Big Brother during COVID-19

The Bell

Hello! This week our top story is a look at the mass surveillance technology Russia is readying to roll-out as a part of its response to the coronavirus. We also look at Putin’s U-turn on support for oil production cuts, Russia’s month-long public holiday, state-owned oil giant Rosneft’s sale of its Venezuelan assets, and the standoff between staff and owners at one of the country’s leading newspapers.  

Are mass surveillance measures a bigger risk than COVID-19?

Early this week, plans for a system to enforce a Moscow lockdown were leaked on social media (Kommersant newspaper later confirmed their authenticity). It was a terrifying glimpse into an Orwellian future. They consisted of: compulsory QR-codes for all Muscovites further than 100 metres from their homes; a tracking app for those infected with COVID-19; and a sophisticated surveillance system involving mobile operators, banks and internet companies. The Bell looked at whether such a system is actually feasible. 

  • Most disturbing were the dystopian QR-codes. The plans suggested that people would be required to apply for a QR-code every time they left the house for an extended period. And if you were stopped by the police without a code, you would be fined. At first, City Hall said the QR-codes were not necessary. But a few days later, it revealed the system was ready, and could be implemented if necessary. 
  • The second part of the plans was a special app to monitor those being treated for COVID-19 at home. It functions like a house arrest bracelet: if a person crosses a designated perimeter, law enforcement gets alerted and a fine is issued automatically. The beta version of the app triggered criticism when it turned out that the app was getting access to all the data on the device on which it was installed. City Hall then announced it would distribute smartphones with the app so it wouldn’t be necessary to install it on your own device.
  • Finally, the plans envisaged a complex system for tracking citizens during the pandemic using geolocation data from mobile operators, and surveillance cameras.
  • Some of these measures are obviously feasible. For example, Moscow already has 105,000 functioning surveillance cameras with face recognition technology. And it would also be relatively easy for Moscow to build a system to track violations after the event, and automatically fine those breaking the rules.
  • But the most ambitious measures – in particular 24/7 online monitoring of every Muscovite using geolocation – are much more complicated, according to some of the system’s creators contacted by The Bell. 

Why the world should care 

You may think that such a level of surveillance would be an effective way of cutting coronavirus transmissions. But nothing exists to regulate when such a system would stop functioning. It is also unclear where the collected data would be stored, or who would get access. Many fear that the pandemic will pass — but Big Brother will remain.’

Russia U-turns on oil production cuts

Putin threw his weight behind swingeing oil production cuts Friday as collapsing crude prices forced Russia to return to the negotiating table. Russia now looks on the verge of a historic agreement with the U.S. and Saudi Arabia to shore up crude prices.  

  • Russia is prepared to work with Washington and Riyadh to push through production cuts of 10 million barrels per day (bpd), Putin said Friday at a meeting with oil company executives and government ministers. That amounts to about 10 percent of global supply. But the Russian leader warned that any agreement would have to be reached on a “partnership” basis. Putin’s comments followed a tweet by U.S. President Donald Trump on Thursday that said Russia and Saudi Arabia had agreed to cut production by at least 10 million bpd.
  • Putin’s decision is a remarkable U-turn, coming less than a month after Russia dramatically tore up its cooperation with the Organisation of the Petroleum Exporting Countries (OPEC) — so-called OPEC+ — after Saudi pressure for 1.5 million bpd of cuts. As recently as last week, Putin was resisting calls to return to negotiations.
  • Putin alleged Friday that the Saudis had been to blame for the splintering of OPEC+. But this prompted furious denials from Riyadh and Saudi Foreign Minister Prince Faisal bin Farhan said Saturday that Putin’s comments were “fully devoid of truth.”

Vladimir Putin and Mohammed bin Salman Al Saud

  • The end of OPEC+, first formed in 2016, unleashed a month-long price war that sent markets into a tailspin, and by Wednesday crude was down 67 percent since the start of the year to almost $20 a barrel. But the rumors of a deal between Russia, U.S. and Saudi Arabia sparked a recovery: Trump’s tweet sent the price soaring almost 25 percent in a day and, by Friday, oil was again above $30 a barrel.  
  • A video meeting between OPEC and its allies, including Russia, is likely to take place later next week. Whatever the outcome, some analysts have pointed out that oil companies will be forced to make production cuts either way as global oil storage facilities fill up amid a collapse in demand caused by the coronavirus pandemic.

Why the world should care

Restarting collaboration with OPEC was necessary for Moscow because of the dire economic consequences for Russia of a long period of low oil prices. But that was likely not the only reason: a grand bargain with the U.S. and other major world powers has long been a top diplomatic goal for the Kremlin.  

Russia gives up controlling stake in Rosneft

Amid the coronavirus news, you may have missed one of the biggest deals in the Russian oil industry for several years. Oil giant Rosneft announced last weekend that it was selling its Venezuelan business to another state-owned company for $3.8 billion.

  • All Rosneft’s joint ventures, service companies and trading operations in Venezuela will be passed to a state-owned entity, according to a statement published Saturday. In return, Rosneft will receive a 9.6 percent share of the company’s own equity, which is worth $3.8 billion. 
  • The government controls Rosneft through state-owned holding company Rosneftegaz, which has a 50 percent plus one share in the oil giant. While the deal’s structure is secret, it is likely Rosnefttegaz’s holding will now fall to 40.4 percent, meaning the state loses its majority stake. It is unclear what Rosneft will do with the shares, but the company has been buying equity on the market since August 2018. There was speculation (Rus) a share package of up to 13 percent could now be sold to a private investor, or even distributed to management.
  • Dumping its assets in Venezuela will help Rosneft evade U.S. sanctions — its subsidiaries Rosneft Trading and TNK Trading were sanctioned this year for working with Venezuelan state oil company Petroleos de Venezuela (PDVSA). U.S. officials said Thursday that, if Rosneft stopped its work with PDVSA, the sanctions on Rosneft Trading and TNK Trading would be lifted.
  • In recent years, Rosneft has played a central role in Russia’s support for embattled Venezuelan President Nicolás Maduro, providing financing and helping sell oil. Maduro tweeted Tuesday that Putin has reassured him of Russia’s continued support after the deal, and it looks likely Rosneft will retain influence over Russia’s ties with Venezuela. The state-owned company widely assumed to be in line to take over Rosneft’s Venezuelan assets, Roszarubezhneft, was created the same day as the deal was announced. Roszarubezhneft’s CEO will be Nikolai Rybchuk, reportedly a colleague of Sechin during his work in Angola in the 1980s as a security officer.

Why the world should care

The deal is a big win for Sechin. Not only does it allow Rosneft to escape U.S. sanctions, but the company also builds up its pile of treasury shares, and gets rid of unprofitable assets badly hit by oil price woes and Venezuela’s accelerating coronavirus outbreak.

Why has Putin announced a month-long holiday? 

Putin gave his second televised address in eight days on Thursday, but instead of declaring a national emergency or a nationwide lockdown, he extended a public holiday until the end of April. The Russian president has left the difficult decisions to the prime minister and regional governors, who are nervous about missteps. As a result, ordinary people suffer.

What happened. Putin announced that a public holiday, which began Monday, would last through April 30. We wrote about the previous announcement in detail here. Putin did not specify any other measures, but he expanded the powers of regional governments. No one really understands how this ‘holiday’ should be working. Some companies continue to operate, others have taken the ‘holiday’ to mean that those who can work from home are required to work as normal.    

The catch. The initial reaction to last week’s holiday announcement was predictable: Russians headed en masse to the parks for barbecues. In response, Moscow Mayor Sergei Sobyanin on Sunday introduced a European-style lockdown. Muscovites are currently forbidden from venturing further than the nearest grocery store or trash bin. Similar measures are gradually being introduced by other regions across the country. 

Sources told The Bell and Bloomberg that Sobyanin had wanted strict measures to be introduced by the federal authorities from the very beginning. However, Putin refused to declare a national emergency because he feared it would dent his approval ratings, a source told Meduza. This week Putin did eventually sign a law giving the government the right to declare a national emergency. But Prime Minister Mikhail Mishustin is also afraid that taking this step would make him more unpopular, according to Meduza’s source. 

Who is suffering. Businesses are expected to continue paying staff, and many small and medium-sized businesses fear they will go under. While Putin is guaranteeing salaries, he isn’t offering any government support other than some subsidized loans. If a national emergency was declared, businesses would be freed from obligations, including that of having to pay salaries. But, as things stand, businesses must either fire employees, file for bankruptcy, or pay salaries – otherwise they face criminal charges. Economists forecast (Rus) that up to 80 percent of small and medium-sized businesses could declare bankruptcy, and that the unemployment rate will jump from below 5 percent to 9 percent. 

Why the world should care 

You don’t need to be a scientist to understand what people flocking to outdoor barbecues in the early days of an epidemic will do to infection rates. If politicians had not been so concerned with their popularity, Russia’s response to COVID-19 may have been more coherent. Instead, more businesses will go bankrupt, and more people will die.


Battle between staff and owner at business daily

The drama at business daily Vedomosti that we wrote about last week continues to rage, with more and more evidence that routine censorship is around the corner. This week, acting editor-in-chief Andrei Shmarov changed a headline on an article about Rosneft’s Venezuelan assets sale, making it factually incorrect. Though he said he was simply “practising”, this was immediately interpreted as yet another indicator that Shmarov is beholden to Rosneft.   

Vedomosti journalists have also formally asked (Rus) the new owners to consider another candidate for the editor-in-chief role: Vedomosti editor Afisa Voronina. In an internal poll this week, she was backed by 70 percent of employees, while Shmarov didn’t get a single vote. Vedomosti’s journalists are determined to fight, but they have few illusions: “the owners have the law, money, and the unwritten right of owners to influence the publication’s content on their side,” they wrote (Rus) in a public appeal. Unfortunately, it’s hard to disagree. 

Support The Bell!

The Bell's Newsletter

An inside look at the Russian economy and politics. Exclusively in your inbox every week.