Following the release of the US aid package to Ukraine, the best-case scenario for Kyiv in '24 seems to be that 🇷🇺's gains are limited to incremental progress at the height of its defense spending. But what if 🇷🇺's military spending has not yet peaked?
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carnegieendowment.org/politika/92326 1/ From the Kremlin’s standpoint, U.S. aid may not directly challenge Russian military superiority in Ukraine, but it could increase the costs associated with maintaining superiority and thus delay Russia’s victory. Putin may view this aid package as potentially the last one

Russia's economy, fueled by the ongoing war with Ukraine, shows surprising stability amidst sanctions. However, this stability is precarious and not everlasting. In my newest paper for @CarnegieEndow, I explore the resilience and risks of Russia's economy
carnegieendowment.org/2024/04/10/is-… 1/ While sanctions restrict Russia's economic growth, they've paradoxically shielded it from certain external shocks. Key pillars of resilience include:
- Market nature of the economy
- Commodities-based exports
- Strategies to bypass sanctions
- Significant fiscal impulse

Behind Russia GDP’s 3.5% expansion in 2023 are uncontrolled growth of expenditures, high inflation, distortions in the labor market. Problems will only multiply in the future, as I argue in a @ForeignAffairs piece. THREAD 1/

foreignaffairs.com/russian-federa… 2/ Putin faces an impossible trilemma. He must fund the war against Ukraine, maintain the Russian populace’s living standards, and safeguard macroeconomic stability. Achieving all three goals is impossible

1/ Russia's wartime budget (source: leak to @business ) key takeaways:
- Putin prepares for the long war
- Guns above the butter (military spending exceeds social)
- all the cows that can still give milk in Russia's economy will be milked to death
(more in 🧵👇) 2/ - first time in history war expenditures exceeded 6% GDP
- with social spending and national security it's more than RUB 20 trln
- Somehow government wants to collect from economy RUB 35 tln revenues amid sanctions (19,4% GDP)
- deficit in '24 - RUB 1,6 tln

The wave of asset nationalizations in Russia affects both foreign owners and Russians. This violates Putin's promise to his elites not to revise the results of privatization. Aguing in my recent piece for @CarnegieEndow why Putin breaks its own rules👇👇👇
carnegieendowment.org/politika/90543 Putin's deal with the elites in his first term can be summarised as "you support me, and I will not reconsider privatization". It's a ground basis of their loyalty formula. But war is a reduction of resources. Amid decreasing rents, Putin can’t live on loyalty alone.

Sanctions have not breached Russia’s economic fortress but have put a time bomb under its foundations. Accumulated imbalances and inflated demand the reason for the dollar over 100, argue in my piece for @opinion

bloomberg.com/opinion/articl… The effect of an emergency rate hike (now 12%) of the Bank of Russia will be more extended in time - the gravity of the financial market works. The effect of capital controls, which have so far been abstained from, will also be limited

How Kremlin is patching holes in the regime with Band-Aids a 🧵:

Putin has made 3 different speeches in the last 4 days. The two main pillars of Putin's regime: PR and the siloviki. The Prigozhin mutiny dealt a blow to both. The Kremlin is now busy patching up the holes All weekend society was busy w dumskrolling, buying currency&stocking up on cash. The people of Rostov welcomed the Wagnerites. But Putin and the whole state machine spread the narrative that the society showed solidarity and patriotism
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A quick 🧵: no one from elites took Prigozhins side publicly yet. Calls to unite around Putin from reg. governors are coordinated from the Kremlin and barely sincere.Elites demonstrate co-called negative loyalty -- don't like what is going on, but not so much to protest vocally Prigozhin never belonged to the elites in the "friend or foe" system. His entire resource was based on his personal acquaintance with Putin, the fulfillment of his informal orders with the help of PMCs, and his media independence from the Kremlin
carnegieendowment.org/politika/88572

I'd love to write how Prigozhin ends, but I don't have a crystal ball. This is what happens when the state releases its monopoly on violence. While we're all waiting for the updates, read tw newsletter: can defense spending sustain Russian economic growth?
en.thebell.io/keynes-in-khak… Russia's economic policy increasingly resembles "military Keynesianism,"while demand stimulated by military spending and payments to the population is also more or less related to the army or the military-industrial complex
more about Keynesianism learn 👇

TW newsletter, I look at Ukraine’s counteroffensive and economic scenarios for Russia. The situation is clear as mud, but we can place some expectations between two extreme scenarios.
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en.thebell.io/ukraines-count… In case of Ukrainian success (the recapture of a significant part of the occupied territories in Kherson and Zaporizhzhia) we can expect further repression, more mobilization, and a complete shift to a war economy. What does it mean?

ltst newsletter: I focus on the #Russian labor market where there is a growing staff shortage. 🇷🇺 leaders talk proudly of record low unemployment. However, the headline figures mask despair of firms forced to increase wages as productivity falls
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en.thebell.io/russia-has-too… 2 waves of wartime emigration and mobilization cost the workforce about 600,000 men — 2% of all men aged 20-49. Same time, 390,000 men moved to posts in military, security and public administration, noticed @x1skv They have primarily moved from construction, processing and retail

2022 left #Russia's elites atomized and awaiting repressions. Uncertainty because of sanctions scares them even more than uncertainty from #Putin. Absence of any mechanism to lift sanctions or any dialogue on this issue localizes elites within 🇷🇺
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carnegieendowment.org/politika/89271 Since the beginning of the war, 🇷🇺 elite and technocrats have not found the strength to either love the war or oppose it. Partly because of the moral career they made, partly because of the pressure from the FSB
carnegieendowment.org/politika/88143

We spoke about the #war for this newsletter with almost ten high-ranked Russian officials and Forbes-list members.Key findings:
- most of them feel deceived
- they expect to see “disloyal” colleagues exposed and punished
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thebell.io/en/russian-bus… Before the invasion, Putin repeatedly tried to reassure businesses, warning of “possible turbulence” but adding there would be no long term problems. “It will take a few months, six months at most,” described a source Putin’s words at a meeting with business in early February '22

Does a Record Budget Deficit Herald the Collapse of the Russian Economy? Unfortunately no. It's premature to make a trend on one-month data. But slowly & surely, the sanctions noose is tightening. here are my findings 👇👇👇 for @CEIP_Politika

carnegieendowment.org/politika/89009 The first month of 2023 saw the deficit reach a record RUB 1.8 trillion. Spending grew by 58% compared with January 2022, when there was a budget surplus of RUB 125 billion ($25 billion), while revenues fell by over a third.

Instead of the annual press conference, #Putin talked to the #Kremlin pool (BTW, since today, they have an official dress code). Here is a short thread about what we learned:
- #Russian economy is resilient because its deficits are smaller than those of the U.S. and China 1/ - the price cap will not affect budget revenues: "we're still selling at these prices." the reciprocal law he will sign on Mon-Tue bloomberg.com/news/articles/… 2/

Divergent trends in #Russia regions. @bank_of_russia version:
Central region:New buildings are unsold due to oversupply on the secondary market
NW region: The shipyards are busy but face labor shortages.Meat and dairy producers have simplified and cheapened the range of products Volga region: due to the uncertainty, developers reduced the number of new projects. Horizon of tourist trips was significantly reduced
South region: High tourist flow supported consumption, but expectations are subdued. Azov-Black Sea ports cargo turnover at maximum

#Putin suggested establishing new intnl settlement system based on ancient Hawala. The urge for Hawala 2.0 shows how desperately 🇷🇺 needs a systemic solution to the issue of intnl payments.Attempts to switch to rub/yuan/gold/crypto haven't been successful

frankrg.com/102702 Hawala (originated in 8th century in South Asia) is an informal funds transfer system that allows for the transfer of funds from one person to another without the actual movement of money. Nowadays it is also called underground banking and is widely used, for instance, in Iran

1/ The English version of my text for @CarnegieEndow: Why Are Russia’s Technocrats Silent on the War? based on several interviews with high-ranked #Russian officials came up. A thread about it 1-12

carnegieendowment.org/politika/88143 2/ The Russian Security Council meeting on February 21, just a few days before the invasion, showed that #Putin is the only person in the room who is allowed to make decisions. the rest need to support him undoubtedly or even anticipate his wishes.

У нас интересная дискуссия со @Stanovaya о Пригожине. Согласна со многими наблюдениями, однако считаю, что он все еще маргинал: мы достоверно не знаем как часто Пригожин встречается с Путиным, он как и Кадыров может создавать видимость этих встреч 👇

https://twitter.com/Stanovaya/status/1579754415615275008

возможно, Пригожин может позвонить руководителю администрации президента Антону Вайно, но не факт, что Вайно подорвется выполнять пригожинскую просьбу. Его роль в назначении Суровикина в принципе минимальна - его назначение и методы обсуждались еще летом

THREAD
1/ #Russia’s reasons to agree #grain deal and deblock ports in #Ukraine:
1. Exemptions from sanctions for Putin’s cronies banks and billions $ from food exports
2. Russia’s agricultural sector is crucially dependent on import

For @CarnegieEndow
carnegieendowment.org/eurasiainsight… 2/ Russia got $11bln from grain exports in 2021, $10 in 2010. It’s very important part of state revenues. This year a record harvest is expected (130 min tonnes), and correspondingly high profits. Beneficiaries of the largest agricultural holdings are close to the #Kremlin