Tim Ash:  Thought on Russian protests

It’s probably worth a quick recap on Russia political risks after the demonstrations over the weekend.

It’s tempting here to take the Kremlin narrative that these were relatively small scale and are not backed by the wider population – hence will go nowhere. Indeed, there have been similar protests back in 2011, in 2015 following the murder of Boris Nemtsov, and in 2019 – which all went nowhere. And you could ask yourself if the opposition got no momentum even after the death of a respected reformer such as Nemtsov why would Navalny’s arrest – someone with a chequered background – be different this time around.

 

Maybe.

 

But something feels different this time around

The protests were not huge – perhaps 40k in Moscow – but they were very widespread with protests in 50 plus cities. And remember that the turnout was against the background of widespread intimidation – arrest of opposition leaders, warnings to students they will be kicked out of schools and college, plus restrictions in social media and the internet, and very cold weather.

Videos seemed to suggest broader support with cars honking horns in support and passers by critical of police brutality.

And I know that opinion polls still show 60% odd support for Putin – but these hide popular opinion as I think Russians mask their responses given obvious concern about repression given the brutal historical context. But interestingly opinion polls do show widespread frustration with government – if not necessarily Putin, the Supreme leader – and corruption, poor public service, red tape and bureaucracy and poverty and inequality. The ruling United Russia is unpopular and might struggle in looming parliamentary elections even if the opposition is restricted from running.

 

Navalny’s Putin Palace video has hit a nerve

I think Navalny’s Putin Palace video has hit a nerve – Russian’s despise inequality/Kleptocracy. And the video now has close to 80 million views with Russia only having a population of 140m.

Perhaps we underestimated the move by Putin to enact constitutional powers, making himself president for life, in effect. There are shades here of Erdogan’s move to an Executive presidency, and how unpopular that has made him with a large swathe of the population.

The narrative has always been that Russians are different, they tolerate injustice and follow the direction of strong leaders hence don’t protest. But that may be changing – it seems to be in neighbouring Belarus. Perhaps it’s the new social media generation.

It just feels different this time around.

 

Anyway things to watch for  

 

* Do the protests gain momentum. Will they occur every weekend as in Belarus? Will they be able to keep scale/scope?

 

* Reaction of authorities? Will they overreact as occurred in Belarus – where beatings and arrest of protesters gave extra life/duration to protests. Similar regime reactions were counterproductive in the Arab Spring and in Ukraine in 04/05 and 13/14 and more recently in Kyrgyzstan.

 

* Global impact – could Putin embark on a more aggressive foreign and security policy overseas to distract attention and bang the nationalist drum. He did after 2011 and this led to the annexation of Crimea, invasion of Donbas. Where could these foreign adventures be? Possibly Ukraine, Georgia or Central Asia.

 

 

More sanctions?

 

* Sanctions – notable I think that the Polish President and even French foreign minister have called for sanctions. Presumably these will be rolled out if Navalny is not released and if, as seems likely, he is given a new longer jail term in a court hearing due for Feb 2. Also watch how the Kremlin deals with the 3000+ arrested this weekend – are they jailed/abused in custody? All this will shape the Western reaction. Nord Stream 2 though now looks dead in the water. I would expect sanctions against individuals in the Putin regime but use of the Magnitsky legal infrastructure also now risks a bigger push against Kleptocracy bringing risks to oligarchs and Russian corporates.

 

All this comes as the new Biden administration takes office – and the Kremlin has tried to make the link. Notable perhaps that many of the Obama foreign policy team who were on the ground during the Ukrainian Euromaydan are also key players in the Biden team – Victoria Nuland, for example is back at State.

 

 

Navalny puts Russia at center stage of US diplomacy

 

Some have argued that the Biden team will have its priorities elsewhere and will not be focused on Russia, when the bigger threats are China and Covid. The argument is also that the Biden team will want to work on areas of mutual interest with Putin, such as the new Start Treaty and Iran, and will try and limit areas of dispute/conflict.

 

I would counter the above:

 

First, the Navalny affair has thrust Russia centre stage and made it the first foreign policy challenge for Biden.

 

Second, the Biden administration will be quite different from the Trump regime. It is full of experienced technocrats and policy makers. Biden is an older president and logic suggests he will delegate. Unlike under the power vertical under Trump, this administration will be able to multitask. So likely Antony Blinken will be the most powerful Secretary of State in years – albeit he seems very likely/eager to work with/thru Congress. But it’s possible to imagine the Biden administration fighting full throttle against Covid while also having an ambitious foreign policy agenda, including countering the threat from Russia.

 

Third, because of the Trump era, and because of strong fears that Russia helped him win in 2016 using malign KGB money channels though oligarchs and their banks – and used the same channels to corrupt Western market democracy elsewhere (Brexit, far right and left in Europe, Montenegro coup) – fighting Kleptocracy will be a key theme for the Biden team. Expect a coordinated response built around global Magnitsky. But expect a very effective sanctions regime to be rolled out – re run of April 2018 oligarch designations. And this all fits in really well with the anti corruption agenda pushed by Navalny and the Russian opposition.

 

And the Biden team will want this new infrastructure in place by the 2024 elections, if not the 2022 midterms, to ensure that dirty KGB oligarch money cannot influence future US elections. This is a clear and present danger as seen by this Biden team. This is not something that will be put on the back burner. And I think the Biden team will want to send a strong and clear early message to Putin that we know your game, – this will be couched around responded to cyberattacks, chemical weapons use and fighting Kleptocracy.

 

** Please note that any views expressed herein are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions. The views expressed do not reflect the opinions of all portfolio managers at BlueBay, or the views of the firm as a whole. In addition, these conclusions are speculative in nature, may not come to pass and are not intended to predict the future of any specific investment. No representation or warranty can be given with respect to the accuracy or completeness of the information. Charts and graphs provided herein are for illustrative purposes only.

 

 

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.