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Russia Reform Monitor - No. 2113
Russia's privatization shell game;
How Moscow undermines Western politics
Edited by Amanda Azinheira
January 19, 2017
With oil prices rising and the prospect of a potential lessening of U.S. sanctions with the advent of the Trump administration, investors are beginning to see new promise in the Russian market. According to the Financial Times, Russia has already seen modest improvements in its GDP, as wary speculators begin to eye the country anew. However, these benefits have yet to trickle down to average Russians, who continue to experience diminishing real incomes and still suffer under high inflation. Moreover, economists caution that the country faces long-term structural difficulties that will impede a quick recovery, especially since Russian President Vladimir Putin refuses to implement necessary - but unpopular - policy reforms.
Andrey Karlov, the Russian ambassador to Turkey, has been shot dead in Ankara. Reuters reports that Karlov's killer, a former member of the Turkish riot police, shouted "Don't forget Aleppo" as he attacked the envoy while the latter was giving a speech in an art gallery. Turkish authorities suspect the gunman to have ties to influential exiled cleric Fethullah Gulen, who was implicated in the attempted July 2016 coup against the government of President Recep Tayyip Erdogan - a charge that Gulen has publicly denied. However, the assassin's comments suggest that the motive for the attack was Russia's ongoing involvement in Syria in support of the Assad regime - a position that has created significant discontent in Turkey, despite a recent warming of relations between Ankara and Moscow.
Russia has successfully tested the Nudol missile, which can disable satellites crucial to U.S. military functions. According to the Washington Free Beacon, the December test is the fifth such trial of the program - a testament to its significance for the Russian military. Russia has claimed that the Nudol, a "direct ascent" interceptor, is strictly intended for use against enemy missiles, but the Kremlin has also admitted that it is engaging in efforts to develop anti-satellite capabilities - a line of effort that experts say the new missile can significantly augment.
Moscow has been looking to fill holes in its budget through the sale of shares in various state owned energy companies, most prominently the Rosneft and Bashneft oil concerns. A lack of foreign interest and a dearth of potential buyers, however, has made Russia's privatization one "in name only," notes The Moscow Times.
Specifically, while approximately 50 potential buyers were approached to bid on Bashneft, not one was able to approach the $5 billion that Rosneft itself offered for the majority shares. This effectively left Bashneft a publicly controlled company after the buyout - a situation that was to have been remedied when Rosneft itself was privatized. However, very few buyers could be found for the latter firm, due to U.S. and EU sanctions as well as the sheer net worth of Rosneft. The company was prepared to essentially buy itself when Glencore, a British-Swiss firm, and the Qatari Sovereign Wealth Fund finally made an offer. However, analysts say, this hasn't solved the problem - because both Glencore and the Qatari Sovereign Wealth Fund are being financed chiefly by Russian banks, which are largely reliant on and strongly tied to Rosneft itself. The result is a shell game that has left Russian privatization efforts all but meaningless.
Russia is supporting extremist groups throughout in order to destabilize the European Union and the West, the New York Times reports. In a throwback to Soviet-era practices, the Kremlin had funded a neo-Nazi faction in Hungary and a Russian nationalist movement in Norway, carried out practice drills with, or generally encouraged, radical right-wing individuals and groups to engage in the politics within their respective countries. Pro-Russian candidates and parties are seeing an increase in funding, and are generally rising in power in Europe and the West, largely as a result of this strategic assistance.
After many years of delay, construction has finally begun on the first highway bridge to connect Russia and China. Radio Free Europe/Radio Liberty reports that, pursuant to plans agreed upon more than a year ago, Russia will build two thirds of the highway, while China will be responsible for the remaining third of the project, which is slated to be completed in October of 2019. The bridge is expected to be traversed by 3 million metric tons of cargo and 1.5 million passengers annually. It is expected to lower the cost of transporting Russian raw materials to Chinese manufacturers - an increase in trade that, while long in the making, has likely been fast-tracked by recent Western trade sanctions.