A couple of thoughts on the past and the upcoming year in Russian politics: the Kremlin’s core challenges and what specific areas I will be watching this year.
The most important change that the past year brought to Russia in my view – something that I expect to become increasingly obvious in 2025 – is that the narrative that the Kremlin pursued in the first roughly two years of the war has irrevocably expired. This narrative implied that with a decisive Russian victory in Ukraine, which, in the Kremlin’s telling, was always just around the corner, the arrangements of domestic politics and economics, as well as Russia’s relations with the rest of the world could revert to business as usual. But with an economy and fiscal policy set more firmly on a war footing, an accelerating asset redistribution, new sanctions affecting financial flows, a looming crisis triggered by high inflation and interest rates, and the firmer integration of the war in domestic politics, this now looks impossible. Even in the case of a ceasefire, and regardless of the terms of it, the war (and a broader conflict with the West) will remain a defining principle of Russia’s domestic politics in the foreseeable future.
Asset redistribution will continue. Just in the course of 2024 at least 67 companies with combined assets of 544 billion rubles were nationalized and partially redistributed, benefiting specific groups of interest (such as Rostec or the Kadyrovs) and there is interest in further nationalizations and expropriations at the highest level. Gradually and cautiously, but the Kremlin is rolling back the remaining rights and privileges of the “old” elite, except for top security and political power brokers, who however will have to start to retire to cushioned but less active positions (like Nikolay Patrushev in 2024). Sanctions on key energy projects and trade are unlikely to be eased in the foreseeable future (albeit the terms of a potential ceasefire are unknown), which means that these constraints will continue dictating the direction of Russia’s domestic economic transformation, from monopolization to having to cede control over the terms of Far Eastern development. It seems very unlikely that the Kremlin will run out of money to finance its war effort in 2025 or even in 2026, but this will require increasingly worse and riskier trade-offs. And adjusting to post-war economic realities would also be politically or financially costly. Take, for instance, an interesting recent study by Craig Kennedy about the preferential loans with which the Kremlin has underpinned war spending (and supported other sectors too). Kennedy suggests that continuing the policy of preferential loans will, over time, increase credit market risks – and indeed the Central Bank has lobbied for the scaling back of these programs. However, I’d add, discontinuing them, i.e. in the event of a ceasefire, and scaling back defense spending, will raise the risk of a labor market shock.
I don’t want to repeat the arguments made by others in the ongoing debate about Russia’s economic resilience (or the lack thereof). Vladislav Inozemtsev’s piece on Riddle and Yakov Feygin’s thoughtful answer to it discuss the most important aspects. I do believe, however, that due to the above, the core challenge for the Kremlin in 2025 is constructing an image of peace. This has traditionally been understood as coming up with a spin on whatever settlement Putin is able to walk away with at the end of ceasefire or (rather unlikely) peace negotiations to then sell to the Russian public. This, of course, is an important aspect. However, the Kremlin will also need to explain to political and business elites variably looking for stability and spoils what victory looks like for them, and this will not be easy to square with constructing an image of victory for the tens of thousands returning from the war and looking for the rewards promised to them over and over by the president himself.
And now on to specific issues I will be watching as the year unfolds.
- In economic policy, the main conflict will be between business executives, especially in preferential sectors, and the Central Bank. 2024 ended with a fragile and unstable equilibrium whereby the Central Bank paused key rate hikes in exchange for the government scaling back preferential lending programs. But with inflation still accelerating, the ruble newly unstable, and the government urging both regions and companies to increase investments, it is questionable whether this agreement will hold in the longer term. It is very possible that in 2025, as productivity growth cannot keep pace with salaries and profit margins are squeezed by higher costs, we will start seeing the end of the growth of real incomes, at least in sectors that do not have access to special credit conditions. If inflation stays high, this will lead to discontent. The coal industry, which was squeezed and in certain cases disrupted by falling global prices, rising production costs and export bottlenecks this year, will, by virtue of its political and – in certain regions – social significance, demand bailouts and special conditions, which itself is a source of conflicts, as transit infrastructure capacities, a major part of the puzzle, cannot be easily and quickly expanded. In general, as Russia continues to reorient trade flows to Asian markets, I expect federal and regional authorities to lobby more eagerly for investments from “friendly” countries (mainly China) into infrastructure development in the Far East and the Arctic (the latter of which has been set back considerably by sanctions against key energy projects), ceding control over the pace and the priorities of development projects. Of course, whether or not the United States and the EU adopt more sanctions affecting Russia’s trade and payment flows – and, perhaps more importantly, whether they tighten the enforcement of existing measures – will make a world of difference.
- I expect to see more conflicts over expropriation and nationalization of assets, akin to the (still-unresolved) dispute over Wildberries in 2024, as interest groups can make use of increasingly repressive, war-inspired legislation to attack opponents, providing also opportunities for power brokers with the necessary amount of political capital to try and turn their clout into gold by offering protection. Putin’s ability and willingness to act as the ultimate arbiter of these conflicts has not been questioned so far; though this seems unlikely, if it happens, it would be a significant turning point. In the field of nationalization, major sectoral mergers supported by the state – e.g. in the oil sector – would be the next major line to cross, but I find a further consolidation of defense and defense-adjacent sectors likelier.
- The Kremlin will likely continue taking away privileges from regional elites by taking appointments in both operationally significant as well as simply influential positions (e.g. regional governments vs the Federation Council) under tighter control, and going after regional power brokers seen as relatively independently operating. Vladimir Yakushev’s task as operational head of the United Russia party appears to be strengthening the party’s top-down command structure at the expense of regional elites. Steps have been taken to reduce reliance on the operational support of local elites when managing elections, too: the Justice Ministry will now simply be able to disqualify any candidate or sitting lawmaker by labeling them a “foreign agent”, even if they pass localized filters, while the rollout of electronic voting to further regions in 2025 will make electoral engineering more efficient. At the federal level, one important thing to watch in 2025 is whether more key security and political officials are gently pushed towards something that looks like de facto retirement (FSB head Alexander Bortnikov has been on this list for what feels like an eternity – perhaps 2025 will be the year) and whether, in parallel, we will see more people with family connections to core regime leaders appointed to leading positions, or whether the retirements will partially unclog the pipelines of upwards mobility inside the system. I am leaning towards expecting the former.
- As regards specific regions, one important question for 2025 is whether regional leaders with links to Security Council secretary Sergey Shoigu will be axed, given the series of dismissals, corruption investigations and failed promotions affecting Shoigu’s circles. I have regarded the purge in the Defense Ministry as a process having to do more with addressing corruption in the defense sector, than a targeted hit on Shoigu himself, but it is unquestionable that the political momentum seems to be limiting Shoigu’s ability to push back, thus anyone seeking to unseat his allies may very well try to do it now. Andrey Vorobyov, the long-serving governor of the affluent Moscow Region looks like the prime target – and indeed the governor has had to deal with a series of corruption cases indicating attempts to weaken his position (as a side note: so has, to some extent, Alexander Drozdenko, the governor of the Leningrad Region who faces an election this year). But the Ulyanovsk Region, led by Alexey Russkikh, another person from Shoigu’s circles, could also be up for grabs. Then there is the question of whether the Kremlin will try to push former Donetsk commander Artyom Zhoga, Putin’s new plenipotentiary in the Urals Federal District, to play an active enough role to spook or even push out governors seen as inefficient in an area long since dominated by people close to Moscow mayor Sergey Sobyanin. Upon Zhoga’s appointment, there were rumors about “cracking down on the Yekaterinburg elite”, which the Kremlin sees as too liberal, for instance. Whether or not the Kremlin will attempt to play a direct more role in the upcoming vote on the head of Tatarstan in September this year will be indicative of how much the region’s traditional operational autonomy is still standing.
- Apart from the aforementioned changes in personnel policies, on the whole, I do not expect regional governance to change a lot in 2025; the crisis management system perfected in the COVID crisis, which distributes blame, political responsibility and micromanagement decisions downwards, while allowing the federal center to have a tight control over data flows and agenda-setting has worked well from the point of view of the federal authorities. Nonetheless, I suspect we will see a bigger emphasis on highly and sometimes flamboyantly performative politics to signal loyalty with the Kremlin’s stated or imagined policy priorities, many of which governors have little power or will to actually influence locally (e.g. birth rates or the appointment of war participants to administrative positions). This may also incentivize the kind of boastful and bullying behavior that has traditionally been the field of people such as Ramzan Kadyrov, but has now been adopted by, for instance, Vologda governor Georgy Filimonov in his conflict with steel mogul Alexey Mordashov.
- As regards politically risky issues, utility breakdowns and increasing failures in public services such as transportation or health care accessibility will continue to cause local dissent, and we might see growing tensions between those whose financial and social status has been elevated by the Kremlin’s focus on the war and those who are losing out or are simply exhausted. Especially if its hand is tied due to reduced military aid or a disadvantageous ceasefire, Ukraine could also ramp up drone and sabotage attacks against industrial establishments, infrastructure and key officials. However, over the past three years the Kremlin has learned to live with these issues. Repressive laws are now flexible enough for the authorities to interpret virtually any form of dissent as a serious crime or national security threat, and I expect “political technologists” and the security services to have plans ready to manage the risk. Operationally, the Kremlin will continue alternating between trusted (and tightly overseen) local officials and security-backed heavyweights (e.g. Khabarovsk governor Dmitry Demeshin) to handle local dissent, depending on how acute the crisis seems to be and how involved local elites are. On the other hand, sudden, violent eruptions of frustration, triggered by trivial issues but fueled by repressed dissatisfaction, will continue to represent a constant risk for the authorities that is difficult both to calculate and to mitigate.