The fake murder of a Russian journalist makes for ideal propaganda for both Ukraine and Russia

The Bell

Dear readers, due to a technical problem, our English newsletter is being published a day late. Please accept our apologies!

1. The fake murder of Arkady Babchenko, a Russian journalist living in Kiev, became an ideal stimulus for information propaganda from both Ukraine and Russia

Arkady Babchenko at his “resurrection” briefing. Photo credit: AP/TASS

What happened

  • We will not retell the entire saga of Arkady Babchenko’s murder and resurrection — this has been done many times by media across the globe, and Babchenko himself explained the details of the operation at a special press conference.
  • It is plausible to suggest that an attack on Babchenko could have been planned, and it is understandable that so many people believed this. There are enough cynics or fanatics who could achieve their own political goals with the help of a “ritual murder” (for example, demonstrations of patriotism and loyalty to those in power, or further exacerbation of the conflict in Ukraine). For them, Babchenko and his provocative social media posts are a brightly colored target.
  • However, for now, the results of the Ukrainian security services’ operation (and it is important not to forget that they are also the offspring of the KGB, just like the Russian FSB) appear questionable. The only possible goal of such a special operation is to gather as much as possible firm evidence, but the evidence which has been provided so far is unconvincing. There is the unfulfilled killer Alexey Tsymbalyuk — a monk who fought in the war in eastern Ukraine on the Ukrainian side against pro-Russian separatists (no, it’s not a joke). He confirms that after he received the order for the contract killing he immediately contacted the SBU (Ukraine’s security service). There is also the organizer of the murder who is in custody, Boris German. He owns a company which produces scopes for the Ukrainian army. But German says that he did everything on the orders of the SBU, as a form of counterintelligence, which was pre-agreed with the SBU. Boris German himself named the person who supposedly ordered the hit — his acquaintance named Vyacheslav Pivovarnik, who, according to German, “is responsible for Ukraine and terrorist attacks in Putin’s private fund”.
  • The Bell tracked down “the supposed head of Putin’s fund”, a 34 year old business coach from Kiev. If we believe social media accounts and registers of Ukrainian and Russian companies, then he really does now live in Russia. Pivovarnik and German do have business connections such as employees of a Russian nationalist fund and a company owned by a former Russian Duma deputy, Sergey Shishkarev. However, Pivovarnik looks more like a nominal director in German’s companies and in other companies owned by Ukrainian businessmen. He does not appear to be an independent actor or the owner of important assets on behalf of someone highly ranked among the Russian elite.
  • For now, most questions surrounding the supposed threat to Babchenko remain unanswered. Authorities from both countries have successfully used this case for their own propaganda. Russian state media didn’t even have to change its tone: the standard line “a provocation by Ukrainian security services” unexpectedly came to life, as did a confirmation that Kiev is a dangerous place even for Russian oppositionists. They also added that the actions taken by Ukraine’s SBU are even being discussed by “Reporters without borders” and the OSCE.

Why the world should care

There is a not very clever, but popular Orwellian theory, that the current conflict in its smoldering form might actually be beneficial for authorities in both countries. It allows both sides to mobilize their populations around an external threat. According to this theory, the attempt on Arkady Babchenko’s life, which he luckily survived, creates ideal conditions for propaganda on both sides.

2. Russian business is trapped between a rock and a hard place: Western sanctions or the risk of going to prison in Russia

What happened

The refusal to issue Roman Abramovich a UK visa could have a negative impact on the London luxury real estate market, but it will not stop the flow of Russian businessmen heading to Europe. After the “bail in” of three major Russian privately owned banks in 2017, a new group of Russian businessmen-fugitives has appeared, and they are selling their Russian assets from their suites in upscale European hotels.

  • Last week, Boris Mints left for London together with his family. Mints has an interesting biography. At the beginning of the 1990s, he was a bureaucrat responsible for the privatization of state property in Ivanovo, one of Russia’s poorest cities. In 1994, Mints was noticed by the architect of Russian privatization, Anatoly Chubais, who invited him to come work in the presidential administration. Until 2004, Mints worked in organizations close to Chubais. Chubais is one of the few people from the Yeltsin era who has survived the Putin era in highly ranked roles; he is currently running the state company, Rosnano. Since then, Boris Mints managed to become a major businessman: he owns expensive, luxury office buildings in the center of Moscow, and an entire group of pension funds, which are all under the O1 Group umbrella. Goldman Sachs invested in O1 Group, and this spring, Russian Forbes estimated Mints’ net worth to be $1.3 billion.
  • A few days after it became clear that Mints had left Russia, it was reported that Mints was under preliminary investigation. The investigation was initiated by the new management of Otkritie Bank, which was until recently the largest privately owned bank in Russia, and was placed under Central Bank control in 2017 for financial rehabilitation. This might be related to the fact that just before the Central Bank stepped in, O1 Group made a strange transaction: its bonds appeared on the balance sheet of Otkritie, and O1 Group used the money it received to pay down multi-billion debts, including those owed to Otkritie. Then, O1 Group defaulted on its bonds. At face value, the bank voluntarily traded secured loans for unsecured bonds.
  • Another former banker sends his greetings from Cyrpus. Dmitry Ananev, the former owner of Promsvyazbank, which was also once a top 10 bank and another victim of government rescue in 2017, is trying to sell his Russian assets. Ananev owns a construction company which is among the top 5 in the Russian market, and one of the country’s leading printing presses and an agricultural holding. If he will not find buyers, the companies could be bankrupted or liquidated. Russian media have reported that Ananev is negotiating from the Four Seasons resort (the only hotel from this luxury chain in Cyprus is located in Limassol). Forbes estimates Ananev’s net worth at $700 million (149th in the Russian list). His brother and partner, Alexey Ananev, is still in Russia, where he still has an integration company, “Technoserv”, 40% of which he is selling to state-owned VTB Bank.
  • For those hoping to preserve their business empires and remain in Russia, the future does not always look bright. In February, business ombudsman Boris Titov gathered disgraced Russian businessmen in London, and tried to convince them to return to the motherland, with a promise to put an end to any criminal investigations against them. Most people present at the meeting had skeptical reactions, however, three people took advantage of the offer. Two were really able to return to Russia and avoid prison sentences: one appeared at the police station himself, sat there for several hours, and was released with a piece of paper stating that he appeared before them. Another was briefly detained, but was released after Titov met with Vladimir Putin. The third one, however, was far less lucky: a Russian court issued an international warrant for his arrest and arrested Bashkirian businessman Azamat Kildigushev in absentia, right after Titov asked the court for its help in allowing the businessman to return to Russia.
  • The risks for those who remain in Russia were evident in the telling “fresh” photographs of billionaire Ziyavudin Magomedov, who has already been held in custody for two months. Magomedov is a billionaire, on the Forbes list, an investor in Uber and Virgin Hyperloop One, and he is yet another university classmate of former deputy prime minister, Arkady Dvorkovich. Magomedov, whose business is closely tied to the state, is accused of stealing $40 million from state contracts. There are also rumors that the businessman found himself in jail over a conflict with one of his many partners close to the Russian government. We wrote about this case in detail here.

Why the world should care

No matter what measures are taken against oligarchs and their bank accounts abroad, the West is still seen by Russian capitalists as a “quiet harbor”, where you can still throw down your anchor, and save money and assets. Even with the rising costs of stopping in that quiet harbor, the brutality of compliance procedures and questions at border control, for many it is still the best alternative to the Russian investigative committee. This will remain the case as long as Russia doesn’t take real steps towards improving the internal business climate. For now, we don’t see any real steps in that direction.

3. Russian authorities don’t fear the next generation: the children of today’s bureaucrats and managers of state companies are continuing the family tradition

What happened

In the West, progressive Russian youth are often referred to as the “Navalny generation” and the world expects them to lead political change in Russia. But in reality, not all young Russians are taking to the streets with posters exclaiming “Down with the tsar!”. The majority, to the extent that one can generalize, are not at all interested in politics. And there are those who are bringing a tsarist tradition back to life – passing power on from parents to children. This conclusion could be drawn if you study the rating made by political technologists with the fund, Petersburg Politika (.pdf). The question isn’t which careers relatives of influential politicians and businessmen chose. From the list you can make a simple conclusion: there is definitely a trend of relatives coming to power.

  • It is immediately evident that those who had a successful career are often the children of managers serving in Russian law enforcement agencies. The most successful careers were of the two sons of the head of the Security Council of the Russian Federation, Nikolay Patrushev. One of his sons was just named minister of agriculture, and the other is a vice president with an oil subsidiary of Gazprom. Of 17 people, who political technologists deemed the “most successful”, not one of them works in a privately held company or a company not tied to the state. The majority are employed either by the government or in state companies.
  • Another detail: the children of regional bureaucrats, as a rule, make their careers at home, in that region. Sometimes the children of managers of state companies even continue the family tradition within that company working alongside their parents. The most interesting example is Ivan Sechin, the son of Rosneft CEO, Igor Sechin. Ivan is now roughly 30 years old. For now, he has risen to deputy head of one of Rosneft’s departments, but he has already received a government medal from Vladimir Putin, for “service to the fatherland, 2nd order”. Ivan Sechin was awarded this medal for “many years of voluntary work” in the oil and gas sector, although when he received the medal he was only 25 years old.
  • In Soviet times, it was pretty difficult to build a career on the backs of your parents. The children of bureaucrats and managers usually counted on prestigious but unrelated careers. It is difficult to imagine that the local party could be run by the son of the former party leader, or that a factory would have been passed on to the nephew of the former director. It was far more common to rise from the head of a collective farm to an important role within the party. In addition, this “social elevator” only worked for those who had glowing records and reputations, at least from the point of view of those in power.

Why the world should care

Those who believe that liberal change can come to Russia through a generational change should have a close look at the leaders of this rating. It is possible that they might be running the country in 15-30 years. Continuity, which the Russian political elite refer to only in a positive context, could mean that the changes that the country needs might not happen at all in the foreseeable future.

4. With smart speakers and prime subscriptions, Yandex is trying to go Amazon way in Russia

What happened

The Russian tech tiger and Google’s main competitor in Russia, Yandex, has launched two projects which, if successful, could make the company closer to the status of “Russia’s Amazon”. One is the smart unit “Yandex Station” — the market for such devices in Russia is small, but in the U.S. already 50 million people use similar devices. Amazon’s Echo is already a big driver of growth. Yandex will also start to look more like Jeff Bezos’ company with a new subscription service, Yandex Plus, which is an analog to Amazon Prime, which brings Amazon $10 billion in annual revenues.

  • Yandex first announced its intelligent personal assistant product, Alisa, in 2017. Alisa can understand and execute voice commands, connect to other devices in the home (for example, the TV) and manage them. For example, she can choose a film from an abstract description without the actual name. Yandex Station will go on sale this summer and will retail at 9 900 RUB ($160). The price for a Yandex Plus subscription is 169 RUB or $3 per month. Subscriptions to Amazon Prime cost roughly $100 per year.
  • Mikhail Bilenko, who is responsible for Yandex Station and Alisa, lived in the U.S. for 23 years and was responsible for machine learning at Microsoft. Prior to his departure, he was in charge of the Machine Learning Algorithms team, but he told The Bell that Yandex offered him “huge projects and they are more interesting”. Bilenko believes that Yandex’s device is technically on par with Amazon’s, and unlike Amazon’s, the Yandex unit “understands Russian”. In short, that is Alisa’s main competitive advantage in Russia, because it is unclear when voice recognition systems from Amazon or Google will learn to speak Russian.
  • At the same time, Yandex is trying to copy Amazon’s strategy in retail: the company has teamed up with Russia’s largest bank, Sberbank, to create an online shopping platform. The partners recently previewed a beta-version of their internet shop, “Beru” (roughly translated, “I’ll buy”). The project founders did not shy away from stating that their goal is to create the Russian version of Jeff Bezos’ company.

Why the world should care

Russia has already proved that, along with China, it is among a handful of countries capable of competing in search engines. Now Google’s primary Russian competitor, Yandex, is trying to make the Amazon model work in Russia. The success or failure of this attempt will help us understand if Russia’s technological backwardness is a real or imagined threat in the context of economic and political isolation. This will, in the long run, free (or not) the hands of those in power trying to “tighten the screws” in the internet. In their attempts to block Telegram, the authorities already made threats by blocking some of Google and Amazon’s IP addresses.

Peter Mironenko, The Bell

This newsletter is made with the support of the Investigative Reporting Program at UC Berkeley.

Support The Bell!

The Bell's Newsletter

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