Russian pension reform is now official. The new law, which President Vladimir Putin signed yesterday, raises the official retirement age by five years, making the age of retirement 65 for men and 60 for women. It’s the sixth major pension reform enacted since the Soviet Union fell, and it comes at a huge political cost to Putin. The president’s famously high approval rating now stands at just 58 percent – 17 points lower than where it stood last year, according to the Levada Center. (The Russian army has a higher public approval rating at 66 percent.) Putin’s candidates failed to win gubernatorial elections in districts that tend to receive a lot of government investment and subsidies. In the past month, six governors have either quit or been replaced by officials hand-picked by Putin, no doubt part of the lead-up to 2019 gubernatorial elections. Putin raised the retirement age simply because the government needs more money. Higher oil prices have helped, but they can go only so far. Russia needs to enact structural reform, however painful, if it is to insulate its economy from the vagaries of oil prices.
European round-up. It’s been a busy 24 hours on the Continent, and while no single development stands out, the picture is one of uncertainty. Austrian Chancellor Sebastian Kurz met with Russian President Vladimir Putin and spoke movingly about how EU-Russia ties should be repaired – only for the Dutch Defense Minister to accuse Russia of a cyberattack on the Organization for the Prohibition of Chemical Weapons today. (The United States and the United Kingdom have also accused Russia of similar crimes in the past 24 hours, which seems more than a little coincidental.) Meanwhile, we finally have some clarity on Italy’s budget deficit projections: 2.4 percent in 2019, followed by decreases to 2.1 percent in 2020 and 1.8 percent in 2021. For all its bravado, the government in Rome appears to be pretty conciliatory, though a government official reserved the right to change the numbers depending on how things go in 2019. Farther east, the Czech parliament voted to condemn the European Parliament for initiating Article 7 procedures against Hungary. Last, we turn to Serbia, whose media is notoriously difficult to parse. A pro-Western daily reported that Russia wants Serbia to stop escalating tensions in Kosovo, while a nationalist daily discussed the prospects for war.
The peculiar geopolitics of oil. Reuters issued a bombshell report earlier this morning. According to four unnamed sources, Russia and Saudi Arabia have reached an agreement to raise oil production by as much as 500,000 barrels per day. The United States is rumored to support the agreement. We say “rumored” because this agreement is too politically noxious for public fanfare. Saudi Arabia and Russia are trying to balance between boosting prices, which would benefit their respective economies immediately, and oversupplying the market, which would hurt them down the road. Russia’s behavior here is interesting. In the past month, Russia has reached a deal with Turkey in Idlib and, despite its tensions with Washington, has agreed with the U.S. to boost production – which of course comes at Iran’s expense. The geopolitics of oil has a logic all its own.
- U.S. Secretary of State Mike Pompeo has canceled the Amity Treaty, which allowed Iran to take the U.S. to the International Court of Justice for applying sanctions to humanitarian supplies headed to Iran. (The court ruled in favor of Iran.) The treaty also provided a framework to facilitate business and investment and to regulate consular relations.
- Ukraine’s Foreign Ministry declared persona non grata Hungary’s consul in Zakarpattia, a Ukrainian region that borders Hungary.
- South Korea’s Foreign Minister said that, in exchange for North Korean facilities closures, the U.S. should declare an end to the Korean War. She also gently criticized the U.S. for continuing to demand that Pyongyang provide a full inventory of its nuclear and missile facilities before moving forward.
- Russia has announced that Foreign Minister Sergey Lavrov will meet with his Slovak counterpart Oct. 9.
- The U.S. Congress passed a law creating the U.S. International Development Finance Corp, which will be responsible for lending money to foreign nations for development projects.
- Army chiefs from Sudan and South Sudan confirmed an agreement to conduct joint military exercises and discussed the formation of joint forces.