THE BELL WEEKLY: Trump's aid cut-off threatens Russian independent media

Hello! This week our main story is how Donald Trump’s suspension of foreign aid will hit Russian independent media and NGOs. We also look at the latest warnings—from a well-connected Russian think tank—over the state of the economy.

US aid suspension hits Russian independent media and NGOs

The decree by US President Donald Trump’s decree halting American aid to foreign countries and suspending the work of the United States Agency for International Development (USAID) hits exiled Russian media and NGOs hard. For many organizations and publications, grant funding is the sole means they have of ensuring their continued existence.

• As soon as the new US administration announced the suspension of all international aid programs, there was panic among the Russian emigrant community. Most exiled Russian NGOs and media rely on grants as their major—and sometimes sole—source of funding, with a significant chunk coming from Washington. The topic has been high on the agenda for Russia’s opposition and anti-war communities— though only behind the scenes. Affected NGOs and media outlets do not want to admit publicly that they receive American funding, as it could lead to criminal prosecution by the Russian authorities. They are also reluctant to publicly discuss financial problems.
• Dozens of organizations are under threat from within the Russian-language anti-war diaspora community, including those who help persecuted individuals to leave Russia, try to protect minority rights and bring accurate information about the war to audiences within Russia. According to The Moscow Times, citing a source in Washington, up to 90 organizations have already lost their funding. As one example, The Ark, which offers temporary housing, legal aid, psychological support and other assistance to Russians forced to flee their homeland, immediately lost half its budget.
• Former political prisoner Andrei Pivovarov (released in the summer 2024 prisoner exchange) wrote that Trump’s decree would lead to the cancellation of one-off events and the abandonment of long-term projects. “You can cancel a conference, but you can’t, for example, stop paying the rent. You can’t tell your landlord: ‘wait, Trump will work it out’. He’ll just cancel the contract. And many simply do not have the kind of safety net that can pay for these three months, or raise money via crowdfunding,” he explained. “It will be even more difficult with people. There are many countries where residency is tied to a work contract, and if there is no money for that it raises questions about the basis for extending [residency].”
• Russian propaganda channels are jubilant. For decades they have been telling Russians that the opposition lives on Western money and carries out orders from abroad. Trump’s decree offers them a great opportunity to say that these claims have now been proven and that “independent” media is nothing of the sort. Of course, nobody on the pro-Kremlin side is bothering to look at the details of how Western grant funding actually works. Maria Zakharova, a representative of Russia’s Foreign Ministry, has already claimed that USAID forced “countless grant-eaters” to remain silent about alleged Ukrainian war crimes.
• Not all funding for Russian civil society came from US state grants.  Private foundations as well as European governments also support Russian initiatives. But removing perhaps a quarter of the support from Russian journalists and organizations can only lead to ever more fierce competition for the remaining funds—not every project will survive.

Why the world should care

Trump’s radical measures are hitting activists and NGOs around the world. Russian organizations and media outlets, cut off from their homeland, face greater problems than many as they have far fewer sources of alternative funds.

High interest rates could trigger wave of bankruptcies, says think tank linked to defense minister

The Center for Macroeconomic Analysis and Short-Term Forecasting—which has deep connections to Defense Minister Andrei Belousov—has predicted a wave of bankruptcies if high interest rates stay in place. Alongside arms manufacturers and big businesses, the think tank is one of the main lobbyists calling for lower borrowing costs.

• The Russian economy is facing the threat of a large jump in corporate bankruptcies, the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) has warned. The center is run by Dmitry Belousov, brother of Russia’s defense minister and was previously headed by Andrei Belousov himself before he moved into government in the mid-2000s. Its analysts point to high interest rates as the cause, with loan repayments becoming increasingly difficult as more and more companies struggle with securing payments from their counterparts—the result of firms moving money from operations into short-term deposit accounts to secure high rates of return. 
• In the manufacturing industry, more than 20% of businesses have a “risky” level of borrowing, the CMASF calculated—meaning they are paying two-thirds of their pre-tax profits on debt. The highest repayments-to-profit ratio was recorded in machine-building, woodwork, leather, automobile and metallurgical sectors. In some areas, like construction and coal-mining, the return on working capital (profits as a proportion of total assets) was lower than borrowing costs.
• This is not the first time that the center has warned about potential problems in the Russian economy due to high interest rates. In a previous report, it warned about an unprecedented convergence of the return on capital and the lending rate, and said that 2025 could set a new record for the debt burden in many industries.
• Since their first warning, various sets of data have backed them up. The government is even considering support measures to help avoid a wave of bankruptcy in the coal industry, which is particularly struggling, and among metal producers (we wrote about the troubles affecting that industry in our economic newsletter on Friday.)
• The central bank has faced repeated attacks for taking the key rate to 21%—the highest in more than two decades—not just by analysts but also by many entrepreneurs (we covered the pressure on the bank back in December). The next meeting of the bank’s rate-setting board will be held on February 14. What it decides will largely be determined by the as-yet unpublished figures for corporate lending in December.

Why the world should care

The unbalancing of the economy due to high inflation and interest rates is one of the key things to follow in Russia right now. The Belousov brothers’ think tank is certainly a bit biased in favoring big business and defence, but has historically been considered to be a good analyst of the state of Russian industry.