To strengthen the position of its elite, Russia discovers “new oil”

2021-07-20

Analysts at Minchenko Consulting have released a new Politburo 2.0 report on the state of affairs in Russian politics. Experts have noted a number of trends that indicate that state elites are seeking to strengthen their positions, which are still highly dependent on oil prices and now also on cross-border carbon regulation. In this regard, the government has already taken a number of necessary measures, including the supervision of deputy prime ministers of the federal districts. RTB explores how construction is becoming the new oil.

The further we go, the greater the risks borne by the system built on super-profits from the export of hydrocarbons: the crisis of relations in OPEC +, cross-border carbon regulation within the European Union and surges in raw material prices lead to instability. Even the construction of the Nord Stream 2 gas pipeline, which is capable of mitigating risks is not a way of eliminating them.

The country’s main builder is Marat Khusnullin, who currently holds the post of Deputy Prime Minister in the government of Mikhail Mishustin. In fact, Khusnullin also became the delegate responsible for the implementation of regional programs, including, for the most part, infrastructure projects. He will head the government commission on regional development and will be empowered to monitor the work of deputy prime ministers of the cabinet in the federal districts.

Deputy Prime Minister of the Russian Federation since 2020 – Marat Khusnullin

Back in March, the elites set a course for “Aggressive Infrastructure Development” – in accordance with this, a number of state strategies and plans were approved. In the construction industry, a pool of relevant documents is called the “Aggressive Construction Strategy”. According to this document it is planned to commission 120 million sq. m of housing per year by 2030 – and all this is without infrastructure facilities. Many changes will be presented under the guise of a massive renovation.

To ensure a tremendous pace, the Strategy envisages the abolition of many optional rules for developers. In turn, most of the mandatory rules and regulations will become optional. In this regard, there is a great risk of falling not only in costs but also in the quality of construction.

Construction must be economical: the government intends to limit costs for business and the budget at the expense of cheap labour to maximise profits. Major government officials do not forget to remind about the importance of actively attracting migrant workers, there are special programs for these measures. The process of entering the country for labour resources continues to be simplified.

An initiative to attract prisoners is subordinated to the goals of the fastest acceleration of the growth of infrastructure. This cheap labour force, fully controlled by the employer is an extremely profitable resource for projects that require efficiency.

To build up the required square meters, you need working hands. A large-scale construction project needs both unassuming migrants and prisoners as well as skilled and experienced workers who are able to participate in the broadest training of young specialists – pensioners.

“When I had to solve complex problems of metro design, we gathered designers from all over the Soviet Union, who were already retired,” said Marat Khusnullin.

Preparations for a large-scale all-Russian construction project are in full swing. This project is intended to solve several problems at once: to increase the incomes of the local business of agglomerations and large construction capital, bank income from mortgages, budget revenues from the second most profitable industry, the purchasing power of the population due to stable employment and the expected increase in wages due to a significant reduction in business costs.

Revitalization of the economy is one of the expected outcomes of the Strategy implementation. At the same time, it is absolutely clear that there will be no cardinal improvements in the life of any employee and the debt load will increase – after all, someone has to pay for the Great Construction. The main question remains whether big capital will be able to dodge the explosion of a huge mortgage bubble that arose on the basis of rapidly growing massive debt on loans.