Terrorism, bread and babies in Russia's sights for 2016, Putin tells nation

Terrorism, bread and babies in Russia's sights for 2016, Putin tells nation
By Ben Aris December 3, 2015

As the world reels amid terrorist chaos created by the US and now abetted by Turkey, resurgent Russia will drive the counter-offensive, President Vladimir Putin said in his annual state of the nation address on December 3, while overtly threatening more retribution against Ankara for downing one of his country's bombers.

In a tight one-hour speech to more than 1,200 state officials and dignitaries gathered in the Moscow Kremlin, the Russian leader urged the international community to unite in "one mighty fist" against the terrorist scourge, while leaving no doubt as to whom he blamed for its emergence.

"Someone wanted to change unfavourable regimes, roughly imposed their rules, and what was the result?" Putin said in a clear but unspecified attack on the United States. "They stirred up a mess, destroyed statehood, drove peoples against each other, and then, having opened the way for radicals, extremists and terrorists, quite simply washed their hands of it."

But the focus of the speech was far more on domestic issues than in 2014. Russia is also on track to overcome its current economic difficulties and perform on equal terms on the world markets, Putin stressed, without even broaching the crisis around Ukraine and Russia's seizure of Crimea last year, which incurred broad Western economic sanctions.

In one of the key calendar speeches where the Russian leader outlines his plans for the coming year, the event marked a new sense of direction in the Kremlin's agenda following lackadaisical speeches at the St Petersburg Investment and Economic Forum in the summer and at the VTB "Russia Calling" conference in the autumn.

In both of those speeches Putin said almost nothing about reform and economics, whereas beyond the battle cries regarding terrorism, this speech could be set up with the two words: "bread and babies". Putin dived deep into detail when outlining the government's answer to the acute demographic crisis the country faces and the need to reform agriculture so that Russia will be self-sufficient in food by 2020.

While he delivered an almost ritual poke at the US over disorder in the world, Putin's invective this year was however almost entirely reserved for Turkey, following the November 24 incident in which a Turkish jet shot down a Russian Su-24 bomber near the Syrian border.

"Allah decided to punish the Turkish elite by relieving them of their sense and judgement ... They will regret they ever did this," Putin said to the assembled Russian elite that included the widow of the pilot killed in the incident, and the widow of a marine killed in the ensuing search operation.

Russia imposed food sanctions on Turkey on December 1 on a business estimated to be worth $765mn. This will cause chaos in Turkey's agricultural sector in the same way that Russia's retaliatory food ban on Europe has done in the West. And the president explicitly said there is more to come.

"If somebody may have thought that after committing a treacherous war crime - the killing of our people - it will be possible to get away with a ban on tomatoes or restrictions in construction and other industries, they are grossly mistaken," Putin said. "We shall remind them many a time what they have done and they will more than once feel regret. We are perfectly aware of what action is to be taken."

Within half an hour of the end of the conference, Russian Energy Minister Alexander Novak told TASS that the Turkish Stream pipeline construction project has been suspended. The pipeline would have provided Turkey with cheaper gas and billions of dollars of Russian investment.

The Kremlin is clearly incensed by the Turkish leadership's decision to shoot down their plane that was in Turkish airspace, by their own admission, for a mere 17 seconds.

Putin combined his verbal attack on Turkey with fresh calls for a broad international coalition against terrorism that he first floated during his UN speech on September 24, and repeated after last month's terrorist strikes in Paris. He said that there should be "no safe havens" for terrorists and repeated the Russian claim that Turkey is buying oil from the Islamic States (IS) and selling it on the international markets, thus financing terrorism.

"We know who in Turkey makes money and allows terrorists to make profit," the Russian president said, reiterating recent Russian allegations made against President Recep Tayyip Erdogan's family and entourage that were vehemently rejected by Ankara. The money is used by gunmen for "recruiting mercenaries, purchasing weapons, organizing inhuman terrorist attacks directed against our citizens, citizens of France, Lebanon, Mali and other countries," he added.

All this will play well with the domestic audience. A recent poll from the independent pollster the Levada Centre found that three-quarters of Russian feel their country is once again a major power in the world, although the same number said they think Russia should improve its relations with the West. It is this context that Putin is playing to: there is a palpable sense of fear in Moscow that another terror attack is imminent, while memories of the Nord-Ost theatre siege and the Beslan school massacre are still fresh, not to mention the bombing of a Russian jetliner over Egypt in November that claimed 224 lives.

In the most recent bne IntelliNews Watcom footfall index, traffic at shopping malls in the capital have plunged by 10% in the last month as shoppers stay away fearing a terror attack. Still, one in two Russians support Putin's decision to launch airstrikes against rebels in Syria, according to another recent poll.


International politics was dealt with relatively quickly and firmly in a well articulated and deftly timed speech that will primp up Putin's image at home after a recent small drop. However, the president's rating remains soldily over 80%.

Putin then moved onto business and fixing the investment climate next with a range of suggestions and abominations. This was remarkable, as in the two big economic forums this year he said next to nothing about reforms or business – itself unusual as he usually reels off a long list of the latest positive macroeconomic results.

He singled out corruption as a major problem and discussed giving Russia's general prosecutor more powers, but called on him to use his powers of arrest prudently. This was an acknowledgement of the main corruption-related issue: wine-maker Boris Titov has been appointed Russia's anti-corruption tsar, the ombudsman for business, and has claimed that more than 100,000 entrepreneurs have been falsely imprisoned in Russia by bureaucrats abusing their powers in an effort to extract a bribe.

This fight is not going well after Titov was able to get less than 2,000 of these people released last year, and the lack of small- and medium-sized enterprises is a major drag on growth. But as part of a package to improve the business climate, the president promised to leave taxes low and continue cutting red tape.

During his speech, Putin also proposed changing the rules on detention and decriminalising a number of articles of the Criminal Code to make it harder to work this scam.

"I am asking the Russian State Duma to support the proposal of the Russian Supreme Court to decriminalize some articles of the Russian Penal Code and transfer some of the crimes that pose no great threat to the public or society to the category of administrative offences but with one major reservation - the offence will be classified as a crime if it is committed for a second time," Putin said.

He also annouced that Russia's capital amnesty would be extended for another six months. Introduced last year as part of Putin's deoffshorisation drive, Russian businessmen are allowed to bring cash home with no questions asked. But teh scheme has been a failure as domestic business still don't trust the government: Putin blamed the "complex rules" on the lack of ehthusiasm. 


Putin then picked up the agricultural theme, which emerged as one of two non-terror-related main arcs of the speech. Russia has been thrown back on its own resources and found them lacking after it bans one foreign supplier after another. The most recent ban on Turkey's food stuffs has been delayed to January 1 to give shops a chance to find alternative sources of fresh produce, but analysts are expecting that even then there will be shortages.

More damagingly, already high food prices will be sent higher. Estimates vary from the Central Bank of Russia (CBR) official comment on the morning of speech that overall inflation will not rise by more than 0.2% to 0.4% as a result of the sanctions, with others putting the increase in inflation as high as 2%. That would prevent the CBR from cutting interest rates again soon and could delay a return to economic growth by at least four months or probably much more.

"By 2020 Russia should become self sufficient in food production," Putin said, then calling on anyone with an idle piece of potential agricultural land to sell it, while more state support was also offered to "efficient" farms.

The government has been investing heavily in agriculture, which has been pretty much the only sector to report growth this year. Russia is on track to bring in a bumper harvest of more than 106mn tonnes of grain in 2015 and has already become a major grain exporter. (Turkey could be in trouble here too as it was the second largest buyer of Russian grain in 2014 after Egypt.) All this has seen Russia climb up the global grain export rankings and it plans to increase its grain exports this year.

In 2014, Russia earned $20bn from agricultural exports overall, which was 25% more than was earned through arms sales, and one third of revenues from exporting gas, Putin said.


The second big theme was children. The demographic disaster of the 1990s when male life expectancy fell into the 50s is about to hit the working population and will seriously impede economic growth for the next decade.

The Kremlin launched what has turned out to be a highly successful maternity programme of subsidies and better natal care several years ago and as a result the natural population growth has been way ahead of even the most optimistic forecasts: the birthrate began to rise strongly in 2008 and the population has been growing in the last two years.

"People want children. Ever second child at the moment is born into a family that already has two or three children. People want babies because they believe in the future of this country," Putin said to rousing applause.

This maternity programme was due to expire at the end of this year, but Putin announced it would be extended by another two years.

All in all the president was in a combative mood but set a pragmatic tone with the speech. Between warning Turkey that Russia "doesn't tolerate treachery" he took a leaf from the US play book that he has no problem with his "friends" the Turkish people. The bulk of the speech was dealing with the specific issues and carried an unusual amount of detail on individual regions. But Putin also played to the soaring sense of Russian national pride by quoting Dmitry Mendeleyev, the Russian scientist who invented the periodic table, whose words 100 years ago "directly apply to us today".

""Dispersed, we will immediately be destroyed. Our power is in unity, in warriorship, in the tight-knit family spirit that increases the population, and in the natural growth of domestic wealth and peace," Putin waxed.


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