Russia in Review

Russia in Review: a digest of useful news from U.S.-Russia Initiative to Prevent Nuclear Terrorism for March 28 – April 4, 2014

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

Nuclear security agenda:

The U.S. Energy Department's nuclear-security arm is reviewing its assistance to Russia amid continuing tensions with Moscow over Ukraine. It was not immediately clear to what extent the Energy review would consider the nuclear-security and nonproliferation work conducted by NNSA officials. In the meantime, the agency has already decided to drop a request in its fiscal 2015 budget proposal for funding training equipment that would be used by Russian security forces as they practice responses to possible attacks on nuclear-material transports or sites housing these sensitive materials. (GSN, 04.01.14).
The U.S. Department of Energy informed the Russian state-run nuclear corporation Rosatom of the suspension of several peaceful atomic cooperation projects, the communications department of Rosatom stated on Thursday. These consist of several technical meetings, particularly devoted to scientific issues. (Itar-Tass, 04.03.14).
The Obama administration's proposed 2015 budget reduces the National Nuclear Security Administration's $790 million in spending on nuclear nonproliferation programs by 20 percent, or $152 million. (Mother Jones, 04.01.14).
The United States submitted to IAEA the INFCIRC/549 declaration of its civilian plutonium stock. According to the declaration, as of December 31, 2012, the United States had 44.4 tons of separated plutonium described as "held elsewhere", 4.6 tons in unirradiated MOX fuel, and less than 0.05 tons held in the fuel fabrication process. (IPFM Blog, 04.02.14).

Iran nuclear issues:

Iran and Russia have made progress towards an oil-for-goods deal that sources said would be worth up to $20 billion, which would enable Tehran to boost vital energy exports in defiance of Western sanctions. (Reuters, 04.02.14).

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

NATO will suspend "all practical civilian and military cooperation" with Russia because of its annexation of Crimea, saying it has seen no sign that Moscow was withdrawing troops from the Ukrainian border. In a joint statement announcing the suspension of cooperation, foreign ministers of NATO countries said political dialogue in the NATO-Russia Council could continue, "as necessary, at the ambassadorial level and above, to allow us to exchange views, first and foremost on this crisis." (CNN, 04.01.14).
Neither Russia nor NATO countries will gain from the North Atlantic Council's decision to suspend cooperation with Russia, the Russian Foreign Ministry said. Russia has recalled its top military representative to NATO for consultations, widening the rift between Moscow and the Western alliance. (Interfax, Reuters, 04.04.14).
A NATO official says the alliance does not expect the use of Russian territory to transport supplies used by Western forces in Afghanistan to be affected by NATO’s suspension of cooperation with Moscow. (RFE/RL, 04.03.14).
NATO's decision to suspend cooperation with Russia will harm Afghanistan, Moscow's envoy to NATO Aleksandr Grushko has said. NATO's decision to suspend cooperation with Russia gives Moscow the right to suspend NATO transit to Afghanistan across Russian territory, Federation Council Defense and Security Committee Chairman Viktor Ozerov said. (Interfax,04.04.14).
Moscow and NATO traded tough words on Thursday. Russia called on NATO to justify moves to boost its presence in Eastern Europe in a reminder of one of Moscow’s “red lines” in its fraying relations with the West. NATO’s secretary-general has angrily defended the alliance’s stepped-up military deployments in central and Eastern Europe, saying they were part of its “core task” to defend members under threat of attack. (Financial Times, 04.03.14).
The United States says all U.S. forces will be withdrawn from the NATO transit center in Kyrgyzstan in July. (RFE/RL, 04.03.14).
Norway’s former Prime Minister Jens Stoltenberg is to be the new head of NATO. (Financial Times, 03.28.14).

Missile defense:

The Pentagon announced that it would halt negotiations with Russia on its plans to build a missile shield in Europe. The suspension is hot air, as the negotiations lost their significance long ago, Russian experts said. "It's a matter of ritual. The consultations had been nothing but a failure for the past four years," said retired Lt. Gen. Yevgeny Buzhinsky. (RIA Novosti, 04.03.14).
Missile Defense Agency Director Vice Adm. James Syring said that speeding up the timetable for standing up the Polish missile site -- the facility that draws most Russian concern -- would depend on the development progress of its next-generation Block 2A interceptor. Accelerating the pace of work on the Romania site, however, would largely be a matter of funding, he suggested. (GSN, 04.03.14).
Some U.S. lawmakers are exploring the potential for speeding up missile-interceptor deployments in Europe amid concerns over Crimea. And Senator Kelly Ayotte (R-N.H.) said it was a "mistake" for the Obama administration to shelve a Bush administration plan to field long-range missile interceptors in Poland and a large radar in the Czech Republic. (GSN, 03.31.14, 04.03.14).
The U.S. missile defense system could see additional costs and delays after several test failures and technical challenges in 2013, according to a new report by the Government Accountability Office. The U.S. government has already spent $98 billion since 2002 with an additional $38 billion to be spent through fiscal 2018, according to the report. (Reuters, 04.01.14).

Nuclear arms control:

The latest aggregate data released by the US State Department for the New START treaty shows Russia increased its deployed launchers by 25 from 473 to 498, and the warheads attributed to those launchers increased by 112 from 1,400 to 1,512 compared with the previous count in September 2013.During the same period, the United States decreased its number of deployed launchers by 31 from 809 to 778, and the warheads attributed to those launchers decreased by 103 from 1,688 to 1,585. (FAS, 04.01.14).
In January, the United States informed NATO allies that Russia had tested a ground-launched cruise missile. The Obama administration is reviewing whether to formally declare the test to be a violation of a 1987 treaty that bans medium-range missiles. While making it clear that he was not prejudging the outcome of that review, NATO commander Gen. Philip M. Breedlove described the Russia missile test as a militarily significant development. (New York Times 04.03.14).
A consortium of universities will use the $25 million grant by the U.S. National Nuclear Security Administration over the next half-decade to investigate, among other things, geophysical models for aiding in the confirmation of underground atomic explosions. (GSN, 04.01.14).

Counter-terrorism cooperation:

No significant developments.

Cyber security:

The Pentagon is significantly growing the ranks of its cyberwarfare unit in an effort to deter and defend against foreign attacks on crucial U.S. networks, Defense Secretary Chuck Hagel said Friday. Hagel said that the fighting force at U.S. Cyber Command will number more than 6,000 people by 2016, making it one of the largest such forces in the world (Washington Post, 03.29.14).

Energy exports from CIS:

French oil major Total has secured the rights to explore three hard-to-recover oil blocks in West Siberia. Total will join other majors, ExxonMobil, Statoil and Royal Dutch Shell, to develop Russian shale oil, a key driver in Moscow's efforts to at least maintain its oil output at more than 10 million barrels per day. (Reuters, 04.04.14).
German Economy Minister Sigmar Gabriel said there was "no sensible alternative" to Russian natural gas imports and it was unlikely Russia would stop deliveries because of the crisis over Ukraine (Reuters, 03.31.14).
Rosneft said Tuesday it was on track to start production at its first liquefied natural gas plant in the country's far east in 2018 to 2019, despite East-West tension over Ukraine. The world's largest listed oil company by output signaled its partnership with U.S. ExxonMobil for building the plant — which will have an initial annual capacity of 5 million tons —would not be affected by the standoff. (Reuters, 04.01.14).
Gazprom Chief Executive Alexei Miller met the European Union's energy chief on Tuesday, the European Commission said, amid growing concerns in Europe that the crisis in Ukraine could compromise natural-gas supplies from Russia. (Wall Street Journal, 04.01.14).

Bilateral economic ties:

Ford’s Russian joint venture is cutting nearly 13% of its staff because of falling sales and a weakening of the ruble. (Wall Street Journal, 04.03.14).

Other bilateral issues:

Russia does not intend to publish new blacklists of Western citizens who may be targeted in sanctions as result of the Ukraine crisis, Russian Deputy Foreign Minister Sergei Ryabkov said on Saturday. He also said that the actions by the United States to curb ties with Russia may force a number of responses by Moscow. (Interfax, RIA Novosti, 04.03.14, Reuters, 03.31.14).
The U.S. government has practically stopped talks with Russia on the exchange of tax information about U.S. residents' accounts in foreign banks under the Foreign Account Tax Compliance Act, or FATCA. (The Moscow Times, 04.01.14).:
NASA said Wednesday that it was suspending most contacts with Russian space agency officials. The one exception, NASA said, would involve operations of the International Space Station, the primary space collaboration between the two countries. Defense Secretary Chuck Hagel has also directed the Air Force to review the use of Russian engines in rockets that send American military satellites into orbit. (New York Times, 04.03.14).
Russia has threatened to retaliate against US diplomatic missions after JPMorgan Chase blocked a money transfer from a Russian embassy. (Financial Times, 04.01.14).
According to a survey released Wednesday by independent pollster Levada Center, the number of Russians whose attitude toward the U.S. is "bad" or "very bad" is 61 percent, compared to 56 percent in early March, and 44 percent in January. Americans' views of Russia have undergone similar changes with 68 percent, or more than two-thirds, viewing Russia as "unfriendly" or an "enemy," a Gallup poll released last week showed. (The Moscow Times, 04.03.14).
Two-thirds of Russians think that a military conflict between Russia and the West against the background of deteriorating relations over the situation in Ukraine is unlikely, one of Russia's leading polling organizations reported on 2 April. (Levada.ru, 04.02.14).

II. Russia news.

Domestic politics, economy and energy:

President Vladimir Putin has supported German Gref, the CEO of Russia's largest lender Sberbank, who offered to create a national payment system based on the existing Universal Electronic Card, or UEC. Currently, Visa and MasterCard take up, respectively, 60 and 35 percent of Russia's credit card market, which according to the Central Bank saw almost 26 trillion rubles ($740 billion) worth of transactions in 2013.(Moscow Times, 04.04.14).
In a sign of confidence that the ruble had regained some strength, Finance Minister Anton Siluanov said the ministry will resume buying foreign currencies to replenish the country's rainy-day reserve fund in the coming days. The announcement caused the ruble to weaken 0.7% to 35.35 versus the dollar on Wednesday, but the currency has pulled back significantly from its low of 37 rubles per dollar on March 3. (Wall Street Journal, 04.03.14).
Stress tests carried out by the Bank of Russia showed that Russian lenders could survive the closure of external markets, the central bank's first deputy chairman said Friday. (Wall Street Journal, 04.04.14).
The Russian government approved a plan to privatize an additional 431 companies through 2016. About 20 percent of Novorossiysk Commercial Sea Port, the Russian Lottery, and multiple scientific-research, construction, and agricultural facilities are up for sale, in addition to regional airports, shipping companies, and metallurgy businesses. (Moscow Times, 04.01.14).
The number of Russian debt capital market transactions, including everything from sovereign bond issues to preferred shares and covered bonds, fell to just four in March, according to Dealogic. That was the lowest level since January 2012. In February, Russia completed 15 deals worth $6.31 billion. (Wall Street Journal, 04.02.14).
Russia's service sector shrank in March at the fastest rate in 43 months, the HSBC purchasing managers index showed on Thursday, pointing to an imminent recession in the economy. (Reuters, 04.04.14).

Defense:

President Vladimir Putin has said Russia's takeover of Crimea showed off its military prowess, as his defense minister reported that the Russian flag was now flying over all military sites on the Black Sea peninsula. He also said that the results of snap combat readiness drills conducted last month have confirmed that training in the Russian military has improved. (Reuters, RIA Novosti, 03.31.14).

Security, law-enforcement and justice:

The Federal Security Service has detected an increase in "foreign disruptive actions" since the souring of relations with the West over the situation in Crimea, said Alexander Malevany, the service's counterterrorism director, at a meeting with President Vladimir Putin. (RIA Novosti, 03.28.14).
Four Russian servicemen were killed and seven were wounded when a bomb hit their vehicle in the North Caucasus republic of Chechnya. (New York Times, 04.03.14).
Seven people died and 29 were injured in hate crimes in Russia in 2014, the Sova human rights center told Interfax on Tuesday. (Interfax, 04.01.14).

Foreign affairs and trade:

The Russian delegation in the Parliamentary Assembly of the Council of Europe will not permit a discriminating vote on stripping away its powers and will leave the PACE spring session, delegation head, State Duma international affairs committee head Alexei Pushkov said. (Interfax, 04.01.14).

Russia's neighbors:

President Vladimir Putin of Russia told Chancellor Angela Merkel of Germany on Monday that the Kremlin was beginning to withdraw troops from the border area near Ukraine. Russian troops deployed close to the Ukrainian border will return to base after completing their exercises, Foreign Minister Sergei Lavrov said Thursday. (AFP, New York Times, 04.03.14).
President Vladimir Putin signed a law on Wednesday cancelling three agreements with Ukraine signed in 1997 governing the Black Sea fleet’s basing in Sevastopol until 2017 and another one signed in 2010 extending the original lease to 2042. (Financial Times, 04.02.14).
Russia has only made a "token" withdrawal of troops from Ukraine's eastern border, U.K. Foreign Secretary William Hague said on Friday. NATO’s secretary-general said on Tuesday the alliance had not seen any signs of a pullback of Russian troops from Ukraine’s borders. NATO’s top commander said on Wednesday that the 40,000 troops Russia has within striking distance of Ukraine are poised to attack on 12 hours’ notice and could accomplish their military objectives within three to five days. (New York Times, Wall Street Journal, Financial Times, 03.04.14).
Russia raised the gas price for Ukraine on Thursday for the second time this week. The latest rise will be to $485 per 1,000 cubic meters - two days after Gazprom announced a 44 percent increase in the gas price to $385.5 per 1,000 cubic meters from $268.5 due to unpaid bills. (Reuters, 04.04.14).
Ukraine is in emergency talks with European neighbors on the possibility of importing natural gas from the West, Prime Minister Arseniy Yatsenyuk said. He said Russia’s decision to increase gas prices was unacceptable. "That kind of action taken coercively against Ukraine is something we oppose," White House spokesman Jay Carney told reporters in Washington. (Reuters, 04.04.14, RFE/RL, 04.04.14).
A Ukrainian delegation plans to visit Moscow this week to hold talks on the country's $1.7 billion debt for natural gas owed to Russia's Gazprom. (RIA Novosti, 04.01.14).
Ukrainian government officials on Thursday blamed Ukrainian special police units directed by then-President Viktor Yanukovych and supported by Russian agents for killing some of the 76 people who died in the center of Kiev in February. Yanukovych said he had nothing to do with the deaths and Russian President Vladimir Putin accused the demonstrators themselves of the shootings. Moscow possesses information indicating that the Right Sector was behind snipers' shooting in Kyiv, said Russian Foreign Minister Sergei Lavrov. Russian officials have also accused the United States of having a hand in the deaths, assertions U.S. officials have called absurd. (Washington Post, 04.03.14, Interfax, 03.30.14).
Russian authorities have deported two of the 25 Ukrainians who were detained on Thursday in Russia on suspicion of planning to carry out terrorist attacks in the country. (The Moscow Times, 04.04.14).
Ukraine's parliament has ordered the immediate disarming of illegally armed groups in the country following a fatal shooting Monday on the city's main square believed to have involved a political activist of the Right Sector movement. (RIA Novosti, 04.01.14).
While the United States and Russia agreed the crisis in Ukraine requires a diplomatic resolution, four hours of talks Sunday between U.S. Secretary of State John Kerry and Russian Foreign Minister Sergey Lavrov failed to break a tense East-West deadlock over how to proceed. (AP, 04.01.14).
U.S. House Intelligence Committee Chairman Mike Rogers on Sunday raised concerns about Russian troop activities near Georgia and Ukraine. He said Russia has moved some of its most advanced equipment into South Ossetia, a disputed region near the border of Georgia and Russia. (Washington Post, 03.31.14).
The U.S. is likely to move a warship into the Black Sea and send a small team of soldiers to Europe as part of NATO's effort to bolster allies in Eastern Europe who are worried about Russia's military annexation of Crimea, a senior defense official said. (AP, 04.03.14).
Pennsylvania-based Westinghouse Electric Co. on Thursday said it’s in negotiations to extend its contract with Ukraine’s Energoatom and supply nuclear fuel for three reactors, a deal that would bolster Ukraine’s commitment to long-term cooperation with the West. (Wall Street Journal, 04.03.14).
The first half of the Chernobyl arch has been assembled. It is now being gradually moved to make way for construction of the other half. (WNN, 04.01.14).
The European Union should refrain from introducing broad economic sanctions against Russia if the situation around Ukraine does not deteriorate, European Commission Vice President Olli Rehn said Tuesday. (RIA Novosti, 04.01.14).
Ukraine's ailing economy would have collapsed without Russia's financial help, the head of the International Monetary Fund said Wednesday. (RIA Novosti, 04.03.14).
Russia warned Ukraine against integration with NATO on Tuesday, saying Kiev's previous attempts to move closer to the bloc had strained ties with Russia and caused problems between Moscow and the defense alliance. The development of closer ties, including economic cooperation, between Moscow and Kiev will depend on Ukraine's commitment to maintaining a non-aligned status, the Russian Foreign Ministry said (Reuters, RIA Novosti, 04.01.14).
Russia urged Ukraine on Friday to carry out genuine rather than "cosmetic" constitutional reform, pressing Moscow's call for the former Soviet republic to give more power to its regions which have many Russian speakers. (Reuters, 04.04.14).
Russian Ambassador to the United States Sergey Kislyak said Sunday that Ukraine needs to change its constitution to better respect regional differences within the nation. (Washington Post,03.31.14).
Ukraine's pro-Western government said it would seek to hand more power to the country's regions in a bid to defuse pro-Russian unrest in its east. But it stopped short of proposing a federal structure pushed by Russia. (Wall Street Journal, 04.03.14).
Former Ukrainian Prime Minister Yulia Tymoshenko said: “I am categorically against the federalization of Ukraine… After Russia’s aggression, support for joining NATO is around 70 per cent. I think that if Ukraine remains outside different systems of collective defense and security, Ukraine will remain a territory of instability, a territory of possible military conflict on the European continent.” (Financial Times, 03.31.14).
The Ukrainian Central Election Commission has completed the process of accepting documents from people willing to run for the country's president. Full package of documents was filed by 24 contenders, seven of them have already been registered as candidates. Ukraine’s presidential election effectively became a two-horse race on Saturday after boxer-turned-politician Vitaly Klitschko pulled out and threw his weight behind confectionery oligarch Petro Poroshenko. (Financial Times, Interfax, 03.29.14).
Monitors from the OSCE have arrived in Kiev and fanned out to nine cities across Ukraine on a six-month mission to study developments in the escalating conflict with Russia and reduce tensions on the ground. (Financial Times, 04.01.14).
Germany's top diplomat said Ukraine won't join NATO and urged Russia to move troops away from the Ukrainian border, saying it would be a "small signal" that the crisis is easing. (Bloomberg, 04.01.14).
Ukraine has banned sales of Russian chocolate, cheese and fish on its territory. (The Moscow Times, 04.04.14).
Ukraine is planning to file a lawsuit against Russia at the International Court of Justice over the annexation of Crimea, the country's foreign minister said. (The Moscow Times, 04.02.14).
A top European Union official on Tuesday challenged President Vladimir Putin's statement about a blockade of Moldova's pro-Kremlin self-proclaimed republic of Transdniestr by Ukraine, saying border guards had confirmed that customs procedures were being conducted as usual. (The Moscow Times, 04.01.14).
The U.N. atomic agency has gotten caught up in the diplomatic crossfire over Crimea as Russia insists its agreements with the Vienna-based watchdog now also cover the annexed Black Sea peninsula, a confidential exchange showed on Friday. (Reuters, 03.28.14).
Almost a quarter of Russians think war with Ukraine is likely and three out of four Russians would support their government if such a war were to break out, a recent poll showed. (The Moscow Times, 03.31.14).
Dmitry Firtash, a Ukrainian oligarch with close ties to Russia, has been indicted in Chicago for money laundering, racketeering and bribing Indian officials. (Financial Times, 04.01.13).
Over the last two years, Ukrainian tycoons have spent more than £2 billion ($3.32 billion) on luxury residential properties, primarily in London's Knightsbridge and Belgravia districts. Russians are the second-highest spenders in London's property markets, followed by Kazakhs, Azerbaijanis and Georgians among buyers from the former Soviet Union. (The Moscow Times, 01.04.14).
Kazakh Foreign Minister Erlan Idrisov says that the presidents of Russia, Belarus and Kazakhstan will sign an agreement on the creation of the Eurasian Economic Union (EES) next month. (RFE/RL, 04.03.14).
The executive director of Kazakhstan’s KazAtomProm national nuclear company has been arrested on corruption charges. Kazakh State Anticorruption Agency said on April 1 that Valery Shevelyov is suspected of embezzling $710 million. (RFE/RL, 04.01.14).
After six years in office, Armenia’s Prime Minister Tigran Sarkisian has stepped down unexpectedly for reasons that were not immediately clear. (RFE/RL, 04.03.14).
After a diplomatic dispute over border violence, some checkpoints along the Kyrgyz-Tajik border have opened for the first time since mid-January. (RFE/RL, 03.31.14).
The Polynesian island nation of Tuvalu has retracted its 2011 recognition of Georgia's breakaway regions of Abkhazia and South Ossetia. (RFE/RL, 03.31.14).

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