Everyones Wants to Like and Be Liked

Mail.ru Group Speaks Out against Punishments for Likes and Reposts
Company Proposes Changing the Law and Law Enforcement Practice
Olga Churakova and Yekaterina Bryzgalova
Vedomosti
August 6, 2018

Mail.ru Group не раз критиковала громкие законодательные инициативы, касающиеся интернетаMail.ru Group has repeatedly criticized high-profile law bills and laws affecting the internet. Photo by Yevgeny Yegorov. Courtesy of Vedomosti

Mail.ru Group, which owns the largest social networks in Russia, VK and Odnoklassniki [“Classmates”], has harshly condemned the practice of filing criminal charges against social media users for likes and reposts on social networks.

“Often the actions of law enforcement authorities have been clearly disproportionate to the potential danger, and their reaction to comments and memes in news feeds are inordinately severe,” reads a statement on the company’s website. “We are convinced laws and law enforcement practices must be changed. We believe it necessary to grant amnesty to people who have been wrongly convicted and decriminalize such cases in the future.”

Recently, the number of convictions for posts and reposts on social networks has reached a critical mass, explained a Mail.ru Group employee. Most of the convicitions are not only unjust but also absurd. He would not explain what specific corrections the company was going to propose.

“We believe current laws need to be adjusted, and we are going to make pertinent proposals,” VK’s press service told Vedomosti.

Mail.ru Group has repeatedly criticized high-profile laws and law bills affecting the internet. In 2013, for example, the company opposed an anti-piracy law. In 2015, it teamed up with Yandex to criticize the “right to be forgotten” law. In 2016, it opposed a law bill that proposed regulating messengers and search engines.  But punishing people for likes and reposts has become a political issue. Members of the opposition and social activists have often been the victims of Criminal Code Article 282, amended in 2014 to allow prosecution of people for incitment to hatred or enmity while using the internet.

Communist Party MP Sergei Shargunov addressed the problem during the President’s Direct Line in June of this year.

“If Article 282 were taken literally, certain zealots would have to convict Pushkin, Tolstoy, Dostoevsky, and Mayakovsky, and have their works removed,” he said.

Putin agreed it was wrong to reduce such cases to absurdity. Subsequently, he tasked the Russian People’s Front (ONF) and the Prosecutor General’s Office with analyzing how the notions of “extremist community” and “extremist crime” were employed practically in law enforcement.

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“Prosecutions for Incitement to Enmity (Criminal Code Article 282 Part 1) in Russia. Numbers of People Convicted, 2009–2017. Source: Trials Department, Russian Supreme Court.” Courtesy of Vedomosti

An Agenda for the Autumn
On June 25, Shargunov and Alexei Zhuravlyov, leader of the Rodina [“Motherland”] party, tabled draft amendments in the Duma that would decriminalize “extremist” likes and reposts. The MPs proposed transferring the violation described in Criminal Code Article 282 Part 1 to the Administrative Offenses Code, where infractions would be punishable by a fine of up to 20,000 rubles or 15 days in jail, while leaving only Part 2 of Article 282 in the Criminal Code. Part 2 stipulates a punishment of up to six years in prison for the same actions when they are committed with violence, by a public official or by an organized group. The government, the Supreme Court, and the State Duma’s legal department gave the draft amendments negative reviews, pointing out that the grounds for adopting them were insufficient. A spokesman for Pavel Krasheninnikov, chair of the Duma’s Committee on Legislation, informed us the committee would start working on the amendments when MPs returned from summer recess.

The ONF, which held a meeting of experts in July, has begun drafting a report for the president. The legal community, the General Prosecutor’s Office, the Interior Ministry, telecommunications watchdog Roskomnadzor, and the Russian Supreme Court must send their proposals to the Kremlin’s control directorate before September 15.

Leonid Levin, chair of the State Duma’s Committee on Information Policy, agreed there was a problem.

“The law is repressive, and there is no misdemeanor offense, although the Supreme Court issued an opinion that different cases should not be treated identically,” he said.

While there has been no lack of proposals, no one is in a hurry to abolish the law completely. A source in the Kremlin said dissemination of prohibited information should be punished. But a way of relaxing the law must be devised and, most important, a means of avoiding random convictions, he added.

A Demand for Liberalization
Recently, VK had been under pressure from the public due to the huge number of criminal prosecutions for posting pictures and reposts, said Pavel Chikov, head of the Agora International Human Rights Group. He argued the statement issued by Mail.ru Group was an attempt to defend the company’s reputation. According to the so-called Yarovaya package of amendments and laws, since January 1, 2018, VK has been obliged to provide law enforcement agencies with information about its users upon request, but the question of the legality of providing information having to do with people’s private lives remains open, since under Russian law a court order is required for this, Chikov noted.

Political scientist Abbas Gallyamov argued political decentralization and moderate opposition were now fashionable.

“Even the most cautious players sense the dictates of the age and have been trying to expand the space of freedom. Mail.ru Group is trying to be trendy,” he said.

Gallyamov predicted that, as the regime’s popularity ratings decline, the screws would be loosened, and the number of people advocating liberalization would grow.

Part of the political elite realizes many things have gone askew, agreed political scientist Alexander Kynev. A number of people hoped the circumstances could be exploited to push the idea of moderate liberalization. This could be a way of showing the regime was ready to talk, he argued.

“A lot will depend on what the autumn brings, on the results of regional elections. Now it would appear to be a topic that is up for discussion, but there are no guarantees. There are people in the government interested in having the topic discussed, but this doesn’t mean a decision has been taken,” Kynev said.

Translated by the Russian Reader

Life on the Installment Plan, Part Three

DSCN9641The “handy lawyer” at a place calling itself the Civil Legal Defense Center promises to relieve people “of their debts 100% quickly and legally.” Photo taken in central Petersburg on 22 July 2018 by the Russian Reader

Russians’ Bank Debts Grow Twice as Fast as Their Wages
Central Bank and Economic Development Ministry Plan to Reduce Banks’ Interest in Loaning to General Public
Tatyana Lomskaya and Emma Terchenko
Vedomosti
August 1, 2018

The Economic Development Ministry has reported individual consumer loans have been growing faster than wages and savings. In June, they grew by 15.9% in annual terms after a 15.1% uptick in May. If the season were not taken into account, this would amount to an increase of over 20%. However, real wage growth during the same period slowed to 7.2%, while the growth rate of savings deposits fell 7.1%. (The figures for May were 7.6% and 7.7%, respectively.)

The entire portfolio of loans to the general public increased by ₽1.1 trillion to ₽13.3 trillion [approx. €181 billion] during the first six months of 2018, according to figures from the Central Bank. Sberbank alone lent a record-breaking ₽714 million [approx. €9.7 million] in consumer loans during this period, which was 74% more than a year ago, while VTB Bank supplied the general public with ₽400 million in loans or 32% more than over the same period in 2017.

The public’s demand for consumer loans has grown. Inflation is relatively low in the wake of 2014, the Central Bank’s key rate has stabilized at a low level, and wage growth has picked up, explains Sergei Shirokov, managing director of Sberbank’s Borrow and Save Division.  Since the start of the year, VTB has twice improved the terms of its loan programs and increased the issuance of loans by 17%, notes Dmitry Polyakov, a vice-president at the bank.

Companies, on the contrary, have increasingly gone on a savings binge, writes the Economic Development Ministry. In June, they increased their bank deposits by 8.3% in annual terms. (The increase in May was 6.5%.) Their outstanding loans have also grown, but only by 2.8%, compared to the same period in 2017, or by 3.3% when corporate bonds are taken into account. (In May, the same figures grew by 2.6% and 3.1%, respectively.)

Banks have focused on lending to the public. Under current regulations, they find this more profitable than lending to businesses, complained Economic Development Minister Maxim Oreshkin. This circumstance worried his ministry, he said. He suggested the Central Bank should make it more profitable for banks to loan to companies as opposed to making consumer loans. The ministry did not respond when we asked whether Minister Oreshkin, as a member of Sberbank’s advisory board, had voiced his concern about the high rate of consumer loans issued by Sberbank.

Retail lending has actually been recovering faster than corporate lending, partly because the public vigorously decreased their debts to banks in 2015–2016, whereas now, as wages have increased and rates have hit bottom, they have again accumulated debts, says Natalya Orlova, chief economist at Alfa Bank. Banks are also more interested in lending to individual due to western sanctions against Russian companies, she continues. If a company is at risk of western sanctions, it might also have trouble paying back its loans. Unlike mortgages, however, the growth of consumer loans has almost been exhausted. Outstanding loans have nearly reached 10% of GDP, the maximum for Eastern Europe, warns Orlova.

Consumer lending started to recover last year amid falling personal incomes. People were able to increase consumption only by taking out retail loans, analysts at RANEPA noted. In early 2018, on the eve of the presidential election, the salaries of state-sector employees increased dramatically. The government had to make good on President Putin’s May 2012 decrees and bring the salaries of teachers, doctors, and researchers to 100–200% of average regional wages. On the heels of the wage increases, personal incomes rose by 4,2–5,6% in annual terms from February to April. In May and June, however, real personal incomes of Russians returned to a near-zero growth rate. This sparked an increase—from 12% in May to 22% in June—in the percentage of Russians who anticipated that their family’s financial circumstances would worsen over the next year. The percentage of people who excepted their fortunes to change for the better shrunk from 24% to 19%, according to a poll conducted by inFOM.

The Central Bank has already been reducing the profitability of consumer loans for banks. The risk ratio for unsecured consumer loans was increased on May 1, and the regulator plans to raise it again on September 1 for loans whose total cost exceeds 10% per annum. The Central Bank has been also been reviewing other proposals for stabilizing the growth of consumer loans, said Vasily Pozdyshev, the Central Bank’s deputy chair, as quoted by RIA Novosti. For example, increased oversight requirements could be applied to banks whose consumer loan portfolios increased much more quickly than the market average, or the growth of such loans could be restricted, said Pozdyshev. According to him, the banks had made an interesting propose to introduce differentiated risk ratios for consumer loans depending on their amount: large loans in amounts greater than ₽300,000 [approx. €4,000] would bear the greatest risk ratio. In addition, as of 2019, banks should start regularly calculating the PTI (payment to income) ratio as a means of determining a customer’s credit worthiness, although the Central Bank would not use it as a regulatory instrument befored 2020, added Pozdyshev.

High-risk borrowers are more likely to seek loans from microfinance institutions (MFIs). According to the National Credit History Bureau, MFIs issued ₽26.3 billion [approx. €358 million] in so-called payday loans from April to June, which was 23.8% more than last year. Vulnerable segments of the populace are already seriously indebted, says Georgy Okromchedlishvili, principal analyst at ITS Wealth Management, and significant growth in these loans is not anticipated in the future, but nor is a noticeable decline expected. Stable economic growth has to be in place for that to happen, he argues.

Translated by the Russian Reader

Zampolit

default-1n9iGeneral Andrei Kartopolov has never worked in political indoctrination. Photo by Alexander Nikolayev. Courtesy of Interpress/TASS and Vedomosti

Defense Ministry Establishes Main Military Political Department 
Alexei Nikolsky
Vedomosti
July 30, 2018

As established by a decree signed by President Putin and published on Monday, the Russian Defense Ministry has added an eleventh deputy minister, head of the Main Military Political Department of the Armed Forces. A decree signed the same day appointed as department head Lieutenant General Andrei Kartopolov, who had previously commanded the Western Military District. On Sunday, Kartopolov, who commanded Russian forces in Syria in 2016, attended the naval review in Petersburg with the president, Defense Minister Sergei Shoigu, and naval commander-in-chief Admiral Vladimir Korolyov.

Kartapolov graduated in 1985 from the Moscow Higher Multi-Service Command College, and his entire subsequent career as officer has been bound up with the ground forces. In 2014–2015, he was head of the Main Operations Department, the most important unit in the General Staff.

The new department subsumes the Main Department for Morale (GURLS), headed by Colonel Mikhail Baryshev, said a source at the Defense Ministry.  It is a successor to the Main Political Department of the Soviet Army (GlavPUR), which traced its origins to the Red Army’s Political Directorate, founded in 1918. However, unlike the Soviet Army’s political indoctrination units and given that the Russian Armed Forces were depoliticized after the Soviet Union’s collapse (the law “On the Status of Servicemen” forbids them from involvement in political organizations), the GURLS handled troop morale and psychological support, patriotic education, cultural and leisure activities, and the needs of religious servicemen, according to the Defense Ministry’s website. The department oversees the military’s psychology and sociologists, while there are deputy personnel commanders, customarily known as zampolity [the Soviet-era term for “morale officers” or “deputy commanders for political indoctrination”] in most battalions, divisions, and units.

According to two sources in the Defense Ministry, aside from the work done by the GURLS, the new deputy minister will oversee the Yunarmiya (“Youth Army”) youth movement and other grassroots organizations. This part of the job has been transferred to the new deputy minister’s brief from that of Deputy Minister Nikolai Pankov, who in the early 2000s headed the Main Department for Personnel and Educational Work, which subsequently was reformed as the GURLS. However, at this stage the new department will not incorporate the Defense Ministry’s Department for Information and Mass Communications, the army’s mass media outlets, its historians, its cultural organizations, and other units that were once part of the GlavPUR. The statute of the new department has not yet been drafted, said another source at the Defense Ministry. According to a third source close to the Defense Ministry, establishment of the Main Military Political Department was partly inspired by celebrations of the centenary of the Red Army’s Political Directorate. However, reconstructing a similar department under current conditions is out of the question, although the word “political” in the new department’s name might offend many people, he admitted.

According to Viktor Bondarev, chair of the Federation Council’s defense committee, there is currently no unit engaged in political indoctrination among servicemen.

“We also need to develop a systematic approach to questions of morale, ideology, and patriotic education. Our western enemies have been doing a lot to discredit the image of Russia and the Russian army. We must mount a fitting defense against such attempts, generate a healthy counterweight,” explained the Federation Council member.

Since the greater number of rank-and-file soldiers and sergeants are contract servicemen [rather than conscripts], their education and motivation to serve must be overseen by trained deputy commanders, and therefore creation of the new department is justified, argues Viktor Murakhovsky, editor of the magazine Arsenal of the Fatherland. Unlike the Soviet era, however, they should not be equally subordinated to their commander and their political indoctrination officer, nor should political parties be allowed access to the army, argues Murakhovsky.

Translated by the Russian Reader

Twenty Percent of Russian Schoolteachers Contemplate Quitting

Twenty Percent of Russian Schoolteachers Contemplate Quitting
Salaries Lower than Official Rates, While Workload Is Extremely Heavy
Yelena Mukhametshina
Vedomosti
June 27, 2018

russian teacher salariies

“How Much Schoolteachers Are Paid.” Orange = average monthly salary according to ONF survey, in rubles; blue = average monthly salary according to Rosstat (Russian State Statistics Service), in rubles. From top to bottom, the two sets of figures are provided for Moscow, Arkhangelsk Region, St. Petersburg, Moscow Region, Leningrad Region, Murmansk Region, Krasnoyarsk Territory, Orenburg Region, Volgograd Region, Vladimir Region, Voronezh Region, Pskov Region, Kostroma Region, and Rostov Region. The figures given are for the period January–March 2018. Courtesy of Vedomosti

A third of Russian schoolteachers do not know how their salaries are calculated or whether incentive payments and reimbursements are added to their paychecks. This was one finding of a survey carried out by the Russian People’s Front (ONF) in May 2018, during which researchers interviewed more than 3,000 teachers in 82 regions.

“Wage growth remains insignificant, making it impossible to attain the wage levels claimed by Rosstat,” the ONF concluded.

In Murmansk Region, for example, the survey showed teachers earned an average of ₽36,382 a month [approx. €495 a month], while official statistics showed they earned ₽50,560 a month [approx. €688 a month].

But even the salary the teachers earn comes at the price of an extremely heavy workload, the researchers stressed. The workload was heaviest in Kemerovo, Kostroma, and Samara Regions, where teachers averaged over thirty classes a week.

A quarter of schoolteachers have second jobs or hold additional positions at the same school, while twenty percent think of quitting the profession due to the heavy workload. Seven percent of the teachers surveyed spoke of not having been paid at all or paid in full at times. Twenty-three percent said their paychecks had been miscalculated, while fifty-seven percent had not been paid for overtime or additional duties.

Lyubov Dukhanina, deputy chair of the State Duma’s education committee and a member of the ONF’s central staff, argues the current nontransparent system of calculating salaries, which divides salaries into basic pay and incentive pay, should be abandoned. Instead, teachers should receive a guaranteed salary for their work. She also notes that, according to many teachers, incentive payments are unfair and opaque, and the amount of these payments can vary wildly from month to month.

Igor Remorenko, rector of Moscow State Pedagogical University and former deputy education minister, said all systems of compensation include guaranteed basic pay.

“In organizations undergoing reform, the lower the guaranteed basic pay, the better, because it enables you to rotate employees. In stable organizations, the constant part of the paycheck is more important, because it motivates employees. We need to move in the direction of having teachers sign annual contracts and feel confident in the future, while accepting the possibility of being paid different amounts depending on differing workloads from month to month,” said Remorenko.

The ONF’s survey actually embellished the real picture, noted Vsevolod Lukhovitsky, co-chair of the Teacher Trade Union.

“There are legal means of turning tiny salaries into big salaries on paper. For example, in Moscow, until 2018, the statistics included only full-time employees who had open-ended contracts, while the part-timers, who earned less money, were not included in the stats,” said Lukhovitsky.

According to Lukhovitsky, a law bill would be tabled in the State Duma this autumn that would establish a guaranteed minimum salary, equal to at least two minimum wages, for eighteen academic hours.

“It’s nice a large organization like the ONF has supported our conclusions four years after we started talking about going back to a fixed salary,” said Lukhovitsky.

Naturally, teachers are dissatisfied with their salaries. They are thus fertile ground for the ONF, argues political scientist Konstantin Kalachev. Teachers play a key role in elections and the entire political system.

[The ONF is a pro-Putin, astroturfed “populist” front organization. Teachers are critical to the Putin regime because many of them serve as polling station workers during elections, due to the fact that polling stations are commonly set up in schools. Teachers are thus often involved in the systematic vote rigging and electoral fraud that have helped keep Putin and his allies in power for twenty yearsTRR.]

“The current system of governance sometimes needs to let off steam. There is nothing frightening about the fact the stats are fudged, and the president’s May decrees are not fully implemented. The president sets tasks, and if they are not solved that is the problem of the people trying to solve them,” said Kalachev.

It is pensioners, teachers, and physicians who have the most impact on approval ratings, “so it makes sense the powers that be are focused on worrying about teachers,” he concluded.

Translated by the Russian Reader

Mass Death of Herring on Sakhalin Island

piltun herringDead herring in Piltun Bay, Sakhalin Island. Photo courtesy of Sakhalin Environmental Watch

Environmentalists Report Mass Death of Herring on Sakhalin Island
Vedomosti
June 13, 2018

The NGO Sakhalin Environmental Watch reports the mass death of Pacific herring in Piltun Bay in the northeast of Sakhalin Island.

The highest concentration of dead fish has been observed at two points: along the shore from the mouth of the Khalchikov River to the mouth of an unnamed creek flowing from Lake Krivun (4,609 fish per 10 meters of shoreline), and two kilometers south of the mouth of the Sabo River (5,990 fish per 10 meters of shoreline). Environmentalists have discovered a dense concentration of dead fish in the vicinity of the mouth of the Khalchikov: the fish cover an area of 440 square meters that is approximately 30 centimeters, which amounts to roughly 93 tons.

“The death of this quantity of mixed-age fish is an abnormal event. We might have witnessed the destruction of the majority of the herring population in Piltun Bay,” the environmentalists write in their communique. “The cause of death is still unclear. We have to wait for the outcomes of lab tests.”

Sakhalin Environmental Watch is concerned the Russian Federal Fisheries Agency (Rosrybolovstvo) has not made sufficient efforts to evaluate the scale and causes of the tragedy.

Translated by the Russian Reader

Soaking the Public to Make Russia a Powerhouse

Russian Authorities Could Raise the VAT to 20%
Giving Them Two Trillion Rubles to Execute Putin’s May Decree
Yelizaveta Bazanova and Filipp Sterkin
Vedomosti
May 27, 2018

Prime Minister Dmitry Medvedev has promised to find the eight trillion rubles [approx. €110 billion] the government lacks to carry out Putin’s new May decree. We have learned the government and the Kremlin will go looking for a considerable portion of this sum in the public’s pockets. Approximately two trillion rubles could be collected over six years by raising the VAT from 18% to 20%. Our sources, three federal officials, said this option had been discussed and was one of the most likely options, although a final decision had not been made. However, one of our sources said the Finance Ministry had proposed abolishing the 10% preferential VAT rate and replacing it with an allowance.

Another two trillion rubles or so would be supplied by an increase in the retirement age, which Medvedev had announced, said two of our sources, without specifying how quickly it would be increased and by how much.

The final four trillion rubles would be provided by measures that have already been made public. The state would raise three trillion rubles for infrastructure projects by floating fixed and variable federal bonds, and establishing a temporary fund within the budget. The remaining one trillion rubles would be supplied by reforming taxation of the oil industry, nullifying export duties and raising the severance tax to offset them.

However, some of the decisions could still be revised, our sources said. As one of them noted, everything was in a state of rapid, constant flux.

Who Will Pay the VAT Increase?
Officials have long discussed an increase in the VAT, but as part of an overall taxation maneuver, as proposed by the Finance Ministry, that would have involved reducing pension deductions while raising the VAT to a flat rate of 22%. The Finance Ministry’s idea was to sanitize the economy and pump an additional 500 billion rubles into the budget. The idea was rejected, but several officials said it had proven impossible to find the money to carry out the May decree without raising taxes. Increasing the VAT without reducing pension deductions was a common trick, said a member of the board of the Russian Union of Industrialists and Entrepreneurs (RSPP).

The VAT was pegged at 20% until 2004, when it dropped to 18%. Returning it to 20% would be a less painful solution than the other options on the table—increasing the personal income tax rate and introducing a sales tax—argued two officials. Although, as one of them noted, if the state wanted to stimulate economic growth, it should not rob it of resources.

By increasing the VAT, the state would be primarily confiscating resources from the general public, which has experienced a four-year-long slide in incomes, while businesses would be able to compensate a considerable portion of their costs by embedding them in prices and thus passing them on to consumers.

As research by the UK’s statistical service has shown, companies raise prices ahead of time when an increase in the VAT is expected. Natalia Orlova, chief economist at Alfa Bank, has calculated that a two-percent increase in the VAT would accelerate a rise in prices of 0.8% to 1%, which would not be terrible during a period of low inflation. (In April, inflation was 2.4% in annual terms.) But along with abolishing the preferential rate, raising the VAT could deal a serious blow to the general public and have a knock-on effect on consumption, warned Alexandra Suslina at the Economic Expert Group. The preferential rate is currently valid for food products (except luxury items), children’s goods, books, textbooks, and medicines. In 2017, the preferential rate deprived the federal budget of an additional 550 billion rubles or about 0.6% of GDP.

According to a study by Alexander Isakov, chief economist at VTB Capital, when prices suddenly rise, people are less inclined to skimp on food, alcohol, and transportation. A one-percent increase in prices leads, most of all, to decreased spending on communications and medical care.

Business would pass on costs to domestic consumers, but the VAT for exports is zero percent, said the RSPP board member. There would also be victims, however. A tax increase would hit sectors where competition is intense the hardest, warned Vladimir Salnikov, deputy director of the Center for Macroeconomic Analysis and Short-Term Forecasting (TsMAKP). This was borne out by an IMF study performed in the wake of an increase in the VAT in Germany in 2007.  When competition is intense, companies find it harder to retain their market share after price rises. Retailers, who have already slashed their profit margin amid weak consumer demand, would suffer, said a tax consultant at a major retailer. Salnikov warned the structural effect would be bad, increasing the burden on manufacturing industries, not on raw materials exporters.

Most of all, it would increase the burden on the machine-building and transportation sectors (by 6.8% and 6.6%, respectively), the electricity sector (by 6.8%), construction (by 5.6%), the information sector (by 5.4%), and the hotel business (by 4.4%), according to Salnikov’s calculations. On the other hand, it would decrease the burden on chemicals manufacturing, wood processing, and agriculture.

Officials have little time to decide who will pay for Putin’s May decree. The cabinet has drafted proposals for the tax system, and final decisions would have to be made during the State Duma’s spring session, Anton Siluanov, appointed first deputy prime minister and finance minister, said earlier. Currently, no decisions had been made, his adviser Andrei Lavrov confirmed, but in the near future the government would be deciding on measures for adjusting the tax system. Natalya Timakova, the prime minister’s spokesperson, would not comment on the subject, while Dmitry Peskov, the president’s press secretary, was unavailable for comment on Sunday.

fullscreen-1tqbPerformance of actual pensions and wages vis-à-vis the same period during the previous year. Red line=actual amount of allocated pensions; blue line=actual paid wages; *=lump-sum payments taken into account. Source: Rosstat. Courtesy of Vedomosti

Working for the Decree
Saving two trillion rubles over six years would mean raising the retirement age by at least one year annually for both women and men, noted Yuri Gorlin, deputy director of RANEPA’s Institute for Social Analysis and Forecasting. This would make it possible decrease transfers from the federal budget by two trillion rubles, agreed Tatyana Omelchuk, senior researcher at the Finance Ministry’s Financial Research Institute (NIFI). This option for increasing the pension age was tabled by the Center for Strategic Research when it was headed by Alexei Kudrin, who has now been tapped to chair the Accounting Chamber. Annually, around 40% of the Pension Fund’s income is provided by the federal budget. In 2018, 3.34 trillion rubles will be transferred from the budget to the Pension Fund.

The pension age should be raised not only to save two trillion rubles for executing Putin’s decree but also to generate resources for increasing pensions at the same rate as salary increases, said an official. There was the danger the government would try to minimize the transfer as much as possible, and then there could not be enough money to step up the indexing of pensions, Gorlin noted.

Options for raising the pension age were discussed even before Tatyana Golikova was appointed deputy prime minister for social issues. In an interview with RBC, she said the government had only discussed the decision. The final parameters had not been agreed. Her spokesperson declined to comment.

Gorlin said the main goal of raising the retirement age was to ensure a more acceptable increase in pensions. An excessively radical approach to the problem would significantly increase the danger of unemployment’s rising, while also spurring the demand for disability pensions, he argued. Referring to the findings of a sociological survey, experts at the Higher School of Economics have claimed the most acceptable option for raising the retirement age would be sixty years for women and up to sixty-three years for men. Gorlin argued the most rational option would be between sixty-two and sixty-three years for men, and between fifty-nineand sixty-one years for women.

Translated by the Russian Reader

The Annals of PreCrime: “An Absolute Nightmare”

precriminals.jpegUnder legislation currently tabled in the Russian parliament, these up-and-coming Russian businesswomen could do hard time in a penal colony for the wholly fanciful crime of “complying” with western sanctions against target businesses and individuals. Image courtesy of Credit Bank of Moscow

Sanctions Victims Refuse the Russian State’s Protection
Big Business Categorically Rejects Adopting Law on Anti-Sanctions
Yelizaveta Bazanova, Anna Kholyavko and Yekaterina Burlakova
Vedomosti
May 16, 2018

“An absolute nightmare”: that was the phrase used by the majority of lawyers and executives of Russian and foreign companies whom we asked to comment on plans to imprison people who “implemented” foreign sanctions. On Monday, a law bill to this effect, tabled by State Duma Speaker Vyacheslav Volodin, Federation Council Speaker Valentina Matviyenko, and leaders of all four parliamentary factions was passed in its first reading. The second reading has been scheduled for Thursday.

Under the law bill, if a company refuses to sign a public contract with an entity on the sanctions list, the company and its executives would be threatened with a maximum fine of ₽600,000 [approx. €8,200] and a maximum prison term of four years.

The board of the Russian Union of Industrialists and Entrepreneurs (RSPP) has decided passage of the law would be completely unacceptable. Companies would find themselves between the frying pan and the fire: violations of sanctions would threaten them with secondary sanctions, while complying with sanctions would make them criminally prosecutable in Russia.

The RSPP’s resolution was supported even by board members who had themselves been sanctioned.

“We believe it would cause further damage to the Russian economy, including business with foreign and Russian companies, and both Comrade Vekselberg [Renova Group Chair Viktor Vekselberg] and I voted for the resolution,” Interfax has quoted VTB Bank president Andrei Kostin as saying.

A spokesperson for Vekselberg did not respond to our questions. We were also unable to contact a spokesperson for Oleg Deripaska, another target of western sanctions, yesterday evening.

If passed, the law would be unlikely to have a considerable impact on how businesses operate, but it could be a means of threatening and pressuring them, the entrepreneurs we surveyed said unanimously. The wording of the law bill is harsh. Nearly anyone could be prosecuted on the flimsiest of pretexts, complained an executive at a transnational food producer.

The key risk is the absence of clear criteria for defining what would constitute a violation of the proposed law, our sources all agreed. Even the Russian Finance Ministry could be prosecuted. In its Eurobonds prospectus, it pledged not to use the funds raised to support entities targeted by western sanctions. In January, Alfa Bank warned Russian defense companies it would not handle their accounts due to sanctions. Spokespeople for the Finance Ministry and Alfa Bank did not respond to our inquiries.

The Kremlin has also been unhappy with the law bill, said a federal official close to the presidential administration.

The law bill, if passed, would also generate risks for those companies who refuse to do business in Crimea due to sanctions, said Alexei Panich, a partner at Herbert Smith Freehills. These include the state banks Sberbank and VTB, as well as mobile telecom operators. Andrei Isayev, deputy head of the State Duma’s United Russia faction, claimed  companies who do not open branches in Crimea would not be affected by the law. What was at stake, he said, were the ordinary deals and transactions companies perform almost automatically. However, refusal to do business with counterparts in Crimea could be considered a criminal offense under the terms of the law, said an attorney at a major international law firm. The law could complicate public offerings, the issuing of loans, and contracts and transactions, he specified.

An employee at a major international firm explained it would be hard to determine whether a company refused a deal with a counterpart due to their bad reputation or the threat of sanctions. An auto dealer agreed the threat of criminal prosecution would be powerful leverage. To encourage its partners to agree to a deal, a business could threaten to report them to law enforcement agencies, argued Panich.

The proposed measures were excessive, agreed a spokesperson for an agricultural commodities trader. Some companies have in-house rules restricting such deals. Our source said the law bill appeared to be means of coercing such companies. Theoretically, it could be used as leverage. A company or person on the Specially Designated Nationals And Blocked Persons List (SDN) could show up and demand another company do business with them, agreed the head of major private bank. It was difficult to imagine how banks would solve such dilemmas, he said.

“There are many ambiguities in how the law would be interpreted, and what specific actions or inactions would be punishable,” he concluded.

Foreign businesses could interpret the law bill as a signal it was time to wrap up their operations in Russia, said the vice-president of a major foreign company that produces popular consumer products. No one has any intention of sacrificing their top executives to the Russian law enforcement and judicial system.

All issuers of bonds include in their covenants the refusal to do business with entities targeted by sanctions. Perhaps expatriates who do not want to take risks would leave the country, argued an employee at a large foreign company.

Passing the bill into law would be a mistake, said political scientist Yevgeny Minchenko. The law would have to be seriously amended over time.

“Knowing how this could affect both Russian companies and foreign business operating in Russia, this is very risky decision in my opinion,” Minchenko told us.

Spokespeople for Sberbank and Credit Bank of Moscow declined to comment.

With additional reporting by Vladimir Shtanov, Darya Borisyak, Alexandra Astapenko, and Svetlana Bocharova

Translated by the Russian Reader