Geopolitical tensions fade

Hello! This week our top story is an analysis of why strained relations between Russia and the U.S. appeared to ease, and what the two sides were trying to get out of an escalation. We also look at what might happen now top independent media outlet Meduza has been labelled a ‘foreign agent’, and we profile secretive grocery store chain Svetofor that recently became Russia’s fastest growing retailer.

Crisis recedes as Russia pulls back troops, Navalny ends hunger strike

Fears of a geopolitical showdown faded this week as Russian troops withdrew from the Ukrainian border, opposition leader Alexei Navalny said he was stopping his hunger strike and President Vladimir Putin’s annual state-of-the-nation address was notably light on saber-rattling. In the space of just three days tensions that had been building for months appeared to dissipate.

Que se passe-t-il ?

Putin gave his annual state-of-the-nation address Wednesday and many were expecting a sensation: perhaps a formal recognition of the rebel republics in Eastern Ukraine or an announcement Russia would formally unite with neighboring Belarus. However, there was almost no drama: Putin didn’t even mention Ukraine and devoted barely five minutes to foreign policy. The main topic was social handouts.

The same evening there was an unsanctioned rally in support of Navalny, with people in several cities taking to the streets. In Moscow — in sharp contrast with similar protests in January and February — everything went off peacefully, and there were just 20 arrests.

The following day, Defense Minister Sergei Shoigu announced an end to military training exercises on the Ukrainian border and the return of troops to their bases. The number of Russian soldiers massed near Ukraine had reached menacing levels: somewhere between 80,000 (a Ukrainian estimate) to 100,000 (the figure given by European Union officials).

Navalny’s doctors announced late Thursday that the opposition leader had received a visit from an independent medic and confirmed his condition (after more than three weeks on hunger strike) was life-threatening. Navalny said the next day that he would halt his hunger strike.

The markets responded with significant gains to this positive news. Since Thursday the ruble has risen 2.5 percent against the greenback, strengthening past 75 ruble against the dollar for the first time since the end of March.

Making sense of events

If you look at a timeline of the last couple of months, it suggests that the beginning of the latest round of geopolitical confrontation coincided with the start of Navalny’s prison term (he was sent to a penal colony on Feb. 25) and President Joe Biden’s first significant moves in respect of Russia: imposing sanctions over Navalny’s poisoning on March 2 and describing Putin as a murderer two weeks later. It was also around this time that Russia began moving troops toward its border with Ukraine.

When tensions along the Ukrainian border were at their height in early April, The Bell asked analysts about the possibility of war breaking out  – but they all agreed that this was unlikely. Instead, the timeline suggests Russia was attempting to give itself a bargaining chip in negotiations with the West.

March 2 — the U.S. imposes sanctions on Russia for the 2020 nerve agent poisoning of Navalny.

March 5 — Bloomberg reports on preparations for new sanctions to target Russian state debt

March 16 — U.S. intelligence publishes a report on Russian interference in the 2020 presidential election and a CNN source claims sanctions could be imposed within a week

March 17 — Biden answers in the affirmative to a question about whether Putin is a murderer. The ruble starts a fall that will last for three consecutive weeks

March 30 — The Ukrainian military announces Russia is massing troops on its border

April 5 — Putin’s spokesperson Dmitry Peskov says Putin’s state-of-the-nation address will be on April 21. Theories about an escalation in Eastern Ukraine begin to swirl

April 8 — A senior Kremlin official says a military conflict would be “the beginning of the end” for Ukraine

April 13 — Biden calls Putin to discuss Ukraine and Navalny, and suggests a face-to-face meeting

April 15 — the U.S. imposes new sanctions on Russia. They do not pose any serious problem for the economy or the government’s fiscal plans. Biden gives a speech and talks of de-escalation

April 17 — Russia responds to U.S. sanctions. The most serious move is a ‘recommendation’ the U.S. ambassador returns to Washington. Preparations continue for a Putin-Biden summit

April 20 — Independent doctors visit Navalny in prison

April 21 — Putin gives his state-of-the-nation address and barely mentions foreign affairs

April 22 — Shoigu announces Russian troops will leave the Ukrainian border area

April 23 — Navalny ends his hunger strike

Pourquoi le monde doit-il s'en préoccuper ?

These events look a lot like an effort by the Kremlin to test the new U.S. administration and we will soon find out how effective this has been: on June 2, the White House is due to impose a second round of sanctions. The only positive on the horizon is the upcoming meeting between Putin and Biden, but — at least for the moment — most analysts struggle to see much scope for meaningful progress.

‘Foreign agent’ label hits top independent media outlet Meduza

The authorities are stepping up their attack on independent media. The Ministry of Justice announced Friday that Meduza, Russia’s most popular independent media outlet, will be designated a ‘foreign agent’ (a Soviet-era term implying espionage). Theoretically, this has no impact. However, in reality, it limits Meduza’s ability to share articles on social media and could lead to a fall in advertising revenue.

• Legislation allowing media outlets to be designated as ‘foreign agents’ came into force in 2017 and was beefed up two years later. Until now, the ‘foreign agents list’ has only included publications officially financed by foreign governments like the U.S. funded Voice of America and Radio Free Europe/Radio Liberty. Meduza is the first major independent outlet on the list.
• From now on, Meduza will be obliged to preface all its articles and social media posts with a capitalized paragraph of text. On a smartphone, this takes up seven lines of the screen. From now on, Meduza’s Facebook posts will look like this:

• Theoretically, it’s not just Meduza who is affected: anyone who shares a link to a Meduza story is now supposed to refer to the media outlet’s ‘foreign agent’ status. If not, that individual can also be deemed a ‘media foreign agent’ (although this procedure has not yet been tested in court).
• If it breaks the rules, Meduza faces a fine of up to 5 million rubles ($67,000). Repeat violations would see the publication blocked in Russia. Readers who share Meduza articles without the relevant warning can be fined up to 2,500 rubles ($35), while other media outlets that re-post stories could be forced to pay up to 50,000 ($800). Radio Liberty/Radio Free Europe, a ‘foreign agent’ since 2017, has already incurred 19 million rubles ($253,000) in fines.
• But the biggest blow for Meduza is likely to be loss of advertising. Officially, there is no ban on advertising with a foreign agent, but any Russian company is likely to be nervous of such an association. In particular, companies doing business with the state will see it as a red flag. Advertising currently provides Meduza with the bulk of its revenue and Galina Timchenko, Meduza’s founder and CEO, told The Bell that she could not rule out financial problems.
• The most popular independent publication in Russia, Meduza was set-up by journalists from Lenta.ru who lost their jobs for political reasons after Russia’s 2014 annexation of Crimea. Meduza calculates its monthly readership is 13.9 million people.

Pourquoi le monde doit-il s'en préoccuper ?

The Russian government has spent several years building a legislative arsenal that enables it to stifle any inconvenient media outlet – we are now seeing these weapons put to serious use for the first time.

Rencontrez les frères sibériens qui ont construit un "Walmart à prix cassés".

Aujourd'hui encore, il existe de grandes entreprises russes au sujet desquelles il n'existe pratiquement aucune information publique. Cette semaine, The Bell a publié un long article racontant l' histoire de l'une d'entre elles : une copie russe de Walmart connue sous le nom de Svetofor. Avec un chiffre d'affaires d'environ 2,5 milliards de dollars en 2020, cette entreprise sibérienne est récemment devenue la chaîne de supermarchés à la croissance la plus rapide de Russie.

• "Lorsque j'ai rencontré pour la première fois [les propriétaires de Svetofor], cela m'a rendu fou qu'ils soient si discrets", a déclaré un vétéran du marché de la vente au détail. "J'ai aimé le concept et j'ai essayé d'organiser une réunion par l'intermédiaire de connaissances communes. Personne ne m'a rappelé ! Ce n'est pas comme ça qu'on fait dans le commerce de détail. Tout le monde se parle".
• Les mystérieux propriétaires de Svetofor, qui ne donnent jamais d'interviews, sont Sergei et Andrei Schneider, deux frères issus d'une famille d'origine allemande. Ils ont fondé l'entreprise en 2009, alors que les leaders du commerce de détail russe semblaient inattaquables. Mais Svetofor a réussi à copier le format des magasins discount occidentaux et à créer une chaîne de magasins où les prix étaient au moins 20 % inférieurs à ceux de ses principaux rivaux.
• Comme tout le monde dans le commerce de détail russe, le modèle des Schneider était Walmart aux États-Unis et Aldi et Lidl en Allemagne. Mais Svetofor est allé plus loin. Un magasin Svetofor typique est une boîte en béton de 1 500 mètres carrés située dans une banlieue sinistre, empilée du sol au plafond avec des palettes de produits bon marché.
• La chaîne est prête à tout pour obtenir des prix bas (par exemple, en achetant des produits proches de leur date de péremption) et ouvre des magasins dans des endroits où les autres supermarchés ne vont pas. Les Schneider partaient du principe que les consommateurs viendraient chez eux si le prix était correct - et il l'était.
• La baisse constante des salaires en Russie a été l'une des principales raisons du succès de Svetofor, qui a poussé les consommateurs à se tourner vers les magasins à bas prix. Elle a également contraint les leaders incontestés du marché russe de la vente au détail - X5 Retail Group et Magnit - à se lancer dans le secteur des magasins à bas prix. Tous deux ont annoncé l'an dernier le lancement de leurs propres chaînes de magasins à prix réduits, Chizhik et My Price respectivement.

Pourquoi le monde doit-il s'en préoccuper ?

L'histoire de Svetofor illustre parfaitement l'état de l'économie russe. Aujourd'hui, Svetofor s'internationalise (il est déjà présent en Allemagne, en Lettonie, en Lituanie, en Estonie, en Pologne et en Serbie). Une expansion future est prévue en Espagne, en France, en Grèce et même aux États-Unis et au Royaume-Uni.