Russian businessman Dmitry Potapenko: Nothing threatens the "collective Putin" – neither a pandemic nor oil prices. Meanwhile, Russia is setting up a digital GULAG
A famous Russian businessman Dmitry Potapenko, who regularly criticizes the Kremlin's economic policies, told UNIAN how the "perfect storm" of the global crisis is killing the Russian economy, why are Russian authorities turning the country into a digital GULAG, how easy is it for the Kremlin to suppress any protest movement, and under what conditions could power change in Russia.
High-profile Russian businessman Dmitry Potapenko is never shy about publicly slamming criticism on Russia's economic policies. The last time UNIAN spoke with Dmitry was in 2016 when he said that in Russia the conditional "refrigerator" will never win the fight with the "TV". And, in fact, he turned out to be right. Now he has no doubt about the stability of Putin's regime. In his opinion, ordinary Russians will just have to get by somehow through all hardships as the authorities are not set to address their problems – there's just no need to do that.
Dmitry, now the whole world is in a "perfect storm." Everyone's talking about a recession. Everyone will suffer, but the Russian Federation is a very peculiar country, in the sense that here, two troubles have met. I mean the fall in oil prices and the effects of quarantine, which are killing the economy of any state. So what is worse for the Russian government, Russian state, and Russian political stability?
Based on what we see, this is generally a sublimation of war. When internal tensions arose in any kingdoms and states back in history, some kind of crusade was organized. And here the coronavirus emerged just on time, which almost everyone succeeded in turning into an info-demic to bury their own problems. The same officials who have been feeding off of health care are now being portrayed as saviors of their Fatherland.
Has at least some challenges emerged for the Russian authorities?
No. That's because the Russian government is like a tight knot of kissing snakes. They complement each other, while also slightly annoying each other. Therefore, the tension within the political elites is quite weak. Meanwhile, the so-called people, whom they've always treated exclusively as feed, take no part in this game. And therefore, the authorities couldn't care less about their problems.
We are yet to see a series of pompous funerals
We, in Ukraine, are very keen on discussing and reflecting on the topic that Putin could soon be toppled. It seems to me that it's also important to address this issue so that people don't harbor illusions.
I've also been doing business in Ukraine and regularly record podcasts on the Ukrainian economy, regularly communicating with foreigners, our emigrants, including in the U.S. What I hear is conditionally either pro-Putin or pro-Ukrainian. As the saying goes, a plague a' both of your houses!
The fact is that this is nonsense in both cases. Russia is ruled by a "collective Putin". Once Putin is gone, it will become even worse, including for Ukraine as a state. The reason is very simple – no one is considering the fundamentals of the economy. In Russia, there's state-governed economy. Here, the key is what is happening within the clans. By the way, these are armed clans. They are also mistakenly called oligarchs, which they aren't, in their pure form.
When someone talks about Putin's possible resignation, for some reason they fail to notice what's now happening in Russia. A digital gulag is being created here. To leave home, a person in Russia must obtain a QR code, while government, security and law enforcement officials are allowed to move around completely freely. We get permission to leave home in a non-personalized mode. I'd like to draw your attention – since we communicate with the Ukrainian audience – on the case files of Nuremberg trials. One of the charges there was the assignment of numbers to people and their depersonalization. So, now in Russia, every citizen, including me, has a QR code and a digital imprint. It's no better for us than for prisoners in Nazi Germany. Take note: neither the international community nor the Russian public in any way respond to this.
Such a reaction is perhaps because Europeans believe that this is only for the period of the pandemic...
Russia is introducing the so-called digital passports, combined under the auspices of the tax service. Now, household income and expenses will be consolidated into a single database, into a single register. An exception will be applied to officials. No one has publicly expressed indignation in Europe or America. People there have been living in a completely different paradigm. For them, this is a fetish: if Putin leaves, everything will change. That's not true. Few people understand the underlying reasons for Putin's existence. And Putin is not just a person – in fact, it's the collective management of the country. Therefore, until all layers are analyzed, as long as there's a personification of this evil, there will be no understanding.
Now many economists are watching Russian reserves. It is believed that Putin's stability depends on them. Recently, Deutsche Bank published an outlook: if oil is $15 per barrel, the reserves in the National Wealth Fund will be wasted within two years. If it's $30 – six years. If this money runs out, what's next?
I'd like to say send my greetings to Deutsche Bank and say that those who publish such outlooks are idiots. Who told you that this little stash will be touched? This stash is personified, it is owned by the clan that is in control of the country. Why the hell would they suddenly, for no reason, give out these funds to feed anyone? It is necessary to realize that we in Russia all live in tribal relations. It's not even feudalism. We are still far from feudal relations.
Therefore, this is their personal stash, and not a ruble will be spent from it. Meanwhile, we will get tax hikes, higher gas prices, and so on.
Analysts think in a square-nested way, but here they need to look into tribal relations. The stash will be enough for as long as our elite is in power, and they will only be leaving solely for natural reasons. We are yet to see a series of pompous funerals. Another reason is also possible: their internal contradictions, but not the exhaustion of resources. Oil may even drop to negative parameters, but they will simply collect the missing from the slaves. Calculations by Deutsche Bank are absolutely mediocre, they aren't based on realities.
Nevertheless, Putin regularly holds meetings from his bunker to support various sectors of Russian economy. All the time, he keeps repeating the same thesis that the government will help everyone. What can you say about these efforts by Russian authorities?
They tell us: you have to pay taxes. This is a usurious approach. Because of quarantine, businesses have faced problems, but no one else cares about these problems. They offer a loan. You don’t have to pay anything back right now, but you can claim your teeth, your family or your dog as collateral. You still have to pay, only later. It's in this manner that our government has been acting.
In terms of money, they promised they would defer payments of around RUB 2 trillion. But here's a question: where do we get the money? Authorities ordered that businesses keep all employees on board and pay them. If you fire anyone, you'll have prosecutors at your door right away. We will be given compensation for salaries, which, in fact, equals our taxes – that's RUB 12,130 per employee. The average salary in Russia is around RUB 35,000. And the tax on this RUB 35,000 is 43%, this very RUB 12,100. That is, I have to support my employee, pay them the conditional RUB 31,000, and my taxes will be in the region of RUB 12,100. That is, the state isn't giving me anything. They only spin the money in a circle and take it all away. So here it is, the basic principle of Russian government assistance.
Once again, you don't need to evaluate numbers – what lays beneath those number is what's important. This is exactly the same as personifying the administration regime by Vladimir Putin specifically.
90% of small businesses will die out
Quarantine, albeit hybrid, is still real. Everything is on lockdown. You say that there will be no consequences for the authorities, but what awaits businesses?
Our quarantine is tough. You go out for a walk and your good neighbors call the police on you. Thank God, they aren't being paid for reports yet. I have a theory: they need to ensure that for every fine the person who called the police is paid at least RUB 200. Given the huge number of unemployed, we will return to 1937 within 15 seconds.
Meanwhile, businesses will be dying out. According to my estimates, 90% of small businesses will die. I had a discussion with my business colleagues – they believe some 20% of legal entities will shut. But there will be enterprises that will die de facto, although formally, legal entities will continue to exist.
Now there's a fall, even for those companies that were originally focused only on goods delivery: they have shrank profits from 30% to 60%. And all the rest, simply put, won't come out of this alive. That is, I expect massive bankruptcies in late summer – early fall.
Usually, when there's nothing to eat, people take to the streets. Unrest has already begun in Vladikavkaz. Why are you so sure there'll be no changes in Russia?
Authorities need to do one simple thing: deport most of the migrant workers. We're already seeing the elderly engaged in food delivery. They already have nothing to eat, and they still have debts. They are given some hope: even a smaller income of some kind of pizza or sushi delivery man, or even a janitor. You can't run from a submarine, right? We have 6 million migrant workers. If the authorities react, they will simply replace migrant workers with our impoverished junior researchers or retirees. That's how we rolled back in the 1990s. I'm 100% sure our authorities "got talents".
This is some kind of ultimate zeroing, a return to the 1990s...
Then these problems had accumulated in one particular country. Problems could be resolved through contacts with other states. And now the whole world has its own problems. Now there is no one to interact with.
By the way, Russian oligarchs also have issues, so we can expect redistribution of assets. This will affect approximately 35% of large businesses. Perhaps average people might be happy from learning that someone will get knocked out from the Forbes list of wealthiest people. I personally don't care about a dozen oligarchs facing troubles. I care about the country. Without money from raw materials, we must survive a period of military and, now, digital junta. I call current developments World Digital War 1. Now there'll be just a digital junta, then there will be a period of war between influence groups in Russia. And only, perhaps, in 2025-2026 is there at least some chance of conditional democratization of governance in the country.
What is your conclusion based on? In 2024, the counter of Putin's presidential terms will be reset to zero, starting his new era of another 12 years.
Let's just say that oil prices are very low, but, nevertheless, they are in place. Next year is a turning point for the economy because easily extracted oil is running out in Russia. They need to acquire technology Russia lacks. And it's usually American technology. There's no such technology even in China. That's what will lead to squabbles between clans. I bet it will be in 2023 or 2024.
Vladimir Putin can rule with almost no limits, but he is aging. This means the young and brazen are emerging. Therefore, I hope that some kind of turning point could occur.
In 2024, Putin may again take office as president. But in 2025-2026, the clans will turn pale, and they will seek new blood. That will be it.
You're talking about clans, but the concept of "Kremlin towers" is also used. Could you elaborate for us?
Some call them "Kremlin towers", I call them clans. The fact is that in every clan has both economists and security operatives. For example, in (head of Rosneft Corporation - UNIAN) Igor Sechin's clan that "everyone loves", he is conditionally an economist, but he's backed up by his own security system. There's a clan that is represented by, say, the defense minister. But it is also backed up by an economic bloc – people with the ministry of economic development.
According to my estimates, there are seven to nine such clans in Russian politics. Moreover, they are transformed regularly. And now there's fermentation in them as some members are turning coats. Take Dmitry Medvedev… After Vladimir Putin pushed him aside, he regularly, mind you, sides with him in public rhetoric. And that's the right thing for him to do because he realizes that today, Vladimir Putin is the strongest and most difficult player on this chessboard. Things get messy from time to time between some clans. Take Ramzan Kadyrov (leader of Chechnya - UNIAN) who's in tense relations with Sechin, while Sergei Sobyanin (mayor of Moscow - UNIAN) is with Mikhail Mishustin (Russian Prime Minister - UNIAN).
It is important to understand that these groups are unstable. They don't adhere to any intra-clan connections. There are groups affiliated with the "Ozero" Cooperative, some – with the Foreign Intelligence Service, some, respectively, with the FSB. These clans must be systematized by the number of "bayonets". It shouldn't be assumed that this is only about money. In this case, money plays practically no role.
You say that these clans are actually waging a war between each other that will further escalate. Could Russian authorities attempt to launch some "small victorious war" with an external enemy to reconcile everyone inside? Naturally, the question is in the context of confrontation with Ukraine.
Here, the "litmus test" is Donbas, the so-called "LPR" and "DPR". I believe that whoever gets these territories first will struggle. The reason is very simple: in any case, there will be protest moods in these territories, and they will have to be suppressed. The territory is completely in ruins, so investment is needed. And it's no prize – It's looted junk. Therefore, as you can see, none of the parties to the conflict seeks to escalate. It all boils down to some public tirades. No one is taking any real action, including the so-called West.
Therefore, it's not worth expecting that tanks will be deployed from there toward Kyiv. What's the point? Let me remind you that the first rule of any war, as Comrade von Clausewitz said, is to coerce the adversary to peace on terms favorable to the victor. There is no point in grabbing Donbas. This, in essence, would mean Russia would have to pay the administration's salaries and keep their troops there in full deployment mode.
The so-called sanctions are just - pardon me - a dirty deal
The Russian state pays everyone in the occupied Donbas anyway – both civil servants and the military.
According to my estimates, this is a third of what they would have to pay if it was, conditionally speaking, Russian territory. It is now to the Kremlin an awesome smoldering fire, which actually allows them to speculate on this. It's pretty much the same with Crimea, too. If we proceed cynically from ambition, they would've had to do the same thing they had done in some Ossetia or Transnistria – it's as if they are ours, but not exactly. But what they did in Crimea was they moved the border, built a bridge, and pumped a bunch of dough in there. Even today, there's no longer a consensus on Crimea in Russia as it was before. It is clear why the Crimean operation was carried out. This was done in order for Putin to go down in history as "the unifier of the Russian lands." And now, even this effect is gone, while plenty of money has been spent.
The ruling elites don't give a damn about international sanctions. They fly the world anyway, while Europe welcomes them warmly. I told European politicians that the so-called sanctions are just - pardon me - a dirty deal. See, if they wanted to change something, any sophomore economist would tell them what needs to be done so that the economy collapsed within 15 minutes. They aren't doing any of that. Therefore, let's be honest: the West absolutely doesn't care whose territory should Crimea be. The main thing for them is that nuclear missiles not be launched from the territory of the former post-Soviet space.
Ukraine has long abandoned nuclear missiles.
Actually, it's because there was no nuclear potential in Ukraine that everything happened this way in Crimea. Nuclear capability is an important deterrent. So Kim Jong-il and all his followers, have been doing the right thing when they seek to have own nuclear potential for this small state (North Korea - UNIAN).
Are there any risks to Putin’s “nullification” and why should the authorities suddenly, in the midst of a pandemic, change the law on the police, expanding the powers of law enforcement?
Vladimir Putin's "zeroing" plans are facing no risks. They can rewrite the constitution 10 times a day. In the morning we can wake up with one, and then fall asleep the same night with some other edition. As regards the powers of the police, this is actually the right thing (smiles sarcastically - UNIAN). Because when clans clash, if someone shoots civilians, no one will care. You know, before, sometimes slaves were hung on crosses so that other feudal lords would be afraid. Therefore, the task here is for another feudal lord to see that "my guardsmen are stronger", and, "look, they can easily spill the guts of any random peasant."
Roman Tsymbaliuk, Moscow