirus vaccine. The Bell looked into how two state-owned research institutes are competing against each other to be the first to come up with a vaccine.

  • Officials have kept Putin regularly informed about progress toward a vaccine since last month. Normally, testing would take years, but the president has been promised a coronavirus vaccine will be ready by September. Officials told him 47 potential vaccines (Rus) are being developed in Russia at the moment, although a World Health Organization list includes only 10 possible Russian-made vaccines.
  • The Bell discovered (Rus) that only two state-owned research institutes have a real chance of developing a vaccine. They are Novosibirsk-based Vektor, founded in the 1970s for the development of biological weapons, and Moscow’s Gamalei Institute of Epidemiology and Microbiology. Groups of interested officials and major pharmaceutical companies have gathered around these two centers in recent months.
  • The coronavirus epidemic has thrust state-funded research institutes into the spotlight, and they are fighting for funding. There is a lot at stake: The Bell calculated that about 10 billion rubles ($150 million) may be spent on developing a vaccine.
  • The current leader of the race is believed to be the Gamalei Institute. In May, its head, Alexander Ginzburg, said in an interview (Rus) — as if by accident — that the center’s researchers have successfully tested a vaccine on themselves. “They have immunity and there were no negative side effects,” Ginzburg said.
  • Medical professionals were indignant: such experiments violate scientific ethics and undermine trust in Russian drug developers. But Ginzburg knew what he was doing, and it is his vaccine that the government has decided to begin production of in September. The Gamalei Institute’s vaccine was tested (Rus) this week on 18 military volunteers (in the West testing on military personnel is generally forbidden). And the head of Russia’s sovereign investment fund, which is sponsoring the vaccine, also allowed himself to be used as a human guinea pig. He told (Rus) journalists that — so far — he feels fine.
  • Experts and pharmaceutical executives told (Rus) The Bell that there are doubts over the vaccine’s effectiveness and safety. But they admitted the world is in a hurry to find a vaccine, and Russia must not be left behind. If Russia is successful, private pharmaceutical companies could make huge profits on exports of the vaccine. But first, they will be obliged to support a mass vaccination of Russians. For now, the authorities have said that any such vaccination program will be voluntary.

Why the world should care

It’s unlikely Russia will be able to produce a vaccine to save the world from the coronavirus. But there is no doubt some sort of vaccine will soon be offered to Russians. The economic benefits from an effective vaccine would be enormous.

Kremlin considering an end to flat rate income tax

Officials at the top of government are looking at scrapping the flat rate personal income tax, which has been a cornerstone of Russia’s tax policy under Putin. The move would be marketed as promoting ‘social justice’ and likely coincide with the constitutional referendum scheduled for the end of June that could allow Putin to ‘reset’ his presidential term count.

  • The gap between poor and rich in Russia has always been enormous. Official statistics from the end of 2019 show (Rus) almost half of families could only afford to buy food and clothing. This is one of the reasons for the fall (Rus) in Putin’s approval ratings.
  • Ahead of the referendum, the Kremlin has returned to the old idea of a progressive income tax scale for individuals. Journalists uncovered (Rus) these plans this week.
  • At the moment Russia has a personal income tax rate of 13 percent, a measure that was introduced by Putin in 2001 in a series of major tax reforms widely credited to former Finance Minister Aleksei Kudrin.
  • Under the proposals, this would be raised to 15 percent for those earning over 2 million rubles ($28,700) a year. Income tax could also be scrapped entirely for low earners.
  • A final decision on the changes has not yet been made. But if the authorities decide to act, Putin may appeal to ‘social justice’ and make the announcement in his annual televised Q&A just before the referendum.
  • Economists have different opinions on whether the measures mean people begin hiding their income, or whether they will shrink Russia’s already modest middle class.

Why the world should care

Falling household income is one of the most important issues determining Putin’s popularity. Addressing this trend could not only allow Putin secure a bigger ‘yes’ vote in the upcoming constitutional referendum, but also help secure his longer-term political future.

The end of the road for Vedomosti

This week saw the end of Vedomosti’s editorial independence after 20 years as one of Russia’s most respected business newspapers. The media outlet’s new owner, Ivan Yeryemin, confirmed Tuesday the appointment of chief editor Andrei Shmarov, who is deeply implicated in censorship and closely tied to state-owned oil giant Rosneft. Most of the newspaper’s senior editors resigned in protest, and almost every other employee is now on their way out.

  • Within hours of Shmarov’s formal confirmation, five of the newspaper’s deputy editors announced they were stepping down. All five had worked at Vedomosti since before 2015 when the then owners (The Financial Times, Dow Jones and Sanoma) were forced to sell. The deputy editors said they were resigning because Shmarov was not prepared to uphold Vedomosti’s journalistic standards and was willing to impose censorship. Other Vedomosti staff did not resign, but former editor Dmitry Simakov said (Rus) “absolutely everyone” — including journalists, photographers and designers — was looking for a job.
  • There wasn’t long to wait before the first incident of censorship. A Vedomosti columnist said (Rus) Friday that one of his articles — about the Kremlin’s efforts to ensure a ‘yes’ vote at the upcoming referendum — was pulled overnight by Shmarov.
  • The Bell’s sources have said that Rosneft press secretary Mikhail Leontiev was closely involved in the initial appointment of Shmarov earlier this year and, since 2017, Rosneft has controlled Vedomosti via a complicated chain of debt. Shmarov has admitted that he carried out censorship on the instructions of Kremlin officials and, according to The Bell’s sources, people linked to the Kremlin are currently helping Vedomosti find new editors.

Why the world should care

For many years, Vedomosti was one of the most trusted sources for Russian news, particularly for economic and business issues. Now, when reading the newspaper, you’ll need to remember that it is censored in line with the wishes of the Kremlin and Rosneft.