Russia in Review

Russia in Review: a digest of useful news from U.S.-Russia Initiative to Prevent Nuclear Terrorism for December 12-19, 2014

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

Nuclear security agenda:

U.S. Under Secretary of State Rose Gottemoeller said: “We need cooperation with Russia and other nations to address new threats – first and foremost the threat of terrorists acquiring a nuclear weapon or nuclear material. They need this cooperation for their own security, as well.” (U.S. State Department, 12.16.14).
The U.S. government isn't fully prepared to handle a nuclear terrorist attack or a large-scale natural catastrophe, lacks effective coordination, and in some cases is years away from ensuring adequate emergency shelter and medical treatment, according to a report by the Government Accountability Office. (AP, 12.19.14).

Iran nuclear issues:

Russian President Vladimir Putin said on Thursday the six world powers and Iran were "very close" to reaching an agreement on Tehran's nuclear program. (Reuter, 12.18.14).
Russian Deputy Foreign Minister Sergei Ryabkov says issues such as sanctions imposed on Iran and the Arak reactor remain unresolved and in the way of reaching a final deal. (Teheran Times, 12.17.14).

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

The NATO military alliance is not Moscow’s enemy, Russian Foreign Minister Sergei Lavrov said. (Russia Today, 12.16.14).

Missile defense and nuclear arms control:

Russian Foreign Minister Sergei Lavrov said that the U.S. has made unfounded accusations against Russia of violating the INF (Intermediate Range Nuclear Forces) treaty. He also said that the U.S. was ignoring concerns voiced by the Russian side. “For example, next year, in conflict with the (INF) treaty, the Americans plan to start deploying missile defense launchers in Romania and Poland, which can also be used to launch intermediate range cruise missiles designed to attack various targets, such as the Tomahawk. Regretfully, Washington is pretending not to notice Russia’s concerns," Lavrov said. (RBTH, 12.15.14).
Russia's Foreign Ministry said on Friday it would not follow "American diktat" over the Intermediate-Range Nuclear Treaty between the two countries. (Reuters, 12.12.14).
Under Secretary of State Rose Gottemoeller said: “Current tensions with the Russian Federation highlight the durability of the verification regime and the important confidence that is provided by data exchanges and on-site inspections under the Treaty, as well as the security and predictability provided by verifiable mutual limits on strategic weapons.” (U.S. State Department, 12.16.14).

Counter-terrorism agenda:

Russian Foreign Minister Sergei Lavrov said that so far there has been no cooperation between Moscow and Washington in the fight against the Islamic State of Iraq and Levant terrorist group: "Washington did not see us as a direct participant in the anti-ISIS coalition, which was cobbling together according to its own rules and parameters, with only its own interests in mind and without any regard for international law,” he said. (RBTH, 12.15.14).
"After the fall of the Berlin Wall and the breakup of the Soviet Union, Russia opened itself to our partners. What did we see? Direct and fully fledged support for terrorism in the North Caucasus. They directly supported terrorism, you understand? Is that what partners usually do? I won't go into details on that, but this is an established fact," Russian President Vladimir Putin, when asked about the economic consequences of Crimea. (The Moscow Times, 12.18.14).

Cyber security:

No significant developments.

Energy exports from CIS:

OPEC Gulf members and Russia held the line on resisting oil output cuts. Russian Energy Minister Alexander Novak said: "If we cut, the importer countries will increase their production and this will mean a loss of our niche market," he told reporters, speaking through an interpreter. (Reuters, 12.16.14).

Bilateral economic ties:

It was announced on December 16 that Orbital Sciences had signed a contract with Energomash for the supply of new RD-181 rocket engines. The contract is worth almost $1 billion. (Interfax, 12.19.14).
Russia's top space corporation is mulling joint projects with Boeing and Lockheed Martin despite sanctions. The state-run Energia will work to ensure that the Orion reusable spacecraft is compatible with Russian spacecraft, Vladimir Solntsev said. (Moscow Times, 12,16.14).

Other bilateral issues:

President Barack Obama said Thursday that he had signed into law a new Russian sanctions bill passed by Congress but did not intend to impose further sanctions against Moscow for now. The Ukraine Freedom Support Act of 2014, which has been earlier passed by the U.S. Congress, authorizes, but does not mandate, $350 million in military aid for Ukraine. The bill also authorizes sanctions against Russia's defense and energy industries, including Rosoboronexport and Gazprom. “It sets the table for the new Congress to mandate secondary sanctions on Russia that will create a serious rift with the Europeans,” Cliff Kupchan, a former congressional aide said of the bill. Russian Deputy Foreign Minister Sergei Ryabkov warned that Russia "will not be able to leave this without a response." (RFE/RL, 12.14.14, Foreign Policy, 12.12.14, Reuters, Financial Times, 12.19.14).
Obama administration officials stressed that the sanctions regime is contributing to Russia’s deepening economic woes. "The combination of our sanctions, the uncertainty they've created for themselves with their international actions, and the falling price of oil has put their economy on the brink of crisis," said Jason Furman, chairman of the White House’s Council of Economic Advisers. Privately, Obama officials and allies take clear satisfaction from Putin's plight and are more willing to claim credit. "The sanctions highlight the economic and geopolitical cost of the foreign policy choices that Putin has made,” a senior administration official said. "I think it's a pretty hard sell to say that the sanctions strategy on Russia is what is tanking the ruble right now," said a senior congressional GOP aide. (Politico, 12.16.14, RFE/RL, 12.16.14)
“For our part, we are always open to constructive and honest dialogue with the United States both in bilateral affairs and on the world stage, where our two countries bear a special responsibility for international security and stability,” Russian Foreign Minister Sergei Lavrov said “The question is, when will Washington be prepared to cooperate on the basis of genuine equality and respect for Russia’s interests, which we are not going to compromise under any circumstances?" (RBTH, 12.15.14).
Russia has made constructive moves in recent days towards reducing tensions in Ukraine, U.S. Secretary of State John Kerry said Tuesday, and he raised the possibility that Washington could lift sanctions if Moscow keeps taking positive steps. “These sanctions could be lifted in a matter of weeks or days, depending on the choices that President Putin takes," Kerry told reporters. (Reuters, 12.17.14).
The Western sanctions imposed on Russia are aimed at changing the regime and destabilizing the situation in the country, Russian Foreign Minister Sergei Lavrov said. (Interfax, 12.16.14).
A senior U.S. official said on Tuesday that damaging the Russian economy for the sake of it, or ousting Vladimir Putin, were never Washington objectives. (The Wall Street Journal, 12.18.14).

II. Russia news.

Domestic politics, economy and energy:

At his annual press conference on Thursday Russian President Vladimir Putin said that:
- Russia should try not to waste its $419 billion in currency reserves. The central bank has spent about $75 billion this year defending the ruble. (The New York Times, 12.18.14).
- Russia's economy would inevitably rebound after the ruble's dramatic slide this year but offered no remedy to a deepening financial crisis."... "Under the most unfavorable external economic scenario, this situation may go on for about two years. But it may also start improving in the first quarter, in the middle, at the end of the next year." Putin said. (Reuters, 12.18.14).
- Western sanctions on the country's defense, oil and gas, and banking sectors account for about "25 percent" of Russia's current difficulties. (Washington Post, 12.18.14).
- It was too early for him, or anyone else, to plan for the country's 2018 presidential election. (RFE/RL, 12.18.14).
An Associated Press-NORC Center for Public Affairs Research poll released Thursday found that about 80 percent of Russians support Vladimir Putin. (AP, 12.18.14).
Russia's ruble strengthened on Friday after Finance Minister Anton Siluanov confirmed his ministry had sold foreign currency, and on expectations that exporters will increase dollar sales. At 2:10 p.m., the ruble was about 2.2 percent stronger at 60.13 to the dollar, and had gained 2.6 percent to trade at 73.77 to the euro. On Tuesday the ruble plunged to a record low against the dollar, reaching 80 to the dollar, as investors grew convinced that the Russian central bank’s surprise move overnight to jack up interest rates to 17% wouldn’t be enough to alleviate the pressure on the currency. (Reuters, The Wall Street Journal, 12.19.14).
Russia's stock market suffered new falls on Friday. The dollar-denominated RTS index was down 1.5 percent to 753 points, while its ruble-based peer MICEX traded 2.3 percent lower at 1,442 points. (Reuters, 12.19.14).
Russian debt maturing September 2023 is yielding 7.84%, about 0.07 percentage point more than Monday’s close, according to Tradeweb. (The Wall Street Journal, 12.16.14).
Western sanctions over Russia's role in the Ukraine crisis are likely to last "for a very long time," possibly decades, Economy Minister Alexei Ulyukayev said. Ulyukayev said a lack of structural reform of the economy had partly set Russia up for "the perfect storm." He added that if there were no sanctions, no falling oil prices and if "we had not done some foolish things" which he did not elaborate on, the Russian economy could show annual growth of between 2.5 and 3 percent. (Reuters, 12.18.14).
The violent fluctuations of the ruble are encouraging Russians to speed up purchases of goods before retailers adjust prices to the new economic reality. Besides cars and household electronics, another all-time popular investment tool in Russia is real estate. The fluctuations have also prompted retailers to make emergency price revisions or even suspend sales and deliveries in Russia until the crisis cools. Late on Tuesday, U.S. tech giant Apple said it had been forced to halt online sales of iPhones, iPads and computers in Russia. (Moscow Times, 12,18.14, 12.17.14).
Russian oil giant Rosneft is expected to repay a $7.6 billion portion of a bridge loan that matures on Sunday, bankers close to the deal said. A second loan repayment of around $6.9 billion is due from Rosneft in February on maturity. Russian corporate debt in hard currency exceeds $600 billion, of which more than $100 billion falls due over the coming year. (Reuters, 12.16.14. 12.17.14).
Russia’s new-car sales tumbled nearly 12% to 2.2 million vehicles in the first 11 months of the year. (The Wall Street Journal, 12.18.14).
A natural population growth in Russia stood at 37,100 in January-October 2014, Labor and Social Protection Minister Maxim Topilin said. (Interfax, 12.19.14).
Russia's richest man Alisher Usmanov has transferred his holdings in mobile operator Megafon and iron ore producer Metalloinvest to Russian entities after President Vladimir Putin urged businessmen to bring their assets home. (Reuters, 12.19.14).

Defense:

General Sergei Karakayev, commander of the Strategic Rocket Forces (RVSN), confirmed that Russia will revive the Soviet tactic of launching nuclear missiles from trains in order to combat Washington's efforts to upgrade the U.S.'s attack capability. Karakayev said last year that Russia was being forced to consider reintroducing missile trains by the U.S. Prompt Global Strike program, which is developing hypersonic missiles capable of fast, high precision strikes anywhere on the globe. (Moscow Times, 12.16.14).
General Sergei Karakayev told journalists on December 16 that "experimental work on test samples of a new silo-based missile system armed with Sarmat-class missiles is expected to begin in 2015."(RFE/RL, 12.16.14).
Russia has the right to deploy nuclear weapons in the Crimean peninsula, Russian Foreign Minister Sergei Lavrov said. (LA Times, 12.14.14).

Security, law-enforcement and justice:

One of the organizers of the devastating 2002 attack on Moscow's Dubrovka Theater has been arrested in the Russian capital. Khasan Zakayev, a 41-year-old Chechen native, has been detained in Moscow and will be held until at least February, when investigators are expected to officially charge him for the two-day siege that claimed more than 130 lives. (Moscow Times, 12.17.14).
Russian authorities say three militants, including the leader of an armed group, have been killed in the Kabardino-Balkaria region in the volatile North Caucasus. (RFE/RL, 12.18.14).
A court in the Russian city of Kazan has sentenced an ethnic Tatar to three years and 10 months in a general corrective prison colony for fighting in a militant group in Syria. The defendant, 27-year-old Raif Mustafin, was also sentenced to a further year of limited freedom after his release, according to which he will be barred from relocating and attending public events. (RFE/RL, 12.18.14).
The Grozny apartment that served as the office of the local monitoring group branch of the Committee to Prevent Torture (KPP) was destroyed by a fire late on December 13.The following day, Grozny police detained two KPP lawyers, Sergei Babinets and Dmitry Dmitriyev, and confiscated from them their mobile phones, two laptops, and three cameras, one of which was the property of Al-Jazeera journalists who were visiting Grozny. (RFE/RL, 12.13.14).
Russia's Justice Minister has announced that Moscow will abide by a "baseless" ruling by the European Court of Human Rights to pay damages to shareholders of defunct oil giant Yukos, despite the Kremlin's disagreement with the decision. (Moscow Times, 12.17.14).
Russian prosecutors said Friday that Kremlin critic Alexei Navalny should be imprisoned for 10 years and his brother Oleg for eight years if found guilty of stealing more than 30 million rubles ($500,000). Reuters. 12.19.14).
Russia's Federal Security Service has revealed the name of an agent it says spied for the FSB for 20 years while working at Estonia's internal security police (RFE/RL, 12.14.14).

Foreign affairs and trade:

At his annual press conference on Thursday Russian President Vladimir Putin:
- Accused the West of trying to build a virtual wall around Russia by moving NATO forces closer to its border, and noted that the $50 billion that Russia plans to spend on its military next year is much less than the Pentagon's budget. (The New York Times, 12.18.14).
- Using the symbol of the Russian bear, Vladimir Putin said he wondered how the creature should behave. ‘Maybe he should stop chasing pigs and boars around the taiga, but start picking berries and eating honey. Maybe then he will be left alone,'' Mr. Putin said. ''But no, he won't be! Because someone will always try to chain him up. As soon as he's chained, they will tear out his teeth and claws. ‘The latter, he said, was a reference to Russia's nuclear deterrence. (The New York Times, 12.19.14).
- Said Russia resumed flights of its strategic bombers is in response to flights of U.S. Air Force strategic airplanes in the vicinity of the country's border, conceding that Russia had contributed to a recent rise in global tensions by resuming long-range military surveillance flights across Europe and along the edges of North America. (Interfax, The New York Times, 12.19.14).
- Said Ukrainian President Petro Poroshenko is looking to restore peace in his country, but many senior Ukrainian officials are opposed to this idea. (RIA Novosti, 12.18.14).
Moscow will not initiate the lifting of restrictions on EU food imports which were adopted in response to Western sanctions: Russian-EU relations have reached “a point where goodwill gestures do not lead to the necessary result,” Russian Foreign Minister Sergei Lavrov said. (RBTH, 12.15.14).
European Union leaders warned Moscow they were ready exercise their combined muscle over the long haul in a confrontation with Russia. "We must go beyond being reactive and defensive. As Europeans we must regain our self-confidence and realize our own strengths," said Donald Tusk, the former Polish premier who chaired a brief EU summit in Brussels on Thursday. Tusk said the European Union needs a strategy for dealing with Russia that lasts for years, not months. (Reuters, RFE/RL, 12.19.14).
German Chancellor Angela Merkel said Thursday that sanctions against Russia over Ukraine remain unavoidable as long as Moscow does not respect Ukrainian sovereignty and help ensure what she called "European security with Russia, not against Russia." (Reuters, 12.18.14).
German Finance Minister Wolfgang Schaeuble said Wednesday that Europe had no choice but to keep up pressure on Russia over the Ukraine crisis via sanctions, though the door remained open to dialogue. “Therefore only the bitter path of sanctions remains,” he said. (Reuters. 12.18.14).
European Union foreign policy chief Federica Mogherini urged Russian President Vladimir Putin on Thursday to radically change his attitude to the rest of the world and be more cooperative. (Reuters, 12.18.14).
French President Francois Hollande reiterated Friday he sees "no reason" to hand over a Mistral-class helicopter carrier to Russia given Moscow's continued destabilization of war-torn eastern Ukraine. The Baltic fleet's training ship Smolny carrying the crews of two Mistral-class helicopter carriers Vladivostok and Sevastopol with return from Saint-Nazaire, France, to Russia before the New Year holiday. (Interfax, 12.18.14, Moscow Times, 12.19.14).
EU restrictive measures on Crimea and Sevastopol approved by the European Union Council on December 18 were published by on Friday. From now on acquiring real estate assets or expanding real estate assets acquired earlier, acquiring enterprises or expanding one's stake in operating companies, lending to organizations operating in Crimea, setting up new enterprises in Crimea and Sevastopol in partnership with local organizations and rendering investment services in the acquisition of real estate assets or enterprises and their expansion is prohibited. (Interfax, 12.19.14).
Sweden’s relations with Russia took another knock over the weekend after a second near miss this year between a commercial jet and Russian military plane triggered a rebuke from Stockholm. (The Wall Street Journal, 12.15.14).
Russian president Vladimir Putin’ spokesperson Dmitry Peskov said: “It's very primitive to think that, being on bad terms with Europe or the United States, Russia will look for different alternatives. That Russia will show its back to Europe and look to China and India--and that this is a new dimension in Russia's policy. Russia has always attached the utmost value to historic and strategic relationships with India and China.” (National Interest, 12.12.14).
Russian Foreign Minister Sergei Lavrov said that Russia has no intention of changing its course in relations with China since it meets the essential interests of both countries. “These are in every sense mutually beneficial relations, in which there are no seniors or juniors, no leaders and no one being led. The course of Sino-Russian relations has been plotted with consideration for the fundamental interests of the peoples of the two countries and we do not intend to change this,” Lavrov stressed. (RBTH, 12.15.14).
The Indian government has decided to lease a second nuclear submarine from Russia. Currently, India operates an 8,140-tonne Akula Class submarine. The lease conditions allow India to fire conventional weapons only from the platform. The second leased submarine will also be the same class and is expected to come with the same conditions. (NDTV, 12.16.14).
Tehran backs Russia's efforts to host a new round of peace talks between Damascus and the Syrian opposition, Iran's deputy foreign minister said Wednesday during a visit to Moscow. (Reuters, 12.17.14).
Russian President Vladimir Putin has invited North Korean leader Kim Jong-un to Moscow next year to mark the 70th anniversary of the Soviet defeat of Nazi Germany in World War II, the Kremlin's spokesman said Friday. (Reuters. 12.19.14).
Russia welcomes the move by the U.S. to normalize its relations with Cuba, Deputy Foreign Minister Sergei Ryabkov has said. (Reuters, 12.18. 14).
Russia, one of the world's main wheat exporters, has cut grain exports to all but a few countries after imposing tougher quality checks, an exporters' lobby group said Wednesday. (Reuters, 12.17.14).
Germany’s BASF SE, the world’s largest chemical company by revenue, and Russia’s OAO Gazprom have called off an asset-swap deal amid mounting political tensions between Russia and the West, BASF said Thursday. (The Wall Street Journal, 12.19.14).
Denmark has laid claim to an energy-rich but difficult-to-develop part of the world that's a fount of holiday lore: the North Pole. Like Russia and Canada, Denmark is looking at the long-term economic potential of the North Pole. (National Geographic, 12.17.14).

Russia's neighbors:

Sergei Lavrov, Russia’s foreign minister, said on December 16th that “Russia does not insist on the federalization of Ukraine or the autonomy of Donbas,” a sharp turn from the Kremlin’s previous line. (The Economist, 12.17.14).
Ukraine’s president said in Warsaw on Wednesday he would propose to walk away from the country’s nonaligned status to eventually join the North Atlantic Treaty Organization and the European Union. (AP, 12.17.14).
The draft law renouncing the non-bloc status of Ukraine play into the hands of party of war supporters, Russian Foreign Minister Sergei Lavrov said. (Interfax, 12.19.14).
Russian Foreign Minister Sergei Lavrov also called Poroshenko "the best chance Ukraine has at the moment" for resolving a conflict that has killed more than 4,700 and left the ex-Soviet republic effectively bankrupt. (AFP, 12.17.14).
There have been at least 1,357 fatalities since the Sept. 6 cease-fire and 4,707 deaths in eastern Ukraine since the whole conflict started in April, according to a United Nations report published Monday. (The Wall Street Journal, 12.15.14).
The Ukrainian military suffered its heaviest losses in a week of relative quiet in the east, an official said Friday, raising further concerns about an elusive next round of peace talks with pro-Russia separatists. Five servicemen were killed and seven wounded. (The Wall Street Journal, 12.19.14)
The International Monetary Fund estimates Ukraine needs another $15 billion in financing to withstand an economic crisis but the European Union has only limited capacity to help, European Commission President Jean-Claude Juncker said on Wednesday. (Reuters, 12.17.14).
In order to put the country back on a sound financial footing, Ukraine's finance ministry is proposing sweeping cuts. Among the most startling proposals are to reduce the number of MPs from 450 to 150, reduce obligatory schooling from 11 to 9 years, and abolish the constitutional guarantees of free education and medicine, as well as abolishing a constitutional norm prohibiting closure of existing institutions (such as schools and hospitals). (Business New Europe, 12.12.14).
The leaders of the self-proclaimed Donetsk People's Republic plan to push for more east Ukrainian territory at a Dec. 21 round of peace talks in Minsk. (Moscow Times, 12.18.14).
Ukrainian President Petro Poroshenko has instructed security officials to provide residents of eastern Ukrainian regions with heating and electricity, according to an official statement published on Poroshenko's website Sunday. (Reuters, 12.14.14).
"We will no longer support the Ukrainian economy. It is a burden for us and to be honest, we are tired of it," Prime Minister Dmitry Medvedev said in an article published Monday. He claimed Moscow had given its neighbor $82.7 billion in gas-price discounts in recent years. Medvedev said Russia would bring in a tariff increase on Ukrainian imports if there was evidence that Kiev was implementing the provisions of the EU trade deal ahead of 2016. This could cost Kiev about $15 billion He also said that Ukrainians working in Russia illegally will face stronger enforcement measures from Jan. 1 next year, which may prevent them from working there and cost Ukraine $11 billion-$13 billion, or 7% of its GDP, according to Mr. Medvedev’s estimates. (Reuters, The Wall Street Journal, 12.15.14).
A former deputy interior minister of Georgia, Ekaterina Zguladze, has been appointed to a similar post in Ukraine. (RFE/RL, 12.17.14).
Belarussian President Alexander Lukashenko and Ukraine's Petro Poroshenko will meet on Sunday. (Reuters. 12.19.14).
Belarus has slapped a 30 percent commission on foreign currency purchases in an effort to rein in demand for dollars and euros and prevent a currency crisis like the one that struck Russia earlier in the week. (Reuters. 12.19.14).
Belarusian President Aleksandr Lukashenka has blamed Moscow for a trade dispute that is straining ties between the traditional allies. Russia and Belarus have been at odds since late November, after Russia banned imports of meat and milk from Belarus, claiming it found traces of harmful substances. (RFE/RL, 12.16.14).
Ukraine plans "to denounce" its intergovernmental agreement with Russia to build two new reactors at the Khmelnitsky nuclear power plant, Energoatom president Yuri Nedashkovsky said. (World Nuclear News, 12.17.14).
Just as the European Parliament on Dec. 18 approved an association agreement with Georgia, the Georgian-claimed, breakaway region of South Ossetia unveiled a rival association deal with Russia. (EurasiaNet, 12.18.14).
Uzbekistan's National Security Service is reportedly questioning citizens who return from working in Russia to see if they have become jihadists, amid suspicions that some mosques in Russia are becoming centers for Islamic radicalization. (Moscow Times, 12.15.14).
Kazakh citizen Yevgeny Vdovenko has been sentenced to five years in prison for fighting alongside pro-Russian separatists in eastern Ukraine. (RFE/RL, 12.15.14).
The prime ministers of the Shanghai Cooperation Organization (SCO) member states met in Kazakhstan’s capital, Astana. Ahead of the talks, Russian Prime Minister Dmitry Medvedev met with his Chinese counterpart, Li Keqiang. On December 14, Li and Kazakh Prime Minister Karim Masimov presided over the signing of some 30 agreements worth about $14 billion. (RFE/RL, 12.15.14).

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