Russia Update: Income Falls by 4.9% This Year Due to Economic Crisis

September 29, 2015
Aleksei Kudrin. Photo by Pyotr Kovalev.

Russians’ income has fallen 4.9% this year by contrast with last year due to the economic crisis. The fall in purchasing power has also reduced manufacturing and construction.

Welcome to our column, Russia Update, where we will be closely following day-to-day developments in Russia, including the Russian government’s foreign and domestic policies.

The previous issue is here.

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‘The Greatest Political Show’: Novaya Gazeta on the Meeting of Obama and Putin at the UN

In a piece titled “The Greatest Political Show,” Aleksandr Panov of the Russian independent news site Novaya Gazeta analyzed President Vladimir Putin’s speech at the UN yesterday, September 28, and his subsequent meeting with US President Barack Obama.

2015-09-29 23:19:54

He noted that Russia’s increased presence in Syria likely helped Putin to
get the meeting. Curiously, there were conflicting reports about
whether it was the US or Russia that made the overture for the meeting.
White House press secretary Josh Earnest said Russia was “desperate” to get the meeting. Yury Ushakov, aide to Putin denied the claim and said it was the
Obama Administration sending the offers for a meeting.

Kremlin press
secretary Dmitry Peskov said Putin would speak on Syria, and only get to
Ukraine “if there was time.” Meanwhile, the US said the main topic was
Ukraine and fulfilling the Minsk agreement and “there will be time for
this.” Then later the White House said Syria would be the priority.

of State John Kerry said on the eve of the meeting and reiterated later that the forces
fighting ISIS should be coordinated and the goal was a “united, secular
without foreign troops. Lavrov in turn said that a
Russian analysis of compliance with the Minsk accords was sent to the

We could note that while Kerry has condemned the separatists
holding elections on different dates and called for the need to
implement the Minsk agreement generally, he has not focused on the point
Ukrainian President Petro Poroshenko again emphasized today which is that Russia must return
control of the Ukrainian border back to Ukraine.

During the
General Assembly meeting, Russian UN Ambassador Vitaly Churkin
demonstratively left the hall during Poroshenko’s speech, although the
rest of the Russian delegation remained in the room, Novaya Gazeta reported. TASS cited an
unnamed “high-placed diplomat” who said Churkin had left the room over
Poroshenko’s “politicized and aggressive speech which did not correspond
to the topic of the summit.” Poroshenko had noted the “traitorous
annexation” of the Crimea and the ruinous effect of the war on the
Ukrainian economy.

The Ukrainian delegation also left the hall
when Putin spoke, after first hanging over the balcony a bullet-ridden
Ukrainian flag from the Battle of Ilovaisk.

Panov wrote that Ukraine’s UN Ambassador Yuriy Sergeyev had written “Let him
see the flag from Ilovaisk” on Twitter. But it was actually more broadly directed:

Panov summarized Obama’s
speech in one line: “Democracy is better than tyranny” and said Obama
stuck to Washington’s position that Bashar al Assad must step down.
Russian experts said Obama was not calling for the immediate resignation of
Assad, however, and spoke of transferring power in the future. That
appeared to give a basis for some discussion with Putin.

Obama condemned
the annexation of Crimea in his speech at the UN and while he did not
mention Putin by name, clearly meant to reference him:

this basis, we see some major powers assert themselves in ways that
contravene international law. We see an erosion of the democratic
principles and human rights that are fundamental to this institution’s
mission; information is strictly controlled, the space for civil society
restricted. We’re told that such retrenchment is required to beat back
disorder; that it’s the only way to stamp out terrorism, or prevent
foreign meddling. In accordance with this logic, we should support
tyrants like Bashar al-Assad, who drops barrel bombs to massacre
innocent children, because the alternative is surely worse.”

Panov mentioned Putin’s proposal for a creation of a joint information center to include
Russia, Iran, Iraq and Syria which was called a “coalition of rivals” by some
in Washington. Panov cited Christopher Dickey in an article title “After Four Years of
Failure in Syria, Obama Looks to Russia and Iran for Help
” expressing some reservations about this arrangement:

case in point, on Sunday an intelligence-sharing agreement was announced
among Syria, Iran, Russia, and the government in Iraq. (Some pundits
are calling the Damascus-Tehran-Moscow-Baghdad alliance taking shape
“the gang of four.”) Yet there also are as many as 3,000 U.S. personnel
in Iraq working, in many cases, precisely, on intelligence gathering.
Will their insights be shared by Baghdad with Tehran, Moscow, and
Damascus? It will be very hard to tell. But the question itself suggests
some of the contradictions, and the traps, that lie ahead.

Dickey also noted that there was
more common ground between Putin and Obama than seemed at first by
Obama’s concession that “realism dictates that compromise will be
required” in Syria. Dickey thought Putin’s statement in an interview with Charlie Rose on CBS’ Sixty Minutes to be “more specific” in his plan to support “the legitimate
government of Syria” and have a dialogue with “the rational opposition”
in Syria to conduct reform.

Panov also watched former Congressman Mike Rogers on CNN, who spoke of the message from “Professor
Obama to the leaders of the world — that you shouldn’t be dictators
and terrorists and bad people; unfortunately that’s not going to change
what’s on the ground for these countries.”

Rogers went on to say:

think you’ll hear more detail from Putin who’s actually making an
on-the-ground realistic approach to where he thinks he can gain strength
and influence across the Middle East. I think we should have had a
little bit of counter to that with the President.”

After his 90-minute meeting with Obama, Putin gave a press briefing in which he
deemed the meeting “useful, constructive and very candid” and noted that it addressed both
Ukraine and Syria. Putin blamed the US for the “low state” of US-Russian

Asked about the possibility of Russian air strikes on ISIS
positions, Putin said:

“We are contemplating it and do not rule
anything out, but we will act in full accordance with international law.
Such air strikes must be conducted only after a UN Security Council
resolution or the appropriate request from the government of Syria.”

called the air strikes on ISIS made by the US, Australia and now France
“unlawful” but claimed he would not put any Russian boots on the ground.

It was a “useful exchange of opinions” and nothing more, concludes Panov; there were no breakthroughs.

US media was much more laudatory, seeing Putin as the winner. as Rob Garver of The Fiscal Times writes; the congratulatory headlines for Putin might have been scripted by Putin himself for
his controlled Russian media, but appeared in the US. He saw Russia’s
own media as even more subdued.

— Catherine A. Fitzpatrick

Tyumen Resident Sentenced to 2 Years of Prison for Participation in ISIS

UPDATED: A court in the Siberian city of Tyumen sentenced local resident Vitaly Makarov to two years of labor colony for taking part in combat in Syria on the side of ISIS, Novaya Gazeta reported, citing TASS.

We have been unable to find any additional information about Vitaly Makarov beyond this report.

The regional FSB department said that the sentence went into effect September 25 after Makarov was found guilty.

According to a source in the regional FSB who spoke to TASS, Makarov spent a year in Syria fighting on the side of what was described as a division of ISIS called Jaish al-Muhajireen wal-Ansar, which TASS translated as “the Jamaat for visitors and residents,” and characterized as “fighting on the side of international terrorist organizations and anti-government groups” at the time.

The FSB source said that in March 2013, Makarov, who had earlier converted to Islam and chosen the Muslim name “Yusuf,” studied in an Islamic theological school in Egypt, then flew from Cairo to Turkey where he illegally crossed the Turkish-Syrian border as a “mercenary” and then joined
Jaish al-Muhajireen wal-Ansar.

The FSB source added that Makarov had sworn allegiance to the so-called “amirs” of an “unlawful armed formation” and went through physical, combat and tactical training at a base in Syria. From 2013-2014, he took active part in combat in Syria as part of the anti-Assad forces for which he regularly received cash in Syrian currency. The amount was not specified.

But then, said the FSB source, fearing for his life, in January 2014 Markarov stopped his participation in armed conflict in Syria and returned to Egypt. There, on February 10, as he attempted to fly to Turkey to resume combat, he was expelled by Egyptian law-enforcement back to Russia for violating Egyptian migration law. When he arrived in Moscow, he was met by FSB agents who arrested him.

The FSB said they gathered “exhaustive information” about Makarov’s involvement in ISIS during his pre-trial investigation and he fully admitted his guilt. He asked for an expedited review of his case.

That may explain his light sentence given the seriousness of the charges.

The FSB also said the number of Russian citizens fighting for ISIS now numbers 2,400, up from the figure of 1,700 given by FSB chief Aleksandr Bortnikov at a conference on combating extremism sponsored by the White House in February.

Sergei Smirnov, first deputy director of the FSB, said fighters who had joined terrorist groups were a grave danger upon their return to Russia as they had acquired training and combat experience. About 500 criminal cases have been opened up in Russia to date related to participation in ISIS, which Russia has banned. Some of them are related to young people supporting ISIS on social media.

— Catherine A. Fitzpatrick

Russian Incomes Drop by 4.9% in Economic Crisis
Russian incomes have dropped by 4.9% this year compared to last year, reported citing the Ministry of Economic Development’s latest report.

The reduction in Russians’ purchasing power has led to a fall in sales and manufacturing of consumer goods.

small gain in real income recorded at mid-summer has now been eroded by
a new fall in income. In June, real income, that is income after
obligatory payments corrected for inflation, rose 1.4% but then fell 1.1%
in August when many Russians are on vacation.

Experts accounted
for the slight rise in income by the fact that Russians had begun to
spend their foreign currency savings. Rubles obtained through foreign
currency exchanges are considered income, but this trend then tapered
and incomes began to fall again, said Liliya Ovcharova of the Center for
Analysis of Income and Living Standards of the Higher Economic School.

In reality, the “foreign exchange infusion” lasted only a month, says Purchasing power reduced by 9%.

Rosstat, the state statistics agency had earlier warned about the growing number of Russians below the poverty line.

to official statistics, the number of Russians living in povery grew by
3 million, with a total of 20 million or 14% of the population. Aleksei
Kudrin, former finance minister, said the number may grow in the coming
year due to the reduction in the indexation of pensions to inflation

The reduction in purchasing power has led to a fall in
manufacturing including a 9.1% drop in perishables including beverages and
tobacco products, despite Russia’s “import substitution” policy whereby
domestic items are promoted to replace banned foreign imports.
Production of non-food goods has fallen by 8.3%. Russians have to spend
more on food, clothing and household goods even as they have less cash.
And evidently they are making the choice for purchasing food above all,
as manufacturing of clothing fell by 26% with knitwear by 26.4% and
shoes by 19.3%.

The Ministry of Economic Development
characterized the Russian consumer goods market as “worsening” and
“shrinking” and predicted that the market “would not stabilize soon.”

Overall, Russia’s GDP has fallen by 3.8% annually compared to 2014, and by 4.6% for August by comparison to last August.

car manufacturing is also down by 26% and housing construction, which
had increased almost by a third in the first quarter as the government
continued to make good on Putin’s populistic pledges, has now shrunk by
5.9% annually.

“The consumer is paying for the crisis,” as Kudrin and other economists said earlier this year.

— Catherine A. Fitzpatrick