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The Interpreter
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
Russia Update: November 30, 2015

Publication: Russia Update
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The Interpreter
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
Russia Bans Some Foods from Turkey; No Embargo on Manufactured Goods, Says Vice Premier

The  Russian government has banned  some food items from Turkey as part of its "limited measures" to be taken against Ankara over Turkey's downing of a Russian plane in Syria last week, Novaya Gazeta reported, citing Interfax.

On November 28, President Vladimir Putin ordered sanctions against Turkey to be implemented, including suspension of charter tour packages. The visa-fee regimen is suspended until January 1, 2016.

Vice premier Arkady Dvorkovich said tomatoes and some other vegetables would be banned along with fruits, Interfax reported.

The measure will not go into effect immediately, but in several weeks' time so retailers have a chance to adapt to the shortages.

While there has been some discussion as to whether Russia would ban auto parts from Turkey, Vice Premier Igor Shuvalov said Russia would not ban manufactured goods from Turkey.

Prime Minister Dmitry Medvedev said that the list of banned items may be extended, and some visa sanctions against Turks may also be implemented in order to "wind down" cooperation with Turkey.

-- Catherine A. Fitzpatrick 

The Interpreter
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
Russia To Run Greater Deficit, Increase Needs-Based Assessments to Cope with Economic Crisis
Russia's finance minister Anton Siluanov is resigned to low oil prices that may fall below $40 per barrel and says "Russia's next president" will have some tough choices to make regarding spending on social needs, Reuters reported (English summary here and full Russian text here).

"Russia is faced with a difficult choice in the medium term: either to drastically cut social spending, spending on education and healthcare, and at the same time leave tax rates unchanged, or follow a path of greater spending but raise some taxes," he said.

"This is a difficult public dilemma - and an answer to these questions should be in the programme of the next Russian president."

President Vladimir Putin has not indicated whether he will seek another term, but he is eligible for another term under Russian law and is expected to remain in power until 2024.

Siluanov said there was nothing to do but "wait until prices on oil rise" and that he saw no indication that the current trend of low prices would change, particularly as Iran will enter the oil market as sanctions are lifted:

"You can't rely on the Russian 'perchance,' that suddenly everything will change drastically and the prices of oil will go up, and everything will go back to the situation of two years ago. It will not return."

Russia is in a crunch created by the worldwide drop in oil prices following the recession, Western sanctions over the war in Ukraine, and the defaulting of some Russian regions over-extended in meeting the populist social pledges of Putin's election campaign in 2011, to say nothing of investor panic sparked by last year's nationalization of the Bashneft oil division of investment company AFK Sistema which kicked off the ruble's tumble.

The solution so far is to increase the deficit, says Siluanov:

"Next year poses huge risks," Siluanov said.

The deficit, now planned at 2.4 trillion roubles [$36 billion], will be almost entirely financed from one of Russia's sovereign wealth funds, the Reserve Fund, which now stands at $65.7 billion roubles [nearly $1 billion]. If the budget deficit widens, the stash may dry up.

The ministry is left with few options: try to improve tax collection, push for privatisation of the country's many state companies, including selling a stake in the oil major Rosneft , or try to tap foreign debt markets.

Plans call for $3 billion in foreign borrowing next year, which would be the first time Russia has tapped international markets in two years. The ministry said earlier that the funds might be raised in Chinese yuan, but Siluanov said Russia would be ready for other markets as well.

For comparison, the US deficit in 2015 is $468 billion with more than twice the population of Russia.

Siluanov acknowledged in the interview that "we cannot dramatically reduce our significant social programme spending" but can't afford a deficit larger than 2% of GDP.

In fact, Siluanov acknowledged that the deficit would go to 3% of the GDP in the budget for 2016.

Russians have already seen cuts in health care and have suffered the loss of 1/3 of their savings value and some have been laid off from jobs as well. The widespread strikes by truckers over increased road tolls which persisted this week is one indication of the labor unrest Russia might expect with an austerity budget.

Even so, Siluanov is pragmatic:

"The laws of economics cannot be undone; they are objective. And as much as we would like to increases expenditures - you need resources for that. And if you don't have them, then it is unacceptable to make unsecured expenditure commitments. It's self-deception." 

To cope with the reduced budget, Siluanov says there will be more cost-cutting measures and a stricter needs-based approach to giving social benefits. 

Siluanov sees a solution to some of Russia's problems in privatization, which would provide ready cash to the government and in theory make some companies function better and generate more tax revenue. Although in theory Russia moved to a mixed economy and encouraged free enterprise years ago, in fact there is still a lot of reluctance to encourage privatization.

Says Siluanov:

"There is a need to activate privatization, to substantially increase the revenues from it -- but there isn't even a discussion (in the government) regarding this. The prices on the assets are now lower than they were, say, 2-3 years ago, but that should not be considered an obstacle."
As for Rosneft, whose CEO is Igor Sechin, a close associate of Putin's, the cash has already been counted, says Siluanov:

A  year ago we had (in the budget) revenue from the privatization of the 19.5 % of Rosneft shares worth about 500 billion rubles. Now the price of that asset is approximately the same, and we believe that a significant resource for adding to the budget under the conditions of decreasing revenues.

-- Catherine A. Fitzpatrick

The Interpreter
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
Russian Prosecutor General Declares Soros Foundations 'Undesirable' for Russia
Russia's Prosecutor General has declared the activity of the Soros Foundations "undesirable," reported, citing a notice on the prosecutor's web site.

Open Society Institute and Open Society Foundation, part of the network of Soros foundations, were referenced in the prosecutor's statement, which came in response to an appeal by the Federation Council or upper house of the Russian parliament (translation by The Interpreter):
It has been established that the activity of the Open Society Foundations and the Open Society Institute OSI Assistance Foundation are a threat to the foundations of the constitutional order of the Russian Federation and state security.

Earlier as we reported, the Federation Council created a "patriotic stop list" of 12 foreign non-governmental organizations which were deemed "undesirable" in Russia.

In August, Chris Stone, the president of the Open Society Foundations published a statement on the foundation's web site.
In recent days, several voices in Russia have called for the Open Society Foundations to be banned from work in Russia as a so-called undesirable organization, but as of this writing, the Russian authorities have not done so, and we are continuing to support many Russian organizations that seek our assistance to participate actively as part of their society. We are determined to continue to support those who seek our assistance in accordance with our mission and within the limits of the law.

It is more than a quarter-century since the Open Society Foundations began work in Russia to support the aspirations of the Russian people. We have helped to finance a network of internet centers in 33 universities around the country; helped Russian scholars to travel and study abroad; developed curricula for early childhood education; and created a network of contemporary art centers which are still in operation.

In fact, three years after President Vladimir Putin came to power, Soros closed the foundation's own Moscow office in 2003, where he had spent more than a billion in the previous 15 years. A private military force stormed the office and seized computers and documents, ostensibly related to a long-standing real estate dispute.

At that time, as the Forward reported, George Soros himself made a statement that he no longer saw the need to subsidize activities such as science that the state itself should fund, and that philanthropy should be taken up by Russia's own wealthy individuals. But he also indicated in a press conference at the time that reforms were not progressing and it was futile to attempt to promote them:
“We tried to satisfy the expectations of those people in Russia who wanted to move to an open society and believed that they had the support of the West...I think that you [the Russians] have to largely abandon that illusion and act on your own.”

Even so, in the last 15 years, the Soros foundations had continued to fund projects in Russia at a lower level through a local foundation created for this purpose and through cross-border projects with other regional Soros foundations. Now that activity has essentially been banned.

-- Catherine A. Fitzpatrick