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Russia in Review

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Russia in Review: a digest of useful news from U.S.-Russia Initiative to Prevent Nuclear Terrorism for July 25-August 1, 2014

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

Nuclear security agenda:

  • The Obama administration in its proposed 2015 budget chose to cut nuclear nonproliferation programs in the Energy Department by $399 million while increasing spending on nuclear weapons by $534 million, according to a new analysis of nuclear security spending by a bipartisan group at Harvard’s Kennedy School of Government. (Center for Public Integrity, 07.30.14).

Iran nuclear issues:

  • No significant developments.

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

  • NATO is not well prepared to face the new threat posed by Russia and has serious deficiencies in its command structures, its ability to predict and warn of potential attack, and in the readiness of its forces, a committee of U.K. lawmakers warned Thursday. (Wall Street Journal, 07.30.14).

Missile defense:

  • No significant developments.

Nuclear arms control:

  • The United States has concluded that Russia violated the INF treaty by testing a prohibited ground-launched cruise missile, according to senior American officials, a finding that was conveyed by President Obama to President Vladimir V. Putin of Russia in a letter on Monday. Separately, the Obama Administration submitted a report to the Congress on adherence to arms control. State Department Spokeswoman Jennifer Psaki said that in the report the U.S. "determined that the Russian Federation is in violation of its obligations under the Intermediate-Range Nuclear Forces Treaty.”  (KUNA, 07.29.14, New York Times, 07.29.14).
  • The Russian government on Wednesday defended itself against the INF treaty-violation accusations and responded with its own allegations that some U.S. ballistic missile defense activities contravened the accord. The Russian Foreign Ministry in a statement said: "We have accumulated a considerable amount of complaints to [be addressed to] the U.S. in the framework of the treaty. In particular, on target missile defense tests similar in characteristics to the short- and intermediate-range missiles and the manufacturing of armed drones, which meet the treaty's definition of ground-launched cruise missiles." (GSN, 07.31.14).
  • Russia's top general, Valery Gerasimov, told the chairman of the U.S. Joint Chiefs of Staff on Thursday that Moscow was committed to adhering to the Intermediate-Range Nuclear Treaty after Washington accused Russia of violating the agreement.  (Reuters, 07.31.14).
  • NATO and Poland joined with the United States on Wednesday in voicing concerns that Russia was in violation of a Cold War-era nuclear missile treaty. (GSN, 07.31.14).

Counter-terrorism cooperation:

  • No significant developments.

Cyber security:

  • The asylum granted by Russia to NSA leaker Edward Snowden ran out last night with no extension announced. (Washington Post, 08.01.14).

Energy exports from CIS:

  • Officials from Russia, Ukraine and the European Union will discuss gas supplies on Sept. 12. (Reuters, 08.01.14).

Bilateral economic ties:

  • International payment systems operators Visa and MasterCard said Wednesday that they would not stop servicing the cards of VTB, Bank of Moscow and Rosselkhozbank after they were hit by U.S. sanctions. (The Moscow Times, 07.30.14).
  • Bank of America said on Tuesday that its net exposure to Russia stood at $3.94 billion, down more than 40% from $6.72 billion at the end of December and down from $5.21 billion at the end of March.  (Wall Street Journal, 07.29.14).
  • Russia accounts for 8.8% of J.P. Morgan Chase's EMBI Global sovereign index and 12.8% of the CEMBI corporate bond index.  (Wall Street Journal, 07.30.14).
  • Hot on the heels of accusations that McDonald's was misleading customers about the nutritional value of its products, Russia's food safety watchdog on Monday said it has opened an investigation into the cheese used by the chain. (The Moscow Times, 07.28.14).
  • With McDonald's already under the microscope from food hygiene inspectors, a lawmaker has asked Russia's consumer rights watchdog to open an investigation into the products sold by KFC and Burger King. (Moscow Times, 07.31.14).
  • Wendy’s Co., the third-biggest U.S. fast-food hamburger chain, said it’s retreating from the Russian market after three years, following a change in the local franchisee’s management. (Bloomberg, 07.28.14).

Other bilateral issues:

  • The rift with Russia is "not a new Cold War," U.S. President Barack Obama said Tuesday when announcing new sanctions. With the steps announced Tuesday, the U.S. now has sanctioned five out of Russia's six largest state banks. U.S. has also taken steps to penalize Russia's energy sector by restricting the export of technology that could be used to expand Russia's deep-water, Arctic offshore or shale oil production. But administration officials said the restrictions were designed to avoid affecting current energy production capabilities. (Wall Street Journal, 07.29.14).
  • Russia will not impose like-for-like measures or act "hysterically" over Western economic sanctions, Foreign Minister Sergei Lavrov said Monday, trying to stake out the high ground amid growing tensions with the West. (Reuters, 07.28.14).
  • Russian Foreign Minister Sergei Lavrov and U.S. Secretary of State John Kerry have agreed in a phone conversation on the importance of ensuring a swift ceasefire in eastern Ukraine, a Foreign Ministry statement in Moscow said."(Reuters, 07.28.14).
  • As one of its last actions before recessing for August, the Senate confirmed John Tefft to be the U.S. ambassador to Russia, a post that has been vacant since February.  (Washington Post, 08.01.14).
  • U.S. Senator Roger Wicker has asked the Justice Department to investigate whether Mikhail Lesin, Russian former press minister, violated the Foreign Corrupt Practices Act or laundered money by acquiring multimillion-dollar homes in the Los Angeles area. (RFE/RL, 08.01.14).
  • Gennady Timchenko, a billionaire with close ties to President Vladimir Putin, has accused U.S. intelligence agencies of preparing a "provocation" against the businessman. (The Moscow Times, 08.01.14).

II. Russia news.

Domestic politics, economy and energy:

  • The tragedy of WWI reminds us what excessive ambitions, an unwillingness to listen to each other and violations of liberties lead to, Russia's president said. He was speaking at the opening ceremony of the memorial to the Heroes of WWI in Moscow.(Russia Today, 08.01.14).
  • Russian President Vladimir Putin this week approved the introduction of a sales tax, aiming to prop up regional budgets amid economic turbulence exacerbated by Western sanctions, a person close to the government's economic bloc said Friday. (Wall Street Journal, 08.01.14).
  • Russia's manufacturing sector grew in July for the first time since October, ending an eight-month downturn, the HSBC Manufacturing Purchasing Manager's Index showed Friday. The manufacturing PMI index rose to 51.0 in July, moving above the 50-point mark that separates growth, and up from June's 49.1 reading. (Wall Street Journal, 08.01.14).
  • Russian stocks and the ruble slid Friday for a second day as OAO Sberbank and VTB Group fell after the European Union imposed sanctions on the nation’s biggest lenders. The benchmark Micex Index dropped 1 percent to 1,365.92 by 4:54 p.m. in Moscow, headed for a 1.6 percent decline in the week The ruble traded down 0.1 percent at 35.7845 versus the dollar, set for a 1.8 percent drop in the last five days. (Bloomberg, 08.01.14).
  • Russia has to pay the former owners of now defunct Russian oil company Yukos €1.87 billion ($2.51 billion) in compensation for unfair tax proceedings, the European Court of Human Rights said Thursday. (Wall Street Journal, 07.31.14).
  • An international tribunal in The Hague has awarded the shareholders of the now-defunct Yukos oil company more than $50 billion, in ruling on claims that the Russian government illegally seized the company from one of the country’s most powerful oligarchs. (New York Times, 07.29.14).
  • LUKoil said in a statement that it had agreed to sell 240 gas stations and six petroleum storage facilities in Ukraine to Austrian company AMIC Energy Management GmbHM. (Moscow Times, 07.31.14).
  • Some 64 percent of Russians believe that the violence in Ukraine was a "result of interference by the West," while another 20 percent blamed the "nationalist policy of the Ukrainian leadership," according to a survey by the independent Levada Center pollster. (The Moscow Times, 07.29.14).
  • A law requiring popular bloggers to register as mass media took effect Friday. (The Moscow Times, 08.01.14).

Defense:

  • The Russian navy said during Sunday’s Navy Day celebrations that a French-made Mistral-class carrier will become the flagship of its budding Mediterranean Fleet. The Defense Ministry announced Sunday that the navy will receive more than 50 warships and support vessels of various classes by the end of 2014 (The Moscow Times, 07.27.14).
  • President Vladimir Putin on Monday urged the Defense Ministry to redouble its efforts to wean the defense sector off foreign suppliers. Russian firms currently make their own versions of just 58 of the 206 types of defense products that the country imports, but state development programs should add another 40 to their repertoire by 2020. (The Moscow Times, 07.28.14).

Security, law-enforcement and justice:

  • The Moscow City Court on July 30, sentenced four men from Tajikistan and Russia's North Caucasus Republic of Dagestan to prison terms ranging from 7 to 11 years. The men were found guilty of being members of the banned Hizb ut-Tahrir group, planning to use violence to overthrow Russia's constitutional structures, and illegally obtaining and possessing weapons and explosives. (RFE/RL, 07.30.14).

Foreign affairs and trade:

  • The European Commission has published the names of eight Russians and three companies that will have their assets frozen as part of sanctions against Russia's actions in eastern Ukraine. The people on the list include billionaire businessman Arkady Rotenberg as well as Yury Kovalchuk and Nikolai Shamalov. The companies named include Russian National Commercial Bank, anti-aircraft weapons maker Almaz-Antey and Dobrolyot airline. (Reuters, 07.31.14).
  • Russia has reacted angrily to additional sanctions imposed by the European Union over Moscow's role in the Ukraine crisis, saying they would hamper cooperation on security issues and undermine the fight against terrorism and organized crime. Russia's Foreign Ministry also accused the United States, which has already imposed its own sanctions against Moscow, of contributing to the conflict in Ukraine through its support for the pro-Western government in Kiev. (The Moscow Times, 07.27.14).
  • With a statement drafted by Russia, the UN Security Council strongly condemned any sale of oil from Syria or Iraq by terrorist groups and reminded all countries that buying this illegally obtained oil violates UN sanctions. (AP, 07.28.14).
  • Moscow lashed out on Tuesday over two major rights reports by blasting the EU for its "distorted" and "superficial" coverage of fundamental rights in Europe and slamming a UN report on Ukraine as "hypocritical." (Moscow Times, 07.29.14).
  • Russia announced a ban on most fruit and vegetable imports from Poland on Wednesday and said it may extend the restrictions to the rest of the European Union. (Reuters, 07.30.14).
  • Germany and the European Union are trying to convince several non-EU countries, including Switzerland and Turkey, to join the bloc and the United States in imposing sanctions against Russia. (Reuters, 07.31.14).
  • Canada said on Tuesday it plans to impose additional sanctions on Russia in the coming days. (Reuters, 07.30.14).
  • Japan is imposing more sanctions against Russia over its support for pro-Moscow rebels in Ukraine. (AP, 07.28.14).
  • In a speech on Saturday, Prime Minister Viktor Orban of Hungary said his country was done with liberal democracy. Mr. Orban cited Russia, Turkey and China as “successful” examples of the kind of “illiberal new state based on national foundations” that he wants Hungary to be. (New York Times, 07.01.14).
  • A senior judge in London on Thursday opened a high-profile public inquiry into the poisoning death of the former K.G.B. officer Alexander V. Litvinenko, saying that allegations of Moscow's involvement would be ''of central importance.'' (New York Times, 08.01.14).
  • Russians accounted for around just 2% of London real estate transactions during the last 18 months, Savills data show. That’s a smaller contribution than North Americans, who clocked in at 3%. (Wall Street Journal, 07.29.14).

Russia's neighbors:

  • During talks in Minsk on Thursday militia leaders fighting in Ukraine and key players seeking to resolve the conflict have agreed on steps to secure a ceasefire, release of hostages and access to investigators probing the Malaysian aircraft disaster. The meeting took place at the initiative of Ukrainian President Petro Poroshenko. (Itar-Tass, Interfax, 8.01.14)
  • The leaders of Britain, France, Germany, Italy and the United States agreed by telephone on Monday that they would take further measures against Russia over the Ukraine crisis, the French presidency said. (Reuters, 07.28.14).
  • A team of 70 international experts, including Dutch and Australians, have reached the Malaysian Boeing 777 crash site in eastern Ukraine. (RIA Novosti, 08.01.14).
  • Ukrainian authorities said Monday that data retrieved from the black boxes aboard Malaysia Airlines Flight 17 showed the plane was destroyed by "massive explosive decompression" caused by shrapnel from a missile. (Wall Street Journal, 07.28.14).
  • There were reports that Ukraine's government used short-range Soviet-designed Tochka- ballistic missiles against the rebels, three U.S. officials told CNN. (CNN, 07.29.14
  • A Russian security official said up to 40 mortar bombs fired by Ukrainian forces fell in the Russian province of Rostov near the border where Ukrainian government forces are fighting pro-Russian separatists. (Reuters, 07.25.14).
  • 40 Ukrainian soldiers surrendered to Russians at the border on Sunday. (New York Times, 07.28.14).
  • Ukraine's military said 14 people, including at least 10 soldiers, were killed in an ambush by pro-Russian separatists near the town of Shakhtarsk, in eastern Donetsk region, early on August 1. (RFE/RL, 08.01.14).
  • According to a United Nations count released on Monday, 799 civilians have been killed since mid-April, when Ukraine began to battle insurgents here, and at least 2,155 have been wounded. (New York Times, 07.30.14).
  • More than 40,000 refugees from conflict-ridden eastern Ukraine have settled in Russia's neighboring Rostov region. (The Moscow Times, 07.27.14).
  • MH17 crash created "a completely new situation that makes further-reaching measures necessary," a spokeswoman for Angela Merkel said Monday. (Wall Street Journal, 07.28.14).
  • The Pentagon and American intelligence agencies are developing plans that would enable the Obama administration to provide specific locations of surface-to-air missiles controlled by Russian-backed separatists in eastern Ukraine.(New York Times, 07.28.14).
  • The United Nations has not received any hard evidence that Russia supplied pro-Russian separatists in eastern Ukraine with weapons, the United Nations High Commissioner for Human Rights said Thursday. (The Moscow Times, 07.31.14).
  • The State Department and the Office of the Director of National Intelligence on Sunday released high-altitude images that "provide evidence that Russian forces have fired across the border at Ukrainian military forces.(New York Times, 07.28.14).
  • A Russian Defense Ministry spokesman, Maj. Gen. Igor Konashenkov, charged Sunday that the United States is getting most of its intelligence data on the Russian military from social media and suggested it turn to more "trustworthy" information. (Washington Post, 07.28.14).
  • Russia's consumer protection watchdog said on Thursday that it had stopped imports of Ukrainian juice, the latest trade ban that Moscow has announced following new Western sanctions over Ukraine.  Russia may also ban imports of powdered milk and dry whey from Ukraine due to the discovery of harmful substances in them. (Interfax, 07.26.14, Reuters, 07.31.14).
  • The mayor of Kremenchuk, a town in central Ukraine, was fatally shot Saturday. The house of another mayor, in Lviv in western Ukraine, was damaged by fire from an antitank grenade launcher. (Washington Post, 08.27.14).
  • Ukraine's parliament has overwhelmingly rejected Prime Minister Arseniy Yatsenyuk's resignation. His resignation would have opened the way for early parliamentary elections. (RFE/RL, 07.31.14).
  • The Ukrainian economy contracted by 4.7 percent in the second quarter compared with the same period last year and shrank by 2.3 percent in the three months from April, when the separatist rebellion began, to June. That followed a 1.1 percent fall in gross domestic product in the first three months of the year. (Reuters, 07.1.14).
  • G7 leaders have issued a joint statement warning Russia that it will face added economic sanctions if Moscow does not change the course of its Ukraine policy. (Reuters, 07.31.14).
  • Asked whether the U.S. is considering military assistance to Ukraine, U.S. President Barack Obama said Ukraine's forces are better armed than the separatists.  US lawmakers who met Thursday with Obama said the commander in chief gave them no indication he intends to send arms to Ukraine. (Defense News, 07.31.14, Wall Street Journal, 07.29.14).
  • The Ukrainian Army in recent weeks has taken 60 cities and towns with a total population of more than one million citizens from under rebel control, Valeriy Chaly, the deputy chief of Ukraine’s presidential administration, said. (New York Times, 07.30.14).
  • The Ukrainian parliament voted to add a special 1.5 percent military duty to the personal income tax and to repeal a number of tax exemptions for various industries. Without a tax increase, funding for national defense would run out by Friday, officials said. (Washington Post, 07.31.14).
  • Visiting Russian Foreign Minister Sergei Lavrov says Tajikistan is welcome to join the Eurasian Economic Union of Russia, Belarus and Kazakhstan that comes into being in January. (RFE/RL, 07.30.14).
  • The United States is in negotiations to open a new military base in southern Uzbekistan that would bring $1 billion to the Uzbek budget annually. (RIA Novosti, 07.30.14).
  • Foreign ministry officials from six member-states of the Shanghai Cooperation Organization (SCO) are meeting in the Tajik capital, Dushanbe. (RFE/RL, 07.31.14).
  • Troops from six member-states of the Collective Security Treaty Organization (CSTO) have started joint military exercises in Kyrgyzstan.  (RFE/RL, 07.30.14).
  • Georgian prosecutors have filed criminal charges against former President Mikheil Saakashvili. (RFE/RL, 07.28.14).
  • A top Georgian official on Thursday said Russia's possible cancellation of a decades-long free-trade agreement between the two countries came as no surprise and in the end "will not be a tragedy.” (Moscow Times, 07.31.14).
  • Russia said Friday that it will impose import duties on products from Moldova. The move follows Russia's decision to suspend imports of fruit and limit meat imports from Moldova. (Reuters, 08.01.14).
  • The Volgodonsk branch of AEM-Technology has started preparing the core melt trap, or core catcher, for shipment to the site of the Belarus nuclear power plant, near Ostrovets. (WNN, 07.31.14).
  • Azerbaijan said that up to nine Azerbaijani soldiers were killed and five were injured during the clashes with Armenian troops. On July 31, Nagorno-Karabakh authorities said that two of its troops were killed in an attack by Azerbaijani troops. (RFE/RL, 08.01.14).

 

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