THE BELL WEEKLY: Russia’s ‘Special Demographic Operation’

Hello! This week we highlight how Moscow is going into overdrive to try to boost the country’s low birth rate through misguided legislative initiatives. We also cover attempts to pass a law to seize property and assets from people who have fled the country and the central bank preparing to raise interest rates yet again.

Putin’s new passion: boosting Russia’s flagging birth rate

The bleak demographic prospects for Russia’s near future have prompted the authorities into fresh action, with new legislation set to come into force to try to boost the country’s low birth rate. Last week, a bill banning “childfree propaganda” passed the first of three readings in parliament. The measures would make it illegal to share information that promotes the idea of not having children. Discussion around the potential ban comes in the context of government officials drawing up a host of plans to try to drive up the country’s sagging birthrate — something that appears to be Vladimir Putin’s latest obsession.

• The bill proposes a ban on “childfree propaganda” on the internet, in the media, in movies and advertising, threatening fines of up to 400,000 rubles ($4,200) for individuals or 5 million rubles ($52,000) for companies and organizations that are deemed to violate the rules. Foreigners who breach the measures would face deportation from Russia. In the wake of lawmakers backing the bill, lawyers recalled how Moscow started out by fining people who breached the notorious “gay propaganda” law— and now a decade later anything the state deems to be pro-LGBT is outlawed as “extremist”.
• It’s not entirely clear what would constitute propaganda under the proposals. The initiative defines the concept of “childfree propaganda” in rather vague terms, meaning everything will depend on the subjective assessment of the executive authorities. However, we can guess at what might break the law. According to lawyers, “childfree propaganda” could likely be found “in any post by a woman over 25” —  an age limit seems to be arbitrary — “that makes even one positive reference to her life without children, especially if she mentions that she has no plans to have any.”
• There is no doubt that the bill will be approved by the Duma, after which it will go to senators for a rubber-stamp vote before President Vladimir Putin can sign it into law. In a sign it is set to advance, several parliamentary heavyweights have endorsed the proposals. Moreover, driving up Russia’s birth rate is Putin’s new passion, journalist Farida Rustamova reported, citing information from high-ranking officials. For this reason, deputies and senators are eager to please their superiors. Over the past two years, the government has rejected similar ideas on three occasions — but now “the concept has changed.”
• In recent months, Russian officials seem to have focused their minds on how to increase Russia’s birth rate. Lawmaker Tatyana Butskaya proposed that employers monitor the birth rate among their workforce. “We should organize ourselves and conduct another special operation, like the Special Military Operation, we need a Special Demographic Operation,” she said. Fellow MP Zhanna Ryabtseva urged women to “give birth, give birth and give birth again,” pointing out that women could be starting families in their late teens. And Health Minister Mikhail Murashko condemned the desire of the younger generation to build a career before having children.
• Putin himself has repeatedly urged Russians to start families earlier and have as many children as possible. “Big, multi-child families should be the normal way of life for all the peoples of Russia,” he said in November 2023, encouraging Russians to preserve the tradition of families with seven or eight children. In February, he called on women to have two or three children to maintain Russia’s population.
• Russia’s demographic situation is far from encouraging. The latest figures show that the population fell by 243,000 people (0.17%) in 2023. There’s no indication that this will improve in 2024 or 2025. Due to the war and the changing economic situation, a third of Russians have decided to postpone or abandon plans to have children, according to researchers at the Higher School of Economics.

Why the world should care:

Demographers have repeatedly explained that families decide whether to have children based primarily on their financial circumstances and their overall confidence in the future. However, officials continue to ignore the war and the noticeable price rises facing ordinary Russians, preferring instead to promote “traditional values” that have nothing to do with real issues of demographics.

Russia proposes confiscating exiles’ property

A bill that would allow authorities to seize property from Russians that have left the country has been introduced to Russia’s parliament. Although it had an unusual path to the floor of the Duma, it has every chance of being voted into law and could have been ordered by the Kremlin.

• Unlike most bills, the measures were not submitted by a group of lawmakers in the Duma or the upper Federation Council, but by a region: the oil-rich, predominantly Muslim, Tatarstan. Deputies from Tatarstan’s regional parliament first put forward the proposed measures in spring 2023, but they were kicked back for revisions. An updated version has now returned to the State Duma and garnered a positive response from the government.
• The Tatar parliament said the initiative was necessary because since the start of the war in Ukraine there have been many cases of Russians based abroad acting “against the foundations of constitutional order and the public security of the Russian Federation.”
• The bill will allow Russians abroad to be held responsible for any crime against Russian interests. That would include “discrediting” the army, calling for the introduction of sanctions against Russia, insulting the authorities, calling for violations of Russia’s territorial integrity (which effectively means calling for the return of occupied territory to Ukraine), and sharing significant “false” information, a term that can be interpreted very broadly. All these are proposed to be administrative offenses, which would not attract long prison terms.
• But part of the punishment would involve giving the authorities the right to seize property belonging to exiled Russians. Lawyers say it is not entirely clear what this would mean in practice. Under current Russian law, seized property should not exceed the size of any fine that is issued for the offense, nor be greater than 100,000 rubles ($1,040). Experts think it is most likely that the authorities will be able to seize money from bank accounts.

Why the world should care:

This bill should not be seen as a regional initiative that has somehow broken onto the national stage. Apparently, the idea came from the very top and was introduced by a region in an attempt to demonstrate a broad base of support. As a rule, fewer than 10% of regional bills become law and most of them are unimportant technical proposals. However, there is another example of a significant piece of legislation coming from the regions: the first ban on LGBT propaganda among teenagers.

The Central Bank readies another rate hike

There is little doubt that the central bank is gearing up to raise its key interest rate in its next meeting on Friday. Currently set at 19%, it’s expected to be hiked to 20-21% — matching or surpassing the emergency interest rate introduced days after Russia invaded Ukraine. This time round, it could stay in place for a much longer period of time. 

• The bank’s own economic statistics, published last week, outline why a rate hike is likely. First, Russian companies are still actively taking on new loans. Corporate lending is important because it generates more aggregate nominal demand in the economy than retail lending. In September, the portfolio of corporate loans was up 2%, or 1.6 trillion rubles ($16.7 billion) from a month earlier. So far this year the level of outstanding corporate borrowing has grown 14.5%, despite high borrowing costs.
• While the central bank’s rates are high, businesses prefer to take on loans at a floating rate, not a fixed one. In the corporate lending sector, the share of floating rate loans has exceeded fixed rate offers for several months (53.1% against 48.5% of new issues). This, however, is a vicious circle. If the rate is not fixed, it allows for a much more intense increase in the debt burden as companies still take on loans in the hope of lower rates in the future. However, in the end it actually leads to greater increases in both interest rates and the debt burden, explainedeconomist Yegor Susin.
• Secondly, high demand, which is not being matched by increased production or imports, continues to contribute to rising prices. In September, seasonally adjusted inflation was up from 7.5% to 9.8%. There is a high risk of continued rapid price increases for food. The projected harvest for this year is low due to frosts in May and a spring drought and a quota on duty-free chicken imports expires this year.
• Inflationary expectations, which the Central Bank usually monitors closely, are also on the rise. The latest study this month saw them jumpfrom 12.5% to 13.4% — the highest level since December.
• It’s unlikely that this week’s rate hike will be the end of the story. In the coming months the Central Bank will have to further tighten its monetary policy. Among the pro-inflationary factors Russia faces, the bank singled out the increase in the 2024 budget deficit to 1.7% GDP ($34.4 billion), a 75-80% increase in the recycling fee for new cars, which led to increased demand for car purchases, and a rise in communal service fees of 11.9% next year, more than double the initially planned 5.7%.
• Rates were raised to 20% during an emergency hike in February 2022, after Russia invaded Ukraine and the West imposed sweeping sanctions. Friday’s decision could take them even higher.

Why the world should care:

Russia’s attack on Ukraine has led to serious disbalances in the economy, forcing the Central Bank to try to use tighter and tighter monetary policy to fight back. But in the long term, high interest rates increase the likelihood of a recession, which would have consequences for tens of millions of ordinary Russians.