Russia in Review

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

Nuclear security agenda:

The Russian government is firming up separation of the country's military and civilian nuclear assets with a change to the legal status of certain Rosatom subsidiaries. Russian President Vladimir Putin has awarded the status of 'federal nuclear organization' to eight state unitary enterprises within Rosatom by signing a decree published on the Kremlin's website on 26 June. (World Nuclear News, 07.01.14).
Tactical-strategic exercises "Atom" took place within the boundaries of the Ozersk city and the Kunashak municipal area in Russia. The exercises ended with interception of the mock terrorists who tried to cross the water boundaries of the Ozersk area. 890 people participated in the exercise, which took place on June 22-26. (Rosatom, 06.27.14).
Two years after an 82-year-old nun was able to infiltrate a U.S. nuclear weapons site in Tennessee, the U.S. approach to securing such facilities remains "chaotic," according to a report to Congress by the nonpartisan Government Accountability Office. (GSN, 07.02.14).

Iran nuclear issues:

No significant developments.

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

No significant developments.

Missile defense:

No significant developments.

Nuclear arms control:

As of March 1, 2014, the total number of Russia's deployed and non-deployed launchers accounted under New START was 905, not 906. The corrected information was published by the U.S. State Department on July 1, 2014. (Russianforces.org, 07.02.14).

Counter-terrorism cooperation:

No significant developments.

Cyber security:

Russian President Vladimir Putin signed legislation punishing opinions deemed extremist on the Internet with as long as five years in prison as the government reinforces its control over the web. The law, approved by parliament this month, also imposes a maximum of six years in prison for financing extremist activities, according to the text of the measure posted today on a government legal portal. (Bloomberg, 06.30.14).
A new report by a U.S. computer security company details systematic attacks against Western oil and gas companies by a group of hackers identified as being from Russia. (RFE/RL, 07.01.14).
U.S. intelligence leaker Edward Snowden has filed an official petition to extend his asylum in Russia for another year. (The Moscow Times, 07.01.14).

Energy exports from CIS:

Rosneft, Russia's biggest oil firm, said Tuesday it would take gas producer Gazprom to court if it refused to offer the state-controlled company access to a gas pipeline due to be built to China. (Reuters, 07.01.14).
Russia's Prime Minister Dmitry Medvedev on Wednesday said a "full-scale" gas crisis between Moscow and Kiev will develop by autumn, after Gazprom last month cut off gas supplies to Ukraine over unpaid bills. (Reuters, 07.03.14).
Ukrainian energy officials have proposed a plan to the EU Commission that would allow Ukraine to increase reverse flows via Slovakia to 30 bcm. According to a UralSib report, Gazprom would lose nearly $3 billion in 2016 if the EU accepted the proposal. (The Moscow Times, 06.27.14).
Gazprom has been struggling to adapt to the tectonic changes in global gas markets and has finally decided a fresh face is needed at its foreign trade division. After 12 years in service, Alexander Medvedev has lost his job as head of Gazprom Export and been replaced by one of his former deputies. (Financial Times, 07.03.14).
Russian officials said they saw little threat from future U.S. exports of a type of ultra-light oil, approved last month after a 40-year ban, and that prices should hold up despite the extra supply. (Reuters, 07.01.14).

Bilateral economic ties:

Russia's state-controlled oil giant, OAO Rosneft, has submitted a deal to buy a Morgan Stanley oil-trading unit to a confidential U.S. committee that weighs national security risks. (Wall Street Journal, 07.02.14).
Visa and MasterCard can avoid paying a security deposit of up to $2.9 billion if they can find Russian partners to process payments within the country by Oct. 31, Central Bank chief Elvira Nabiullina said Tuesday. (The Moscow Times, 07.01.14).
McDonald's plans to open 70 restaurants in 30 Russian cities by the end of this year, significantly expanding its reach into cities that were never home to the fast food empire before. (The Moscow Times, 07.01.14).

Other bilateral issues:

Russian President Vladimir Putin said that relations between the United States and Russia are not in good shape, but Russia is ready for constructive dialogue on equal terms. “We have always tried to be predictable partners, handle business on an equal basis, but in return our legal interests were partially ignored and are still ignored,” Putin said during a meeting with Russian ambassadors and permanent representatives. (RIA Novosti, 07.01.14).
Evgeny Lukyanov, deputy head of Russia's supreme security body says US international dominance is being replaced by multiple centers of power. He urged a global agreement on the results of the Cold War, warning that the world could otherwise become engulfed in chaos. Lukyanov told reporters that all nations should gather and reach an agreement finalizing the Cold War. He suggested that it is done at a global congress of all major players and said that the only existing organization for such task is the UN and its Security Council. (Russia Today, 07.02.14).
"I think all the possibilities exist for an improvement in relations. The only issue is that our American colleagues be more respectful to our arguments and interests", Russia's ambassador to Washington Sergey Kislyak said. But, he said, "we don't hear this yet, particularly in conditions where we have seriously different views about what is going on in Ukraine." (Interfax, 08.01.14).
Washington has requested Moscow's formal approval of its appointment of John Tefft as U.S. ambassador to Russia, a source in the Foreign Ministry told The Moscow Times on Monday. Tefft served as ambassador to both Ukraine and Georgia in the past decade, and as a top diplomat in Moscow in the 1990s. (The Moscow Times, 07.01.14).
The president of the Russian Academy of Sciences (RAS), Vladimir Fortov, is set to develop the Academy's cooperation with American scientists regardless of the political situation. "I will do whatever I can to develop our contacts, despite the winds blowing in one direction or another," Fortov told a press conference on Wednesday.(Interfax, 07.02.14).
The U.S. Department of the Treasury took additional measures against supposed representatives of several transnational criminal organizations, including Russian State Duma member Adam Delimkhanov, the Treasury announced in the press release on Wednesday. (RAPSI, 07.02.14).

II. Russia news.

Domestic politics, economy and energy:

Russia’s Economy Minister Alexei Ulyukayev said the government has prepared for three possible sanctions scenarios, ranging from a ban only on exports of "luxury goods, caviar and furs," the closure of western markets to a wider list of Russian goods, and the harshest one, which includes a ban on "whole sectors like metals, fertilizers, oil, gas etc." In the latter case, he said, the Russian economy would "seriously" contract. Without sectoral sanctions, Russia's economy will grow by more than the officially forecast 0.5% in 2014, the minister said. (Wall Street Journal, 06.28.14).
The Central Bank head Elvira Nabiullina said on Tuesday that the ruble's long-term stability could be ensured only by curbing capital flight. She added that capital flight from Russia this year would remain high. According to official forecasts, net capital outflow should reach around $100 billion this year. (Reuters, 07.01.14).
The Bank of Russia is working with its counterparts in Belarus and Kazakhstan on creating a regional payment system within the countries' customs union, the central bank's first deputy chairman said Wednesday. (Wall Street Journal, 07.02.14).
The Central Bank has delayed the decision to select the company that will create Russia's new national payment system by about two weeks, the regulator's head, Elvira Nabiullina, said Tuesday at a banking conference in St. Petersburg. (The Moscow Times, 07.01.14).
Russian authorities have softened their tone on Bitcoin; the central bank now says it won't hamper the usage of the virtual currency whereas previously it had vowed to crack down on the electronic payment instrument. (Wall Street Journal, 07.02.14).
Western sanctions on Russia are likely to push Moscow toward increased self-reliance and hamstring reforms sorely needed to boost flagging economic growth, the International Monetary Fund said Tuesday. The IMF confirmed economic growth forecasts it slashed in April at 0.2% for this year and 1% for 2015. The Fund is less optimistic than the Russian government which sees the economy expanding by 0.5% or more this year.(Wall Street Journal, 07.01.14).
Moody's has cut the credit-rating outlook of Russia to "negative," a sign of a possible future downgrade. (RFE/RL, 06.28.14).
Russian manufacturing activity slowed in June for the eighth consecutive month, hurt by the crisis in Ukraine, a business survey showed Tuesday. The HSBC purchasing managers' index, or PMI, edged up to 49.1 last month from 48.9 in May, but remained below the 50.0 mark that separates expansion from contraction. (Reuters, 07.01.14).
Russia’s BN-800 fast neutron reactor reached criticality. The reactor is built at the Beloyarsk Nuclear Power Plant in Zarechny. (IPFM Blog, 06.27.14).
Russian regulator Rostechnadzor has granted Rosenergoatom a ten-year service life extension for the Kalinin 1 nuclear power unit until 2025. (WNN, 07.01.14).
Foreign investors bought around 60 percent of a secondary share issue in the Moscow Exchange, showing the appetite for Russian shares from abroad, a Russian central banker said on Wednesday. European (33%) and American (10%) investors accounted for 43% of shares of the exchange bought this week. (Reuters, 07.02.14).
Zurich Insurance Group AG said it will dump its general insurance retail business in Russia, an exit that will end up cutting into the Swiss company's profit by about $300 million because of exchange rate losses. (Wall Street Journal, 03.07.14).
About 28 percent of Russians likely have never surfed the web in their lives, according to a new poll by the independent Levada Center. A majority of Russians, however, are web-savvy — 46 percent go online daily, and another 15 percent hit the net at least once a week, the poll showed. (The Moscow , 07.01.14).
Russia's legislature abandoned the policy of keeping the country on daylight-saving time all year. The 2011 move to impose permanent "summer time" in 2011 was one of the most memorable and least popular initiatives of Dmitry Medvedev's presidency. (The Guardian, 07.02.14).

Defense:

About four hundred Russian sailors arrived in western France on Monday to train on Mistral amphibious assault ships before the first of two is delivered to Moscow by the end of the year. (Reuters, 06.30.14).

Security, law-enforcement and justice:

Officials of Russia's Investigative Committee and Prosecutor-General's Office say that reputed Russian crime boss Aleksandr Matusov, 52, was extradited by Thailand on June 3 and will be interrogated as soon as he arrives in Moscow. (RFE/RL, 07.03.14).
Omar al-Shishani, one of hundreds of Chechens who have been among the toughest jihadi fighters in Syria, has emerged as the face of the Islamic State of Iraq and the Levant, appearing frequently in its online videos. (AP, 07.02.14).

Foreign affairs and trade:

Russian President Vladimir Putin has accused the West of seeking to use the crisis in Ukraine to destabilize the whole region. Putin told a biannual meeting of Russian ambassadors at the Foreign Ministry in Moscow on July 1 that "events provoked by the West in Ukraine are a concentrated manifestation of a containment policy against Russia" and dubbed Western sanctions regarding Russia a "policy instrument." (RFE/RL, 07.01.14).
Russia President Vladimir Putin said on Tuesday he sees the fine imposed on French bank BNP Paribas SA in the U.S., as Washington’s attempt to “blackmail” Paris to prevent the sale of warships to Russia. “We even know that they had hinted that if the French don’t deliver the Mistrals to us, the sanctions would be removed from the [French] banks, or, at least, the fines minimized,” Mr. Putin said. (Wall Street Journal, 07.01.14).
Russian fighter-jet pilots will not participate in military action against Islamic militants in Iraq, Moscow's top diplomat in the restive Middle Eastern country said Tuesday. Though Russian specialists accompanied a shipment of fighter jets that arrived in Baghdad on Saturday, their roles in Iraq will be limited to assisting with the jets' assembly and ensuring their flight-worthiness, Russian Ambassador to Iraq Ilya Morgunov said. (The Moscow Times, 07.01.14).
Russia warned the U.S. on Monday against stepping up support for Syria's opposition, saying it would only bolster a caliphate declared by the Islamic State in Iraq and the Levant, or ISIL, in part of Iraq and Syria. (Reuters, 07.01.14).
The European Union is taking Russia to the World Trade Organization to try to overturn a ban on pork exports from the bloc. The restrictions have so far cost European pork exporters $790 million, the European Commission says. (Reuters, 06.30.14).
New European Union air cargo rules that have ignited a row with Russia and jeopardized annual trade worth more than 13 billion Euros ($18 billion) came into force on Tuesday, and are likely to heighten tensions between the EU and Moscow. (Reuters, 07.01.14).
The Federal Customs Service has made a last-minute concession to stop Russia from being ejected by a UN-backed customs system that has expedited European trucking for 60 years. (Reuters, 07.01.14).
Shanghai is leading a race to host the headquarters of a new “BRICS” development bank that will challenge for the first time the US postwar dominance of multilateral lending institutions, people familiar with the matter in Brasília and Washington said. (Financial Times, 07.02.14).
In one of the leaked conversations released by a Polish magazine, Polish Foreign Minister Radek Sikorski was heard denouncing the alliance with the U.S. as worthless and describing it in obscene terms. Russian Foreign Minister Sergey Lavrov said Saturday that allegations of Russia's hand in the scandal were aimed at deflecting public attention from the awkward situation. (The Moscow Times, 06.29.14).
Iran began exporting automobiles to Russia for the first time in five years on Sunday, after meeting upgraded emission standards, the country's largest auto manufacturer said. (AP, 06.29.14).
Russians make up the third-largest group of foreigners who buy real estate in Italy, after Germans and Brits, the Italian ambassador to Russia said. The share of Russians among foreign real-estate owners increased from a mere 2 percent in 2005 to 13 percent last year. (The Moscow Times, 07.03.14).
Russia's United Nations delegation on Tuesday blocked a request by the producers of the House of Cards political drama to film two episodes in the U.N. Security Council, citing the need to keep the world's leading security chamber available for unanticipated crises. (Foreign Policy, 07.01.14).

Russia's neighbors:

Foreign ministers from Russia, Ukraine, Germany and France agreed Wednesday on a series of steps for a resumption of the cease-fire in eastern Ukraine. The steps include reopening talks no later than Saturday "with the goal of reaching an unconditional and mutually agreed sustainable cease-fire" to be monitored by OSCE. (WP, 07.03.14)
Ukrainian President Petro Poroshenko announced on July 3 the appointments of Colonel General Valeriy Heletey as Ukraine's new defense minister and Lieutenant General Viktor Muzhenko as head of the joint chiefs of staff. Heletey is a former policeman who headed the state's VIP bodyguard service, while Muzhenko is a career soldier trained in the Soviet Union. Poroshenko also appointed Yury Kosyuk, an agriculture magnate and one of Ukraine's richest men, to oversee defense issues in the presidential administration. (RFE/RL, 07.03.14).
Heavy fighting resumed in eastern Ukraine early Tuesday shortly after President Petro O. Poroshenko declared an end to a 10-day cease-fire. Ukrainian officials said three servicemen had died and 10 were injured in the fighting Wednesday. Ukraine's border service said nine guards were wounded on Thursday when rebels shelled the Dolzhansky border post with Russia. An army spokesman said 200 Ukrainian servicemen had died since the operation started in April. (Wall Street Journal, 07.02.14, RFE/RL, 07.03.14, New York Times, 07.01.14).
Russian journalist Anatoly Klyan has died in eastern Ukraine after being shot while trying to film a protest by separatist-minded women against the Ukrainian army, news reports said. (The Moscow Times, 06.30.14).
Pro-Russian separatists in eastern Ukraine have released four OSCE monitors they had held captive for more than one month. (RFE/RL, 06.28.14).
On Sunday, Ukrainian President Petro Poroshenko was quoted as saying that instead of fighting separatists militarily, "we should be fighting for the minds and hearts" of the people in eastern Ukraine. “We will never succeed in bringing these regions back by force," Poroshenko said in an interview with the French daily "Le Figaro". (RFE/RL, 06.28.14).
Kiev is ready to continue consultations with independence supporters from eastern Ukraine at any acceptable location, the Ukrainian president's administration said Wednesday. (RIA Novosti, 07.02.14).
In a stern warning that cited civilian casualties in war-torn eastern Ukraine, Russia on Wednesday demanded that the Ukrainian government reinstate a cease-fire and halt its military operation aimed at suppressing the pro-Russian separatist insurrection that has destabilized the region for more than three months. And on Tuesday, as open warfare enveloped eastern Ukraine, President Vladimir V. Putin of Russia reiterated his commitment to protecting ''Russian people'' wherever they live. (NYT, 07.03.14).
Russian President Vladimir Putin offered to let monitors from the Organization for Security and Cooperation in Europe be stationed at border crossings, but that issue should be revisited now that the cease-fire has ended, Russian Deputy Foreign Minister Grigory Karasin said. On Sunday Putin held prolonged telephone talks with German Chancellor Angela Merkel and with his French and Ukrainian counterparts Francois Hollande and Petro Poroshenko on various aspects of the current crisis in Ukraine. (Interfax, 06.29.14, Wall Street Journal, 07.02.14).
Russian Prime Minister Dmitry Medvedev has lashed out at a U.S. State Department spokeswoman for suggesting some of the supposed refugees fleeing war-torn Ukraine for Russia could be going to visit their grandmothers. According to the United Nations, 110,000 Ukrainian refugees have gone to Russia since the start of the year and 54,000 more have left their homes and moved elsewhere in Ukraine. (MT, Wall Street Journal, 07.03.14).
The White House on Wednesday faulted pro-Russian separatists for failure to abide by a cease-fire in Ukraine and said it supported President Petro Poroshenko's decision to end it, holding fast to its support for the Ukrainian leader. (Wall Street Journal, 07.02.14).
French President Francois Hollande and German Chancellor Angela Merkel urged Russia's Vladimir Putin on Thursday to encourage separatists in eastern Ukraine to reach an agreement with the Ukrainian authorities, the French president's office said. (Reuters, 07.03.14).
Germany's Angela Merkel warned Moscow ahead of talks on Ukraine on Wednesday that economic sanctions remained an option unless it backed peace efforts, as Ukrainian government forces pressed on with an offensive against pro-Russian rebels. "Regarding sanctions against Russia, we have so far reached level two and we cannot rule out having to go further," Merkel said on Wednesday. (Reuters, 07.02.14).
Belarus and Kazakhstan have turned down a Russian proposal to restrict imports to the Customs Union from Ukraine. Moscow proposed the restrictions at a Eurasian Economic Commission meeting, but the corresponding resolution was not supported by Belarus or Kazakhstan, an official told Vedomosti. (The Moscow Times, 06.30.14).
Russian presidential spokesman Dmitry Peskov said: “Moscow cannot tell the separatists what to do. But it can appeal to them and use whatever influence it has… Russia's influence on the separatists should not be exaggerated." (The Moscow Times, 07.01.14).
Ukraine has rekindled a long-held ambition to have its own storage facility for used nuclear fuel with the signing on 24 June of a revised contract with Holtec International. (WNN, 07.02.14).
Ukrainian inflation in 2014 could speed up to 17-19% due to hryvnya devaluation and the rise in regulated tariffs, said Valeria Hontareva, the head of the National Bank of Ukraine. (Interfax. 07.03.14).
Moldova's parliament has ratified the country's Association Agreement with the European Union. President Nicolae Timofti told parliament on July 2 that a "definite prospect of EU membership should be the next keynote step of Moldova.”(RFE/RL, 07.02.14).
Moscow on Wednesday said tying Moldova closer to the European Union violated the rights of the people in the former Soviet republic's breakaway, Russian-speaking region of Transnistria and said it would foster closer ties with the enclave. (Reuters, 07.02.14).
The European Union called on Russia to reach a "very speedy resolution" of a fresh trade dispute with Moldova over meat exports. (Wall Street Journal, 07.03.14).
Some 40 officers serving in Uzbekistan's National Security Service have reportedly been dismissed or arrested. If confirmed, it would be the second mass purge conducted within Uzbekistan's law enforcement bodies since early June, when some 100 employees of Uzbekistan's State Customs Committee were reportedly arrested on corruption charges (RFE/RL, 07.03.14).
A court in Kazakhstan's largest city, Almaty, has sentenced five members of the banned Islamic group Hizb ut-Tahrir to prison terms of between six and 7 1/2 years. (RFE/RL, 07.01.14).
Tajik Foreign Minister Sirojidin Aslov will hold talks with British officials about the situation around a researcher arrested in Tajikistan. (RFE/RL, 06.27.14).
The European Court of Human Rights has condemned Russia for the mass deportation of Georgian citizens in 2006. (RFE/RL, 07.03.14).
Russian President Vladimir Putin has arrived in Minsk to participate in events marking the 70th anniversary of the liberation of Belarus from Nazi occupation. (RFE/RL, 07.02.14).

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