Hello! This week our top story is Russia’s first antisemitic riot in decades. We also analyze the central bank’s aggressive interest rate hike and what it means for Russia’s economic outlook.
Putin blames the West after anti-Israel riot shocks Moscow
In Russia’s North Caucasus, the weekend brought a series of antisemitic protests, culminating in a mass riot in Makhachkala, the capital of the predominantly Muslim republic of Dagestan. Angry crowds of protestors stormed the city’s airport, breaking through to the runway in a bid to get to passengers arriving on a flight from Tel Aviv. The riot was the first large-scale openly antisemitic incident in Russia for decades. Russian authorities, clearly unprepared, blamed the riot on “Ukrainian provocateurs,” even though it is obvious that Moscow’s own anti-Israeli propaganda during the crisis in the Middle East has played a role in fostering antisemitism at home.
- During the latest flare-up of fighting in the Middle East, antisemitic sentiment in Russia’s North Caucasus has been on the rise. Chechen leader Ramzan Kadyrov has been vocal on his Telegram channel since the start of October condemning “Zionist war crimes, supported by the collective West.” The largest Muslim organization in the North Caucasus issued a statement threatening “harsh measures” on behalf of Muslims all over the world if the United Nations failed to “stop the genocide of the Palestinian people.”
- This state of heightened tension was the backdrop to a series of spontaneous anti-Israeli protests in the region, with Dagestan, a republic of three million people, Russia’s highest birthrate and one of the 10 poorest regions in the country, at their centre.
- The riots started after an absurd rumor that “refugees from Israel” were on their way to Dagestan. On the evening of Saturday, Oct. 28, local residents staged a protest outside a hotel in the city of Khasavyurt, where the refugees were supposedly going to be housed. Police decided to let the protestors into the hotel so they could see for themselves that there were no Israelis inside. After that, the crowd dispersed, leaving behind a banner that read: “Israeli citizens (Jews) are strictly prohibited from entering.”
- Things seriously escalated the next day, when on Sunday evening social media was abuzz with reports that a flight from Tel Aviv was en route to the airport in Makhachkala, the Dagestani capital. The plane was indeed on the way — although most of the passengers from Israel would be taking onwards connecting flights to Moscow. At around 7:00 p.m., when the plane was due to land, an angry mob of several hundred gathered at the airport. After overcoming the resistance of a few police officers, the crowd burst into the passenger terminal, shouting antisemitic slogans. There, they started to search the premises, checked passengers’ documents and stopped cars from departing as they tried to identify Israeli and Jewish passengers. Some of the rioters managed to get onto the runway, preventing planes from taking off for several hours, but they did not manage to get to the plane that had landed from Tel Aviv. For several hours, the mob was in control of the airport. It wasn’t until around 2:00 a.m. that the police regained control and managed to evacuate the airport. Some 20 people were injured, including some police officers who were hospitalized.
- For both local and national authorities, the sight of a crowd storming Russia’s 15th busiest airport was a nasty shock. Even though the protestors’ intentions were well known and documented online, it still took more than 90 minutes for any significant police presence to appear at the airport. The Dagestani authorities took five hours to issue their first comment on the situation. State media was silent for the first two hours, and then shied away from the antisemitic nature of the protest in their reports. The TASS news agency wrote cautiously that people gathered to “protest against the Israeli-Palestinian conflict.” It wasn’t until the authorities recovered from their initial shock that we saw angry criticism of the rioters begin, not only for seizing the airport but also for “inciting ethnic hatred.”
Putin’s take on events
Already on Sunday evening, more forward-looking officials understood that Ukraine and the West should be blamed for trying to incite a pogrom in Makhachkala. While authorities in Dagestan were silent, the experienced leader of neighboring North Ossetia Sergei Menyaylo (who was also a former governor of Sevastopol in annexed Crimea) got out early, saying the incident was a “provocation planned from the outside” and that a surge in xenophobia was being “fueled from outside our country.”
The idea of Ukrainian provocation was an obvious suggestion — especially since, even if there were no grounds for such claims, there was something tangible that Russia could point to in the shape of a Telegram channel with Ukrainian links. The original source of both the message about Jewish refugees staying in a Dagestani hotel and the call to aggressively protest the arrival of the flight from Tel Aviv (or “meet the plane like adults,” as the channel wrote) came from the ‘Morning Dagestan’ Telegram channel, which was launched in 2022 with support from Ilya Ponomarev, a former Russian lawmaker in the State Duma and one-time friend of Putin aide Vladislav Surkov. Ponomarev now lives in Ukraine, runs a network of pro-Ukrainian political and media projects and received Ukrainian citizenship in 2019. Parts of the Russian opposition have long considered him a provocateur.
After the events in Makhachkala, Ponomarev downplayed his connections to the channel, saying that he only helped “a group of Islamists from Dagestan” launch the channel, which has been “free-sailing” since autumn 2022. However, just two months ago he called the outlet “our channel” and in May told reporters he was an investor in Morning Dagestan.
Unlike Foreign Ministry Spokeswoman Maria Zakharova, Putin did not mention Ponomarev by name at a televised meeting with his security chiefs on Monday evening. Instead, he developed the idea of Ukrainian involvement in the riot in a much broader sense. Putin said the Ukrainian leadership was trying to inspire pogroms in Russia “under the orders of their Western patrons”. He added: “The ruling elites of the United States and their satellites are behind the tragedy of the Palestinians, the carnage in the Middle East, the conflict in Ukraine and many other conflicts in the world.”
It is also worth noting that the antisemitic riot did not lead Putin to abandon the anti-Israeli rhetoric he has adopted since the beginning of the crisis. Moreover, he appeared to stop just one step short of justifying the rioters. “Nothing can justify the terrible events in the Gaza Strip. When you look at the bloodied, dead children, the suffering of the elderly, the deaths of medics in the Middle East, fists clench,” he said. “But emotions are unacceptable.”
Why the world should care
It’s no exaggeration to say that the incident in Makhachkala is the first major antisemitic riot in Russia since World War 2. Modern Russians are characterized by a high level of xenophobia, but not antisemitism. A 2016 survey showed that only 8% of the population held negative views of Jews. In a 2022 study, Russians ranked Jews first in a poll asking them which “foreign ethnic” group they would be happiest to count among their family, friends, neighbors and colleagues.
In 2019, Alexei Levinson, one of Russia’s leading sociologists, told Meduza: “The most vivid strain of antisemitism in Russia comes from the elite tiers of the population. In wider society, latent antisemitism is currently at a very low level. However, if it should emerge, it will come from above.” Despite flirting with Russian nationalism, Russian authorities under Vladimir Putin have always sought to carefully suppress any signs of inter-ethnic conflict — not least because Putin himself regards “preventing Russia’s collapse” as one of his greatest achievements.
Now things are changing. First, with the invasion of Ukraine, authorities have become much more supportive of aggressive nationalist and religious rhetoric. This applies both to Slavic Russian nationalists and, for example, the likes of Ramzan Kadyrov, the Muslim leader of Chechnya. Second, the anti-Western foundations of Russia’s propaganda have inevitably merged into a condemnation of Israel (The Bell previously covered this trend) and the promotion of a shadowy global conspiracy against Russia. Third, the Russian state, focused on its war in Ukraine, no longer has the resources to closely control other aspects of life in the country.
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Central Bank tips economy towards recession to stem inflation
The central bank has reacted aggressively to surging inflation, the falling ruble and the imminent increase in government spending. It hiked the base rate on Friday by two full percentage points, from 13% to 15%, and signalled there was little likelihood of rates coming back down again before spring or summer 2024. This step might enable the bank to curb inflation, but threatens an even greater militarization of the economy and will put further pressure on non-military industries.
- On Oct. 27, the Bank of Russia’s board decided to raise its key rate by two percentage points, from 13% to 15%. The regulator acted more aggressively than expected, with the consensus among analysts on the eve of the decision predicting an increase to 14%.
- There was never any doubt that the rate would rise to some degree. Since the bank last raised rates, Russia saw a record rate of inflation in September of 14.6% on a seasonally-adjusted rate, as well as the publication of the government’s huge spending plans in its 2024 budget that plots a 20% increase in state outlets next year. The increase is driven by record levels of military expenditure, which will account for more than 6% of Russia’s GDP.
- An extended period of double-digit interest rates should slow inflation and strengthen the ruble. However, the side effect could be a return to recession. After the latest decision, Bloomberg Economics put Russia’s chances of slipping into a recession next year at 70%.
- The central bank’s policy has had curbing inflation as its main goal for some time. Now, tightening monetary policy also chimes with the political aims of the Russian authorities. The consequences of an economic downturn will be long-term, but the Kremlin needs a quick win on inflation because of the presidential election scheduled for March 2024.
- Taking into account the central bank’s tighter policy, economist Anton Tabakh detailed one potentially negative scenario for Russia’s economy next year. If things don’t go to plan, inflation may remain high — fuelled by sanctions, high import costs, a weak ruble, budget expenditure and staff shortages. And at the same time, high interest rates will trigger a recession in parts of the Russian economy not seen as priorities for government spending — that is, outside of the military sector and infrastructure investment.
- On average, that situation means overall headline numbers on growth, for instance, might look acceptable. But the economy is more and more resembling the old Soviet joke about averages. (The head doctor of a hospital asks a nurse to report on the average temperature of the patients. “36.6 degrees,” the nurse says. To which, the doctor replies: “How many times do I have to tell you? We don’t count those in the morgue.”)
- In economic terms, the strong performance of Russia’s military sectors may simply end up concealing full-scale stagflation in the civilian parts of the economy — no growth and rapidly rising prices — Tabakh warned.
Why the world should care
Put simply, Russia’s economic policy is as follows: The government is accelerating the economy and pushing inflation higher by pumping money into industries related to the war and by increasing social spending. The Central Bank is trying to slow down inflation by raising interest rates and sacrificing economic growth. The defense sector will continue to grow due to government orders, meaning the looming recession will hit hardest in civilian parts of the Russian economy. This vicious circle leaves Russia facing a difficult decision in the event of regime change — moving away from expenditure on the military-industrial complex (and, by implication, Russia’s aggressive foreign policy) will automatically lead to a deep economic and social crisis at home.