In the Thick of It

A blog on the U.S.-Russia relationship
Moscow crowd
After years of rapid expansion during President Vladimir Putin’s first stint as president, Russia's middle class has dwindled in the years since his return to office in 2012. Confrontation with the west after the annexation of Crimea, the resulting sanctions and the Kremlin’s focus on macroeconomic stability at the expense of prosperity have entrenched a stagnation which has hit middle-earners hard. By one count, Russia’s middle class shrunk 20 percent during the economic crisis that followed.

But even as their economic decline coincided with Russia’s more aggressive foreign policy, there is little evidence that Russia’s current and former middle-classers connect their plight to the Kremlin’s conduct beyond its borders. There may be economic discontent at home, but Russia’s confrontational stance against the west remains popular, and calls to reverse years of economic inertia focus squarely on what the government can do on the domestic front—meaning Putin feels little pressure from Russia’s long-suffering middle classes to change course on the world stage.
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Sberbank
This article was originally published by The Moscow Times with the subheading: "Talk of financial Armageddon should Russia be kicked out of the system may be overblown."

Ukraine has joined the chorus of voices calling for Russia to be disconnected from SWIFT—the financial messaging network that underpins the global banking system.

In a meeting with EU foreign ministers, Ukraine’s top diplomat Dmytro Kuleba said he had called for a tough new package of sanctions, including the expulsion of Russian banks from the Society for Worldwide Interbank Financial Telecommunications (SWIFT) network, which currently links more than 11,000 banks operating in at least 200 countries and territories around the world.

The proposal—long popular among those who favor slapping hard-hitting sanctions on Russia—has picked up new supporters since last year’s poisoning of Alexei Navalny. Talk of a possible embargo reached fever pitch in Moscow in the days leading up to U.S. President Joe Biden’s announcement of a new round of sanctions against Russia mid-April, with top Russian officials and banking figures talking up the dangers of being disconnected.

“We cannot rule out any potential threats," Kremlin spokesperson Dmitry Peskov said last month when asked about the possibility. “Sanctions are unreasonable and unpredictable and therefore the situation forces us to be alert,” he added.
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handshake
Nearly half of Russians and Americans believe that relations between the two countries will not change over the next 10 years, though more than 60 percent of Americans and Russians see areas for cooperation in nuclear non-proliferation, arms control and responding to epidemics, according to recent polling from the Levada Center and Chicago Council on Global Affairs.

Only 10 percent of Americans and 19 percent of Russians believe relations will improve within the next 10 years. Forty-three percent of Americans and 29 percent of Russians believe relations will get worse, while the plurality of Russians and Americans believe relations will not change within the next decade, according to the Levada poll conducted Jan. 29 through Feb. 2.
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rubles
U.S. President Ronald Reagan and his secretary of state, George Shultz, as well as U.S. President George H.W. Bush, are well known to have worked effectively with their Soviet counterparts to advance bilateral arms control. What is less known is that Reagan, Bush and successive presidents also sought to convince the Kremlin to give the market economy a chance, as they believed that a transition by the Soviet Union to a market economy would have been in America’s interest. The 1992 Freedom Support Act submitted by the Bush Administration to Congress, for example, stated that “recent developments in Russia and other independent states of the former Soviet Union present an historic opportunity for a transition of the independent states of the former Soviet Union into the community of democratic nations…the entire international community has a vital interest in the success of this transition.”

Today, Russia’s transition to a market economy is at least partially completed, though estimates point to the state holding between 33 and 46 percent of the economy, with this control concentrated in “strategic” sectors such as energy and banking. Nevertheless, this transition did not succeed in embedding Russia into the Western camp. Nor did a similar effort to encourage China’s transition to a market economy yield the results the West had hoped for, such as democratization of the Middle Kingdom and its alignment with the U.S. and its allies.

Despite this, promoting worldwide economic reform has remained popular among U.S. leaders; most recently, Donald Trump sought to convince North Korean leader Kim Jong-un of the benefits of a market economy during their 2018 summit in Singapore. Below, we have compiled a selection of calls for economic reform in Russia, in chronological order, made by U.S. presidents and their administrations beginning with Ronald Reagan.
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social media icons
The share of Russians relying on television as a main source of news continues to decline, while the number of those who depend on social media or internet publications for news is on the rise. Although Russian social media sites remain popular, Russian usage figures of non-Russian sites with video capabilities such as YouTube, Instagram and TikTok are growing at significantly faster rates. These factors present worrying trends for the Kremlin, which depends heavily on television and a controlled information space to broadcast its message to the Russian public.

Russia’s leading independent pollster, the Levada Center, surveyed 1,600 individuals in 137 settlements across 50 regions of Russia on Jan. 29-Feb. 2, 2021, and found that 64 percent of Russians cited television as a source from which they most often learn about news. This figure, while the highest of all listed media, has been in steady retreat since Levada began asking the question in August 2009. Meanwhile, over the same time period, Levada found that both social networks and internet publications greatly increased in popularity as news sources. Throughout much of 2020, percentages for reliance on both of these forms of media had remained stagnant; these latest figures thus represent a jump upward beginning in 2021.
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stock market
A year after the coronavirus pandemic plunged the global economy into turmoil and sent stock markets tumbling, Russia has emerged as one of the world’s best performers.

Russia’s economy shrank by just 3.1% in 2020 — far less than advanced economies — and could reach its pre-pandemic size within the next 12 months. The most recent praise for Russia’s handling of the crisis came from the International Monetary Fund (IMF), which said Moscow had surpassed expectations in dealing with the crisis and upgraded its forecasts for the year ahead.

That Russia’s strong performance came after five years of stagnation is no coincidence, economists say, and has triggered fresh debate over whether Russia has managed to conquer the pernicious boom-and-bust cycle, and what other countries can learn from its example.

“Russia has definitely made huge progress in terms of beating boom and bust,” said Elina Ribakova, deputy chief economist at the Institute of International Finance (IIF). 
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Russian state duma
Despite a raging pandemic, declining real incomes, rising poverty and the so-called non-systemic opposition’s discontent with the prosecution of Alexei Navalny, the share of Russians who view their country as headed in the right direction and who had a positive view of Russian President Vladimir Putin’s performance continued to exceed the share of those who held the opposite view on these issues so far this year, according to the Levada Center’s latest batch of polling results. At the same time, the Russian president, whom 41 percent of respondents do not want to see stay on in his current role beyond 2024, had to contend with a decline in the approval of his cabinet’s work and the lower chamber of the Russian parliament, which is dominated by his loyalists, ahead of parliamentary elections this fall.

The share of Russians who think their country is headed in the right direction has held steady at 49 percent this year, while the share of those who hold the opposite view has increased from 40 percent in January 2021 to 43 percent in February, according to Russia’s most prominent independent pollster. The largest share of Russians who believed that Russia was headed in the wrong direction, 82 percent, occurred in August 1999 as separatist violence flared again in the North Caucasus. The share of Russians who thought their country was headed in the right direction was highest in December 2007, August 2014 and June 2015 (64 percent), according to Levada.
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sanctions
As President Joe Biden settles into the Oval Office, he has filled the upper echelons of his new administration with officials who have vocally supported sanctions against Russia. While it is difficult to predict specific changes to the existing sanctions regime, now targeting more than 700 Russian individuals and organizations, it is reasonable to assume that Washington will continue using these economic tools to pressure Moscow, even while conducting a review of the measures currently in place. Some high-level pro-sanctions officials in Washington have expressed openness to seeking common ground with Russia in areas where the two countries’ interests converge, so there is room to hope that the new administration may try to assess the sanctions’ effectiveness in advancing U.S. interests. Nonetheless, for now, near-term changes to the U.S. sanctions policy toward Russia seem more likely to be tweaks than overhauls, and they will be shaped by a mix of foreign-policy considerations, domestic political pressures and lessons learned.
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Protests for Navalny Jan. 23, 2021
Nearly half of young Russians expressed dissatisfaction with Russian President Vladimir Putin in a recent poll by the Levada Center, marking a significant decrease in approval from previous years and a generational divide.

Only 51 percent of Russians aged 18 to 24 expressed approval for Putin, while 57 percent of those 25 to 39 years old, 60 percent of 40- to 54-year-olds and 73 percent of those 55 years and over expressed approval for the president’s decisions.

A similar generational divide is evident in responses to the question “is the country moving in the right direction?”. Forty-three percent of respondents aged 18 to 24 and 44 percent of 25 to 39-year-olds responded that Russia was moving in the right direction. Those numbers again rose among older demographics, as 47 percent of respondents aged 40 to 54 and 57 percent of those 55 and older said they believed the country was going in the right direction.
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2021
The Levada Center has just released the results of its latest annual poll on the most significant events of the past year, and, predictably, the global coronavirus outbreak tops the list. As many as 39 percent of Russians believe the pandemic was the most significant event of 2020, while another 11 percent see the most significant event of 2020 as the amendments to the Russian Constitution, which have been designed to firm Russian President Vladimir Putin’s grip on power and reset the number of presidential term limits this veteran leader can serve, according to the poll (see Table 1). Rising prices came in third, according to Levada. In contrast, the share of Russians who view the 2020 presidential elections in the U.S. as the most important event of the past year was below the poll’s margin of error of 2.4 percent, totaling just 1 percent.
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