On June 3rd, Putin was interviewed by Pavel Zarubin of Rossiya 1 TV channel. This is a partial transcript focused on the portion of the interview relating to food and energy.

Pavel Zarubin: Mr President, we have just followed your meeting with the head of Senegal who is also the current leader of the African Union. He expressed, and actually in the past week many countries have expressed concern not so much about the food crisis, but they are afraid of large-scale famine because world food prices are climbing and so are oil and gas prices, These issues are interrelated.

Naturally, the West blames Russia for this, too. What is the real situation at this point, how is it developing? And what do you think will happen in the food and energy markets?

President of Russia Vladimir Putin: Yes, indeed, we are seeing attempts to place the responsibility on Russia for developments in the global food market and the growing problems there. I must say that this is another attempt to pin the blame on someone else. But why?

First, the situation with the global food market did not become worse yesterday or even with the launch of Russia’s special military operation in Donbass, in Ukraine.

The situation took a downturn in February 2020 during the efforts to counter the coronavirus pandemic when the global economy was down and had to be revived.

The financial and economic authorities in the United States, of all things, found nothing better than to allocate large amounts of money to support the population and certain businesses and economic sectors.

We generally did almost the same thing, but I assure you that we were much more accurate, and the results are obvious: we did this selectively and got the desired results without affecting macroeconomic indicators, including excessive inflation growth.

The situation was quite different in the United States. The money supply in the United States grew by 5.9 trillion in less than two years, from February 2020 to the end of 2021 – unprecedented productivity of the money printing machines. The total cash supply grew by 38.6 percent.

Apparently, the US financial authorities believed the dollar was a global currency, and it would spread, as usual, as it did in previous years, would dissolve in the global economy, and the United States would not even feel it. But that did not happen, not this time. As a matter of fact, decent people – and there are such people in the United States – the Secretary of the Treasury recently said they had made a mistake. So, it was a mistake made by the US financial and economic authorities – it has nothing to do with Russia’s actions in Ukraine, it is totally unrelated.

And that was the first step – and a big one – towards the current unfavourable food market situation, because, in the first place, food prices immediately went up, they grew. This is the first reason.

The second reason was European countries’ short-sighted policies, and above all, the European Commission’s policy in regard to energy. We see what is going on there. Personally, I believe that many political players in the United States and Europe have been taking advantage of people’s natural concerns about the climate, climate change, and they began to promote this green agenda, including in the energy sector.

It all seems fine, except for the unqualified and groundless recommendations about what needs to be done in the energy sector. The capabilities of alternative types of energy are overestimated: solar, wind, any other types, hydrogen power – those are good prospects for the future, probably, but today, they cannot be produced in the required amount, with the required quality and at acceptable prices. And at the same time, they began to belittle the importance of conventional types of energy, including, and above all, hydrocarbons.

What was the result of this? Banks stopped issuing loans because they were under pressure. Insurance companies stopped insuring deals. Local authorities stopped allocating plots of land for expanding production and reduced the construction of special transport, including pipelines.

All this led to a shortage of investment in the world energy sector and price hikes as a result. The wind was not as strong as expected during the past year, winter dragged on, and prices instantly soared.

On top of all that, the Europeans did not listen to our persistent requests to preserve long-term contracts for the delivery of natural gas to European countries. They started to wind them down. Many are still valid, but they started winding them down. This had a negative effect on the European energy market: the prices went up. Russia has absolutely nothing to do with this.

But as soon as gas prices started going up, fertiliser prices followed suit because gas is used to produce some of these fertilisers. Everything is interconnected. As soon as fertiliser prices started growing, many businesses, including those in European countries, became unprofitable and started shutting down altogether. The amount of fertiliser in the world market took a dive, and prices soared dramatically, much to the surprise of many European politicians.

However, we warned them about this, and this is not linked to Russia’s military operation in Donbass in any way. This has nothing to do with it.

But when we launched our operation, our so-called European and American partners started taking steps that aggravated the situation in both the food sector and fertiliser production.

By the way, Russia accounts for 25 percent of the world fertiliser market. As for potash fertilisers, Alexander Lukashenko told me this – but we should double-check it, of course, although I think it is true – when it comes to potash fertilisers, Russia and Belarus account for 45 percent of the world market. This is a tremendous amount.

The crop yield depends on the quantity of fertiliser put into the soil. As soon as it became clear that our fertilisers would not be in the world market, prices instantly soared on both fertilisers and food products because if there are no fertilisers, it is impossible to produce the required amount of agricultural products.

One thing leads to another, and Russia has nothing to do with it. Our partners made a host of mistakes themselves, and now they are looking for someone to blame. Of course, Russia is the most suitable candidate in this respect.

Pavel Zarubin: Incidentally, it has just been reported that the wife of the head of our largest fertiliser companies has been included in the new European package of sanctions.

What will all this lead to in your opinion?

Vladimir Putin: This will make a bad situation worse.

The British and later the Americans – Anglo-Saxons – imposed sanctions on our fertilisers. Then, having realised what was happening, the Americans lifted their sanctions, but the Europeans did not. They are telling me themselves during contacts: yes, we must think about it, we must do something about it, but today they have just aggravated this situation.

This will make the situation in the world fertiliser market worse, and hence the crop prospects will be much more modest, and prices will keep going up – that is it. This is an absolutely myopic, erroneous, I would say, simply stupid policy that leads to a deadlock.

Pavel Zarubin: But Russia is accused by high-ranking officials of preventing the grain that is actually there, in Ukrainian ports, from leaving.

Vladimir Putin: They are bluffing, and I will explain why.

First, there are some objective things, and I will mention them now. The world produces about 800 million tonnes of grain, wheat per year. Now we are being told that Ukraine is ready to export 20 million tonnes. So, 20 million tonnes out of 800 million tonnes amounts to 2.5 percent. But if we proceed from the fact that wheat accounts for merely 20 percent of all food products in the world – and this is the case, this is not our data, it comes from the UN – this means that these 20 million tonnes of Ukrainian wheat are just 0.5 percent, practically nothing. This is the first point.

The second. 20 million tonnes of Ukrainian wheat are potential exports. Today, the US official bodies also say that Ukraine could export six million tonnes of wheat. According to our Ministry of Agriculture, the figure is not six but about five million tonnes, but okay, let us assume it is six, plus it could export seven million tonnes of maize – this is the figure of our Ministry of Agriculture. We realise that this is not much.

In the current agricultural year of 2021–2022, we will export 37 million and, I believe, we will raise these exports to 50 million tonnes in 2022–2023. But this is apropos, by the way.

As for shipping out Ukrainian grain, we are not preventing this. There are several ways to export grain.

The first one. You can ship it out via the Ukraine-controlled ports, primarily in the Black Sea – Odessa and nearby ports. We did not mine the approaches to the port – Ukraine did this.

I have already said to all our colleagues many times – let them demine the ports and let the vessels loaded with grain leave. We will guarantee their peaceful passage to international waters without any problems. There are no problems at all. Go ahead.

They must clear the mines and raise the ships they sunk on purpose in the Black Sea to make it difficult to enter the ports to the south of Ukraine. We are ready to do this; we will not use the demining process to initiate an attack from the sea. I have already said this. This is the first point.

The second. There is another opportunity: the ports in the Sea of Azov – Berdyansk and Mariupol – are under our control, and we are ready to ensure a problem-free exit from these ports, including for exported Ukrainian grain. Go ahead, please.

We are already working on the demining process. We are completing this work – at one time, Ukrainian troops laid three layers of mines. This process is coming to an end. We will create the necessary logistics. This is not a problem; we will do this. This is the second point.

The third. It is possible to move grain from Ukraine via the Danube and through Romania.

Fourth. It is also possible through Hungary.

And fifth, it is also possible to do this via Poland. Yes, there are some technical problems because the tracks are of different gauges and the wheel bogies must be changed. But this only takes a few hours, that is all.

Finally, the easiest way is to transport grain via Belarus. This is the easiest and the cheapest way because from there it can be instantly shipped to the Baltic ports and further on to any place in the world.

But they would have to lift the sanctions from Belarus. This is not our problem though. At any rate, President of Belarus Alexander Lukashenko puts it like this: if someone wants to resolve the problem of exporting Ukrainian grain, if this problem exists at all, please use the simplest way – through Belarus. No one will stop you.

So, the problem of shipping grain out of Ukraine does not really exist.

Pavel Zarubin: How would the logistics work to ship it from the ports under our control? What would the conditions be?

Vladimir Putin: No conditions.

They are welcome. We will provide peaceful passage, guarantee safe approaches to these ports, and ensure the safe entry of foreign ships and passage through the Sea of Azov and the Black Sea in any direction.

By the way, several ships are stuck in Ukrainian ports at this point. These are foreign ships, dozens of them. They are simply locked up and their crews are still being held hostage.

The Bell, 6/5/22

This week our top story is a dissection of April economic data released by the Russian authorities that – while better than many expected – still suggests a sustained recession. We also look at why the founder of IT giant Yandex – Russia’s Google – was sanctioned by the European Union, and what it means for the company.

Russia’s economy is faring better than expected – but the worst is yet to come

Economic indicators for April released last week painted a surprisingly good picture: Russia’s economy appears to have shrugged off the initial effects of Western sanctions. But don’t be misled: the long-term effects of these sanctions are only starting to make themselves felt. Moreover, the EU last week announced a new round of sanctions: including an oil embargo that – as recently as a few months ago – was all but unthinkable.

What’s happening?

Analysts last week finally got a chance to see what’s going on with the Russian economy when the State Statistics Service (Rosstat) published data for April. Unsurprisingly, the figures showed Russia sliding into recession – but the fall was not as steep as it might have been, and some of the numbers even allowed for cautious optimism.

According to the Ministry of Economic Development, Russian GDP fell 3 percent year-on-year in April. GDP in March rose by 1.3 percent.

• Industrial output fell 1.6 percent year on year (manufacturing was down 2.1 percent). At the same time, energy production went from a 7.8 percent rise in March to a fall of 1.6 percent in April. However, according to unofficial figures published by state-owned news agency TASS, the situation for commodities improved in May – for the first time in two months oil production ceased falling and – in the first 29 days of May – was even up 1 percent compared with April.
• Metals, pharmaceuticals and agriculture also did relatively well. And the construction sector is still being supported by new orders for housing projects.
• State expenditure from January through April increased almost 15 percent (not least due to a rise in military spending that is currently running at 2.5 times pre-war levels). But the state can afford it: oil and gas revenues almost doubled (up 90.6 percent).
• Russian salaries were still rising in real terms in March (up 3.6 percent year on year). But the figures for April and the more significant data about real disposable incomes will be known only in July. Salary rises were strongest in the private sector (7.1 percent) while they were down 3.9 percent in the public sector, according to Dmitry Polevoy, the director of investments at Loko-Invest.
• The biggest falls in April were in logistics and consumer spending: wholesale trade turnover was down 11.9 percent, retail by 9.7 percent, freight transport by 5.9 percent, hospitality by 6.7 percent. Lending activity continues to decline, especially in the consumer sector (down 1.8 percent in March). The problems for retail are due to a correction from a March surge, a decline in real incomes that were hit by rising prices (annual inflation in April was 17.8 percent) and increased uncertainty, according to Sofia Donets, chief economist for Russia at Renaissance Capital.
• Automobile sales in April plummeted 79 percent year on year after a 63 percent decline in March. The automobile industry is more dependent than most on imports and suffered a greater price shock as a result of Western sanctions.

How bad is it?

The government and the Central Bank are most concerned by the fall in consumer spending. However, the reduction in April (8.8 percent) was only a third of that seen at the peak of the coronavirus crisis in April 2020 (26.8 percent).

The recent data is evidence that the current crisis will be very different from the pandemic: back then we saw a sharp fall and a gradual rebound; this time the fall will be steady and prolonged, according to Raiffaissenbank’s chief macro-analyst Stanislav Murashov. Consumer demand will likely continue to decline, firstly due to shortages arising from import problems, then due to a deteriorating labor market (although, for the moment, unemployment remains close to a record low of 4 percent).

What happens next?

Imports will continue to fall, dragging productivity with them as reserves of foreign raw materials and components are exhausted, according to Central Bank analysts. And until new suppliers and restructured supply chains can provide strong evidence of a recovery in imports, it’s too early to talk of any structural transformation.

The main economic downturn is still to come and will hit in the second half of the year, according to Polevoy of Loko-Invest. Donets was surprised by the promising data for April and would not rule out the possibility of a second slump for the Russian economy.

Guessing what might happen after the end of this year is even more difficult.

But, by the end of 2022, Russia will lose its largest oil market. The EU confirmed last week that it will implement an oil embargo to close Europe’s borders to 90 percent of Russian oil before the end of the year. By the start of 2023, it will also block trade in oil products.

The effect of the embargo

Estimates vary, but the embargo could cost Russia up to $60 billion a year in export revenue. Oil sales remain Russia’s biggest single source of revenue, with exports worth $180 billion in 2021 (by comparison, natural gas exports generated $64 billion).

However, the level of damage to the state’s finances will depend on global oil prices and the effectiveness of Russia’s “planned pivot to Asia”. Independent analysts believe that the Asian market can only absorb about 1 million of the 3 million barrels of oil per day that will have nowhere to go after the EU embargo begins.

Global oil prices are currently about $120 per barrel, a level that means the Kremlin has little to worry about in the short term. However, Russia’s Urals cruise blend is selling at an unprecedented discount due to sanctions. And that discount is increasing as the fighting in Ukraine continues. According to official figures, the average price in April for a barrel of Urals was $71, almost $20 less than in March ($89) or the first quarter average of $88. Prices for Brent also fell, but slower: from $117.3 in March to $104.6 in April. Bloomberg calculated that from April through mid-May, Urals was selling at a 32 percent discount against Brent.

The announcement of the European embargo again inflated global prices: in the middle of last week, prices for Brent touched $125 and at present they are about $120. But prices can change. Oil cartel OPEC+ unexpectedly decided Thursday to increase production for the first time since spring 2020.Why the world should care: Economist Oleg Itskhoki told The Bell in March that we were seeing “an experiment on the Russian economy and the Russian population on a never-seen-before scale”. He wasn’t wrong. Even now, economists insist that “specific” and “unprecedented” circumstances make it almost impossible to make forecasts. The only thing we can say with certainty is that things will continue to change unpredictably and that a recession is unlikely to last for less than two years (something even admitted by the Ministry of Economic Development).

Sanctions on the founder of ‘Russia’s Google’

One of the biggest sanctions “guessing games” is over: Arkady Volozh, the founder of Yandex, Russia’s biggest IT company, was hit by Western sanctions last week. A crucial gateway to Russian-speaking internet users, Yandex has long been under pressure from the Russian authorities and has become a vehicle for state censorship.

• Yandex founder Arkady Volozh was included in the sixth round of EU sanctions Friday. Alongside Volozh on the list was President Vladimir Putin’s alleged girlfriend Alina Kabayeva, metals billionaire Alexei Mordashov and controversial Foreign Ministry press secretary Maria Zakharova. Within half an hour of the news, Volozh announced his departure as Yandex CEO and Yandex board member. The company itself has not yet been sanctioned. Through a family trust, Volozh controls 45.6 percent of votes within Yandex’s shareholder structure.
• The official explanation for sanctioning Volozh was that there are state-owned banks among Yandex investors, Yandex has a “golden share” that allows the government to veto key decisions (such as changing shareholders) and the company’s role in promoting Russian state-owned media sources in its search results.
• As well as operating Russia’s most popular search engine, Yandex runs the largest aggregator of taxi and food delivery services, audio and visual streaming services, Russia’s most developed self-driving car project and much more. But the company has drawn the most ire for its news aggregator service Yandex.News (that, ironically, generates almost zero income).
• Yandex has never produced its own journalism. The company simply created an algorithm that selects the most popular news from Russian media, picks out major events and displays the ‘top five’ stories on the homepage for Yandex’s search engine. However, Yandex has such a huge audience that – since the early 2010s – Yandex.News has been the biggest news source for the Russophone internet. In March, Yandex.News was attracting 14 million users a day.
• The Kremlin has long understood the political importance of controlling Yandex.News. The first time officials pressed Yandex to tweak its algorithm came in 2008 after Russia’s invasion of Georgia. For several years, Yandex fought back and managed to stop political interference. However, after the annexation of Crimea in 2014, everything changed. Russia passed a law in 2016 obliging news aggregators to include only media sources officially registered in Russia. At the same time, Yandex was required to restrict itself to 15 Kremlin-approved sources when filling its ‘Top Five’. None of the chosen publications were critical of the government.
• At the same time, Yandex has spent years fighting attempts at nationalization. In 2008, metals billionaire Alisher Usmanov attempted to buy a large stake in the company with the Kremlin’s backing. Then another state-owned company, Sberbank, acquired a “golden share” in Yandex, allowing it to block any change of shareholder. Thus, the Kremlin ensured that Yandex could not be sold to a foreigner. In 2018, Sberbank’s growing ambitions led to speculation that it could bid for a large stake in Yandex. But Yandex fought back, and its “golden share” is currently held by a specially-established “Public Interest Fund,” which is under de facto Kremlin control.
• With the outbreak of war in February, Yandex faced a double crisis: not only the “golden share,” but also Yandex.News was toxic and made it at risk of sanctions. At the same time, any sudden moves perceived as anti-war in Russia raised the specter of nationalization. “If we remove news from the home page, we will get 10 minutes of fame. But nothing will change. Ten minutes later, everything will be back to normal and there will be no more Yandex,” the head of Yandex’s Russian office Elena Bunina told a staff meeting in March. Later that month the company agreed to sell Yandex.News to state-controlled internet holding VK. But it was already too late: three days earlier managing director Tigran Khudaverdyan was sanctioned by the EU and the United Kingdom. This week, Volozh joined him on the list.
• Yandex finds itself in a very awkward position. Most Yandex staff are young, educated IT specialists who do not support the war and are frustrated that Yandex.News has harmed their company’s reputation. About 10 percent of staff have fled abroad since the start of the war. Several senior managers have also left the country. Volozh himself has lived in Israel for several years. 

Why the world should care: While Yandex’s future remains unclear, its experience is a stark illustration of the ethical dilemma facing Russian businesses. Before the start of the war, making compromises with the government was relatively risk-free. After the war began it became clear that those compromises carry a very high price. But, by then, it was already too late.

By Gilbert Doctorow, 6/3/22

It has been my rule not to join the vast majority of my fellow political commentators at the scrimmage line in sterile debates of the one subject of the day, week, month that has attracted their full attention. Their debates are sterile because they ignore all but a few parameters of reality in Russia, in Ukraine. For them, ignorance is bliss. They do not stir from their armchairs nor do they switch channels to get information from the other side of the barricades, meaning from Russia.

I will violate this overriding rule and just this once join the debate over how Russia’s ‘special military operation’ will end.  Nearly all of my peers in Western media and academia give you read-outs based on their shared certainty over Russia’s military and political ambition from the start of the ‘operation,’ how Russia failed by underestimating Ukrainian resilience and professionalism, how Putin must now save face by capturing and holding some part of Ukraine. The subject of disagreement is whether at the end of the campaign the borders will revert to the status quo before 24 February in exchange for Ukrainian neutrality or whether the Russians will have to entirely give up claims on Donbas and possibly even on Crimea.

As for commentators in the European Union, there is exaggerated outrage over alleged Russian aggression, over any possible revision of European borders as enshrined in the Helsinki Act of 1975 and subsequent recommitments by all parties to territorial inviolability of the signatory States. There is the stench of hypocrisy from this crowd as they overlook what they wrought in the deconstruction of Yugoslavia and, in particular, the hiving off of Kosovo from the state of Serbia.

I mention all of the foregoing as background to what I see now going on in Russian political life, namely open and lively discussion of whether the country should annex the territories of Ukraine newly ‘liberated’ by forces of the Donetsk and Lugansk People’s Republics with decisive assistance of the Russian military. By admission of President Zelensky yesterday, these territories now amount to 20% of the Ukrainian state as it was configured in 2014.

In the past several weeks, when Russia concentrated its men and materiel on the Donbas and began to score decisive victories, most notably following the taking of Mariupol and capitulation of the nationalist fighters in the Azovstal complex, leading public officials in the DPR, the LPR and the Kherson oblast have called for quick accession of their lands to the Russian Federation with or without referendums. In Moscow, politicians, including Duma members, have called for the same, claiming that a fait accompli could be achieved already in July.

However, as I see and hear on political talk shows and even in simple political reportage on mainstream Russian radio like Business FM, a counter argument has raised its head. Those on this side ask whether the populations of the potential new constituent parts of the RF are likely to be loyal to Russia. They ask if there is truly a pro-Russian majority in the population should a referendum be organized.

This is all very interesting. It surely is a continuation of the internal debate in Moscow back in 2014 when the decision was taken to grant Crimea immediate entry into the RF while denying the requests for similar treatment from the political leaders of the Donbas oblasts.

However, there surely are other considerations weighing in on the Kremlin that I have not seen aired so far. They may be likened to the considerations of France following the fall of the Berlin Wall in 1989, when the possible reunification of Germany was the talk of the day. Sharp witted observers said at the time that President Mitterand liked Germany so much that he wanted to continue to see two of them. Today Vladimir Putin may like Ukraine and its brethren Slavs so much that he wants to see three or four of them.

To be specific, from the very beginning the number one issue for Moscow as it entered upon its military adventure in Ukraine was geopolitical: to ensure that Ukraine will never again be used as a platform to threaten Russian state security, that Ukraine will never become a NATO member. We may safely assume that internationally guaranteed and supervised neutrality of Ukraine will be part of any peace settlement. It would be nicely supported by a new reality on the ground: namely by carving out several Russia-friendly and Russia-dependent mini-states on the former territory of East and South Ukraine. At the same time this solution removes from the international political agenda many of the accusations that have been made against Russia which support the vicious sanctions now being applied to the RF at great cost to Europe and to the world at large: there will be no territorial acquisitions.

If Kiev is compelled to acknowledge the independence of these two, three or more former oblasts as demanded by their populations, that is a situation fully compatible with the United Nations Charter. In a word, a decision by the Kremlin not to annex parts of Ukraine beyond the Crimea, which has long been quietly accepted by many in Europe, would prepare the way for a gradual return of civilized relations within Europe and even, eventually, with the United States.

Link here.

This is a Russian-made documentary produced by Masterskaya Movie Company in 2022. I’ve been told that it originally aired on Russia 1 TV channel. The description from Rumble is:

Film traces the history of the Ukrainian tragedy from 1917 to some of the newest footage we’ve all been watching…