These are the two big stories in and about Russia today, and in what follows I will provide an overview of what we know and from whom.
The item about which we know more is the replacement of Shoigu by the economist Andrei Belousov, and my prime source of information on this is…The Financial Times.
Considering how I regularly use The Financial Times as a whipping boy for mainstream media generally, one may wonder why I do not simply cancel my online subscription to them. However, on days like today I believe that my annual investment in the FT is fully justified, because there are in practice two FTs: one is the editorial board, which inserts propagandistic content, assigns misleading titles to articles and offers its own opinion pieces on the lead pages. The editors are assisted by servile second quality journalists, like their man in Riga, Max Seddon. The other FT consists of high quality, well informed journalists who stand by and wait for the moment to publish some very serious material that generally contradicts the ignorant propaganda in the first category of items. So it was today.
The FT’s first article on the removal of Shoigu was written by Seddon alone and was published already last night under the title “Vladimir Putin replaces Russia’s security chiefs in surprise reshuffle.” The very tendentious interpretation assigned to the article appears in the first paragraph, which tells us that Shoigu’s departure shows “the Russian president is dissatisfied with the handling of his two-year invasion of Ukraine.”
The FT’s follow up article published this morning and appearing just next to the first in the on-line edition has two other authors besides Seddon, Anastasia Stognei and Polina Ivanova: “Andrei Belousov to bring economic rigour to Russian defence spending.” The title is already a tip-off that the article will be positive and factual, which it is. This article makes use of Russian sources including a professor now teaching at the University of Chicago, Konstantin Sonin, who by his politics should be doing Belousov no favors, but who also speaks with considerable respect for Belousov’s professional qualities, honesty and on the likely impact on the Russian economy of his statist policies.
The point here is that there have been rumors of corruption in high places at the Ministry and the sudden arrest of Shoigu’s most senior assistant Ivanov a week ago was the tip-off that changes would be coming in the cabinet reshuffle following Putin’s inauguration for his latest term of office. A make-over is all the more timely now that the Defense budget has ballooned out to over $118 billion, representing more than a third of the total state budget. What is needed at the top is an effective business manager and all indications are that this is precisely what Belousov will be.
But the wider ramifications are that Belousov will be a major force for using state subsidized credits to nullify the detrimental impact of the sky-high 16% prime rate put in place by the austerity minded neo-Liberal director of the Bank of Russia Elvira Nabiullina and Finance Minister Siluanov. Russia’s outstanding industrial performance in 2023 was due largely to the largess enabling preferential interest rates to certain manufacturers, which had been called for by Nabiullina’s enemies on talk shows like Evening with Vladimir Solovyov. For better or worse, the military industrial complex will be a driver of the Russian economy, guiding strategic investments and achieving what the old Soviet planning apparatus strived to do but never could.
As regards the ongoing Russian offensive in the Kharkov region of Ukraine, the Russian government remains dead silent about its intentions and state television does not speculate though commentators on commercial radio, such as Business FM by giving the microphone to analysts like Georgy Bovt.
What we can say is that the Russians have surely achieved one of their immediate objectives: to compel the Ukrainian armed forces to draw down troops from the line of contact further to the south in Donbas in order to support the defense at Kharkov. Whether the Russians will actually take Kharkov is unclear, though might be said to be unlikely. Instead, the Russians may very well now stage a big offensive to take Chasiv Yar, the contested city west of Avdeevka that is the gateway to Kramatorsk and Slavyansk. That would assure the conquest of the entire Donetsk region. No amount of of artillery shells or HIMARS or ATACMS now being delivered by the US will change the situation: the Ukrainians are short of men. Period.
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Now I ask the indulgence of readers as I close today’s essay with a look back at one of the key elements in my Travel Notes of the past couple of weeks: food supply in Russia at present. This time, however, I place the emphasis on a different aspect to the issue. I ask you to bear with me, and I assure you that at the end of this section I will deliver an important verdict on the state of the Russian economy and on the prosperity of the population.
I have spoken about foreign suppliers of fresh produce like Iran and Turkey at this off-season moment. But it must be said that what the Russian consumer sees on the shelves and buys is overwhelmingly made in Russia, which is as it should be in the world’s largest exporter of foodstuffs. What is locally grown, of course, also includes vegetables. Iceberg lettuce may be imported but rucola, young beet leaves, leaf lettuce in plastic pots, cherry tomatoes – all of this comes from greenhouses on the outskirts of all major Russian urban centers. And most of the tinned and frozen food items in the stores are also Russia-sourced.
What is striking in the 7 months since my last visit is how the local food offerings have expanded both horizontally by nomenclature and vertically by quality. By this I mean not only new and exotic foods, but simple traditional staples that were gone from the stores for many decades.
One good example is jams and related fruit preserves.
Going back to tsarist times, berry and other fruit preserves were a regular part of the Russian diet at all levels of society. The preserves were sufficiently fluid that you could pour them when you served them in little saucers as an accompaniment to tea. Indeed, the preserves could be added to the tea in lieu of sugar. Being only briefly boiled, they retained vitamins and were nutritious as well as aromatic.
As recently as a couple of years ago, this kind of product was only a fond memory. Russian supermarkets had nearly stopped carrying any preserves. I assumed it was due to dietary changes now that Russians had become calory-conscious and were reducing their intake of carbohydrates. In any case the few jars of jams on the shelves were awful. The contents had been boiled to death and were good only for making peanut butter and jelly sandwiches, if I may bring up another nostalgic note, this time from my American past. Since Russians do not make peanut butter and jelly sandwiches, and never did, the fruit preserves on offer in the stores had few buyers.
On this visit I was stunned to see a very big offering of highest quality fruit preserves, all produced in Russia. The producers clearly take pride in their products because their labels set out the list of ingredients in descending order and it is a very good sign to see fruit in first place. In any case, whether first or second there is sugar, yes sugar, of which Russia is a big producer, not glucose or corn syrup. Prices are two to three times cheaper than what similar premium grade jams would cost in Europe, if you are lucky enough to find them there.
I will not take your time describing other food product categories that in the past seven months have been revived from the dead, such as Russian made hard cheeses. Suffice it to say that whatever their political convictions may be all of my Russian interlocutors agree that the product assortments in their supermarkets not to mention specialty shops are very impressive and have grown considerably over the past year. However, relatively few, if any of my friends can make sense of this.
For those who lived under Soviet times, there is a logic, strange as it may seem to us: “They [meaning the authorities] are putting this out on the store shelves to keep us happy.”
Indeed, in Soviet times, especially before national holidays, exotic or prized foodstuffs like fresh pineapple or good hard salamis were put up for sale to provide cheer to the population. But the notion that anyone in the Kremlin is instructing the managers of the Pyatyorochka or Perekryostik supermarket chains to expand their product assortments is utter nonsense. Russia is now a free market economy and businesses take their decisions to maximize profits. Period.
Moreover, it is similar nonsense to believe that these supermarkets would fill their shelves with products just for show value to impress foreign visitors or local shoppers. The products are there because the demand for them is there, and the demand is there because people have money in their pockets to spend.
A month or so ago, President Putin remarked that during 2023 the rise in take home pay and pensions corrected for inflation was over 5%. At a minimum, the sharp increase in retail store offerings confirms a significant rise in spending power, in particular among the lower strata of the population.
Neither you nor I am naïve, and surely the ongoing war is a contributory factor in growing prosperity. If the FT believes that the new Defense Minister will ensure that Russia has both guns and butter, I qualify this by saying that Russia already is in this ‘sweet spot.’ The military supply factories are all operating on a three-shift basis. Unemployment is at an all-time historic low.
Recruits to the military pocket 6,000 euros at sign-up, if we take into account both the fixed sum from the federal government and the variable regional government contributions. After that, they receive 2,000 euros a month when in the war zone, which amounts to four times or more normal civilian salaries. And those warriors who destroy a Leopard tank or similar NATO equipment are immediately paid 10,000 euros or more each from the government plus large premiums from patriotic minded companies and businessmen. All of these separate elements add a lot to purchasing power of the general population.
©Gilbert Doctorow, 2024