June 18, 2021

Ahead of the U.S.-Russia summit, Russian President Vladimir Putin claims the Russian economy has now reached pre-pandemic levels. In an attempt to project strength ahead of his meeting with U.S. President Biden in Geneva, Putin announced the recovery of the Russian economy from the pandemic. Putin’s posturing ahead of the summit is no surprise as he seeks to elevate Russian influence on the international stage, and any numbers out of the Kremlin should be cause for skepticism. But the World Bank also recently announced that it expects Russian GDP to grow by 3.2% in 2021 and 2022 thanks to increasing vaccination rates and returning demand. These figures are in line with Russian central bank figures which estimate growth of 3-4% in 2021. The World Bank also reported that the Russian banking sector has been resilient and labor markets are improving, but not to pre-pandemic levels. Russia’s economy contracted 3% in 2020 due to Covid-19 and the drop in oil prices, the worst contraction in Russia in over a decade. Despite a recovery from the pandemic, Russia’s commodity-dependent economy has been in decline for some time due to the lack of investment, economic structural issues, and corruption. Russia’s economy has also been hit by international sanctions which have been in place since 2014 when Russia annexed Crimea. Additional sanctions have been placed on Russia since then, due to its involvement in Ukraine, interference in the U.S. elections, the use of nerve agents against Russian opposition figures, including Alexei Navalny, and most recently, for its role in the SolarWinds hack against U.S. government agencies and private sector companies. But economic concerns and sanctions seemed to take a backseat to the other matters raised at the Biden-Putin summit, including nuclear weapons, cybersecurity, the Arctic, Afghanistan, and human rights. Most issues went unresolved by the end of the short “Strategic Stability Dialogue,” but Biden and Putin did agree to send their ambassadors back to their posts in Moscow and Washington, DC. They also agreed to explore further U.S.-Russian dialogue on strategic stability and cybersecurity. The summit served as a first step to repair the spiraling U.S.-Russian relationship, but working level meetings will be the real key to any future success in easing tensions between the two nations.

For more of Jack Devine’s thoughts on Russia and the ongoing intelligence threat Russia poses to the United States, check out his recent OpEd in The Daily Beast, “We Need Nothing Short of New Moscow Rules to Wrangle Putin.”

Nigeria’s conflict with Twitter is indicative of growing socio-economic unrest. Tension between Twitter and the Nigerian government has been increasing over the past year and came to a climax earlier this month when President Muhammadu Buhari outright banned the social media giant and threatened to prosecute anyone using it. The controversy erupted when President Buhari, who has over 4 million followers on Twitter, made a tweet threatening to punish regional separatists and Twitter deleted it, deeming the message in violation of its abusive behavior policy. Since 2020 Nigeria has been dealing with increasingly challenging political and economic circumstances, including a decrease in oil output amid the Covid pandemic, rampant kidnappings by organized criminal groups, an entrenched violent Islamic extremist element, and increasing unemployment- particularly of its youth. Earlier this year, in a move likely triggering Nigeria, Twitter decided to open its first Africa base in Ghana, describing the nation as “a champion for democracy, a supporter of free speech, online freedom and the Open Internet.” According to estimates by Nigerian thinktank NOI, nearly 40 million Nigerians – mostly in the south, regularly use Twitter to express political dissent or advocate for government accountability on issues ranging from police brutality to infrastructure repair. But Twitter is also commonly used to advertise businesses and search for employment, suggesting that the ban could negatively impact the local economy. President Buhari, one of several global leaders frustrated with Twitter’s governance, might now be looking to support a nationally regulated, tax-paying social media platform as an alternative. Similar efforts worldwide have resulted in the ascent of less robust, more overtly partisan platforms. Nigeria’s ban has met with internal opposition from groups advocating for human and constitutional rights and has been condemned by the U.S. and the European Union among others. While several nations have restrictions on Twitter or have placed a temporary ban on the platform in the past, only three nations have completely banned the platform: China, Iran and North Korea.

El Salvador is the first country to pass legislation recognizing Bitcoin as legal tender, leading to questions of implementation and risk. The U.S. dollar (USD) will remain El Salvador’s official currency, but with Bitcoin (BTC) as a payment option for everything from taxes to food, President Nayib Bukele’s move welcomes cryptocurrency investment at a time when global crypto operations are in flux due to increased regulations stemming from environmental and cybercrime concerns. El Salvador has experimented with a limited, BTC-based economy with outside investors at its rural beach area El Zonte to a debatable degree of success. Details of the new legislation have been largely shared via social media, leading some to assert that Bukele is trying to divert attention from recent corruption scandals that have hurt his public image. Under the new law, the exchange rate between BTC and USD will be dictated by the market, and exchanges in BTC will not be subject to capital gains tax. Businesses without the necessary technology to transact in BTC will not be penalized for refusing the currency at present. Bukele has also touted BTC to facilitate the transfer of remittances, which account for some 20% of El Salvador’s economy. It is notable that Bukele chose to institute BTC as opposed to a national digital currency that the country could better manipulate. But details are scarce, and questions on implementation abound. It takes money to have a smartphone with enough functionality and cell service to make BTC transactions, and many of the unbanked citizens who could benefit the most from access to digital payments will likely remain without access. BTC is also volatile, and a lot of local businesses will want to exchange it for USD as quickly as possible. El Salvador has promised that the government will establish a $150 million fund so that businesses can promptly exchange BTC for USD, but the underlying exchange mechanism for these transactions is unreliable and too opaque according to many industry professionals. The fund could also be readily abused by crypto-bearing criminals looking for an easy place to cash out. In addition, the new law could impact international economic agreements. The IMF, who is currently in the middle of loan negotiations with El Salvador on a $1bn program, has already expressed concerns about the legislation, and the World Bank rejected El Salvador’s request to help with BTC implementation.