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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 December 19-24, 2014

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

Nuclear security agenda:

  • No significant developments.

Iran nuclear issues:

  • No significant developments.

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

  • Russia said on Wednesday NATO was turning Ukraine into a "frontline of confrontation" and threatened to sever remaining ties with the Atlantic military alliance if Ukraine's hopes of joining it were realized. (Reuters, 12.24.14). See more on this issue in Russia’s Neighbors section.
  • Russian Deputy Defense Minister Anatoly Antonov said the number of flights by NATO tactical aircraft near Russian borders has more than doubled this year to over 3,000 missions, and that of reconnaissance aircraft's missions over the Baltic and Barents Seas has grown from 258 in 2013 to 480 in 2014. (Xinhua, 12.24.14).

Missile defense:

  • No significant developments.

Nuclear arms control:

  • The New START treaty “is called the 'golden standard' in reaching global security agreements. It is alive and is being implemented today ... we should preserve this treaty," Russian Deputy Defense Minister Anatoly Antonov told a press briefing. Antonov insisted that Russia's plans for creating a new generation of railroad-based ballistic missiles did not run counter to the treaty. (Xinhua, 12.24.14).

Counter-terrorism agenda:

  • Lawyers for Boston Marathon bombing suspect Dzhokhar Tsarnaev seeking to have his trial moved out of Massachusetts again drew parallels Monday between the media coverage of their client's case to the coverage received by Oklahoma City bomber Timothy McVeigh. (AP, 12.23.14).

Cyber security:

  • No significant developments.

Energy exports from CIS:

  • "Right now, the rate of extraction of reserves from tight reservoirs in Russia amounts to less than 1 percent, and substantial resources, estimated by experts at 11 billion-22 billion tons, are not explored," Russian Energy Minister Alexander Novak said. (Interfax, 12.22.14).
  • BP PLC is negotiating a deal with Kremlin-controlled OAO Rosneft that could give it a percentage of an Eastern Siberia field believed to have large petroleum reserves. (Wall Street Journal, 12.24.14).

Bilateral economic ties:

  • Russian President Vladimir Putin has said that trade between Russia and the United States has increased by 7 percent. Imports from the U.S. have risen by 23 percent, he said. Russia’s Kommersant daily reported on Wednesday that the purchase of Boeing airliners by Aeroflot explains the hike in the U.S.-Russian trade. (Interfax, 12.22.14, Kommersant, 12.23.14).
  • Russia has complained that a U.S. move to scrap a 15-year-old deal sheltering Russian flat-rolled steel producers from high import duties is inconsistent with World Trade Organization rules. (Reuters, 12.23.14).
  • OAO Rosneft’s planned acquisition of Morgan Stanley’s oil-trading and storage business has collapsed after the companies failed to win regulatory approval, amid tensions between the governments of the U.S. and Russia. (Wall Street Journal, 12.22.14).

Other bilateral issues:

  • The U.S. on Friday expanded its Russia sanctions. The Treasury Department added 24 individuals and entities to a list that bars travel and bans financial contacts with U.S.-connected people and businesses. The U.S. also is imposing, for the first time, a broad ban on doing business in the breakaway Crimea region. Friday’s measures roughly coincide with the European Union’s sanctions announced Thursday on Crimea-based companies. (Wall Street Journal, 12.19.14).
  • Russian Presidential Aide Yury Ushakov has expressed hope for swift recognition by the United States of the uselessness of its sanctions against Russia and suggested that Moscow would respond to Washington's restrictive measures against Crimea. "It took Americans over 50 years to recognize the uselessness of sanctions against Cuba. As for the sanctions against Russia, these, unfortunately, are still building up but we would like to hope that realization in the Russia story will come sooner, “Ushakov said. (Interfax, 12.22.14).
  • Russian Presidential Aide Yury Ushakov has said that leaders from most countries, including the former Soviet Union's Allies in World War II, have been invited to attend festivities marking the 70th anniversary of the Victory in the 1941-1945 Great Patriotic War in Moscow. When asked whether U.S. President Barack Obama was among those invited, Ushakov replied: "Of course." (Interfax, 12.22.14).
  • U.S. President Barack Obama dismissed the idea that international leaders such as Russian President Vladimir Putin are outwitting him. “There was a spate of stories about how he is the chess master and outmaneuvering the West,” Obama said of Putin. “Right now, he's presiding over the collapse of his currency, a major financial crisis and a huge economic contraction. That doesn't sound like somebody who has rolled me or the United States of America.” (LA Times, 12.22.14).
  • The U.S. government will replace all Russian nationals holding supervisory positions at its embassy and consulates in Russia with American citizens. The move is part of the new 2015 Intelligence Authorization Act (H.R. 4681), which was introduced by U.S. Congressman Mike Rogers (R-MI) in May and was approved by Congress on Dec. 9. Adoption of this act, which is currently awaiting approval by the US president, will not trigger any dismissals, the press service of the US embassy in Moscow told said Tuesday. (International Business Times, 12.22.14, Sputnik, 12.23.14).

 

II. Russia news.

Domestic politics, economy and energy:

  • The Russian government has instructed five of the country's biggest state-controlled exporters to limit foreign currency assets as part of its efforts to support the ruble. The energy companies Gazprom, Rosneft, and Zarubezhneft as well as diamond businesses Alrosa and Kristall were instructed on December 23 to reduce their foreign currency reserves to October levels and to not raise them again until March. (RFE/RL, 12.24.14).
  • The ruble weakened in early trade on Wednesday. At 10:25 a.m. in Moscow, the ruble was 0.7 percent weaker against the U.S. dollar at 54.88 after opening 0.7 percent up. On Tuesday S&P revised Russia's credit ratings to credit watch negative from negative, warning the country's monetary flexibility deterioration could lead to putting its sovereign rating into junk territory as soon as mid-January. (Reuters, 12.24.14).
  • The Bank of Russia said Wednesday it will stabilize the financial sector by helping companies cover foreign debt after the Western sanctions cut off Russia from global capital markets. Next year Russian banks and companies will have to pay back $101.6 billion, according to the central bank data.  The Central Bank has already bailed out midsized Russian retail bank Trust this week. (Wall Street Journal, 12.24.14, RFE/RL, 12.22.14).
  • Russia consumer prices showed the highest weekly gain since the start of the records in the week to Dec. 22, the data from the Federal Statistics Service said Wednesday. According to the data, consumer prices gained 0.9% in a week—the highest weekly increase since 2008, when the service began publishing the figures. (Wall Street Journal, 12.24.14).
  • Prime Minister Dmitry Medvedev has warned that Russia's economy faces a risk of a "deep recession" if the government abandons its spending plans. (RFE/RL, 12.23.14).
  • Russia's government has pushed the country into an economic crisis by not tackling its financial problems fast enough, former finance minister Alexei Kudrin said on Monday. Kudrin said he believed that between 25 and 35 percent of the decline in the ruble could be attributed to sanctions. The rest, he said, was down to a stronger dollar and investors' mistrust of Russian authorities and their actions. Even if the price of oil rose to $80 per barrel, gross domestic product was still likely to fall by more than 2 percent in 2015, Kudrin said. At $60 per barrel GDP would decline by 4 percent or more, he added (Reuters, 12.22.14).
  • Russia stiffened its bid to curb grain exports on Monday with plans for an imminent duty on shipments to defend domestic bread supplies against a crumbling ruble. (Reuters, 12.22.14).
  • Rosneft said on Monday it paid back $7 billion of a bridge loan it had taken to acquire TNK-BP, the largest foreign debt repayment by a Russian company since Western sanctions were imposed. (Wall Street Journal, 12.22.14).
  • Many Moscow developers are planning sharp price rises on real estate as access to financing tightens amid a steadily worsening economic climate. (The Moscow Times, 12.22.14).
  • The Russian government has taken steps that will require the heads of some of the country's top state-controlled companies to publicly disclose their personal incomes. (RFE/RL, 12.22.14).
  • The chairwoman of the Russian Federation Council says the upper house of parliament is drafting legislation that would retroactively proclaim the Soviet Union's 1954 transfer of Crimea to Ukraine as “legally void and nonbinding” since the moment of its enactment. (RFE/RL, 12.22.14).
  • Russia Sunday blocked access to a Facebook page set up in support of Aleksey Navalny, the anti-corruption blogger convicted of embezzlement. Prosecutors are seeking a 10-year sentence for the blogger, who has been sharply critical of Russian President Vladimir Putin. Tens of thousands of people have used a new Facebook page to voice plans to attend a January rally outside the Kremlin in support of Navalny. (International Business Times, 12.22.14, RFE/RL, 12.23.14).
  • The English-language newspaper The St. Petersburg Times, which is published in St. Petersburg, has to suspended publication due to the difficult economic situation. (Interfax, 12.22.14).

Defense:

  • Russia's Strategic Nuclear Forces added 38 new intercontinental ballistic missiles to their tables of equipment this year, including 22 submarine-based missiles, Defense Minister Sergey Shoigu said. (Tass, 12.22.14).
  • The commander of the Space Command, Major-General Oleg Maidanovich, reported that four new early-warning radars - in Yeniseysk, Barnaul, Irkutsk, and Kaliningrad - are now on combat or "experimental combat" duty. (Russian strategic nuclear forces blog, 12.19.14).

Security, law-enforcement and justice:

  • In an address to mark the national holiday of Employees and Veterans of Russia's Security Forces President Vladimir Putin said the most important tasks for Russia's intelligence services were the fight against global terrorism and the prevention of "any attempts of foreign special services to deal a blow to Russia and her political and economic interests." (RFE/RL, 12.20.14).
  • Chechen leader Ramzan Kadyrov has described the Islamic militants that plague his republic as an incurable disease, in comments to the Izvestia newspaper, saying that the only way to deal with them is to destroy them. Kadyrov also said that “if I found out that there was someone more devoted to Putin than me, I'd lose respect for myself.” (Moscow Times, 12.22.14).
  • At least two more homes belonging to the relatives of suspected militants in Chechnya have been razed after Russian President Vladimir Putin denounced the "extrajudicial settling of scores," according to a report by human rights group Memorial. (The Moscow Times, 12.24.14).

Foreign affairs and trade:

  • Chinese Foreign Minister Wang Yi said that China was willing to offer Russia unspecified assistance in the wake of the ruble’s fall, and said Beijing had full confidence in the Kremlin’s ability to solve it. “We consistently support and help each other. If the Russian side requires it, then we will offer required assistance within the scope of our abilities,” he said. (Wall Street Journal, 12.22.14).
  • China's trade minister proposed more use of China's currency in settling trade with Russia in the face of a falling ruble to ensure safe and reliable trade. China and Russia signed a three-year currency-swap line of 150 billion yuan ($24 billion) in October (Reuters, 12.21.14, Bloomberg, 12.22.14).
  • Russia isn’t in talks with China about any financial aid, said Dmitry Peskov, a spokesman for President Putin. (Bloomberg, 12.22.14).
  • Moscow has called on Paris to decide by the end of the year whether it will deliver two Mistral-class warships. Deputy Defense Minister Yury Borisov also said Russia will gladly take back the money it paid for the warships, whose handover has been delayed by concerns over Moscow's role in the Ukraine crisis. (RFE/RL, 12.20.14).
  • The head of the Russian presidential administration, Sergei Ivanov, has said that however the situation evolves around the delivery of the French Mistral helicopter carriers, it will be acceptable to Moscow. (Interfax, 12.23.14).
  • Cuban President Raul Castro met on Friday with the vice-president of the Russian government Dmitry Rogozin, who is attending here the 12th Cuba-Russia Intergovernmental Commission. (Cuba News, 12.20.14).
  • Canadian Prime Minister Stephen Harper announced new sanctions against Russia on December 19, including additional restrictions on the export of technology used in the oil and gas industry. (RFE/RL, 12.20.14).
  • The head of Austria's government criticized fellow European Union countries on Saturday that are calling for tougher sanctions against Moscow, warning against pushing the Russian economy towards collapse. "I cannot approve of the euphoria of many in the EU over the success of sanctions against Russia. I see absolutely no cause for celebration. I do not know why we should be pleased if the Russian economy collapses," Faymann told the Oesterreich newspaper. (Reuters, 12.21.14).
  • German chemicals maker BASF SE’s decision to call off a long-planned asset-swap deal with Russia’s OAO Gazprom wasn’t the result of political pressure from the German government, the German Economics Ministry said Friday. (Wall Street Journal, 12.19.14).
  • First batches of food products from Iran will be supplies to Russia already in January 2015. (Tass, 12.23.14).

Russia's neighbors:

  • Ukrainian lawmakers on Tuesday voted to remove a legal barrier to joining the NATO defense alliance. "Finally, we corrected a mistake," Ukrainian President Petro Poroshenko wrote on Facebook on Tuesday. "There is no alternative to Euro-Atlantic integration." The move provoked an angry response from Russia. Russian Prime Minister Dmitry Medvedev said the legislation to abandon nonaligned status was "in essence, an application to enter NATO, turning Ukraine into a potential military opponent of Russia." "This is counterproductive and only escalates confrontations and creates an illusion that by adopting such laws it might be possible to settle a profound domestic crisis in Ukraine," Russian Foreign Minister Sergei Lavrov said. A NATO spokesman said Tuesday that "we respect the decision" of the Ukrainian parliament. U.S. State Department spokeswoman Marie Harf said on December 23 that "any decision on potential NATO membership is one for Ukraine and NATO to make." (Washington Post, RFE/RL, 12.23.14).
  • Ukrainian crisis talks have begun in Minsk, bringing together representatives of Ukraine, Russia, pro-Russian separatists, and the Organization for Security and Cooperation in Europe.  (RFE/RL, 12.24.14).
  • A ceasefire in east Ukraine has generally been holding in past days, Russian President Vladimir Putin noted along with the leaders of Germany, France and Ukraine in telephone talks on the Ukraine crisis, the Kremlin said in a statement. (Reuters, 12.23.14).
  • Kazakh President Nursultan Nazarbaev, during a visit to Kyiv, has reportedly called on Russia and Ukraine to seek compromise in order to end the conflict in eastern Ukraine and preserve its territorial integrity. Nazarbaev has earlier stated he is ready to act as an "honest mediator" to help resolve the crisis in eastern Ukraine. (RFE/RL, 12.22.14).
  • Ukraine's Finance Minister forecast the economy will shrink by 4.3 percent next year. (Reuters, 12.23.14).
  • Ukrainian state energy firm Naftogaz said Tuesday it had transferred $1.65 billion to Russia's Gazprom — the second tranche of a debt repayment agreed under a deal that saw Moscow resume gas supplies to Ukraine earlier this month.  (Reuters, 12.24.14).
  • Ukraine on Wednesday afternoon resumed electricity supply to Crimea after a temporary delivery cut, which paralyzed the peninsula. (Xinhua, 12.24.14).
  • Russia's Investigative Committee has issued a statement claiming that it has proof of the Ukrainian military's involvement in the July downing of Malaysia Airlines Flight MH17. Citing an unidentified Ukrainian soldier, investigators say the man "personally witnessed" events in Ukraine's Air Force suggesting the doomed flight was shot down by a SU-25 fighter jet controlled by the Ukrainian military. (Moscow Times, 12.24.14).
  • Kyrgyzstan has signed an accession agreement to join the Russian-led Eurasia Economic Union, which comes into effect on January 1. Russian President Vladimir Putin said the new union will have a combined economic output of $4.5 trillion and bring together 170 million people. (RFE/RL, 12.23.14).
  • On Tuesday Moscow hosted a summit of the Collective Security Treaty Organization. Russian President Vladimir Putin has urged members of CSTO to be prepared to take "preventive measures" against the Islamic State group in Central Asia. Fears that IS and other Central Asian militants fighting in Syria and Iraq pose a domestic threat to Central Asian republics were heightened after the Islamic Movement of Uzbekistan pledged allegiance to the Islamic State group in October.   (RFE/RL, 12.23.14).
  • On Friday the Belarusian central bank announced a "temporary" 30% tax on foreign-exchange transactions, raised interest rates on its own standing facilities to 50% from 24%, and decreed that exporters must convert half of their foreign-currency proceeds into the local currency. (Wall Street Journal, 12.24.14).
  • Russia and Armenia have signed an intergovernmental agreement on cooperation in extending the operating life of unit 2 of Armenia's sole nuclear power plant. The VVER-440 unit - which operates at Metsamor, 30 km from the capital Yerevan - is due to be withdrawn from service in September 2016. (World Nuclear News, 12.23.14).

The next issue of Russia in Review is to be distributed on January 9, 2015.

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