#2
http://readrussia.com
March 16, 2015
Is It All Doom and Gloom?
By MARK ADOMANIS
[Chart here http://readrussia.com/2015/03/16/is-it-all-doom-and-gloom/]

Internet commentary is full of laws. The most famous of the bunch, Godwin's law, isn't actually a binding rule it's simply an observation that as a debate continues the odds of someone employing a comparison to Hitler or the Nazis rapidly approach 1. As a description of objective reality, there are parts of Newtonian physics that don't hold up as well: internet trolls flock to Hitler comparisons the way flies swarm to a piece of rotting meat.

Rather than making an observation about the fickleness of human nature, though, I want to propose an actual law, a law that would govern writing about Russia.* You can call it "Adomanis' law," "the first law of Russia commentary," or the 11th commandment. You can call it "Bob" if it makes you happy, because the name isn't the important part.

The law is an exceedingly simple one: before making a statement about Russia make a good faith effort to verify that the statement is factually accurate.

For example, Western coverage has recently focused on the "despair" felt by many Russians as their government has waged war in Eastern Ukraine. Rare is the news report that doesn't mention the "loss of hope" among the public or suggest that the society is careening into a kind of mass depression.

Now the idea that recent Russian government policy would cause a kind of mass psychosis is entirely plausible. If I were a Russian citizen I certainly would be depressed at the prospect of an indefinite war in Ukraine and the government's decision to implement a cynical kind of national conservatism steeped in fatuous rhetoric about "souls," "faith," and "tradition."

The thing is, there's actually a pretty quick and easy way to determine a society's overall level of depression: look at the suicide rate. Even in a place like the United States, suicide rates change quite quickly in response to external stimuli. For example the US' suicide rate has increased about 12% since the start of the financial crisis, exactly as you would expect to see amidst a sea of foreclosures, layoffs, and broken dreams. Other developed countries see almost identical patterns: suicides rise and fall as economic fortunes wax and wane. The Soviet Union, as one more example, recorded a long-term increase in the suicide rate during the "era of stagnation."

And what has been happening to Russia's suicide rate recently? Well after spiking during the early 1990's, temporarily declining, and then spiking again during the ruinous 1998 economic crisis, it's been in rapid long-term decline. The total rate of suicide in the population is now almost 50% lower than it was in 1992. During 2014 alone, it decreased by almost 10%. Straight comparisons to Soviet-era data are trick, but a strong case could be made that Russians are now less likely to end their own lives that at any other point in their country's troubled and tragic history.

That is you can say that "in response to Putin's aggression in Ukraine, Russians have returned to the bleak mood of despair that characterized Soviet communism" but that doesn't fit with the data. If Russians were actually lapsing into a society-wide depression we would expect to see the suicide rate nudging up. Instead it's continuing to tank.

Does the decline in suicide "justify" the Russian government's policy? No. Of course not. I think the Russian government's policies in Ukraine are horrible and I've said so, in print, more times than I can remember. But when trying to gauge the overall level of depression in a gigantic continent spanning country like Russia what I think ultimately doesn't matter. What matters is the behavior of actual Russians. And, to date, their behavior simply does not square with a hypothesis of growing depression and despair.

Now there is nothing magical about recent trends in the suicide rate. There is nothing written in the heavens that says Russia must record year-over-year decreases in self harm. The number of suicides could (and, if I had to guess, probably will!) increase in 2015. That's not a certainty, but it's a very real, and very sad, possibility. If and when that happens it will be perfectly fair to use it as a data point in a narrative about the adverse consequences of Putin's strategy. But one can't anticipate these things, one can only look at actual changes in behavior and so far those have been telling a surprisingly positive tale about how Russians see their future.

The world would be a much simpler, and likely better, place if it comported with a straightforward narrative. It'd be nice if bad behavior in one sphere was "punished" with poor performance in another if, say, Putin's adventurism in Ukraine led to a skyrocketing suicide rate of decreased life expectancy. But the world doesn't work that way. It's a confusing hodgepodge of good and bad and positive and negative that can only be disentangled by patient analysis and a relentless focus on hard, measurable data.

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 #4
Center for European Policy Analysis
http://cepa.org
March 15, 2015
Where is Putin?
By Edward Lucas
Edward Lucas is a Senior Vice President at the Center for European Policy Analysis (CEPA). Energy, Commodities and Natural Resources editor for The Economist, the London-based newsweekly, he is one of the foremost experts on Russia and Central and Eastern Europe. Mr. Lucas has covered Central and Eastern European affairs since 1986, writing and speaking widely on the political and economic climate of the former communist countries and how current trends there affect the West. A graduate of the London School of Economics, he is an expert on energy security, the political use and abuse of history and economic reform in ex-communist countries. His book The New Cold War, first published in 2008, has recently been reissued in a revised and updated edition.

Prescient  or preposterous? Vladimir Putin's absence from public life sparked a frenzy last week. Nobody agreed what was going on, but almost all commentators agreed that it was significant. As Leonid Bershidsky noted,

"No other kind of state would be so opaque, nor its citizens so preoccupied with their ruler."  

Andrei Illarionov, a former advisor to Putin and now a fierce critic of his regime, said he had been toppled in a backstage coup. A well-connected Washington-based economist, Anders Aslund, suggested that a full-scale Kremlin power struggle was under way. On one side are Putin, his close ally Igor Sechin (head of the Rosneft energy company), the Chechen leader Ramzan Kadyrov and the interior ministry; on the other, the security and criminal-justice agencies.

Others agree with at least the outlines of that: Stanislav Belkovsky, who has long played a role as a conduit for rumours and black PR from various Kremlin factions, said that Putin is stuck between a rock and a hard place. His reputation for stability rests on having "won" in Chechnya, so he cannot afford to cross Kadyrov. But he cannot side against the Siloviki because they would overthrow him. Those tensions are not new: the real question is whether they have increased to the point that Putin's own position is threatened.

Some foresee bloodshed; critics of the regime have hurried abroad amid talk of a hardliners' "hit list." But not only opposition figures may be in danger. One rumour said that Putin's long-time bodyguard, General Viktor Zolotov, was dead. Aslund tweeted (without a source) that Vladislav Surkov, once the "gray cardinal" of the Kremlin, had fled to Hong Kong with his family.

But Vladimir Milov, a close friend and ally of the murdered Boris Nemtsov, urged people to calm down. It was not the first time, he noted, that Putin had been in a funk after an upsetting event. Mark Galeotti, a British academic specialising in Russian security and intelligence, said the rhetoric (of "traitors" etc) and troop movements that would accompany a forced leadership change, or the quelling of a rebellion, were notably absent. Nina Ivanovna, a blogger, said that the whole episode might be designed to distract attention from the murder of Nemtsov and the war in Ukraine.

A happier explanation was that the Russian leader was in Switzerland celebrating the birth of a child by his secret lover, the gymnast Alina Kabaeva. Bershidsky said wryly that if this version were true it might make the Russian president more human.

The Kremlin, meanwhile, has snarlingly dismissed speculation and scaremongering with a dogged insistence that nothing is amiss: the president was simply working "exhaustively" with documents. The only real clue of a change in political direction came from a bland but sinister announcement on Tass that Putin wanted a new federal agency to deal with nationalities: perhaps to bring the Chechens to heel, or to stir up more trouble with "compatriots" abroad.

Who is right? As so often in Russia you can stitch the few available facts (and what seems to be misinformation) into a sinister pattern. Or discount them as random noise. Only afterwards, if ever, do you find out what really happened.

My hunch is that the shots that killed Boris Nemtsov, the opposition leader, last month were indeed the first salvo in an internal power struggle that will bring radical change in Russia's leadership. But Kremlinology is barely more reliable than astrology. Maybe in a week's time Putin will again be dominating the television news as usual, with politics continuing on the lines the world counts as "normal".

For certain, though, Russia's political life under Putin has been anything but "normal". It has been secretive, paranoid and deceitful. The hybrid rule of political, bureaucratic, criminal and intelligence-service interests has destroyed the country's political institutions, undermined the constitution, savaged the economy and enabled the greatest looting spree in history. The regime cowed critics with fear and masked the looting with lies: venomous propaganda against a mythical external enemy (the West) and against a demonised "fifth column" at home.

This system is inherently unstable and brittle. Feuds bubble, requiring constant personal intervention from the man in the centre. If he is distracted, either by mental or physical illness, or by something in his private life, factions polarise and the struggle for power intensifies. That leads to justified worries among outsiders about the security of Russia's nuclear arsenal, and the prospect of the country's disintegration.

Vyacheslav Volodin, the Kremlin's deputy chief of staff, said last year: "there is no Russia today if there is no Putin." That was meant to highlight public support for the Russian leader. But it could also be read another way: that without Putin at the helm, the Russian ship sinks. The Soviet Union had political institutions of a kind. True, they handled political transitions badly, but there were rules and clues which Putin's Russia dangerously lacks.

As the former US government official Paul Goble notes, whoever comes after Putin is likely to be worse: more aggression abroad, and more repression at home, will be the easiest way to consolidate power:

"many of the "siloviki" believe that Putin has failed to act in ways that would have brought Moscow a victory in Ukraine, and they will push for more aggressive moves in order to prove their point as well as to justify an increased role for themselves in the constellation of a post-Putin regime. And whether they are in the cautious or the aggressive camp, they are not liberals and they are not democrats. They are part and parcel of the authoritarian regime which was never completely dismantled in 1991 and which has been restored with extreme vigor by Putin over the last 15 years."

Whatever lies behind the Russian leader's disappearance, the danger is that the West will respond in the wrong way: by easing sanctions. If Putin has been extinguishing rebellion or settling feuds, Western policymakers will want to cut him some slack. Stability is better than upheaval. If a new face appears at the top-whether a new president or a new prime minister-the West will hope that he will be a more predictable partner than the elusive and erratic Putin-and offer him an olive branch.

In truth the West has as little idea of Kremlin politics as we have chance of influencing it. Our real priority should be remedying our weaknesses (especially the ones that Russia exploits) and helping our allies and friends by raising the cost to the Kremlin (whoever is in charge there) of aggression abroad.

But we haven't, and I fear we won't. Ukrainians are paying the price for our illusions now; but the bill is growing, and it will come to us later.

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 #5
Interfax
March 14, 2015
One third of Ukrainians want war in Donbass stopped through concessions - poll

One third of Ukrainian citizens think the Ukrainian leadership must make all necessary concessions in order to stop the bloodshed in Donbass, and more than 20 percent said no concessions were possible, according to a poll conducted by the GfK Ukraine pollster.

Twenty-one percent of respondents, polled recently, said Ukraine could give special temporary status to the Donetsk and Lugansk republics under partial control from Kyiv, says a report released on Friday.

Twelve percent of those surveyed said that the Russian language could be given the status of second official language and that this norm could be documented in the constitution.

Eleven percent of those questioned said Ukraine could give up plans to join NATO and lay down its non-aligned status in the constitution.

But 21 percent of the respondents said the Ukrainian leadership must not make any concessions, but, instead, mobilize the population, secure aid from the West and free Donbas in a military operation.

The poll was conducted on February 2 to 15 and involved 1,000 citizens aged over 16 in all regions of Ukraine, except Crimea. It was also conducted in the Kiev-controlled territories of the self-proclaimed Donetsk and Lugansk people's republics. The margin of error was within 3.1 percent.

 #6
Interfax
March 16, 2015
Military specialists advised using all means of deterrence in 'Crimean Spring' - documentary

Some military specialists suggested that Russian President Vladimir Putin should have used all means of deterrence in the Crimea situation but Putin declined to do so, it was said in a documentary, Crimea - Return to the Motherland, aired by the Rossiya-1 channel on Sunday.

"We were told by the Defense Ministry later that certain military specialists suggested that Vladimir Putin, the Supreme Commander in Chief, should use every available means to demonstrate Russia's readiness to defend its national interests," said documentary author Andrei Kondrashev.

"The president said the situation was complicated and dramatic but the Cold War was over and we did not need an international crisis of the Caribbean type.

Moreover, such actions were unnecessary under those circumstances and would have been at variance with our interests," the journalist said.

"Speaking of our nuclear deterrence forces, they are always in a state of full combat readiness," Kondrashev quoted the president as saying.

Russian President Vladimir Putin commented extensively on the circumstances surrounding the absorption of Crimea by Russia in a documentary entitled "Crimea: Return to the Motherland," which aired on television channel Rossiya 1 March 15.

Putin said that the idea of taking Crimea away from Ukraine did not develop until after Yanukovich was ousted.

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 #7
Putin Reveals Details of Russia-Crimea Reunification, Maidan in Documentary
March 15, 2015

VLADIVOSTOK (Sputnik) - Andrei Kondrashov's movie, titled "Crimea. Way Back Home" highlights the much-discussed reunification of the Crimean republic with Russia after 60 years under Ukrainian rule.

Moscow refused to send troops to Ukraine despite the parliament's authorization, and the number of personnel at Russia's military base in Crimea was not exceeded, Russian President Vladimir Putin said in "Crimea. Way Back Home," a documentary on Crimea's reunification with Russia broadcast on Rossiya-1 TV channel on Sunday.

Crimea and the city of Sevastopol became parts of Russia following a referendum, in which over 96 percent of Crimean voters backed a move to reunify with Russia, prompting the West to slap the region with rounds of individual and economic sanctions.

"We did not even have to use the Federation Council's authorization to send our troops to Ukraine, I did not pretend. In accordance with the relevant international agreement, 20,000 people could be stationed at our military base in Crimea, and even more. Even given the number of personnel we added, we did not get 20,000."

Putin added that Russia had not actually violate any regulations.

Russia has deliberately positioned the K-300P (SSC-5) Bastion mobile coastal defense missile systems in Crimea so that they could be seen from space, President Putin said.

"Bastion is a defense system, which protects the coast and the territory. It does not attack, but it is an effective, modern, high-precision weapon... Yes, and at one point, so that it would be understood that Crimea is well-protected, we positioned these Bastion coastal systems there."

"Apart from the above, we deliberately positioned these defense systems in a way to be seen from space," he added.

Russian President Vladimir Putin said in a documentary on Crimea's reunification with Russia that the Kremlin had been ready to place its nuclear forces on alert if an "unfavorable scenario" in Crimea had unfolded.

Moscow was informed of "radical" Ukrainian authorities' readiness to carry out terrorist attacks in Crimea, targeting a large number of civilians, Putin added.

"There was some information that terrorist attacks could be carried out, and certain radical Ukrainian leaders, including of the security agencies, were ready to conduct some acts linked with large number of casualties," Putin said

The Russian leader stressed it was "in no way admissible" to allow bloodshed while providing the people of Crimean with the "opportunity to express their will" at the March 16, 2014 referendum on secession from Ukraine and reunification with Russia.

"To block and disarm 20,000 people, of course you need a certain set of personnel, and not just in terms of quantity, but also quality... So I ordered the Ministry of Defense... to deploy the special forces of the Main Intelligence Directorate [GRU], Marines and paratroopers under the guise of reinforcing our military facilities in Crimea," Putin said.

Vladimir Putin said he had never thought of "dismembering" Crimea from Ukraine until the February 2014 armed coup in Kiev.

"We cannot leave this area and the people who live there to whims of fate, to let the people of Crimea be thrown under the wheels of this nationalist bulldozer. I set certain tasks, I did say, what and how we should do, but immediately stressed that we would do so only if we are absolutely convinced that the people who live in the Crimea want it," Putin said.

Russia knew from the start that the United States is the real "puppeteer" behind the February 2014 Ukrainian coup, the Russian leader noted.

"Formally, the opposition was primarily supported by Europeans, but we knew very well... that the real puppeteers were our American partners and friends. It was them who helped prepare nationalists [and] combat troops."

The Russian president added that pro-Kiev combat units were also being prepared in Poland and Lithuania.

"What did our partners do? Abetted the staging of a coup. That is, they began operating from a position of strength. I do not think this is the best way of doing things," the Russian president said.

In last month's interview with the CNN, US President Barack Obama said the United States "had brokered a deal to transition power in Ukraine."

Organizers of last year's coup in Ukraine planned to seize power and physically eliminate then-President Viktor Yanukovych, Putin said in "Crimea. Way Back Home."

In November 2013, a political crisis erupted in Ukraine when the country's authorities announced a halt to its European integration process. Major protests began in Kiev's central square and soon spread across the country.

"It became known that not only his capture, but his physical removal was being prepared, as preferable to those who committed the coup. As the famous historic figure said - no man, no problem."

A February 2014 government coup in Ukraine, that came after months of protests, forced then-President Yanukovych to flee the country.

"I do not want to evaluate his work [Viktor Yanukovych's]. He said, 'I could not sign an order on weaponry use. I could not bring myself to do it.' Can we blame him for it? I cannot say. And I do not want to do it. I don't think I have a right to do so. Whether it is good or bad - the consequences of inactivity are grave. This is clear," Putin said as quoted by the All-Russia State Television and Radio Broadcasting Company, which broadcasted the documentary on Sunday.

Sanctions should be implemented against people responsible for government coups and their helpers, Russian President Vladimir Putin said.

"We acted in the interests of Russian people, and in the interests of the whole country. Changing this for money, for goods, for the possibility of some contracts or bank transfers is unacceptable."

The West tried its hardest to prevent Crimea's reunification with Russia following the last March's referendum, the president said.

"At first, they assumed that we might not dare to do it [reunify with Crimea]. Then, when they realized that we would not stop, they began to offer a variety of options, they tried their hardest to prevent the reunification of Crimea with Russia, by any means and in any format," Putin said when asked about what was the Washington and Brussels' opinion about the events on the peninsula.

The United States and the European Union have condemned Putin's insight into what they refer to as Crimea's "annexation." Jen Psaki, the US Department of State's spokesperson, said it was consistent with Moscow's "deceitful approach" to eastern Ukraine, although she confessed to having no idea of the film's exact contents.

Putin's interview has also stirred controversy in Kiev, with the Ukrainian prime minister urging the International Court of Justice at The Hague consider the footage as evidence of Russia's premeditated invasion.

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#8
Rossiya 1 TV (Moscow)
March 15, 2015
Russian state TV shows Crimea film, talks to Putin (pre-recorded interview)

Russia's main, state television network has shown a film in which Russian President Vladimir Putin defended Russia's takeover of Crimea.

Entitled "Crimea. Road to the motherland", the 2.5-hour film was shown by the Russian official state television channel Rossiya 1 on the evening of 15 March.

The film, peppered with sound bites from a pre-recorded interview with Putin by Rossiya 1 personality Andrey Kondrashov, recalled and in places reconstructed the events of one year ago.

Russia's ultimate goal in Crimea, Putin said in particular, was not to annex it but to defend its population of Russians from what he described as a Donbass scenario, in a reference to the armed conflict between the Ukrainian forces and Russia-backed rebels in the southeast of Ukraine.

To "save the life" of Yanukovych; "return" and protect Crimea

The film began with Putin's account of how he set out to "save the life" of Ukraine's then president, Viktor Yanukovych, following his ouster in late February 2014. Yanukovych's rivals planned his physical elimination, Putin said.

Whenever he spoke, throughout the film, Putin was shown seated face to face with Kondrashov, both dressed formally, suit and tie, in an office typical of highly placed Russian officials, furnished with dark wood.

The meeting at which Yanukovych's extraction from Ukraine was enacted, Putin said, took place overnight from 22 to 23 February.

"We finished at about seven o'clock in the morning. As we parted, I will not hide it, I told all my colleagues, there were four of them: The situation has unfolded in Ukraine in such a way that we have to start work on the return of Crimea to being part of Russia, because we cannot abandon this territory and the people who live there, for them to fend for themselves, under the steamroller of nationalists. So I set specific tasks. I said what we should do and how we should do it, but straight away I underlined that we will do so only if we are absolutely convinced that this is what the people themselves, those who live in Crimea, want. The people had to be given the opportunity of self-determination, to express their will. That was our goal, let me tell you quite frankly and honestly. I thought to myself: If that is what people want, then so be it. That is to say, either they are there with more autonomy, with rights of some kind, but as part of the Ukrainian state - so be it then - but if they want a different way, then we cannot abandon them," as Putin told Kondrashov.

Goal not annexation but self-determination

Following the first, concentrated portion of Putin's interview with Kondrashov, the film settled into a format where the narrative, which recalled and in places reconstructed the events of one year ago, was interspersed with sound bites from Putin, typically a minute or so each, with a few exceptions.

To summarize his comments, Putin spoke about an "upsurge in extreme nationalism" in Ukraine; the US "puppeteers" that were behind the action in Ukraine and in effect aided and abetted a "coup d'etat"; what he described as the inextricable links between Crimea and Russia, including the region's martial history; support for Russia including among the peninsula's Crimean Tatar population; and how he was dealing with the crisis personally.

Among the points that he enlarged on, Putin said that it had never been the plan to take Crimea from Ukraine, until the "coup" and the "armed and anti-constitutional seizure of power". When secret soundings were taken in Crimea on his instructions, they found that 75 per cent wanted to join Russia, Putin said.

"The ultimate goal was not Crimea's seizure or some kind of annexation. The ultimate goal was to give people the opportunity to express their opinion on how they wanted to live from now on."

"Legally, it was all watertight ["komar nosa ne podtochit" was the Russian proverb used]," Putin remarked.

Nuclear deterrent

Russia was "ready" to put its nuclear forces on combat alert, Putin went on to say on the subject of the military component of his decision-making at the time.

"We were ready to do that," Putin said, when asked by Kondrashov "whether what you're saying now means that we put our nuclear forces on combat alert, too".

"Indeed, I was speaking to colleagues and told them directly, exactly as I am speaking to you now, absolutely openly, that this is our historical territory, Russian people live there, they are in danger, we cannot abandon them, it was not us who carried out the coup d'etat, it was done by nationalists and people with extreme beliefs, whom you backed. Where are you, however? Thousands of kilometres away, but we are here and this is our land. What do you want to fight for there? You don't know? We know and we are ready for this. This is an honest, open position. That's the way it is. So, I don't think that someone had the desire to turn all of this into some world conflict. We were not going to look for trouble. They simply forced us to take such action. Let me repeat, we were ready for the most unfavourable development of events, but I proceeded from the premise that it would not come to this. And there was no point in stirring up the situation unnecessarily," Putin told Kondrashov.

"Later, we were told in the Ministry of Defence that during those days, some military experts suggested Vladimir Putin, as supreme commander-in-chief, use all available means to demonstrate Russia's readiness to protect its national interests. The president replied: Despite all the complexity and dramatic nature of the situation, the Cold War has ended and we don't need international crises like the Caribbean one. Moreover, the situation did not call for such actions, and this would be contrary to our interests. As for our forces of nuclear deterrent, added the president then, like always they are in a state of full combat readiness," Kondrashov said.

"Afterword" filmed "on the Crimean anniversary"

It is not one's role in history that matters, Putin said, when asked by Kondrashov if he, Putin, was aware that what he was doing would make history. The main thing is to "do the right thing", for Russia and its people, Putin said.

And would he do it all over again on Crimea? "What do you think? Of course," Putin said. People - Russians - are worth all the sanctions in the world, Putin added.

In what was billed as the "Afterword", Kondrashov met Putin "on the anniversary of the Crimean events" (it was otherwise undated) in surroundings that suggested a Kremlin hall.

"When we acted in a consistent and quite a tough manner in Crimea, my assumption was that the kind of tragic events we are witness to in the Donbass were possible. And it was precisely so as to prevent such a turn of events that we had to take the action necessary to ensure free expression of the will by the people of Crimea. It was for that purpose  that we had to boost our military grouping in Crimea, for the numerical strength of our military to enable conditions to be put in place for a referendum to be held, moreover a bloodless referendum. I am convinced that had we then not done it, events in Crimea would have taken a turn similar to that which we are witness to today in the Donbass, if not an even more severe scenario, although, it would seem, could there be anything more severe and more tragic than what is happening right now in Luhansk and in Donetsk," Putin told Kondrashov.

As for Crimea's future as part of Russia, socioeconomic development takes priority - a new bridge, for example, to connect Crimea and Russia, as well as sectors such as tourism and energy.

In conclusion, asked what he would like to wish the people of Crimea, Putin's one-word answer was: "Happiness."

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 #9
TASS
March 15, 2015
Russian special forces were deployed to Crimea against Ukraine, Putin tells film

Vladivostok, 15 March: GRU forces were deployed to Crimea to disarm the Ukrainian units, Russian President Vladimir Putin has said [GRU is the military Main Intelligence Directorate and its special forces]. In an interview with the makers of the film "Crimea. Road to the motherland" aired on the [Russian official state] TV channel Rossiya 1, he explained the reasons for the move.

"In order to block and disarm 20,000 well-armed men, you need a specific set of personnel, and not just quantity but also quality-wise. We needed specialists who know how to do it. So I gave orders and instructions to the Ministry of Defence, I won't hide it, for the special forces of the Main Intelligence Directorate plus naval infantry and airborne troops to be deployed there as if to reinforce the protection of our military facilities in Crimea."

The president also spoke about how work was carried out to influence the Ukrainian military. "One of the (Ukrainian Navy) commanders flatly refused to side with the Crimean authorities, shall we say. I asked for veterans to work on him. I simply told our military straight: send in the veterans! They [military] met my suggestion with scepticism. They said: Come on, they're granddads, what can they do? So, these granddads went in and talked to him to explain things till seven in the morning. At any rate, at 7 a.m. he took a pen and paper and submitted his resignation."

"I must say that the guys, the Ukrainian soldiers, conducted themselves in a very dignified manner. They tried to remain faithful to the oath," Putin said. "But no-one knew to whom they swore that oath, because the state [government] was no longer, the president was overthrown, who, by the way, at that time was the legitimate supreme commander-in-chief of the armed forces. And who is giving the orders? Some usurpers of power ["zakhvatchiki vlasti"]? Absolutely illegitimate people?"

According to the Russian president, there were many phone calls from Western leaders at the time. "There were many phone calls. Our American counterparts during those talks were saying directly that we were blocking Ukrainian military units. I said that there were no longer any military units but there are groups of people, servicemen. They are unarmed, they are in no danger, and we will do everything in our power for no incidents associated with the use of weapons to happen now. It was no armed forces any longer, though. It was something else," Putin said.

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#10
TASS
March 15, 2015
Kiev "coup" plotters wanted ex-president dead, Putin tells film

Vladivostok, 15 March: The organizers of last year's coup d'etat in Kiev were going to physically eliminate Viktor Yanukovych, who then served as president of Ukraine, Russian President Vladimir Putin has said.

"I invited the heads of our special services and the Ministry of Defence to the Kremlin, and set them the task to save the life of the president of Ukraine, who would have just been eliminated," Putin said in the film "Crimea. Road to the motherland" shown by the TV channel Rossiya 1.

On the evening of 21 February, Yanukovych told Putin on the phone about his plans to take part in a regional conference in Kharkiv, the Russian president said. "I won't hide it, I expressed my point of view that in such a situation it was better not to leave the capital," he said. "Then (Yanukovych) phoned and told me that after all, he had decided to go. The only thing I said was at least not to pull out the security forces any further. 'Oh, yes, yes, I know that,'[Yanukovych replied,] only then to leave and pull all the law and order forces out."

On the same day the opposition seized the presidential administration and the government. "After that, it was then (February) the 22nd, Viktor Yanukovych phoned again. He said that he was in Kharkiv, he wanted to consult, to talk things over on the development of the situation," Putin continued. "Of course, I said I was ready, welcome, wherever you want."

Meanwhile, reports were coming in about preparations not just to capture Yanukovych but physically to eliminate him, Putin said. "If he were not there, then the opposition forces would have found it easier to fulfil the tasks that they had set themselves," he explained.

Putin proposed a meeting with Yanukovych for example in Rostov and said he was ready to fly there. Shortly afterwards, however, Yanukovych's guards telephoned to say they could not fly out. "Later we learnt that by that time his motorcade had already come under fire, Yanukovych's motorcade, as had Prosecutor-General Pshonka, one of whose bodyguards was wounded," Putin said. "That is, by that time there had already been a coup and, in fact, an operation had begun by the opposition to capture and destroy him."

Yanukovych went to Crimea. "Our electronic surveillance services, in effect, began to escort his motorcade. Every time, we would get a fix on his position along his route. When, however, I was shown the map, it became clear that he would soon run into an ambush. Moreover, according to our intelligence there were heavy machine guns in place there, to keep it short," Putin noted. That was between 22 and 23 February.

"(Yanukovych's) bodyguards were told they could go no further. Before we got a fix on him with technical devices, however, we were ready to extract him straight out of Donetsk, by land, by sea or by air," the Russian president continued. Yanukovych, however, did not want to move to Russia and went to Crimea. For a few more days, while the events to do with the coup unfolded, he remained on Ukrainian territory.

"A few days later, however, when it became clear that there was no longer anyone to negotiate with in Kiev, he asked, and we took him to Russia," Putin said.

"The fact that we saved his life, the life of his family members, I think it's a good deed, a noble one," the Russian president believes. "I do not want to judge his work. He said: 'I could not sign the order for the use of weapons. I could not bring myself to do it'," Putin said. He added: "Can he be blamed for that? I do not know, and I'm not going to do that. I do not feel I have the right to do so. Whether it was good or bad, the consequences of inaction have been grave. That much is obvious.

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#11
Moscow Times
March 16, 2015
No, Crimea Is Not 'Suffering Reign of Terror' Under Russian Rule
By Peter Hobson
Peter Hobson is business editor at The Moscow Times

U.S. Assistant Secretary of State Victoria Nuland last week told an influential group of U.S. senators that due to Russian actions in Ukraine, "Crimea and parts of eastern Ukraine are suffering a reign of terror."

Nuland, who spearheads White House policy in Eastern Europe, is persona non grata in Russia and Crimea, which Moscow annexed last year. Perhaps because she has not talked to anyone who actually lives in Crimea, the evidence she gave to the senators was wrong.

Fear may be rife in separatist eastern Ukrainian regions that have endured months of heavy fighting and more than 5,000 deaths, but Crimea is not suffering from either war or terror.

Three reporters from The Moscow Times have visited Crimea in the last month. More than fear, the vast majority of Crimeans feel relief that the region has escaped the violence engulfing eastern Ukraine and satisfaction that they no longer have to live in Ukraine.

The feature of local life most often stressed by Crimeans is peace, not terror. They see the conflict between eastern Ukrainian separatists and the Ukrainian army and think they dodged a bullet. Far from an aggressor, Russia to them is a protector.

Western sanctions and a Ukrainian economic blockade have driven price inflation and damaged Crimea's vital tourism industry by cutting the number of foreign visitors. But massive Russian subsidies pouring into Crimea have offset price rises for many by sharply raising pensions and state employee salaries. Ukraine is meanwhile suffering an even deeper economic crisis.

Nuland's use of the word "terror" conjures up images of Stalinist purges. Nothing similar exists. Those who do not want to live under Russian rule are free to leave, and many have.

Fleshing out her testimony in Washington, Nuland said, "Crimea remains under illegal occupation and human rights abuses are the norm, not the exception, for many at risk groups there." Tatars, Ukrainians, gays, lesbians, journalists and others are at risk of persecution, she said.

There is some truth in this - Russia has a weak culture of minority rights and an often heavy-handed bureaucracy. But while many in these communities are disappointed, few, if any, are terrified.

The vast majority of Crimeans are Russians or half-Russians, and most of these feel less oppression and less terror than when they were governed from Kiev - another culture with a weak understanding of minority rights. This majority has felt impinged by a decade of nationalist rule in Kiev that aimed to make them Ukrainian, and has felt threatened by the eruption of violence in Ukraine last year.

While sounding off about terror, Nuland ignores the fact that Crimea's accession to Russia reflects the desires of a majority of the population. The form of Crimea's change of sovereignty may be illegal and deserve condemnation, but the substance is pure democratic justice.

This is a point rarely made in the West. Instead, Nuland-style demagoguery is stoking hawkish public opinion and driving aggressive policy in the West toward Russia, a nuclear superpower.

And while Nuland may not be talking to residents of Crimea, she is at the center of U.S.-Russia policy and the debate on arming Ukraine. The people who will make those decisions are relying on her for information and advice.

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 #12
Orientalreview.org
February 10, 2015
German sociologists on Crimea's choice
By Konstantin KOSARETSKY
Konstantin Kosaretsky is a Ukrainian freelance journalist and writer.
[Charts here http://orientalreview.org/2015/02/10/german-sociologists-on-crimeas-choice/]

A few days ago an interesting study, "The Socio-Political Sentiments in Crimea," was released by the Ukrainian branch of GfK, the well-known German social research organization, as part of the Free Crimea initiative. Intriguingly, the primary objectives of this project, launched with the support of the governmental Canada Fund for Local Initiatives, were to "debunk aggressive Russian propaganda" and to "reintegrate Crimea into Ukraine." Thus the researchers can hardly be suspected of being Russian sympathizers. So let's take a look at the results.

The attitudes of Crimeans were studied in January 2015. This representative sample included 800 respondents living on the peninsula, from all age and social categories. The poll had an error margin of 3.5%.

In answer to the most important question: "Do you endorse Russia's annexation of Crimea?" 82% of the respondents answered "yes, definitely," and another 11% - "yes, for the most part." Only 2% gave an unambiguously negative response, and another 2% offered a relatively negative assessment. Three percent did not specify their position.

We feel that this study fully validates the results of the referendum on reunification with Russia that was held on March 16, 2014. At that time 83% of Crimeans went to the polling stations and almost 97% expressed support for reunification.

Ukrainians continue to question whether this was a credible outcome, but it is now backed up by the data obtained by the Germans. The 82% of the respondents who expressed their full confidence in the results of the Russian election make up the core of the electorate who turned up at the ballot boxes on March 16, 2014.
These figures are also relevant in terms of another important question. The former chairman of the Mejlis of the Crimean Tatars, Mustafa Dzhemilev, has repeatedly stated that all Tatars on the peninsula are opposed to reunification with Russia. Dzhemilev's statements have been widely quoted by the media, which present them as entirely authoritative and undisputed.

But let's think about that - Crimean Tatars make up 12% of the Crimean population, yet only 4% of those polled conveyed disapproval of Crimea's reunification with Russia. And that 4% very likely includes not only Tatars, but also Ukrainians and citizens of other ethnicities. There's an inconsistency here. Of course further study is needed on this issue, but the results obtained by GFK cast doubt on whether Mustafa Dzhemilev or the entire Mejlis of the Crimean Tatars is an accurate barometer of the feelings of the Crimean Tatar community.

Those few respondents who disapproved reunification were then asked "Why do you fully or mostly disapprove annexation?" Only 20% of them (i.e., less than 1% of the total sample) claimed that they preferred to live in the state of Ukraine. The most common response, offered by 55% of those who opposed reunification, was "Annexations was not fully legitimate, it should be brought into accord with the international law." Which means that, in theory, they do not object to the idea of living in Russia, but rather question the legitimacy of the transition.

No doubt it would be a good idea to hold such a referendum under the auspices of international legislation and in accordance with Ukrainian law. But would laws ever be passed that would grant Ukrainian regions the right to secede? Back in the totalitarian Soviet Union, Ukraine exercised its right to a referendum without a single shot being fired, while in "democratic Ukraine," separatists are either burned alive as in Odessa, or are shot along with the elderly and children as is happening in the Donbass.

In answer to a question about their financial circumstances, 21% of Crimeans said that in the last year their position had "improved significantly," while another 30% claimed it had "somewhat improved." Only 13% of that population has experienced a setback, to a greater or lesser extent. This suggests that, despite EU sanctions on the peninsula's economy, and despite Ukraine's partial blockade on communication from Crimea, the reunification with Russia has provided most Crimeans with material gains. But even among those who have not reaped those sorts of benefits, there are few signs of nostalgia for their old Ukrainian citizenship: although 13% of citizens have seen their financial well-being decline, only 4% disapprove of the reunification with Russia. These figures suggest that economic sanctions are an ineffective means of persuading the residents of the Crimea to view Ukraine more favorably.

The results of the survey indicate that 28% of the residents of the peninsula regularly watch Ukrainian TV, and another 20% regularly consult Ukrainian news websites. This proves that no steps have been taken in Crimea to restrict access to Ukrainian sources of information, such as Ukraine has done in relation to Russian media.

And now the moment of truth: "What is your opinion of what is being written by the Ukrainian media about Crimea?" Who could be a more objective judge on this issue than the residents of the peninsula themselves? Who else but they - who have been fated to experience all the pros and cons of both Ukrainian and Russian citizenship - could better evaluate the accuracy of the information being published? Perhaps no one.

However, only 1% of those surveyed reported that the Ukrainian media "provides entirely truthful information" and 4% said it was "more often truthful than deceitful." But 45% of respondents see "completely untrue information" on Ukrainian TV, and another 35% claim those broadcasts are "more often deceitful than truthful." The rest either do not watch Ukrainian news programs or do not pay attention to information in those programs about Crimea.

This is the verdict on the contemporary Ukrainian press, as handed down by an impartial panel of eight hundred jurors.

But if those who shape the media coverage in Ukraine today are so biased in regard to Crimea, how can we expect them to report objectively on other critical problems associated with this country? Can we trust Kiev's official stance on the tragedy of Malaysia Airlines Flight 17? Or on the causes of the humanitarian crisis in the Donbass? Or on the presence of Russian troops inside Ukraine? Or on the human fatalities in Odessa or the victims of the "Heavenly Hundred"?

GfK's study demands a clear answer to these questions.

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 #13
www.thedailybeast.com
March 15, 2015
Crimea's Curse One Year On
Russia thought it could trump international law in Crimea, but it has just begun to feel the consequences.
By Anna Nemtsova

SIMFEROPOL, Crimea - On Sunday, on the eve of the one-year anniversary of Crimea's referendum opening the way to Russian annexation, there was still no sign of Vladimir Putin anywhere near Sevastopol and Simferopol, the two main cities preparing for the festive events.

The Russian president went missing on March 5.

An independent Russian television channel reported that Putin was sick with the flu. But that did not defuse the mystery. Putin's spokesman Dmitry Peskov refused to reveal the secret of Putin's whereabouts, leading to all sorts of problematic speculation, including stories he was in Switzerland awaiting the birth of his love child.

Meanwhile, officials from Moscow and Crimea gathered here late last week for a panel discussion about the way "reunification" with Crimea a year ago changed Russia, Ukraine, and the world.

They call those events the "Crimean Spring"-some people even call it "Putin's Crimean Spring"-but there was a problem evident, even at this forum: The referendum leading to annexation held on March 16, 2014, was backed by the Russian military, and it showed that Russia was not going to obey any international laws any longer.

So the pundits from local think tanks and from Moscow, including academics and politicians, were left to discuss the "post-Crimea" post-annexation reality that spoiled Russia's relations with the West. That issue is not going to vanish for many years, and that was obvious for everyone in the room. But there was no one there to demand explanations.

The forum participants spoke of opponents, meaning the West, critics of the annexation and foreign media, but in fact there was nobody  for them to argue with at the roundtable-all participants shared positive views about the referendum. The problems had all been caused by the pro-European Union uprising centered in the Ukrainian capital of Kiev around the Maidan square which resulted in the fall of the pro-Moscow government of Ukraine's then-President Viktor Yanukovych in February last year.

"If not for Nazis on the Maidan, the junta coup in Kiev, there would have never been the referendum," one of the forum participants, Russia Public Chamber deputy Sergei Markov told The Daily Beast. "If not for the Russian unity, the powerful will of Crimea population to live in Russia, there would have never been the reconciliation."

"A few years before," as Markov puts it, he began to work on pro-Russian ideology in Crimea with pro-Kremlin political lobby organizing forums and roundtables with local political analysts, academics, and politicians. In the new post-Crimea reality Markov claimed that "Russia was not just a state within administrative borders; the newly shaped Russkiy Mir [Russian World] is a place where the majority of the population shared the Russian language, culture and heritage."

The big changes are "a watershed for Russia's new era," said Mikhail Remizov, president of a Moscow think tank, the National Strategy Institute, and the changes developed in less than a month. In late February last year a few uniformed men seized the local parliament, surrounded Simferopol airport and showed up outside Ukrainian military bases in different parts of the peninsular. But actually the decision to turn Crimea Russian was made a few days earlier in Moscow. In a recent interview for a documentary produced of the one-year anniversary Putin said he made a decision to take over Crimea at an all-night meeting on February 22, right after president Yanukovych fled Kiev.

The referendum apparently showed that as many as 97.6 percent of voters wanted Crimea to join Russia. Over a month later, on May 18, Putin signed a Russia-Crimea decree absorbing the strategic Black Sea peninsula, saying that Crimea had "always been part of Russia."

Since last spring, Russia has paid a high price for Crimean annexation and for backing the war between Ukrainian rebels and military forces in eastern Ukraine, known as the region of Donbass. Early on he may well have thought Donetsk, Luhansk, Odessa, Kharkiv and other cities in south-eastern Ukraine would follow Crimea's lead, mostly because the majority of its population had always identified themselves as Russians.

But Markov says that "as a result of the coalition of Western states against us, we'll see no Western investments, no Western technologies for a long time." So Moscow will have to rethink its finances. "There should be a different model for Russia's economic development, which we still don't have," said Markov. "The main challenge right now is to find a new ideology, a new project for Russia."

What troubles did Crimea Spring cause for Crimea itself?  Crimea became a part of Russia but remained a territory never recognized by Ukraine or the West. In practical terms that meant, among other things, that nobody could ever use Visa and Mastercard in Crimea. The main industry, tourism, shrank by over 30 percent. With Ukrainian banks and the border closing down and the Russian ruble replacing the Ukrainian hryvnia, life felt more like winter than spring to many Crimean businessmen unable to deal with Ukraine.

While state workers were happy with Russian-paid salaries and pensioners with Russian-paid pensions, the Crimean populations immediately noticed that the prices for all goods became "Moscow-like," Denis Baturin with the Crimea Public Chamber told The Daily Beast. "Every truck bringing goods to the peninsula has to pay various fees of about [about $2,400] and wait for five days on the border for clearance in each direction to and from Crimea. That makes everything you buy in our stores much more expensive."

As the "Crimea Spring" forum wrapped up, it was a rainy, gray day in Simferopol. Workers were putting together a stage for Monday's celebrations. A spokeswoman for the Crimea parliament tells The Daily Beast there will be a staged "protest" against Kiev, a reconstruction of last year's events, outside the administration building and then late at night some fireworks.

She looked happy as the preparations unfolded full speed: the anniversary celebration of Crimea Spring, which brought the relationship between Russia and the West to its lowest point since the Cold War, was coming close. Did she hear anything about Putin's plans to visit the peninsula? The organizers hoped very much that "the leader" would join the party, too, she said.

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 #14
Zakharchenko: Kyiv breached ceasefire over 8,000 times

DONETSK. March 16 (Interfax) - The administration of the self-proclaimed Donetsk People's Republic (DPR) has accused Kyiv of massive ceasefire violations.

"Kyiv has violated the ceasefire regime 8,254 times since the Minsk meeting. The populated area of Spartak is currently under attack," Alexander Zakharchenko, the head of the DPR, told reporters on Monday.

Zakharchenko denied the involvement of the militia in the attacks on populated areas on the Mariupol track.

"We were the first to withdraw equipment and cease fire. We did not storm Shirokino and we did not open fire on the airport," Zakharchenko said.

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#15
Ukraine needs constitutional reform - Council of Europe chief

OSLO, March 16. /TASS/. Ukraine should carry out constitutional reform to reunite the country, Council of Europe Secretary-General Thorbjørn Jagland writes in an article published on Monday by Norwegian newspaper Aftenposten.

"It seems that the first points of the Minsk agreement - on ceasefire and withdrawal of heavy weapons - are being complied with. Nevertheless, if the remaining provisions are not implemented, armed stand-off can begin again, probably on a bigger scale, which can lead to tragic consequences,"writes Norway's former prime minister.

"The forthcoming process will be very difficult and involve substantial decentralization of power in the Donbas region and elections in the country's east," he says.

"All reforms should have a strong constitutional basis. Constitutional reform has to be carried out, so there must be concord within the country on what kind of state Ukraine wants to become in the future."

Agreements reached in the Belarusian capital Minsk last month now provide the only real opportunity for resolving the conflict, Jagland says. "This is a chance to unite and consolidate the country. This is a chance to lay the foundation for reforms ensuring de facto division of powers, the existence of independent courts of parliament and a free press.

"This is the only way to defeat corruption and restore trust in each other both domestically and abroad."

Jagland repeatedly points out that Europe, Russia and the United States should restore at least a minimum level of mutual trust, lost in recent years.

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 #16
Oil, dividends, cheap assets - return to Russia rewards investors
March 16, 2015
By Karin Strohecker and Sujata Rao

LONDON (Reuters) - Fund managers who bet on beaten-down Russian stocks and bonds have been rewarded with some of the best returns in emerging markets so far in 2015.

Foreign investors fled Russia last year, panicked by an oil price collapse, a simmering conflict on the Russia-Ukraine border and Western sanctions that effectively froze the country out of credit markets. The subsequent 50 percent plunge in the rouble's exchange rate between May and December provided another catalyst for the exodus.

Those fears have not entirely vanished. Yet since the start of the year, oil has bounced 25 percent, the rouble has stabilised, and the central bank is reversing last year's interest rate hikes, cutting rates on Friday to 14 percent.

"We held nothing (in Russia) from about February last year, to December, and since December we have put our money back to work," said Paul McNamara, investment director for emerging markets at GAM.

Russian asset prices, always cheap but especially so these days, were a factor, McNamara said.

"Usually one of the things we try and do is buy things that are beaten up - after owning no Russia last year we started buying Russia," he added.

Investors such as McNamara have been amply rewarded so far, as Russian stocks and bonds have returned in excess of 5 percent, outstripping most other emerging markets as these graphics show:

Russia-dedicated bond funds tracked by Boston-based data provider EPFR Global have received $116 million so far this year, though this only partly reverses last year's $864 million.

For some bond investors, the 13 percent yield on one-year local government debt appears a fair compensation for political risk. Dollar debt yields almost 5 percentage points above U.S. Treasuries, close to what countries such as Ethiopia and Pakistan, with far lower credit ratings, pay.

Moreover, with the Russian government and companies unable to place new hard currency debt, sovereign external debt stands at $54 billion, down $2 billion from year-ago levels.
Costa Vayenas, head of EM investment at UBS Wealth Management says he is "not underweight" Russia.

"What you have are bonds that are certainly at the sovereign level very cheap, especially when you consider the Russian sovereign can pay back the entire stock of debt this afternoon if it wants to," Vayenas said, referring to Russia's $350 billion war chest.

A key component of recent investor confidence has been the rouble's relative stability compared to other high-yielding emerging currencies such as Turkish lira and Brazilian real that are feeling the heat from the looming U.S. interest rate rise.

The rouble's real effective exchange rate (REER) - a gauge of whether a currency is overvalued or undervalued - stood 25 percent below its 10-year average in February, this graphic shows: link.reuters.com/vuf47v

STOCKS SOAR

Those who correctly timed their return to Russian stocks will also have watched them outperform virtually every other emerging market this year. In dollar terms, Russian equities are up 15 percent this year.

Russia equity funds tracked by EPFR have done better than any other developing country group, enjoying inflows of over $400 million this year, even though falling retail sales, wages and capital spending all point to a deep economic recession.

One reason for the bounce is that Russian stocks are at least twice as cheap as emerging market peers on a forward earnings and price-book: link.reuters.com/guv77v

But for Matt Linsey, who runs GAM's North of South emerging equity fund, Russian companies' propensity to return money to shareholders via dividends is the main lure. Russian dividend yields - the ratio of dividends versus share prices - are among the highest in the world: link.reuters.com/vaj66s

"What you have seen is some of the domestic stocks have been increasing their dividend quite surprisingly," said Linsey. "Companies are returning a lot more cash to shareholders."

Gas firm Novatek (NVTK.MM: Quote, Profile, Research, Stock Buzz) for instance has recommended raising dividends by a third, while Lukoil (LKOH.MM: Quote, Profile, Research, Stock Buzz), said it would maintain dividends even if oil falls to $40 a barrel.

Whether market gains continue will hinge on oil and a rollback of Western sanctions imposed on Russia's financial and energy sectors last July. Many are not convinced.

"I can't deny the pricing is not attractive but to my mind there are still non-economic non-market risks attached to investing in Russia," said Kieran Curtis, a bond fund manager at Standard Life Investments who is happy to stay on the sidelines.

He noted that Russia's weighting in the emerging market debt benchmark GBI-EM has more than halved in the past year to 4.5 percent as outstanding debt has fallen. That makes missing a market bounce less painful for fund managers.

"If Russia was still 10 percent of the benchmark that my fund is measured against, it would be more uncomfortable for me to be short," Curtis added.

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#17
Moscow Times
March 16, 2015
Oil Crash Is Crushing Russia
By Wenyuan Qiu
Wenyuan Qiu is an energy analyst.

The impact of oil prices on the Russian economy is well known. After crude fell 50 percent last fall, the Ministry of Economic Development forecast a 3 percent GDP contraction this year, along with 12 percent inflation. The crash in oil prices will not only test President Vladimir Putin's domestic support. It will upend Russian foreign policy, challenging the modernization of the country's armed forces while diminishing its influence in Asia and Europe.

Russia doesn't just need petroleum to fuel its tanks and planes, but to pay for them as well. Because oil and gas revenues comprise half the federal budget, defense spending is tethered to energy prices.

The slump comes at a particularly inopportune time for the military. Even if its resources were not being consumed in eastern Ukraine, Russia's ongoing initiative to improve its armed forces is extremely costly, with defense expenditures set to soar 44 percent from 2013 to 2016.

Shrinking energy revenues are now curtailing those ambitions by constraining the budget. According to Finance Minister Anton Siluanov, the crash will deprive the Kremlin of $180 billion in 2015 alone.

Despite this shortfall, the Finance Ministry's official stance is to leave military allocations untouched, choosing instead to decimate funding for every other sector. Siluanov himself has admitted that something must change. "When we were adopting the defense program, the forecasts for the economy and budget revenues were completely different," he said. "Right now, we just cannot afford it."

Revenue losses are also damaging the country's foreign trade position, already under pressure from Western sanctions imposed against Russia in the wake of the Ukraine crisis. While the media widely interpreted Moscow's natural gas deals with Beijing last year as evidence of a deepening alliance, they actually reflect an increasingly imbalanced partnership.

Negotiations between the two governments began in the early 1990s, but it was not until last May when an internationally isolated Russia finally agreed to supply gas to China at prices much closer to Beijing's liking than its own. Tumbling oil prices further widened the gap between these countries because China is the largest net importer of petroleum in the world, benefitting at Russia's expense.

The oil crash is not just undermining Russian business interests with the country's allies. It is contributing to the waning of Gazprom's importance in Europe, where NATO members are eager to chip away at the continent's usage of pipelined natural gas from Western Siberia.

Russia's state-owned gas export monopoly had already been hurting - Gazprom's revenues from foreign sales were down 16 percent last year, reflecting the lowest shipment levels in a decade.

To make matters even worse, Russia is losing leverage while it loses money. Until recently, the European liquefied natural gas market had been substantially less attractive than that of its counterpart in Asia, where robust consumption growth and long-term contracts tied to elevated crude prices supported by far the highest LNG rates in the world.

LNG can be shipped from any supplier and is an alternative to Russia's gas pipelines. Two years ago, cargoes landing in Asia were worth 50 percent more than those arriving in Europe. By the end of 2014, this premium had disappeared, worn down by the oil crash and decelerating Chinese demand. In February, LNG priced higher in Europe than in Asia for the first time in more than five years.

Consequently, there are now twice as many tankers bound for European ports as there had been a year ago. This is happening as Russia's neighbors complete landmark investments in LNG import infrastructure.

Lithuania, which traditionally relied on Russian sources for all of its natural gas, now has an LNG intake facility capable of processing 90 percent of national demand, and has already signed deals with Statoil in Norway and Cheniere in the United States. Poland's terminal will open later this year.

All of these factors are subverting Russia's power in the European gas markets, which it wielded throughout the past decade to influence dependent countries.

As the oil slump continues, it is becoming increasingly clear how much of Russia's military, economic and political clout depended on the value of a few interlinked resources. The energy markets have handed the country a crushing combination of setbacks while its friends exploit it and its rivals grow more independent.

Right now, oilmen from Texas to Saudi Arabia are not just drilling the earth. They are sending tremors through the Kremlin.

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 #18
Business New Europe
www.ne eu
March 16, 2015
The Russian banking system? Yeah, that's going to be a problem
Mark Adomanis in Philadelphia

The most basic part of any bank's business model is the extension of loans to consumers and corporations. Clients need money, to expand their business, buy a home, or, in a less sunny scenario, to re-finance existing borrowing, and the bank gives it to them while charging interest. Assuming that the loan is paid back on time (which, in certain circumstances, can be a very big assumption!), the bank profits on the difference between the rate at which it can borrow money and the rate that it charges its clients. It's a simple and often quite profitable line of work.

However a bank, even the best-run and most capable of all banks, knows that not 100% of the loans it extends will be paid back. Businesses go bankrupt, people lose their jobs, and repayment terms that once seemed reasonable can quickly become unrealistic. Banks thus need to create a "provision" to guard against bad debts - those loans that the bank reasonably expects will not actually be paid back. There are more or less accurate ways of estimating these provisions, but there's no single "right" answer. Because the process of estimating provisions is forward-looking there is a certain amount of inherent subjectivity.

Looking at its 2014 IFRS results released on March 13, we can see that VTB's basic business of lending money to people and charging them interest on that money isn't doing very well. The bank's provision for bad loans more than doubled, going from RUB96.9bn in 2013 to RUB255.4bn in 2014. This essentially means that VTB expects that RUB255.4bn worth of loans that it extended will not actually be paid back. Not to get too far into the technical weeds, but an increase in a provision is essentially a decrease in net income: the bank originally thought it would collect on the loan, but no longer does and it needs to adjust its profit accordingly.

The deterioration in the quality of VTB's loan portfolio caused its net interest income (the amount it actually earned minus the amount it had to set aside for provisions) to plummet from RUB226.1bn to a mere RUB98.9bn. VTB's core business, then, suffered a 56% decrease in profitability from 2013 to 2014.

Other lines

But that's not all: in the dazzling world of modern finance banks don't just limit themselves to the, rather boring, business of loaning money and charging interest; they invest in other financial vehicles (stocks, bonds, derivatives, etc.) or foreign currencies. As the value of these investments ebbs and flows, banks can record huge profits or, when the economy enters a down cycle, enormous losses.

VTB's other lines of business performed even worse than its loan portfolio. In 2013, VTB gained RUB13.2bn from its investments in various "financial instruments." In 2014? It lost RUB3.0bn. It also had to record a RUB20bn asset impairment charge, essentially a formal recognition that assets it thought were worth X were, in fact, worth a lot less. Had VTB not been able to book a RUB99.2bn gain from the deposit insurance agency, basically an extension on a super-favorable government loan that helped it absorb Bank of Moscow, its "other operating income" for 2014 would have been -RUB80.7bn (for comparison's sake, in 2013 it was positive RUB9.6bn).

Compared with most Russian banks, VTB is generally regarded as well-run and well-capitalized. If the damage from 2014 was this bad for VTB, and it was really bad, the only thing that prevented the bank from recording a large loss was that very generous loan from the deposit insurance agency, then it is going to be much worse for the still-large number of poorly run Russian banks. Certainly the deposit insurance agency can't give everyone RUB100bn.

Additional IFRS results will trickle out over the next several weeks. But if even the largest state-run banks like VTB are witnessing such huge deteriorations in their performance, it seems as if the Russian banking sector is on the verge of systemic crisis.

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 #19
www.rt.com
March 16, 2015
On Russia's anti-crisis measures
By Alexander Yakovenko
Dr Alexander Yakovenko, Russian Ambassador to the United Kingdom of Great Britain and Northern Ireland, Deputy foreign minister (2005-2011).

Given the negative trend in Russia's economy caused by many factors, such as the fall in oil prices and sanctions, the Russian government has agreed the "Priority Action Plan for the sustainable development of the economy and social stability in 2015".

The plan, costing about $35 billion, is to support the Russian economy during a period of unprecedented external political and economic pressure. It includes 60 measures aimed at securing sustainable economic development and social stability during this period, and follows three basic principles - to encourage economic growth, support priority industries and fulfill all social commitments. The measures stipulated for 2015-2016 are designed to accelerate restructuring of the economy, stabilize strategic companies in the key sectors, balance the labor market, reduce inflation, moderate the consequences of consumer price increases for low-income families as well as secure sustainable growth and macroeconomic stability in the medium-term.

The plan includes the following key actions: supporting import substitution and exports in the non-commodities industries, including the high-tech sector; assisting the development of SMEs by reducing cost of capital and their administrative expenditures; creating conditions for attracting investments in the key sectors; compensating additional inflation outlays of the most exposed social groups, such as pensioners and large families; reducing tensions in the labor market and supporting full employment; optimizing budget expenses, concentrating resources in the priority areas of development and fulfilling all social commitments made by the government; securing soundness of the banking system and creating financial support mechanism for strategic companies.

The document provides for budget expenditure cuts of 10 percent in 2015, primarily by slashing inefficient spending. At the same time, all social commitments will be fulfilled, which requires additional budgetary allocations. Moreover, spending on defense, agriculture and Russia's international obligations will not be reduced. Government investment will be focused primarily on completing current projects, while the start of some new projects will be delayed. Financing of government bodies will be reduced.

We believe that the gradual stabilization of the global commodity markets as well as measures taken by the Bank of Russia will secure the foreign currency market stability and at the same time create conditions for reducing interest rates and increasing loan affordability. This, in combination with the increased price competitiveness of Russian products due to the ruble weakening, will help basic industries to gradually overcome the recession. The accompanying decrease in the inflation rate in the consumer market will reduce the crisis effects on the standard of living in Russia.

While implementing emergency anti-recession measures, we will also prioritize structural reforms to diversify the national economy and create conditions for sustainable economic growth in the medium- term.

To secure better results, all the measures mentioned will be implemented by the government in close cooperation with the Federal Assembly of the Russian Federation, regional and local authorities, as well as with the professional and expert community. The Action Plan will be modified if necessary.

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#20
Moscow Times
March 16, 2015
Kadyrov, FSB at War After Nemtsov Death
By Vladimir Frolov
Vladimir Frolov is president of LEFF Group, a government relations and PR company

The Chechen connection to the assassination of Russia's opposition leader Boris Nemtsov is pushing Russia's spooks into political battles they would rather avoid.

The FSB appears to have uncovered signs of a conspiracy that implicates Chechen leaders very close to Ramzan Kadyrov. According to Novaya Gazeta, investigators have found a sustained effort by elements in the Chechen security forces to track and target not only Nemtsov, but several prominent opposition figures and public personalities critical of President Vladimir Putin.

This raises the prospect of Kadyrov's direct involvement as part of his strategy to keep himself indispensable to the Kremlin as a force of violence against the regime's opponents.

If Kadyrov were indeed freelancing into political assassinations in Moscow and were allowed to walk away unpunished, he would be taking Putin and the entire Russian leadership hostage, which might be precisely his plan. This would be a threat to the Russian state that the FSB would be legally obligated to fight.

Kadyrov has been raising his political profile and sought to position himself as Putin's most trusted lieutenant and even a peer ruler, aiming at a higher federal role. His brazen forays into Russia's foreign and security policy, and his attempts to speak on behalf of all Russia's Muslims, unnerved many in Moscow.

His political alliance with Putin's aide Vladislav Surkov, who owes his return to the Kremlin to Kadyrov's intervention, has created a lock over Putin's succession plans, where any future Russian president should be acceptable to Kadyrov. His willingness to play a central role in physically suppressing anti-Putin opposition opened a horrifying prospect of a sectarian war in Russia.

The stakes are huge. Full investigation and arrests of co-conspirators risk destabilization in Chechnya escalating into war. A decision to freeze the investigation in its tracks and cover up would be extremely demoralizing for Russia's security services and essentially signal the disintegration of Putin's power vertical. It would expose Putin's humiliating dependency on Kadyrov, raising the risks of his seizure of power in Moscow.

For the spooks this creates a loyalty test between the Russian state and its leader who may have been taken hostage by Russia's enemies. There must be rich irony in the fact that the FSB, Russia's ruthless security service, is now acting as the last best hope for Russia's democracy.

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 #21
Russia Direct
www.russia-direct.org
March 16, 2016
The Kremlin's perception of Western sanctions is dangerous
It is time for the Kremlin to realize that the notion that Western sanctions can in some way benefit the Russian economy is fundamentally false and dangerous.
By Oleg Buklemishev
Oleg Buklemishev is an associate professor in the department of economics at Moscow State University (MGU). In 1997-2000 he headed the international capital markets division. He worked as an assistant to the finance minister. In 2000-2004 he was an assistant to the prime minister and deputy director of the secretariat of the prime minister of Russia. From 2005 to 2012, he was chief analyst and member of the board of directors at NGO MK Analytics. He is author of the book "The Eurobond Market" (1999).

A year has passed since the imposition of international sanctions on the Russian economy as a result of events in neighboring Ukraine. So it is now possible to sum up the initial results of their impact and predict the further trajectory of life "under sanctions."

Strictly speaking, the sanctions' ultimate objective of pressuring the Russian leadership into a review of its new expansionist foreign policy strategy, launched in February-March 2014, has not been yet been achieved. However, the very fact of their introduction and continuation, despite the real losses suffered by business and the fierce opposition from some very powerful lobbies in the West, shows how serious the Ukraine crisis is viewed in the rest of the world.

Sanctions, at their core, are an attempt by one set of actors in international relations to express disapproval of another and to try to change its actions without - crucially - resorting to military force.

History has no subjunctive mood, so we cannot conjecture how events might have developed if sanctions had not been introduced against Russia last year.

Indeed, despite the consistent tightening of the measures, they did not prevent the annexation of Crimea or an escalation of the conflict in eastern Ukraine and the significant expansion of separatist-controlled territory. Nevertheless, it is just possible that the sanctions were in fact a major deterrent in the development of the Ukrainian crisis; without them, the situation could have been even more acute.

Moreover, the sanctions are still relatively young. Modern "smart" sanctions are aimed at a limited "target audience" and become tangible throughout the economy as a whole only after the elapse of a certain period. Formally, contrary to existing notions, the economic sanctions directly affect a relatively small set of Russian individuals and legal entities, as well as a very narrow section of foreign trade operations. The measures so far imposed by the United States, Canada, the EU, Japan and a number of other countries pertain to imports of dual-use technologies and deliveries of modern technologies and equipment to Russian companies, as well as to a range of services in the field of hydrocarbon exploration and production.

Wide-scale sanctions take the form of financial constraints that effectively sever a significant part of the Russian economy from the now customary sources of foreign capital in all its manifestations. As such, instead of refinancing past loans and raising new capital for development, many Russian companies are being forced to take money out of circulation and pay off debts. Despite all the assurances of the Russian government regarding the potential alternatives to "Western money," they have not been found, as experts predicted, which has sharply reduced domestic investment resources.

The most severe negative impact on the Russian economy has not come from the sanctions themselves, but the uncertainty they cause. Even the most optimistically minded investor cannot ignore the fact that the Russian authorities could at any time take action that might provoke even tougher sanctions in response. The very real prospect of a further deterioration in the business climate is a far greater obstacle to the investment process than the totality of the current sanctions.

The triple blow to the Russian economy from three different sides (the collapse of an ineffective economic development model, the fall in oil prices and international sanctions) represents Russia's biggest challenge since the 1998 crisis. Nevertheless, the past year has demonstrated that survival under sanctions is possible for a time.

But the deepening investment crisis (the official forecast for 2015 promises a sharp decline in capital investment of 13.7 percent) means that the Russian economy is not just treading water, but also gradually squandering its future. All the while, the country continues to fall ever further behind the rest of the world.

Thus, to restore the investment process and exit the crisis, it is vital to convince potential Russian and foreign investors that, come the next anniversary of sanctions, the Russian economy will not be in an even worse state. Unfortunately, that is a very difficult task and the solution requires at the very least some fundamental economic policy changes.

The idea that the sanctions regime can somehow benefit the Russian economy is fundamentally false. Therefore, one of the most important components in advancing toward sustainable economic development is to remove the threat of tougher sanctions and to make steady progress in the dialogue with Western partners with a view to having them lifted.

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#22
Russia a land of plenty, but hard to reach from rebel east Ukraine
By Gabriela Baczynska
March 15, 2015

USPENKA BORDER CROSSING, Ukraine (Reuters) - Looking out over the several hundred cars lined up to cross into Russia from rebel-held eastern Ukraine, Vladimir curses the separatist authorities who he says are forcing people to venture out of the rebel stronghold in search of basic needs.

In contrast to the highly publicized Russian humanitarian aid convoys that roll into rebel-held territory, the kilometer-long line at the Uspenka border post testifies to the hardships common people endure in the conflict between Ukrainian troops and forces of the Donetsk People's Republic (DNR).

"For now, the DNR are only good at fighting, they have no clue about civilian needs," said Vladimir, a locksmith who works in one of the region's many mines.

He said he arrived at the border crossing in his Chevrolet at 5:30 a.m. on Sunday to take his 78-year-old father to Russia for eye surgery no longer available in Donetsk.

By noon, he was still at the far end of the line.

Those in the line said rebel border officials were taking their time in checking vehicles and documents and the numbers wanting to cross had increased of late.

Moscow has vocally supported the separatists who took up arms against Kiev last April -- the West says with weapons and troops -- and Russia is a welcome escape from the hardships of the conflict, but traveling there is fraught with frustration.

"This is a complete mess," said Mikhail, 60, who had been in the queue for more than 24 hours and still had more than a dozen cars in front of him.

Like many others he was queuing to leave in order to buy petrol in Russia, where it costs half as much as in rebel-held eastern Ukraine. Despite their self-proclaimed independence, rebel regions still use the hryvnia, which has fallen to record lows since the start of the Ukraine crisis early last year.

"It undermines trust in the new authorities," he said of the separatists, who captured Donetsk last April and then proclaimed their own Donetsk People's Republic. "When the election comes, do you think I will vote for them?"

Early on Sunday, a convoy of some 40 trucks, including large gasoline tankers, tagged "humanitarian aid from Russia" crossed through the Uspenka point into rebel-held territory past the long line of cars waiting to leave the separatist stronghold.

Some want to leave altogether, others just want to stock up on cheaper supplies, food and medicine. Some simply go to visit relatives who live only dozens of kilometers away.

"Is that what we fought for in here? We lived like animals before, and after all that, we still live like animals. I have family in Taganrog in Russia, I will no longer be here," said a pensioner who gave her name as Tatyana.

Adding to the tensions among locals, car carrying separatist fighters often speed to the front of the line, bypassing waiting motorists.

The head of the DNR border guard unit on site refused to comment on the situation.

Fighting in east Ukraine has largely died out since a ceasefire agreement sealed in Minsk in February but some representatives on the ground from the OSCE, Europe's security watchdog, said on Sunday the number of incidents and violations has increased in recent days.

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 #23
Russia Insider
http://russia-insider.com
March 15, 2015
Ukraine's Maidan Curse
Step by step, Maidan after Maidan, life in the country goes from bad to worse.
By Yury Nickulichev
Yury Nickulichev is a professor at the Russian Academy for National Economy and Civil Service

The diligent student in contemporary Ukraine must long have noticed a very peculiar - nay, exclusive! - feature of the country's political life. It's the regular, recurring, cyclical, unavoidable and inescapable Maidans. Topographically, Maidan is the central square of Kiev (and of a few other Ukrainian cities), the word meaning "an open field" which has traditionally served as a location for various local gatherings.

There was a time when this area in Kiev was a vacant ground called the Goat Swamp. But here we are not talking about topography, of course, but about politics. Since the 1990s, Kiev's Maidan has become something very close to a powerful political "institution" rivaling the central state authorities (or, as in the case of Euromaidan of 2014 - 2015, even overthrowing them).

Since "perestroika", the place has seen at least four large-scale and lengthy political rallies, not to mention a number of smaller ones. In 1990, some 100,000 students gathered here to demand independence from Moscow (and soon the Ukraine's president, Leonid Kravchuk, would refuse to sign the New Union Treaty, thus effectively paving the way to the dissolution of the USSR). In 2000 - 2001, it was "the Ukraine without Kuchma", i.e. a mass protest campaign demanding the resignation of the newly elected President Leonid Kuchma. Then there came the famous Orange Revolution of 2004. Now it's Euromaidan.

Since no other post-Soviet country has ever experienced anything even remotely resembling this form of a mass radical activity, here's the conclusion: the MAIDAN is a unique feature of Ukrainian politics. There must be something in the country's political culture that sends some of the people to live in tents for weeks or even months, summer or winter, protesting against what other people do.

The problem therefore is dual. Because the other side of the coin is almost a total corruption of the powers that be. In Ukraine, this corruption is of legendary and epic proportions; it encompasses all spheres of public life; it's almost ubiquitous and eradicable; it is both economic and political. Not surprisingly, In 2012, Ernst & Young put Ukraine among the three most corrupted countries of the world, while, according to Wikileaks cables, none other than American diplomats did not hesitate to describe the regimes of Kuchma and Yushchenko as a typical kleptocracy. But considering the scale of the problem, isn't it, too, a manifestation of the traditional political culture?

There's something very uncomfortable with this picture, is there not? We have a society whose one part regularly "steals", while the other no less regularly takes to the streets to protest against corruption and other forms of social injustice. But aren't they the same Ukrainians? Two-faced Janus - two faces but one body? We'll never understand the Ukrainian politics without finding a clue to that contradiction.

But it requires a closer look at history.

Historical accounts might differ, but what's unquestionable is the fact that up to the Soviet times, Ukraine had never been an independent state (so when Ukrainian "activists" were taking down statues of Lenin throughout the country, they were destroying the monuments of the founder of their first nation-state). Historically, the territories of modern Ukraine had been under the rule of several external powers, originally of Polish-Lithuanian Commonwealth, later Russian and Austrian Empires. As a result, and adding the insult to injury, during the 17-th and 18-th centuries these lands practically lost their own, Ukrainian-speaking, aristocracy, once very powerful and influential. With only very rare exceptions, the nobility en mass was abandoning not only the Ukrainian language and customs but also the traditional Orthodoxy of the land, embracing Catholicism along with "all things Polish". (Even as late as the end of the 19-th century Polish was one of the most widely spoken language... in Kiev, to say nothing of Lvov and vast areas of Western Ukraine!).
 
But in early modern Europe, for a people to be left without an aristocracy was roughly as good as being a body without a head, with nobody to provide political leadership and purpose, patronize education and high culture, support the church and endow the people with a sense of national identity. Not surprisingly, with time passing, even the ethnonym "Ukraine" was forgotten, parts of the country having their own names and titles.

Later, at the end of the 18-th century, when Ukrainian territories were fully integrated into the Russian political system, the nobles of the land now began assimilating with the Russian nobility. "Alas, Madness has befallen us through these disgusting and ungodly lords," lamented the famous poet Taras Shevchenko, number one in the national cultural pantheon. "They changed their good native mother for a despicable drunkard", "despicable drunken" representing here Russia of course. (Ironically, writing this, Shevchenko himself resided in Saint-Petersburg, wrote mostly in Russian and drank like a fish). For many of his compatriots, however, the loss of the Ukrainian-speaking aristocracy was tantamount to a national tragedy, approaching death of the nation.

And now we are getting to the heart of the matter.

I argue that, historically, there emerged a specific type of political culture in Ukraine. Let's call it the Maidan culture. It was the political culture of small communities - either of Cossacks or peasants, with only marginal participation of the local petty gentry that survived. There were towns of course, but those were few, scattered, small, politically insignificant - and all had their own maidans! Historical data also shows that the local communities of the then Ukrainian lands, especially those of the Cossacks', were inherently democratic and egalitarian. Inevitably, this type of political culture was entirely and completely parochial, for how could it be otherwise with a stateless people? Having rural Ukraine as a locus of ethno-cultural identity, it was very limited in an ideological sense.

Due to the lack of a native nobility and underdeveloped public life, many ideas of a higher order just could not emerge. In terms of social psychology, there was a very sharp divide between us and them, "them" being the rest of the world. Thus the country was existentially divided, much deeper than the popular theories of "East/West" or "Ukrainian-speaking/ Russian-speaking Ukraine's divide" suggest. Regretfully, but quite naturally, such communities never had any loyalty to any external power whatsoever, be it Poland, the Osman Empire, Moscovia, their own rulers, the Russian Empire or the USSR (see the history of Ukraine). From time unmemorable, or at least since the 17-th century, the most vicious enemy has of course been the 'moscal', i.e. the Muscovite. To wit, it's a culture of a built-in anarchy.

Well, my point here is that this type of political culture has survived despite the 70-year long Soviet rule. Sure, Ukraine is a modern state with a range of political subcultures and the archaic Maidan-type subculture is only one of them. But periodically, it resurfaces and even begin playing a crucial role.

After the outbreak of the protests on the Maidan in Kiev at the end of 2014, a sociological study revealed that residents of Kiev made up only 12 per cent of protestors, with 88 per cent thus being from outside Kiev, and people who came from Western, predominantly rural, Ukraine making up 55 per cent (24 per cent were from central and only 12 per cent from the southern and eastern Ukraine). What's also interesting is the fact that in February, 2015 the number of activists representing a political party on Maidan constituted only 3 per cent. No affiliation with the agents of mainstream politics!

Instead...

Many observers were puzzled and mystified at the sight of the torch-lit march in Kiev on January 1, 2015. Technically, it was said, the event was staged by the "Svoboda" party (But "Svoboda", again, is not a political party; it's a very loose "political association"). What was it then that brought some 2,500 people to the streets of the "civilized" Kiev? We now know what. It's "the blood and soil", the most (or only?) solid foundation of the Maidan political culture.

Time flies by... Step by step, Maidan after Maidan, life in the country goes from bad to worse. Is it a curse of the Goat Swamp?   

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 #24
Center TV (Moscow)
March 14, 2015
Ukrainian pundit tells Russian TV talk show his vision of Donbass conflict

The 14 March edition of Sergey Minayev's talk show "Right to Know" on Moscow city government-controlled Centre TV channel featured Mykhaylo Pohrebynskyy, director of the Kiev Centre for Political Studies and Conflictology. Other panellists included Ukrainian writer and journalist Oles Buzina, editor in chief of the Lenta.ru news website Aleksey Goreslavskiy, Time magazine journalist Simon Shuster and Vremya Novostey newspaper independent observer Arkadiy Dubnov. The discussion focused on the following topics below.

Minsk peace deal

The discussion kicked off with the implementation of the Minsk peace deal reached between the Ukrainian conflicting parties on 11-12 February. Pohrebynskyy said that in his view the conflict had come to an end. According to him, this is proved by "understanding and willingness to prevent the conflict from escalating being shown by external players, Russia, the USA and the EU first and foremost". Moreover, both the Ukrainian authorities and the leaders of the self-proclaimed DPR and LPR republics in Donbass are "interested in at least a pause in the conflict", Pohrebynskyy said, adding that the both sides "are lacking sufficient economic and military resources" to continue the confrontation. In addition, the both sides have withdrawn heavy military hardware from the contact line, he said, noting that this also helps prevent hostilities from resuming. The pundit went on to discuss the provisions of the Minsk peace deal that are yet to be fulfilled, particularly holding regional elections in Donbass. He cast doubts that all the peace agreements would be fulfilled in the near future, particularly carrying out a constitutional reform, and supposed that "some interim decisions might be taken, probably in autumn, after all the sides realize that the peace deal cannot be implemented in full".

Future of Ukraine

According to Pohrebynskyy, "part of the Ukrainian elites has put up with the fact that Donbass is lost", but the elites "need guarantees" that after Donbass, other southeastern regions will not be lost. In his view, if the Ukrainian authorities have such guarantees, the conflict would be "easy and simple to resolve". Pohrebynskyy wants Donbass to remain part of Ukraine since "if this region of Russian culture is lost, Ukraine will become a monocultural state" and this will be "a loss and a defeat for Ukraine as the state and for people".

Russia, USA, EU and Ukrainian conflict

Pohrebynskyy disagreed with the opinion that the Ukrainian conflict was a war between Russia and Ukraine, between Vladimir Putin and Petro Poroshenko. He said: "Russian Ukraine lacks the leader; that is why leadership qualities in Russian Ukraine are symbolically shifted onto the leader that exists in the neighbouring country; this does not mean, however, that the war is being waged between Putin and Poroshenko. In a broader sense, if we speak about who is fighting whom in Ukraine, it is a war between Putin and Obama, but not Putin and Poroshenko."

According to Pohrebynskyy, "both Russia and the USA, which wants to deter Russia, are strongly interested in playing the Ukrainian card". "Big players" could not but take advantage of people's sentiments in Ukraine's southeast, who "do not want to live in a way dictated by the current authorities in Kiev" and "are resisting control by the Kiev authorities over this territory", Pohrebynskyy said. In this respect, Ukraine is a "tool in a big game between Russia and the USA", the pundit concluded.

Speaking about the EU's stance on the Ukrainian issue, Pohrebynskyy said that initially Europe wanted Ukraine to be an area of its influence regardless of Russia's interests, but recently it had realized that "it paid and still had to pay too high a price" for resolving the Ukrainian issue independently without Russia participating and had changed its stance for active interaction with Russia on Ukraine. In the expert's view, Europe's main interest now is "purely economic": to share responsibility for the settlement of the conflict in Ukraine and the restoration of Donbass.

Domestic situation in Ukraine

The last part of the discussion focused on the existing political and socioeconomic situation in Ukraine. Among the points discussed were the landscape of political forces, the performance of civil society and local oligarchs (particularly Dnipropetrovsk Region governor and businessman Ihor Kolomoyskyy), political activities of Yuliya Tymoshenko, the leader of the Fatherland party, a new loan from the IMF and possible ways of spending it as well as the recent wave of suicides committed by leading members of the Party of Regions and the possibility of a third Maydan protest in Ukraine.

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 #26
Politico.com
March 15, 2015
'You Can't Bomb It Away'
The State Department's former No. 2 on Iran's nuclear program, Putin and past secretaries of state. (excerpt re Russia)
By SUSAN B. GLASSER
Susan Glasser is editor of Politico.

William J. Burns hasn't quite finished what he started. But if President Barack Obama cuts a deal with Iran in the coming weeks to curtail its nuclear program, the soft-spoken Burns will-deservedly-get no small share of the credit for getting the negotiations started after years of stalemate. Burns, along with Jake Sullivan, a close adviser to Hillary Clinton, began the secret talks with the Iranians in Oman, talks that never became public until late 2013, when the months of maneuvering yielded an agreement to begin negotiating in earnest. It was a fitting capstone to a career that had Burns rise to the No. 2 post in the State Department, only the second career Foreign Service officer ever to do so; he retired to much insider fanfare last fall, hailed as a "diplomat's diplomat" who had served in just about every sensitive posting in Washington, as well as ambassador to Russia as Vladimir Putin went from tough to tougher and U.S. envoy to Jordan in the midst of Middle East tumult. Politico editor Susan Glasser met recently with Burns, now head of the Carnegie Endowment for International Peace, to talk about the heated politics of the Iran talks, Putin and what he learned from all those secretaries of state....

SG: Thinking about the continuity of some Washington debates, the cycles of debate-Russia is probably the greatest example of that really, in the last two decades. First of all, like, where do you think things are headed at this point? With the assassination of Boris Nemtsov it almost suggests that it's become much more unpredictable. The future may always be unpredictable in Russia-but that really, we don't even know what trajectory it's on.

WJB: There's a lot of truth to that. Boris Nemtsov's murder is a pretty cruel reminder of how dark the political atmosphere has become in Russia. It's not the first of those kind of murders. When I was in ambassador to Russia, I remember speaking at [reporter] Anna Politkovskaya's funeral. And I remember being struck by the fact that we had two or three thousand mourners, and not a single senior Russian government official. But Nemtsov is clearly the most prominent figure to be murdered. And I think what it says about Russia in a sense is, you had President Putin in his first two terms as president, including when I was ambassador from '05 to '08, who had established a kind of rough social contract, where the deal was: I'll ensure that economic growth picks up and standards of living rise if everyone else stays out of politics. I think that began to slow down, and then stagnate, as a result of everything from falling oil prices to corruption, to the sanctions that were produced by aggression in Ukraine. And so, in his third term he's looked for a different way to mobilize people and nationalism was the answer. But not just any kind of nationalism, a chauvinism which is very much us against them, which has just gotten more and more aggravated and sharpened as a result of the war in Ukraine. And so you create an atmosphere, in which I don't know who was responsible for Nemtsov's murder, but where that kind of unpredictability and violence becomes more and more common. And that's a dangerous thing for Russia, both internally, but it's also dangerous I think in terms of foreign policy, too.

SG: Here in Washington, did we fundamentally misread Putin? Or has he shifted?

WJB: No, I mean I think hindsight is always a more perfect guide. There's this kind of steady accumulation of grievance, the sense that history in the last 20 years, not just for Putin, but for lots of thoughtful Russians, is a story of the West taking advantage of Russian's moment of historic weakness; the West treating Russia as less than a first-class citizen globally; of the West trying to deny Russia its entitlement, as lots of Russians see it, to a sphere of influence, in its own region. You can agree or disagree, I'm not arguing you accept or indulge that kind of point of view, but, understanding it is important, and I think that is a trend line that you can see going back seven, eight, nine years. Now that's not an argument against the effort [to reset relations] in the first couple of years of the Obama administration.

Even to this day, you look at the Iran nuclear issue, or a few other ones, arguably on counterterrorism, potentially at some point in the future on Syria or other issues, there could be some room to work together. And, the reality with managing a relationship with a very complicated, unpredictable country like Russia, is that you don't have the luxury of ignoring it, either.

SG: So Iran is a good example-this process of negotiating with the Iranians has continued in the exact same time period that the bottom has fallen out of our direct relationship with Russia, the Russians have invaded and taken over Crimea, they have effectively invaded Eastern Ukraine, and by the way, would you say that's a fair characterization? What is your characterization of Russian military activity in Ukraine?

WJB: Well, it's obvious aggression, I mean, that the Russians have mounted first in Crimea and now in a wider swath of Southeastern Ukraine, I don't think there's any question about that, about direct Russian involvement. People have been pretty direct about this being aggression, and a violation of sovereignty. And a lot of norms that matter in the 21st century.

SG: So why haven't they tried to blow up the Iran talks then? Or are they waiting?

WJB: Well, I mean, I think Russians are capable of looking at their interests, and they don't have an interest in a nuclear-armed Iran. That's not to say that they share our interests exactly with regard to this Iranian leadership or this Iranian regime. But I think on that score there's a fair amount of common ground. And I think they've been constructive, as partners in that effort, along with the Europeans and the Chinese. So we'll see. There's still a lot of ground to be covered in the negotiations, but so far the Russians have played a constructive role. One example: their willingness if this is ever worked out in an agreement, to take a significant part of the current Iranian stockpile. Which would be a big contribution to reaching an agreement.

SG: If they wanted to be unconstructive, what would they do? Would they resurrect the S-300 sale?

WJB: Yes, that's one thing that could be done. Sanctions busting of one kind or another is another example....

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 #27
Carnegie Moscow Center
March 16, 2015
Who Benefits From Ending Russian-Ukrainian Cooperation in the Space and Defense Sectors?
By Vladimir Dvorkin
Major General Dvorkin (retired) is a distinguished military fellow in the Carnegie Moscow Center's Nonproliferation Program.

Until recently, the space and defense sector was one of the few remaining mutually beneficial areas of cooperation between Russia and Ukraine. But in early-February, Russia announced that it would suspend cooperation with Ukraine on the Dnepr program which uses converted SS-18 intercontinental ballistic missiles (ICBMs) manufactured at the Dnipropetrovsk Yuzhmash plant to launch commercial satellites. Russian officials also announced that they would no longer buy Yuzhmash-made Zenit booster rockets used in the Sea Launch project. This decision is likely to hurt not only Ukrainian, but Russian interests as well.

THE RUSSIAN-UKRAINIAN-KAZAKHSTANI DNEPR PROGRAM

The Dnepr project is the most successful defense-industrial conversion projects of the post-Cold War era that has benefited Russia, Ukraine, Kazakhstan, as well as a host of state and commercial interests in Europe, the United States, and elsewhere around the world. The project utilizes converted Soviet-era R-36 ICBM known in the West as SS-18 to launch commercial payloads into space. The legacy project of the Soviet defense-industrial complex scattered across Ukraine, Russia, and Kazakhstan is an example of everyone winning as a result of multilateral cooperation in space and on Earth.

The Dnepr program owes its success to several factors. Its launch vehicle can remain on the launch site for a long period of time, thus allowing for rapid launch even in challenging weather conditions at any time of the day or season. It has been exceptionally reliable, and greatly reduced the cost of putting a payload into space.

The first launch of a Dnepr launch vehicle took place in April 1999. From then until November 2013, 18 launches were carried out using R-36M rockets, putting a total of 86 satellites in orbit. The launch vehicle's large payload-up to 4 tons-and reliability made it an attractive choice for governments and commercial customers. One recent launch put 24 satellites into orbit all at once. Customers for the Dnepr launch service have included space agencies and private companies from 19 countries, including Russia, Ukraine, the UK, the United States, Italy, Saudi Arabia, Germany, and France.

The program has brought tens of millions of dollars in revenue to Ukraine's premier defense-industrial enterprise-the Yuzhmash plant in Dnipropetrovsk. Had it not been for the launch business, the factory would have shut down long ago due to the lack of orders. Following the announcement by Russia to suspend its cooperation with Yuzhmash, the factory has furloughed thousands of workers. The program has also benefited Kazakhstan, whose Baikonur space launch facility has been used for multiple launches.

The program has also resulted in significant benefits for Russia. In addition to commercial benefits for Russia from the space launch program, it made it possible for the Strategic Rocket Forces (SRF) to extend the service life of the SS-18 ICBM. The space launch vehicles and the SS-18 ICBMs share a number of systems and components, and the continuing manufacture of these components has made it possible for the SRF to keep the SS-18s in service.

Yuzhmash is not the only Ukrainian defense enterprise to have benefited from this cooperation. The Kharkiv-based Khartron-Arkos electronics plant has supplied both the Dnepr and the SS-18 programs with guidance systems. Since 1999, Khartron-Arkos has greatly improved the rocket's guidance system, thereby satellite launch accuracy.

Although the loss of contracts with Russia is likely to hurt Yuzhmash, it appears likely to recover from this setback. The company has a contract with the U.S. Orbital Sciences Corporation to build the first stage of the Antares launch vehicle (a 1.9-billion dollars contract through 2018); with the Brazilian Space Agency to develop the Cyclone-4 launch vehicle; with the European Space Agency to participate in the Vega space launch system project; as well as with several other countries.

THE ZENIT LAUNCH VEHICLE PROJECT

Russian decision to stop buying Zenit launch vehicles from Ukraine is likely to hurt Russian interests as well. Established in 1995 as a joint Russia-Ukraine-U.S.-Norway venture called Sea Launch, the company has used the Zenit 3SL launch vehicle, designed and built by Yuzhmash to launch satellites from a sea platform, as well as from the Baikonur space launch facility in Kazkahstan.

From March 1999 to May 2014, Sea Launch carried out a total of 36 launches. The program suffered several setbacks when three launches failed in 2000, 2007, and 2013, but the problems were identified and fixed, as was subsequently demonstrated by the successful launch of an Israeli satellite from Baikonur in September 2013. At least five launches were planned for 2014-2015, but only one was carried out in 2014.

Sea Launch has also experienced financial difficulties and had to file for bankruptcy in 2009. It emerged from bankruptcy in 2010, but reportedly its future is still in question.

It would make sense for Russia to help Sea Launch resolve its financial difficulties.  The project offers the possibility of using a launch vehicle and platform for Russian military and civilian satellites, as well as international commercial satellites. Moreover, future joint projects could include the use of Zenit rockets for manned space flight. Such cooperation can benefit both countries. Yuzhmash remains an important potential partner with a vast unrealized potential for Russian defense and space industries. Russia should do everything within its powers to sustain this cooperation.

Russian official statements about the intended replacement of Zenit with the Angara launch vehicle are overly optimistic and premature. So far, only two launches of the Angara have been carried out, and it is not yet certain that the launch vehicle and its supporting infrastructure can be used with confidence.

The Russian government's decision to end cooperation with Ukraine on these two space launch programs is likely due to political motivations alone and goes against the economic and technological interests of Russia, Ukraine, and many other countries that rely on the Dnepr and Zenit launch vehicles. This decision is worth reconsidering.

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 #28
Russia Insider
March 25, 2015
Europe Doesn't Need an Army: It Needs a Better Foreign Policy
The CEPS Task Force Report on "More Union in European Defence"  advocates for the creation of a European Army. But is a more militarized Europe the answer?
By Gilbert Doctorow
Gilbert Doctorow is a professional Russia watcher and actor in Russian affairs going back to 1965. He is a magna cum laude graduate of Harvard College (1967), a past Fulbright scholar, and holder of a Ph.D. with honors in history from Columbia University (1975). After completing his studies, Mr. Doctorow pursued a business career focused on the USSR and Eastern Europe. For twenty-five years he worked for US and European multinationals in marketing and general management with regional responsibility. From 1998-2002, Doctorow served as the Chairman of the Russian Booker Literary Prize in Moscow. A number of his early scholarly articles on Russian constitutional history under Nicholas II drawn from his dissertation remain 'in print' and are available online. Mr. Doctorow has also been an occasional contributor to the Russian language press including Zvezda (St Petersburg), Russkaya Mysl (La Pensée russe, Paris) and Kontinent (a journal sponsored by Alexander Solzhenitsyn) on issues of Russian cultural and political life. He regularly publishes analytical articles about international affairs on the portal of the Belgian daily La Libre Belgique. Mr. Doctorow's current research interest is trends in U.S. area studies programs. He is a Visiting Scholar of the Harriman Institute, Columbia University during the 2010-2011 academic year. Mr. Doctorow is an American citizen and a long-time resident of Brussels, Belgium.

Earlier this year the Centre for European Policy Studies (CEPS), one of the most authoritative think tanks in Brussels, issued a 25 page brochure entitled "More Union in European Defence," making the case for concrete steps to be taken by the European Member States in the direction of forming a European Army.

The timeliness of this tightly argued report cannot be overstated. Within weeks of its appearance, EU Commission President Jean-Claude Juncker issued a call for the creation of just such an Army.

In what follows I will critique this report, which might appear to be an unreasonably ambitious challenge for someone who is not a security professional were it not for two factors. First, the report itself is a model of transparency and integrity. It incorporates counter-arguments to its recommendations which, to a neutral reader, outweigh by far the recommended course of action. Second, there is an inexplicable flaw in the composition of the panel of experts responsible for the report.

To be sure, chair of this CEPS Task Force is Javier Solana, one of Europe's best names in the field. Solana was NATO Secretary General from 1995-1999, followed directly by 10 years of service as the EU High Representative for Common Foreign Policy and Security Policy. Two of his close assistants from the past, Nick Witney and Helmar Linnenkamp, join him on the Task Force. Then there is also a second former NATO Secretary General, Jaap de Hoop Scheffer.

With all due respect, the aforementioned were all deeply involved in creating the circumstances that today find Europe in an extremely dangerous confrontation with Russia over Ukraine specifically and, more broadly, over the security architecture governing the Continent. Javier Solana helped formulate and implement NATO expansion to the former Warsaw Bloc countries and former Soviet Republics of the Baltics; he helped formulate and implement the EU's Eastern Partnership policy. Both programs ultimately crossed Russia's red lines.

The Task Force also includes a former President of one Member State, Latvia, a Baltic country that is at the forefront of those that have provoked and fueled the present crisis. The remainder of the panel includes several politicians from centrist parties; and a good number of experts from various European think tanks and universities in various spheres of international affairs including security and defense policy, financial regulation, EU international law. There even appears to be one expert in Middle Eastern studies with a knowledge of Arabic.

What is missing is precisely any expertise on Russia out of the 19 members of the Task Force. This is not merely an anomaly, it is a fatal flaw given that the entire logic for more integrated European armed forces and a better common defense is precisely the Russian challenge that has arisen ever since the onset of the Ukraine crisis and Russian annexation of (or 'reunification with') Crimea one year ago.

I will return to this point later. For now let us move on to the question of internal contradictions in the Report between the exposition of the defense and security problem Europe currently faces, the proposed way forward and the potent obstacles to any moves down the road recommended.

The Report sets out a remarkably frank analysis of the status quo, meaning the failings of common defense today, the wastefulness of the 190 billion euro aggregate spending by European Member States and the lack of coordination in R&D, the lack of timely information sharing about budgeting for national armed forces. It is also very explicit about the forces, economic and political, working against any change. These begin with the ongoing economic travails of Europe which began in 2008 and have led to belt-tightening budgets which resist calls to higher defense spending, namely to reach the hoped-for 2% of GDP. Add to this the problems facing those who would add to Brussels' competences in the face of the wave of Euroskepticism that has swept across European populations thanks to pain from the austerity and the Euro crisis, which violate the EU's founding principle of solidarity. But current financial strains aside, the Report recognizes the sovereignty issues of the Member States that work against their pooling force capabilities. And the sovereignty is not just a matter of stubbornness or jealousy by each state of its assets; it is differing perceptions of security threats and resources required. It is not by chance that France has traditionally looked South at threats and Germany has looked East.

The Report nonetheless bravely formulates what it considers to be realizable objectives to make things better, if not to move directly to the stated objective of a European Defense Union.
 
That being said, it is up to the reader to decide whether objective obstacles to a common defense outweigh the subjective wishes of the authors of the report, however reasonable and modest they may seem taken in the abstract.

At this point I must invoke the anecdote of the Grand Vizier giving his Sultan the roll call list of reasons why there could be no 21 gun salute that day, finally coming to the single reason trumping all others: that there was no gunpowder available.

The 'no gunpowder' in the present case is the immediate reaction of the UK government to Commission President Juncker's call for an EU Army: Britain absolutely refuses to sign up; Britain has its own defense interests, in Gibraltar, in the Falklands and elsewhere which it will not make subject to the very different interests of European Commissioners. And without British participation, no European Defense Union, no European Army is thinkable.

We must remember that the populists in UKIP are holding David Cameron's feet to the fire on this. No sooner did Jean-Claude Juncker make his address on the European Army than Nigel Farage came out and said "I told you so," meaning that this kind aggrandizement of power by Brussels at the expense of the Member States was precisely why the UK should leave the Union.

Meanwhile, there is another wholly separate line of reasoning that one can apply against the argumentation for a European Defense Union and European Army. This is to peel away the well-defined and agreed upon military threat or potential for threat posed by the Russian armed forces today and look back a bit at the political dimension which brought us to the present state of affairs. For there can be no doubt that had the European Union pursued a more politically astute foreign policy and taken proper cognizance of Russian national interests upon which it impinged by snatching up Ukraine between November 2013 and February 2014 as it did, we would not be in a New Cold War today. There was no talk whatsoever of an aggressive Russian foreign policy, of threats of hybrid warfare, or of the Baltics being overrun prior to 22 February 2014. None.

Similarly, if I may clean out the stables, the other security threat identified in the CEPS Report as justifying a European Defense Union and European Army, the one in North Africa, is the direct result of the EU's wrongheaded foreign policy and military choices during the Arab Spring, and particularly the EU's military intervention in Libya leading to the murder of Colonel Gaddafi and the subsequent state of chaos spreading out to the East and West along the Mediterranean and south through the Sahel into Mali.

There are those who interpret the notion of creating a European Army as a sign of the growing rift between the Old Continent and the United States. In effect, from the very beginning of the confrontation with Russia over Ukraine there have been voices in the United States Congress calling for armed assistance to the Ukrainian side. This was not greeted with any enthusiasm in Europe, which went along with the alternative response to "Russian aggression" by imposing ever more punishing sanctions on Russian leaders and on key economic sectors in Russia. This hidden divergence in policy came into the open in early February 2015, when in view of the pending disastrous defeat of the Ukrainian army at Debaltseve, Washington hawks publicly placed great pressure on President Obama to kick aside restraint and send lethal weapons to Kiev. This real threat and the escalation of violence it would provoke in Eastern Ukraine led to a remarkable demarche by Chancellor Merkel that was denounced by the American hawks and put in the public arena the widening chasm in diplomatic and military policies between Europe and the United States.

In this context, talk of a European Army which would support NATO but have a separate identity not subject to control by Washington may have seemed to be reasonable and timely to its proponents. Regrettably or not, as I say, a European Defense Union or European Army is simply not feasible.

That leaves Europe with the unpalatable choice of submitting to a US diktat on arming Ukraine and facing a hot war on its borders that might suck the EU into an unpredictable, likely unwinnable open war with Russia.

What is to be done, then, about this cul de sac into which European military strategy is headed?

I would suggest that when you cannot move forward, think of backing up. To be specific, threats which have emerged due to poorly conceived and under-informed foreign policy can be put back in their box only by revising that foreign policy in such manner as to remove the sources of conflict. In this case, the solution is recognition of Ukraine as a neutral power that belongs neither to the EU sphere of influence nor is a candidate for NATO membership. It also means revisiting the nationalities policies of Estonia and Latvia, which were known to violate European principles of human rights with respect to their Russian speaking populations when they had been largely stripped of citizenship by the post-Soviet governments. The solution of convenience and back room deals among European officials that led to their blind eye to this festering abuse in 2004 when the new Member States joined the Union must be reversed. That alone is the sustainable solution to alleged fifth columns of Moscow in the Baltics alluded to obliquely in the CEPS report.

These solutions to the perceived Russian threat are possible only when Europe taps into the relevant expertise coming from area studies and does not rely on fatuous notions such as Angela Merkel's supposedly deft hand with Russia because she commands the language. Europe can and must do better.

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 #29
Dances With Bears
http://johnhelmer.net
March 15, 2015
IMF MAKES UKRAINE WAR-FIGHTING LOAN - ALLOWS THE US TO FUND MILITARY OPERATIONS AGAINST RUSSIA, MAY REPAY RUSSIAN BOND AND GAZPROM BILL - FRANKLIN TEMPLETON BOND DEAL IN FREEFALL
By John Helmer, Moscow
[Links, charts, footnotes, and photos here http://johnhelmer.net/?p=12920]

The International Monetary Fund (IMF) has agreed on a scheme of war financing for Ukraine. For the first time, according to Fund sources, the IMF is not only violating its loan repayment conditions, but also the purposes and safeguards of the IMF's original charter.

IMF lending is barred for a member state in civil war or at war with another member state, or for military purposes, according to Article I [1] of the Fund's 1944-45 Articles of Agreement. This provides "confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity."

To deter Russian and other country directors from voting last week against the IMF's loan, and releasing their reasons in public, the IMF board has offered Russia the possibility of, though not the commitment to repayment for Gazprom's gas deliveries, and the $3 billion Russian state bond which falls due in December.

On March 11 the IMF board agreed to approve an Extended Loan Facility (EFF) for Ukraine for a total of 13.4 billion Special Drawing Rights (SDR), currently equivalent to $17.5 billion. Here are the IMF papers spelling out the details [2].

The first tranche agreed for payment amounts to $4.6 billion, and was paid on Friday. According to the IMF, another $4.6 billion may be released in three instalments later in the year - in June, September, and December. At the same time, the Ukrainian government is obliged to repay the IMF $840.1 million [3] in past-due loan amounts and charges.

The Fund's managing director Christine Lagarde (lead image) did not claim in her press release [4] that this is new money. Instead, she said the IMF is making a "change in the IMF-supported program from Stand-By Arrangement [SBA] to Extended Arrangement under the EFF, which is consistent with the more protracted nature of Ukraine's balance-of-payment needs." Lagarde also claimed the loan's purpose is to "support immediate economic stabilization in Ukraine and a set of deep and wide-ranging policy reforms aimed at restoring robust growth."

Lagarde implied this money is not for continuing the war in the Donbass, but counts on the February ceasefire becoming a permanent armistice. The EFF loan, she said, "involves risks, notably those stemming from the conflict in the east of the country. I am heartened that the ceasefire agreed last month in Minsk seems to be largely holding for now."

The loan papers don't say the IMF will stop paying if it doesn't. Instead, the Fund is saying it will supply cash so long as the war doesn't exceed the present level of violence, and doesn't break out of the line of contact towards Odessa in the south, Kharkov in the north, or Kiev. According to Thanos Arvanitis [5], a deputy director of the Fund's European Department, "an essential assumption for the [EFF] program is the non-intensification of the conflict. So what we have assumed both for the macro framework and...the growth for 2015 and beyond, is that the ceasefire agreement holds, that the flare-ups that we have seen in recent periods do not repeat themselves and we think that with this the economy not affected directly by the conflict can start being delinked from the conflict."

The EFF is scheduled for disbursement over four years, with repayment stretched out until 2028. It substitutes for the Stand-By Agreement (SBA), the first Ukrainian loan the IMF board agreed to in April of 2014, six weeks after the ouster of President Victor Yanukovich. That loan for 11 billion SDRs ($17.1 billion) was signed for a two-year term. Payout was suspended in October of 2014, after two tranches of $4.5 billion had been paid [6]. Repayment had been scheduled until 2019.

Here is the original schedule for the SBA:

Counting until last week, the IMF had refused to hand over $5 billion of last year's loan. The IMF Staff Report [2], just released, claims this wasn't money withheld because the Kiev government had failed to meet the borrowing conditions, spending limits, and performance targets, but simply because "the funds were not purchased" (page 33). That's outcome, not explanation.

Here is the new EFF loan schedule:

In the new IMF accounting, the Fund claims the EFF will provide $5.8 billion more than the abandoned SBA. In the old IMF accounting this is much less: subtracting the new EFF total from the old SBA total makes 1.372 billion SDRs, or $1.8 billion.

In practice, by extending loan disbursement from March 2016 until December 2018, and by handing out just $4.6 billion to start with, the IMF is cutting back on last year's promised exposure to the government in Kiev. The board is also reserving the opportunity to cancel the loan a second time, and bring repayments forward. The first tranche is substantially less than the "front-loading" requested by the US minister of Ukrainian finance, Natalie Jaresko.

Take a magnifying glass to the tables titled "Ukraine Capacity to Repay Indicators" in last year's SBA, and in this month's EFF: it can be seen the newly scheduled repayments to the IMF are significantly larger from now until 2019 in the new scheme than they were in the old one, and of course they go on for much longer - another decade in fact. . For comparison, go to the SBA document [7], "Assessment of the Risks to the Fund and the Fund's Liquidity Position", page 10; for the EFF document, open this link [2], and go to the similarly titled document, page 13.

At the IMF Andrew Tweedie (below left) and Mark Flanagan (centre) are responsible for drafting this sleight of hand; Nikolai Gueorguiev (right), a former Bulgarian finance ministry official, has been in charge of negotiating the terms with the government in Kiev. In 2008 Flanagan was much more sceptical in his assessment [8] of Ukrainian government accountability and capacity to repay much smaller liabilities than is plain today.

This trio is now making the IMF loan look less onerous for the Ukrainian economy by projecting faster recovery of GDP and exports than they thought was reasonable a year ago; and also by anticipating that other forms of debt relief, including grants, subsidies, and low-cost loans from the US and European Union will reduce the proportion of Ukrainian debt owed to the IMF.

That's guesswork. It didn't work in 2014 - because of the war in the east. As Lagarde's reference to the ceasefire implies, and the EFF papers now confirm, if the war continues, the government in Kiev will be unable to repay; the IMF board's loan conditions will falter; and disbursement of the EFF cash will stop, just as the SBA cashflow did from last October. So what calculation is the IMF making of the military costs and the war's impact on what the IMF is calling the Ukraine's fiscal balance?

There are 163 pages in the dossier released by the IMF to demonstrate that the new loan to Ukraine meets the Fund's charter, lending conditions, and criteria for repayment. The term "war" appears only once, referring to "war-induced supply shocks"; the terms "defence" and "army", not at all. Referring to military spending by the government, the IMF dossier acknowledges the "risks to the outlook are exceptionally high and predominantly on the downside. Fighting in the East may resume and spread. This would unravel confidence, increase the direct loss of economic and export capacity while military spending may rise sharply." This is an admission that the war is what the IMF charter labels "measures destructive of national or international prosperity."

As for government expenditure, the IMF staff report claims "the budget continues to provide pensions to all pensioners who relocate from the ATO regions, but does not assume any fiscal revenue from or spending to the areas of active conflict in the East, except military spending which has been increased." The IMF doesn't say by how much, or to what value. The acronym ATO which the IMF staff uses stands for "anti-terrorism operation" - it is Kiev's term (and justification) for the civil war.

Budget targets which the IMF has agreed with the government include "maintaining the nominal wage bill at 2014 level (except for military personnel)" and "as a result of these bold but necessary actions, and the optimization of staff in budgetary institutions, the wage bill of the budgetary sector (excluding the military) is maintained at the 2014 level." Again, the IMF places military pensions and wages for active military personnel below the budget line.

Then there is this table, which requires a magnifying glass:

Look again at footnote 4: "The balance in 2014 treats part of the military spending and the EU grant as one-off operations. The balance in 2015 treats import duty surcharge, part of military spending and part of the NBU profit transfer as one-off operations."

This reveals that past and future spending on the war and the rearmament programme President Petro Poroshenko announced [11] last week are "one-offs", below the budget line, and not counted by the IMF in the conditions it has set for the release of the scheduled instalments. Since budget funds are fungible, and since the Ukrainian government and Verkhovna Rada (parliament) have agreed to increase military spending substantially, the IMF was asked to say why it is contributing to the war risks by allowing EFF support for military budget outlays at the same time as it is concealing their magnitude in reporting to the IMF board.

Olga StankovaOlga Stankova (right), the Fund's spokesman on Ukraine, was asked to clarify the meaning of the EFF documents, and to say if the IMF has exempted military spending from conditionality and targeting, and is also keeping the value of that spending undisclosed. Stankova replied: "All military and security spending is included in the budget and relevant performance criteria under the program."

This is evasive, sources close to the Fund board concede. Several country directorates at the Fund in Washington are known to have expressed their concerns to Lagarde. Press leaks [12] from the French directorate have accused Lagarde and her staff of "whitewashing" the risks and costs of the war.

A Russian central banker who has served at the IMF comments: "the Fund should not place military spending below the line. But if you try to nail the Fund down on that, you would be wasting your time. The Fund has internationally-renowned expertise in doublespeak and hypocrisy. What the Fund is doing around Ukraine was at first laughable; now has become outrageous. No matter what, the Fund will keep financing the civil war in Donbass because the Americans want the fighting to continue and spread. Period."

Anton SiluanovFor the time being, the Russian Finance Ministry is not demurring. Finance Minister Anton Siluanov (right) followed Lagarde's announcement of board approval for the EFF with this confirmation that Russia will contribute its share to the loan [13]. "The [EFF] program will be financed via the IMF quota resources, and the funding from shareholder countries in the framework of their participation in the so-called New Borrowing arrangements. As such, the Russian Federation will participate in the funding in accordance with its obligations as a participant, and deliver the first tranche of the IMF program for Ukraine in the amount of $13.75 million dollars. The Bank of Russia will carry out the payment on 13 March 2015."

Although the Obama Administration claims it will not deliver lethal military equipment, it has been offering loans, repayment guarantees, and cash support for Ukrainian military agencies to buy it through third countries. Russian analysts call this a takeover by the Pentagon of the Ukrainian defence budget. Details of the line items totalling UAH 85 billion (about $4 billion) approved this month by the Verkhovna Rada can be read here [14].

International bankers say they cannot think of a precedent in which the treasury of a country at war finances a defeated opponent to renew the fight. Siluanov hints his reason is tactical. Moscow will not call a default of covenants in the December 2013 bond for $3 billion, he says, if Kiev agrees to exclude this debt from its restructuring of other bond obligations, and repays the Russian debt at maturity this coming December [15].

American advocates of Ukrainian repudiation of the Russian bond include George Soros, who made his pitch in January. Click [16] to read. An analysis [17]  Anna Gelpernby Anna Gelpern (right) for the Peterson Institute of International Economics in Washington, argues that the UK should add to its sanctions on Russia by barring enforcement in the UK courts if Kiev refuses to redeem the Russian bond. The institute's research on Ukraine is funded by the Dniepropetrovsk oligarch, Victor Pinchuk. "Ukraine would then have the option to walk away from this debt," claims Gelpern, "without the usual legal and market consequences of repudiation. Such debt sanctions would reinforce the financial, energy, and trade sanctions under way, and by themselves would represent an appropriately targeted response to the conflict."

A year ago, Sergei Storchak, the deputy finance minister in charge of Russia's participation in the IMF, acknowledged there was a risk of a Ukrainian default on the Russian bond. "We probably have risks, but not so big ones. It's possible to begin with the fact that the debtor has a difficult financial situation, that it can't return the money to us in two years [December 2015]." Storchak added [18] that while the option existed for substituting one bond instrument for another, he was opposed to including Ukraine's debt to Russia in a general restructuring. "This wouldn't be right. I think that our bond demands won't be part of the package. If we will decide, then it will be on a bilateral basis."

StorchakRight now Storchak won't say what the Kremlin will do if the Russian backing for the IMF loan doesn't eventuate in bond redemption. A spokesman for Storchak (right) said Friday: "we have received many requests related to this subject. If we get the [official's] answer, we will send it to you." There has been none. A Russian finance ministry source denies that Storchak has gone soft on Lagarde. He concedes the IMF programme is a tactic the Finance Ministry has persuaded the Kremlin to accept in order to preserve the possibility of getting Gazprom and bond repayments out of the flow of funds the IMF is underwriting. Currently, the IMF estimates the outstanding Ukrainian debt to Gazprom through 2014 at $6.6 billion. For 2015 the IMF is projecting a Gazprom debt of $6 billion, dropping off slightly for two years, then rising to $6.1 billion in 2019 and again in 2020.

"As for the Russia's stance regarding the EFF," a Moscow source close to the central bank says, "the disbursements under this program, paradoxically, create for Russia a slight chance of getting paid either for gas supplies or on the Eurobonds. The Ukrainians did not budget for the repayment on the bonds. Soros reportedly told them to renege on the 'Russian bond' at the first opportunity, and there are Ukrainian officials who no doubt want to do so, with relish."

If the Russian bond stands a chance of repayment on time, the US bond investor Franklin Templeton has next to none, according to the EFF papers. It is likely to face an extension of maturity date, deferral of coupon payments, and a reduction of the principal to be redeemed (haircut). For the story of how Franklin Templeton's California's bond trader lobbied for a US Government guarantee that he would get $8.8 billion at maturity for bonds he paid $4 billion to acquire, read this [19].

The Franklin Templeton bond holdings appear to represent about half of the $17.3 billion in Ukrainian sovereign bonds outstanding. According to the IMF staff report, the "debt operation [haircut] would be guided by the following program objectives: (i) generate about US$15 billion in financing [that's debt relief] during the program period; (ii) bring the public and publicly guaranteed debt/GDP ratio below 71 percent of GDP by 2020; and (iii) keep the budget's gross financing needs at an average of 10 percent of GDP (maximum of 12 percent of GDP annually) in 2019-2025."

Last week Lagarde tried obfuscating the haircut operation by claiming: "the Ukrainian government has taken actions toward consultations with the holders of their public sector debt with a view to improving medium-term sustainability." The staff report concedes the Americans may want their war cake, and eat their bonds too. "Creditor participation in the debt operation may fall short of expectations. Creditors may balk at the terms being offered in the debt operation and holdouts may try to free ride. The negotiations may be protracted, particularly as some creditors have large positions in specific bond issues. At the same time, Ukraine's continued capacity to service its debts would be contingent on a successful debt operation that ensured sufficient program financing and restored debt sustainability with high probability, and this should help encourage participation."*
*http://www.imf.org/external/pubs/ft/scr/2015/cr1569.pdf [2] (page 15)

Franklin Templeton has hired Blackstone Advisory Partners to fight the haircut and block a separate Russian bond deal. The advisory unit is headed by Martin Alderson Smith in New York (below, left). The Blackstone Group has avoided operating a regulated office in Moscow, engaging a consultant instead. Until last September [20] that was Dmitry Kushaev (centre). Blackstone's founder and chief executive, Stephen Schwarzman [21] (right), is keeping his seat at the Russia Direct Investment Fund, a Kremlin investment vehicle, but he is shy about mentioning [22] it.

Finance Minister Jaresko is showing embarrassment at providing favour for the Pentagon's arms, but not for Franklin Templeton's bonds. She told [23] a creditor conference last week that the Russian government would not be paid off separately. "We invite the holders of the Russian bonds, as well as all of our other eurobonds to participate in this process on the basis of transparency, good faith and inter-creditor equity. " If she and Franklin Templeton make common cause against the Russian bond, the Kremlin will have to rethink its backing for the IMF loan.

 [return to Contents] 

 #30
Wall Street Journal
March 16, 2015
EU Ministers Divided Over Extending Sanctions Against Russia
Foreign ministers wary that extension could threaten improving conditions in eastern Ukraine
By NAFTALI BENDAVID and  VALENTINA POP

BRUSSELS-European foreign ministers meeting in Brussels Monday signaled differences over whether to extend sanctions against Russia until the end of the year, suggesting consensus may be difficult to reach at a summit later this week.

The European Union has already extended its sanctions against individuals and firms linked to the Russian takeover of Crimea until September. Now several EU governments are pushing to extend the broader, more powerful sanctions against Russia's defense, energy and banking sectors until the end of 2015.

That would tie the penalties to Russia's implementation of a recent cease-fire agreement reached in Minsk, Belarus. That deal requires in part that Ukraine control its border with Russia by the year-end.

"I hope we can have a clear political commitment to maintaining sanctions until Minsk is implemented in its entirety," said British Foreign Secretary Philip Hammond. "It's important to send a signal to the Russians that we are united, we are determined, and that they have to deliver on their commitment."

The Minsk deal has resulted in a fragile cease-fire and the pullback of heavy equipment on both sides. But some Western diplomats believe it will only have lasting value if the Russia-Ukraine border is secured, so Russia can't continue to send arms and weapons to Ukrainian separatists.

The diplomats argue that extending sanctions is crucial to ensuring that Russia follows through on its agreement to give Ukraine control over its border by the end of the year.

"Sanctions must stay, definitely," said Lithuanian Foreign Minister Linas Linkevicius. "It's the only we way we can keep pressure, and pressure must be kept. It's quite obvious."

The foreign ministers didn't plan to discuss extending Russian sanctions at Monday's meeting. But EU heads of state and government are gathering in Brussels on Thursday, and the sanctions extension is expected to be high on their agenda.

Britain and Lithuania are two of the countries that have long favored a relatively tough line against Moscow, and it is far from clear whether a consensus among other EU members can be reached. Some countries argue that with the cease-fire beginning to take hold, this isn't the time for a sanctions extension.

They also note that EU leaders will hold a summit in June, shortly before the sanctions are set to expire, so they can extend them then if they choose.

"There is no need to decide now on Russia sanctions-they are still ongoing until summer," said Austrian Foreign Minister Sebastian Kurz.
He added, "Sanctions are a means of pressure, not a goal as such. Extension of sanctions depends on the situation on the ground in eastern Ukraine."

The predominant feeling among the ministers was that conditions in eastern Ukraine are finally improving, albeit slightly, after months of killing and conflict. That could weigh against a sanctions extension that some fear could disrupt the fragile improvement.

"The news is better than for some time," said Spanish Foreign Minister Juan Manuel Garcia-Margallo. "Things seem stable right now, and when the situation is stable, in my opinion we don't have to think about increasing [sanctions], nor for that matter reducing them."

The emphasis on the cease-fire reflects how far the crisis has moved beyond Russia's annexation of Crimea a year ago. EU foreign policy chief Federica Mogherini sought to signal Monday that the bloc hasn't forgotten that annexation, which Western leaders consider illegal.

"The EU reaffirms its deep concern at the continuous military buildup and deterioration of the human rights situation in the Crimean peninsula, including the denial of free speech and the persecution of persons belonging to minorities," Ms. Mogherini said in a statement marking the annexation's anniversary.

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 #31
Consortiumnews.com
March 14, 2015
US Intel Stands Pat on MH-17 Shoot-down
March 14, 2015
By Robert Parry
Investigative reporter Robert Parry broke many of the Iran-Contra stories for The Associated Press and Newsweek in the 1980s.

Exclusive: Almost eight months after Malaysia Airlines Flight 17 was shot down over eastern Ukraine - creating a flashpoint in the standoff between nuclear-armed Russia and America - the U.S. intelligence community claims it has not updated its assessment since five days after the crash, reports Robert Parry.

Despite the high stakes involved in the confrontation between nuclear-armed Russia and the United States over Ukraine, the U.S. intelligence community has not updated its assessment on a critical turning point of the crisis - the shooting down of Malaysia Airlines Flight 17 - since five days after the crash last July 17, according to the office of the Director of National Intelligence.

On Thursday, when I inquired about arranging a possible briefing on where that U.S. intelligence assessment stands, DNI spokesperson Kathleen Butler sent me the same report that was distributed by the DNI on July 22, 2014, which relied heavily on claims being made about the incident on social media.

So, I sent a follow-up e-mail to Butler saying: "are you telling me that U.S. intelligence has not refined its assessment of what happened to MH-17 since July 22, 2014?"

Her response: "Yes. The assessment is the same."

I then wrote back: "I don't mean to be difficult but that's just not credible. U.S. intelligence has surely refined its assessment of this important event since July 22."

When she didn't respond, I sent her some more detailed questions describing leaks that I had received about what some U.S. intelligence analysts have since concluded, as well as what the German intelligence agency, the BND, reported to a parliamentary committee last October, according to Der Spiegel.

While there are differences in those analyses about who fired the missile, there appears to be agreement that the Russian government did not supply the ethnic Russian rebels in eastern Ukraine with a sophisticated Buk anti-aircraft missile system that the original DNI report identified as the likely weapon used to destroy the commercial airliner killing all 298 people onboard.

Butler replied to my last e-mail late Friday, saying "As you can imagine, I can't get into details, but can share that the assessment has IC [Intelligence Community] consensus" - apparently still referring to the July 22 report.

A Lightning Rod

Last July, the MH-17 tragedy quickly became a lightning rod in a storm of anti-Russian propaganda, blaming the deaths personally on Russian President Vladimir Putin and resulting in European and American sanctions against Russia which pushed the crisis in Ukraine to a dangerous new level.

Yet, after getting propaganda mileage out of the tragedy - and after I reported on the growing doubts within the U.S. intelligence community about whether the Russians and the rebels were indeed responsible - the Obama administration went silent.

In other words, after U.S. intelligence analysts had time to review the data from spy satellites and various electronic surveillance, including phone intercepts, the Obama administration didn't retract its initial rush to judgment - tossing blame on Russia and the rebels - but provided no further elaboration either.

This strange behavior reinforces the suspicion that the U.S. government possesses information that contradicts its initial rush to judgment, but senior officials don't want to correct the record because to do so would embarrass them and weaken the value of the tragedy as a propaganda club to pound the Russians.

If the later evidence did bolster the Russia-did-it scenario, it's hard to imagine why the proof would stay secret - especially since U.S. officials have continued to insinuate that the Russians are guilty. For instance, on March 4, Assistant Secretary of State for European Affairs Victoria Nuland fired a new broadside against Russia when she appeared before the House Foreign Affairs Committee.

In her prepared testimony, Nuland slipped in an accusation blaming Russia for the MH-17 disaster, saying: "In eastern Ukraine, Russia and its separatist puppets unleashed unspeakable violence and pillage; MH-17 was shot down."

It's true that if one parses Nuland's testimony, she's not exactly saying the Russians or the ethnic Russian rebels in eastern Ukraine shot down the plane. There is a semi-colon between the "unspeakable violence and pillage" and the passive verb structure "MH-17 was shot down." But she clearly meant to implicate the Russians and the rebels.

Nuland's testimony prompted me to submit a query to the State Department asking if she meant to imply that the U.S. government had developed more definitive evidence that the ethnic Russian rebels shot down the plane and that the Russians shared complicity. I received no answer.

I sent a similar request to the CIA and was referred to the DNI, where spokesperson Butler insisted that there had been no refinement in the U.S. intelligence assessment since last July 22.

But that's just impossible to believe. Indeed, I've been told by a source who was briefed by U.S. intelligence analysts that a great deal of new information has been examined since the days immediately after the crash, but that the problem for U.S. policymakers is that the data led at least some analysts to conclude that the plane was shot down by a rogue element of the Ukrainian military, not by the rebels.

Yet, what has remained unclear to me is whether those analysts were part of a consensus or were dissenters within the U.S. intelligence community. But even if there was just dissent over the conclusions, that might explain why the DNI has not updated the initial sketchy report of July 22.

It is protocol within the intelligence community that when an assessment is released, it should include footnotes indicating areas of dissent. But to do that could undermine the initial certitude that Secretary of State John Kerry displayed on Sunday talks shows just days after the crash.

Pointing Fingers

Though the DNI's July 22 report, which followed Kerry's performance, joined him in pointing the blame at the Russians and the ethnic Russian rebels, the report did not claim that the Russians gave the rebels the sophisticated Buk (or SA-11) surface-to-air missile that the report indicated was used to bring down the plane.

The report cited "an increasing amount of heavy weaponry crossing the border from Russia to separatist fighters in Ukraine"; it claimed that Russia "continues to provide training - including on air defense systems to separatist fighters at a facility in southwest Russia"; and its noted the rebels "have demonstrated proficiency with surface-to-air missile systems, downing more than a dozen aircraft in the months prior to the MH17 tragedy, including two large transport aircraft."

But what the public report didn't say - which is often more significant than what is said in these white papers - was that the rebels had previously only used short-range shoulder-fired missiles to bring down low-flying military planes, whereas MH-17 was flying at around 33,000 feet, far beyond the range of those weapons.

The assessment also didn't say that U.S. intelligence, which had been concentrating its attention on eastern Ukraine during those months, detected the delivery of a Buk missile battery from Russia, despite the fact that a battery consists of four 16-foot-long missiles that are hauled around by trucks or other large vehicles.

I was told that the absence of evidence of such a delivery injected the first doubts among U.S. analysts who also couldn't say for certain that the missile battery that was suspected of firing the fateful missile was manned by rebels. An early glimpse of that doubt was revealed in the DNI briefing for several mainstream news organizations when the July 22 assessment was released.

The Los Angeles Times reported, "U.S. intelligence agencies have so far been unable to determine the nationalities or identities of the crew that launched the missile. U.S. officials said it was possible the SA-11 was launched by a defector from the Ukrainian military who was trained to use similar missile systems." [See Consortiumnews.com's "The Mystery of a Ukrainian 'Defector.'"]

The Russian Case

The Russians also challenged the rush to judgment against them, although the U.S. mainstream media largely ignored - or ridiculed - their presentation. But the Russians at least provided what appeared to be substantive data, including alleged radar readings showing the presence of a Ukrainian jetfighter "gaining height" as it closed to within three to five kilometers of MH-17.

Russian Lt. Gen. Andrey Kartopolov also called on the Ukrainian government to explain the movements of its Buk systems to sites in eastern Ukraine and why Kiev's Kupol-M19S18 radars, which coordinate the flight of Buk missiles, showed increased activity leading up to the July 17 shoot-down.

The Ukrainian government countered by asserting that it had "evidence that the missile which struck the plane was fired by terrorists, who received arms and specialists from the Russian Federation," according to Andrey Lysenko, spokesman for Ukraine's Security Council, using Kiev's preferred term for the rebels.

Lysenko added: "To disown this tragedy, [Russian officials] are drawing a lot of pictures and maps. We will explore any photos and other plans produced by the Russian side." But Ukrainian authorities have failed to address the Russian evidence except through broad denials.

On July 29, amid this escalating rhetoric, the Veteran Intelligence Professionals for Sanity, a group of mostly retired U.S. intelligence officials, called on President Barack Obama to release what evidence the U.S. government had, including satellite imagery.

"As intelligence professionals we are embarrassed by the unprofessional use of partial intelligence information," the group wrote. "As Americans, we find ourselves hoping that, if you indeed have more conclusive evidence, you will find a way to make it public without further delay. In charging Russia with being directly or indirectly responsible, Secretary of State John Kerry has been particularly definitive. Not so the evidence."

But the Obama administration failed to make public any intelligence information that would back up its earlier suppositions.

Then, in early August, I was told that some U.S. intelligence analysts had begun shifting away from the original scenario blaming the rebels and Russia to one focused more on the possibility that extremist elements of the Ukrainian government were responsible, funded by one of Ukraine's rabidly anti-Russian oligarchs. [See Consortiumnews.com's "Flight 17 Shoot-down Scenario Shifts"and "Was Putin Targeted for Mid-air Assassination?"]

German Claims

In October, Der Spiegel reported that the German intelligence service, the BND, also had concluded that Russia was not the source of the missile battery - that it had been captured from a Ukrainian military base - but the BND still blamed the rebels for firing it. The BND also concluded that photos supplied by the Ukrainian government about the MH-17 tragedy "have been manipulated," Der Spiegel reported.

And, the BND disputed Russian government claims that a Ukrainian fighter jet had been flying close to MH-17, the magazine said, reporting on the BND's briefing to a parliamentary committee on Oct. 8. But none of the BND's evidence was made public - and I was subsequently told by a European official that the evidence was not as conclusive as the magazine article depicted. [See Consortiumnews.com's "Germans Clear Russia in MH-17 Case."]

When the Dutch Safety Board investigating the crash issued an interim report in mid-October, it answered few questions, beyond confirming that MH-17 apparently was destroyed by "high-velocity objects that penetrated the aircraft from outside." The 34-page Dutch report was silent on the "dog-not-barking" issue of whether the U.S. government had satellite surveillance that revealed exactly where the supposed ground-to-air missile was launched and who fired it.

In January, when I re-contacted the source who had been briefed by the U.S. analysts, the source said their thinking had not changed, except that they believed the missile may have been less sophisticated than a Buk, possibly an SA-6, and that the attack may have also involved a Ukrainian jetfighter firing on MH-17.

Since then there have been occasional news accounts about witnesses reporting that they did see a Ukrainian fighter plane in the sky and others saying they saw a missile possibly fired from territory then supposedly controlled by the rebels (although the borders of the conflict zone at that time were very fluid and the Ukrainian military was known to have mobile anti-aircraft missile batteries only a few miles away).

But what is perhaps most shocking of all is that - on an issue as potentially dangerous as the current proxy war between nuclear-armed Russia and the United States, a conflict on Russia's border that has sparked fiery rhetoric on both sides - the office of the DNI, which oversees the most expensive and sophisticated intelligence system in the world, says nothing has been done to refine the U.S. assessment of the MH-17 shoot-down since five days after the tragedy.

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 #32
Pushkov does not expect improvement of Russia-U.S. relations

MOSCOW. March 16 (Interfax) - Chairman of the State Duma International Affairs Committee Alexei Pushkov is not expecting any improvement in Russia-U.S. relations in the foreseeable future.

"Such hopes are expressed here from time to time: they are claiming that we will be good with America again when the crisis passes. No, we won't be good with America, and this is already clear. Obama is the most composed American leader but we still have what we have," Pushkov said at parliament hearings in the State Duma on Monday.

"His successors are either well known to us, like Hillary Clinton who, in my opinion, is the author of the disastrous crisis in Syria and a co-author of the ISIL, or are totally insane people from the Republican Party," he said.

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#33
The International New York Times
March 16, 2015
Putin and the 'Mariupol Test'
By HANS BINNENDIJK and JOHN HERBST
Hans Binnendijk is a senior fellow at the Johns Hopkins Center for Transatlantic Relations and served as senior director for defense policy at the National Security Council. John Herbst is director of the Atlantic Council's Eurasia Center and served as U.S. ambassador to Ukraine from 2003 to 2006.

WASHINGTON - As the West remains divided over providing defensive lethal weapons to Ukraine, President Vladimir Putin of Russia is pondering whether to move on the strategic Ukrainian port city of Mariupol. The West needs to unite and deter him.

President Obama has now agreed to provide Ukraine with $75 million in nonlethal assistance, a decision which is unlikely to satisfy those in Washington and Kiev who want the United States to send antitank and antiaircraft weapons. A new approach is needed.

The Minsk II cease-fire agreement brokered by Russia, Germany and France last month has changed the political dynamics in Europe. Germany and to a lesser degree France have resisted calls to provide lethal weapons to Kiev, and much of the rest of Europe takes its cue from Berlin and Paris. They did not want the arms issue to interfere with the Minsk negotiations, and they continue to oppose sending weapons to Ukraine as long as the basic cease-fire holds. They do not want to give a pretext to Mr. Putin and his proxies to move further into Ukraine.

Chancellor Angela Merkel is now widely associated with the cease-fire, and to some degree Germany is seen as a key guarantor that the agreement will be maintained. Some German politicians have quietly indicated that they would need to reconsider their overall policy should a fundamental breach of the cease-fire take place. A major Russian separatist attack on Mariupol would represent such a breach and would trigger a major European policy review.

Given this reality, a coordinated trans-Atlantic initiative could both unite the West and deter Mr. Putin from pursuing what is likely to be one of his key goals - the creation of a land bridge from Russia to Crimea. A Western initiative - call it "the Mariupol test" - would require the United States to reach agreement with Germany and the rest of Europe now on how the West would react should Mr. Putin make a move against the city. It would require the Obama administration to press its European allies to unite and deter Mr. Putin's next move.

Russia has already violated the Minsk II cease-fire agreement by seizing the strategic transportation hub of Debaltseve a few days after the accord was reached. Although Western intelligence reports that Moscow is moving in more heavy weapons, the rest of the cease-fire line still seems to be holding, for now.

Along with many policy makers and analysts in Washington, we believe that providing lethal weapons to Kiev would show solidarity with Ukraine, make further military moves by Russia more painful, and deter Mr. Putin from aggressive steps elsewhere. Yet maintaining alliance unity in the face of the Kremlin's challenge is critical to designing the kind of multifaceted response needed to prevent Ukraine from collapsing.

Mr. Putin is unlikely to honor Minsk II if he believes he can circumvent it without much cost. He is proud, emotional, aggrieved and shrewd - historically a dangerous combination. His skills, well-honed at the K.G.B., include a perfected ability to obfuscate and divide. His long-term goal may be the creation of "Novorossiya," or New Russia, which would constitute all of southern Ukraine past Odessa to Moldova, and would enable Russia to control the entire northern coast of the Black Sea. There are no large armies to stop him.

If he succeeds, Ukraine would be a less-viable state, heavily dependent on Russia for access to the sea. The West would have failed to preserve Ukrainian independence or halt Russian aggression.

Mr. Putin may seek to create Novorossiya one slender slice at a time, thereby reducing his chances of massive confrontation with the West. An intermediate Kremlin goal would be to connect Crimea by land to Russia. Mariupol stands in the way. Ukrainian volunteers of all ages are digging trenches there to block what they believe will be Mr. Putin's next move. The West must decide how to prevent Mariupol from becoming another bloody road bump on Mr. Putin's westward drive.

American and European leaders urgently need to construct a viable deterrent to Mr. Putin's plans for Novorossiya. This would not include NATO boots on the ground, since few in government or the public at large in Europe and America support that option. But any plan to contain Russia must be tough to be effective.

Mr. Putin has said he wants the cease-fire to hold. The West needs to unite and force him to keep that promise. It needs to construct a Mariupol test, which will turn that town from a road bump into a red line with teeth.

Washington and its European allies need to decide now what they will do should the separatist fighters and their Russian enablers who took Donetsk and Luhansk appear in Mariupol in force.

Under such circumstances, Kiev must be given lethal weapons and training, not just by the United States but by the Europeans as well. Tougher economic sanctions should also be imposed. The West should publicly discuss suspending Russia from the Brussels-based Swift financial-messaging system, a step which could cripple the already reeling Russian economy. Strict new limits on visas for Russian travel to the West should also be imposed. Such measures could ignite a dramatic reaction from Russia, such as a natural gas cut-off to Europe. But absent the will to introduce Western ground forces, it will take stern measures such as these to deter Moscow.

Should the cease-fire hold and Ukraine regain full control of its territory, then the West may start to ease sanctions. Mr. Putin will need incentives for him to back down. That can be done without accepting what the Kremlin has gained through violence.

A carrot-and-stick approach also should have some appeal in Germany. If Germany leads on this issue the rest of Europe is likely to follow. As Ms. Merkel has said, the stakes for Europe are high. If military force can be used to change borders, the rules that have created a fairly unified, peaceful and prosperous Europe are open to revision everywhere.

Drawing the line at Mariupol in the manner we propose could constrain Mr. Putin enough to preserve the rule of law on the Continent. President Obama and Chancellor Merkel need to construct a deterrent proposal soon to make the "Mariupol test" a success.

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 #34
Wall Street Journal
March 16, 2015
Bringing Ukraine Back From the Brink
An economically successful Ukraine is vital to the security of Europe and the sustainability of democratic values everywhere.
By NATALIE JARESKO
Ms. Jaresko is the finance minister of Ukraine.

A little more than a year ago, the Ukrainian people chose a path of fundamental change. Citizens took a stand in Kyiv's Maidan Square for the right to live in a free, independent and prosperous European country and to put an end to endemic corruption and mismanagement. More than 100 people gave their lives during the Revolution of Dignity. Since then, another 6,000 have died defending Ukraine's territorial integrity, while one million have been forced to leave their homes due to the war in the east and the illegal annexation of Crimea. Ukraine has been bleeding to protect not only its sovereignty but the European order and the global principles of freedom and democracy.

To ultimately win this fight, Ukraine must be financially stable. The country has been in a deep and persistent recession and has lost 20% of its economy to war, infrastructure damage and the loss of economic output from the regions under occupation. Our currency has devalued some 70% since last year. Reserves of foreign currencies amounted to little more than $5 billion last month, and the government has resorted to all available tools to stabilize the balance of payments and stem currency speculation and capital flight. Today we have seen these tools working to decrease the volatility of our currency.

But to do more we need the support of the international community. An economically successful Ukraine, underpinned by good governance and the rule of law, is of vital interest to the security of Europe and sustainability of democratic values in the region. To this end, the International Monetary Fund's approval of a new program for Ukraine provides much-needed financial stamina for our successful transition to stability and growth.

Ukrainians have shown the world we are determined to deliver far-reaching reforms, and the new IMF framework will help us get the job done. Earlier this month, our president, government and parliament came together to adopt additional laws to accelerate reforms and implement specific actions agreed to with the IMF. The IMF program unlocks a $17.5 billion, four-year loan that will help jump-start our economy. This in turn clears the way for $7.2 billion in funds from bilateral and multilateral partners. We are grateful for this support and will continue to get our economy on track, deliver clear progress on the reform path and prove that the international community's support was timely.

In addition to the IMF funds and the commitments from our financial partners, the IMF program calls for $15 billion to be generated through debt operations. We will now engage in consultations with bondholders to improve the sustainability of our finances. Our goal is to complete debt restructuring in time for the IMF's review in June. It is in everyone's interests to achieve a solution that strengthens Ukraine's financial situation and lays the groundwork for recovery.

Ordinary Ukrainians also need to feel that change is real and that the benefits of this transition are worth it. That means tackling corruption at all levels, and Ukraine is setting up the National Anti-Corruption Bureau, an independent law-enforcement agency with special powers and a staff of 700, to investigate corruption by government employees, public officials and private legal entities. We are also implementing public-procurement reforms with controls, training and information-technology systems to increase transparency and combat fraud and abuse. And an electronic value-added-tax system and payroll-tax breaks have been introduced to fight corruption, bring commercial activity out of the vast shadow economy and broaden the tax base.

We are also overhauling Ukraine's energy sector, historically one of the most inefficient and corrupt in Europe. Often-painful restructuring will create a transparent system that reflects market prices and provides targeted social subsidies for the most vulnerable members of our population. This new system will also diversify imports to improve energy independence, reduce overall import volumes, increase energy efficiency and eliminate systemic sources of corruption such as intermediaries in the import of foreign gas.

To strengthen the financial sector, we have increased the National Bank of Ukraine's ability to quickly resolve failed banks. We have also just adopted legislation on strengthening law enforcement in situations where related third-party transactions and insider deals have contributed to bank failures. This will enable us to recover assets and bring to justice those involved in fraud or criminal activity. Changes such as these are essential to rebuilding public trust and ensuring our citizens' deposits are secure.

Ukraine has tremendous potential. With an educated workforce, attractive labor-cost advantages, a reformist leadership and a free-trade agreement with the European Union, we are creating the conditions for a rebound in business and investment activity. This is a historic opportunity, and it is essential for Ukraine to continue on the path of fundamental change if we are going to succeed.

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 #35
New York Times
March 16, 2015
Editorial
Murder? Pull Out the Kremlin Script

Back in the old U.S.S.R., the stock response to a politically embarrassing development was to ask, "In whose interest is this?" The understood answer was that Washington had engineered events to embarrass the Soviet Union. And like so many Soviet practices, this one has found new life in Vladimir Putin's Russia. In whose interest was the uprising in Kiev? The downing of the Malaysian jet? And now the murder of the Kremlin critic Boris Nemtsov? For Mr. Putin's investigators and storytellers, the answer is obvious: The devious West was trying to create an opposition martyr and demonize Russia's leader.

Mr. Nemtsov's killing on Feb. 27 was followed by the detention of several Chechens, an ethnic group that has been linked to other politically motivated murders. The official narrative, however, has been almost comically confused: The prime suspect, Zaur Dadayev, was said to have confessed, but he then told Russian human rights inspectors he had been tortured and coerced. In classic Soviet style, investigators accused the rights officials - not the interrogators - of violating the law.

Meanwhile, officials and news media close to the Kremlin put out preposterous hypotheses: that Mr. Dadayev was a Muslim upset by Mr. Nemtsov's support of Charlie Hebdo, the French magazine that ran cartoons of the Prophet Muhammad, or that Ukrainian nationalists had ordered the killing.

The powerful Investigative Committee, which is leading the probe, was reported to have few doubts. An unnamed source told the Russian news service Interfax on Friday that the investigators were working on the premise that the killing was intended to "destabilize" the country and that the trail of those who ordered it "leads abroad." It was an old script: After the 2006 murder of the crusading journalist Anna Politkovskaya, for example, the chief prosecutor pointed to people abroad, "forces interested in destabilizing the country." Prosecutors never identified who ordered her murder; chances are they will never identify who ordered Mr. Nemtsov's.

The propaganda is intended to defend Mr. Putin against the suspicion that Mr. Nemtsov was a direct or indirect victim of the Kremlin. Most Western experts discount the notion that Mr. Putin or his lieutenants would have wished Mr. Nemtsov killed, since the furor over his death was bound to outweigh his impact as an opposition figure.

Laying any untoward event at the feet of the West may still work with Mr. Putin's Russian constituency, but nobody abroad is likely to put any store in the committee's findings. Only an internationally monitored investigation would have credibility, and if Mr. Putin really wants to clear his name, that is what he needs. It is more likely, however, that the conspiracy talk will continue until, as in Soviet days, Russians cease believing anything the Kremlin says.

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 #36
New York Review of Books
www.nybooks.com
March 15, 2015
A Kremlin Conspiracy Gone Wrong?
By Amy Knight
Amy Knight is a former Woodrow Wilson fellow. Her books include Who Killed Kirov: The Kremlin's Greatest Mystery, Spies Without Cloaks: The KGB's Successors, and How the Cold War Began: The Igor Gouzenko Affair and the Hunt for Soviet Spies.

Last week, when Russian authorities rounded up five Chechen suspects in the assassination of leading opposition politician Boris Nemtsov, it appeared the Kremlin was following a predictable path. After offering numerous far-fetched hypotheses about who committed the murder and why, the Russian Investigative Committee settled on the same explanation it has put forth in numerous past political murders, including that of Anna Politkovskaya: the Chechens did it.

According to the usual pattern, the suspects would then be expected to confess, a motive would be concocted-in this case, that Nemtsov had made statements against Russian Islamists-and the crime would be declared solved. But hardly anyone in Russia seems to believe that this is why Nemtsov was killed, or indeed, that these suspects, if they were the killers, acted on their own. Instead, the arrests have led to new speculation about the Kremlin's involvement in the murder. They also appear to be causing an internal struggle within the government itself-a struggle that could help explain President Vladimir Putin's absence from public view for over a week.

Russian authorities have accused one of the five Chechens, Zaur Dadayev, of organizing the crime, but even if he did, it is unlikely that he would have decided to do so on his own. Dadayev was a deputy commander of the crack "North" battalion, which is based in the Chechen capital of Grozny and is under the patronage of the authoritarian Chechen President Ramzan Kadyrov, a close Putin loyalist. Many commentators think that Dadayev would not have undertaken such a bold assassination-in the center of Moscow just minutes from the Kremlin-without Kadyrov's explicit orders.

But the chain of command would have to go higher than the Chechen president. Although Kadyrov runs Chechnya like a fiefdom, and has for years cracked down on his enemies with impunity, even reportedly using death squads against them, his powers have clear limits in the Russian capital. On Friday, I spoke with Akhmed Zakaev, head of the Chechen government in exile, who is based in London, and he stressed that Kadyrov would never embark on a mission to kill such a prominent figure as Boris Nemtsov without Putin's approval. Kadyrov, he said, "can do what he wants in Chechnya, but not in Moscow or Russia. It is most likely that Nemtsov was assassinated because it was Putin's wish."

Yet even if Zakaev is right, it is hard to explain why Putin would then go out of his way to praise Kadyrov in public. On March 9, just two days after the arrests of Dadayev and the other four Chechens was made public, the Kremlin announced that it had awarded Kadyrov a medal of honor for his service to the Russian state. (Amazingly, at the same time, Putin also conferred a medal of honor on Andrei Lugovoy, the prime suspect in the fatal 2006 poisoning in London of Alexander Litvinenko, an ex-KGB officer who was an outspoken enemy of Putin. As it happens, a British public inquiry into the Litvinenko murder is now taking place, in which Lugovoy's name has been coming up almost daily.)

Kremlin spokesman Dmitry Peskov immediately dismissed the timing of the two awards as a coincidence. But to many observers it looked like Putin was implicitly endorsing those who may have been responsible for the killings of Litvinenko and Nemtsov. To make matters worse for Putin, on Friday Kadyrov affirmed his admiration for Dadayev-and his lethal fighting skills-on instagram: "He is a real warrior and patriot. In one battle alone...he destroyed eight of the most dangerous terrorists." Kadyrov added that he himself was completely devoted to President Putin and was ready until the end of his days to fight against Russia's "enemies."

In fact, Kadyrov's reckless sponsorship of murders of Chechens abroad who are perceived to be enemies of Moscow has long troubled Russia's main security agency, the FSB, according to several Russian sources, and the rapid arrest of Kadyrov's associate in the Nemtsov case may have in part been an attempt to rein in his lawlessness. But Putin apparently owes a great deal to Kadyrov. Zakaev told me that Putin probably gave Kadyrov the medal of honor days after the Chechen arrests as a way to send a message to Russia's security officials that "Kadyrov is not to be touched."

In the meantime information has continued to emerge that undermines the official story that Dadayev was the mastermind of Nemtsov's murder. According to the initial reports by the Investigative Committee, Dadayev confessed to the crime. But on March 11 a journalist for Moskovskii Komsomolets and several human rights activists managed to get into Moscow's Lefortovo Prison, where Dadayev and two other suspects had been held since March 5. Dadayev told them that he had spent two days in shackles with a hood over his head, waiting for his appearance in court so he could proclaim his innocence. He claimed that he had been denied a lawyer, coerced into a false confession by investigators, and beaten and tortured, along with the two others who were in Lefortovo. The activists visiting the prison reported that there was clear evidence the men had been physically abused. Russian authorities claim the prison visit was a breach of protocol and have threatened the human rights activists with criminal prosecution.

Also, the head of the Kadyrov's North Battalion let it be known after Dadayev's arrest that Dadayev had been dismissed from service on February 28, the day after the shooting. This suggests that the Investigative Committee had either worked incredibly fast to solve the crime, or, more likely, that they knew in advance that Dadayev would be implicated. Then, on March 11, sources in the law enforcement agencies told the independent newspaper Novaya Gazeta that the mastermind of the Nemtsov murder was not Dadayev but a member of his regiment named "Ruslan." And on Saturday, Ekho Moskvy cited an anonymous FSB source claiming that a Chechen fighter who is now in Ukraine, Adam Osmayev, was the one who ordered the crime.

Of course it is entirely possible that some of the accused did in fact carry out the murder, but the idea that these men decided to kill Nemtsov on their own is far-fetched. The circumstances of the killing-the timing, the location, and the precision of the shots, which killed Nemtsov from behind and did not hit his companion-indicates a highly professional, carefully prepared undertaking that required sophisticated surveillance of Nemtsov to determine his intended route home that evening. It seems very unlikely that this could have been accomplished without the involvement of some part of the security services, probably the Federal Protective Service (FSO), which is directly subordinate to Putin and operates surveillance cameras in the exact area where Nemtsov was shot.

Above all, the suggestion by Kadyrov that the killers were incensed by statements Nemtsov had made against radical Islam after the terrorist attacks in Paris in January makes little sense. As Ruslan Khasbultov, a Chechen who was a leading national politician in the early Yeltsin years, said recently:

"Nemtsov never expressed anti-Chechen views. On the contrary, during the first Chechen War, Nemtsov collected almost a million signatures against the war in the Nizhegorod region where he was governor-which caused Yeltsin great displeasure."

In early 2001, when Nemtsov was deputy speaker of the State Duma, he came up with a detailed plan, never adopted, for governing Chechnya that would have ended the conflict there and paved the way for Chechnya to become a parliamentary republic.

Far more plausible, as I have pointed out, is the theory that Putin wanted Nemtsov out of the picture because of his increasingly harsh, unremitting campaign against the Kremlin for its military involvement in the Ukrainian crisis. As many observers have noted, Nemtsov was about to publish a damning report on Russia's Ukraine campaign, called "Putin: The War." This week, Nemtsov's long-time aide Olga Shorina explained to me by telephone from Moscow that immediately after Nemtsov's murder the security services raided his apartment and removed his computer and papers relating to the report-apparently in an effort to keep the report from getting out.

According to Shorina, however, Nemtsov had taken the precaution of placing much of the documentation for the report elsewhere. She and Ilya Yashin, co-leader of Nemtsov's opposition party, are now putting together the information, she said, and with the help of outside experts, doing further reporting that Nemtsov had planned. Shorina and Yashina hope to finish the report and publish a million copies in April. When I asked Shorina if Russian authorities might try to obstruct publication, she replied with a laugh: "Well, they could try but I don't see how they could do it. And in any case, the report will be based entirely on open sources." She added that Boris was not a purveyor of secrets: "Everything he said and wrote was out in the open."

Tragically, it was precisely this openness that made Nemtsov such an enemy to the Kremlin. Nemtsov made no secret of the fact that he lobbied western governments to impose sanctions against Kremlin officials and institutions because of the war in Ukraine. Vladimir Milov, Nemtsov's longtime colleague and fellow oppositionist, who coauthored earlier investigations of the Kremlin with Nemtsov, said on his blog this week:

"The top Russian leadership considered Nemtsov 'personally responsible' for the sanctions and for suggesting which sanctions (blocking access to credit above all) would be the most effective. In a sense this could be revenge, similar to [the case of] Litvinenko. Nemtsov was not just considered a politician, playing this or that role in Russia, but the person, in the Kremlin's opinion, 'guilty' for the difficult situation the Putin establishment found itself in because of sanctions."

Whatever the hostility the Kremlin seems to have felt toward Nemtsov, it appears that some in Putin's circle, including officials in the FSB, think that this time Putin has gone too far. Zakaev, the exiled Chechen leader, told me: "Putin has to either give up Kadyrov or take full responsibility for Nemtsov's murder. Throughout Putin's time in power, this is the first time we see such a huge disagreement within Putin's team."

At the very least, the shocking murder of Boris Nemtsov and the clumsy way the investigation has been conducted have created a serious credibility problem for Putin. Democratic oppositionist Alexey Navalny has said that the only thing that could refute his theory that the murder of Nemtsov was ordered by the Russian president would be a completely transparent, thorough investigation. But the more conflicting accounts that emerge-and the longer Putin remains out of public view-the less transparent the case becomes.

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 #37
The Vineyard of the Saker/Odnako
http://thesaker.is
March 15, 2015
When The Kiev Army Has No More Tanks
By Denis Seleznev
source: http://www.odnako.org/blogs/kogda-u-kievskih-voysk-zakonchatsya-tanki/
Translated by Eugenia

The military operation in Donbass resulted for the Ukrainian army in huge losses of weapons - first of all, tanks. It has been estimated that during hostilities of 2014 the Military Forces of Ukraine (MFU) lost up to 200 tanks destroyed or taken by the adversary. The resumption of the active hostilities naturally leads to new losses. From the beginning of 2015 through the mid-February 50 tanks were destroyed, at least 40 taken, and a number damaged and had to be removed for repairs. Therefore, in a month or so of fighting Kiev lost more than 100 tanks, or at least 300 from the beginning of the military campaign. The age factor is also worth noting - most tanks in the army of Ukraine were produced about 30 years ago. This further increases the rate of breakups and malfunctions.

Can no longer do it by themselves

Theoretically, MFU could still make up for losses, since in addition to 600 T-64 that the army had at the beginning of hostilities (although not all of them were operational), warehouses stored additional 600 T-64, 600 T-72, and 150 T-80. However, there were serious problems with the introductions of these machines into the active army. First, back in summer at least 300 of stored T-72 were deemed unsuitable for repairs. In reality, many of these units are now just carcasses of tanks after having been dismantled to fulfill export contracts. Total up to 800 tanks of this type were sold during the period of independence, while remaining served as the source of spare parts. Although T-64 was not exported (with the exception of a few tanks sold in the fall of 2014), unsuitable storage conditions led to failure of many units and external equipment.

The President and Minister of Defense of Ukraine solemnly presented modernized and reconditioned weapons to representative of military units. Judging by the photos of these events, total of about a hundred of repaired and refurbished tanks were transferred. At least a third of them are tanks intended for export to Congo and Nigeria and produced in the prewar time. It is also worth noting that the transfer of 31 tanks (a battalion) refurbished in the tank repairing facility in Lvov ended up in a scandal. After the ceremonious presentation by the President, the commander of the tank battalion of the 14th tank brigade refused to accept the machines because of their unsatisfactory technical condition. Soon after all of them were returned to the facility for additional repairs.

Interestingly, according to the general director of the Malishev factory who was present at one of those ceremonious transfers, his plant managed to repair up to 20 damaged in battle tanks "Bulat" - Ukrainian modification of T-64 - in three months. Considering that the Lvov facility and Malishev factory are the best-preserved enterprises of the kind, the whole Ukrainian industry is hardly capable of providing more than one tank battalion a month. This means that it would need to work for 3-4 months to make up for losses incurred in one month.

As to the supplies of new rather than refurbished machines, here the prospects are even less optimistic. The only factory in Ukraine capable of producing new tanks is the Malishev factory in Kharkov. According to its general director Nikolai Belov, the current production cycle for a tank is 9 months. It is unclear how many tanks the factory can produce simultaneously. Based on the most optimistic assessment of "Ukroboronprom" (the Ukrainian state-owned corporation of military enterprises), in 2015 the Ukrainian tank industry will be able to produce up to 40 new tanks. This number doesn't look so small, particularly taking into account that in the last two years the factory produced no more than 10 new machines. But it will still be necessary to find reliable suppliers to replace some Russian-produced components, if the production is to reach even these numbers, modest as they are in comparison with the demands of the front.

At the beginning of February, the government approved the state military contract for 2015. And although the document is considered top secret, several politicians have already criticized it, thereby partially revealing is content. From their statements, in particular, it is clear that the main emphasis is on the production and repair of tanks, and that considerable funds will be spend for this purpose. It is important to bear in mind, though, that, eager to secure financing, many Ukrainian enterprises apparently considerably overstate their capabilities. The problem seems so serious that the head of the Council of the National Security and Defense Turchonov suggested punishment for the failure to fulfill the state defense contracts. According to him, the failures to carry out work according to contracts have become widespread in the industry. This looks logical considering that the Ukrainian industry suffers from the deficit of not only production capacity but also of workers. The hope to find several thousand qualified workers for the monthly salary of $80-100 today appears like heavy irony.

Bearing in mind everything said above, if the fighting is resumed the tank units in the Kiev army will either be shrinking at the accelerating rate or will require import of ready to go tanks. If such import does not come, two or three more battles at the scale of Debaltsevo cauldron - and MFU will be facing serious shortages in tank units.

Will abroad help?

Obviously, for a quick fix, MFU will have to import tanks exclusively of the Soviet origin. Taking into accounts the specifics of the Soviet export and the current international situation, only tanks T-72 available in the Eastern Europe fit the bill. Totally, about 800 tanks of this type are today in the armies of Czech Republic, Bulgaria, Hungary, Poland, Slovakia and some other republics of the former Yugoslavia; 500 of them in the army of Poland. Additional 600 tanks are stored in warehouses in these countries. Naturally, these tanks are all in different technical conditions, which even the local Ministries of Defense, the same as in Ukraine, will not be able to assess. Nevertheless, MFU theoretically could count on several hundreds of tanks from these countries. However, such plans at this point meet with multiple difficulties.

First, it is important to note that Ukraine has a serious competitor looking to buy tanks T-72 in Europe - Iraq. The military of that country suffers serious losses in heavy weapons in the fighting with Islamic groups. Out of 150 tanks "Adams" supplied by the US, the Iraqi tank units lost close to a half. They also lose tanks of the Soviet origin at a similar rate. Back in 2009, the Iraq Ministry of Defense announced the intent to buy up to 2,000 T-72 machines. In reality, later only Hungary supplied 77 tanks from its storage, and they were modernized in American facilities. Additionally, Bulgaria supplied armored machines, not tanks, but universal trucks MT-LB from old stocks.

With the start of hostilities in Iraq in summer of 2014, the question again arose regarding the export of weapons from Europe. In July, the leaders of the EU officially recognized the need to support Iraq with weapons. The first countries announcing the delivery of tanks were Hungary and Czech Republic. In summer, a well-publicized group of 58 Hungarian T-72 tanks that was supposed to be delivered to Ukraine were in reality sent instead to Czech Republic for refurbishing. And today the effort of Czech repairmen is concentrated on fulfilling contracts with Iraq and Nigeria. In January, Ukrainian airplane "Mria" delivered to Africa 16 tanks for the Nigerian military. Several media sources interpreted this event as the beginning of arming of Ukraine by Eastern European countries. Interestingly, according to the statement of the Czech firm "Escalibur" that is engaged in the export of refurbished tanks, the contract with Iraq on the export of more than a hundred of units of tanks will fill the production capacity of the enterprise for two years. So, Ukraine will have to wait for a long time to obtain tanks from Czech Republic. The second supplier for these contracts - Hungary - today has only several dozens of these machines left that require repair and reconditioning and will not help Kiev in any way.

Poland, naturally, appears to be the most realistic option as a supplier. In Soviet times, that country used to produce T-72 by license and possesses to this day the most extensive tank arsenal in Eastern Europe. In addition to 530 T-72 in use by the Polish Army, 200-300 units are in storage. So far nothing is known about the plans to supply heavy weapons from Poland to Iraq, so it could be expected that Polish tank reserves would be available to help MFU. However, there are objective difficulties here as well.

First, the Polish tank industry itself is not in the best shape. After signing in 2003 the contract with Malaysia to deliver 48 tanks RT-91 (an improved version of Polish T-72), the Poles were 2 years late in fulfilling it because of the production problems. Things hardly improved since then. So, the program of modernization of 40 tanks for the Polish army itself in 2011-2013 dragged for three years. Of course, refurbishing tanks after storage and modernization are not at all the same things. Nevertheless, it would not do to count on the great capacity of the Polish industry - it will also not be able to catch up with the MFU losses.

It would similarly be unwise to write off the position of Polish officials. It has been said multiple times in the Ministry of Defense of the republic that Poland would arm Ukraine only if there is the collective decision of NATO and the EU. The Poles have no intentions of getting embroiled on their own in the conflict with Russia because of Ukraine. No less important condition is the full payment for the weapons by the Ukrainian side - the neighbors do not intend to give out free gifts to Kiev. The words of the Minister of Defense Tomas Semonyak that Poland is ready to sell tanks RT-1 to Ukraine any time sounded like sarcasm. The truth is that this stealth technology-based machine currently exists as a single experimental unit, and its production could even hypothetically start no earlier than 2018. However, Ukrainian media did not understand sarcasm and in fall of last year spread the victorious news that Poland was about to start supplying Ukraine with invisible tanks.

Bulgaria could be another source of tanks, since that country might have in storage as many as 150 tanks. However, Bulgaria also sees more attractive prospects in the Iraq market. In an attempt to secure contracts from Iraq, Bulgarian officials even openly bribed Iraq giving away 18 howitzers D-20 from the army storage as well as several thousand units of small arms. This was done, undoubtedly, in the hope of a larger weapon contract.

Furthermore, Bulgaria does not have adequately developed industry, and the condition of tanks even in the army units is far from ideal. The parliamentary report published in the fall of 2014 stated that only 20% of Bulgarian tanks T-72 have required spare parts, and 80% of tank batteries have served their resource and are exceedingly unreliable. Therefore, their own stores of T72 tanks are becoming for the Bulgarian army today nothing more that the source of spare parts for those 80 tanks of that model that are still in the active army units.

As to the facilities capable of repairing tanks, during the years after the breakup of the Warsaw Pact the country lost the potential of its industrial-military complex to a large degree. Factories possess neither qualified personnel in sufficient number, nor equipment to be able to produce enough tanks required by the scale of the Ukrainian front. For example, during 2013 and 2014 many meetings took place in the "TEREM-Khan Krum" plant, which is the main tank repairing facility in the country, demanding to pay back wage arrears. The plant has been on the verge of bankruptcy for many years as well as in the epicenter of corruption scandals.

Romanian enterprises, by the way, are in a similar position. That country has no stores of T-72, and the military is armed with totally outdated T-55, but Romania is hardly in a position even to help with the repairs of tanks from other countries. During the last 25 years, the Romanian military industry has been constantly "reformed", or, more precisely, simply disintegrated. By 2014, many enterprises were on the verge of bankruptcy. Only in May of 2014, the government forgiving the military industry $200 million debt started to reanimate the remaining facilities. Romania perceived the conflict in Ukraine as a threat to its own security, particularly bearing in mind the possibility of thawing the conflict in Transnistria. Possessing the most outdated army in Eastern Europe, the Romanians are today facing the necessity to quickly modernize their military. Naturally, the Ukrainian problems appear to them secondary.

As far as the countries of the former Yugoslavia are concerned, Serbia is the only country with reasonable resources, but Serbia, for obvious reasons, will not be helping Kiev against Russia. Slovakia, which has in storage at least a hundred of T-72 as well as leftovers of the military industry from the Soviet times, holds a similar position and spoke out many times against arming Ukraine.

Therefore, it could be noted that there is a theoretical possibility of obtaining tanks in Eastern Europe. The best option for Ukraine would be direct transfer of battle-ready tanks from the army units. If we ignore the political aspect of the situation, such action would be, of course, unacceptable for the Eastern European military. In spite of the increased tension in Europe, military budgets in most of these countries not only are not increasing but keep declining remaining, at best, at the level of last year. Therefore, Eastern Europe simply cannot afford to give away their army weapons. Even if a theoretical possibility to replace tanks supplied to Ukraine by the eastern allies by tanks from the US and Germany exists, there is simply not enough machines to match the Ukrainian demands. The countries bordering Ukraine are not satisfied with the size of their own military forces, and all are now asking for reinforcement with the contingents from the US and Western Europe.

Speaking about a more realistic possibility, i.e. repairs and supplying weapons from storage, this could be successful provided there was a unified political will in Europe and mobilization of industrial capabilities in Eastern Europe as well as in Western countries. For the supplies of tanks to Ukraine to play a significant role, they must become an all-European business. It is not realistic to make secrete deliveries due to time required to make the machines ready and also because of the tanks' foreign origin, which would be immediately discovered when they appear in the front. This would, in its turn, mean further aggravation of the political crisis in Europe. So far, there is no united will in the West when in come to arming Ukraine. The leader of the EU - Germany - is against supplying Ukraine with weapons. At least, for now. Such countries, as Czech Republic and Slovakia that theoretically could become the centers of tank preparations for Ukraine, are also dead set against such deliveries. The Czech Republic stopped selling even capsules for pistol cartridges to Ukraine. Poland, although maintaining a position loyal to Maidan, has neither desire nor resources to get embroiled in the conflict on its own. It also demands full payment for its weapons. Moreover, Poland, like nobody else, overprices its weapons - at some point, it sold to Malaysia pretty outdated PT-91 for $5.5 million apiece.

Thus, it could be concluded that at this time the only more or less realistic option for Kiev is to establish the supply line of spare parts and components of tanks from the Eastern European countries. However, such supplies on the large scale appear unlikely, unless the West makes a collective decision to help The possibility of such deliveries should not be altogether excluded - Kiev will, most likely, make a determined effort to make them happen. Kiev will be most interested in tank engines that at this moment are the most problematic component for the Ukrainian tank manufacturers. Nevertheless, by all indications, Ukraine will have to solve the tank problem by itself, at least, for the forthcoming months. This means that if the hostilities resume the tank component of the MFU will definitely do down at a significant rate.

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#38
Interfax
March 16, 2015
Fire in Novodevichy Convent bell tower did not damage building

It took firefighters almost three hours to extinguish the fire in the Moscow Novodevichy Convent bell tower. The fire, which affected an area of 300 square meters, did not do any damage to the historical building.

"The internal premises were not damaged by the fire and external facing plaster fell off in the places affected by the most by the fire," Alexander Gavrilov, deputy head of the Russian Emergency Situations Ministry's Main Department for Moscow, told reporters.

The fire began at an altitude of 35 meters, he said.

The speculated cause of the fire is a short circuit caused by heat guns used for drying the facade during restoration work, a source in the law enforcement agencies told Interfax.

In the meantime, the press service for the Moscow cultural heritage department has blamed the fire on the firm doing the restoration work.

"The work was done with violations of the established regulations. We believe these violations caused the fire," the press service said.

Russian Deputy Culture Minister Grigory Pirumov, for his part, said that heat guns were not in use on the territory of the convent and the bell tower had been disconnected from the mains power supply.

"No work has been done since 11:00 a.m. on March 15. Before that time, the work was done without using flammable materials and there were no workers in the tower. The heat guns had been switched off a week ago and the tower was without power," the Culture Ministry press service quoted Pirumov as saying.

The press service said all restoration work is subject to a guarantee and therefore rebuilding work will be done within the shortest time possible.

A report saying the wooden scaffolding on the territory of the convent were ablaze was received by the firefighting service at 10:41 p.m. Moscow time. The first firefighters arrived at the scene at 10:45 p.m. The fire was fully extinguished at 1:23 a.m. on Monday, the Russian Emergency Situations Ministry's Main Department for Moscow told Interfax. The fire affected an area of 300 sq. meters.

According to the Russian Emergency Situations Ministry's Main Department for Moscow, 113 firefighters and 29 units of equipment were used in the operation to extinguish the fire.
The Novodevichy Convent was founded by Great Prince Vasily II in honor of the Smolensk icon of Our Lady Odigitria. The convent is protected by UNESCO and hold World Heritage title.

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 #39
The Hollywood Reporter
March 13, 2015
Russian Government Plans to Make Soviet-Era Films "Public Property"
By Vladimir Kozlov    

The Russian government plans to make Soviet-era movies exempt from the copyright law, which would strip studios that produced them of a sizeable income.

Copyrights to Soviet-era films are currently owned by the studios that produced them decades ago, such as Moscow-based Mosfilm or St. Petersburg's Lenfilm.

However, over the last few years, the idea has been floated that since the films were funded by the Soviet government, they have to be "public property," so no studio could charge any copyright fees for them.

Last year, President Vladimir Putin said the government should carefully examine the issue.

Now the communications ministry has spoken in favor of the idea.

"We are supporting the idea of turning the Soviet film heritage into public property," Deputy Communications Minister Alexei Volin was quoted as saying by the Russian daily Vedomosti.

He added that the idea should be executed carefully, with interests of the studios to be observed.

Mosfilm, the Soviet era's largest film studio, currently has the biggest library of the period's films, some of which it has voluntarily made available to watch for free on its website and YouTube channel.

Still, the studios are widely believed to generate a substantial income from their libraries of Soviet-era films, the amount of which has never been revealed. Now they are set to lose it, unless the government chooses to compensate them.

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