THE BELL WEEKLY: Russia targets foreign agents’ income, again

Hello! This week our main story looks at new measures to bar more income streams for “foreign agents.” We also look at a wave of under-the-radar IT layoffs and Russia saying it is preparing for a direct conflict with NATO.

Russian “foreign agents” to lose property and asset income 

Russia’s authorities continue to crack down on opposition figures and journalists they have designated “foreign agents.” In the latest set of measures, they will be barred from earning income on their Russian assets, with proposed bans on collecting money from the sale or rental of property, through dividends or as interest on savings. In short, the authorities continue to come up with new ways to leave the handful of foreign agents still in Russia with fewer and fewer sources of income.

• A bill currently working its way through Russia’s State Duma would require foreign agents to receive payments for certain activities into special accounts — the same way foreign companies from unfriendly countries are obliged to receive dividends. Funds from these accounts can only be accessed once the “foreign agent” status is revoked. This is almost impossible, so in effect the funds are frozen — and unusable — indefinitely, except for the payment of government fines.
• The measures were published as amendments to a second reading of a bill targeting other income streams for foreign agents. As often happens in Russia, the bill’s scope changed significantly between the first and second readings. At first, the legislation was only about halting royalty payments to musicians and authors who had left Russia. But even before the bill had its first reading, speaker Vyacheslav Volodin decided to expand it, probably after securing approval for his initial calls to more broadly restrict the incomes of foreign agents. “Those who harm Russia by insulting its citizens and participants in the special military operation, should not get rich at the expense of our country,” he wrote on his Telegram channel.
• The package of amendments now includes restrictions on other forms of income that have nothing to do with creative work: such as income from selling or renting property, selling vehicles, and savings and investment returns.
• The restriction on property income is particularly hard-hitting. Apartments obtained during privatization after the Soviet era are typically the largest assets that many Russian families have. Amid soaring prices for rental property in Moscow, an emigrant might be able to fully support himself in an inexpensive country like Armenia or Georgia by renting out an apartment in the Russian capital. The ban on investment returns is also interesting. The register of foreign agents has already been manipulated and this means it can be further weaponized to settle scores in the business community. 
• Russia currently lists 493 individuals as foreign agents. These include prominent journalists, politicians, activists, cultural figures and scientists. But there is another unpublished register of people affiliated with foreign agents (for example, employees of an organization that has been labelled a “foreign agent”) which encompasses about another 1,000 people. It would be entirely logical for the authorities to extend these restrictions to that larger group. The Duma is in fact eager to go much further and make all Russians who criticize the Kremlin from abroad liable to have income channeled into these special, unusable, accounts. Volodin directly stated that for those who “are not classified as foreign agents but who speak negatively of Russia after leaving” there will also be restrictions on property and assets.

Why the world should care

Vladimir Putin’s regime remains true to itself. It loves to use economic methods to strangle the opposition — having previously enjoyed success on this front. Now it will be even more difficult for those designated foreign agents to survive in exile.

‘Silent’ tech layoffs despite massive labour shortages

As the year comes to an end, Russian companies are laying off IT staff. Back in 2022, the government and employers were bending over backwards to keep them in the country, offering exemption from military service, preferential mortgages and pay rises. But two-decade-high interest rates are taking a toll: despite an unprecedented shortage of qualified staff, Russian companies have started to halt expensive projects with unclear returns, while cutting costs and staff.

• The surprise wave of lay-offs — amid nationwide labour shortages in almost every civilian sector — are being carried out both by tech companies, and by IT departments in companies from other sectors. Companies themselves are trying to hush it up, various IT recruiters told The Bell. 
• “You could call it a silent round of lay-offs,” one recruiter said. In fact, layoffs have been happening throughout 2024, but in recent months they’ve become more frequent. “Nobody’s going to put it out there in public,” the recruiter told The Bell. “They’ll say: ‘Well, yeah, we fired everyone. Yeah, the whole department, the whole project. But these aren’t lay-offs, what are you talking about?’”.
• Mass redundancies have occurred at VK — Russia’s second largest IT company and a potent Kremlin propaganda tool — and leading mobile operator MTS, two market sources told The Bell. Samolet, one of the largest development companies, is another believed to have cut its IT department. Finally, state-run Sberbank is starting to trim its development costs, even though CEO German Gref harbors dreams of turning the bank into a tech giant inspired by Silicon Valley’s big hitters. 
• The main reason for the layoffs is the same as the main problem facing Russian businesses overall — high interest rates. Borrowing costs have climbed significantly since summer 2023, when they first moved into double digits. In late October, the Central Bank raised the base rate to 21%, the highest level since 2003. This pushes up market rates for borrowing and returns on deposits. The bank assumes that more expensive loans will slow the rate of borrowing, while high returns on savings will encourage the population to save and restrict demand. All of that helps the battle against inflation, it says. 
• Meanwhile, the government needs funds to pay for its war. IT staff, who have been something of a “sacred cow” in recent years, now face tax rises. All of this prompts businesses to abandon expensive long-term projects with uncertain returns, market sources told The Bell. As a result, entire teams are being cut, with both marketers and developers facing the axe. 
• “IT specialists came at a high price and companies’ earnings did not increase that much,” one source explained. “In addition, there were many long-term projects, or projects that never took off. The market was overheated so, in fact, we are now seeing an optimization.” One IT recruiter told The Bell: “We get whole teams coming to us” after being laid off.

Why the world should care

Tech layoffs are a bad sign. “The economy is in the shit,” was how one of The Bell’s sources put it. “It seems like everybody needed IT specialists, there was a shortage of personnel and all that. But there’s no money to develop the market and marketing tools have collapsed. Although we need marketers and IT specialists, there’s no money. But everybody is hiding this — because the Russian economy cannot be in the shit.”

Putin and Belousov warn NATO: Russia is preparing for war

Vladimir Putin and Defense Minister Andrei Belousov delivered their end-of-year report to a giant defense ministry conference on Monday, hailing the state of affairs at the front and in the rear. They talked about the latest successes in the Ukraine invasion, the increase in military spending and Russia’s preparations for conflict with NATO.

• 2024 was “a landmark year for achieving the goals” of the war in Ukraine, Putin stated, saying the Russian army had captured 189 settlements since January. According to Belousov, Ukrainian forces retain control of under 1% of the territory of the self-styled Luhansk People’s Republic, and 25-30% of the Donetsk People’s Republic, and the Zaporizhzhia and Kherson Regions — all parts of Ukraine that Russia claims to have annexed.
• According to Putin, the breakthrough on the front came thanks to people voluntarily signing up to fight. Some 430,000 soldiers have been recruited so far this year, compared with 300,000 in 2023. Amid massive bonuses and salaries, more than 1,000 people are signing up to join the army every day.
• Spending on national defense “right now” amounts to 6.3% of GDP and 32.5% of the federal budget, Belousov announced. As a result of this, the defense ministry will need to “bring order” to the defense ministry’s vast property network in 2025 “We also cannot increase these expenses indefinitely,” Putin admitted, noting that Russians are already “giving all they can.” 
• Putin announced that the hypersonic Oreshnik intermediate-range missile system would go into serial production in the near future, despite having said at a meeting with Russia’s allies on Nov. 28 that it was already in full swing. And in the third quarter of 2025, Russia should have its own new specialized drone unit, mirroring a decision made by Ukraine back at the start of the year. 
• Both Putin and Belousov also spoke of the prospect of direct conflict with the West. Putin complained that Russia was “being pushed to our red lines” while Belousov said that preparations for a conflict with NATO “in the next decade” were part of the defense ministry’s tasks and blamed NATO statements at its recent July summit for the increased threat. At the summit the military alliance’s final declarationdescribed Russia as “the most significant and direct threat” to its members, which requires the strengthening and modernizing of its nuclear potential.

Why the world should care

Moscow acknowledged that generous payments to contract soldiers have helped deliver an accelerating offensive on the front. Army sign-up bonuses have increased fivefold in the past year to top one million rubles on average. But it also appears that every last drop has been squeezed from the war budget. The next priority will be modernizing weapons and utilizing manpower. 

Talk of preparation for conflict with NATO can be seen as an alarming signal. It’s the first time this possibility has been discussed at such a high level in public. Previously, only the West had raised the prospect of a direct clash: former NATO general secretary Jens Stoltenberg warned that if Ukraine was defeated, its neighbors could be the next targets, while Germany’s Defense Minister Boris Pistorius called for preparations for a war with Russia in the next three-to-five years. The Kremlin previously dismissed these remarks as “scare tactics” but today Belousov himself spoke in the same terms.