SITUATION UPDATE BRIEF: RUSSIA – GERMANY: RISING POLITICAL INTOLERANCE COULD THREATEN RUSSIAN ECONOMIC RECOVERY

Key Takeaways

The poisoning of prominent Russian opposition leader Alexei Navalny on 20 August has triggered widespread international condemnation. In particular, the announcement by German authorities that a Novichok nerve agent was used has led to accusations of Kremlin involvement, raising regional tensions and threats of sanctions.

However, the absence of any identified and culpable individuals is preventing the deployment of targeted sanctions, increasing the prospect of broader sanctions being introduced. With pressure mounting for the West to respond, a broader sanctions regime will not only threaten Russia’s economic recovery but also pose potential new challenges for firms conducting business in Russia.

In addition, the competition of the Nord Stream 2 gas pipeline remains particularly uncertain, with German Chancellor Angela Merkel facing increasing pressure to cancel the project. With Merkel resigning next year, the future of the project will likely become a major political issue ahead of the CDU leadership election in December, increasing policy risk for involved companies.

The timing of the poisoning, just weeks before regional elections on 13 September, also points to an emerging pattern of growing political intolerance. With the ruling United Russia party increasingly threatened by Navalny’s “Smart Voting” tactics, numerous further attacks against opposition politicians in recent days suggests the elite are moving against the non-systemic opposition.


Context

On 20 August the prominent non-systemic opposition leader Alexei Navalny, founder of the Anti-Corruption Foundation (FBK), was poisoned in Tomsk by what German authorities maintain is a form of Novichok nerve agent. Navalny’s poisoning, with a similar substance to that used in the 2018 Salisbury attack in the UK, has led to accusations of Kremlin involvement, with the possibility of Western sanctions threatening to undermine Russia’s economic recovery. However, the timing of the poisoning, just weeks before regional elections, also potentially points to an increasingly intolerant Kremlin following the consolidation of President Vladimir Putin’s position after sweeping constitutional amendments were passed in July…

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