Every Tuesday, The Ukrainian Week/Tyzhden publishes an overview of the political, social and economic situation in Russia and Belarus in partnership with the Foreign Policy Council “Ukrainian Prism”. The Council’s Russian and Belarusian Studies Programme presents a new weekly #aggressoranalysis, in which Iaroslav Chornogor and Anton Oksentiuk analyse the latest news in Russian domestic and foreign policy.
This week’s highlights: The sentencing of American journalist Evan Gershkovich, plans to supply vast amounts of Russian gas to Iran, and the collapse of the Arctic LNG 2 project
Domestic policy takeaways:
- Russia faces significant problems with migration and labour shortages. The Bell conducted a study and found that since the beginning of the war and the start of mobilization, 666,000 people have left Russia. This figure is based on data from migration and statistical services of 70 countries where Russians have emigrated. However, this number may be underestimated, as not all popular destination countries share such statistics. The emigration figures indicate that this wave of Russians leaving due to the war is the largest in the past 20 years. As a result of this mass emigration, even the official Russian authorities acknowledge the significant problems it poses for the country. The Central Bank of Russia published a new monitoring report on companies, recording a record labour shortage in Russia. One of the main problems of the economy – labour shortage – continues to grow rapidly.
- Labour availability reached another historical minimum in the second quarter of 2024. The low number of engineers and IT specialists caused significant problems. Companies involved in the production and processing of goods were most affected.
- Organised crime in Russia is growing at a record rate. According to statistics from the Russian Ministry of Internal Affairs, the number of crimes committed by organised criminal groups in the first five months of this year increased by 76% compared to the same period last year. Additionally, since the Russian full-scale invasion of Ukraine, the Ministry has recorded a sharp rise in criminal incidents related to the illegal arms trade. The highest number of such crimes occurred in regions near the Ukrainian border, where the number of robberies, murders, and other crimes involving firearms increased by 5 to 17 times by December of last year compared to 2021. At the end of 2023, the Ministry decided to conceal this statistic.
- Russian LNG project “Arctic LNG-2” is on the verge of collapse. Reuters has published a review of the situation surrounding the Russian company Novatek’s Arctic LNG-2 liquefied natural gas project. According to the publication, the project is on the verge of collapse after the implementation of US sanctions in November 2023 and EU sanctions in June 2024. A source familiar with the situation stated that Novatek has been forced to sharply reduce gas production for Arctic LNG-2 on the Gydan Peninsula. The reduction affects significant volumes. According to the Russian pro-government publication Vedomosti, 425 million cubic metres of gas were produced for the project in December 2023, 215 million cubic metres in April 2024, and the production volume fell to 55 million cubic metres in May.
- The plant cost Russia $25 billion and took ten years to build. The first LNG shipments were scheduled to begin in the first quarter of this year. The sanctions have effectively killed the entire project. Another problem was China’s refusal to deal with the sanctioned Arctic LNG-2. In July 2024, the Chinese company Wison New Energies suspended its activities in Russia and refused to supply modules for the project, further delaying the start of even the first production line.
Foreign policy takeaways:
- Russian court sentences American journalist Evan Gershkovich to 16 years in penal colony. A Russian court has sentenced Wall Street Journal correspondent Evan Gershkovich to 16 years in a hard-regime penal colony on charges of spying. Representatives of the Russian Prosecutor General’s Office accused the journalist of “collecting classified information on behalf of the CIA about the activities of the Uralvagonzavod defence corporation, which produces and repairs military equipment.” Security forces arrested Gershkovich in Ekaterinburg in March 2023 and held him in pre-trial detention. Throughout the year, the media circulated information about the negotiations for the journalist’s exchange. Most likely, in late 2023 or early 2024, there was already a dialogue about exchanging Gershkovich and Russian opposition figure Alexei Navalny for Vadim Krasikov, an officer of the Russian special services who killed Zelimkhan Khangoshvili, a former platoon commander of the Chechen Republic of Ichkeria, during the Second Chechen War in 2019. Krasikov is serving a life sentence in Germany. Navalny’s death could significantly delay the exchange. Russia has repeatedly publicly emphasised its interest in returning its officer. During a press conference in December 2023, Putin acknowledged ongoing negotiations on a possible exchange. In an interview with American journalist Tucker Carlson, he virtually directly announced his interest in returning Krasikov. Similarly, the US had previously stated that work was underway to return Gershkovich.
- The question of another American imprisoned in Russia, Paul Whelan, a former Marine also accused of espionage, remains open.
- The conclusion of the “case” against Gershkovich legally allows his exchange to begin. The conclusion of this case was postponed several weeks ago. The court session was scheduled for August 13, and the verdict against the journalist was pronounced as soon as possible. The Russian practice of previous exchanges worked similarly: after the verdict and the transfer to the colony, the Russians began to exchange political prisoners. This fact can be seen as a confirmation of the likelihood of Gershkovich’s exchange.
- Russia and Iran sign a memorandum on huge gas supplies. At the end of June, Gazprom and the National Iranian Gas Company signed a memorandum regarding the potential supply of Russian gas to Iran. At that time, no detailed information about the agreements was known. Last week, Iranian Oil Minister Javad Owji announced the details of the signed memorandum. It concerns the possibility of Gazprom supplying Iran with up to 110 billion cubic meters of gas per year, which is 45% of the volume consumed by the Islamic Republic today. The price for this amount of gas is about $10-12 billion per year, equivalent to $100 per thousand cubic meters of gas – the lowest possible price. Currently, Russia sells gas to Europe and Türkiye for about $400 per thousand cubic meters and to China for $260. This means discounts of 75% and 62%, respectively. Today, only the CIS countries pay such a low price for Russian gas. Another important factor is that exporting such volumes of gas to Iran will require the construction of a new gas pipeline along the bottom of the Caspian Sea. Russian analysts estimate the cost of such a project to be $20 billion, with its implementation expected to take up to 10 years.
- At the same time, it should be noted that Tehran is almost completely self-sufficient in gas production. Therefore, Iran simply does not need such massive amounts of gas, suggesting that the discussion will revolve around its possible re-export to other countries. India and Pakistan could be the main buyers. However, Iran’s gas sector is under sanctions, raising questions about the legal aspects of the potential re-export of Russian energy resources.
- All these factors make us very sceptical about such a gas project. The Russian company Gazprom already has significant financial problems; for example, it has decided not to pay dividends for 2023. Given this situation, the likelihood of implementing the agreement between Iran and Russia seems low.
