Russia in Review

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

Nuclear security agenda:

Russia has informed the United States that it is planning to reduce its participation next year in a joint effort to secure nuclear materials on Russian territory, a move that could seriously undermine more than two decades of cooperation aimed at ensuring that nuclear bomb components do not fall into the hands of terrorists or a rogue state. Sergey V. Kirienko, the head of Russia’s state nuclear company, has told senior Obama administration officials that no new projects in Russia are “envisioned” in 2015, according to American officials. (New York Times, 11.12.14).
The framework agreements between Rosatom and U.S. Department of Energy continue to hold well, Russian Ambassador to the United States Sergei Kislyak said Saturday. Russia is not considering imposing sanctions against the United States in the field of scientific cooperation on account of the benefits the partnership brings, he said. (RIA Novosti, 11.08.14).
The Pentagon will have to spend billions of dollars over the next five years to make emergency fixes to its nuclear weapons infrastructure, U.S. Defense Secretary Chuck Hagel will announce on Friday, after two separate Pentagon studies concluded that there are “systemic problems across the nuclear enterprise,” according to senior defense officials. (New York Times, 11.14.14).

Iran nuclear issues:

Russia says a November 24 deadline for an international agreement to curb Iran's nuclear program in exchange for the removal of sanctions might not be met. (RFE/RL, 11.13.14).
Russia has agreed to build up to eight new nuclear power reactor units in Iran. The entire construction project of the nuclear power units in Iran, including equipment and nuclear fuel supplies, will be under the IAEA safeguards and fully meet the nuclear nonproliferation regime the same way as during construction of the first power unit of Bushehr nuclear power plant, Rosatom said. If the agreement with Rosatom means that Iran is willing to send nearly all its LEU to Russia for conversion to fuel rods, it might then be able to hold on to most of its operational centrifuges while still meeting the overriding requirement of the West’s negotiators—to push its “breakout capability” to nearly a year. (The Economist, 11.14.14, World Nuclear News, 11.11.14).

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

In response to NATO's "anti-Russia inclinations," the Kremlin will resume its Cold War-era practice of sending long-range bombers to patrol the western Atlantic and eastern Pacific, Russia's defense minister announced Wednesday. "In the current situation, we have to maintain military presence in the western Atlantic and eastern Pacific, as well as the Caribbean and the Gulf of Mexico," Shoigu said. (LA Times, 11.13.14).
Asked about Russian exercises in the Gulf of Mexico, Col. Steve Warren, a Pentagon spokesman, said that Russia has conducted military exercises there before and that the operation was occurring over international waters. Still he stressed that it is important that Moscow “conduct their operations safely and in accordance with international standards.” (WSJ, 11.12.14).
European Leadership Network recorded almost 40 incidents in the past eight months involving Russian forces in a “volatile standoff” with the West that “could prove catastrophic at worst.” The report traced a turning point in the number and gravity of incidents involving Russian forces to March. By October, it said, NATO officials had already reported three times as many intercepts of Russian aircraft as in all of 2013. (WSJ, 11.10.14).
Eight northern European nations agreed Wednesday to step up cooperation to counter an increase in Moscow's military activity that has included a tripling of NATO intercepts of Russian jets this year. (Reuters, 11.13.14).

Missile defense:

No significant developments.

Nuclear arms control:

The U.S. announced that it will attend the third Conference on the Humanitarian Impact of Nuclear Weapons. The Conference, set to take place on December 8-9, 2014 in Vienna, Austria, aims to strengthen the global nuclear disarmament and nonproliferation regime. (Nukes of Hazard, 11.07.14).

Counter-terrorism agenda:

Moscow is contemplating joining the fight against the Islamic State in Iraq and Syria which has recruited foreign fighters from Russia’s North Caucasus region. (The Hill, 11.11.14).

Cyber security:

"It is very difficult to break Runet. There have been a great deal of speculation about this but I can tell you as a technical specialist that an immediate shutdown of the Russian Internet segment is impossible," head of Russia’s national Internet domain coordination center Andrei Kolesnikov said. (Interfax, 11.12.14).

Energy exports from CIS:

Russia’s Gazprom and China National Petroleum Corp signed a “framework agreement” in Beijing on Sunday for supplying natural gas through pipelines into western China. The deal comes less than six months after the two countries signed a landmark $400 billion gas deal that’d supply gas along the eastern route to eastern China. “The two Siberian gas deals altogether could account for almost 17% of China’s total gas consumption by 2020,” Gordon Kwan, head of commodity research at Nomura Holdings, said. Eventually, the deal means Russia could ship more natural gas to China than to Germany, now its largest customer. The pipeline, in theory, could also be used to divert energy supplies, currently headed to Europe, to Asia. (New York Times, 11.11.14, WSJ, 11.10.14).
Russia's Gazprom will invest 839.2 billion rubles ($18.1 billion) next year, the bulk for development of the Yamal Peninsula's natural gas deposits and also including research for a new gas pipeline route to China, the company said Thursday. (Reuters, 11.13.14).
Ukraine is likely to buy around 1 billion cubic meters, or bcm, of gas from Russia by the end of the year, Ukraine's energy minister said Friday, while state energy firm Naftogaz said it may send prepayments by the end of November. Earlier this week Ukraine has signaled it may hold off from paying Russia's billion-dollar gas invoice — part of an EU-brokered agreement to restart supplies frozen since June — in the hope mild weather can help it last out longer as it grapples with near-bankruptcy. (Reuters, 11.13.14. Reuters, 11.14.14).

Bilateral economic ties:

When JPMorgan Chase & Co agreed to lead a $700 million bond offering for Russian natural gas producer Gazprom, it was doing business that some U.S. banks are afraid to do, several lawyers and a banker said. (Reuters, 11.09.14).
Canadian pork producers will not be able to return to the Russian market after Russia lifts restrictions on food imports because the Federal Veterinary and Phyto-Sanitary Oversight Service is banning imports of this meat effective November 14, and the same fate awaits U.S. poultry farmers. (Interfax, 11.13.14).

Other bilateral issues:

U.S. President Barack Obama and Russian President Vladimir Putin took time on the sidelines of Tuesday’s economic summit in Beijing to discuss a trio of foreign policy challenges, according to a White House official. The pair spoke on three separate occasions for a total of between 15 or 20 minutes, National Security Council spokesperson Bernadette Meehan said. “President Obama had an opportunity to speak with President Putin. Their conversations covered Iran, Syria and Ukraine,” Meehan said. (The Hill, 11.11.14).
Ukraine has not been a top focus during a pair of summits in Asia this past week, U.S. Deputy National Security Advisor Ben Rhodes said, although President Barack Obama did raise it briefly with Putin when both attended the Asia Pacific Economic Cooperation forum in China. Obama arrives in Brisbane on Saturday and will be discussing his frustration over Ukraine with a key bloc including German Chancellor Angela Merkel, French President Francois Hollande and British Prime Minister David Cameron. (Reuters, 11.14.14).
President Vladimir Putin accused the United States on Friday of undermining the very trade institutions it created by imposing sanctions on Russia, a "mistake" he hoped would be overcome in the "final count." Putin said he would not bring up sanctions at the G20 meeting, which starts on Saturday in Australia, as “it'll make no sense.” (Reuters, 11.14.14).
U.S. secretary of State John F. Kerry said Saturday after a meeting with Russian Foreign Minister Sergei Lavrov that the United States and Russia will keep talking about the deteriorating situation in eastern Ukraine, although he made clear that Washington does not accept Moscow's denial of involvement in the arming of pro-Russian rebels. (Washington Post, 11.09.14).
“The world is on the brink of a new Cold War. Some are even saying that it’s already begun,” former Soviet leader Mikhail S. Gorbachev said Saturday at an event marking the 25th anniversary of the fall of the Berlin Wall. (WSJ, 09.08.14).
Cable news channel CNN will end its broadcasts in Russia starting on Jan.1, after the country passed a law restricting foreign ownership of media outlets. (Moscow Times, 11.11.14).
Four U.S. students have been kicked out of Russia after authorities there said they had the wrong visas. (RFE/RL, 11.12.14).

II. Russia news.

Domestic politics, economy and energy:

The Russian economy is prepared for the worst-case scenario, Russian President Vladimir Putin said on Friday. "Yes, it's ready. We are considering all scenarios, including the so-called catastrophic decline in energy prices, which is quite possible, and we admit it," Putin said. If it came to it, Putin said Russia’s reserves would be used for areas like infrastructure development. (Business Insider, 11.14.14).
Brent crude oil fell to a four-year low of less than $80 per barrel on Thursday, descending to the point that Russian President Vladimir Putin recently said could, if prolonged, trigger the collapse of the world economy. “If world prices stay at the level of $80, all production will collapse," Putin said last month. (Moscow Times, 11.13.14).
Russia's central bank has forecast three years of stagnation, cutting economic growth estimates for 2014-16 to almost zero. The base scenario forecast economic growth of 0.3 percent this year, zero in 2015, and 0.1 percent in 2016. The bank also significantly raised its forecasts for net private sector capital outflows, to $128 billion this year and $99 billion in 2015. The bank expects Western sanctions to last until 2017. The bank anticipated that the current account surplus would be $60 billion in 2015, while the bank's forex reserves would fall by $42 billion. (RFE/RL, Reuters, 11.10.14).
The OECD said its gauges for China, Brazil and Russia pointed to stable growth. (WSJ, 11.12.14).
The Russian ruble fell further on Friday, dragged down by weak oil prices and by fears of new Western sanctions against Russia because of the deteriorating cease-fire in eastern Ukraine. The ruble was down to 47.42 on Friday against the dollar, and down to 59.05 against the euro. Global oil benchmark Brent was near a four-year low below $78 per barrel early on Friday. (Reuters, 11.14.14).
The Russian Central Bank announced that it would eliminate the trading corridor it has been setting for the ruble and the regular interventions when it reached the boundaries. In recent weeks, that mechanism has done little to stem the ruble’s slide, but cost the central bank nearly $30 billion in interventions. (WSJ, 11.10.14).
The Russian Central Bank said Tuesday it was limiting banking sector ruble liquidity by temporarily cutting the size of its foreign exchange swap operations to the equivalent of $2 billion a day. (Reuters, 11.11.14).
The Russian Central Bank will try to convince export-focused companies to convert their revenues into rubles in an attempt to stabilize the battered currency. (WSJ, 11.13.14).
A Central Bank official said Tuesday that the regulator will finish building its alternative to the SWIFT inter-bank messaging service, a key element in Russia's plans to diminish foreign influence over its financial system, by the end of May next year. (Moscow Times, 11.11.14).
Russia's lower house of parliament approved changes that will reduce oil export duties and increase taxes for mineral extraction, seeking to balance the needs of the producers and its budget. Analysts say the companies with the highest exposure to the refining sector, such as Bashneft, Gazprom Neft and LUKoil, will be the biggest losers. (Reuters, 11.11.14).
Russia’s Nikimt-Atomstroy has developed and manufactured a remotely operated welding system for the production of mixed uranium-plutonium oxide (MOX) fuel assemblies for nuclear power units. (WNN, 11.13.14).
The government is revising a program that allows graduates to study abroad at the state's expense and could limit it to nations and universities that are deemed friendly to Russia. (Moscow Times, 11.13.14).
The Kremlin strengthened its position in the drawn-out media war with the West this week with the launch of Sputnik, an international multi-platform news agency meant to provide a pro-Russian alternative to Western media coverage. (Moscow Times, 11.11.14).
The editor-in-chief of business daily Kommersant has resigned, triggering speculation Monday that he was forced out over a recent article in the newspaper about oil giant Rosneft. (Moscow Times, 11.10.14).

Defense:

Russian Defense Minister Sergei Shoigu said the situation near Russia's south-western borders remained uncertain. "This is largely due to the situation in Ukraine, the fueling of anti-Russian tendencies by NATO and the increase in the foreign military presence in direct vicinity of our borders. “Russia’s armed forces must be capable to guarantee the country's security in that region, Shoigu said, adding that Russia would create a "full-fledged and self-reliant" army group on the Crimean Peninsula (Global Times, 11.11.14).
NATO's top commander says Russia is reinforcing its bases in disputed Crimea, but there is no clear assessment of whether that includes deployment of nuclear weapons. (AP, 11.11.14).
Russian military prosecutors refused to shed light into the deaths of 12 Russian paratroopers that allegedly perished while fighting alongside insurgents in Ukraine's turbulent east, citing state secrecy requirements. (Moscow Times, 11.10.14).

Security, law-enforcement and justice:

A day after proclaiming the death of Islamic State commander Tar khan Batirashvili on his Instagram account, Chechen leader Ramzan Kadyrov has apparently backtracked, having deleted both the claim and the photograph used to substantiate it. (Moscow Times, 11.14.14).
A court in Grozny on November 10 sentenced a local man to two years' imprisonment in a penal colony for fighting in Syria. Said Mazhaev, a 22-year-old Grozny native, went to Syria in November 2013. He returned home to Chechnya on January 14, when he was arrested. (RFE/RL, 11.11.14).
Alexei Staroverov, head of the Prosecutor General's Office administration, has been suspended and questioned over his links to a series of motorway murders outside Moscow after it emerged that the alleged ringleader of the killers had been living in the prosecutor's house. Multiple news reports had claimed that the gang's motives were religious and that its members saw the killings as a form of Islamic jihad. During a meeting with Interior Minister Vladimir Kolokoltsev on Saturday, Putin spoke of a “terrorist crime” in an apparent reference to the motorway murders. (Moscow Times, 11.13.14).
Russia is appealing a European Court of Human Rights ruling obliging it to pay $50 billion in compensation to former shareholders of the defunct Yukos oil company, questioning the Hague-based court's jurisdiction in the matter. (Moscow Times, 11.12.14).
A Russian court Friday extended tycoon Vladimir Yevtushenkov’s house arrest until March 16, 2015, saying he might otherwise go into hiding or influence witnesses in a money-laundering case. (WSJ, 11.14.14).

Foreign affairs and trade:

President Vladimir Putin says Russia hopes to sharply increase trade with Asian nations and diversify its exports to the region. Trade with Asia-Pacific countries "currently makes up over a fourth of overall Russian trade turnover," Putin said on November 10." In the future, we are planning to bring this share up to 40 percent." (RFE/RL, 11.10.14).
Russian President Vladimir Putin reiterated on Friday that he wants to strengthen ties with China, and avoid using the dollar for bilateral trade. Data from China’s central bank suggest that companies are already starting to shun the U.S. currency. “We’re moving away from the diktat of the market that denominates all the commercial oil flows in U.S. dollars,” Mr. Putin said. Turnover in direct transactions in the two currencies soared to $1.2 billion over the course of October, from $307 million in September and as low as $52 million in July. (WSJ, 11.14.14).
Russia's Vnesheconombank (VEB) is poised to get billions of dollars from China Development Bank for investment in Russian real estate, VEB head Vladimir Dmitriyev said. (Moscow Times, 11.10.14).
Chinese banks are prepared to invest more than $10 billion in Russia's giant Yamal liquefied natural gas project. (Moscow Times, 11.07.14).
VTB, Russia's No. 2 bank, may delist from the London Stock Exchange (LSE) in favor of Chinese bourses as sanctions imposed in the Ukraine crisis hit its ability to raise capital in Western markets, its chief executive said on Monday. (Reuters, 11.10.14).
Russian state development bank Vnesheconombank plans to open a new branch in Hong Kong, where energy giants Gazprom, LUKoil and Rosneft are also looking to potentially list, Russia's Economy Ministry said Saturday. (Reuters, 11.09.14).
The G20 leaders’ summit in Australia starting on Saturday is setting up as a showdown between Western leaders and President Vladimir Putin, following fresh reports of Russian troops pouring into eastern Ukraine. (Reuters, 11.14.14).
Russian President Vladimir Putin plans to have a separate bilateral meeting with German Federal Chancellor Angela Merkel on the sidelines of the G20 summit in Brisbane, Australia, Kremlin press secretary Dmitry Peskov said. (Interfax, 11.14.14).
Western investment banks' income from syndicating Russian debt sales and share listings in 2014 stands at just over $100 million, a quarter of 2013 earnings and the lowest since 2004. Adding fees from loans and merger/acquisition deals, they have made around $350 million — less than half last year's total. (Reuters, 11.14.14).
Russia may demand monetary compensation unless France delivers the first of two Mistral helicopter carriers by the end of November. A Russian delegation that had planned to travel to France on Friday to take part in a ceremony to transfer the first ship in the 1.2 billion euro ($1.5 billion) deal had stayed home and no new date for a handover had been set. (Reuters, 11.14.14).
The leaders of Japan and Russia agreed to continue deepening bilateral ties through a range of steps--including a visit by Russian President Vladimir Putin to Japan next year. (WSJ, 11.09.14).
The former head of Syria's main political opposition said he had visited Russia with other opposition figures and had discussed ways to end the conflict with Damascus' ally Moscow, but had insisted that President Bashar Assad must go. (Reuters, 11.09.14).
7News reported Wednesday that "four Russian warships are bearing down on Australian waters, led by the guided missile Cruiser Varyag, the flag ship of Russia's Pacific fleet." (Washington Post, 11.13.14).
Sweden has confirmed that a small foreign submarine illegally entered its waters in October, but said it's still unclear which country was behind the incursion. (RFE/RL, 11.14.14)
Russian paratroopers have landed in a Serbian field as part of an unprecedented military exercise in the Balkan nation, which is seeking to join the European Union. (RFE/RL, 11.14.14)

Russia's neighbors:

The cease-fire in eastern Ukraine is all but dead, Ukraine's representative to the Organization of Security and Co-operation in Europe, or OSCE, said. "Since the Minsk agreement ...we have more than 2,400 breaches of the cease-fire by militant groups. More than 100 Ukrainian soldiers and dozens of civilians have been killed," he said. (Reuters, 11.13.14).
A senior NATO official confirmed on Wednesday what Ukrainian military officials and monitors from the Organization for Security and Cooperation in Europe had been saying for days: Russian troops and military equipment are crossing the border into Ukraine, seemingly preparing for renewed military action, though what exactly remains unclear. Russia forcefully denied that any of its troops or equipment had crossed into eastern Ukraine. (New York Times, 11.13.14).
The Ukrainian military said on November 13 that four of its soldiers had been killed and 18 wounded in fighting with the rebels over the previous 24 hours. (RFE/RL, 11.13.14).
In Kyiv, military spokesman Andriy Lysenko said shelling by separatists in both the Luhansk and Donetsk regions had intensified, but that Ukrainian forces have no intention of renouncing a September 5 cease-fire. (RFE/RL, 11.13.14).
UN Assistant Secretary-General for Political Affairs Jens Anders Toyberg-Frandzen told the council that the UN was "deeply concerned over the possibility of a return to full-scale fighting" in eastern Ukraine. (RFE/RL, 11.12.14).
Ukrainian government forces are redeploying in preparation for a possible new offensive by pro-Russian separatists in eastern regions, Defense Minister Stepan Poltorak said Wednesday. (Reuters, 11.12.13).
The director of the Organization for Security and Cooperation in Europe said Wednesday that the group’s drones monitoring military activity in eastern Ukraine have been shot at and jammed, part of a rapidly deteriorating situation in the region. (WSJ, 11.12.14).
A Ukrainian security adviser says there is no point in holding new peace talks with pro-Russian separatists until Kyiv is satisfied that the rebels holding territory in the Donetsk and Luhansk regions are adhering to a truce deal signed on September 5 in Minsk. (RFE/RL, 11.14.14)
Russian President Vladimir Putin on Monday accused Ukraine's government of interfering with the investigation into the downing of a Malaysia Airlines jet in July that killed 298 people. (Reuters, 11.10.14).
Ukraine's top priority is to build an army strong enough to stop Russian military aggression, Ukrainian Prime Minister Arseniy Yatsenyuk said Friday, as the country's military reported more deaths in a separatist conflict. (Reuters, 11.14.14).
The United States warned Russia on Thursday the West might punish it further for its "military escalation" of the crisis. But EU ministers, at most, may order officials to draw up names of eastern Ukraine separatists, and possibly some Russians, who would be added to an existing list of officials under EU travel bans and asset freezes, EU diplomats said. (Reuters, 11.14.14).
German Chancellor Angela Merkel said there were no plans to add new economic sanctions against Russia. However, Merkel floated the possibility of issuing travel restrictions on pro-Russian politicians recently elected in the Crimean peninsula, which Russia has annexed. (WSJ, Foreign Policy, 11.11.14).
The Czech Republic's deputy prime minister said that a political solution to the crisis in Ukraine was needed to avoid another round of Western sanctions against Russia, which he said would further damage economic ties. (WSJ, 11.12.14).
Ukraine will be forced to buy coal from Russia to get through the winter, Ukrainian Energy Minister Yury Prodan said Wednesday. Conflict between pro-Russian rebels and Ukrainian forces in Ukraine's industrial east has disrupted coal supplies to thermal power plants (TPP), which provide around 40 percent of the country's electricity. (Reuters, 11.12.14).
A state security officer who was Ukraine's counterintelligence chief in the final weeks of former President Viktor Yanukovych's rule has been arrested on suspicion of "high treason." (RFE/RL, 11.10.14).
The hryvnya traded at 15.53 per dollar on Thursday, trimming this year's slide to 47 percent. That's the biggest drop worldwide, surpassing a 29 percent depreciation in the Russian ruble, which is the second-worst performer. (Bloomberg, 11.13.14).
A year of revolution and war has taken a grim toll on Ukraine's economy. GDP could fall by 10% this year. Inflation has hit 19%; at the beginning of the year, prices were stable. The central bank raised rates this week, for the third time this year, to 14%. The decline in GDP is twice as big as the IMF forecast in April. (The Economist, 11.14.14).
The yield on Ukraine's dollar-denominated note due in July 2017 hit a record 17.95 percent on Wednesday, almost quadruple the average borrowing cost for emerging markets. (Bloomberg, 11.13.14).
Russia's food safety watchdog, Rospotrebnadzor, has banned the import of Ukrainian "cheese-like products," according to a press release published Thursday on the regulator's website. (Moscow Times, 11.13.14).
Energoatom, Ukraine's nuclear power plant operator, has opened an office in Brussels in order to work closely with the European Commission and other European institutions. (WNN, 11.07.14).
Belarusian regulator Gosatomnadzor has found that all the required safety measures are in place for the construction of the country's first nuclear power plant. (WNN, 11.07.14).
Belarusian President Aleksandr Lukashenka has lashed out at officials with children living in the United States, suggesting they were ineffective and could potentially be dismissed. (RFE/RL, 11.11.14).
China has pledged $40 billion to set up a Silk Road Fund to help connect countries across Asia. (RFE/RL, 11.08.14).
Turkmenistan has signed an outline deal with Turkey to supply gas to a new pipeline that could help Europe reduce its dependence on Russian gas imports. (Reuters, 11.07.14).
Georgian President Giorgi Margvelashvili has warned lawmakers that the country is in political crisis and called on parliament to "unite on the path toward Europe." (RFE/RL, 11.14.14)
Georgian Prime Minister Irakli Garibashvili has accused two ministers who left the cabinet last week of "anti-state activities," saying they "misrepresented Georgia" to the West. (RFE/RL, 11.10.14).
Georgian Prime Minister Irakli Garibashvili appointed Tamar Beruchashvili as the country's new Foreign Minister on November 11. (RFE/RL, 11.11.14).
Kakha Bendukidze, a key figure behind Georgia's anticorruption drive and liberal economic reforms after the Rose Revolution of 2003, has died at age 58. (RFE/RL, 11.14.14)
The armed forces of Azerbaijan shot down and destroyed an Armenian military helicopter in the Nagorno-Karabakh region on Wednesday, the defense ministries of both countries said. (AP, 11.12.14).
Iranian and Azeri officials signed five cooperation agreements on Wednesday to expand ties in areas of economy, renewable energy, industry, communications, and transport, IRNA reported on Wednesday. The cooperation deals were signed at the presence of Iranian President Hassan Rouhani and his Azeri counterpart Ilham Aliyev in Baku. (Payvand, 11.13.14).
The European Parliament has ratified Moldova's political and trade agreement with the European Union. (RFE/RL, 11.13.14).
Moldova has extended its gas-supply contract with Russia's Gazprom for another year. (RFE/RL, 11.12.14).

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