Russia Matters, 8/20/24

Since Kamala Harris chose Tim Walz as her running mate on Aug. 6, the U.S. press has published dozens of newsstories on what qualities make the Minnesota governor most appealing to American voters concerned with domestic issues. Significantly less, however, could be found in American media on Walz’s record and views on foreign policy issues in general, and U.S. policies in the post-Soviet space in particular. This RM compilation is meant to remedy that lack, detailing Walz’s views on this region, as expressed since first serving as a member the U.S. House of Representatives, and later as the governor of Minnesota. The compilation also details what bills and edicts related to post-Soviet Eurasia he co-sponsored and signed while a Congressman and a governor, respectively.

Born on April 6, 1964, in Nebraska, Walz grew up there before enlisting in the U.S. Army National Guard at 17. In 1989, he graduated from Chadron State College, after which he spent a year teaching, and then served full-time as an Army National Guardsman. He then became a high school teacher and football coach. In February 2005, he submitted documents to represent Minnesota’s 1^st District in the U.S. House of Representatives, before retiring from the National Guard in May of that year after 24 total years of service. Walz won that election and served in the U.S. House of Representatives from 2007–2019. While still in Congress, he ran for governor of Minnesota in 2018, won, and was reelected in 2022.

The first evidence of Walz’s public support for Ukraine in its interaction with Russia dates back to his first term in the U.S House of Representatives. In September 2008, Walz co-sponsored H.Res.1314: “Remembering the 75th anniversary of the Ukrainian Famine (Holodomor) of 1932–1933.” Walz then repeatedly acted in support of Ukraine in his subsequent years in Congress. For instance, in 2015, he co-sponsored a bill to authorize assistance and sustenance to the military and national security forces of Ukraine. He remained supportive of the Ukrainian course upon leaving Congress to take up his post as the governor of Minnesota. 

When Russia invaded Ukraine in February of 2022, the governor instantly condemned the attack as “unprovoked,” adding “It’s time to unite, protect democracy and work together to hold Russia accountable.” In 2022, Walz also issued an executive order to compel Minnesota state agencies to terminate any contracts with Russian entities over Russia’s war against Ukraine. 

In 2023, Walz met with Volodymyr Zelenskyy, saying it was “an honor” to speak with the Ukrainian president and to promise Minnesota’s “unwavering support.” Speaking on the two-year anniversary of the invasion in February 2024, Walz declared that Minnesota supports Ukraine as it fights “to defend freedom and democracy.” That same month, Walz signed an agricultural deal between his state of Minnesota and the north Ukrainian region of Chernihiv, saying “It’s a really important showing of friendship and a real important showing of ties.”

It’s worth adding that Walz’s long support for Ukraine, and his repeated criticisms of Russia, have not gone unnoticed in either Ukraine or in Russia. Just this month, Walz has been praised by Oleksandr Merezhko, Ukrainian foreign affairs chairman, who described Walz as “very pro-Ukrainian and our press and our people, they view him as a friend, as a true friend of Ukraine,” and the Kyiv Independent described Walz as an outspoken Ukraine supporter. And in comments given to European Pravda, a Ukrainian online newspaper, Ukraine’s Ambassador to the U.S. Oksana Markarova praised Walz’s record on Ukraine. “Governor Walz is definitely one of the leaders of such support and a reliable friend of our country,” Markarova said. His long record of support for Ukraine in Congress and as Minnesota’s governor also landed him a spot on a list of 77 newly sanctioned U.S. nationals unveiled by the Russian Foreign Ministry in February 2023, and which bans these individuals from travelling to Russia for being involved in arms supplies from the U.S. to Ukraine.

What emerges from a review of Walz’s foreign policy views and votes in Congress and as governor is that like his running mate, Vice President Kamala Harris, Walz believes that Ukraine deserves support for aspiring to develop as a democracy under the shadow of a predatory Russia. Like most American foreign policy thinkers of the post-WWII generation, he also shares the American view that economic growth and trade go hand-in-hand with healthy democratic governance. This explains the consistency of his positions on U.S. trade and security assistance with Ukraine.  

In addition to being staunchly pro-Ukrainian in the conflict between Kyiv and Moscow, Walz has also once confessed that concerns related to Russia and nuclear security keep him awake at night and called for lifting Moscow’s restrictions on exports of American dairy products to Russia.  Walz also co-sponsored the International Human Rights Defense Act of 2018, which established in the Department of State a permanent Special Envoy for the Human Rights of LGBTI individuals, a move that could not have possibly pleased Vladimir Putin—who seeks to portray himself as an international defender of traditional values. 

The compilation of Walz’s views on various issues, which you can find below, is part of Russia Matters’ “Competing Views” rubric, where we share prominent American figures’ takes on issues pertaining to Russia, U.S.-Russian relations and broader U.S. policies affecting Russia. All sections may be updated with new or past statements. The quotes below are divided into categories similar to those in Russia Matters’ news and analysis digests; reflecting the most pertinent topic areas for U.S.-Russian relations broadly, and for the drivers of the two countries’ policies toward one another. Text that is not italicized or in brackets is a direct quote from Walz.

I. U.S. and Russian priorities for the bilateral agenda

Nuclear security and safety:

• Asked during a 2010 Star Tribute Editorial Board endorsement interview to identify a global threat that kept him up at night, U.S. Rep. Tim Walz pointed to Russia and nuclear security. (Star-Tribune, 03.24.14)

North Korea’s nuclear and missile programs:

• No significant statements could be found.

Iran and its nuclear program:

• No significant statements could be found.

Humanitarian impact of the Ukraine conflict:

• When a sovereign nation is threatened, each and every one of us stands up, fights back and does right by humanity and peace in this world …We cannot stand idly by; we all must do our parts [to help Ukraine]. (AP, 03.07.22)
• [When inking an agricultural deal between Minnesota and the north Ukrainian region of Chernihiv:] It’s a really important showing of friendship and a real important showing of ties. (Al Jazeera, 08.07.24)
• [During a virtual meeting with Zelenskyy in 2024:] It was an honor to hear from President Zelenskyy firsthand and offer him our unwavering support. (Al Jazeera, 08.07.24)

Military and security aspects of the Ukraine conflict and their impacts:

• We stand with Ukraine and condemn Russia for these unprovoked and unlawful attacks. (Office of Gov. Tim Walz, 02.25.22)

Military aid to Ukraine: 

• Walz co-sponsored H.R.955 that was to authorize assistance and sustainment to the military and national security forces of Ukraine. (Congress’ official web site, 02.12.15)
• Walz voted in support of H.Res 162, “Calling on the President to provide Ukraine with military assistance to defend its sovereignty and territorial integrity.” (GovTrack.us, 03.23.15)
• We stand ready to support the federal government in guiding our nation through this violent time, and I am committed to standing together with leaders at all levels of government, regardless of political party, to work towards peace. It’s time to unite, protect democracy, and work together to end this violence and hold Russia accountable. (Office of Gov. Tim Walz, 02.25.22)

Punitive measures related to Russia’s war against Ukraine and their impact globally:

• [When signing  Chapter 43, HF 4165 into law to condemn Russian aggression against Ukraine in his capacity as a governor:] Today, I was proud to sign this bipartisan bill into law to help ensure that our state does not aid the Russian government’s illegal aggression against Ukraine … Ukrainians are our friends, family and neighbors and we continue to stand firmly with our Ukrainian community here in Minnesota and abroad. (Gov. Walz’s official site, 04.01.22)
• [When issuing Executive Order 22-03 in March 2022, directing more than two dozen Minnesota state agencies to terminate any contracts with Russian entities:] Minnesota stands firmly with Ukraine and strongly condemns the Russian government’s actions….I encourage other individuals, companies and organizations to stand with their Ukrainian neighbors and end support to Russian entities. (Star-Tribune, 08.05.22)

Ukraine-related negotiations: 

• No significant statements could be found.

Great Power rivalry/new Cold War/NATO-Russia relations:

• No significant statements could be found.

China-Russia: Allied or aligned?

• No significant statements could be found.

Missile defense:

• No significant statements could be found.

Nuclear arms:

• No significant statements could be found.

Counterterrorism:

• No significant statements could be found.

Conflict in Syria:

• The Assad Regime, which is backed by Putin’s Russia, committed an unconscionable war crime against the Syrian people when it carried out a chemical attack killing innocent men, women and children. I condemn Assad’s use of chemical weapons in the strongest possible terms… Assad must be brought to justice, but we cannot enter into another perpetual war. If we are to take further military action in Syria, we owe it to our brave service members to provide them a clear directive, an unquestionable path to victory and a coalition of allied forces to fight by their side. (Congressional Documents and Publications, Twin Cities Pioneer Press, 04.07.17)

Cyber security/AI:

•  No significant statements could be found.

Elections interference:

• [A statement released by Congressman Walz following reports of communication between the White House and the FBI concerning potential Russian ties to U.S. political operatives during the 2016 election:] The fact that any communication whatsoever took place between the White House and the FBI on the pending investigation in question is further grounds for the necessity of an independent, nonpartisan commission to investigate the Putin-Russia attack on our electoral system, including but not limited to any potential ties between U.S. political operatives and Russian intelligence agents. We must get to the facts to restore faith in our democracy. The American people deserve to know the truth. (Congressional Documents and Publications, 02.24.17)
• At the very least, it appears [Chairman of the House Permanent Select Committee on Intelligence Devin] Nunes’ ability to independently investigate Russia’s attack on our democracy is compromised. As the credibility of any congressional investigation relies on a commitment to bipartisanship and the independence of those conducting it, I call on Chairman Nunes to immediately recuse himself. (Congressional Documents and Publications 03.31.17)
• Walz co-sponsored H.Con.Res.47: Expressing the sense of Congress that until the conclusion of the FBI’s criminal and counterintelligence investigations into the nature of the Russian connection to the Trump campaign, the Trump Administration is acting under a “gray cloud” of the appearance of a conflict of interest, and, as such, should refrain from taking any actions or making any changes to United States policy that could be seen as benefitting President Putin or his inner circle. (Congress.gov, 04.05.17)
• Former FBI Director James Comey‘s testimony today raises serious questions and concerns about the President’s actions and what appears to be his attempt to personally influence the investigation into the Russian attack on our 2016 election. I am deeply alarmed that President Trump seems to be more concerned about clearing his own name than on preventing future attacks on our democracy. Russia’s attack on our electoral process isn’t a political or partisan issue. It’s an American issue. The American people need and deserve the whole truth. We need to establish an independent commission immediately. (Congressional Documents and Publications, 06.08.17)

Energy exports:

• No significant statements could be found.

Climate change:

• No significant statements could be found.

U.S.-Russian economic ties:

• [A letter to U.S. Trade Representative Ambassador Ron Kirk and U.S. Secretary of Agriculture Tom Vilsack urging them to make full use of all of the World Trade Organization‘s tools to address issues that have continued to prohibit U.S. dairy exports from having fair access to the Russian market:] When [the bill] is signed into law and the U.S. permanently grants Russia normal trade relations, the United States will be able to use the WTO’s mechanisms to address Russia’s non-science based sanitary and phytosanitary barriers to American dairy exports. We strongly urge you to consider using the WTO’s mechanisms to reopen these markets and ensure that American dairy producers and processors have the opportunity to compete on a level playing field in the Russian market. (Office of Rep. Ron Kind, 10.20.12)
• Walz voted against a House resolution authorizing the extension of non-discriminatory trade relations with the Russian Federation. (GovTrack.us, 11.15.12)
• Walz voted to support a bill prohibiting the Department of Defense from purchasing equipment from Russian arms dealer Rosoboronexport unless it could be shown that the firm was cooperating with a U.S. defense contractor. (GovTrack.us, 06.14.13)

U.S.-Russian relations in general:

• Walz voted to support H.R.6156, better known as the Magnitsky Act, which was intended to punish Russian officials responsible for the death of Russian tax accountant Sergei Magnitsky in a Moscow prison in 2009. (GovTrack.us, 11.16.12)
• Walz co-sponsored the International Human Rights Defense Act of 2018 which established in the Department of State a permanent Special Envoy for the Human Rights of LGBTI (lesbian, gay, bisexual, transgender or intersex) individuals. (Congress.gov, 06.07.18)

II. Russia’s domestic policies

Domestic politics, economy and energy:

• Don’t associate citizens [such as Russians] with their governments in many cases. (Star-Tribune, 08.05.22)

Defense and aerospace:

• No significant statements could be found.

Security, law-enforcement and justice:

• No significant statements could be found.

III. Russia’s relations with other countries

Russia’s general foreign policy and relations with “far abroad” countries:

• No significant statements could be found.

Ukraine:

• Walz co-sponsored H.Res.1314: “Remembering the 75th anniversary of the Ukrainian Famine (Holodomor) of 1932-1933 and extending the deepest sympathies of the House of Representative to the victims, survivors, and families of this tragedy, and for other purposes.” (Congress.gov, 09.23.08) [An estimated 3–5 million Ukrainians lost their lives due to starvation during the Soviet Union’s first forced collectivization campaigns. Russia does not recognize this famine as a consequence of Soviet policy.]
• Walz voted in support of H.Res 447, “Supporting the democratic and European aspirations of the people of Ukraine, and their right to choose their own future free of intimidation and fear.” (GovTrack.us, 02.10.14)
• Walz voted to support H.R. 4152, “Support for the Sovereignty, Integrity, Democracy and Economic Stability of Ukraine Act of 2014” and H.R. 4278, the “Ukraine Support Act.” (GovTrack.us, 03.06.14, GovTrack.us, 03.27.14)
• Walz voted to support H.Res 348, “Supporting the right of the people of Ukraine to freely elect their government and determine their future.” (GovTrack.us, 10.20.15)
• Walz declined to vote for or against H.R. 1997, “Ukraine Cybersecurity Cooperation Act of 2017.” (GovTrack.us, 02.07.18)
• I’m proud to declare today as Ukrainian Solidarity Day in Minnesota …We stand with our Ukrainian community here in Minnesota and abroad as the brave and resilient people of Ukraine continue to defend freedom and democracy against this unlawful, unprovoked Russian invasion. (Office of Gov. Tim Walz, 03.06.22)
• To our Ukrainian Minnesota communities, you are woven into the fabric of this state. Without Ukrainian Minnesotans there is no Minnesota, and today, we are all Ukrainians. (AP, 03.07.22)
• One year ago, Russia attacked Ukraine—an independent, sovereign, and democratic state. And as long Ukraine must defend freedom against tyranny, Minnesota will continue to stand with our Ukrainian community and the people of Ukraine. (Walz’s X account, 02.24.23)
• This week, I visited the Ukrainian Embassy to reaffirm our ongoing commitment to Ukraine. I’ve said it before and I’ll say it again: Minnesota stands with the people of Ukraine as they fight to defend freedom and democracy. (Walz’s X account, 02.24.24)

Other post-Soviet republics:

• One of Walz’s first votes as a Congressman was to table a motion to reconsider H.Res.1166, “Expressing the sense of the House of Representatives regarding provocative and dangerous statements and actions taken by the Government of the Russian Federation that undermine the territorial integrity of the Republic of Georgia.” (Congress.gov, 05.07.08) [Walz was one of the two-thirds ‘aye’ votes needed for the special resolution to stand.]

By Dave DeCamp, Antiwar.com, 9/9/24

Former US State Department official Victoria Nuland has acknowledged that the US discouraged Ukraine from signing a peace deal with Russia during the early days of the Russian invasion.

Nuland, who recently resigned from her post as Under Secretary of State for Political Affairs, made the comments in an interview that was published on YouTube on September 3.

Mikhail Zygar, an exiled Russian journalist, asked Nuland about former Israeli Prime Minister Naftali Bennet’s claim that the US and its allies blocked his efforts at mediation and reports of former British Prime Minister Boris Johnson urging Ukrainian President Volodymyr Zelensky not to sign a deal.

Zygar also mentioned that David Arakhamia, a Ukrainian official who led negotiations with Russia at a meeting in Istanbul in March 2022, acknowledged last year that a deal was on the table at the time and that Russia’s main demand was for Ukrainian neutrality.

Wow! Nuland basically admits that Ukraine-Russia peace deal, which was close to being finalized in spring 2022, “fell apart” because US, UK & other Western governments “advised” Zelensky government that it was not “good deal” even though even members of Ukrainian delegation… pic.twitter.com/HPsrpOzQNf

— Ivan Katchanovski (@I_Katchanovski) September 8, 2024

Nuland claimed the US took a hands-off approach to the negotiations when they first started and said it wasn’t until “relatively late in the game” that the Ukrainians started seeking the advice of the US and its allies.

“The Ukrainians began asking for advice on where this thing was going, and it became clear to us, clear to us and the Brits, clear to others, that Putin’s main condition was buried in an annex to this document that they were working on. And it included limits on the precise kinds of weapons systems that Ukraine could have after the deal,” Nuland said.

She said the deal would make Ukraine “neutered” as a military force and said there were no similar constraints on the Russian military. “People inside Ukraine and people outside Ukraine started asking questions about whether this was a good deal, and it was at that point that it fell apart,” Nuland said.

Boris Johnson traveled to Ukraine on April 9, 2022, and, according to Ukrainska Pravda, told Zelensky that even if Ukraine was ready to sign a deal with Russia, the “collective West” was not. Arakhamia confirmed this account in November 2023, saying that when the negotiators returned from Istanbul, Johnson visited Ukraine and “said that we would not sign anything with them at all, and let’s just fight.”

On April 20, 2022, around the time the talks broke down, then-Turkish Foreign Minister Mevlut Cavusoglu said Turkey thought a deal could be reached following the Istanbul talks, but then it got the impression that some NATO members wanted to prolong the war to weaken Russia.

“After the talks in Istanbul, we did not think that the war would take this long … But, following the NATO foreign ministers’ meeting, it was the impression that… there are those within the NATO member states that want the war to continue, let the war continue and Russia gets weaker. They don’t care much about the situation in Ukraine,” Cavusoglu said.

On April 25, 2022, after visiting Kyiv, Secretary of Defense Lloyd Austin declared that one of the US’s goals in the war was to see a “weakened” Russia.

The Bell, 8/30/24

Russia’s mid-term future: high interest rates and high inflation 

Russia’s Central Bank published Thursday a document laying out its vision for the economy over the coming three years. Titled the “Main Directions of Monetary Policy 2025-27,” it examines four different scenarios (the worst of which would see Russia plunge into a deeper crisis than 2008). Taken together, the scenarios appear to confirm that Russia will continue to increase spending on the war in Ukraine, and that the country is likely to face persistent high inflation and several years of double-digit interest rates.

Four scenarios

This is an annual report, and the Central Bank always reviews several different scenarios for economic development. Last year, there were three such scenarios, this time (“due to complex internal and external circumstances”) there were four: one baseline, two pessimistic (persistent inflation and high-inflation) and one optimistic (low-inflation).

The bank’s baseline scenario assumes that inflation will slow to 4-4.5% next year, and will continue to hover around 4% in the longer term. To achieve this, monetary policy will remain tight. GDP would grow by 3.5-4% in 2024, before slowing in 2025 and 2026.

The baseline scenario is the one considered most plausible. However, one of the biggest variables is the level of state spending and state subsidies in the coming years, Central Bank deputy chairman Aleksei Zabotkin told journalists at a press conference.

Both pessimistic scenarios (persistent inflation and high-inflation) assume that interest rates will remain in double digits. In the persistent inflation scenario, the labor market would remain tight and inflation would be driven by high domestic demand (which, in turn, would be supported by state spending), as well as increased wages. In this scenario, average interest rates would have to stay one or two percentage points higher than in the baseline. But even under such tight monetary conditions, inflation was not predicted to fall to 4-4.5% until 2026.

The high-inflation scenario is even more dire. In this eventuality, the problems in the Russian economy are amplified by a serious deterioration in external circumstances: disbalance on the financial markets leading to a global financial crisis and recession. While the Russian economy is internationally isolated, falling demand for Russian products was still assumed to cause significant damage. This scenario also envisaged more Western sanctions on Russia. If this comes to pass, the prediction is that the Russian economy would enter recession, inflation hit 13-15% and interest rates soar to 22%.

There is also an optimistic scenario – low-inflation. This assumes significant increases in investment, and growth in productivity. In this case, inflation would fall faster than in the baseline scenario, economic potential would increase, and GDP would rise.

However, with the Kremlin’s current economic policies and existing structural restrictions, the chances of this scenario occurring are not great.

Inflation is here to stay

Under current circumstances the persistent inflation scenario is the most likely of the four. It assumes that the high demand we witnessed in the second half of 2023 will be sustainable, and will continue through 2025. In other words, the state will maintain high levels of spending in order to fund the war in Ukraine.

The persistent inflation model also assumes stronger protectionist policies, as well as the imposition of import tariffs to stimulate import substitution. Winegrowers and winemakers, domestic electronics assemblers, polymer and plastic processors, manufactures of Russian trucks and automobiles and many other sectors are already urging the government to impose import tariffs. Of course, any new foreign trade tariffs are, by definition, pro-inflationary. They make imported goods more expensive and push up demand for domestic goods, which translates to increased prices. 

However, government spending is the biggest inflation driver. The Central Bank estimates that the cost of fulfilling all of the goals set by President Vladimir Putin in this year’s state-of-the-nation address will be 18 trillion rubles ($199 billion) between now and 2030. This includes new social spending, loan write-offs, tax breaks and more. In its reports, the Central Bank highlighted Putin’s promises to increase the minimum wage by an annual average of 10.5% through 2023; index pensions at 8.8-14.7% every year; resume indexed pensions for working pensioners from 2025; and increase payments for children. In addition, Putin announced major spending on road building, housing and communal services. Of course, the government can always postpone these spending plans, and use alternative sources of income to fund its war (read more about this here).

State spending has a huge impact on demand and inflation, according to the Central Bank. It results in organizations and the public demanding more credit to expand production and consumption, including real estate purchases – and increases in interest rates are unable to fully keep pace with these pro-inflationary factors. Moreover, in this scenario, businesses and households will focus more on past cases of high inflation when making purchasing decisions, which risks fixing inflationary expectations at a higher level.

The Central Bank has already alerted the Kremlin to the risk of increasing inflation. At a meeting on Aug. 26, Putin urged the government to assist the bank in curbing rising prices, Vedomosti reported. The discussion focused on measures to reduce subsidized lending.

Why the world should care

The most likely economic scenario for Russia’s economy over the next three years appears to be one of accelerating inflation and high interest rates. The Central Bank’s latest three-year forecasts assume increases in state spending (far outstripping what will be collected via higher taxes). This would be yet another major boost to inflation.

EU imports to Russia in June hit lowest monthly level for 20 years 

The volume of imports from the European Union to Russia in June reached its lowest level for more than 20 years, according to Eurostat figures. Total exports from the EU to Russia in June were worth €2.472 billion – the lowest figure since Jan. 2003. 

• The main reasons for the ongoing collapse in these figures are EU sanctions and the threat of secondary U.S. sanctions, plus the voluntary withdrawal of European companies from trade with Russia since its full-scale invasion of Ukraine.
• The decline is visible in all sectors—from automobiles and alcohol to microchips and machine tools. However, the same Eurostat data indicates that Russia is meeting its need for European goods with the help of “friendly” nations.
• This is illustrated by one of Russia’s key defense sectors: machinery and transport. Here, the drop in European exports to Russia has been matched by a sudden increase in exports to some ex-Soviet nations, the UAE, and Turkey. This growth cannot be explained by surging demand in those countries and strongly suggests that the buyers are simply re-exporting EU goods to Russia.

• Evidence of re-export is also visible in microchips (the EU has almost completely banned microchip exports to Russia). Direct trade in these crucial parts between the EU and Russia plummeted from being worth €56 million in June 2021 to just €2,500 in June 2024. However, at the same time, Russia’s neighbours actively started importing microchips from Europe: for example, Turkey bought €14 million worth in June 2021 and €24 million worth in June 2024. The growth is even more steep in countries like Armenia in the South Caucasus and Kyrgyzstan in Central Asia, although the volumes are smaller.
• This can also be seen in the market for ship propellers and blades. Before the war, Russia imported €2.5 billion worth a year of these products. Now, they are classed as dual-usage goods and cannot be delivered directly. However, countries like Turkey, the UAE and even landlocked states such as Armenia and Kyrgyzstan have significantly increased their orders of European propellers.
• It’s difficult to gauge China’s role in re-exporting to Russia from these statistics as the volumes are too big to pick out tell-tale anomalies. Nevertheless, many believe that Beijing is the biggest re-exporter of EU goods to Russia.
• Western countries have long been concerned about the re-export of sanctioned goods to Russia, especially dual-use goods. The recent 14th package of EU sanctions addresses the issue by requiring exporters to check the final purchaser. The U.S. also threatens to impose secondary sanctions in case of re-exporting the sanctioned goods. The effect of these measures will take some time to materialise in full.

Why the world should care

It’s unlikely that the recent anti-circumvention measures will completely stop or greatly reduce re-exports to Russia. However, the more barriers are put in place, the more expensive it will be for Russian companies to obtain the Western goods they require. This pushes up inflation inside Russia and limits productivity.

Figures of the week

Inflation is falling. Between Aug. 20 and Aug. 26, weekly inflation was 0.03% (last week, it was 0.04%), according to the Economic Development Ministry. Annual inflation slowed from 9.04% to 9.01%. Despite the seasonal fall in fruit and vegetable prices, food prices continue to rise. Only regulated prices, as well as the costs of household and tourist services, are falling.

In the first half of this year, state-owned gas giant Gazprom increased its net profits 3.5 times year on year to 1.04 trillion rubles, according to the company’s financial statement. The growth is primarily due to increased gas exports following last year’s catastrophic fall, plus rising oil exports. In the first six months of 2024, gas exports to the EU were up by a quarter, from 14.8 billion cubic meters to 18.3 billion cubic meters. Over 2024 as a whole, Gazprom expects deliveries to China to increase by a third, from 22.7 billion cubic meters to 30 billion cubic meters, rising to 38 billion cubic meters next year. However, the price of selling gas to China is lower than to Europe, and exports are limited because there is only a single pipeline connecting the two countries. For the moment, the Chinese market is not enough for Gazprom to replace the losses it has suffered from the war and Western sanctions. 

After a slight slowdown in June, industrial output in July returned to growth, according to Russia’s State Statistics Service. The industrial production index was up 3.3% in July, driven by the manufacturing sector. The four sectors with the biggest growth are all related to the war in Ukraine: computers and optics, finished metal products, medicine and healthcare, and transport.

Russian government website, 8/27/24

Mikhail Mishustin: “The tasks are significant and complex, requiring substantial resources. To keep the budget balanced, careful planning is essential to ensure funds are used efficiently and yield specific results.”

Mikhail Mishustin’s opening remarks:

Good afternoon, colleagues.

Today, we are finalising the creation of a new portfolio of national projects for the next six years. The initial concepts emerged at the end of last year, immediately following the meeting of the Council for Strategic Development and National Projects. The process of defining specific areas of activity for the future documents began in accordance with the objectives set out in the Presidential Address to the Federal Assembly and the May executive order.

In this process, not only the heads of relevant departments were involved, but also a diverse group of experts, including representatives from the business sector, scientific and expert communities, the Federal Assembly, and the regions.

As a result, 19 projects were developed, each with ambitious goals for our country’s development through the end of the current decade, along with a detailed list of those responsible and project overseers.

The President also addressed key approaches in this area during yesterday’s meeting. He stressed the importance of evaluating how each decision, event, and legal amendment contributes to achieving the national development goals.

I will highlight the most crucial projects that deserve our focused attention. These include Family, Infrastructure for Life, Long and Active Life, and, of course, Youth and Children. These projects encompass essential decisions aimed at enhancing the lives of our citizens. They are designed to improve the quality of the environment in communities, address demographic challenges, and provide support for motherhood and childhood, as well as improve the healthcare and education systems, and housing availability.

Implementing these projects will enable the construction of thousands of new schools, kindergartens, and sports facilities, as well as major renovations of cultural and higher education institutions. It will also support the ongoing modernisation of housing and utility services, improve public transportation, road conditions, and advance the landscaping of various areas.

A priority was given to achieving technological leadership, which is of vast importance in the current situation, where a number of states are still a source of external challenges and unfriendly actions.

There are nine national projects aimed at reaching this goal. Within the next few years, Russia must continue to work pro-actively to create a technological and production base of its own. In the chemical industry, for example, dozens of new technological chains should emerge before the end of this decade. In the composites, over 15 production facilities and 60 products are expected to be added. The output of drones should be increased five-fold.

As for the transport sector, it should provide people with extensive opportunities for wayfaring and business and private travel in a comfortable environment and at affordable prices. Businesses, at the same time, should have enough funds for effective freight transportation. For this purpose, the share of Russian-made aircraft in the national fleet should constitute no less than 50 percent by the end of the current decade.

We will do this within the framework of national projects, including Means of Production and Automation, New Materials and Chemistry, Transport Mobility, New Health-Saving Technologies, Remotely Piloted Aircraft Systems, and others.

These solutions should help our country both to meet the existing challenges and continue the in-depth transformation of the Russian economy, primarily with an eye to shaping a supply-side economy, with its non-resource component on the upgrade. By 2030, we will have to increase the share of gross value-added in real terms and the manufacturing industry’s production index by no less than 40 percent on 2022. Yet another goal is to ensure that Russia is one of the top ten world leaders in R&D and to increase the domestic spending on these purposes to no less than 2 percent of the GDP.

It is also necessary to increase the share of domestically produced hi-tech goods and services created on the basis of Russian innovations in the overall volume of their consumption by 50 percent and the earnings of small-sized technological companies – by no less than 600 percent as compared with last year’s level. Economic growth should be accompanied with a rise in people’s wellbeing and increased industrial earnings, a build-up in private investment, definitive solution of the personnel shortage problem, and introduction of a modern governance model based on Big Data. The Effective and Competitive Economy, Personnel, Data Economics and Digital Transformation of the State, and Tourism and Hospitality Industry national projects are aimed at reaching these objectives.

In this area, by the end of the decade, 40 percent of medium-sized and large enterprises in basic non-resource industries, as well as all state and municipal social sphere organisations will need to be involved in the implementation of projects aimed at increasing labour productivity. This is in order to create favourable conditions for small and medium-sized businesses to develop tourist infrastructure, build new federal year-round resorts and adopt state-of-the-art platform solutions and services for public administration, benefiting people and businesses.

Colleagues,

The tasks are significant and complex, requiring substantial resources. To keep the budget balanced, careful planning is essential to ensure funds are used efficiently and yield specific results.

Today, we will discuss in detail our priorities and the financial component because we have little time for adjustments.

I want to remind you of what the President said during yesterday’s meeting. National projects should not include insignificant, non-working items that serve only bureaucratic purposes, but should instead focus on producing real results and practical, positive changes in people’s lives.

As early as in September the entire portfolio of new national projects should be submitted to the Presidential Council for Strategic Development. Please, keep this in mind as we proceed.

By John Helmer, Website, 8/26/24

Remember the old adage — sticks and stones will break my bones but words will never harm me.

In the war by the US and its Anglo-European allies to destroy Russia since 1945, the propaganda war has been lost by the Russians many times over. That war is still being lost [3].

But for the first time since 1945, the battlefield war is being won by the Russian General Staff.

The uncertainty which remains is whether President Vladimir Putin will continue to restrict the General Staff’s war plans in order that Putin can go to negotiations with the Americans on terms which will forego the demilitarization and denazification of the Ukrainian territory between Kiev and the Polish border, and concede to the Kiev regime unhindered control of the cities to the east — Kharkov, Odessa, Dniepropetrovsk.

Call those terms Istanbul-II. As with the draft terms initialled in Istanbul at the end of March 2022 [4], Istanbul-II amounts to an exchange of dominant Russian military power for US and Ukrainian signatures on paper with false intention and temporary duration.  

The US administration says it believes Putin will concede. It also believes that by staging its war of pinpricks — that’s the drone, artillery and missile barrages fired by the Ukrainian military, directed by the US and UK – in the Black Sea and Russia’s western border regions, Putin’s red lines and threats of retaliation are exposed [5] as empty bluff. The same interpretation of Putin, and confidence that he will accept US terms, are the foundation of the Ukraine “peace plan” of Donald Trump’s advisors [6]. The Trump plan’s offer of “some limited sanctions relief” reflects the conviction in Washington that Putin’s oligarch constituency can be bribed to push Putin into the same “frozen war” concessions as Roman Abramovich got Putin to accept at Istanbul-I – until the General Staff stopped them both.

Putin’s restrictions on the General Staff’s proposals for neutralizing the US and British air surveillance and electronic warfare operations; and his orders to stand by while the Ukrainians have assembled several thousand forces, first to cross into Kursk, and then into Bryansk and Belgorod, are now as visible in Moscow as they have been in Washington.

Moscow sources believe it was the Kremlin which was taken by surprise by the Kursk attack on August 6, but not the General Staff and the military intelligence agency GRU. They understood the battlefield intelligence as it was coming in and requested Putin’s agreement to respond. In retrospect, they say “we told you so”; they imply their hands were tied by the Kremlin orders.

“My understanding for now,” says one of the sources, “is that these are pinpricks that feel painful but they are not life threatening. Russia will not take any land, for now, other than the four regions. It should be the eight regions but it’s obvious Putin doesn’t have the will and the military does not have the capacity to hold. So we will see Ukrainians inside Kursk for a while. But it should be downplayed because it should not be allowed to be a bargain chip in negotiations the other side is aiming at.”

Putin said this himself, the source points out at his meeting on August 12 [7] with the Chief of the General Staff, Valery Gerasimov, and others. “These [Kursk] actions clearly aim to achieve a primary military objective: to halt the advance of our forces in their effort to fully liberate the territories of the Lugansk and Donetsk people’s republics, the Novorossiya region.”  Putin also said: “It is now becoming increasingly clear why the Kiev regime rejected our proposals for a peaceful settlement, as well as those from interested and neutral mediators…. It seems the opponent is aiming to strengthen their negotiating position for the future. However, what kind of negotiations can we have with those who indiscriminately attack civilians and civilian infrastructure, or pose threats to nuclear power facilities? What is there to discuss with such parties?”

“It’s obvious at this point,” comments a military source, “that the Americans and Ukrainians have decided that Putin will come to terms if they snatch enough Russian territory and keep up their strikes behind the Russian lines…The Ukrainians are going for broke in the north while the centre collapses. But they know, no matter how expensive it is, the longer they remain on the attack, the worse it looks for the Russian leadership. They also have the measure of Putin who gives orders for half measures.”

This is also obvious in the Security Council in Moscow. The Council’s deputy secretary, ex-president Dmitri Medvedev, made the point explicitly in his Telegram account declaration on August 21 [8], implying that until he had said it, no one else dared: “In my opinion, recently, even theoretically, there has been one danger – the negotiation trap, into which our country could fall under certain circumstances; for example. Namely, the early unnecessary peace talks proposed by the international community and imposed on the Kiev regime with unclear prospects and consequences.” Medvedev was referring to Istanbul-I. “After the neo-Nazis committed an act of terrorism in the Kursk region, everything has fallen into place. The idle chatter of unauthorized intermediaries on the topic of the beautiful world has been stopped. Now everyone understands everything, even if they don’t say it out loud. They understand that there will BE NO MORE NEGOTIATIONS UNTIL THE COMPLETE DEFEAT OF THE ENEMY! [Medvedev’s caps]” 

Medvedev’s reference to the “idle chatter of unauthorized intermediaries” is to the Hungarian Prime Minister Victor Orban, whom Putin endorsed at the Kremlin on July 5 for the ill-concealed purpose of sending a message to presidential candidate Trump with whom Orban talked on July 10. For that story, click [9].  

Days before his meeting with Orban, Putin had announced [10] his abandonment of the demilitarization, denazification objectives of the Special Military Operation in exchange for “the complete withdrawal of all Ukrainian troops from the Donetsk and Lugansk People’s Republics and from the Zaporozhye and Kherson regions.” 

This change of objective has not yet been acknowledged by the Kremlin media; it is opposed [11] by the Russian military and by the majority of Russian voters.   “War is war — either we go to war or surrender” – is a popular slogan on Russian social media for Putin to stop restricting the General Staff.

 “The problem for the Russians,” comments a military source, “is that they, especially the Kremlin, the Defense Ministry, and the Foreign Ministry have lost the propaganda war. This puts them in a bad spot as they need more than stopping, then pushing the Ukrainians back in Kursk, or a Donbass victory, in order to recover. They need to knock the Ukrainians out of the war. But on that Putin says one thing — he does another.”

The Ukrainian border crossing began between 5 and 5:30 in the morning of August 6.

The first reports from the Defense Ministry in Moscow were false. On the afternoon of August 7, Chief of the General Staff, Valery Gerasimov, in a public briefing of the president and other officials, claimed [12]: “At 5.30 am on August 6, units of the Armed Forces of Ukraine numbering up to 1,000 people went on the offensive with the aim of capturing a section of the territory of the Sudzha District in the Kursk Region. The joint actions by the state border covering units together with border guards and reinforcement units, air strikes, missile forces, and artillery fire stopped the enemy’s advance into the territory in the Kursk direction…We will complete the operation by defeating the enemy and reaching the state border.” 

This Ukraine force count was much too low; their advance was not stopped; the restoration of the state border has not been achieved after three weeks of fighting. Either Gerasimov knew much better and was lying to Putin for public propaganda; or else he didn’t know what the true situation was.

The General Staff’s misdirections were repeated by the only independent Russian media sources not directly under state control – the military bloggers, the best of whom are Boris Rozhin (Colonel Cassad) and Mikhail Zvinchuk (Rybar). Rozhin tried to downplay the attack through the first day, relying on Defense Ministry and region official releases. Rozhin’s first report appeared at 10:12 on the morning of August 6: [14] “The governor of the Kursk region reported an attempt by the enemy forces to break through on the territory of the region. The attack was carried out by limited forces and was repulsed. The Armed Forces of the Russian Federation and the FSB did not allow the breakthrough of the enemy’s forces”. This was false.

Gerasimov’s report to Putin exposed himself, the General Staff, and the Defense Ministry to a round of allegations of incompetence and negligence which were published a week later by media under Kremlin control. These allegations [15] include a failure by Russian intelligence to detect the concentration of Ukrainian forces in advance of the border crossing, and a personal failure by Gerasimov to “ignore several warnings about a Ukrainian buildup near the Kursk border. ” An anonymously sourced report by a non-Russian reporter with a record of plagiarism and fabrication claims to be based on “hawks in the siloviki apparatus [who] don’t make it a secret that Gerasimov should be fired” and replaced, the reporter claimed, by a combination of the discredited General Sergei Surovikin and the head of the Federal Security Service, Alexander Bortnikov.

The campaign against Gerasimov also appears to be a defence of Putin’s advance knowledge and his operational orders to Gerasimov before August 6 [15]: “President Putin’s reaction to the Kursk invasion was visible in his body language. He was furious for the flagrant military/intel failure; for the obvious loss of face; and for the fact that this buries any possibility of rational dialogue about ending the war.” 

Moscow sources explain these are Kremlin claims aimed at whitewashing Putin’s refusal to allow the General Staff to extend their operations into the Ukrainian Sumy region to break up the attack concentration in advance; and at concealing Putin’s purpose in preparing for the Istanbul-II negotiations. The sources also point out that the National Guard, the well-armed and highly mobile presidential force, has failed to appear in any role in the Kursk region, not even in defence of the predictable target of the Kurchatov nuclear power plant. The Guard commander, Victor Zolotov, Putin’s former bodyguard, did not appear in the Kremlin meetings on the Kursk operation until August 12, when he was at the bottom of the table on Putin’s right, sitting opposite Gerasimov; in the Kremlin record [7] Zolotov had nothing to say….

As the Russian analysts struggle to explain what has happened at Kursk, they have largely ignored the history illustrated in this chart and this map. In order to blame the regional administrations and scapegoat the governors, as the Kremlin has encouraged, the record of repeated requests to put the regions on a war footing in advance – not an anti-terrorism operation after the event – has been censored, along with the record of Putin’s temporizing, procrastination, and refusal. For Putin’s comparable form in responding to high-casualty coalmine accidents in Kemerovo region and to coke and steel plant pollution in Chelyabinsk, both of them caused by oligarch supporters of the president, click to read this [40] and this [41]. 

Because Martyanov is based in the US, he has used his military reports to imply political blame at the level of the civilian regional administrations. “The best equipped Ukrainian (practically all of it fresh NATO hardware) and motivated troops, and NATO generals who planned this catastrophe for them, covered part (about 11-12 kilometers) of what is called the security zone, which was not prepared (why, we will know in a due time–administration of Kursk Oblast has a lot to answer for)…”

The national politician closest to the war front has carefully reversed the scapegoating down the command line, and at the same time held the Kremlin to account for its insistence on the war as an anti-terrorist operation. This is Dmitri Rogozin [42] – at one time the civilian minister in charge of the military-industrial complex, a potential presidential successor, and currently senator for Zaporozhye . According to Rogozin as early as August 7 [43], “the transfer of responsibility for restoring order and legality in these territories to the National Anti-Terrorist Committee, which is headed by the FSB and which includes or involves all those who are necessary for the case, including the Ministry of Defense, is also a recognition of the fact that in the person of the Kiev regime we are dealing with terrorists, and not with the state. With all the consequences…” 

By that last phrase Rogozin (right) meant that since the Kursk attack was a terrorist operation directed by terrorists in Kiev, the Russian anti- terrorist operation should extend to Kiev, Putin’s restrictive orders to the General Staff  should be lifted, and the “terrorist regime” should be destroyed throughout the territory to the Polish, Romanian and Hungarian borders. “The situation in the world and in our country has changed radically, and these decisions are urgently needed.” Rogozin was addressing [43] Putin as the decision-maker.

“[Alexander] Syrsky is not a Ukrainian,” Rogozin said on August 11, referring to the Russian- born Ukrainian general staff chief. “He’s one of our traitors. Zelensky is also not a Ukrainian. He’s one of the Jewish traitors. They don’t feel sorry for Ukrainians. They’ll definitely throw them at us… Zelensky is threatening us with a series of terrorist attacks across the country, including the Urals, Siberia and the Far East. That’s how you should understand his words. If his threats are not military, but terrorist in nature, he positions himself as the leader of a state terrorist organization and is subject to liquidation. I hope that my logic is clear and obvious to those who should immediately make a decision to start planning an operation to eliminate Zelensky.” 

This is as close as a national politician has come so far to reverse the logic of Putin’s proposals for Istanbul-II, and instead to empty the territory of its “terrorists” and their weapons to the full limits of the demilitarization and denazification goals of February 2022.

“Whoever is to blame on the Russian side for the invasion of Kursk,” comments [45]a military source, “this is officially now a tar baby for the Ukrainians.  They can’t afford to stay but they can’t afford to leave either. They should thank their lucky stars for Putin. It not for him, they’d have no place to leave for or return to.”

Reversing the operational logic of the anti-terrorism operation has a domestic political corollary which Rozhin admitted ruefully on August 24. [46] “Many people are already talking about the need to use useful organizational solutions of the Stalinist period, especially in terms of mobilizing the country and society in war conditions, starting with the former de-stalinizer [Dmitri] Medvedev, who now scares the directors of defense factories with Stalin’s letters from the Second World War. The reason for this is simple — referring to the previous historical experience, in the 20th  century, in terms of decisions in a difficult period for the country, there is no one to turn to except Stalin. Well, not to Gorbachev nor to Nicholas II.” 

For “organizational solutions of the Stalinist period”, read the end of the Russian oligarchy.

An oligarch source in Moscow denies this. “The oligarchs are having the best time in the last two decades inside Russia,” the source says. “None of them wants to leave for the west and no one is asking Putin to make any compromise with the US. Everyone understands the money is not coming back; they have written off their London, their Sardinia properties. Their children are fine in the US and UK with their new nationalities, but they were not going to return anyway. So no, there is no real pressure from oligarchs on Putin for a war settlement. But everyone wants some sanctions softened.”

John Helmer discusses these issues with the hosts of The Duran here.