Thoughts on number-crunching after the elections and why research into falsification is important. Why did Putin have to have 87%? Musings about regional finances in early 2024. And some stories from the regions that didn’t make the cut in Bear Market Brief.

The new normals

The official results of Russia’s presidential election – 77.4% of turnout and 87.2% for Putin – mark another shift in the nature of Russia’s autocracy; while earlier elections were clearly rigged, the authorities preserved a degree of nuance in regional variation. Nothing similar was visible last Sunday, with regions that are traditionally more pluralistic or opposition-oriented announcing over-80% support for Putin. Only in a handful of regions in Russia’s Northwest did officials dare to report a figure slightly below 80% – and the reasons are unclear.

I am not going to write about the elections in general – you can read about that in the upcoming Bear Market Brief – but let me share a couple of thoughts about numbers and why they matter.

First, just a side note: when it comes to online voting, my previous assessment of it – that it is useful for the authorities inasmuch as it provides a more cost-effective way to execute the same coercive and manipulative practices that they would do without it, but it is not a kill switch in itself – still stands. Around 8 million people voted online, according to (dubious) official figures, less than 10% of the officially reported turnout. Online votes did skew noticeably in favor of Putin, but with the level of rigging observed in the “offline” vote, it only mattered significantly in Moscow, where, based on my calculations (which you can see here) Putin’s result would have been under 80% without online votes.

Secondly – I had a back-and-forth with people on Twitter about the reading of the analyses of election falsification based on the method of Sergey Shpilkin, a long-time observer and researcher of electoral fraud. Shpilkin uses a statistical method based on the observation that turnout and pro-regime vote at each individual polling station should not strongly correlate if the votes are not falsified, but in Russia the two almost always do. This then allows researchers to make an educated guess about the number of “anomalous” votes, based on what they regard as the normal distribution of votes. This is possible because the amount of fraud has historically differed between regions, but there are methodological differences. Novaya Gazeta estimated that 31.6 million votes (of 74.5 million reported “offline” votes) were anomalous, while election researcher Ivan Shukshin made a “conservative estimate” of 22 million votes. In both cases we’re talking only about offline votes, which were cast in the internationally recognized territory of Russia, plus Crimea. It is safe to assume that the turnout and vote figures reported from the newly occupied regions were all made up.

Some took Novaya Gazeta’s number and ran with it, claiming that it was proof that Putin’s actual vote tally was not 87% as reported but closer to the 40% mark. But neither analysis suggests this. First off, it is important to stress that Shpilkin’s method does not capture all forms of fraud and manipulation: it wouldn’t necessarily show the full effect of coerced voting, let alone the intimidation and manipulation exercised by the authorities in the campaign. (Similarly, the method, by its nature, cannot say anything about the preferences of those who did not participate in the vote, or about the reasons of those who did take part and voted for Putin.)

Second, the “anomalous votes” that are the result of simply stuffing ballots into boxes or making up votes when tallying them, will also increase, anomalously, the reported turnout. Votes that were “reassigned” from one candidate to another after the count – which reportedly also happened, and of which Shukshin also shows evidence in his analysis – do not. We can assume that most anomalous votes fall into the first category, in which case turnout figures were likely much lower than the reported 77.4%, even as Putin, in all likelihood, captured a large majority of this much smaller pie.

This is important because engineering a high turnout was one of the main goals of the Kremlin, and the authorities put a lot of effort and resources towards achieving this, from coerced voting to various softer methods to motivate voters. Engineering a high turnout (or as my FPRI colleague, Olga Khvostunova had said, at least 60 million votes for Putin) was important because of the dual function of elections in an autocracy, which we could call ritualistic acclamation and norm enforcement. In other words, the election must show that the incumbent ruler has popular support and is without alternatives, but also that the regime is able to define and enforce the limits of acceptable social behavior.

This new normal, of course, centers on the war and the duty to show at least a basic-level support for it – and it is as much directed at elites as it is at ordinary citizens; take Putin’s mention of a “new elite” in his state-of-the-nation speech last month.

Of course, it is important for the Kremlin to ensure that people (and elites) are interested in the continuation of the war because they draw financial (or political, which in Russia is essentially the same) benefits from it. But these benefits will need to be sustainable. Some of the initiatives being discussed at the level of the government look mostly or purely performative, such as a draft law that would add war veterans to the categories of people who can form subsidized building and land cooperatives, or another one that would make utilities free for the children of those who received the “Hero of Russia” decoration. In spite of Putin’s announcement that more than 30,000 current and former soldiers applied for a new program called “Time of Heroes” – another project linked to Putin’s deputy chief of staff, Sergey Kirienko, which promises to open a path for them to serve as officials – there is little to suggest that the Kremlin is actually eager to entrust war participants with important functions. More indicative is the growing number of direct beneficiaries of the state-backed seizure and reprivatization of former foreign assets (on whom The Bell published an excellent analysis) – which the government is planning to step up in the near future.

For officials, the message is: you can be easily replaced by someone more loyal. (This is one plausible reason why, when Far Eastern election regions – under the watchful eye of Yury Trutnev, perhaps the most powerful and most ambitious of Putin’s “plenipotentiaries” – started announcing sky-high turnout and pro-Putin vote figures, others might have decided that they could not afford to stay far behind.)

For the grand public, what we see is the culmination of the securitization of the domestic political discourse. The pre-election raids at the associates of activist Pyotr Verzilov were not the only development that served as a reminder of how much of domestic politics has come to be viewed through the lens of national security. Just to take one of the most recent examples: over the past week, in the Kemerovo Region the authorities conducted searches in the home of Maxim Andrianov, an ecological activist who opposes the construction of the Krapivinskaya Hydroelectric Power Station on the river Tom, a construction project first planned in the USSR and – according to a report by Govorit NeMoskva – opposed by locals, but promoted by the region’s governor, Sergey Tsivilyov and aluminum businessman Oleg Deripaska. Over the past couple of years conservationist movements against similar investment projects in several regions were partly or fully successful (although far from universally), and the Kemerovo activists had also had successes challenging the authorities at court. It seems likely, however, that local civil society movements that have been tolerated in previous years partly because they did not challenge the Kremlin, will be increasingly stifled in the coming months and years. The securitization of domestic politics has been increasingly open over the past 4-5 years, as Russia expanded its “foreign agents” legislation to potentially include all dissenters, security officials started linking non-political issues to separatism (to which the 2020 constitutional reform dedicated a whole article), and the 2021 National Security Strategy expanded the definition of national security to a range of areas not commonly associated with it. The full-scale war, of course, accelerated this process (as it did many others) by forcing its own brutal logic on domestic politics.

The cartoonish results announced on Sunday, as well as the choreographed scenes of grand unity, which included having all “opponents” kowtowing before Putin and his program, also serve this purpose: drawing the contours of new normal with a firm hand.

Yet if, in spite of the virtually limitless tools and resources at the disposal of the authorities to increase turnout, getting the desired results still required the authorities to invent tens of millions of votes, that says a lot about the limits of their ability to mobilize voters. It also suggests that the enforcement of this “new normal” will not rely on some sort of grand mobilization but on maintaining or increasing the state’s high repressive capacity – if and as long as this is possible.

Regional finances

Pending changes to Russia’s tax system have also prompted questions about the distribution of the additional fiscal receipts envisaged by the government. As of right now it is unclear what will happen to tax receipts from the rumored three-bracket PIT and higher corporate income taxes. Historical examples suggest that the federal budget will mostly benefit from these changes.

When in 2021 Russia introduced a higher (15%) personal income tax rate for individuals making more than five million rubles a year, the additional income went to the federal budget, even though PIT receipts are normally shared by regional and local budgets. Similarly, while regional budgets keep most corporate income taxes, the rate of which is currently set at 20%, the federal budget pockets 3 of these 20% since 2017 – ostensibly temporarily, since before the distribution had been 2-18.

This should not necessarily mean that regions lose out. If regional budgets were to keep all of these taxes, richer regions with higher-income taxpayers and more companies would benefit, while theoretically the federal budget has the opportunity to reduce fiscal inequality by redistributing tax receipts in the form of grants, subsidies and other budgetary transfers. But under the current circumstances where war-related expenditures (which are executed on the federal level) are prioritized above all, this seems unlikely. The experience of 2023 – when interbudgetary transfers decreased by 11% – suggests that if the federal government will increase these transfers anywhere, it will do so for the occupied territories in Ukraine, as reconstruction here is considered a political priority above all. Adding the money that went to these territories from the federal budget to the count would have resulted in an overall increase of interbudgetary transfers. Even the meagre sums distributed in Russia’s “social gasification” program seem to mostly benefit the occupied territories (and Chechnya).

At the same time, profit margins declining due to upwards pressures on salaries, ballooning infrastructure costs and the petering out of the recovery experienced in 2023, will likely affect regional incomes downward. Consumer inflation (which in many cases has been handled by ineffective regional-level price caps), inflation affecting such areas as public transit, which is hit by the double whammy of higher labor costs/shortages and volatile fuel prices, and the necessity to finance social support measures for the families of war participants and other categories. These were already reflected in 2023 spending (with overall expenditures on utilities and housing growing by almost 30% and on transit – by 21%). Regions and cities may lose other income (e.g. due to the recent draft amendments of the law on outdoor advertising). The creation of special economic zones to stimulate investment is unlikely to change this in the short term.

Over 2023, as regions were expected to increase expenditures on infrastructure (including the renovation of utility networks) and social payments, the federal government preferred helping them with various credit instruments, leading to an increase in debt, but not the cost of servicing this debt. Most of this will, according to Putin’s address, be written off over the next three years, rewarding, in effect, those that used these instruments more aggressively over the past years. To be fair, this write-off, while a large sum, is not a very significant amount of Russia’s federal budget. But it does signal the limits of the federal government’s credit-based policy, and at a time when the limits of the growth based on the military industrial complex are also showing. Regions will be expected to find cuts or increase their own incomes – to the benefit of occupied territories.

Also-happeneds

• In sanctions-related news, two articles caught my eye last week. First, The Moscow Times and Arctida, an NGO revealed that European companies had supplied equipment worth more than $630 million to the Arctic LNG 2 project, one of Russia’s flagship energy export projects over the past two years. This in itself would not be particularly surprising, however the shipments continued even after the project was sanctioned by the US last year. Sanctions (and associated delays receiving ice-class carriers) and questions of profitability have delayed the launch of the project, but did not prevent it. It appears that there is room to tighten sanctions enforcement. Another telling story appeared in the Financial Times about how the ongoing Red Sea crisis has forced companies to increase shipping from Asia to Europe via routes operated by Russian Railways (RZhD). Inasmuch as this increases RZhD’s income, it helps the Russian budget, which has had to subsidize the company’s investment program. But a particularly large increase of demand (which does not seem to be the case so far) may also raise tariffs for domestic importers.
• Last week several Russian regions signed partnership agreements with Moldova’s autonomous region, Gagauzia. The region’s government is strongly pro-Moscow, and has recently asked Russia for support. It is unclear how exactly the partnership agreements are supposed to work in practice, however, beyond the likely exchange of officials (which might be the point). It seems that while Russia is eager to maintain political tensions in Moldova (together with the related threats), it is not ready to commit to any specific measures of support beyond existing ones. Using regional leaders instead of federal-level officials for these purposes has become increasingly common over the past years – albeit Tatarstan’s head, Rustam Minnikhanov was declared persona non grata in the country last year.
• To close out on a somber note, an unpleasant story from Bashkortostan. Fresh on the heels of putting down recent protests by force, apparently as part of a charm offensive, a photo of the local governor, Radiy Khabirov and his son was featured on the wrapper of the “Atay” (“Father”) chocolate bars. Schoolchildren from a local high school, competing as a team in KVN, a long-running comedy show, made a joke about the chocolate bar, referencing Khabirov’s restrictive language policies and corruption allegations concerning his wife. As a consequence, they had to record a public apology. A hardening autocracy has no tolerance of humor, which it fears.