Page 52 - Russia OUTLOOK 2024

informal control.
This hybrid capitalism has always been a favoured policy. Russia is now a capitalist free market economy, but the Kremlin has always been keen to keep some control over key businesses and sectors. To get the best of both worlds, typically the Kremlin sets up or promotes at least two state-owned champions in each key sector – Sberbank and VTB in banking, Rosneft and Gazprom Neft in oil – but allows a raft of privately owned entities to compete against them, including foreign-owned companies.
The idea is that the two state-owned titans will compete with each other and have the benefit of this competition to keep them efficient. They also have pressure from underneath from the privately owned companies to add additional impetus. The result is all the benefits of a market economy, but where the Kremlin remains in direct control of the core of each sector. The first round of stoligarchs are the men that run these competing national champions.
The current redistribution of assets has expanded this system. The nationalisations have been split between entrepreneurs and the state. The entrepreneurs have picked up formerly foreign-owned assets in non-politically sensitive sectors like retail and food processing, whereas the state has taken over big companies that are economically significant to whole cities or regions, such as in the automotive sector.
The new class of stoligarchs are state-sponsored “minigarchs”: rich enough and competent enough to take the formerly foreign-owned businesses over, but not prominent enough to attract the attention of the US Office of Foreign Assets Control (OFAC) or end up on the EU sanctions list.
In this sense, sanctioning the traditional oligarchs has been a policy mistake, as they have no influence over the Kremlin or Putin, and never have had much influence ever since Putin’s famous oligarch meeting in 2000, when he told them to stay out of politics.
• 2.8 Foreign exchange reserves
The international reserves of Russia as of December 1, 2023 amounted to $592.352bn, which is 2.82% (or $16.269bn) higher than the figure at the beginning of November, the Bank of Russia said in a statement.
Just over half of all Russia’s reserves have been frozen, with two thirds of that sum held in Belgium.
Foreign exchange reserves in November rose by 3.06% to $440.475bn. The value of monetary gold in reserves increased over the month by 2.15% and amounted to $151.88bn.
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