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Forgive the shorter format today. Jet lag, the headaches of starting up a new laptop and renewing subscriptions, and planning for a long winter of painful energy priecs knocked out most of my productive time this morning. I hope to finish the other post this evening. Rather than get too into the weeds on a story or diving deep, I wanted to offer a few thoughts about the US Defense Department's new vocabulary choice of "strategic competition" over "great power competition." The White House just released its interim national security guidance, a sort of bridging document from the Trump White House's 2018 release pushed out by H.R. McMaster that made considerable hay of the term 'great power competition.' Setting aside the deficiencies of the former terminology – as a realist, for instance, I find it laughable that any given era not be defined by leading powers competing in various forms – the new terminology has offered a bit of relief to Russianists in the Washington policy world. For instance, Mike Kofman immediately grasps the political stakes:

The problem with any argument lies in how power is conceived in the first place. You'd have to be a completely unserious analyst or commentator to suggest Russia isn't a great power as an imposing nuclear power. By the same token, one would have to be quite ignorant of Russia's domestic economic development, Eurasia's structural challenges, as well as shifts in the global economy to place Russia as an economic great power outside of a few resource export niches and what appears to be a declining edge as a military technology leader as China rises. In other words, contesting whether or not Russia is a great power is a foolish exercise. It holds enough security trump cards. But being a great power in 19th or early 20th century terms is not being a great power on 21st century terms, where Russia's lopsided integration into the global economy and obsession with economic sovereignty shape and harm its ambitions.

Russia specialists committed to highlighting its military capabilities probably experienced the Trump years with considerable trepidation. No one likes the threat de jure overtaken by a shinier foe, in this case China. Shifts in priorities affect budgets, space for project work, access to institutions, interest from administrations, everything in Washington. The Moral Panic of 2013-2016 ranging from Syria to Crimea to the election gave way to an administration lead by a president who'd charged on the campaign trail that China was "raping" America. If switching to strategic competition offers some relief, I'd suggest we start talking more seriously about the capacity of US economic power to reshape Russia's options, not through coercion, but construction, investment, regulation, and trade. The fear that Russia distracts from China is true when taken as a function of the over-commitment to the placement and use of military assets and resources in conflicts or aims peripheral to US national interests and realistically managed by partners willing to cough up more. It isn't when it comes to China given that the urgent need for an explicit and well-designed American industrial policy and industrial finance institutions is tied up in the energy transition and China's overly-dominant market share of key inputs and components as are a variety of questions about carbon pricing, trade policy, economic norm-setting and more. But so long as the strategic discussion of Russia is wrapped up in intelligence and hard power paradigms – understandable given the history of US-Russia relations and Moscow's toolkit – these distinctions are more revealing about individual or organizational positions in bureaucratic fights over resources and eyeballs than debates about Russia.

What's going on? – Quick Hits

Putin calmed natural gas prices and markets slightly by suggesting that Gazprom was prepared to increase offerings on the company's electronic trading platform that would not compete against long-term contracted volumes. It's not clear that an increase on the ETP would necessarily meet demand needs, though, nor did anything Putin actually said suggest Gazprom is recasting itself as a political stabilizer for European gas markets. It's still trying to maximize profit per market rules.

Tatiana Evdokimova grabbed a great graph that inspired a bit of food for thought:

Young people are saving more, pensioners are running down their savings, and people with children to support have generally seen their savings decline since 2014-2015 boosted in the last 18 months by targeted support measures to families with children. Some of that savings hike might be generational wealth transfers, a lot of that would come from belief that future benefits won't help much and that they have to plan for future shocks and uncertainty. That also means consuming less today, which compounds Russia's demand problem.

Polling from the Levada Centre shows that Russians' trust in Putin has hit a 9-year low. To the extent these polls are useful for parsing out public opinion, they're now back at levels seen during the 2011 period when protests erupted over Putin's return to power or else during 2004 when his first term was ending:

Red = president

Here's the link to the original source. Suffice it to say that the authorities know something's up as they add to the defense and security budgets.

Total inflation for September reached 0.94%, a record level for September since 2014. As of October 4, annualized inflation stood at 7.48%. Food price inflation is higher than the topline rate at 9.21% annualized as of September. No signs that existing formal and informal mechanisms are doing the job slowing it down unless, of course, price inflation would actually be much more extreme in their absence. The latter conclusion would imply lots of foregone profits and resources for investment.

Supply chain bottlenecks for imports of the chips needed for automobile manufacturers led to a collapse in sales in September. They fell 22.6% year-on-year against September 2020 when sales levels were reeling from the initial shocks due to COVID. None of this is specific to Russia, but the implications for manufacturers and consumer recovery are quite negative as shortfalls lead to bid up prices and delivery delays that will take considerable time to unwind.

The government, at Putin's instruction, just agreed to a packet of development projects in different economic spheres in line with 2030 socioeconomic development goals costed at 4.6 trillion rubles ($63.94 billion). 10 social projects, 7 construction projects, and 15 technology initiatives led the pack in terms of policy areas of focus. The planning periods are divided up into 2021-2024 and 2025-2030. We should note that a spending plan of this size over 9 years is actually quite small and inflation is going to play havoc with long-term planning, part of the reason the Kremlin likes low inflation – it theoretically makes it easier for planning institutions.

Rospotrebdnazor has strengthened controls over the import of food and beverage products from China, which has caused problems for Russian beverage manufacturers. Producers are already complaining that they face problems importing apple concentrate and frozen fruit. They've requested Anna Popova and Rospotrebnadzor review the existing regulations and help them out.

Despite the spin from MinEkonomiki and the government, concensus forecasts showing world growth for 2021-2025 slowing are dragging Russia down with them. Turns out Russia's still expected to trail global GDP growth:

Blue = Russia Light Blue = Eastern Europe Red = World

Eastern Europe and its integration into industrial supply chains will outpace Russia. Resource windfalls no longer create growth by themselves.

Finally, China lifted its ban on imports of Australian coal. What comes next is unclear. Russia's rising export targets for coal are intended to keep monotowns and regional budgets and earnings together in place of harsher adjustment, like relocation and state income support in the wake of mine closures and layoffs. If Australia retains market access after the current energy squeeze, they may have more scope to invest into capacity for longer. We'll see.

COVID Status Report

27,550 new cases and 924 deaths were recorded today. The Operational Staff has finally broken through the 900-death ceiling they had long imposed on the official data and case levels are up past where they were during the worst of the 3rd wave and set a record since the start of the year. The official death data also supports the idea that the worst of it is coming across the regions while St. Petersburg and Moscow have gotten a decent handle on it or else had enough people infected to reduce risks:

Red = Russia Black = Moscow Purple = St. Petersburg

There may, however, be another uptick in vaccinations as higher death counts and infection levels scare more people into taking the leap:

Doses administered, 7-day rolling average

Testing requirements are contributing to higher count levels since it makes it easier for the government to track data. MinTrud wants to continue the additional payments to medical workers dealing with COVID and surges at hospitals. Tatiana Golikova hinted that QR-codes may be included in a federal response if cases keep climbing. Seems likely at this point as a dodge to avoid more federal support payments and also make it easier to collect data.

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