On the appointment of war participants, the Far East and others

Thoughts about Russian politics in the past couple of weeks.

In this dispatch, I would like to dive into two recent developments that highlight that even in today’s Russia, Putin has to operate with certain constraints, such as vested interests or the laws of economics.

A new shiny representative of the “new elite”

On October 2 Vladimir Putin appointed Artyom Zhoga, a former entrepreneur and pro-Russian fighter from the occupied Donetsk Region in Ukraine to the position of presidential plenipotentiary in the Urals Federal District, a key industrial heartland which contains some of Russia’s most important energy and machine building regions. In recent years, and especially after his son was killed in the war, Zhoga has built himself a rapidly ascending political career. Prior to his appointment, he was the speaker of the “Donetsk People’s Republic’s” parliament, but most people probably remember him for his bad acting when, in December 2023, the Kremlin used his staged question to Putin about his plans to kick-start his presidential campaign.

Zhoga’s new position is the highest and most important occupied by a war participant since Putin announced, in his February speech, that the veterans of the war in Ukraine would become a “new elite”, in an attempt to attract more people to sign up contract soldiers.

Presidential plenipotentiaries are expected to act as liaisons between governors and the president (whom they represent in their district), coordinate and supervise the work of regional governments, and can also influence appointments. While the latter is not a given - and elites from key industrial regions have their own channels to the Kremlin - Zhoga certainly has significant backing in the Presidential Administration and can probably also build on the media hype around him, which links him personally to Putin (even if he is more of an avatar of the war than someone with real access).

In spite of this, his appointment does not appear to have been entirely smooth sailing. His predecessor, Vladimir Yakushev, who was appointed General Secretary of the ruling United Russia party, was dismissed more than a week before Zhoga was named to replace him. While rumors started almost immediately, Zhoga himself was not seen in public for almost a week until he appeared at a Kremlin-sponsored event celebrating the anniversary of the “annexation” of Ukraine’s occupied regions. There is some indication that local elites expressed strong disapproval with Zhoga. The Yekaterinburg-based website “66.ru” cited unnamed insiders who warned that Zhoga’s appointment might trigger a wave of resignations and dismissals in the regions of the Urals, beyond the new envoy “kneecapping” Yekaterinburg, the macroregion’s relatively pluralistic large city. Others hinted that Zhoga might want to focus on the war veterans of the Urals. The concern is probably justified, given that one of Putin’s recently appointed governors, Khabarovsk head Dmitry Demeshin is on a mission to rein in established elites.

Indeed, this is not the first time that local elites resist Putin’s “new elite”. War participants failed to sweep United Russia’s “primaries” this year, even though the number of such nominees grew threefold (from slightly over 100 to slightly over 300) between 2023 and 2024, partly a result of the party granting them a 25% bonus on each recorded vote. Most of these candidates however gained seats in weak municipal councils, not the regional parliaments, which serve as a major means for local elites to influence power. In Tuva, where a relatively high number of war participants ran (and received mandates), there were stories of outright intimidation, but war participants complained of incumbent elites actively undermining them in several other regions too. Some speculated that Andrei Turchak, the former general secretary of the party, had to leave – and become governor of the remote Altai Republic – partly because he failed to meet the Kremlin’s expectations in this regard.

More than a dozen other alumni of the “Time of Heroes” program, a kind of training for carefully selected ex-fighters to enter public administration, have been appointed to various positions over the past months; typically in regions whose leaders had – for various reasons - been more eager than others to follow the lead on the Kremlin’s pro-war initiatives. They were given positions either in towns or cities or as aides or deputies to established elites. It is unlikely that war participants with no prior experience and connections in public administration would get higher positions. They include city council speakers in Nizhny Novgorod and Krashnovishevsk (in the Perm Territory), a deputy speaker in Blagoveshchensk, deputy mayors in Stavropol and Tomanovo (in the Belgorod Region), a district head in the Khanty-Mansi Autonomous Region, an assembly committee head in the Altai Republic, a deputy governor in the Khabarovsk Territory, a regional minister in the Sakha Republic, an aide to the governor of the Kemerovo Region, an aide in the Ministry for Education, a director in the pro-Putin youth organization “Movement of the First”, and of course, three senators: one from the occupied Crimea and the Kursk Region (both directly affected by the war), and one from the Republic of Altai, led by Turchak who had not only tried to accumulate political capital with similar initiatives prior to his “exile” to the region, but is currently likely trying to do everything to get back into the good graces of the Kremlin.

Elevating actual war participants to leadership positions is just one part of the Kremlin’s efforts to build a pro-war coalition, along with a major ongoing asset redistribution in the economy, allowing officials to use war propaganda and service in the occupied territories as a career elevator, higher salaries in and around the defense industrial complex, as well as payouts and various goodies for soldiers and their families, which include free public transportation tickets, utilities, tax breaks, in some regions free land, and soon likely debt relief. 

Elevating war participants is clearly important enough for the Kremlin to push regional officials and elites to make an extra effort. As it is obvious from the occasional pushback, this is all fine until the numbers are low. Problems start when the supposed “new elite” starts to believe that they are entitled to more. Federation Council appointments, if they become a norm, can also cause frictions: these positions have been maintained for outgoing regional elites and, more recently, security elites. One important facet of power is the ability to define and enforce the contours of what is acceptable and expected behavior. With an increasing number of “veteran” appointments, the Kremlin is also testing its ability to do so.

The development of the Far East

Another issue that Putin has recently raised on the political agenda is the development of Russia’s Far Eastern regions. He spoke about this at last month’s Eastern Economic Forum in Vladivostok, an event that was supposed to highlight how successfully Russia is dealing with its forced trade pivot to Asian markets. In his speech, Putin enumerated some existing problems, notably the wider region’s energy production deficit (which he ordered the government to solve), transit bottlenecks (which he expects to solve with non-budgetary, including Chinese investment), as well as a lack of urban development (which the government wants to solve via adopting urban development plans).  

A couple of days later Putin’s Far East plenipotentiary and deputy PM Yury Trutnev said that Putin’s speech had a “magical effect on the surrounding world”. And indeed, the assumption often is that when the president issues an order, things speed up. Well, not quite.  

Investment in Far Eastern regions has indeed increased over the past years, at twice the pace observed in the rest of Russia. The draw is evident in rental rates. In a recent rating that I had reviewed on the blog earlier, compiled by the Cian real estate aggregator, Tynda, an important junction on the Baikal-Amur Mainline saw short-term rental prices double in the past 2 years. Cities in the Maritime Territory on Russia’s Pacific coast, home to the wide region’s biggest Russian ports, has also been affected. The federal government is expecting special economic zones to bring further investment. The Economy Ministry expects the total volume of investments to double and reach 10 trillion rubles by 2030.

However, a recent Audit Chamber report suggests that much of this investment has been ineffective. China has only reluctantly invested in development; notably, it has dragged its feet on two of the Kremlin’s priority projects affecting the Far East: the Power of Siberia 2 gas pipeline and the development of transit (mostly of liquefied natural gas) along the Northern Sea Route, due to worries about sanctions and the profitability of the projects.

Master development plans for cities, encompassing much of the wider region’s urban development projects (worth 4.4 trillion rubles in total), assume significant population growth in Far Eastern regions, with next to nothing to support these assumptions. Actually, in spite of various schemes designed to lure Russians to the Far East, these regions are still losing population. It is difficult to imagine that at a time of an already tense wage competition, rising taxes and declining profit margins, employers will be able to offer wages attractive enough for people to move to regions lacking basic public infrastructure. The money is not going to come from regional budgets, either. As the Central Bank recently noted, on the whole regional budgets have not been able to raise their expenditures on social policy, housing and capital investment even to match inflation. As long as the war remains the overall priority of the federal budget, this money will simply not be there. At the same time, the Kremlin has ambitious plans to meet what it expects to be growing needs.

Electricity shortages will need the construction of several more power stations, as it has been highlighted on the Vladivostok forum. The government expects overall electricity consumption to grow by 40% and need 3 GW of additional capacity. But this is not going to happen overnight; the growth of electricity demand is already evident from falling exports and it is likely that the authorities will prioritize industrial demand over other consumers, many of whom already routinely experience power cuts.

At high interest rates, railway expansion and electrification plans – which Putin also underlined – will need hefty tariff increases, as both Russian Railways and the Rosseti network operator have made clear. This will be translated into higher prices. Alas, even as throughput capacity is increasing on Russia’s Far Eastern railways, the gap between this capacity and how much actually gets transported has been growing. There is also a cutthroat competition for these limited capacities between exporters of various goods and commodities - including coal exporters who create low added value but have strong political connections and who cannot export profitably through Western Russian ports, and the infrastructure to do so along the Northern Sea Route does not exist.

One could, of course, go on (and I am planning to in an upcoming piece) – but one takeaway is clear. Once again, we see clear directives and lofty plans coming up against realities: in this case years of underinvestment in infrastructure, laws of economics that cannot be bent enough, and the unwillingness of partners whose support or assent the Kremlin would need to do something transformative.

Also happeneds

-       When money runs low: The independent election observation organization “Golos” drew attention to a fascinating story from the Perm Territory, highlighting how the election rigging – and its cost – extends way beyond election-day manipulations. The organization pointed out, based on court documents, that Elena Lopaeva, a former deputy prime minister of the regional government who was sentenced to four years in prison in February for embezzling money from a charitable fund, admitted to spending most of the embezzled funds to finance Vladimir Putin’s presidential campaign in 2018. Earlier the fund’s former head also claimed in an interview that tens of millions of rubles were spent on Putin’s campaign from the fund, as those responsible in the federal government for compensating the regional government for campaign expenditures did not do so. The case is a classic example of how regional governments are often simply given a list of expectations and benchmarks but not always the money to meet all of them.  

-       Arrest in Bratsk: One of the rare still somewhat competitive elections that took place in Russia this year was in the city of Bratsk in the Irkutsk Region, where a split in United Russia resulted in the incumbent mayor, Sergey Serebrennikov losing in a landslide against his fellow party member, Alexander Dubrovin. Now it seems that the conflict within the local elite did not end there. Two weeks after the election Vasily Dulya, a local businessman and opponent of now-former mayor Serebrennikov was arrested on charges of damaging Serebrennikov’s campaign ads.

-       Sabotage fears: In late September two teenagers were arrested in the Omsk Region for setting fire to a military helicopter, and accused of terrorism. Apparently, they were offered $20,000 for doing so by an unknown person approaching them on a messaging app. Later, the FSB arrested 39 “radicals”, among them several teenagers who are accused of talking to Ukrainian operatives on the Discord messaging app – which could soon be banned and blocked in Russia. The incidents highlight the continuing risks of random sabotage acts for the Russian authorities, made easier by the widespread and routine use, both by the Russian population and by operatives and cybercriminals, of encrypted messaging apps.

-       Municipal reform: One of the consequential bills that will be discussed and likely adopted during the fall session of the State Duma is the reform of municipal government. The reform is the second stage of an overarching public administration reform that began almost three years ago with the adoption of legal amendments affecting regional public administration. The proposed law on municipal self-governance would replicate many of the principles of the first stage of the reform, most importantly increasing the influence of governors over municipalities in their region and merging most current self-government units, effectively scrapping their representative institutions – a process that is already happening in several regions. I wrote about the goals of the municipal reform several times, including shortly after the original bill was presented.

-       Driver shortages: The average salary of long-distance truck drivers has increased by 50% since the beginning of the year, according to job service portal hh.ru. This is partly a consequence of transportation firms expanding their fleet, but also likely has to do with growing salaries in the defense industrial complex and adjacent industries. Along with rising replacement costs, this of course further drives up delivery costs. It is not surprising that developers are testing driverless trucks on certain highways.