Russia Policy Monitor No. 2653

HOW MOSCOW IS HELPING THE HOUTHIS
Since the start of Israel's military offensive against Hamas in the Gaza Strip last Fall, the echoes of the newest Mideast war have reverberated throughout the region. That includes the Red Sea, where maritime commerce has been upended by sporadic attacks by Yemen's Iranian-supported Houthi rebels. As it turns out, however, the Houthis aren't just getting backing from Tehran. Moscow is also playing a material role in the group's assault on shipping in the Red Sea. According to the Wall Street Journal, the Kremlin has been providing the militia with targeting data for missile and drone strikes against vessels transiting the region. The cooperation comes as part of the Russian government's expanding partnership with Iran, which has deepened dramatically over the past year-and-a-half.

The Kremlin's calculus is simple. "For Russia, any flare up anywhere is good news, because it takes the world's attention further away from Ukraine and the U.S. needs to commit resources — Patriot systems or artillery shells — and with the Middle East in play, it's clear where the U.S. will choose," explains Alexander Gabuev of the Berlin-based Carnegie Russia Eurasia Center. (Wall Street Journal, October 24, 2024)

MOUNTING SIGNS OF ECONOMIC MALAISE
To hear Russian officials tell it, Russia's economy is still going strong, despite nearly three years of war against Ukraine and the persistence of extensive Western sanctions. Empirically, however, there are mounting signs that Russia is under serious financial stress. One is the country's interest rate, which has just been hiked significantly. At its late-October board meeting, Russia's Central Bank voted to raise the country's interest rate two points, to 21%. "The growth of domestic demand significantly outpaces the scope to expand the supply of goods and services," the Central Bank said in an official statement after its decision. "Additional budget expenditures and the associated deficit in the 2024 Federal Budget also have a pro-inflationary effect."

Meanwhile, the Kremlin is being forced to take increasingly desperate steps to keep its economic ship of state afloat. As Agathe Demarais of the European Council on Foreign Relations outlines in Foreign Policy, this includes launching a barter trade in foodstuffs with countries such as Pakistan, approaching default on its membership dues in organizations like the Shanghai Cooperation Organization, and shifting to a cash-first payment system as credit card companies increasingly leave the country. (The Bell, October 25, 2024; Foreign Policy, October 28, 2024)

TURMOIL IN THE CAUCASUS
In early October, Chechen strongman Ramzan Kadyrov accused three federal lawmakers in the North Caucasus of plotting his assassination as part of a deepening power struggle involving the Wildberries e-commerce platform. The conflict highlights growing tensions and fractures within the Russian political system, as regional elites assert their interests in contravention to the Kremlin's authority, which has become more fragile amid the Ukraine war. Kadyrov's escalating rhetoric highlights the vulnerabilities inherent in Moscow's traditional governance model, which has relied to date on regional strongmen with a high degree of autonomy. The incident also shows the potential for growing instability across the Caucasus. The Wildberries feud involves a power struggle over ownership of Russia's version of e-commerce giant Amazon among rival Caucasian clans. (CACI Analyst, October 30, 2024)

A RADICAL IN THE RANKS
Russian President Vladimir Putin is taking additional steps to solidify his grip on occupied territories in Ukraine - by integrating their political figures into the Russian government. The latest is Artyom Zhoga, a former military officer from Russian-occupied Donetsk, who has seen a meteoric political ascent. Zhoga was appointed as the Kremlin's special envoy to the Urals District earlier this year. Late last month, however, he received a further promotion: to Russia's National Security Council. "Zhoga's appointment makes him one of 21 non-permanent members of Russia's Security Council, a key executive body overseeing national security and strategic policy," The Moscow Times reports. "The council consists of 13 permanent members, including leaders of major security agencies and high-ranking legislative and executive officials." (The Moscow Times, October 25, 2024)

[EDITORS' NOTE: Zhoga's promotion is indicative of a larger, and potentially consequential, trend. Since the start of the "special military operation" against Ukraine in February of 2022, Putin has repeatedly pledged to elevate a "new elite" comprised of Ukraine war veterans to positions of national prominence - ostensibly as a means of solidifying both his popularity and the legitimacy of his war of choice. Zhoga's rise appears to be part of this pattern.]