"People's bonds": Russia launches mechanism to extract money from ordinary Russians – Ukrainian intelligence

The leaders of seven constituent entities of the Russian Federation are working on launching so-called "people's bonds" – an instrument designed to pull money straight out of ordinary Russians' pockets.

Source: Foreign Intelligence Service of Ukraine (FISU)

Details: Officially, the initiative is presented as financing infrastructure and social projects as well as partially covering regional budget deficits; in practice, it reflects the dire lack of resources. The pilot projects have mostly involved subsidy-dependent regions in Russia's Far East: Khabarovsk Krai, Kamchatka Krai, Primorsky Krai, Magadan Oblast, Amur Oblast, Chukotka Autonomous Okrug and Yakutia.

Ukraine's Foreign Intelligence Service notes that the offer is being marketed as "safe" and "attractive": fixed returns without market volatility at a rate no lower than bank deposits and in some cases up to 16-17% per annum, with the minimum investment starting at RUB 1,000 (approx. US$13).

Purchasing the bonds is very simple, the authorities say – it can be done online with no need for a brokerage account, with full digital identification. The volume of each issuance is limited to up to RUB 1 billion (approx. US$12.7 million), supposedly to ensure the debt is sustainable.

Quote from FISU: "Overly 'generous' terms like these have usually been an indication of heightened risk – the Russian authorities have repeatedly used similar schemes, shifting their financial problems onto citizens.

A key detail is that there is no specific target for which the funds raised will be earmarked. The money can go anywhere: from utilities and transport to education and healthcare, or simply current expenditure. In the short term, this will help temporarily plug holes in the budget and reduce pressure on the banking system. In the longer term, it will only lock in the regions' deteriorating financial condition: deficits will grow, corporate profits tax revenues will fall, and debts will be pushed into the future."

Background:

• Sanctions, the loss of external markets and a deterioration in global markets have exposed the structural weakness of Russia's regional budgets, which are no longer able to cover basic obligations.
• Long-depressed constituent entities such as Kalmykia and Pskov Oblast are the hardest hit.

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