THE BELL WEEKLY: Russia sends ‘nuclear’ signals to the West

Hello! This week, our main story is a look into the expansion of a budget Russian supermarket chain in Europe despite the war in Ukraine. We also look at the return of nuclear threats to Putin’s rhetoric and Russian lawmakers’ latest efforts to pass draconian anti-LGBT legislation.

Russia sends ‘nuclear’ signals to the West

Nuclear threats have probably not been debated so widely in Russia all year as they are being debated now. Last week, there were several reasons why the country’s atomic arsenal was back in the news. Sergei Karaganov, an international affairs expert known in the West for his Kremlin ties, published an article at the start of the week proposing a nuclear strike on Europe. A few days later, President Vladimir Putin again threatened the West with Russia’s nuclear weapons while speaking at the St. Petersburg International Economic Forum (SPIEF).

• In his article, entitled “The use of nuclear weapons could save humanity from a global catastrophe,” Karaganov writes of the divine origins of nuclear weapons and argues that fears around their use no longer exist. Since the fight in Ukraine will determine the future world order, Karaganov believes that the West must be “rolled back” to ensure that Russia and the rest of the world can advance. To ensure this, Russia should use “the weapons of God, dooming itself to heavy spiritual losses.” This means delivering a “pre-emptive retaliatory strike” on “the area around Poznan” (a city in western Poland). This is the only way Russia will enjoy a bright future because history does not judge winners, Karaganov concludes.
• Karaganov is a well-known expert in international relations with vast experience. In Soviet times he trained at the United Nations and worked at the liberal – for its time – Institute of the USA and Canada under the Soviet state think tank the Academy of Sciences. In modern Russia, he worked in the Foreign Ministry, the presidential council and the presidential administration. He was also a co-founder of the Council on Foreign and Defense Policy, which brings together politicians, businessmen, journalists and senior officials. In the 2000s this council was one of the founders of the Valdai discussion club, where Putin participates in annual debates. In addition, Karaganov is an academic supervisor at the faculty of world economics and world affairs at HSE, one of Russia’s most prestigious universities.
• Karaganov is not your average Kremlin-linked political analyst. He is a member of the scientific council within the Russian Security Council, which since the start of the war has become one of the most influential bodies in Russia. It has the ear of Security Council Secretary Nikolai Patrushev, a close colleague of Putin’s, Meduza reported. However, another of the publication’s sources close to the Kremlin urged “not to exaggerate Karaganov’s influence.” Nonetheless, he is regularly involved in Security Council activities and is seen at events with Putin.
• Four days after Karaganov’s article was published, Putin spoke at SPIEF. Prompted by the moderator, the president said that the use of nuclear weapons was “of course, theoretically possible” if there was any threat “to our territorial integrity, independence and sovereignty, the existence of the Russian state.” This is the first time Putin has spoken about a nuclear strike in response to a “threat to territorial integrity,” although he hinted at it last summer after the previous successful Ukrainian offensive. This wording also contradicts Russia’s official nuclear policy, which says nothing about “territorial integrity.”
• In the same speech, Putin said that the first consignment of Russian nuclear arms had been delivered to Belarus for deployment in the country. Russia will complete this deployment by the end of the year.

Why the world should care

Putin’s words are no mistake, but a carefully prepared threat to the West – just as the previous similar threat, which coincides with a Ukrainian military attack, albeit one that is currently impossible to assess. Karaganov’s article and the demonstrative transfer of nuclear weapons to Belarusian President Alexander Lukashenko are similar signals to the West.

How Russia’s most mysterious retailer is building its business in the West

For most Russian businesses, following the invasion of Ukraine, it’s better to forget about any plans to expand into Europe. However, one Russian company is continuing its efforts to conquer the European market despite the war. Svetofor, founded by Krasnoyarsk’s Schneider brothers, remains Russia’s most mysterious retailer. Let’s take a look at how this discount supermarket, which fills its stores with piles of boxes rather than neatly stacked shelves, has opened dozens of stores in the West at the height of the war.

Bare warehouses

The Svetofor chain, founded in 2009 in Siberia by brothers Sergei and Andrei Schneider, is one of Russia's biggest. It is the definition of no-frills — its stores are like warehouses, with no hint of decoration: food, usually products with a long shelf life, sits on wooden pallets alongside cheap manufactured goods. The brands are little-known and the chain tries to offer goods at a 20-30% discount compared with rival shops.

No decorations, limited selection, a simple layout, low staff numbers and cheap premises on the edge of town help to keep prices low.

Russians like this kind of store. By the end of 2020, Svetofor was the fastest-growing retail chain in the country and, two years later, it moved into the top five Russian food retailers with revenues of more than 400 billion rubles ($5.9 billion at the average dollar rate for 2022).

According to a Russian retail expert, the Schneiders looked to move into Europe after successfully launching in Kazakhstan and Belarus. Svetofor began opening stores in those countries in 2017 and quickly found a niche. In Belarus alone, Svetofor now has 190 outlets, 25 of which opened since the invasion of Ukraine. In Kazakhstan, there are at least 50 Svetofor stores. In winter 2022 the chain launched in Uzbekistan, opening four stores.

The company follows the same formula in these so-called “friendly nations,” and in Europe, as it does in Russia, said former employees in the U.K. and one of the Baltic states.

Cheap and apolitical

Svetofor came to the European market under the Mere brand name in 2017-19. There are currently about 100 Mere stores across the continent, although no more than a dozen in any one country. Two sources from Svetofor’s European companies told The Bell they believed that Mere’s total revenue is around 50 million euros (about 1% of the Russian turnover). That estimate was backed up by an expert from a leading analytical company.

Svetofor initially had ambitious plans to open 50-100 new stores in each new country over five or six years. However, since the war broke out, the chain has opened at least 50 new stores abroad, half of them under the Mere name.

There’s no obvious difference between Mere in Europe and Svetofor in Russia. Even the selection of goods is similar. The boxes contain goods from Belarus, Ukraine and Russia, as well as local brands in bulk packages plus groceries from Poland, Lithuania, Germany and occasionally other EU countries. Non-food items are mostly from Turkey. Before the war, European media reported that most of these goods were produced in Russia. But sanctions now prohibit most types of imports from Russia.

Mere is hardly an equivalent of European discount supermarkets such as Aldi or Lidl. These chains rely heavily on their own in-house brands. “Svetofor is a cheap shop for the poor, not a value choice for thrifty Europeans,” said Ivan Fedyakov of the analytical company INFOLine. “Svetofor is now planning to get 50% of its stock from its own brands. In this respect, it is following the strategies of Aldi and Lidl 40 years ago. Back then, they were also hangars with wholesale consignments of consumer goods.”

Hitting a bump in the road

Mere has had to close down completely in several European countries since the start of the war. Oftentimes stores would shut down, or never open as planned, because local shoppers called for boycotts when they realized the company was Russian. This happened in Poland, Belgium and France.

Financial constraints and greater scrutiny from banks should make it harder for Svetofor to do business in Europe. Two sources told The Bell that Svetofor is currently making part of its payments in cryptocurrency. One source familiar with Svetofor’s Russian business claims that crypto transfers have been used since its first foreign project in Romania in 2018. A former Mere manager in another European country insisted that crypto transfers only became standard practice after the start of the war.

However, neither the war nor sanctions have played a significant role in Mere’s slowdown in Europe, according to a Mere source based in the U.K. He said that since the war the company deliberately started to hire Ukrainians, not just for shop work but in managerial roles, in order to mitigate sanctions risks. Moreover, so far no European country has imposed sanctions on the Schneider brothers and their business, so officially “they are not being questioned.”

Why the world should care

Despite successes in several European markets (Mere stores now operate in Germany, the Czech Republic, Portugal, Serbia, Slovakia and Romania), it's clear that a Russian business will find it more and more difficult to operate in Europe, said INFOLine’s Fedyakov. Suppliers and landlords are increasingly reluctant to work with Russian companies — and even without sanctions, there is a strong moral and ethical position against Russia’s aggression in Ukraine.

The trans community is the latest to fall victim to Russian state repression

While much of the world is celebrating Pride month in support and solidarity with the LGBTQ+ community, Russia is preparing changes to legislation that would prohibit gender transition. Russian lawmakers explain these changes as protection of “traditional values” and “national interests.” But in reality, it means that the lives of people in the process of transition, or who are preparing for it, will be crippled. And this is no exaggeration.

• The bill, which includes an article “prohibiting the change of sex of a person,” was submitted for consideration by almost 400 deputies of the lower house of Russia’s parliament. That’s more than half the legislators sitting in the state duma, so there is no doubt that it will be passed into law and it has already passed the first of its three readings. The bill prohibits any medical interventions related to gender transition, preventing doctors from performing breast removal and shaping operations, vaginoplasty, phalloplasty, etc. Hormone replacement therapy for gender transitions will also be banned.
• In effect, deputies are demanding that doctors refuse to help trans people, even though this goes against the basis of Russian medical law, which states that medical help should be available to all people and without discrimination “on the basis of gender.” Moreover, Russia is increasingly disavowing the most recent 11th edition of the International Classification of Diseases, trans activists warn. The classification identifies being transgender as a normal medical condition to be treated as needed. Russia began moving to ICD-11 in 2022 and should complete the process by 2025. However, the new law allows it to apply the classification in a simplified format, explained Russian Health Minister Mikhail Murashko. “It’s a piece of paper, it can be corrected,” he said.
• If the law is passed, trans people will be unable to change their designated gender in their passports. Statistics show in Russia issued 428 passports due to “sex change” in 2020, 554 in 2021 and 936 in 2022.
• The bill makes some exceptions. Deputies propose permitting “medical interventions” to treat “congenital physiological anomalies in forming the sex of children.” However, any procedure would require the approval of a commission from a state medical institution. At the same time, the rest of the world is tending towards a ban on such operations during childhood, endocrinologists say.
• At public discussions of the bill, State Duma deputies described transitions among American teenagers as “Satanism” and said that “the Western transgender industry is trying to seep into our country.” According to lawmakers, a ban on gender transitions is necessary, among other things, to prevent “crowds of homosexuals” from adopting children and evading military service by changing their gender.

Why the world should care

The Russian authorities continue to systematically ban any trace of LGBTQ+ activity. At the end of last year, a law banning “the promotion of non-traditional sexual relations” was imposed, effectively banning any reference to homosexuality in art (literature, cinema) and in everyday life. Now, the authorities have trans people in their sights. In these circumstances, some analysts and human rights activists fear that their next step might be reinstating conversion therapy in Russia, something that is legally prohibited in many countries.