Russia Should Be World’s No. 1 Tourist Destination

zarinaZarina Doguzova. Photo courtesy of Maxim Stulov/Vedomosti

New Rosturizm Head Assesses Russia’s Tourist Potential
Vedomosti
February 11, 2019

Russia’s tourist potential was as huge and immense as the country itself, said Zarina Doguzova, Rosturizm’s new head. On Monday, Economic Development Minister Maxim Oreshkin introduced Doguzova to staff at the agency, which has been given a new leader at the same time as it has come under the  jurisdiction of the Russian Economic Development Ministry.

“The principal task you and I face is discovering this potential and realizing it to the maximum extent,” Doguzova said.

She argued Russia should be the first country that came to mind when foreigners were planning their next holiday, while Russians should be happy to show Russia’s unexplored corners to their children and plan to travel to a neighboring region during the next long weekend, not to a neighboring country.

“This won’t happen tomorrow, but maybe it should,” she said.

When introducing Doguzova, Oreshkin noted that, under her leadership, Rosturizm would be tasked with creating the right image within the country, an image that would present the real picture and thus attract both domestic and foreign tourists.

In September 2018, President Putin signed a decree transferring Rosturizm from the purview of the Culture Ministry to the Economic Development Ministry’s jurisdiction. On February 8, Prime Minister Medvedev appointed Doguzova the agency’s new head.

Doguzova was born in 1985. In 2008, she graduated from the Moscow State Institute for International Relations (MGIMO) and, according to friends, got a job in the press service of Vladimir Putin during his stint as prime minister. In 2012, Putin won the presidential election, and Doguzova transferred to the Kremlin’s office of public relations and communications.

Thanks to Sergei Damberg for the heads-up. Translated by the Russian Reader

Unionized Independent Russian Truckers Persecuted by Putin Regime

Opponents of Plato Road Tolls System Complain to European Court of Human Rights They Have Been Victims of Political Persecution
Their Organization Was Earlier Ruled a “Foreign Agent”
Anastasia Kornya
Vedomosti
December 26, 2018

The Association of Russian Carriers (OPR), an organization of independent truck drivers  the Russian Justice Ministry placed on its list of “foreign agents” late last year, has filed a complaint with the European Court of Human Rights (EHCR) in Strasbourg, claiming its right to freedom of association had been violated and it had been subjected to political persecution, in violation of Article 11 and Article 18 of the European Convention on Human Rights, as reported by Alexei Glukhov, a lawyer with the Agora International Human Rights Group who represents the OPR in Strasbourg.

The OPR emerged during the campaign for the rights of truckers that kicked off after the Plato road tolls payment system went online in November 2015. The OPR brought together independent truck owners and truck drivers. In June 2017, it announced it was planning to nominate its chair, Andrei Bazhutin, as a candidate for the Russian presidency. Shortly thereafter, the Justice Ministry launched an audit of the OPR, resulting in its being ruled a “foreign agent.” The ministry cited four donations from private individuals in Germany, totaling 3,620 euros, as evidence of “foreign financing.”

In a report on its oversight of the work of “foreign agent” NGOs in 2017, the Justice Ministry claimed the OPR had engaged in “political activity” by “organizing and holding  events calling for the resignation of the Russian federal government.” In June of this year, the Krasnogvardeisky District Court in Petersburg fined the OPR 400,000 rubles [approx. $5,755] for failing to voluntarily [sic] register itself as a “foreign agent.”

The complaint says the OPR has been a nuisance to the Putin regime since the organization has led the campaign against the Plato road tolls payment system, which ultimately benefits businessmen closely allied with the Kremlin. The truckers are certain it was their grassroots activism that caused the authorities to persecute them. The fine leveled against the OPR not only was far in excess of the foreign donations it received but has also financially ruined the organization.

Glukhov points out the ECHR has received several dozen complaints from Russian NGOs labeled “foreign agents” by the Russian government, but the court has not yet ruled on Russia’s “foreign agent” law and its application in practice. However, the court has communicated the facts of the first large group of cases to the Russian authorities, while a second group of cases was nearing completion, meaning that a ruling on complaints filed by Russian “foreign agent” NGOs could be expected next year, argues Glukhov. The OPR’s complaint is part of a third wave of complaints filed in Strasbourg. As they await the court’s ruling, Russian NGOs continue to suffer from the harsh law.

Everyone has the right to complain to the EHCR, but the Russian Justice Ministry begins to work with a complaint [sic] only after the court has communicated its consent to hear the case, says Andrei Fyodorov, head of the office of Russia’s representative to the EHCR.

Lawyer Dmitry Agranovsky says the EHCR has rarely ruled that Article 18 of the European Convention has been violated. Recently, however, in response to a complaint filed by opposition politician Alexei Navalny, the court ruled Russia had violated Article 18. The ruling was a precedent of sorts. Agranovsky has the sense that, before the Navalny case, the court’s Grand Chamber had postponed other cases in which Article 18 had been invoked, but now it had worked out a common set of rules that could be applied in other cases as well. On the other hand, there was a risk Article 18 would be devalued, Agranovsky warns [sic].

______________________

[Three] Years of Plato: How Russian Authorities Forced Truckers to Pay Road Tolls

fullscreen-118c.jpg[Three] years ago, on November 15, 2015, Russian authorities launched the Plato system (“Plato” is an acronym for “payment for a ton” in Russian) to collect tolls from owners of heavy-duty trucks traveling on federal highways. The authorities claimed their goal was to compensate for the damage the trucks caused to roads. It was decided the toll would be applied to owners of trucks weighing over twelve tons. Photo courtesy of Maxim Stulov/Vedomosti and RBC 

fullscreen-12pmThe right to develop and implement Plato was awarded to RT Invest Transport Systems without tendering. The company is owned on a parity basis by Igor Rotenberg and RT Invest, which is 25.01% owned by Rostec and 74.99% owned by Andrei Shipelov’s firm Tsaritsyn Capital LLC. The Russian government agreed to pay Plato’s developer and operator 10.6 billion rubles [approx. $153 million at current exchange rates] annually.  Photo of Igor Rotenberg courtesy of Nikolai Galkin/TASS and RBC 

fullscreen-123u.jpgOpposition politician Alexei Navalny and Anti-Corruption Foundation (FBK) lawyer Ivan Zhdanov asked that the courts declare the government’s agreement with RT Invest Transport Systems null and void. Their lawsuit was rejected first by the Moscow Court of Arbitration, and later by the Russian Constitutional Court. Photo of Alexei Navalny courtesy of Yevgeny Razumny/Vedomosti and RBC 

fullscreen-12do Truckers in forty Russian regions protested against Plato in November 2016. They demanded Plato be turned off, a three-year moratorium imposed on its use, and the system be tested for at least a year. Photo by Yevgeny Yegorov/Vedomosti and RBC

fullscreen-12suWhen Plato was launched in November 2015, truck drivers paid 1.53 rubles a kilometer. Four months later, the authorities planned to double the toll, but after negotiations with truckers they made concessions, reducing the toll increase to 25%. Since April 15, 2017, the authorities have charged trucks 1.91 rubles a kilometer. Photo courtesy of Sergei Nikolayev/Vedomosti and RBC 

fullscreen-12d8However, even the discounted [sic] toll increase did not sit well with all truckers [sic]. On March 27, 2016, the OPR went on what it called an indefinite nationwide strike. Truckers protested the toll increases and demanded fairness and transparency at weight stations. Photo by Yevgeny Razumny/Vedomosti and RBC. [The slogans read, “Down with Plato!!! It’s Rotenberg’s Feeding Trough” and “We’re Against Toll Roads.”

fullscreen-12jxIn October 2017, the government approved a bill increasing fines for nonpayment of Plato tolls from 5,000 rubles to 20,000 rubles. If passed, the law would make it possible to charge drivers for violations that occurred six months earlier. The new rules were set to take effect in 2018. Photo of Dmitry Medvedev courtesy of Dmitry Astakhov/TASS and RBC 

fullscreen-1ghbPlato’s database has registered 921,000 vehicles weighing over twelve tons. According to the Russian Transport Ministry, during its first two years of operation, Plato raised 37 billion rubles for the Federal Roads Fund. In the autumn of 2017, the government selected three projects that would be financed by the monies raised by Plato: a fourth bridge in Novosibirsk and bypasses around the cities of Chusovoy (Perm Territory) and Khabarovsky. Photo courtesy of Georgy Shpikalov/PhotoXPress and RBC

fullscreen-11h3.jpgVehicles that transport people are exempt from Plato tolls, as are emergency vehicles, including vehicles used by firefighters, police, ambulance services, emergency services, and the military traffic police. Vehicles used to transport military equipment are also exempt from the toll. Photo courtesy of Gleb Garanich/Reuters and RBC

 

Why Most Russians Will Stay Home for New Year’s

Why Most Russians Will Stay Home for New Year’s
As Incomes Crumble, Even Celebrating with Friends Is Too Expensive for Them
Vladimir Ruvinsky
Vedomosti
December 27, 2018

New Year’s, apparently, has become a truly stay-at-home holiday. The number of Russians who plan to spend the long New Year’s holiday at home has jumped from 41% in late 2015 to 70% in late 2018, according to a survey by Romir, a Russian research company. The main reason is the rapid return to the conservative tradition of growing poverty and uncertainty in the future, combined with the desire to maintain previous levels of consumption of the most vital goods and services, which no longer include a winter holiday away from home.

fullscreen-m4

“How do you plan to spend the upcoming New Year’s holidays?” Overall: at home, 70%; at dacha, visiting relatives, 19%; traveling in Russia, 2%; working, 6%; traveling abroad, 2%; other, 1%. Average monthly income per family member of 10,000 rubles: at home, 73%; at dacha, visiting relatives, 18%; traveling in Russia, 2%; working, 6%. Average monthly income per family member of 10,000 rubles–25,000 rubles: at home, 74%; at dacha, visiting relatives, 17%; traveling in Russia, 1%; working, 5%; traveling abroad, 1%; other, 1%. Average monthly income per family member of 25,000 rubles or greater: at home, 56%; at dacha, visiting relatives, 25%; traveling in Russia, 4%; working, 8%; traveling abroad, 5%; other, 2%. Source: Romir, December 2018. Courtesy of Vedomosti

Surveys of the same representative selection of respondents have shown a drop-off in all other ways of spending the New Year’s holidays, which have basically become yet another period of time off work for Russians. The number of Russians planning to spend the holidays at the dacha or visiting friends or relatives has decreased from 34% to 19% in three years. Trips within Russia have dropped from 8% to 2%, while trips abroad have fallen from 4% to 2%.  Nearly everyone has been scrimping, including Russians with above-median incomes. Fifty-six percent of Russian with monthly incomes of 25,000 rubles [approx. $364] per family memberwill stay home, as will 74% of Russians with monthly incomes between 10,000 rubles and 25,000 rubles per family member. As Tatyana Maleva, an economist from RANEPA, notes, the Russian urban middle class, which has grown accustomed to traveling, cannot afford it.

The picture emerging from the survey reflects the mood of many Russians. Since 2014, real incomes have fallen four years in a row, and all indications are they will be shown to have fallen in 2018 as well. According to Rosstat, the monthly modal income in in 2017 was 13,274 rubles [approx. $233], while the monthly median income was 23,500 rubles [approx. $412]. Given these circumstances, the ruble’s devaluation, which has made trips abroad more expensive, is not such an important factor. In December 2015, one dollar cost as much as it does currently, 67 rubles, and its value was rising.

Holidays at home are not cheap, either. In November 2018, the percentage of Russians who had noticed a rise in prices had grown in comparison with October 2018, according to the Russian Central Bank. Forty percent of Russians noticed upticks in prices for meat and poultry; 32%, rises in the price of petrol; 28%, rising prices for cheese and sausage; while 26% had noticed that milk and dairy products were more expensive. All of these goods are part of the home holiday menu.

In comparison with 2014, consumption levels have fallen. They have not returned to their previous levels. Attempting to wriggle their way out of poverty or maintain their previous income levels, Russians have taken out an ever-growing number of consumer loans, which have proven difficult to pay back. Every fourth Russian who had outstanding loans in 2015–2017 spent 30% of their incomes paying them off, note Olga Kuzina and Nikita Krupensky, economists at the Higher School of Economics, in an article entitled “The High Debt of Russians: Myth or Reality?” published in the November 2018 issue of the journal Voprosy ekonomiki.

Generally, the Russian populace has transitioned to a minimalist model of consumerism, notes Maleva. Scrimping begins literally with the New Year. As Romir’s survey indicates, this transition has become a trend that will, apparently, shape the strategies and tactics of Russian consumers in the future, too. The only thing that has not changed over the years is the president’s televised New Year’s greeting: it costs nothing.

Translated by the Russian Reader

Russian Trucking News

DSCN0034“Delivery for a favorite client.” A short-haul freight truck in downtown Petersburg, August 8, 2018. Photo by the Russian Reader

Officials Want to Equip New Trucks with Special Sensors as of 2024
Carriers Are Worried Tightening Monitoring Weight and Size of Trucks Will Increase Load on Business
Elizaveta Bazanova and Vladimir Shtanov
Vedomosti
December 24, 2018

Officials have concocted a new way to monitor business. They want to equip trucks with axial-load sensors in order to combat trucks hauling loads in excess of legal weights. Legislation requiring such loads be transported by trucks weighing over 3.5 tons will be drafted by 2024. The plan is contained in the outline of the Russian government’s national Safe and High-Quality Highways project, two federal officials told Vedomosti. A spokesperson for Deputy Prime Minister Maxim Akimov said the project’s outline would be approved by the cabinet on Monday.

The Industry and Trade Ministry and the Transportation Ministry would have until 2022 to draft amendments to the technical regulations of the Eurasian Customs Union (EACU), forbidding the import to Russia of trucks not equipped with the sensors. The amendments should also be inserted into Russian technical regulations before 2024, according to the national highway project’s outline. (Vedomosti has seen part of this document.) As of 2024, all new trucks will have to be equipped by manufacturers with the sensors, explained Akimov’s spokesperson. Owners of old trucks will not be forced to install them. They will have the option of installing them, says a source who has learned about the plans from a federal official.

Regulations on equipping all Russian trucks weighing more than 3.5 tons with axial-load sensors have not yet been drafted, according to spokespeople at the Transport Ministry and Rosavtodor (Russian Federal Road Agency).

Russian authorities set about establishing weight-and-size monitoring system for freight trucks in 2016. Their goal is to maintain the quality of roads and reduce the number of accidents. Automatic scales that measure the axial load of trucks have been installed on highways in test regions. If a truck is overweight, the carrier must pay a fine of up to 450,000 rubles [approx. 5,800 euros]. A total of twenty-seven checkpoints in eighteen Russian regions have been set up on federal highways. By 2024, the number of checkpoints should rise to 387, covering federal and regional highways in seventy-five regions.

The pilot program in Vologda Region has shown the average overload is thirty percent, the Transport Ministry reported. During their first year of operation, the checkpoints reduced the number of violators from forty percent to four percent.  On the federal level, the weight-and-size monitoring system will be a public-private partnership. RT Invest Transport Systems, owned by Igor Rotenberg, son of Arkady Rotenberg, and RT Invest, jointly owned by Rostec and Andrei Shipelov, has shown interest in acquiring an operating license. In June 2018, the company proposed a public-private partnership with the government.

The regions will establish their own public-private partnerships. Truck owners will be able to purchase the sensors from any manufacturer. No directives will be issued on this score, a federal official assured us.

3.74 million trucks were registered in Russia as of July 1, reports Autostat. Under the European classification, trucks weighing between 3.5 tons to 12 tons are categorized as N2. Such trucks are manufactured by KAMAZ, Iveco, Mercedes-Benz, and Renault (Midlum), among other companies. They are usually employed for short hauls, for example, from a distribution center to retail outlets, a logistics manager from a company in the consumer sector told us.

Currently, truck owners rarely install the sensors, said Boris Rybak, director general of Infomost, because equipping a truck costs owners between several tens of thousands to several hundreds of thousands of rubles. Trucks manufactured in the west that carry goods in Russia usually have the sensors pre-installed.

Alexander Lashkevich, director for relations with industrial and infrastructure organizations at the Business Lines Group, said they did not install additional sensors, since they are a standard feature on most imported vehicles, but this applies to trucks with a capacity of more than 12 tons. The new K5 line of trucks from KAMAZ features axial-load sensors as a standard feature, said a company spokesperson.  Lashkevich said Business Lines used special calculators that facilitate loading semitrailers so as to avoid overloading.

Introducing weight and size monitoring will help maintain roads, but it is not clear why small-tonnage vehicles need to be equipped with axial-load sensors. Problems with overloaded axles happen to heavy haul vehicles. Ultimately, the load on the shipping business will grow, while the expediency of the planned measures is difficult to assess, warned Lashkevich.

The sensors are not needed on low-tonnage trucks. Problems with excess weight “occur extremely rarely due to the specifics of moving people’s things to new residences,” explained Arkady Usachov, director general of Gentle Move, a moving company.

The damage to roads caused by trucks weighing under 12 tons is considerably less, said Rybak, but equipping even light trucks with the sensors is a worldwide trend: you can load even a 3.5 ton truck with up to ten tons of freight. Such systems are in operation on roads in many countries, agreed Mikhail Blinkin, director of the Institute of Transport Economics and Transport Policy Studies at the Higher School of Economics.

The cost of buying and operating trucks could increase, warned Usachov.

“Freight haulage should be getting cheaper, but this approach will only make it more expensive,” argued Alexander Prokofiev, head of operations at the Moving Center. “Plato, ERA-GLONASS, and other systems will not provide real security, and they will not improve road quality. The amount of freight hauled on the roads will not decrease. Roads have to be built well from the get-go.”

Translated by the Russian Reader

We Wouldn’t Mind If You Died of AIDS and Hepatitis C

aids flagRussia has an HIV epidemic. According to the Federal Aids Prevention Center, approximately a million Russians are infected. A third of them also have hepatitis C. At best, only hundreds of these patients receive state-of-the-art treatment. Image by Yaroslava Chingayev, special to Vedomosti

Officials Want to Replace Current Hepatitis C Treatment with Outmoded Therapy
Industry and Trade Ministry Supplied Money for Manufacture of Drugs
Irina Sinitsyna and Olga Sukhoveiko
Vedomosti
December 13, 2018

The Russian Health Ministry plans to significantly reduce procurements of the most effective treatment for viral hepatitis C, combined interferon-free treatment, thus reducing the availability of the drugs for patients infected with HIV in combination with hepatitis B and hepatitis C. Instead, the ministry has proposed putting these patients on interferon therapy. Maria Onufriyeva, director of Community of People Living with HIV, an interregional grassroots organization, has written about the matter to Health Minister Veronika Svkortsova. Ms. Onufriyeva has also sent a letter to Valery Alexeyev, director of the Honest Procurements Project at the Russian People’s Front (ONF). Vedomosti has seen copies of the letters. Ms. Onufriyeva confirmed she sent them. A spokesperson for Mr. Alexeyev said he received the letter. The Health Ministry has not responded to her query.

In November, Minister Skvortsova said that over 714,000 Russians were infected with HIV. According to the Federal Aids Prevention Center, whose figures Ms. Onufriyeva cites, there are 978,443 Russians infected with HIV. A third of them also have hepatitis C.

In late October, the Health Ministry published the final list and amounts of drugs it would be procuring in 2019 and providing to HIV patients, including HIV patients who also have hepatitis B and hepatitis C, writes Ms. Onufriyeva. (Vedomosti has seen a copy of this list.) In particular, the Health Ministry wants to reduce procument of dasabuvir by 750%, meaning one hundred patients would have access to the drug, while this year 748 people could count of getting it, according to the Community’s calculations.

In monetary terms, this would mean a drop in expenditures on the drug from 431.6 million rubles [approx. 5.7 million euros] to 57.9 million rubles [767, 754 euros].

The Health Ministry plans to switch to narlaprevir, intended for the treatment of hepatitis C in combination with other antiviral drugs. In 2018, as the Community has discovered, and as is borne out by information accessed on the federal procurements website, narlaprevir was not purchased by the Russian governmennt. In 2019, the Health Ministry could spend 139 million rubles [approx. 1.8 million euros] on procuring the drug in order to treat 430 people, the Community argues.

Dasabuvir is the most up-to-date antiviral drug. According to the Community, it can cure 98% of hepatitis C patients in twelve weeks.

This figure was confirmed by Vadim Pokrovsky, director of the Federal AIDS Prevention Center.

In Russia, HIV patients who also have hepatitis C have been treated with dasabuvir in combination with ombitasvir/paritaprevir/ritonavir, manufactured under the brand name Viekira Pak by the American company AbbVie. Dasabuvir was placed on the official Russian list of vital and essential drugs for this year. Two years ago, Alexey Repik’s R-Pharm and AbbVie agreed to partly localize manufacture of the drug at R-Pharm’s plant in Kostroma. As R-Pharm reported then, the deal covered repackaging of the drug and quality control. According to AbbVie, Viekira Pak is distributed in Russia by R-Pharm and Euroservice.

Ms. Onufriyeva writes that interferon therapy is much less effective in treating chronic hepatitis C patients with HIV. The treatment significantly reduces quality of life, since it requires weekly injections.

Mr. Pokrovsky explained the difference. Interferon treatment has almost no effect on the virus itself. It stimulates the body’s immune response, but it has numerous side effects, from impotence to mental disturbances. The treatment lasts a year.

Due to the length of the treatment, Ms. Onufriyeva said, it was between 52% and 133% more expensive than interferon-free treatment.

Tableted by R-Pharma, narlaprevir has to be taken together with ritonavir, pegylated (long-acting) interferon, and ribavirin, as indicated in the instructions.

In 2012, R-Pharma acquired a license for the production and sale of narlaprevir from Merck & Co. It tried to refine the drug with support from a federal targeted program administered by the Russian Industry and Trade Ministry. Trade publication Vademecum wrote that R-Pharm invested 700 million rubles in narlaprevir. The Industry and Trade Ministry would allocate 120 million rubles on clinical trials, Sergei Tsyb, head of the ministry’s Department for Chemical Engineering and Bioengineering, promised in 2012.

A R-Pharm spokesperson confirmed receipt of the funds.

R-Pharm registered narlaprevir in 2016. In the spring of 2017, during a meeting with the business community, President Putin promised R-Pharm’s director general Vasily Ignatiev that the government would allocate funds to procure the company’s drugs for hepatitis C patients.

“I will also keep this in mind when allocating resources for healthcare in 2018 and the following years, in 2019 and 2020. It will be necessary, of course, to use what you have developed,” Putin said.

Mr. Pokrovsky is certain the Health Ministry’s decision to reduce procurements of interferon-free drugs could have been influenced by Russian manufacturers wanting to compensate their costs at the state’s expense.

The R-Pharm spokesperson insisted that the company, like other manufactures, received a request from the Health Ministry to quote its prices for narlaprevir and dasabuvir.

“Our price offers for the drugs were the same as last year’s,” he said.

In total, according to the Community’s calculations, in 2019, the Health Ministry can spend 473.5 million rubles [approx. 6.3 million euros] on the procurement of drugs for treating chronic hepatitis C, as opposed to 1.1 billion rubles [approx. 14.6 million euros] last year.

In November, Vademecum wrote that, in 2019, the Health Ministry would also reduce its overall procurement of antiretroviral drugs under its program for providing drugs to people infected with HIV, including patients who were infected with HIV in combination with the hepatitis B and C viruses. However, although it would spend far less money, it planned to expand coverage to a mere sixty percent of those needing treatment.

Ms. Onufriyeva has asked the Health Ministry to consider increasing procurements and moving away from the chronic hepatitis C drugs scheduled for purchase in 2019 and towards drugs that have proven effective. The latter should be supplied to patients with HIV plus viral hepatitis C, including those suffering from advanced liver fibrosis and cirrhosis.

She has asked Mr. Alexeyev to assist her in protecting the interests of patients by sending inquiries to the Health Ministry, asking them to explain the reasons for the cuts in procurements and the selection of outmoded drugs. She also asked him to verify whether the Health Ministry’s actions were in compliance with antitrust laws.

She told Vedomosti she had not received replies to her letters.

vich

“How the Numbers of HIV-Infected Patients Have Changed, 2013–2018.” The red columns indicate total numbers of patients; the orange columns, first-time infections. Figures are given in thousands of people. Source: Rosstat. Courtesy of Vedomosti

Mr. Alexeyev explained the delay in replying. The letter contained a good deal of specialized and medical information, and it was under review by independent experts working for the Russian People Front’s Honest Procurements Project.

“The Russian People’s Front has drawn attention to problems with the list of essential and vital drugs, and their procurements, and this letter is the latest alarm,” he said.

According to Mr. Alexeyev, the Russian People’s Front has been reviewing the Health Ministry’s procedure for including medicines on the list and had already been in touch with the government.

hep b and c

“How the Numbers of Hepatitis Patients Have Changed, 2013–2018.” The dark blue bars indicate first-time cases of chronic hepatitis B; the light blue bars, first-time cases of chronic hepatitis C. Figures are given in thousands of people. Source: Rospotrebnadzor. Courtesy of Vedomosti

If the grassroots organization Community of People Living with HIV believes the industry regulator acted in a way that violated specific regulations on procurements or antitrust statutes, it can file a complaint with the Federal Anti-Monopoly Service (FAS) in the manner prescribed by law, said Maxim Degtyarev, deputy head of the Department for Oversight of the Social Sector and Trade at FAS. For the time being, however, FAS had no grounds to perform an inspection.

The Industry and Trade Ministry did not respond to our request for information.

Elena Filimonova contributed to this article.

Translated by the Russian Reader

House of Cards

mir-sberbankA disembodied hand proudly holding a Sberbank-issued Mir card. Photo courtesy of PressTV

Central Bank Preparing for Cutoff of Some Banks from International Payment Systems
Regulator Asks Small Banks to Have Backup Intermediary Able to Service Their Cards
Anna Yeryomina
Vedomosti
December 6, 2018

The Russian Central Bank has asked small banks to find a backup partner that would be able to service their bank cards. This would be an asset if their current intermediary banks were cut off from international payment systems.

The Central Bank is concerned with the continuity of card transactions in banks that work with payment systems indirectly, that is, via an intermediary bank. The regulating authority has advised these indirect clients of payment systems to contract with another bank, besides their primary intermediary bank, that could supply them with access to card payment systems. Five bankers confirmed to us they had received the memorandum.

The memorandum also says the contract should provide for a test exchange of information when integrating with the new intermediary banks. It also states payment systems should draft an action plan and recommend it to their participating banks.

The major intermediary banks are Payment Center Credit Union, Uralsib, VTB Bank, Rosbank, and Promsvyazbank.

A Central Bank spokesperson stressed the memorandum was only advisory, but it was based on international recommendations for risk management in payment systems. The need for banks to contract with backup intermediary banks is not so obvious. According to several of its recipients, in early autumn the Central Bank had sent banks a letter urging them to draft plans to ensure the continuity of payments, but it had not recommended any specific measures.

Switching intermediary banks is a time-consuming, expensive process that takes between three to six months, notes Maya Glotova, director of Kartstandart, a processing center that partners with Payment Center Credit Union. The most high-profile case occurred in 2013 after Master Bank’s license was revoked. As Glotova recalls, Master Bank had functioned as an intermediary bank in payment systems and provided payment processing services. Small banks had to halt their operations for several weeks, and several of them had to leave the payments business. Glotova estimates it would cost a single bank more than $100,000 to switch intermediary banks in the three payment systems.

Intermediary banks had little to say about the memorandum. A spokesperson at Promsvyazbank promised to follow the Central Bank’s recommendations, while a spokesperson at VTB Bank said their own intermediary program had worked well.

Several bankers believe the Central Bank is hedging not only against the collapse of intermediary banks but also potential sanctions, which are fraught with the possibility that intermediary banks would be cut off from Visa and Mastercard, as occurred in 2014 and 2015. The United States has been drafting a new set of sanctions that could affect major banks. Payments within Russia would not be affected: these transactions are processed by the National Payment Card System (NSPK). Russian bank cards, however, would not function abroad. (A spokesperson for NSPK, which operates the Mir payment system, said they had not received the Central Bank’s memorandum.)

VTB Bank had drafted a plan to counter sanctions, its president, Andrei Kostin, told the TV channel Rossiya 24 in October.

“We have been mapping out with both the government and the Central Bank how to avoid the consequences, especially for individuals and companies. I think we can overcome them. I don’t think the sanctions will be wholesale and directed against the entire financial sector,” Kostin said.

Translated by the Russian Reader