Vladislav Inozemtsev: The Foreign Agent in the Kremlin

lakhta wreck

The Foreign Agent in the Kremlin
Vladislav Inozemtsev
The Insider
December 31, 2019

One of the crucial events of the past year was passage of the law on labeling Russian nationals as “foreign agents.” Although the law emphasizes that such “agents” should disseminate information from foreign media outlets and receive financial remuneration from abroad, the notion of “foreign agent” has a quite definite meaning for most Russians: someone who works on behalf of a foreign government to the detriment of their own country.

However, if you think hard about the new law and its implementation (the Justice Ministry has been charged with designating individuals foreign agents, but citizens and NGOs will probably also be able to take the initiative), the first thing that comes to mind is the man who signed it so showily into law on December 2—Vladimir Putin, president of the Russian Federation, who took office exactly twenty years ago today, albeit as acting president.

When Putin moved into the Kremlin, Russia was successfully emerging from an economic crisis triggered by a sharp drop in oil prices in the late 1990s and the ruble crisis of 1998. These two events largely brought to a close the aftermath of the Soviet Union’s collapse and the transition from a planned economy to a market economy. Welcoming the new president, people believed him when he said, “The country’s future, the quality of the Russian economy in the twenty-first century, depends primarily on progress in those industries based on high technology and hi-tech products,” while the world took him at face value when he claimed, “Today we must declare once and for all that the Cold War is over. We abandon our stereotypes and ambitions, and henceforth we will jointly ensure the safety of the European population and the world as a whole.” It seemed that the coming decades should be extremely successful ones for Russia, and the country would inevitably takes its rightful place in the world economy and politics. However, events unfolded following a different scenario, and nearly all the trends that we can now ascertain as well-established suggest that if a CIA officer had taken charge of his country’s recently defeated enemy he would have done less damage to it than Putin has done.

First, Russia in the early noughties had very low labor costs: according to Rosstat, the average salary was $78 a month in 2000. Given that energy prices in Russia were then seven to ten times lower than in Europe, it was self-evident the country should decide to undertake large-scale industrialization by attracting foreign investors. The Central European countries, which in the late nineties and early noughties became successful industrial powers by attracting European capital (we can recall what happened with Škoda’s factories) were an example of the strategy’s wisdom.

However, despite what Russian authorities said at the time, preventing foreign capital from entering strategic industrial sectors became policy. Almost immediately after Putin came to power, the government began renationalizing assets that had been privatized in the nineties: instead of raising taxes on companies owned by Russian oligarchs, the regime commenced buying them out, constantly ratcheting up the price, culminating with Rosneft’s purchase of TNK-BP for $61 billion in 2013. In fact, taxes raised from the competitive sectors of the economy and redistributed through the budget went to buy assets in the extractive sector and were invested in rather dubious projects. Consequently, by the early teens, the share of raw materials (mineral products, ore, and metals) in Russian exports had reached 79–80%, as opposed to 50.4% of Soviet exports in 1989. Finally, in recent years, Russia has begun “diversifying” its raw materials exports by reaching out to China, effectively becoming an “energy appendage” not only of Europe but also of the whole world.

Second, as the economy became ever more dependent on extractive industries, Russia under Putin began to deindustrialize rapidly, resulting in a sharp decline in the demand for skilled workers, who could have been employed to develop the country on new foundations. According to various estimates, 16,000 to 30,000 industrial enterprises, which had employed over 13 million people in the late-Soviet period, were closed between 2000 and 2018. As of 2017, 9.9 million people were employed in Russian processing industries, as opposed to 21.7 million people in the RSFSR in 1989, although there was no significant increase in labor productivity. We can concede, of course, that a good many of these enterprises were not competitive, but most of them were never put up for auctions in which foreign investors were allowed to bid, the Russian government did not provide potential investors guarantees on investments in technically modernizing enterprises, and so on. Essentially, the government adopted a consistent policy of simplifying the industrial infrastructure, increasing dependency on imports, and most significantly, downgrading whole cities that had previously been important industrial centers. It would be no exaggeration to say that the bulk of Soviet industrial enterprises was destroyed not in the “accursed nineties,” but in the noughties and the early teens.

Third, the process went hand in glove with a demonstrative lack of attention to infrastructural problems and managing Russia’s vast expanses. About 700 airports were closed between 2000 and 2010, domestic passenger traffic dropped below international passenger traffic, and so many roads fell into disrepair and collapse that since 2012 city streets have been counted as roads in order to buff up the statistics. Infrastructure projects have been concentrated either in Moscow (e.g., the Moscow Ring Road, the Central Ring Road, expansion of the Moscow subway) or on the country’s borders as a kind of exercise in “flag waving” (e.g., Petersburg and environs, Sochi, Chechnya, the Crimean Bridge, the reconstruction of Vladivostok and Russky Island).

Consequently, rural settlements have begun dying out massively in most regions of the country: since 2000, around 30,000 villages in Russia have disappeared, and nearly 10,000 of them have eight or fewer residents. The number of residents in cities with populations ranging from 50,000 of 200,000 people has decreased: population reductions have been recorded in 70% of these cities, while the population has dropped by a quarter in more than 200 such cities. There has been a massive exodus of people from the Russian Far East.  Even the solution of longstanding problems that were handled for better or worse in the nineties has been abandoned, including disposing solid wastes, minimizing harmful emissions, and storing hazardous industrial waste. Russian infrastructure is close to collapse: depreciation of the power grids exceeds 70%, while 75% of the heating network is obsolete. Only 52.8% of local roads meet Russia’s poor standards. All attempts to remedy the situation are propaganda tricks more than anything, and yet budget funds for infrastructure are allocated regularly, just as taxes are collected from the populace.

Fourth, despite formal achievements, such as increasing life expectancy and reducing per capita alcohol consumption, the nation’s physical and mental health is verging on the disastrous. From 2000 to 2016, the number of HIV-infected Russians increased almost twelve times, reaching 1.06 million people, meaning that the threshold for an epidemic has been crossed. Spending on health care has remained extremely low. It is usually measured as a percentage of GDP, but a comparison of absolute figures is much more telling: in 2019, the government and insurance companies allocated only 23,200 rubles or €330 for every Russian, which was 14.2 times less than in Germany, and 29 times less than in the US, not counting out-of-pocket expenses.

Despite the huge influx of immigrants and migrant workers during Putin’s rule, the population of Russia (without Crimea) decreased by 2.7 million people from 2000 to 2019. Drug addiction has been spreading rapidly, becoming one of the leading causes of death among relatively young people in small towns. And yet the authorities see none of these things as a problem, limiting access to high-quality foreign medicines and accessible medical care (the number of hospitals has been halved since 2000, while the number of clinics has decreased by 40%), all the while believing the HIV crisis can be solved by promoting moral lifestyles. There is little doubt that Russia’s population should began dying off at a furious pace now that the reserves of economic growth have been exhausted.

Fifth, the formation of a bureaucratic oligarchy, able to appropriate at will what the authorities see less as “public property” and more as “budget flows,” has generated enormous corruption and blatantly inefficient public spending. A sizeable increase in spending on the space program—from 9.4 billion rubles in 2000 to 260 billion rubles in 2019—producced a drop in the number of successful launches from 34 to 22. Despite promises in 2006 to build almost 60 new nuclear power units, only 12 units have been brought online over the last twenty years. Programs for growing the military-industrial complex have not been consistently implemented: production of new weapons has been minuscule, amounting to only ten to twenty percent of Soviet-era production. The country’s only aircraft carrier has for the second time suffered combat-like damage during an “upgrade,” while its only 4.5-generation fighter has just crashed during a test flight.

The latest challenges posed to Russia by the development of information technology around the world have elicited no response whatsoever from the regime. On the contrary, the bureaucrats and siloviki have consistently acted to discourage researchers and innovators. The dominance of the siloviki in most government decision-making, their utter lack of oversight, and unprecedented incompetence have meant that much of the money that could be used effectively in the military sector and open up new frontiers for Russia has been simply been embezzled.

Sixth, Putin’s rule has been marked by the impressive “gifts” he has made to countries which the Kremlin has often identified as potential enemies. Around $780 billion was spirited from Russia between 2009 and 2019, whereas less than $120 billion was taken out of the country during the entirety of the nineties. The most important cause of this outflow was a law, passed in 2001, establishing a nine-percent tax on dividends paid to “foreign investors” or, rather, the offshore companies registered as owners of Russian assets. (The subsequent abolition of this measure in 2015 has changed little.) Much of this money was invested in passive sources of income in the west or spent on the luxurious lifestyles of Russian billionaires, thus supporting local economies in other countries.

Even more “generous,” however, was Putin’s gift to west in the form of the four million Russian citizens who have left Russia during his presidency: mainly young and middle-aged, well-educated, willing to take risks and engage in business, they now control assets outside the country that are comparable to the Russian Federation’s GDP. This wealth has been generated from scratch by talented people the Russian regime regarded as dead weight. The destruction of human capital is the biggest blow Putin has dealt to Russia, and it is no wonder western analysts argue Russia will need a hundred years at best to bridge the emerging gap.

Seventh, we cannot ignore the holy of holies: national security. We have already touched on the military sector in passing. It is a realm in which technological progress has largely boiled down to showing cartoons to members of the Russian Federal Assembly: space launches are still carried out using Soviet Proton rockets, designed in the sixties; the last of the Tu-22M strategic bombers rolled off the line in 1993; the Su-57 is based on groundwork done while designing the Su-47 during the late eighties;  and the advanced Angara (S-200) missile was developed as part of the Soviet Albatross program from 1987 to 1991. Things are no better in the secret services: agents sent on secret missions set off Geiger counters, like Lugovoy and Kovtun, blow their cover wherever they can, like Mishkin and Chepiga, or get caught in the act, as was the case with Krasikov.

The elementary inability to carry out their work in secret is the height of unprofessionalism: a handful of journalists can dig up nearly all the dirt on Russian agents, using information freely available on the internet. The same applies, among many other things, to the downing of Malaysia Airlines Flight 17 over the Donbass and the regime’s use of unprofessional, incompetent mercenaries from various private military companies.

Finally, eighth, President Putin’s foreign policy deserves special attention. Over the past ten years or so, the Kremlin’s own efforts have led to the creation of a buffer zone of neighboring countries that fear or hate Russia. If something like this could be expected from the Baltic states, which sought for decades to restore the independence they lost in 1940, no one could have imagined twenty years ago that Russia would make Georgia and Ukraine its worst enemies. However, our country’s principal “patriot”—whose daily bedtime reading seemingly consists of the works of Zbigniew Brzezinski, who once argued that Russia’s “imperial backbone” would be broken only when it lost Ukraine once and for all—has consistently sought to make Kiev recognize Moscow as its principal existential threat.

Similar sentiments have emerged in Minsk, where the authorities and populace of the country that suffered the greatest losses in the Great Patriotic War for the sake of the Soviet Union’s common victory have been nearly unanimous in their opposition to further rapprochement with Russia. We won’t even mention Russia’s damaged relations with the US and the EU: at the behest of Moscow, which is immeasurably weaker than the collective west, a new cold war has been launched that the Kremlin has no chance of winning but that could lead Russia to the same collapse suffered by the Soviet Union during the previous cold war. Meanwhile, Moscow’s hollow propaganda and its theatrical micro-militarism have been a genuine godsend to western military chiefs, who have been securing nearly unlimited defense budgets, just like the designers of advanced technology, who have been developing new weapons and gadgets in leaps and bounds.

I will not catalogue the current president’s other achievements—from destroying the Russian education system and nourishing a cult of power in society, thus generating a crisis of the family, to undermining Russian federalism and nurturing an unchecked power center in Chechnya. I will only emphasize once again that not just any foreign agent, after spending decades infiltrating the highest echelons of power in an enemy country, would be able to inflict such damage. I don’t consider Putin a foreign agent in the literal sense of the word, of course, but if it is now comme il faut in Russia to identify those who are working, allegedly, for hostile powers and thus inflicting damage on their own country, it is impossible to ignore what Putin has done over the past twenty years.

The current head of the Russian state should have a place of honor on the list of “foreign agents,” just as “Party card number one” was always reserved for Lenin in bygone days. And the west should be advised not to seek to undermine Putin’s regime but, on the contrary, do its utmost to extend his term in the Kremlin, simply because as long as Russia is so inefficient, backward, and profligate it poses no threat to the rest of the world, however much the strategists at the Pentagon try and convince the top brass otherwise.

Photo and translation by the Russian Reader

A History of Violence

autumn colors.jpgSpontaneous car park amidst the rubble on the corner of Kirochnaya and Novgorodskaya Streets, Petersburg, 12 October 2018. Photo by the Russian Reader

Since I had made nearly a dozen trips to and from the Interior Ministry’s Amalgamated Happiness Center this past summer to get my papers in order, I must have passed through the nearby intersection of Kirochnaya and Novgorodskaya Streets just as many times. So, when I happened on the bizarre autumnal scene, picture above, at the same corner yesterday evening, I was befuddled. What had happened here? I could not recall its having looked like this, as if a bomb had been dropped on it a month or two ago.

Fortunately, my friend AC came to the rescue, sending me the following, all-too-typical journalistic account of what happened on the corner of Kirochnaya and Novgorodskaya this past summer.

This is only a single episode in a much larger history of violence, the story of how Petersburg’s bureaucrats-cum-capitalist sharks-cum-property developers have demolished large parts of its historic center, a Unesco World Heritage Site, to satisfy their greed, and how the city has been turned ugly by their lawless exertions in so many spots that all of us who love Petersburg have long ago lost count of the dead and wounded. {TRR}

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Demolition of Garages near Nevsky Town Hall: As If a Mongol Horde Had Swept Through Petersburg 
Have Officials of the Smolny Trashed a Car Park for War Veterans That Existed 60 Years on Behalf of Oligarch Samvel Karapetyan?
Nikolai Pechernikov
Interessant
August 31, 2018

A conflict over the car park on the corner of Kirochnaya and Novgorodskaya Streets that had lasted for years ended recently in a total victory of officials over ordinary citizens. The garages in the car park, allocated to World War Two veterans in the 1960s by the Smolny District Party Council, were not merely demolished. They were swept from the face of the earth, as if they had been located on enemy territory, in a fortified area that was finally mopped up by friendly forces.

Garage Owners? Get the Hell Out of Here!
In photos taken by an Interessant correspondent from a neighboring block of flats, the pogrom unleashed in the car park by the tough guys from the St. Petersburg Center for More Effective Use of State Property is apparent. A quiet corner in downtown Petersburg has been turned into gigantic rubbish heap. The pavement is chockablock with pieces of wrecked garage roofs, tires, car parts, and broken furniture.

The garage owners, who had not wished to exit their car park meekly, but had filed lawsuits, have been punished with all severity. Their belongings have been tossed out of the garages, broken, and dumped in heaps. The people who carried out this mopping-up operation had probably wanted it to be demonstrative: this is what happens to anyone in Petersburg who gets it in their head to take the moral high ground and try and defend their rights.

The rubbish heap that residents of Kirochnaya and Novgorodskaya Streets can see from their windows is a distressing sight. It looks as if Mamai and the Golden Horde had swept through Petersburg. Most important, over the last few days, it has occurred to none of the responsible parties to clean up the area they mopped up. Apparently, the rubbish heaps will now lie there for several more months.

This barbaric, shameful rubbish heap, the aftermath of a car park’s demolition, testifies to the fact that Petersburg city officials care not a whit for the city’s reputation or their own reputations. Photo courtesy of Interessant

There had been several previous attempts to squeeze out the war veterans and their heirs from the land plot on which the now-demolished garages had stood. In 2016, for example, a tractor demolished the entrance gate to the car park. When the gate was lying on the ground, the tractor drove back and forth over it, flattening the gate ever more convincingly, as if it were doing a victory lap. But the special op ended in mid-sentence as it were. Now, however, it has finally been completed.

Samvel Karapetyan? Welcome!
On whose behalf have officials of the Smolny [Petersburg city hall] been making such efforts? Who means more to them than the people who built garages on the plot back in the day on completely legal grounds?

Allegedly, the plot will be ceded to companies belonging to Samvel Karapetyan, president and founder of the Tashir Group, one of the largest property developers in Russia. Unlike the mopped-up veterans and their heirs, Mr. Karapetyan is quite wealthy. As of late 2017, according to Forbes, he had an estimated net worth of $4.5 billion. Bloomberg recently included him in its index of the world’s five hundred wealthiest people.

Petersburg officials cannot directly gift the plot on the corner of Kirochnaya and Novgorodskaya to Mr. Karapetyan, of course. According to our information, it will probably be transferred to Dargov Cultural Center LLC or Slovak House LLC, companies linked to a network of commercial organizations directly connected to RIO, a chain of shopping malls owned by Mr. Karapetyan’s business empire.

What Will Be Built on the Lot? A Shopping Center? Or a Huge Block of Flats?
The lot at the corner of Kirochnaya and Novgorodskaya would be a quite attractive site for yet another shopping center. It is literally a stone’s throw from Nevsky Town Hall [Nevskaya ratusha], where a considerable number of officials from Petersburg city hall will soon be moving. The entire neighborhood now consists of luxury blocks of flats in which only very wealthy people can afford to live. Thus, a RIO Shopping Center on Kirochnaya (if Mr. Karapetyan actually plans to build one) would not only be located close to city officials but would also be a kind of tool for influencing them.

According to other sources, the plot could be redeveloped into a huge block of flats. Officials, businessmen, and lobbyists no doubt would like to move in next door to Nevsky Town Hall. It would be a question of prestige to many of them.

Either project would be highly profitable to the people who implement it, and experienced officials are also probably eagerly poised to pounce on it. They have a nose for such deals.

When so much moolah is at stake, no one has the time of day for the rubbish heap left in the aftermath of the car park’s destruction, a sight that brings shame on Petersburg.

Translated by the Russian Reader

Sanktsionshchiki

sankts“Sanctioned product”

The Demand for Sanctions Specialists Has Grown in Russia
Svetlana Romanova
RBC
November 9, 2017

According to recruiting agencies and job search sites, he Russian job market has seen a growing demand for employees who understand the ins and outs of sanctions legislation.

According to Headhunter.ru, there were 27 published vacancies for sanctions specialists in October 2017; there were a mere nine vacancies in October 2014. Sberbank, VTB, UniCredit, Raiffeisen, Globex, and the Russian Regional Development Bank are among the companies now recruiting these specialists.

It is not only banks that have been generating the demand (they account for 44% of all vacanies) but also law firms (21%), accounting firms (11%), and insurance companies (10%). Starting pay is 250,000 rubles a month [approx. 3,600 euros a month], but experienced specialists can count on monthly salaries of 500,000 rubles, we were told by the personnel agencies we interviewed.

Vacancies advertised on websites are only the tip of the iceberg: headhunters are usually employed to find sanctions specialists. The first request for a sanctions specialist to the recruiting agencyHays was made by a major private Russian bank in late 2014, said Darya Anikina, managing consultant for financial institutions at Hays. Currently, the agency selects candidates for at least five positions a month at different companies. Our sources at the agencies Cornerstone, Kontakt, and Unity also told us about a deficit of sanctions specialists.

“The profession doesn’t exist officially. It’s not taught anywhere,” said Yuri Dorfman, a partner at Cornerstone.

Headhunters have to make compromises and use their imaginations. For example, Cornerstone recently succeeded in placing a specialist at a bank. At his previous job, he had been employeed preventing money laundering, and monitoring and stopping illegal financial transactions. Sanctions specialists are also aware of the demand and have been making the most of it. When moving to a new company, they ask for at least a thirty or forty percent raise, rather than the customary twenty percent raise.

Whereas sanctions specialists are sought out by banks and legal firms, the consumer goods retail sector has been vigorously looking for specialists to help it get round the Russian Federation’s countersanctions, meaning specialists in logistics and foreign trade. According to the website Superjob, the salaries for such vacancies increased by 18% in 2017.

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Sanktsionshchiki: Who Recruiting Agencies Are Hunting Nowadays
Svetlana Romanova
RBC
November 9, 2017

The Russian labor market’s demand for sanctions experts has been growing. People who practice this new, rare profession earn between 250,000 and 500,000 rubles a month, and employers have been headhunting them with a vengeance.

Since March 2014, the US, the EU, and other countries have been continously imposing more and more sanctions on Russian nationals, companies, and individual industries. This has provoked a demand for sanctions experts on the Russian jobs market. Some companies simply cannot do without their assistance. According to headhunters, there is a lack of such specialists. Employees who have improved their qualifications and learned how to deal with the restrictions and risks occasioned by sanctions can count on salary increases of thirty to forty percent.

Sanktsionshchiki
In March 2014, 46-year-old Artyom Zhavoronkov, a partner at the legal firm Dentons who specializes in mergers and acquisitions, was planning to travel to Washington, DC, to give a lecture to an American audience about how to build a business in Russia. But since the US had imposed the first set of sanctions against Russia [sic], the Americans cancelled the lecture. Zhavoronkov kept his head and suggested changing the subject of the lectures. He decided to talk about something more topical: the sanctions and their consequences. Ultimately, the lecture took place, and it was standing room only in the auditorium. It was then that Zhavoronko understood he had found a new business niche: legal advices on issues related to sanctions. Currently, he consults twenty to thirty international and Russian clients monthly.

Recruiting agencies received the first requests for sanctions specialists in the spring of 2014, but by the autumn of 2017 the demand for such specialists had become stable. The demand has grown not only for temporary consultants like Zhavoronkov: many companies seeks to hire in-house specialists. According to HeadHunter.ru, its website listed nine such vacancies in October 2014. By October 2017, that number had grown to 27. Candidates are usually expected to have degrees in law or finance, a good command of English, and a high tolerance for stress.

This is the tip of the iceberg, because companies usually employ headhunting agencies to find sanktionshchiki. Russian ompanies have realized no one is going to cancel the sanctions anytime soon, the lists of sanctioned companies and individuals have been expanding, and so the problem will not solve itself.

The first request for a sanctions specialist to the recruiting agency Hays was made by a major private Russian bank in late 2014, said Darya Anikina, managing consultant for financial institutions at Hays. Currently, the agency selects candidates for at least five positions a month at different companies. Compared with other professionals, this is a tiny figure, but for the time being they are all that is needed. In a company that employs a thousand people, there might be three or four such specialists, but they will earn more than their colleagues.

Who and What Banks Are Looking for

Vacancy: Specialist for international sanctions monitoring group

Duties: Vetting of bank clients and transactions against the lists of international sanctions, as imposed by the US, EU, UN, and other in-house lists. Search and analysis of additional information on the internet and the bank’s internal databases in order to analyze automatically generated warnings regarding the bank’s clients and transactions. Drafting of brief, well-argued analyses of automatically generated warnings. Filing of reports.

Requirements: Tertiary degree in economics, finance or law. No less than six months’ experience working in a credit institution. Experience working with automated banking systems. Command of written and spoken English at the intermediate level is obligatory. Ability to cope with large amounts of routine work. The candidate must be detail-oriented, focused, perseverant, able to learn quickly, proactive, diligent, and well-spoken.

Sourcejob listing on the website Headhunter.ru

Banks on the Hunt
Artyom Zhavoronkov provides sanctions-related legal services. He establishes whether the owner of a company with whom his client plans to make a business deal is not on the sanctions lists, and he drafts supply contracts that account for international restrictions. But he also provides more ambitious services. Recently, Zhavoronkov drafted a plan for an oil company: he conceived and drafted an in-house list of “sanctions” rules. For example, Zhavoronkov devised a special algorithm for sale managers that prevents them from making deals with companies and individuals on the sanctions list.

“If questions arise, sales managers contact legal counsel, and together they decide whether they can sign a contract,” Zhavoronkov explained.

Most of all, Zhavoronkov is proud he succeeded in getting a major company off the sanctions list. (He did not name the company, citing a nondisclosure agreement.) He conducted long negotiations with regulators, trying to prove to them that the circumstances that had led to his client’s ending up on the sanctions list had changed. Although the US Treasury Department’s Office of Foreign Assets Control (OFAC) has not made public a single instance in which the US has taken Russian companies off the sanctions lists, there have been precendents in other countries. In September 2014, Canada removed sanctions from two Russian banks, Expobank and Rosenergobank, acknowledging they had been placed on the sanctions list mistakenly.

The services of sanctions experts are needed by investment funds, including ones run by major banks, and the management companies of oligarchs who have been sanctioned, said Zhavoronkov.  There is also demand from consulting companies. However, judging by job search websites, it is Russian banks that are most in need of employees versed in the ins and outs of sanctions. Since 2014, banks have accounted for 44% of such vacancies on HeadHunter.ru, with legal companies coming in second at 21%.

Recently, two vacancies were posted by the country’s largest bank, Sberbank. It seeks two experts for its international sanctions monitoring group. The specialists must prepare opinions on transactions and operations, that is, check whether they are covered by the sanctions imposed by international organizations and individual governments, consult with employees, and respond to their requests. Sberbank refused to tell us whether it had succeeded in filling the positions.

Other financial institutions have placed help wanted ads on HeadHunter.ru: VTB, UniCredit, Raiffeisen, Globex, and the Russian Regional Development Bank. None of them agreed to talk with us on the record. RBC’s sources at a major state bank confirmed they have a full-time sanctions specialist on staff. But the source refused to provide details, adding that no one wants to talk about it publicly, since the “topic is painful and nothing to brag about.”

Russian financial institutions that have been sanctioned need specialists to keep from having even more serious restrictions imposed on them and avoid jeopardizing their business partners.

Banks that have not been blacklisted need such specialists to avoid violating the sanctions by working with counterparties. Otherwise, they can also have their access to western loans cut off. Primarily, this concerns the top one hundred financial institutions in terms of assets. It is they who hire sanctions specialists, said Roman Kuznetsov, senior analyst at the investment company QBF. Each major bank has a few sanctions specialists, said Andrei Zakharov, director of the financial institutions personnel recruiting department at Kontakt.

Experience Is More Important than a Diploma
Of course, not a single Russian university educates sanctions specialists, nor are there any continuing education courses on the topic as of yet. Everything has to be learned on the job. Successful candidates for sanctions specialist jobs usually have three or four years’ experience working in legal compliance or auditing departments of banks. Candidates with other financial backgrounds are considered less often, said Darya Anikina.

Dentons employs 200 attorneys. Aside from Zhavoronkov, however, only two of his colleagues, both of them under thirty, deal with sanctions-related cases. Zhavoronkov is their mentor. He made it his goal to cultivate these unique specialists in firm. Currently, there are very few experienced employees who understand the intricacies of the sanctions. Three and a half years have passed since the first sanctions were imposed. This is too short a time to form a pool of specialists.

Unlike the Russian labor market, the specialization has existed on the American job market for several decades. Sanctions compliance in the US is an entire niche business, claimed Zhavoronkov. The staff of any American law firm usually has one such specialist. His or her work is considered routine.

According to Bloomberg, the demand for sanctions expertise in the US grew in 2014. American companies frequently hired former officials from the Treasury Department, who were involved in drafting most of the restrictions. For example, until 2014, Chip Poncy was head of the unit for combating the financing of terrorism and financial crimes at the Treasury Department, but after the first sanctions against Russia [sic] were imposed, Poncy founded Financial Integrity Network, which helps businesses deal with the restrictions.

The costs of making a mistake can be quite hefty. For example, the French bank BNP Paribas agreed to pay $8.97 billion in fines after it was discovered it violated sanctions regimes between 2004 and 2012, when it did business with individuals and companies from Sudan, Iran, and Cuba, which have been sanctioned by the US.

The Reverse Side of the Sanctions
Whereas banks and legal firms have been seeking sanctions specialists, the FMCG (fast-moving consumer goods) sector has been vigorously seeking people who can help them bypass the produce embargo imposed by Russia, that is, they have been seeking experts in logistics and foreign trade. According to the website Superjob, the job of foreign trade manager was among the top jobs in terms of salary increases in 2017. The starting salaries for such specialists have increased by 18% since the beginning of the year.

The Price Tag
None of the vacancies on HeadHunter.ru that RBC examined contained information on the salaries of sanctions specialists. However, recruiters says the starting salary of a specialist with little work experience is 250,000 rubles a month.

Nevertheless, it is difficult to fill the positions quickly, admitted Anikina. Nor is it always clear how and where to find the right people, Yuri Dorfman, a partner at the agency Cornerstone, agreed with Anikina.

“This is not marketing, where the process for filling jobs is clear and formalized. The profession doesn’t exist officially,” he said.

Recently, Cornerstone managed to find a specialist for the compliance department at a bank. At his previous job, he had been employeed preventing money laundering, and monitoring and stopping illegal financial transactions. Sanctions specialists, a new and rare breed, are also aware of the demand and have been making the most of it. When moving to a new company, they ask for at least a thirty or forty percent raise, rather than the twenty percent pay rise customary on the market.

Felix Kugel, managing director of the recruitment company Unity, sees an experienced attorney who has a thorough knowledge of corporate law as the perfect sanctions specialist. The salary of an employee like this could be around 500,000 rubles a month [i.e., over 7,000 euros; by way of comparison, according to the website Trading Economics, the average montly salary in Russia as of October 2017 was 38,720 rubles or 556 euros, although regular readers of this website will know that real monthly salaries are often much lower in particular occupations and regions—TRR].

It is unlikely sanctions specialists will be unemployed.

“I would be glad if the sanctions were lifted, despite the fact I earn money from them,” said Zhavoronkov, “but I am confident this won’t happen in the near future.”

Zhavoronkov recalls the Jackson-Vannick amendment to the Trade Act of 1974, which limited trade with countries that restricted emigration and violated other human rights, e.g., the Soviet Union, China, Vietnam, and Albania. It was officially abolished in 2012, although it had de facto ceased to function in 1987.

The new specialization will be in great albeit limited demand [sic] in Russia in the coming years, agreed Roman Kuznetsov. But additional knowledge about how the sanctions are structured would come in handy to all Russian banking, finance, and legal sector employees. Understanding the ins and outs of the sanctions means you have a good chance of increasing your salary by thirty to forty percent, we were told at Hays.

Restricted Area
The first set of sanctions, occasioned by the annexation of Crimea and the conflict in Donbass, were imposed by the US, EU, Australia, New Zealand, and Canada in mid March 2014. Since then, the black lists have expanded due to the inclusion of personal sanctions (directed at specific people and companies affiliated with them) and sectoral sanctions (directed against individual industries and activities), and other countries and international organizations have joined the sanctions regime. Currently, the US has sanctioned over one hundred Russian nationals and companies, not counting foreign companies connected with sanctioned Russians. The EU has sanctioned 149 individuals and 38 companies.

Five Russian banks with ties to the Russian state have been sanctioned: Sberbank, VTB, Gazprombank, Rosselkhozbank, and Vnesheconombank. These financial institutions are not eligible for long-term financing abroad, and US and European investors are forbidden from buying shares and Eurobonds from these banks. In addition, the US has banned doing business with 33 companies in the Russian military-industrial complex, including Kalashnikov, Almaz-Antey, Rosoboronexport, Rostec, United Aircraft Corporation, and Russian Helicopters. The oil and gas industry is represented in the black lists by Rosneft, Transneft, Gazpromneft, NOVATEK, Gazprom, and Surgutneftegaz. The US and UE have imposed sanctions not only on banks, military-industrial companies, and oil and gas companies but also on completely “peaceful” firms, for example, the drinking water and beverage manufacturer Aquanika, a subsidiary of Gennady Timchenko‘s Volga Group.

In 2016, [former Assistant Secretary of State for European and Eurasian Affairs at the US Department of State] Victoria Nuland said in Kiev that the sanctions would not be lifted until Russia returned Crimea to Ukraine.

Translated by the Russian Reader. Photo courtesy of Stringer

Nice Work If You Can Get It

Oleg Derispaska
Oleg Deripaska. Photo courtesy of deripaska.com

“I believe that it takes just 100 people to change a country for the better provided that these people are driven professionals capable of creating something new. I am sure that in Russia there are far more than 100 such people, so let’s join forces and work together.”
Oleg Deripaska

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Deripaska’s Company Releases Sales Figures for “Olympic” Apartments
Natalya Derbysheva
RBC
May 27, 2016

sochi-olympic village marina
Mockup of the Sochi Olympic Village’s Coastal Cluster. Photo: Andrei Golovanov and Sergei Kivrin/TASS

Oleg Deripaska’s company RogSibAl has sold 20% of the luxury apartments it built on the Black Sea coast in Sochi for the Winter Olympics. The company believes this is a good result. 

RogSibAl, a subsidiary of Oleg Deripaska’s Basic Element, built 2,700 luxury  apartments on the Black Sea coast for the 2014 Winter Olympics in Sochi. Athletes lived in the apartments during the competition. According to Vnesheconombank, the project’s budget was 25.3 billion rubles, 22.3 billion rubles of which RogSibAl borrowed from Vnesheconombank.

The coastal Olympic Village is now known as the Imereti Resort District. It consists of four quarters, the Coastal Quarter, the Maritime Quarter, the Park Quarter, and the Reserve Quarter. Apartments are available for purchase in all four quarters. The price per square meter ranges from 152,000 rubles to 195,00 rubles [approx. 2,070 euro to 2,650 euros per square meter—TRR].

Since the apartments went on sale in 2013, 20% of them have been sold, a Basic Element spokesman told RBC, meaning that over 500 apartments in all have been sold. Basic Element’s spokesman added that the company had sold 118 apartments from January to May 2016.  The company plans to have sold 350 apartments for a total area of 25,000 square meters on the year.

Basic Element has been renting out the unsold apartments. According to the company’s spokesperson, the rental demand for the 2016 summer season is 97–100%.

The sales figures are worse than what Basic Element had planned in 2011. Igor Yevtushevsky, RogSibAl’s general director, had then told Vedomosti that the company was planning to sell 50% of the apartments before the start of the Olympics, and the other half in 2014–2015.

Basic Element’s spokesman said it would be unfair to compare current sales figures with projections made in 2011.

“The project has undergone big changes,” he explained.

The company cites data from the MACON Realty Group, according to which 387 business- and luxury-class real estate transactions were concluded in Sochi from January to May 2016, meaning that the Imereti District’s share of this business was 23%.

The government has discussed the conditions of restructuring the loans issued by Vnesheconombank for building Olympic sites, RBC’s sources told it earlier this week. A federal official explained that Deripaska’s companies were in the most complicated circumstances in terms of loans, since the demand for apartments was not great.

Sochi Olympic Village. Photo courtesy of Nikita Kulachenkov
Sochi Olympic Village. Photo courtesy of Nikita Kulachenkov

Basic Element has not disclosed the figures of the income from its sales of the properties. Its spokesman did say, however, that all the proceeds were being wholly turned over to Vnesheconombank in repayment of the loan and that RogSibAl had been fulfilling all its obligations to the bank.

Given that sales usually begin at the design and construction stage of a property, 20% sales in the second year after a property has been operation is hardly satisfactory, argues Marina Udachina, director of the Institute for Innovations, Infrastructure and Investments. According to her, the situation is partly due to a slowdown in economic growth and a reduction in the demand for luxury properties.

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Nikita Kulachenkov
Facebook
May 27, 2016

Only 20% of the apartments in the Olympic Village have been sold in two years.

Here is what we wrote about this a month before the Games:

“The site is being built by oligarch Oleg Deripaska, one of the few private investors in the Olympics. Only he is building with public money. Twenty-two of the twenty-five billion rubles in the project’s budget has been secured with a loan from state-owned Vnesheconombank. Derispaska’s company is planning to pay back this money by selling the village as a residential complex after the Games. It will be hard for them to find buyers. A single bed in the village costs as much as a two-room flat in Moscow.”

Of course, the crisis, sanctions, and being “surrounded by enemies” have inevitably led to a drop in demand for fairly pricey holiday apartments. On the other hand, this was offset by the fact that demand was supposed to shift to the domestic market from Greece, Cyprus, Turkey, and other countries where housing had become almost twice as expensive for Russians.

As a result, sales did not take off, which is a pity. I know that after the Games a good person, familiar to a lot of my people on my wall, worked on the project.

We can also add to this news the latest about Sberbank, which after agonizing for a long time has today finally sold the Mountain Carousel ski resort on the installment plan to the former governor and current minister Tkachyov* and his young but quite talented son-in-law. The joke there is that Sberbank invested 25 billion rubles into Mountain Carousel, while Vnesheconombank loaned it 55 billion rubles. Vnesheconombank fiercely resisted the sale, because it is one thing when Sberbank is in hock to you to the tune of 55 billion rubles, and quite another when it is Tkachyov and family. Apparently, Gref is tougher and stronger than the moribund Vnesheconombank, although it does not make our lives any easier.

Since for some reason business has not been booming at nearly all the former Olympic sites, the government has authorized the repayment of Olympic loans over a period of 25 years at a reduced 5% interest rate. And to keep Vnesheconombank from kicking the bucket altogether, the Finance Ministry will give it another 150 billion rubles straight from our pockets.

I probably do not need to remind you of the total amount that we, the taxpayers of the Russian Federation, paid for the construction of all these “great power” bells and whistles.

P.S. I’m going to do a little populism practice. Anyone in Russia want a twenty-five-year mortgage at five-percent interest? Ask Tkachyov, Potanin, Deripaska, and Vekselberg “how.” )))

Translated by the Russian Reader. Thanks to Alexei Navalny for the heads-up. This post should be read in tandem with my post for May 25, 2016, “The Decline Has Gone Uphill.”

* On August 2, 2012, Tkachyov announced plans to deploy a paramilitary force of Cossacks in Krasnodar Krai, beginning September 2012, as vigilantes to discourage internal immigration by Muslim Russians. In a speech to police, he stated, “What you can’t do, the Cossacks can. We have no other way—we shall stamp it out, instill order; we shall demand paperwork and enforce migration policies.”

Source: Wikipedia, New York Times

The Life of Eygeny

Evgeny Lebedev, publisher of The Independent
Evgeny Lebedev, publisher of The Independent

While having a gander this morning at how Novaya Gazeta, Russia’s premier liberal newspaper, has been covering the Syrian conflict in recent months, I stumbled across this op-ed piece, essentially an open letter to the British establishment, dated November 6, 2015. Published in the (mostly nonexistent) “English version” of the paper’s website and headlined “Britain must make Vladimir Putin an ally in the disaster that is Syria,” the piece is attributed to “Eygeny [sic] Lebedev, Publisher, The Independent, London.”

To cut to the chase, Evgeny Lebedev (his actual name) who has dual UK-Russian citizenship, it transpires in the piece, wants Britain to make common cause with Russia against the Islamic threat, to wit:

“There may be up to 7,000 Russian nationals who are in Syria as a result of being radicalized. Moscow, not a multicultural city in the way that London is, and run by an administration that is much more militarily decisive because it doesn’t put all big decisions to Parliament [sic], is clear: these terrorists must be killed, before they return to Russia to wreak havoc.

“On that point, Britain and Russia should be of like mind. We, too, know that there are many British citizens who have been radicalised and, for unfathomable reasons, decided to flee to this anarchic region and fight against all the things readers of this newspaper take for granted: democracy, peace, civilization.

“We have common cause with the Russians [sic], a common enemy. The biggest threat to humanity today is cancerous, Islamist ideology that is growing fast right across the world—one that claims, with what truth we don’t yet know, to be behind the weekend’s tragic plane crash in Egypt’s Sinai desert.

“Not for nothing did the head of our [sic] security services say last week that the terror threat in Britain is the highest it has been in his 32-year career.

“Destroying this cancer, or plague, at source could hardly be more worthwhile or urgent; and yet, rather than work with the Russians [sic] to do this, we seem intent on cutting ties instead.

“Britain should not be leaving it to the French to mediate between Russia and the West. For all the greatness of this island nation, for all its hard and soft power, there is a laxity in our [sic] approach to the Syrian crisis.”

If you want to find out more about the exciting life of the fine fellow who penned this, avail yourself of Wikipedia’s bio of the man.

I think your eyes should pop out of your head when you realize that the son of a KGB First Chief Directorate spy and Russian oligarch is nowadays a respectable man about town and media mogul in London, the exact same place where his wealthy dad used to do his spying back in the bad old days. But then again, neither you nor I are as worldly as publisher Lebedev and his dad, so what do we know?

Photo courtesy of Wikipedia