Russia in Review

I. U.S. and Russian priorities for the bilateral agenda.

Nuclear security agenda:

The growing confrontation between Washington and Moscow over Ukraine has derailed a recent accord that promised one of the most expansive collaborations ever between the countries’ nuclear scientists, including reciprocal visits to atomic sites to work on projects ranging from energy to planetary defense. (New York Times, 08.02.14).
Russian Foreign Ministry said in an August 4^th statement: “We are perplexed that the United States has still not ratified the vital Amendment of 2005 to the Convention on the Physical Protection of Nuclear Material.... We would like to hope that Washington, United States, will finally ratify this Amendment by the next summit, which is scheduled for 2016.” (BBC, 08.04.14).

Iran nuclear issues:

After eight months of talks, Russia and Iran have yet to agree concrete details of a large oil-for-goods deal, highlighting the difficulties the two major energy producers face in overcoming sanctions from the West. On Tuesday, Russia puzzled markets when it first said the landmark deal had been agreed with Iran — but later withdrew the statement. On Wednesday, Kommersant cited sources as saying the latest figures discussed at talks were in the area of 2.5 to 3.0 million tons a year (50,000 to 60,000 barrels per day) or a tenth of the original plan. (Reuters, 08.06.14).

NATO-Russia relations, including transit to and from Afghanistan:

The head of NATO has called on Russia to "step back from the brink" of war by pulling its troops back from the Ukrainian border and warned further intervention in Ukraine would bring it greater isolation in the world. (Reuters, 08.08.14).
One in three Germans thinks a war could break out between Russia and NATO over the conflict in Ukraine, according to an opinion poll published on Wednesday. (Reuters, 08.06.14).

Missile defense:

No significant developments.

Nuclear arms control:

In a phone call between the US and Russian leaders, Barack Obama also raised concerns that Russia violated a 1987 treaty that bans all U.S. and Russian missiles of intermediate range, meaning those that can travel between about 300 miles and about 3,400 miles. In a lengthy statement devoted to the Intermediate-Range Nuclear Forces Treaty, the Russian Foreign Ministry criticized the U.S. report that included the allegation that Russia had violated the pact. "The claims are put forward practically without evidence, based on strange deductions and suppositions," the statement said. (AP, 08.01.14).

Counter-terrorism cooperation:

No significant developments.

Cyber security:

Russia has granted Edward Snowden a three-year residency permit that allows him to travel in and out of the country and eventually receive Russian citizenship, according to his Russian lawyer. (Wall Street Journal, 08.07.14).
Prime Minister Dmitry Medvedev signed a decree Friday instructing public Wi-Fi network operators to require user identification — but only in certain spots. (The Moscow Times, 08.08.14).
A Russian crime ring has amassed the largest known collection of stolen Internet credentials, including 1.2 billion username and password combinations and more than 500 million email addresses, security researchers say. (New York Times, 08.05.14).

Energy exports from CIS:

Ukraine on Friday warned that it might cut Russian oil and gas transit flows to Europe and ban Russian airlines from crossing its airspace. The measures are part of a sanctions bill targeting Moscow that will be submitted to parliament, Prime Minister Arseny Yatsenyuk said in Kiev. Yatsenyuk explained that it could include complete or partial bans on transit of all manner of resources, including energy resources and overflights. (DPA, 08.08.14).
Ukraine imported gas from Poland and Hungary in July after Russia cut off supplies, and the volume amounted to about a tenth of its imports a year ago, according to domestic gas transport monopoly Ukrtransgaz on Thursday. (Reuters, 08.07.14).

Bilateral economic ties:

Russia has banned ban all beef, pork, fruit, vegetables and dairy products from the European Union, the United States, Canada, Australia and Norway for one year. Tyson Foods Inc., the largest meat producer in the United States, slipped 2 percent after Russia banned imports of US food. Overall, the U.S. exported well over $1 billion of food to Russia last year. Poultry exports, the largest in the food category, amounted to more than $300,000 million in 2013; nut exports to Russia topped $173 million; and soy bean exports were over $156 million. Pork exports amounted to $16.1 million last year. Russia ranks 23rd among buyers of food from the United States (Washington Post, Boston Globe, Reuters, 08.08.14).
U.S. Commerce Department data released Wednesday underscored that sanctions are a double-edged sword: U.S. exports took the hardest hit, plummeting 34% on the month to the lowest level since January last year. Imports from Russian firms, meanwhile, fell nearly 10%, the third consecutive month of declines in U.S. purchases. That asymmetric fall between buying and selling pushed the trade gap with Russia up 25% to $1.13 billion. (Wall Street Journal, 08.06.14).
Boeing Co. and United Technologies Corp. have been stockpiling titanium parts from a Russian producer in case economic tensions between Washington and Moscow disrupt supplies of the metal critical to building jetliners. (Wall Street Journal, 08.08.14).
Goldman Sachs Group’s credit exposures in Russia, which faces U.S. sanctions for its actions in Ukraine, totaled $473 million as of June. Its market exposure in the country was $624 million, Goldman said in the filing. (Wall Street Journal, 08.07.14).
Coca-Cola HBC warned volumes would fall for the rest of the year, citing a "sudden deterioration" in Russia, its biggest market. In Russia, volumes fell by a low single digit percentage in the second quarter, the first decline in 11 quarters. The company said the escalation of the crisis in Russia and Ukraine had affected consumer spending in the region. (Reuters, 08.07.14).
A possible Russian ban on European and American flights transiting over Siberia would affect 12 of Delta's services. (The Moscow Times, 08.08.14).
The biggest U.S. exports to Russia include commercial aircraft employed in state-controlled airlines, as well as cars, mining equipment and oil field machinery. Mr. Putin's decree didn't threaten those products. Overall, Russia represents about 1% of U.S. international trade, but it represented almost 7% of the EU's exports in 2013. (Wall Street Journal, 08.06.14).

Other bilateral issues:

President Obama spoke with Russian President Vladimir Putin on Friday for the first time since Malaysia Airlines Flight 17 was downed. According to the White House, Obama expressed his concerns about Russia's support for the separatists in Ukraine, and urged a diplomatic solution. In the Kremlin version of the call, Putin warned Obama that economic sanctions against Russia related to its involvement in Ukraine are "counterproductive," and could damage U.S.-Russia cooperation and general global stability. (Washington Post, 08.03.14).
The United States warned Russia on Friday that any further intervention in Ukraine, including under the pretense of delivering humanitarian aid, would be viewed as "an invasion of Ukraine." (ABC, 08.08.14).
In an interview with the Economist magazine Barack Obama said: “I do think it is important to keep perspective. Russia doesn't make anything. …Immigrants are not rushing to Moscow in search of opportunity. The life expectancy of the Russian male is around 60 years old. The population is shrinking.". (Reuters, 08.04.14).
NASA will not use any Russian equipment to build its newest Mars rover. (The Moscow Times, 08.03.14).
Russia's Federal Migration Service moved to deport Jennifer Gaspar, American wife of high-profile human rights lawyer and activist Ivan Y Pavlov, who lives in St Petersburg. (New York Times, 08.06.14).
A poll by the Levada Center revealed that a mere 18 percent of respondents harbor favorable attitudes toward the U.S., a significant decrease from January's 43 percent. The number of those who view the U.S. negatively, on the other hand, skyrocketed from 44 percent in January to 74 percent in July. The Moscow Times, 08.06.14).

II. Russia news.

Domestic politics, economy and energy:

President Vladimir Putin's approval rating has reached a record high of 87 percent, according to the results of a survey published Wednesday by the independent Levada Center pollster. Prime Minister Dmitry Medvedev's approval rating sits at 71 percent (The Moscow Times, 08.06.14).
ING economists estimated that the ban on Western food imports would save Russia about $800 million a month, a figure probably less than the increase in capital flight as investors flee ruble assets. (Reuters, 08.08.14).
The Finance Ministry projects that in 2014 regional governments will run a combined deficit of some 857 billion rubles ($24 billion), some 1.2 percent of gross domestic product (GDP) — a figure that has grown steadily from just 35 billion rubles ($980 million) in 2011. (Reuters, 08.01.14).
A fall in sales of new cars and light commercial vehicles has worsened in Russia, dropping by 22.9% in July compared with a year ago. (Wall Street Journal, 08.08.14).
Russian deputy economy minister Sergei Belyakov apologized in a post on his personal Facebook page on August 6 for the government's decision to divert money from pension funds. He was subsequently fired. (RFE/RL, 08.06.14).
Two major state-controlled Russian banks - Gazprombank and Rosselkhozbank have turned to the government for nearly $4 billion to shore them up after they were excluded from Western capital markets last month as punishment for Russia's support of Ukraine's separatist militias. (Moscow Times, 08.07.14).
Alexei Kudrin, Russia's former finance minister, said the EU sanctions would drive borrowing costs up by 1.5 to 2.5 percent but that Sberbank was in good shape. (Reuters, 08.03.14).
Gennady Timchenko, a Russian billionaire and close ally of President Vladimir Putin, said Monday that Russia's business elite would not put pressure on Putin to change tack on Ukraine due to Western sanctions, which would only strengthen support for the president's policies. (Reuters, 08.04.14).
Rostechnadzor, the Russian regulator, has granted the Research Institute of Atomic Reactors (NIIAR) a license to site a multi-purpose fast neutron research reactor (MBIR) in Dimitrovgrad, in the Ulyanovsk region. (WNN, 08.06.14).

Defense:

Russian military officials say they have launched four days of military exercises in central and western regions of Russia, including most of western Russian and areas that border Ukraine. Interfax quoted Russian Air Force spokesman Igor Klimov as saying that the August 4 to August 8 exercises include the use of 100 military aircraft. (RFE/RL, 08.04.14).
The Defense Ministry has called up reservists for military drills to be conducted across the nation from August to October. (The Moscow Times, 08.01.14).
Russia's armed forces plan to double the number of paratroopers by 2019 to 72,000. (The Moscow Times, 08.06.14).

Security, law-enforcement and justice:

No significant developments.

Foreign affairs and trade:

Russia has banned ban all beef, pork, fruit, vegetables and dairy products from the European Union, the United States, Canada, Australia and Norway for one year. Russia has also prohibited Ukrainian airlines from making transit flights over Russia's airspace to Azerbaijan, Georgia, Armenia and Turkey. Prime Minister Dmitry Medvedev said Moscow is considering imposing similar restrictions on EU and U.S. companies, banning them from transit flights over Siberia to Asia. Narrowing the air corridors open to Western carriers was another possibility, he said. (New York Times, Washington Post, Wall Street Journal, 08.07.14).
After the United States, Russia is the biggest market for European agricultural exports, worth about 11.8 billion Euros last year, or roughly $15.7 billion. That is about 10 percent of European agricultural trade; the vast majority of that commerce stays within the 28-nation bloc. (New York Times, 08.08.14).
European Central Bank President Mario Draghi said the recent escalation of tensions in Russia and Ukraine could weigh on the euro zone's "moderate and uneven" recovery. But it is difficult at this point to gauge the effects of geopolitical risks or the recently announced sanctions on Russia, he said. (Wall Street Journal, 08.08.14).
Senior agricultural experts from all 28 European Union countries will hold an emergency meeting next Thursday to analyze the impact of a Russian ban on EU food imports. 10 percent of EU agricultural exports go to Russia annually with a total value of around 11 billion Euros (14.73 billion US dollar). ( Reuters, 08.08.14).
By nation, Poland and Norway stand to lose the most money from Russia’s food ban: Exports to Russia of the now-banned products were worth more than $1 billion to each country last year. (Wall Street Journal, 08.08.14).
Rheinmetall AG, the German industrial group caught in the cross hairs of Western sanctions against Russia, has lowered its sales and earnings forecasts partly because a canceled export license for a Russian military training center. (Wall Street Journal, 08.06.14).
Russian tourists spent some 1.6 billion euros ($2.1 billion) in Spain last year, almost five times the 388 million euros ($520 million) that the country receives from food exports to Russia. (Reuters, 08.08.14).
Between April and June, there were ‎30,200 fewer Russians visiting the Czech Republic than a year earlier, which represents a 14% annual decline. Russians are the second-largest group of tourists to the Czech Republic only behind Germans. (Wall Street Journal, 08.07.14).
Finland could face an economic crisis because of European Union sanctions against Russia and Helsinki will seek financial compensation from the EU if it is disproportionately hit by the measures, its prime minister said on Wednesday. Russia is Finland's third largest export market, accounting for about 10 percent of total Finnish sales abroad. Russian tourists also spend roughly 2 billion Euros ($2.7 billion) annually in Finland, a neutral country which shares a long border with Russia. (Reuters, 08.06.14).
Bulgaria, one of five EU states that depend totally on Russia for nuclear fuel, and Westinghouse Electric Company signed a shareholder agreement on Friday paving the way for construction of a new nuclear reactor estimated to cost $5 billion. (Energy Monitor, 08.05.14).
Switzerland on Tuesday added 26 Russians and Ukrainians and 18 organizations to a list designed to prevent it being used as a conduit to circumvent Western sanctions against Russia. (Reuters, 08.05.14).
Canada imposed another round of sanctions on Wednesday against Russian and Moscow-backed Ukrainian entities. Ottawa's latest targets for sanctions include four Russian lenders—Bank of Moscow, Russian Agricultural Bank, Russian National Commercial Bank and VTB Bank OAO—and Dobrolet Airlines, a low-cost airline flying from Moscow to Crimea. (Wall Street Journal, 08.06.14).
Russian state oil company Rosneft has concluded agreements with Norwegian and Swiss companies that circumvent EU sanctions prohibiting the supply of technologies and equipment for deep-sea oil production, including on the Arctic shelf. (Itar-Tass, 08.06.14).
A poll by Berlin-based Infratest Dimap for broadcaster ARD said 70% Germans view tougher sanctions against Russia as the right thing to do. 80% of respondents said Russia was largely to blame for the escalation of the conflict in eastern Ukraine. Wall Street Journal, 08.08.14).

Russia's neighbors:

On Thursday Ukrainian President Petro Poroshenko accepted the resignation of Andriy Parubiy, who as head of Ukraine's National Security and Defense Council was a leader of the war effort. (Wall Street Journal, 08.08.14).
On Thursday, Alexander Borodai, a Russian citizen with close Moscow ties, resigned as prime minister of the Donetsk People's Republic. The rebel government will now be led by Alexander Zakarachenko, a local man and leader of an insurgent militia, but Russian citizens still maintain important roles in the insurgent movement. (Wall Street Journal, 08.08.14).
Kiev's military losses now total more than 400 since the conflict with the pro-Russian separatists erupted in April. The United Nations High Commissioner for Human Rights says the conflict has cost the lives of more than 1,100 people in all, including government forces, rebels and civilians.(Reuters, 08.08.14).
In Geneva, the United Nations High Commissioner for refugees said Tuesday that Ukraine had reported 117,000 people displaced within the country since the conflict began. Russia said about 168,000 Ukrainians had crossed the border as refugees, part of an overall flow of 730,000 into its territory since the start of the conflict, the UNHCR said. (Wall Street Journal, 08.05.14).
Five Ukrainian military officers have been arrested in Russia on accusations of directing artillery attacks into Russian territory, Ukrainian officials said Thursday. The five were part of a group of more than 400 Ukrainians who crossed into Russia on Monday. (Washington Post, 08.07.14).
Ukrainian army units which had been trapped by separatists on the border with Russia broke out of the blockade on Friday and rejoined government forces, but 15 soldiers and border guards were killed in the operation. (Reuters, 08.08.14).
On Thursday rebels brought down a Ukrainian Mig-29 fighter plane and a military helicopter sent into the conflict zone to pick up casualties. (Reuters, 08.08.14).
A small U.S. military team has arrived in Kiev to help investigate the downing of Malaysian Airlines Flight MH17, the U.S. said, with more direct training support for Ukraine also possible Ukraine has claimed that pro-Moscow separatists downed the plane after mistaking it for a Russian Aeroflot plane. (The Moscow Times, 08.08.14, Reuters, 08.06.14).
The Malaysian government said Thursday that investigators hope to complete by next week a preliminary report on the downing of Malaysia Airlines Flight 17 in Ukraine. (Wall Street Journal, Washington Post, 08.07.14).
Another Russian journalist has gone missing in eastern Ukraine while covering the ongoing conflict there. Andrei Stenin's employer, the state-run news agency Rossiya Segodnya, said editors had been unable to reach him since Aug. 5. (Reuters, 08.08.14).
The Ukrainian government is forecasting a GDP decline of 6% to 7% this year. Economics Minister Pavlo Sheremeta said at least three percentage points of that is a result of the war in the east. Ukraine's unemployment rate has already jumped from 7.7% last year to 9.3% in the first quarter of 2014. Ukrainian Prime Minister Arseniy Yatsenyuk assesses annual losses of Ukraine from Russia's policy at $7 bln. (Wall Street Journal, Interfax, 08.07.14).
The Ukrainian government is considering sanctions against Russian individuals and companies in retaliation for Russia's involvement with separatists (Washington Post, 08.08.14).
Vladimir Putin spoke to Angela Merkel by phone Wednesday for the first time since before the U.S. and Europe last week imposed the harshest sanctions to date. "The chancellor voiced concerns that reinforcements for the separatists…were being delivered from Russia," a spokeswoman for Ms. Merkel said. (Wall Street Journal, 08.07.14).
Barack Obama says Ukraine does not need additional military assistance to help fight pro-Russian separatists but an invasion by Russia would raise "a different set of questions." (RFE/RL, 08.07.14).
U.S. and European sanctions on Russia "are working as intended," Barack Obama said Wednesday, because there has incredible strain on the country's economy. Still, Mr. Obama concluded the U.S. did not know if the sanctions regime had actually failed. (CBS, 08.06.14).
Russia has roughly doubled the number of its battalions near the Ukrainian border, Western officials said Monday, and could respond to the Kiev government's gains there by launching a cross-border incursion with little or no warning. (New York Times, 08.05.14).
The American defense secretary, Chuck Hagel, said of a Russian incursion into Ukraine: “It’s a threat, it’s a possibility, absolutely.” (New York Times, 08.06.14).
Joe Biden talked on the phone with Petro Poroshenko, and announced $8 million in U.S. aid for border security, including surveillance equipment, small boats and patrol vehicles. The Pentagon has separately asked for $19 million more for training. (Washington Post, 08.03.14).
The European Union applied "double standards" in lifting a ban on military exports to Ukraine, in a move that could contribute to internal repression in the conflict-torn country, Russia's Foreign Ministry said in a strongly worded statement. (Moscow Times, 07.03.14).
The second half of the Chernobyl arch has been raised in a landmark event for the long term management of the accident site. (WNN, 08.05.14).
The presidents of Armenia and Azerbaijan are traveling to Russia's Black Sea resort of Sochi on August 8 to meet individually with Russian President Vladimir Putin and possibly gather for a trilateral meeting. The visits of Armenian President Serzh Sarkisian and Azerbaijani President Ilham Aliyev to Sochi come amid heightened tensions between the two Caucasus nations over the Nagorno-Karabakh region, where there has been sporadic fighting for days. At least 20 people have been killed. (RFE/RL, 08.008.14).
A resident of an Armenian border village arrested by Azerbaijani security forces was reported dead on Friday one day after crossing into Azerbaijan in disputed circumstances. (RFE/RL, 08.08.14).
UN Secretary-General Ban Ki-moon is urging Azerbaijani and Armenian forces to abstain from violence and adhere to their cease-fire agreement after days of deadly skirmishes in the breakaway territory of Nagorno-Karabakh. (RFE/RL, 08.05.14).
A prominent human rights defender has been detained in Azerbaijan. The daughter of Intiqam Aliyev said on August 8 that her father had been taken into custody by police in Baku and that Aliyev's house was being searched by investigators. Aliyev is the latest rights defender to be arrested in Azerbaijan. Rasaul Jafarov was detained on August 2 in connection with an investigation into alleged tax evasion and abuse of authority. Activists Leyla and Arif Yunus are also in custody after being arrested on charges of treason, tax evasion, and illegal entrepreneurship. (RFE/RL, 08.08.14).
A Georgian court has ordered the pre-trial detention of former President Mikheil Saakashvili in absentia. (RFE/RL, 08.02.14).

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