THE BELL WEEKLY: Kremlin goes all-in on online elections

The Bell

Hello. This week we look at how the Kremlin is embracing online voting — and how it further streamlines the manipulation of elections. We also look at how a state-backed mortgage program fuelled inequality and a housing bubble, and a landmark sentence designed to scare Russia’s intelligentsia.

Online voting, electronic manipulation

Russia’s electoral system is moving closer to the Kremlin’s idea of perfection. For the first time in history, an upcoming poll for elections to the Moscow City Duma will be fully online. Electronic voting makes it much easier for the authorities to manipulate the results and has the added benefit of reducing the cost of monitoring polling stations and physically tallying vote counts. Soon, the Kremlin will no longer have to rely on a loyal army of tens of thousands of election officials and volunteers to help boost numbers.

  • The Central Election Commission announced last week that September’s elections to the Moscow City Duma, the capital’s governing council, will take place entirely online. Technically it will still be possible to use a paper ballot — but only if you request it several days ahead of the vote — meaning e-voting is now seen as the norm. Physical polling stations will still exist, decked out with electronic terminals for voters to log in and cast their ballot.
  • The idea of electronic voting is a logical step forward given how many basic services people access entirely online these days. But in Russia’s electoral system — once dubbed a “managed democracy” for having the apparent trappings of elections but in which the results and outcomes are controlled from the center — it has already been demonstrated that online voting allows the authorities to more easily manipulate the results. 
  • In every poll while electronic voting was an option, Vladimir Putin and his party achieved better results from the online electorate than those that cast paper ballots, even though logic suggests the reverse should be true, since younger voters — less inclined to support the authorities — should be more likely to vote online. (Although in some elections, like the 2021 parliament elections, opposition candidates urged against online voting arguing that paper ballots were slightly harder to falsify.) For instance, in the 2024 presidential election, Putin polled 76.8% at physical polling stations in Moscow. But he got 89% from the online vote, bringing his overall vote share in the capital to 85.1%.
  • Online voting was first rolled out in 2020, initially as a supposed anti-Covid measure. Two electronic systems were developed, which authorities said were based on blockchain technology and encrypted so that votes could not be connected to an individual or changed along the way. But unlike a true blockchain, every node of Russia’s online voting systems is under the authorities’ control. As a result, according toexperts, the system gives far-reaching opportunities for fraud — as well as for exposing who individual voters cast their ballots for.
  • Not surprisingly, Russian state agencies and corporations are now not only forcing staff to vote, but obliging them to do so online. Ahead of the 2024 presidential poll, The Bell reported that state-owned airline Aeroflot was among the companies who had issued such an order to its employees. Behind closed doors, a representative of the presidential administration argued that the new system would enable the Kremlin to observe in real time the percentage of people who have voted and, if necessary, to identify how any specific individual cast their ballot.

Why the world should care

It might seem like overkill for the Russian authorities to invest so much time and effort to further secure an already rigged vote. The Kremlin has repeatedly demonstrated it is more than capable of delivering predetermined outcomes through offline voting. However, Putin sees elections are an important tool to demonstrate his legitimacy. Moving them online makes life much easier for Russia’s political managers. At the moment it requires mobilizing a complex network of tens of thousands of people (mostly schoolteachers) across the country to ensure that the “right” results are produced at polling stations across Russia’s 11 time zones. But soon the Kremlin’s “blockchain” will be able to do this with a few clicks of a button.

Award-winning director and playwright sentenced to six years

A Russian military court on Monday put a grim end to one of the most high-profile political cases of the last year. Director Yevgenia Berkovich and playwright Svetlana Petriychuk were sentenced to six years in prison on charges of “justifying terrorism.” The case is designed to become a demonstrative example to Russia’s opposition and cultural elite of the dangers of speaking out.

  • The case against the pair concerned the staging of the play, “Finest, the Brave Falcon.” Named after a Soviet fairytale it tells the story of Russian women who traveled Syria to marry Islamic State fighters they met online. All the stories in the play are real, based on criminal cases that were levied against the women when they returned to Russia (you can read the script here). The show ran from 2020-2021, winning Russia’s most prestigious theater award, a Golden Mask. The case against them was filed in May 2023.
  • Like most Russian criminal case in which the defendants are charged with “justifying terrorism”, the evidence has been plucked out of thin air. The real reason for targeting the women was the Kremlin’s desire to scare the country’s opposition-minded intelligentsia. Berkovich, 39, was the perfect candidate. She comes from a family of intellectuals — many of which were also repressed, including her great grandfather who was executed during Stalin’s Terror — and is well known in Moscow’s opposition circles. In addition to her work as a director, she wrote anti-war poems that were widely circulated on Russian-language social networks.
  • The prosecution did not even particularly try to conceal its political motivations. The trial was openly staged — and even by Russian standards, ugly. Prosecution experts could not explain where in the play the justification of terrorism was supposed to be and some witnesses even switched to the defense’s side. The author of the denunciation that led to the initial charges spoke only in the trial via video link and with an altered voice, raising suspicions he was from one of Russia’s intelligence agencies. Towards the end of the trial, the judge closed the hearings to the public, with the final month heard in secret.

Why the world should care

The trial against Berkovich and Petriychuk became a showcase spectacle itself. By handing down the first prison sentence for a play in Russia’s modern history, the regime is demonstrating to the intelligentsia that it will target people for their anti-war stance, even if they are not a politician or a journalist.

Russia ends subsidized mortgages, leaving a housing bubble and inequality behind

On July 1, Russia halted its preferential mortgage program after awarding loans to millions of people at interest rates of up to 8% — half the Central Bank’s current base rate. The program was first introduced to support the real estate market during the Covid pandemic, but ultimately proved hugely popular among home buyers and was repeatedly extended. The relatively cheap money inflated a property bubble that has seen house prices double and increased inequality to such an extent that even President Vladimir Putin started to worry.

  • A program of state-subsidized mortgages at generous interest rates was launched in April 2020 at the height of Russia’s Covid lockdown. At the time, it seemed that intervention was needed to save the real estate market from collapse. There were few restrictions initially — a modest downpayment, a generous maximum purchase price and limited to new-build apartments. The scheme was set to run for a year, but a combination of lobbying from the construction industry and political necessity saw it extended for four. In total, 1.5 million loans worth a total of 6 trillion rubles (about $75 billion at the average exchange rate over the program) were issued.
  • Over time, the program moved further and further away from market rates. When it was introduced, the Central Bank rate was 4.5% and loans were offered at 6.5%. After the invasion of Ukraine, Russia’s interest rate climbed rapidly: in 2022 the average rate was 10.6%, in 2023 it was 9.9%. In 2024, analysts predict an average rate of 15.9%. Despite this, the state-backed mortgage rate remained artificially low at 8%.
  • The program was a major contributor to Russia’s economy. For example, in 2023, about 29 trillion rubles of loans were issued in total (12) — of which 4.7 trillion was preferential mortgages. In other words, without considering any other forms of subsidized borrowing, a sixth of all new loans were issued below market rates. That’s partly why the Central bank was the main opponent of the scheme — such a high level of non-market money hampered its ability to regulate the economy via interest rates, since rises have less of an impact in sapping demand.
  • For consumers, the main side-effect was a massive rise in accommodation costs. While the program was in place, home prices went up 80%. The affordability of housing halved for anyone not accessing the scheme, Bloomberg calculated. “The subsidized mortgage program, intended to make housing more affordable, led to the opposite result and its main beneficiaries were developers,” concluded Alexander Isakov, Bloomberg’s chief economist for Russia and the CIS.
  • Isakov noted that another unintended consequence was a rise in property inequality. This worried Putin so much that he chose to implement a progressive income tax. In effect, preferential mortgages were an additional tax on the poor: all Russian citizens funded the program through their taxes as the finance ministry paid out subsidies to the banks. However the only beneficiaries were those who could afford the initial deposit and subsequent loan payments, which became increasingly high as house prices, if not interest rates, rose.

Why the world should care

The fact that the preferential mortgage program is over at last represents more proof that the Kremlin and the government are capable of making sensible decisions regardless of lobbying and political necessity. However, when it comes to looking after its core support base — the military and workers in the defense sector – the state is coming up with targeted programs that nobody will attempt to cancel.

Newsletters

Support The Bell!

The Bell's Newsletter

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