This morning I got an urgent message from a friend, alerting me to the fact a funny sounding exhibition of photographs was underway at a downtown photo gallery I had never heard of.
It was true, as my friend pointed out, that the announcement for the show, an exhibition of portraits of Eastern Ukrainian pro-Russian separatist fighters (opolchentsy), taken by Petersburg photographer Mikhail Domozhilov, sounded quite dicey politically, as posted on the website of the exhibiting gallery, ARTOFFOTO.
It sounded a little less outwardly partisan when translated into English and printed on the flyers I would later find lying on a windowsill in the gallery:
“The self-proclaimed and still unrecognized state [of the] Donetsk People’s Republic appeared as a result of a civil war in Ukraine in April, 2014. The Donbass People’s Militia became the driving force of the new republic. In the year that passed after the declaration of the DPR, its militia transformed from an anarchic group of super activists [sic] divided into small groups and willing to go weaponless and die for an idea into a regular army with all its necessary attributes—[a] code [of military conduct], subdivisions [sic] and their chiefs, headquarters and machinery.
“This episode is about transition and transformation, about a shaky equilibrium between belonging to one country and to another, utopic in its essence. And also about the self-identification of the participants throughout the conflict. In several months former miners, builders, mechanics have become professional warriors, and a new, extreme reality has replaced the ordinary one. With major destruction, artillery shelling and [a] non-continuous front, these people suddenly found themselves in the middle of historical events and news reports.
“This episode includes several close-up portraits of militia members in mobile studios at military and training bases, as well as on [the] frontlines.”
(English-language flyer for the exhibition Mikhail Domozhilov, Militiaman’s Pass [Opolchenskii Bilet], ARTOFFOTO Gallery, Bolshaya Konyushennaya, 1, Saint Petersburg, January 15–February 3, 2016)
It was also true that the photographer, Mr. Domozhilov, had shown a penchant in his career for subjects that might be characterized as rightist, such as this fascinating series on the ultras for Petersburg’s Russian Premier League side, FC Zenit.
The ultras series featured virtuosic albeit historically and aesthetically coded works such as this.
On the other hand, Mr. Domozhilov’s tearsheets included portraits, just as compelling, of pro-Ukrainian fighters on the Maidan in Kyiv.
But I did not think it fair to pronounce judgement on the work on the basis of a couple of websites, so I set off into the winter wonderland that Petrograd has become in the last week to see the show for myself.
State Duma Rejects Indexation for Working Pensioners
October 9, 2015 Lenta.Ru
The pensions of working pensioners will not be indexed for inflation. Olga Batalina, head of the State Duma’s Committee on Labor, Social Policy and Veterans Affairs, made the announcement on Twitter.
She noted that all working pensioners would continue to receive payments, but the payments would not be raised while they are employed.
“You quit work, indexation kicks in again,” added Batalina.
Earlier, on October 9, she announced that the government had to decided index pensions twice in 2016. Batalina explained this would be done so that pensions would increase to the level of inflation for 2015.
On October 8, however, Deputy Prime Minister Igor Shuvalov noted that the possibility of a second indexation next year would depend on the Russian economy’s growth.
On the same day,the government approvedthe draft budgetfor 2016. It is expected thatrevenueswill reach13.58trillion rubles, expenditures, 15.76trillion. The deficitis projected at2.8percent of GDP(2.18 trillion rubles).
A part of the treasury’s expenditures will be covered by a freeze on pension savings. Another cost-saving measure is reducing the indexation of pensions (to 4 percent at an expected inflation rate of 12 percent). Moreover, the idea of terminating pension payments to working pensioners was considered.
Translated by the Russian Reader
Balancing Russia’s Budget Could Cost Pensioners $46 Billion
June 24, 2015 The Moscow Times
Russia’s economic crisis is forcing the government to consider sweeping savings on pension payouts, a move that could go down badly with a core part of President Vladimir Putin’s electorate.
The Finance Ministry this week floated a proposal to save more than 2.5 trillion rubles ($46 billion) over three years by raising pensions at less than the rate of inflation.
The measure comes as the ministry struggles to slash spending amid an economic recession that is eroding budget revenues.
A steep devaluation of the ruble has meant that prices have grown much faster over the past year than salaries, and since payroll taxes are the main source of income for the pension system, the Finance Ministry has said continuation of inflation-linked pensions could threaten the country’s state-run pension fund.
In May, average nominal incomes were 7.3 percent higher than in May 2014, while prices were on average 15.8 percent higher, according to the Rosstat state statistics service.
“If the income of the fund continues to grow slower than its payouts, it could break the entire pension system,” the Vedomosti newspaper quoted Deputy Finance Minister Maxim Oreshkin as saying last month.
The government is already subsidizing a 3.3 trillion ruble ($60 billion) hole in the pension fund, said Pavel Kudyukin, an associate professor at Moscow’s Higher School of Economics.
“This is no longer affordable for the state,” he said.
According to documents for a government meeting on Monday obtained by news agency RBC this week, the Finance Ministry has drawn up plans to curb planned pensions increases from 7 percent to 5.5 percent in 2016; from 6.3 percent to 4.5 percent in 2017 and from 5.1 percent to 4 percent in 2018.
That means that payments will be increased not in the line with the actual inflation, which is expected to fall back into single digits early next year, but according to inflation forecasts made in early 2014, before Western sanctions over the Ukraine crisis and a sharp decline in global oil prices pushed Russia’s economy into recession. Russian GDP is expected to shrink by around 3 percent this year.
These changes, together with cuts to some other undisclosed social spending items, would save around 2.5 trillion rubles over 2016-2018, RBC reported, citing the Finance Ministry documents.
The government has said no decision has yet been taken.
The changes may require changes to legislation, which requires that Russian pensions are indexed twice a year in line with inflation.
Spending on pensions has risen rapidly in recent years as President Putin has sought to use booming oil revenues to raise living standards of pensioners and low-paid state employees.
Pensions were raised even in 2009, during Russia’s last economic crisis, Kudyukin said.
Russia’s roughly 40 million pensioners receive on average 12,900 rubles ($240) in state pension payouts, according to the data from Russia’s pension fund.
The Finance Ministry’s proposal to abandon the link between pensions and inflation aroused sharp criticism from other ministries.
Maxim Topilin, the labor minister, demanded that money be found for the indexation of pensions for next year and the following years and for an analysis of the effectiveness of spending, news agency RIA Novosti reported Tuesday.
Analysts polled by the Moscow Times doubted that the measure would be implemented, as pensioners provide a bedrock of support for President Putin ahead of planned elections in 2018.
“Pensioners are the current government’s main electoral support,”said Pavel Salin, head of the political science center at the Financial University. “The authorities will not reduce pension payments on the eve of the election period.”
Unwillingness to alienate voters is why another Finance Ministry proposal, to cut government expenses by increasing the retirement age of civil servants from 60 to 65 years, has little chance of approval, analysts said.
Hiking the retirement age has been on the agenda for several years — the idea has been repeatedly promoted by former Finance Minister Alexei Kudrin — but has never gained traction.
But even if the Finance Ministry succeeds in making savings on pensions, any discontent would not lead to dramatic political consequences, experts said.
The move could cost Putin a few percentage points off his rating, but not dozens, Salin said.
Putin could afford that — the president’s approval rating is at a record high of 89 percent, according to a poll by the Levada Center released Wednesday.
Given the political apathy of Russians and a surge in patriotic feeling that followed Moscow’s annexation of Crimea from last year, people will bear less generous pensions, Kudyukin said.
“The question is, for how long will they bear them?” he added.
Stuck on the needle: oil and gas account for 98% of Russian corporate profits
September 24, 2015 rbc.ru
RBC’s rating of the 500 largest Russian companies shows the real value of the oil and gas industry to the domestic economy. The contribution of all other companies to total gains—46 billion rubles in 2014—amounted to less than two percent
According to Rosstat, Russia exported almost 500 billion dollars’ worth of goods in 2014; oil and natural gas accounted for 42% of this sum. In 2014, oil and gas revenues accounted for 7.4 trillion rubles or 51.3% of the country’s budget. If you look inside the corporate sector, the dependence on the oil and gas sector is even more impressive.
According to data from the RBC 500, a rating of the largest Russian companies, released on Wednesday, the total revenue of oil companies in 2014 amounted to 19.8 trillion rubles or 35.3% of the total revenue of all the companies in the rating, but 97.7% of all net profit, or 1.98 trillion rubles. All other sectors accounted for a mere 46 billion rubles of net profit. If only net profit is taken into account as the outcome of domestic business activity, there are, essentially, no other industries in Russia.
According to Oleg Buklemishev, director of the Economic Policy Research Center at the Moscow State University economics department, the date once again reveal the key story of the interaction between the Russian economy and the state, the agent that redistributes oil revenues.
“The whole history of attempts to diversify the economy has come precisely to this,” says Buklemishev.
This once again confirms that talk of diversifying the economy has just been talk, he adds.
Andrei Movchan, director of the Economic Policy Program at the Carnegie Moscow Center, thinks there is nothing unusual about all this.
“Russia is an exporting country, and all other sectors of industry dwell in the shadows of the oil industry,” he says.
According to Movchan, this is particularly noticeable during a crisis, when currency prices for commodities continue to allow the oil sector to profit.
The oil and gas sector’s net profit in 2013 was also huge, but not to the same extent. Then it amounted to 79.2% of the overall net profit of companies listed in the RBC 500.
“The devaluation of the ruble is having an impact,” explains Natalya Orlova, chief economist at Alfa Bank.
Oil and gas companies, which sell their products for hard currency, have weathered the collapse of the national currency better.
Buklemishev draws attention to the fact that the beginning of 2014 was generally good for the economy, and the effect of the sanctions and falling oil prices began to impact Russian business in the second part of the year. As late as June 2014, Brent crude oil cost $114 a barrel, which helped the oil sector show good results.
It is all a matter of revalued hard currency, argues Oleg Vyugin, board chairman of MDM Bank.
“Oil companies are chockablock with hard currency,” he says by way of explaining their brilliant 2014 results.
It is no wonder the most profitable company was Surgutneftegaz. Due in large part to its revalued hard currency savings, it made 885 billion rubles of net profit, 43% of all profits among the RBC 500.
Crisis More Noticeable
Falling corporate profits among the RBC 500 companies reveal the crisis more vividly than official data. Profits fell by nearly half (45%) from 2013 to 2014: from 3.7 trillion rubles to 2 trillion rubles. However, according to Rosstat’s data, in 2014, profits of Russian companies fell by a mere 10%, from 6.5 to 5.9 trillion rubles. Moreover, according to official statistics, 72% of companies were profitable, while 28% made a loss. Among the RBC companies, the split was slightly different: 81% were profitable, while 19% were loss making.
Movchan argues the difference in the numbers may be due to several factors. There is a “sector bias” in the rating of the largest companies. By the end of 2014, the crisis had not yet reached several sectors, for example, the service sector, which is not represented in the rating due to the absence of large companies there. Buklemishev says the more noticeable drop in profits among RBC 500 companies speaks to the fact that business has been going through difficult times.
“Profit is still a controllable variable, and in a bad situation corporations might try and show less profit in order to pay fewer taxes,” he argues.
But a revenue growth of 14%—the RBC 500 companies earned 56 trillion rubles in 2014—is merely the outcome of high inflation.
“It is practically zero in terms of tangible results,” says Movchan.
Oleg Vyugin agrees with him. According to Rosstat, inflation in 2014 was 11.4% and GDP grew by 0.6%.
“The RBC 500 data, which show a slight real growth in revenue and a fall in profits, correspond broadly to the situation in the economy,” he argues.
There are a few other things worth remarking on in the RCB 500 rating. In terms of revenue (or rather its equivalent, operating income), the financial sector came in second place after oil and gas. Banks and financial companies earned 6 trillion rubles in 2014, outpacing metals and mining. It would seem that a good result for the financial sector testifies to the diversification of the oil economy.
Movchan and Buklemishev note, though, that the financial system is a function of cash flows from the oil industry, just like, however, transport and retail trade. According to Buklemishev, in 2015, the performance of banks will not be so impressive, and the sector itself will make a loss. (In 2014, the banks and financial companies in the RBC 500 showed a profit of 13.1 billion rubles.)
Another trend economists are watching is the strong growth and high net profit margins (the ratio of net income to revenue) in the Internet and online retail sector (e.g., Yandex, Yulmart, Mail.Ru Group, and Wildberries). Here, net profit is more than 50% of revenue. The telecommunication sector has also performed well in terms of profitability (11%). With a profit margin of 10%, the oil and gas industry is only in third place.
The growth of e-commerce is, apparently, one of the few trends showing that a market economy can develop normally in Russia. Oleg Kuzmin, chief economist at Renaissance Capital, argues that growth in this sector is quite understandable: cash flows from the ordinary goods and services sector are being redirected to the Internet. Another reason is that the public has been attempting to reduce its expenditures by buying cheaper goods on the web. It is no wonder that economists have pointed out the low profit margin in the retail segment—3.5% in 2014.
It is interesting to see what yields more profit to foreign companies operating in Russia. Last year, they received 7.2 trillion rubles in revenue here and earned 211 billion rubles in profit. Despite the low margins, most of their profits came from retail trade (17%), the production and sale of alcohol and tobacco (17%), and finance (10.8%). How is that not a diversified economy within Russia’s oil economy?
Translated by the Russian Reader
Russia rejects criticism of greenhouse gas plan, will not amend – top Putin adviser
September 23, 2015 Reuters
MOSCOW, Sept 23 (Reuters) – Russia has rebuffed calls for a more ambitious plan to cut its carbon dioxide emissions after environmentalists branded its current pledge inadequate and backward looking.
The world’s fourth largest emitter of greenhouse gases, Russia pledged in March to keep its emissions at 25–30 percent below the level it generated in 1990, the year before the Soviet Union and its vast industrial complex collapsed.
Green groups say the pledge, made ahead of a global warming summit in Paris in December, is far too easy for Moscow to fulfill because 1990 was a time when Soviet industry was a notoriously prolific polluter whereas Russia’s industrial base today is much smaller.
A group of four global climate research groups, known collectively as Climate Action Tracker, have rated Russia’s pledge as ‘inadequate’, worse than the ‘medium’ assessment they have handed out to other big polluters such as China, the United States and the European Union.
But President Vladimir Putin’s top adviser on global warming dismissed such criticism during an interview on the sidelines of a Moscow meeting of the United Nations’ International Panel on Climate Change this week.
“It is their opinion, it does not reflect anything and is not objective,” Alexander Bedritsky told Reuters, saying Russia would stick to its current plan.
“They can say whatever they want, but our commitments are based on around 70 scenarios of how the climate system will be developing.”
It is unfair to compare the Kremlin’s commitments to those of developed economies such as the United States or European Union member states because Russia is still an economy in transition, he added.
Russia’s pledge stresses the importance of increasing energy efficiency and boosting the use of renewables.
“If the contribution of Russian forests is fully taken into account, limiting greenhouse gas emissions to 70-75 percent of 1990 levels by 2030 does not create any obstacles for social and economic development,” it says.
With its gigantic reserves of oil, gas and coal, Russia emits 2 gigatonnes of CO2 equivalent a year, making it the fourth largest producer of greenhouse gases after the United States, China and India.
According to Greenpeace, 85 percent of CO2 equivalent emissions in Russia come from its energy industry.
They and other green groups say Russia’s current programme is far too unambitious because the Soviet Union was on the brink of collapse in 1990—the year the programme is pegged to—and its greenhouse gas emissions therefore fell sharply as the country’s industrial base shrank.
“This pledge is a tragedy, a catastrophe,” said Vladimir Chuprov, head of Greenpeace’s energy programme.
“With this 25–30 percent commitment they are basically saying: ‘Guys, we’re staying in the 20th century with our carbon-centered technology’.”
Chuprov and fellow environmentalists want Russia, the world’s biggest country by territory, to do much more, noting that its richest company—state-owned Gazprom—is the world’s leading corporate emitter of greenhouse gases.
Specifically, Chuprov says Russia needs to expand its use of renewable energy and try to develop new power generating technologies or risk missing out on another technological revolution.
Currently, Russia gets 90 percent of its energy from carbon fuels such as oil, gas and coal, Chuprov said. Green groups estimate that only around 1 percent of the country’s energy needs comes from renewable sources.
Green groups such as Greenpeace or the World Wildlife Fund complain that central government in Russia does not consult them enough when it comes to formulating climate change policies.
Under its existing plan, Russia would fail to meet the goal set out by the United Nations’ International Panel on Climate Change to cut emissions to 50–80 percent below 1990 levels by 2050, he said.
Bedritsky said Russia was already making good progress and that its greenhouse gas emissions would peak at 25 percent below 1990 levels by 2020. They will then fall or stay flat until 2030, he added.
“Our preparations for the (Paris) summit are not just good, we have achieved excellent results, announced our commitments on time up until the year 2020, and until 2025 and 2030,” said Bedritsky. “We will definitely fulfill our promise.”