#2
www.truth-out.org
May 24, 2015
Families Describe Fleeing War-Torn Ukraine for Russian Camps
By Halyna Mokrushyna
Halyna Mokrushyna is currently enrolled in the Ph.D. program in sociology at the University of Ottawa and a part-time professor. Her doctoral project deals with the memory of Stalinist purges in Ukraine.

"Our potatoes do not need your pernicious Colorado beetles." - Ukrainian refugees on life in a temporary accommodation camp in Russia and how they perceive Ukraine

As part of a media tour to the Donetsk region in eastern Ukraine in April 2015, a group of international journalists visited a camp of Ukrainian refugees who had fled from Lugansk and Donetsk. The camp is located in Rostov oblast in southwestern Russia, near the Ukrainian border. Halyna Mokrushyna, a participant in the tour group, reports on the exchanges she had with the people living in the camp. This is the second of her articles on the media tour in which she participated.

The Temporary Accommodation Point (TAP), as it is called in Russian (Punkt Vremennogo Razmeshchenia), at the "Pioneer" refugee camp in the Primorka village of Neklinovsky district of Rostovska oblast in Russia, is now home for around 350 refugees from Lugansk and Donetsk regions of Ukraine. In Soviet times, it was a summer camp for children (pioneers). It still looks like it: There is a solidly built canteen, dormitories, arbors, benches, ping-pong tables, a sports-ground and metallic triangular sails painted in the colors of the Russian Federation - white, blue and red. The camp is beautifully located on the northwestern shore of the Sea of Azov, 58 km to the west of the large Russian city of Rostov-on-Don. A metallic stairwell descends from the camp to the seashore.

Helicopters of the Federal Fishing Agency patrol the area regularly. But they had to interrupt their patrolling in June of 2014, when the first bus with Ukrainian refugees from Donetsk and Lugansk arrived. They were fleeing from the so-called antiterrorist operation of the Ukrainian army, which launched an offensive against Lugansk and Donetsk in April, when these regions did not accept the nationalist, anti-Russian regime that came to power in Kiev, in February 2014, through a coup d'état. Refugees were mostly women with their children. The children had been deeply traumatized by the sounds of shells and bombs, which the Ukrainian army was indiscriminately directing against the towns and cities where they lived. When the children first heard the fishery agency helicopters, they would scream and take shelter under the ping-pong tables. The administrators of the refugee camp asked the fishery agency to stop patrolling the seashore for a month so as not to traumatize the kids. The agency agreed.

We heard this from the doctor, Yuriy, who provides health care to children of the camp. Yuriy is a pediatrician, originally from Lugansk. He moved to Russia in 2007, because, as he told us, he understood back then (in the aftermath of the pro-Western "Orange Revolution") that things were going to get worse in Ukraine. In Nekninovskiy district, his practice as a pediatrician covers two residential areas with around 1,800 children. In addition, he takes care of two refugee camps - Pioneer and Sale -without being paid for it. Yuriy has an office in the camp and a treatment room. He says that when he first came here in early June 2014, he panicked - nothing was ready, they had to prepare everything from scratch.

The administrator of the camp, Svetlana, took this difficult job in charge. She was the one who found Yuriy, approached him and said: "The camp needs a pediatrician. There is no way you will get rid of me." And so Yuriy came to Pioneer camp.

Svetlana is the owner of the camp. She and her husband bought it from the Russian state with the intention of transforming it into a summer vacation station for kids (the camp was not in use). They were getting ready to receive the first vacationers in June 2014. But on June 4, they got a phone call from the local state authorities asking them to receive Ukrainian refugees instead. The first bus arrived the next day, during the night of June 5 to 6.

Svetlana became the administrator of the camp. She left her apartment in Rostov and moved with her daughter, a dog and a cat to the camp. She now lives there permanently. She oversees the smooth running of the facility, making sure that people living in the camp have everything they need. She is not paid to do the job she does. The Russian state pays for the lodging fees and food of residents. When a piece of infrastructure is broken, Svetlana and her husband pay for the repairs, and the state reimburses them.

Refugees living in the camp receive occasional financial assistance from the Donetsk People's Republic (DPR) and Lugansk People's Republic (LPR). They do not get any support from Ukraine. The Ukrainian state stopped paying any social assistance or pensions in June of 2014 to residents of the "occupied territories of Lugansk and Donetsk regions," that is DPR and LPR.

Almost all of the refugees in the camp are women, with their children and elderly parents. Around 1,500 people have gone through the camp since it began receiving refugees. It works as a transition point for those who have the means and health to find a job and move on with their lives in Russia.

Refugees were directed to the camp through coordinators in Donetsk and Lugansk. They came here by bus. Once in the camp, they are visited by a representative of the Federal Migration Service of the Russian Federation. The representative brings the forms that a person needs to fill in order to apply for the official status of a temporary refugee. This status is granted for one year. It allows the person who receives it to work in Russia without obtaining a special permit. It also comes with free medical insurance. The application, as well as the status itself, is free of charge.

Local employment centers are cooperating with camps, sending them lists of vacancies throughout Russia. They try to match refugees' qualifications with available job vacancies. The Ministry of Emergency Situations sends a schedule of departure to regions where the labor force is needed. Refugees are relocated to the regional camps where the local administration issues them proper documents and finds them permanent housing as soon as possible. Any refugee who arrives, say, in Rostov, and turns to a police or other state agency for help is redirected to the Ministry of Emergency Situations for assistance.

The majority of people who arrived in Pioneer camp have moved on. Those who remain are there either because they have young children or immobilized elder relatives, or they still harbor a hope to return to their homes in Lugansk and Donetsk. "We hope for peace," women in the Pioneer camp told us.

Irina has lived in the camp since late November. She is from Dokuchaievsk, a city 35 km from Donetsk, on the highway south to Mariupol, farther along the coastline of the Sea of Azov. Following the beginning of the military operations of the Ukrainian army against rebellious Lugansk and Donetsk in April 2014, Irina and her family spent the 2014 summer in Berdiansk. (1) In September, they returned to Dokuchaievsk. Irina's younger daughter had to go back to school, and Irina had to resume her duties as an elementary school teacher.

By early September 2014, Dokuchaievsk became part of the DPR. It was on the frontline of the fighting between the DPR insurgency and the Ukrainian army. The city was shelled intensively, so the school year could not begin. Children would stay at home, while teachers would go to school. Shortly after September 1 (the first day of the school year in Ukraine), teachers were sent on unpaid leave. Irina with her daughter and Irina's sister with her two kids went back to Berdiansk, to their relatives. They stayed for two weeks there and then returned to Dokuchaievsk again.

In the DPR, because of the active shelling of the territory by the Ukrainian army, the school year was postponed until October 1. Irina went back to work. However, it was impossible to work in those conditions, she remembers. They would have a lesson or two, and the shelling would start. They had to take refuge in the basement. Teachers would call parents to come and pick up their kids. Some parents would stay in the school basement waiting until the shelling would be over.

Life like this continued for several weeks, until Irina's sister gave under pressure and left Dokuchaievsk with her family for the refugee camp in Primorka. Then Irina broke down as well. Together with her husband and the whole family - her 70-year-old parents, 90-year-old grandmother and their daughter - they took as many personal belongings as they could and drove to Primorka.

The last week before the departure was spent in cold basements or in corridors with thick walls. They would all sleep fully dressed. Irina's daughter was scared of the shelling and of the basements - they used to live in an apartment on an upper story of a multistory building. Irina says she felt such pity for her daughter that she had to leave. If it was not for her daughter, she would have stayed in Dokuchaievsk.

Irina considers herself lucky. Two days after the arrival at the refugee camp, she found work in a local school. Her husband found work in Taganrog, a Russian city 25 kilometers west of Primorka. Their daughter goes to school. Irina plans to stay in the camp until the end of the school year. And then, in the summer, we will see, she says.

In the camp they have two rooms - one big and one smaller. They also have a shower room. They kept their car.

Dokuchaievsk remains on the firing line. Irina says they are checking the city's website regularly.

She perceives the current regime in Kiev very negatively. She believes that the war in Ukraine was provoked by "big money," to carve up new assets. In Irina's opinion, there were no profound reasons for this conflict. In the school where she taught, there were Ukrainian language classes and Russian language classes. Parents could place their children in any language class they wanted. There was no terror, says Irina.

Anna came to the camp from Lugansk with the first wave of refugees in early June. On June 2, 2014, she was in downtown Lugansk two hours before the infamous Ukrainian warplane launched rockets on the regional administration building and in the park surrounding it. She says she was really scared. On that day, she decided she had to leave. Anna knew that the Lugansk insurgency was organizing evacuation of civilians from the city. Her husband helped her and their two daughters to get on the bus and they left in the morning. By late evening of the same day, they arrived at the Primorka camp.

Since then, she has helped out here. She became a self-appointed warden of the camp, taking upon herself the responsibility of solving all kinds of problems related to the everyday life of the camp. When I was interviewing her, we had to interrupt our conversation several times because she would be called upon to answer some questions or to provide information on something.

Anna says her brain still refuses to accept what is happening in Ukraine. It is a nightmare, an absurdity. In Anna's words, Donbas has never been part of Ukraine. The entire Southeast of Ukraine - Kharkov, Zaporozhe, Lugansk, Donetsk - was developed by Russian tsars. The real Ukraine is the central part of modern Ukraine - Kiev, Chernihiv. Ukraine, in its current configuration, reminds Anna of Frankenstein, assembled from different parts, glued together artificially. These are the profound reasons of the civil war in Ukraine.

Anna has always identified herself as being part of the Slavic people - Russians and Ukrainians both. She says they never divided people by ethnicity, between a "pure" Ukrainian or a "pure" Russian. Her grandmother is from Voronezh region in Russia; her grandfather is from Donbas. Who is she? She does not know.

Anna says that Donbas did not accept the Euromaidan ideas and ideals. Donbas does not need the European Union or NATO. People in Lugansk and Donetsk are happy as it is. European ideals - which were instilled in Euromaidan Ukrainians by Western political and social strategists - are alien to Donbas. They are like the pernicious Colorado beetles, which were brought to Ukraine from North America. They destroy young potato plants by eating up leaves. As Anna puts it, "Our potatoes do not need your Colorado beetles".

Life under the ousted president, Victor Yanukovych, was not easy, says Anna. Corruption was widespread, but those who wanted to work, worked. And people were not killed on a massive scale.

Donbas has never been a subsidized region, states Anna. According to Ukrainian legislation, Donbas would send the lion's share of its revenues to Kiev, while keeping only a small part for itself. Kiev now presents various subsidy programs to Donbas as evidence that Donbas is a "depressed" region with an outdated and inefficient economy. However, Kiev is not saying how much Donbas was contributing to the national budget, says Anna.

She believes that Donbas can no longer return to Ukraine. If it ever does, it will be destroyed through various economic programs, even physically. Donbas should become part of a new, independent country of Novorossiya, she says.

According to the latest official statistics, there are 37,630 refugees from Ukraine in Rostov oblast, of which 1,737 are placed in "temporary accommodation points," such as Pioneer camp. There are eight such camps in Rostov oblast, four of them in Neklinovski district. Two camps were closed earlier this year because the number of refugees decreased. Refugees who were already in Rostov have also moved to other regions of Russia. Since the beginning of 2015, over 6,000 of them did so. (2)

Refugees in the Pioneer camp we visited told us that they have everything they need. Kids go to the local school. The school bus picks them up in the morning, brings them back for dinner and then takes them back to school. When the first refugees arrived in June of 2014, local kids mentored Ukrainian kids. They became friends very quickly, which facilitated the transition of Ukrainian kids into the school. In the camp, kids have their own room to do homework and another room for play. Refugees also receive help from psychologists. In the canteen, meals are served four times a day. The canteen is also used as a concert hall. Women from the camp showed us a stand with photos taken during the celebrations of the New Year, a chess tournament and Easter festivities. People in the camp strive to live a "normal" life like the one they had at home.

Anna regularly phones her relatives and friends in Lugansk, many of whom returned home after several months of exile. They tell her that life in Lugansk is difficult. The Lugansk People's Republic administrators are doing the best they can, but building a new state from scratch is a lengthy and difficult process. It is hard for all, especially for families with kids. That is why Anna prefers to stay for the time being in the camp, although her parents and husband are in Lugansk. She says it would be difficult for her to be there right now and watch over the children, fearing that rockets might again fall from the sky.

Anna says she left her whole life behind in Lugansk. She hopes one day she will be able to return home and not have to fear for rockets and shells falling from the sky. Irina also keeps in touch with her friends and relatives in Dokuchaievsk. They hope that peace will return to Donbas. They do not hate ordinary Ukrainians; they hate the ultra-nationalist regime in Kiev thta brought war to their land.

Donbas did not start the war, Kiev did. The DPR and LPR are slowly but surely building a new state. It is a difficult path for the young republics. Kiev has cut all supply lines to the cities and villages that are on the republics' territories. Kiev also regularly violates the cease-fire agreement reached in Minsk on February 12. It is in no hurry to honor the other points agreed upon in Minsk, such as working together with the representatives of DPR and LPR on a new constitution for Ukraine, which would provide large autonomy to the regions, amnesty for prisoners involved in the fighting and the lifting of restrictions of movement to and from the Donetsk and Lugansk regions.

In spite of Kiev's sabotage, the DPR and LPR are emerging as autonomous economic and political entities. A lot of refugees from these regions have already returned home. One day, Irina and Anna hope to follow their path.

Notes:

1. Berdiansk is a summer resort on the Azov seashore. Many internal refugees from the war zone spent the summer of 2014 here in summer camps, built there in the Soviet era for children and families.

2. As of April 22, 2015, the Federal Migration Service of Russia published the following data on the refugees from Ukraine:

* Since April 2014, 950,147 citizens of Ukraine from Southeastern Ukraine entered the territory of the Russian Federation and remained there;

* There are 432 STA in Russian Federation, in which live 26,964 people, including 8660 children (up to age 18);

* 507,982 people live in the private sector;

* 338,977 persons applied for the temporary refugee status;

* 18,7201 people applied for temporary residence

[return to Contents] 

 #3
Kyiv Post
May 24, 2015
Donetsk residents feel abandoned by Ukraine, Russia
By Stefan Huijboom

DONETSK, Ukraine - The beautiful weather stands in sharp contrast to the desperation rising in Donetsk, a place that neither Russia nor Ukraine seem to really want anymore.

And some Ukrainians, as they wait by the hundreds daily to clear the last Ukrainian checkpoint before entering separatist-controlled territory, feel unwanted.

A woman named Irina, too afraid to be identified because of the fighting, is so fed up that she is on neither side. "Everybody suffers from the situation. Donetsk is a gorgeous city, especially during this time of year. It should stop, but unfortunately it won't," she said.

The Russian strategy now in Ukraine seems to be one of destruction, not acquisition anymore. Russian-backed fighters shelled the coke factory in Avdiivka, idling the top employer in the Ukrainian-controlled city.

In much of the rest of the Donbas that Russia or its proxies control, there seems to be a recognition that, unlike Crimea, the Kremlin doesn't want to absorb territories from more than 1 million people have fled.

The cost for Russia to control Donbas seems high and ineffective, especially if it is unable to go the distance and create a southeastern land bridge to annexed Crimea.

Ukraine also doesn't appear to want the Donbas anymore, at least not now, as it has imposed strict border controls. The Ukrainian strategy seems to be containment, not re-acquisition.

A separatist press officer, who refused to be identified because she is not authorized to speak publicly, said that Donetsk will never be part of Russia because of the high costs of reconstruction after more than a year of warfare. And, she said, the Kremlin wants to avoid stiffer ecnomic sanctions that would come with acquiring more Ukrainian territory illegally.

She said that the separatist areas "will always be part of Ukraine, though with our special status. There will be regional elections in the end of this year. For Ukraine that means that we're going to legitimately elect our officials. We've already done that, though. Nonetheless, for now, Russia and only a few other countries only recognize our officials. We'll see what happensby the end of this year.'

Donetsk is trying to acquire the trappings of a separate country.

The rulers have opened their own bank - the Donetsk Central Bank - and taking over the Ukrainian ATB supermarket chain. Another supermarket chain, Brusnichka, shut down recently, some say for tax reasons. The separatists seized one branch of Privat Bank and nationalized it, so customers can collect money without going to Ukrainian territory. It pays out in Russian rubles, however.

The separatists are also collecting taxes, even from those who work outside the areas that the Russians control. That's a lot of people because the separatist-controlled territories don't have a lot of jobs.

It's not clear how tax collection is working. On receipts, the amount for taxes is always 0.00 hryvnia or rubles. How and where people pay taxes is sketchy. Commerce does take place hower, in street goods and from small kiosks. However, picture-taking was not welcome at a recent market, where the merchant shouted: "Who are you and what are you doing? Are you from the tax authorities?

The divide between the have and the have-nots is clearer.

Young people gather in the entertainment area near Pushkin Boulevard while expensive cars pull over with young people who hang out in expensive cafes and restaurant. Where the money comes is treated as a secret by many of them.

Others, meanwhile, are simply struggling to get enough to eat.

For 69-year-old Valentina, a former professor of the Donetsk Polytechnic University, her pension in rubles is not enough to cover her living costs. She begs for money while walking her dog.

"I worked 43 years at the university. I cannot live my life, as I wanted it," she said. "Now I have to beg for money,' she said, pointing to the destroyed roof of a nearby building. 'I could never have imagined that something like this would happen in my life. I don't know if it will become better, but I pray to God it will."

 [return to Contents] 

 #4
Moscow Times
May 25, 2015
Kiev Can Save Donbass By Ditching Crimea
By Vladimir Frolov
Vladimir Frolov is president of LEFF Group, a government relations and PR company.

The West has now engaged Moscow in a delicate diplomatic dance to reach a lasting political settlement in Ukraine.

The key is the right sequence of steps under the Minsk agreements to hold local elections in the separatist areas and negotiate their status within Ukraine, while providing Moscow with enough political cover to relinquish control over Ukraine's border.

Russia's strategy is to turn the Minsk agreements into the Dayton Accords by forcing upon Kiev a constitution written in Moscow that would federalize Ukraine to the point of being dysfunctional. This is the essence of the constitutional changes the separatists sent to Kiev on May 12.

Moscow wants Kiev first to grant a special status to the separatists with maximum autonomy within Ukraine and then allow them to hold an election under their own rules, with no Ukrainian political parties running. Another key demand is to enshrine a "non-aligned status" in Ukraine's new constitution.

Kiev puts the Minsk II sequence in reverse - ending Russian military support for the separatists, OSCE monitoring of the Russian-Ukrainian border, free local elections in Donetsk and Luhansk under the Ukrainian law and devolution of power to the new authorities under the decentralization provisions of the new Ukrainian constitution. This reading is backed by Washington, as U.S. Assistant Secretary of State Victoria Nuland made clear in Moscow.

Berlin and Paris support Kiev but are also concerned this could lead to a prolonged stalemate and a frozen conflict - a scenario, they suspect, welcomed by a Moscow that is waiting for Ukraine's economic collapse to produce a government which would return Kiev to Russian control.

The solution seems to be to hold Ukraine's local elections, scheduled for Oct. 25, in the separatist territories with all Ukrainian and local political forces participating under the OSCE election monitoring. The bet is that the "Oppositionist Bloc" led by former Yanukovych Chief of Staff Sergei Levochkin would win the election in the Donetsk and Luhansk regions, an outcome acceptable to Kiev and Moscow and restoring Ukraine's sovereignty.

The Kremlin is still livid. If it is to trade its failing Donbass venture, it wants something else in the equation - recognition of Russian claims to Crimea.

Here's where Washington comes in - it could persuade Kiev to trade Crimea for the Donbass and Russia's reconstruction aid. It's a small price to pay for peace.

 [return to Contents]

 #5
Donetsk republic's intelligence sees Kiev military buildup near contact line

MOSCOW, May 25. /TASS/. The intelligence of the self-proclaimed Donetsk People's Republic reports that Kiev is sending its troops and heavy weaponry to the contact line, DPR's defence ministry spokesman Eduard Basurin said on Monday.

"The buildup of heavy weaponry banned under the Minsk agreements has been reported," Basurin was quoted by the Donetsk news agency as saying.

Ukraine's army has deployed BM-21 Grad and Uragan 9K57 multiple rocket launcher systems to the villages of Velikaya Novoselka and Olginka. The Smerch 9K58 heavy multiple rocket launchers were spotted near the Bogorodichnoye village, he said.

A city hospital was also seized by the Ukrainian battalion in Dzerzhinsk, he said, citing the intelligence data. "The medical personnel were forcefully evacuated and the work of the medical facility has been blocked," he said.

Foreign mercenaries have also seized private property in the village of Artem, he said. A private military company has accommodated up to 60 people in a residential building near a children hospital, Basurin said.

This shows that the Ukrainian leadership continues military preparations taking advantage of the ceasefire that came into effect starting from February 15, the spokesman stressed.

The Kiev authorities place the stake on the foreign mercenaries and also on the work of sabotage groups against the Donetsk republic's militias, as well as "indiscriminate shellings against civilians and the destruction of the civilian infrastructure of the republic," he said.

The spokesman reminded that the DPR leadership and militias "continue strictly complying with their commitments under the Minsk agreements."

 
#6
Ukraine's Ten saboteurs claim responsible for murder of LPR commander

KIEV, May 24. /TASS/. Commander of the 4th police battalion of the self-proclaimed Lugansk People's Republic (LPR) Alexei Mozgovoi was killed in a special mission of Ukraine's Teni (Shadows) commandos, the detachment's head Alexander Gladky said on Sunday.

He wrote in Facebook "we fled immediately."

Earlier, Mozgovoi had survived several attempts on his life. After the last attempt in late March, he said that it was a provocation aimed to destabilise the situation in the self-proclaimed republic.

In early April, the 4th battalion of territorial self-defence was set up on the basis of the Prizrak (Ghost) brigade, following a resolution on the LPR territorial defence signed by the republic's leader Igor Plotnitsky on March 7, 2015.

Head of LPR Igor Plotnitsky said the murder was in the interests of Kiev, which, he said, instead of moving towards peace under the Minsk agreements, is trying to fail the political stability around the republics in Donbass.

 [return to Contents]

 #7
Ukraine Today
http://uatoday.tv
May 23, 2015
'Great Wall of Ukraine' fortification along Russian border set for completion before late 2018: PM

A massive fortification project dubbed the 'Great Wall of Ukraine' will be completed before the end of 2018 Prime Minister Arseniy Yatsenyuk made that promise during an inspection of the part of the fence that's planned to stretch the almost 2,000 kilometer land border with Russia. He said the government had found ways to build the construction at a cost five times cheaper than the millions of dollars originally estimated.

Arseniy Yatsenyuk, Ukrainian Prime Minister: "Basically, these are the Ukrainian enterprises, which do the construction work and make all the equipment, which is going to be used at the state border. This project has two goals. Fist one is security and defense from Russian saboteurs and the second one is to support our economy, to create new jobs and to develop our science research. Look, what kind of projects were fulfilled by Ukrainian firms".

The checkpoint near here has the popular name interpreted as 'three sisters' - reflecting the once brotherly nations of Ukraine, Russia and Belarus.

Ukrainian officials say the wall will enhance national security, improve the business climate and bring Ukraine closer to NATO membership and EU integration. Meanwhile, Yatsenyuk has previously claimed the fortifications would serve as Europe's de facto eastern boundary, while also helping Ukraine reassure its European partners that it is in full control of its borders.

 [return to Contents]

 #8
Gazeta.ru
May 20, 2015
Russian website looks at "Novorossiya" project suspension
Vladimir Dergachev, 'Novorossiya' project closed - self-proclaimed republics have announced closure of 'Novorossiya' project

Supporters of the LNR [Luhansk People's Republic] and the DNR [Donetsk People's Republic] have officially announced the freezing of the "Novorossiya" project - a scenario that proposed uniting several regions seeking independence from Ukraine under this brand -and the closure of the corresponding political spin structures. Gazeta.Ru recalls the history of the project, which in reality was abandoned a long time ago.

"The activities of the Novorossiya structures have been frozen since they do not fit in with the peace plan signed in the presence of the 'Normandy Quartet' countries," Oleg Tsarev [Oleh Tsarev], the chairman of the "Novorossiya" movement (Gazeta.Ru has written previously about the various meanings of the term "Novorossiya") stated. He reported on the social networks that the activities of the united parliament of Novorossiya had been frozen since "its existence is at odds with the Minsk Agreement" and "neither it nor its deputies can now directly influence the situation in the Donetsk Basin".

A message is currently posted on the homepage of the project's website: "servicing of the official website of the parliament of Novorossiya has been suspended".

Aleksandr Kofman, the head of the Foreign Ministry of the self-proclaimed DNR, admitted that the efforts of the Kyiv [Kiev] authorities to neutralize pro-Russian sentiments in the southern regions of Ukraine had been successful: "The Novorossiya project has ended because its supporters in Kharkiv and Odessa have been successfully neutralized by official Kyiv".

Kofman stated that the popular unrest started too soon: "We were not able to keep the population at rallies, and our supporters in other regions - in Odessa and Kharkiv - were roused earlier than they should have been".

"As a  result, 40 of our lads died in Odessa, many activists were arrested in Kharkiv, and the republics that were planned to be created in these regions ended up without leaders. So the 'Novorossiya' project is closed for some time -until a new political elite capable of heading the movement develops in all of these regions," Kofman wrote on his Facebook page.

In a conversation with Gazeta.Ru, Kofman preferred to clarify his words, noting that these statements did not concern the political prospects of the DNR and the LNR: "It was stated that the leaders of the resistance had been wiped out in other potential republics. And the development of Novorossiya was now closed indefinitely".

"If the residents of Kharkiv, Dnipropetrovsk, and Odessa think that the Donetsk People's Republic should go there and liberate them from the yoke of the junta and they will do nothing, that is wrong. We do not have the right to decide for them," Kofman added.

Why Novorossiya failed

An influential functionary in the DNR cites in conversation with Gazeta.Ru the theory that control was lost over the plan to unite several regions of Ukraine under the "Novorossiya" brand as long ago as 11 May 2014. On that day the referendum on self-determination took place not in eight regions, as had been expected, but only in the [self-proclaimed] Luhansk and Donetsk people's republics.

Nor did the referendum take place in Donetsk Region's Pershotravnevyy district, for instance, where, although there were not actually sufficient Ukrainian army forces, a defence headquarters was stationed under the command of the head of the district. The holding of the referendum failed in places where there was organized resistance by the local authorities, businesses, and pro-Ukrainian patriots.

Supporters of Novorossiya were not able to organize a sufficiently powerful attack on time. In places where Kyiv took up the fight the pro-Russian separatist were unable to take power. For example, the proclamation of the Kharkiv People's Republic petered out after the arrest of 60 people in the seized regional administration and the Dnipropetrovsk after Ihor Kolomoyskyy's administration signed an agreement on mutual understanding and peace with all the city's public organizations and larger Ukrainian rallies brought down the wave of pro-Russian rallies.

An informed Gazeta.Ru source in Ukraine considers the May referendums to have been a false start. In his opinion, the pro-Russian activists were urged on by the annexation of Crimea. But then "Odessa happened and the massive attack on Russian TV", which mobilized some people but on the contrary made some people think: "When pro-Russian people heard many times a day about Ukrainian fascists who were burning alive all those who took to the streets wearing the St George ribbon, in Donetsk this mobilized them to take part in the referendum. In the other regions - it scared them half to death and made such people stay at home."

In addition, he said, "there was no 'Crimean' support among the population or anything like the Black Sea Fleet virtually anywhere in the east of Ukraine. Without these everything went wrong."

According to a Gazeta.Ru source in the militia, the pro-Russian underground in the east of Ukraine, in Mariupol for example, still has potential but it has not had any centralized support from Moscow for a long time now.

Rise and decline of political spin project

The initiators of the "Novorossiya" project did not lose hope even when it became clear that the Ukrainian forces had prevented uprisings in all the regions apart from Donetsk and Luhansk, Gazeta.Ru's source at a centre close to the Kremlin assures us.

On 24 May 2014, delegates (commanders, deputies, activists) from Dnipropetrovsk, Zaporizhzhya, Odessa, Luhansk, Mykolayiv, Kharkiv, and Kherson gathered in Donetsk to inaugurate the "People's Front of Novorossiya". The united parliament of Novorossiya was also created and Oleh Tsarev, the only deputy in the Ukrainian Supreme Council who had openly switched to the side of the separatists, became its speaker.

The united parliament of Novorossiya, although it was largely virtual in nature, nevertheless included people who had a real influence on the situation in the republics. For example, it included Aleksandr [Oleksandr] Zakharchenko, the future head of the DNR, or Aleksey [Oleksiy] Karyakin, the chairman of the people's council of the LNR.

They later began to represent different political platforms. But Oleh Tsarev failed to secure a foothold in the leadership of the republics: Moscow backed the local elite and Tsarev, a representative of the Dnipropetrovsk clan, proved to be unneeded.

Tsarev was not associated with the Donetsk Basin from the very start, the source explains: "All this time Tsarev was perceived as a Ukrainian politician and he tried to return to the subject of Ukraine. Publicly he spoke more about the subject of Ukraine and not about Novorossiya. Novorossiya was a symbol of the ideal Ukraine for him."

"In August, a block was placed on Tsarev in the media. A number of people lobbying for the project were removed from their jobs," a source from the centre close to the Kremlin notes. Numerous co-chairmen started to leave Tsarev's Novorossiya People's Front rapidly.

The united parliament of Novorossiya that he ran was made up of deputies from the LNR and DNR. But during the elections in the republics on 2 November 2014 the structure proved to be unneeded: the expected delegation of representatives did not occur. The parliament and other similar projects were wound up.

According to the source, Novorossiya ceased to be necessary as a symbol in the eyes of the authorities after the September Minsk Agreement. The reverse task emerged - integrating the DNR and the LNR into Ukraine and not increasing the territory under the control of the separatists. "Accordingly, Tsarev and everything linked to him proved to be unneeded."

Although Novorossiya turned out to be an unnecessary political spin project, by inertia it continued to draw in its wake a trail of minor events such as the presentation of an anthem, a flag, and so on.

"Oleh (Tsarev) had the feeling at the time that there would be a new project in the autumn in the humanitarian sphere or relating to refugees, he was actively dealing with these problems. Instead of this, 'unsuccessful' political spin projects like the Centre for Strategic Planning were created this autumn. As a result, Tsarev spoke belatedly of the final freezing of the 'Novorossiya' project this May. He should have spoken about this immediately after the New Year," the source concludes.

[return to Contents] 

 #9
Gazeta.ru
May 19, 2015
Website recounts arrest of alleged Russian soldiers in Ukraine
Vladimir Dergachev, Dmitriy Kirillov in Mariupol, Vladimir Vashchenko, Denis Telmanov, and Andrey Vinokurov, Soldiers of fortune. Russian Federation Defence Ministry demands that SBU free former Russian military men

Gazeta.ru's sources in the Security Service of Ukraine [SBU] and Donbass militia gave details of the detention of "saboteurs" who, under interrogation, described themselves as GRU [Russian army Main Intelligence Directorate] agents. Kiev is promising to present new evidence of their belonging to the Russian military intelligence service. Moscow admits that they served in the Russian Federation previously and demands their release, while in the LPR [Luhansk People's Republic] the prisoners are being described as members of the people's militia.

"Saboteurs" seized in combat

The 3rd Separate Guards Warsaw-Berlin Red Banner Order of Suvorov Third Class Special-Purpose Brigade Military Unit 21208, city of Tolyatti: That, according to the Kiev military, is where the officers detained near the village of Schastya [the name means "happiness" or "fortune," hence the headline "Soldiers of fortune"] in Luhansk Region served. We are talking about reconnaissance team commander Capt Yevgeniy Yerofeyev (nickname Delfin, born 1985, from Kuybyshev) and senior reconnaissance man Aleksandr Aleksandrov, a sergeant serving under contract (nickname Aleks, born 1987, native of Yuzhno-Sakhalinsk).

According to the ATO [antiterrorist operation] forces, on 16 May a group of 14 people went on a reconnaissance mission into the region of the Luhansk thermal power station, where the rotation of fighters from the 80th Brigade with a subunit from the Kharkiv 62nd Mechanized Brigade had just been completed.

The substitution took place at 1800 hours but the new observers noticed "saboteurs" in the "bush." Fighting began, in which a soldier from the 62nd Brigade was killed and two SBU agents from a counterintelligence special subunit were wounded.

The ATO press service published a clip showing a Ukrainian soldier who allegedly took part in the combat clash with the "saboteurs" on 16 May. "An enemy group approached our strongpoint and Junior Sergeant Pugachev gave everyone the command 'into combat.' The first shots hit him, he was wounded... A mobile team dragged the sergeant out of the trench and into a vehicle," the soldier said, adding that Pugachev died of his wounds in the hospital.

According to the service member, after a while it became known that one member of the "sabotage and reconnaissance team" had also been wounded: "They started trying to drag him away and avoid direct contact with us. We decided to move forward in a group so as to locate wounded enemy scouts. We  found one of the scouts - it was a captain from a spetsnaz [special-purpose] regiment." According to the soldier's testimony another presumed Russian service member, a sergeant, was detained by a second group. After 300 m., the militias opened fire on the group with a mortar and a grenade launcher; one soldier was wounded, so the group decided to return.

The captured Capt Yerofeyev suffered a shoulder wound, while Sgt Aleksandrov had a bullet pass through his thigh. According to Gazeta.ru's source in the Ukrainian security structures, the group of supposed Russians was accompanied by locals who, by chance, took the "saboteurs" right up to the Ukrainians' posts in the darkness.

The story of the capture of the supposed spetsnaz men partially coincides with information from two of Gazeta.ru's sources in the LPR.

"They fell into an ambush near Schastya," one source said. "The Ukrainians were using a drone, which relayed information on the group's whereabouts to the Ukrainian Armed Forces' antisabotage subunits. The result was a lash as a result of which the captain commanding the group and a soldier (from the militia) were wounded. The captain was seriously wounded, the other man was wounded in the leg. Both are being held captive. The Ukrops (Ukrainians) have at least one 200 [body; referring to Cargo 200, a body bag]."

The Ukrainian media issued a video of the interrogation of a prisoner. A young man lying in a hospital bed with a wound introduces himself as Sgt Aleksandr Aleksandrov and says he has been serving under contract in the GRU 3rd Spetsnaz Brigade in Tolyatti since 2012. He calls his commanding officer Yevgeniy Yerofeyev. According to the man being interrogated, his group of 14 people was carrying out a reconnaissance mission and was observed by the Ukrainian military. While withdrawing, the scouts were wounded. Under interrogation, he has difficulty recalling the unit's name and the surnames, and he also turns his eyes away from the camera, which could be explained in terms of stress following an injury or by reading a text presented to him.

The Ukrainian siloviki showed Val automatic weapons that were taken from the prisoners. This silent automatic, developed by Soviet designers in the second half of the 1980s, is in the armoury of Russian and Georgian special subunits.

The press service of the Ukrainian Armed Forces General Staff stated after the incident that service members from the Russian Federation Armed Forces General Staff's 3rd GRU Special-Purpose Brigade are urgently leaving their place of deployment in the city of Bryanka in Luhansk Region.

Meanwhile Gazeta.ru's source in the Ukrainian special services claims that the Ukrainian military are afraid of an operation to free the prisoners. For his part, Ukrainian Foreign Minister Pavlo Klimkin alleged that the Russian military even tried to kill the prisoners. However, the official did not divulge any details.

Gazeta.ru's source added that the general prosecutor's office will launch a case, investigative operations will take place in Kiev, and the case will be overseen "at the highest level."

"And whatever is heard about this case in the coming weeks will only be heard with the authorization of the president (Petro Poroshenko). Why did they not report the existence of the prisoners immediately, why were there so many 'civilian leaks' on Facebook? We have our bureaucracy - that is the first thing. Second, the reports only emerged after it had become clear that there will be sincere cooperation with the investigators. The choice was clear, and they are experienced soldiers. A trial is a chance for life, an exchange, and a reunion with their families. Otherwise everything was clear: There is a war on, and it is not only GRU officers who are disappearing without trace," the source says.

"I have not heard of frequent captures of Russian service members, as our military are fond of telling us," Gazeta.ru's Ukrainian source asserts. "Not every Russian citizen here is a career soldier. And I do not believe that anyone on the other side is going to admit that they have been captured any time soon. There is a war on, and they knew what they were getting into."

SBU chief Valentyn Nalyvaychenko has stated that Aleksandrov and Yerofeyev will not be exchanged.

Defence Ministry has "shivers down the spine" at counterparts' actions

On Monday [18 May] the prisoners were moved from Kramatorsk to Kiev. They are being treated at the Main Military Hospital, Gen Viktor Muzhenko, chief of the Ukrainian General Staff, stated at a press conference. According to him there is irrefutable photographic and video evidence that these are serving members of the Russian Army. They have promised to publish this evidence "after certain processing."

If the captured service members really do turn out to be serving Russian soldiers, they can expect to face trial in Ukraine. The possibility also remains that despite Nalyvaychenko's statement Kiev will try to do a deal with Russia to exchange the prisoners for dozens of people who are considered to be prisoners of war and political prisoners. First and foremost, this could mean Nadezhda Savchenko. Such a deal would mean additional political points for Poroshenko and could strengthen his bargaining position under the Minsk Accords.

Meanwhile Moscow and the self-proclaimed republics are denying the involvement of serving Russian soldiers in Donbass.

Official Defence Ministry spokesman Maj-Gen Igor Konashenkov admitted that the prisoners really did previously "serve in a Russian Federation Armed Forces formation and have military training," but "at the time of their capture on 17 May they were not serving members of the Russian Armed Forces." According to him, the leadership of the Association of Veterans of the Special-Purpose Forces had previously asked the Defence Ministry to approach the Ukrainian General Staff through official channels "with a view to stopping the humiliation of their wounded comrades by SBU staffers in the course of extracting advantageous testimonies."

Konashenkov says that in the course of the conflict in Donbass dozens and even hundreds of Ukrainian service members and fighters from territorial battalions have been captured in Russian territory on numerous occasions: "And the attitude towards them was fully in accordance with international standards, and after being provided with the necessary assistance all of them returned freely to their nearest and dearest within a short time. We are counting on the good sense of the Ukrainian leadership and the speediest release of Aleksandr Aleksandrov and Yevgeniy Yerofeyev."

Defence Ministry State Secretary Nikolay Pankov, in conversation with Gazeta.ru, stated: "Our service members were not, are not, and, I believe, will not be there."

At the same time he suggested that the information given on camera by the hero of the video clip was given under torture.

"We know from the example of the straying paratroopers how the Ukrainians treat service members. To be honest, it sends a shiver down your spine. We have seen nothing like this in the movies or read about it in books. I did not think such a thing could happen in the 21st century. I believe with this kind of approach you could turn anyone into a fine 'spetsnaz' man - with addresses, passwords, and rendezvous," Pankov noted.

Serhiy Kozlov, first deputy commander of the LPR people's militia, at a briefing, showed journalists the prisoners' documents, indicating that Yerofeyev and Aleksandrov have been serving in the people's militia of the self-proclaimed republic since the beginning of this year.

Military analyst and Luhansk and Donetsk people's republic supporter Boris Rozhin suggested on LiveJournal that the prisoners are Russian volunteers, who may have served in certain Russian units and then gone over to the LPR people's militia: "It is no secret that volunteers from Russia are fighting there, including former soldiers (I am not even considering the question of people 'on leave'). Suffice it to recall Strelkov himself, or Motorola, who fought in Chechnya. After all, it was said that these were Russian soldiers fighting in Ukraine."

The Ukrainian side, for its part, tried to refute these reports by calling into question the authenticity of the documents shown by the LPR.

Human rights activists will check

Sergey Krivenko, member of the SPCh [Russian Council for the Development of Civil Society and Human Rights] and coordinator of the "Citizen and Army" public initiative, in conversation with Gazeta.ru, promised to check the information on the service members' names and the numbers of their troop units: "Because there were precedents in August and September, there is nothing impossible about this."

One of the most sensational incidents involving Russian soldiers in Donbass took place on 25 August. The Security Service of Ukraine reported the capture of 10 Russian service members from the 331st Regiment of the 98th Svirskaya Division of the Russian Federation Armed Forces Airborne Troops (Military Unit 71211). During interrogation and at a press conference in Kiev they said they had been taking part in exercises and accidentally left Russian territory, getting lost in the darkness. At the same time, the paratroopers lacked distinguishing badges, the markings on their vehicles had been painted over, and the convoy had penetrated the neighbouring state's territory to a depth of about 20 km. Subsequently Kiev handed the soldiers over to Moscow. They were exchanged for 63 members of the Ukrainian National Guard who had been detained in Russia.

 [return to Contents] 

 #10
Sputnik
May 24, 2015
As Ukraine's Debt Approaches GDP, Is Default Inevitable?

Ukraine's international creditors, both the commercial overseas entities and neighboring Russia, are most interested in Kiev avoiding a default, even more so than Ukraine itself, meaning the commenced negotiations are likely to end in a compromise deal.

Kristian Rouz - Despite the recently adopted bill enacting the debt moratorium, Ukrainian authorities have clearly indicated their commitment to avoid the looming sovereign default on the excessive governmental and government-backed obligations. Having started negotiations with creditors that provided roughly $23 billion out of the total $42.5 billion in Ukraine's debt, the government in Kiev seems reluctant to rewrite the nation's credit history.

The civil war-exhausted Eastern European nation has found itself in a complicated financial situation. Ukraine has accumulated a significant governmental and government-backed debt of $42.5 billion as of April 2015, compared to some $37.5 billion in January 2014 and $38.6 in January of 2013, the year after President Viktor Yanukovych was forced from office in a coup.

Ukraine added some $4.5 billion in debt in March 2015 alone, hence the dramatic increase in absolute numbers. The nation's GDP amounted at some $177.43 billion at the start of 2014. However, the Ukrainian economy has been shrinking ever since. The civil war that erupted in spring of 2014 in parts of the eastern regions of Donetsk and Lugansk coupled with the reunification of the Crimean peninsula with Russia contributed greatly to the decline in the nation's GDP.

While some sources claim Ukraine is in fact bankrupt as of May 2015, this is not necessarily the case. The main issue is the lack of reliable measurements of the actual plunge in the nation's economy. Ukraine's GDP declined only some 7.5% in 2014, as stated by the nation's central bank. Adding to that, in Q1 2015 Ukraine's GDP was an annualized 17.5% down (at about $146.37 billion), much of the loss attributed rather to war damage and disrupted territorial integrity than by economic depression. Nonetheless, the actual proportion is hardly possible to estimate.

Kiev is now conducting talks aimed at restructuring some $23 billion of the national debt. The most prominent bondholder group owning some $10 billion of Ukraine's $42.5 billion debt is led by Franklin Templeton. Another of Ukraine's creditors is Russia, holding $3 billion of Eurobonds maturing this December, the money Moscow provided to Yanukovych's government in late 2013, just before the regime change that came about in early 2014.

Now, Russia stated it had no intention to claim debt repayment before this December, however, the Kremlin became jumpy after the Ukrainian parliament enacted the debt moratorium law, even promising 'serious consequences' if Ukraine defaulted or failed to fulfill its $3 billion obligations to Russia in any other way.

Moscow expects a $75 million debt servicing payment in June, which might not come as a consequence of the Ukrainian moratorium law. Ukraine thus might face an International Court of Justice (ICJ) lawsuit. However, the issue of debt obligations before Russia is not the biggest one for Ukraine at this point. In the end, it's only $3 billion out of a total $42.5 billion debt burden.

Ukrainian bonds are on the rise surprisingly. Some $2.6 billion of bonds due July 2017 were advancing three days straight during this past week, adding 0.1 cent to 46.1 cents on the dollar. The dynamics in bond yields are also promising, meaning Ukraine's debt-holders are actually benefitting from the situation and are least interested in the nation's default. In fact, it is in creditors' best interest that Ukraine not only avoided a default, but also borrowed even more international funds to be serviced in the future.
Besides, a favorable situation in Ukraine's bond market is a signal of less risk in the overall economy.

The IMF suggested a scenario for Ukraine's debt to be restructured in a way that means some 40% of the nation's debt will be written off by certain 'debt operations.' However, private creditors are not interested in writing off a penny of the debt (naturally), and that's where Kiev is seeking compromise. The World Bank is not funding Ukraine, potentially missing an opportunity to improve its portfolio, as US backing for Ukraine's economy seems solid. For instance, private creditors have indicated their willingness to compromise, disclosing the details of all parties involved in response to Ukraine's criticism of the situation as 'lacking transparency'. Last week, the aforementioned Templeton, along with BTG Pactual Europe LLP, TCW Investment Management Co. and T. Rowe Price Associates Inc. said the talks would 'commence immediately.'

If the negotiations are successful, the IMF will provide another $17.5 billion tranche to Ukraine, which is basically a solution for most of Ukraine's financial troubles for at least a while. Kiev now has a $15 billion financial gap to be filled by the end of June. The IMF's decision is forecast to be political, meaning the money will be provided and Ukraine is likely to avoid the default. However, the actual outcome might be more chaotic than expected, as Ukraine seems ready to default.

The creditors will have to accept the reality whatever it turns out to be, but for now, the bondholders are more interested in Ukraine avoiding default. In case the default occurs, further negotiations will continue in court according to international law, meaning the creditors will likely lose most of their investment. On the contrary, if Ukraine gets more loans, the creditors will eventually lay their hands on that money plus a premium of Ukraine's future profits. Also, Kiev is scheduled to pay some $500 million to its European creditors in September (which is a lot more than the $75 million payment to Russia due in June), meaning the negotiations are bound to intensify in the summer.

A compromise deal is most likely to meet the interests of creditors, including Russia. The nation's debt will reach $60 billion if the talks are successful, with GDP hovering just above $140 billion, the debt-to-GDP ratio would be about 42.8%. At the same time, Ukraine's total foreign debt, including private obligations, has exceeded $126 billion, almost equaling its battered GDP. That said, Ukraine's government has room to borrowing so far, but the IMF will push through tough reforms and a crippling austerity agenda for Ukraine if it wants the international investment in Ukraine to pay off eventually.

 [return to Contents] 

 #11
http://readrussia.com
May 22, 2015
Ukraine Is Still Heading for Default and No One Seems to Care
by Mark Adomanis

Talk is cheap. It is essentially a cost-free exercise for important politicians like Barack Obama, David Cameron, or Stephen Harper to express a rhetorical commitment to Ukraine's sovereignty. Rare indeed is the Western head of state who has not gone on the record supporting Kiev's "European choice."

Over the past year an almost limitless number of stirring speeches have been given in Washington and London which Russia's conduct has been described in scathing, contemptuous terms. Meanwhile, in the pages of leading Western newspapers and magazines, leading intellectuals have favorably compared the Maidan uprising with some of the seminal moments in all of human history. When it comes to the spoken and written word, Ukraine has not only near-unanimous support among the Western elite but a particularly vociferous and forceful support.   

But, as really ought to be clear, all of this rhetoric is completely and utterly meaningless if it is unsupported by action. You judge people, nations, and politicians not on what they say but on their "revealed preferences." Translated from the economics lingo, what that means is that if you want to understand what someone genuinely values, you need to look at what they do, not at what they say. Anyone can, at a moment's notice, put out a press release of "I support Ukraine in its struggle against Russian aggression." Almost everyone already has. Many fewer people will actually do anything to bring this support out of the realm of the hypothetical and into reality.

Unfortunately for Ukrainians, who seemed as if they were genuinely taken in by the outpouring of professed support for their cause, the West has not been cashing the rhetorical checks it has written. While the West took reasonably firm action to punish Russia (I spent several of the past few days looking at the year-end statements of Russian banks and, based on the carnage I saw, I feel quite comfortable in stating that the "sectoral sanctions" were quite successful in their stated goal of mucking up the financial system) it has not taken any practical steps to bolster Ukraine's increasingly precarious state finances.

Indeed, as of this very moment, Ukraine is careening towards a financial apocalypse that could scuttle its European choice before it can be launched. The "$40 billion bailout" that was thought to have solved Ukraine's problems was (as I have written previously) to a very significant extent about Ukraine selectively defaulting on debt and, even more importantly, having its creditors go along with this. Without the creditors' buy-in the IMF's deal can't work, or at least it can't work in a way that improves, rather than worsens, Ukraine's already tenuous economic situation.

Ukraine's creditors are getting increasingly squeamish about the terms of the deal and have been remarkably hardheaded (some would even say foolhardy) in their insistence that there be no "haircuts" (reductions in value) of their debt portfolios. Already halting progress on the negotiations has come to a complete stop, and there is increasing skepticism that the IMF-established June deadline will actually be met.

Now it's not clear what precisely will occur if Ukraine and its creditors can't come to an agreement over the summer. There are scheduled repayments scattered throughout 2015, but by far the biggest single repayment tranche is not due until December when Ukraine will have to make a whopping $1.5 billion payment to Russia (the fate of this particular loan is a topic, incidentally, that is worth an entire article on its own).

The world can be a messy and confusing place and it's possible, I suppose, that the deadline could come and go without very much happening. But as a statement about the state of Ukraine's economy, the tragicomic shambles of the debt negotiations (which have rapidly lost all pretense of decorum, with passive aggressive statements being regularly leaked to the press) speaks volumes.

As I see Ukraine reduced to fighting its own bondholders tooth and nail, desperate to secure just a little bit of financial breathing room, I have to marvel. I'm not sure I can think of another instance in which the West's soaring rhetorical support has been so staggeringly at odds with its paltry commitment of actual resources. If it wanted to, the European Union could, at a stroke, buy out Ukraine's creditors entirely. Compared to the roughly $350 billion bailout that Greece received, the sums of money necessary to put Ukraine back on solid financial ground are quite modest.

But here's the dirty secret that everyone knows but that no one really wants to admit: no one cares about Ukraine. As the past year has conclusively demonstrated, the West's "revealed preference" is to do nothing.

I'm not saying that's the right decision, mind you. I actually think the West is being penny wise and pound foolish when it comes to its tightfisted Ukraine policy, but there is no other way to look at the available evidence. The West doesn't want to spend any money, hoping that vague exhortations about "reform" and "progress" will prove sufficient to meet Ukraine's very non-rhetorical financial requirements. They won't.

There's never a perfect match between words and deeds. But the West (whether it realizes it or not) is making itself look positively foolish with its rhetorically robust and practically non-existent support of Urkaine.

 [return to Contents] 

 #12
Wall Street Journal
May 23, 2015
Ukraine Tries Adapting to Life Without Lenin
New law bans Soviet street names, statues and other reminders of communist past, as some question priorities
By LAURA MILLS

BORODYANKA, Ukraine-In a country where at least 4,000 localities had a main thoroughfare named after Lenin, outlawing remnants of the Soviet era like street names and statues was bound to cause problems.

Thousands of municipalities are puzzling over how to respond to just such a mandate, which went into effect Wednesday, without sowing confusion or alienating swaths of voters.

While few outside Crimea and the rebel strongholds of eastern Ukraine want to join Russia, not all Ukrainians are ready to repudiate a joint history that remains dear to many across generations.

"I wanted to tell my child that there was 'Uncle Lenin,' and at one point Mama took part in a big celebration in Kiev" in honor of the first Soviet leader, said 37-year-old Svetlana Arshavina, who lives in this suburb northwest of the capital.

"Now what will I tell her? That they took Uncle Lenin and smashed him to pieces?" she asked.

That fate has met Lenin statues across the country since the pro-Western government swept into power in Kiev last year. The phenomenon is so common now that it has its own name-"Leninopad" or "Lenin-fall," a phrase that echoes the Ukrainian word for snowfall.

Borodyanka, population 13,000, was already testament to a history in flux, with a Communism Street just a few blocks down from Independence Street, marking the Soviet Union's 1991 collapse.

Tensions bubbled over when the town's Lenin statue-already relocated to a square on the outskirts in 2008-went missing twice over the past year.

The original life-size bronze was knocked over in the middle of the night last spring and damaged beyond repair. Mayor Viktor Trakhun, a former Communist Party member, reached out to local World War II veterans' groups to help clean up the mess.

Some of them "said they wanted to put it back up," he said. So on April 22, "Lenin's birthday, they drove up with a few television crews" and replaced it with a marble bust.

By early May, though, the bust was missing. The pedestal is now covered with a green tarp.

Nikolai Zakharchuk, who was responsible for resurrecting the statue, blamed vandals for tearing it down. Upon further questioning, he abruptly hung up the phone, saying he didn't trust an American reporter.

Backers of the law say it is needed to help the former Soviet republic break from Russia's sphere of influence and move closer to the West.

"Children are already reading in textbooks that Lenin is a criminal, but are walking to school along Lenin streets and walking by Lenin statues every day," said Volodymyr Viatrovych, head of Ukraine's Institute of National Memory, who helped write the law. "We're fostering schizophrenia."

Many critics, though, consider it a waste of time and money.

A parliamentary survey in 2012 (before Russia's annexation of Crimea) found Lenin was the name of the main street in at least 4,000 cities and villages across the country. That doesn't count Lenin squares or other Soviet-linked names like Red October.

The law gives the national government authority to step in and change names where locals refuse to do so. But an official close to the president said it was meant merely as an impetus for change.

Rights activists say the law also faces potential court challenges. For example, it calls for up to five years in prison for individuals "creating, spreading, or publicly using" communist or Nazi symbols, which could violate freedom of speech laws.

In Kiev, the city has vowed to take down all Communist symbols from government buildings, streets and subway stations by August.

But no one yet knows what to do with the 335-foot-tall Soviet-era "Motherland" statue that towers over the city. Part of a World War II museum, it depicts a giant warrior woman with a shield bearing the Soviet hammer and sickle.

In Borodyanka, the town council said it would have to change 17 street names. Mr. Trakhun said he had already been approached by people concerned that they would have to change passports and other documents to update the address, though the government has said nobody would be forced to do so immediately.

"This isn't the most important thing in our country right now. It's populism," said Marina Kovalenko, a 35-year-old Borodyanka resident. "It's not statues you need to bring down but people who create all of our problems."

 [return to Contents] 

#13
www.rt.com
May 25, 2015
Putin signs bill on 'undesirable foreign groups' into law

The Russian president has signed a bill banning the activities of foreign groups that pose a threat to national security or defense capability, and to punish those who continue to cooperate with such groups.

The bill, initially drafted by two opposition MPs, was passed by both chambers of the Russian parliament last week. It tasks the Prosecutor General's Office and the Foreign Ministry with creating a proscribed list of "undesirable foreign organizations" and to outlaw their activities in the country. The main criterion for putting a foreign or international NGO on the list is a "threat to the constitutional order and defense capability, or the security of the Russian state."

Once the group is recognized as undesirable, all its assets in Russia must be frozen, its offices closed and distribution of any of its information materials must be banned.

If the group does not comply with the ban, its leaders and members would face punishments ranging from administrative fines to prison sentences of up to six years for repeated and aggravated offenses. Russian citizens and organizations that continue to work with banned groups would face administrative fines only.

The new law faced criticism from foreign NGOs and the Russian rights community when it was first drafted. The chairman of the Presidential Council for Human Rights, Mikhail Fedotov, described the new law as "exotic," and said that many foreign groups were "shocked" by it. Another member of the council, lawyer Aleksandr Brod, said in comments to the media that the new law was redundant, as there were enough ways in existing legislation to ensure national security and prevent foreign interference with Russian domestic politics.

The European Union and the United States have officially expressed their concern over the new Russian law. The US State Department said in a statement that the move banning cooperation with various foreign groups could bring about the isolation of the Russian people from the outside world.

Russian officials have not yet reacted to these accusations. Previously, the sponsors of the bill, however, have described it as a preventive measure and denied that it was targeting any specific foreign organizations.

The new law is in line with the "Foreign Agents Law" introduced in Russia in late 2012. That law specifies that all NGOs who receive funding from abroad, and that are even partially engaged in political activities, must register as foreign agents or risk substantial fines. Groups with "foreign agent" status are banned from sponsoring Russian political parties, but otherwise their activities are not restricted.
 

 [return to Contents] 

 #14
Business New Europe
www.bne.eu
May 22, 2015
IMF joins 'worst is over' crowd by predicting weaker recession for Russia in 2015
bne IntelliNews

In the latest prognosis of Russia's economic prospects by the big-league financial institutions, the International Monetary Fund (IMF) has presented a revised and more optimistic scenario than some of its peers.  

GDP will fall by 3.4% in 2015 and return to growth in 2016, with a 0.2% increase expected, the head of the IMF's mission to Russia, Ernesto Ramirez Rigo, said on May 21, as he laid out the Fund's new report on Russia.

The forecast had been overhauled in Russia's favour in view of improved economic data and a strengthening ruble, Rigo said. The economy contracted by only 1.9% in the first quarter of 2015, less than expected, according to the federal statistics service, while the ruble strengthened from RUB80 to the dollar in December to RUB50 to the dollar today.

The official also heaped unexpected praise on Russian regulators for their response to the sharp drop in oil prices and Western sanctions imposed over the Ukraine crisis in the second half of 2014. "The authorities' measures and the anti-crisis package have helped to stabilise the situation and along with that has come a more stable currency. And obviously with that stability has come a stronger confidence," newswires quoted Rigo as saying. The IMF in the report said it now expects inflation to fall from current levels of approximately 16% to 12.5% by the end of 2015.

Ruble volatility was attributed to a switch to an inflation-targeting exchange rate regime. "It's not unusual for a country when it changes exchange rate regimes from a fixed system to a floating exchange regime with inflation targeting to experience certain volatility - or certainly more than in the past," Rigo said.

Saved by savings, but reforms needed

But things could get rapidly worse again for Russia if the oil price declines or geopolitics worsen, he warned: "Within this outlook there are significant risks mainly posed by the oil prices, which clearly for Russia are very important, and the geopolitical tensions. But at the same time these are mitigated by large coffers."

While a shadow of the Russia's vast $510bn gold and forex stash at the end of 2013, the current reserves of $362bn will see the country through to resumed growth, most analysts believe. But this assumes there is no new collapse of oil prices or the fragile ceasefire between government forces and separatists in East Ukraine breaks down, a conflict that has been stoked by Russia.

And while the contraction may be less than expected, the mid-term outlook for the economy remains close to stagnation in the absence of structural reforms. The IMF said it expected the Russian economy to grow only 1.5% annually over the medium term, far below pre-crisis growth rates. "It's fair to say we all know investment should be faster, labour growth is not very dynamic and at the same time productivity growth has been lagging now for a few years...These drags on growth are all structural in nature," Rigo said.

Specific reforms proposed by the IMF in a concluding statement to the mission's visit to Russia include: improving protection of property rights, enhancing customs administration and reducing trade barriers, and empowering the Federal Antimonopoly Service (FAS) to eliminate entry barriers to a number of sectors.

The IMF also says that pension reform should be a priority, while the central bank's course towards reducing banking sector fragmentation by intensifying supervision and tightening capital standards should be continued.

Doomsayers silenced?

Russia can afford a sigh with relief over the IMF's 'worst is over' forecast, although the national leadership has been saying this assuredly for some weeks already, as have several commentators on bne IntelliNews. There was huge uncertainty over the country's economic outlook in 2015 due to the impact of geopolitical factors stemming from the Ukraine crisis and the resultant breakdown of relations with the West.

In the final analysis, the 'technocratic analyses' of international financial institutions and Russia's central bank and government has proved to have been closer to the mark than the more hawkish Western political analysts. While prominent economist Anders Aslund foresaw a 10% GDP collapse for Russia in 2015, the government is calling 4.5%, the European Bank for Reconstruction and Development (EBRD) 4.8%, and the World Bank only 2.9%.

Russian investment banks are even more bullish on GDP development in 2015-2016. "Our prognosis is even better than the IMF's - we expect a GDP contraction of only 1.5% in 2015," Sergei Konygin, analyst at Sberbank CIB, told bne IntelliNews. "Industrial production will be under pressure but the support will come from consumer demand."

The first-quarter data show the economy is dealing with the crisis much better than expected, agreed Uralsib analyst Aleksei Devyatov, while also warning against complacency like some other analysts. "If we look at financial sector then yes, the worst is over, as the ruble is stabilising, inflation is slowing down, budget cuts are not so extensive," he said. "However, the real sector is still suffering, industrial production is falling, and we expect the decline to continue till at least autumn. But the lower interest rate, stable ruble and improving consumer sentiment will eventually break the negative trend."

 [return to Contents] 

 #15
RussEurope
http://russeurope.hypotheses.org
May 24, 2015
Russia: Economic turmoil and policy options
By Jacques Sapir
Jacques Sapir is a noted French economist and Russia expert, who teaches at Ecole des Hautes Etudes en Sciences Sociales (EHESS) in Paris and at Moscow School of Economics. He heads the CEMI Institute (Centre d'Etude des Modes d'Industrialisation).
[Tables, figures and footnotes here http://russeurope.hypotheses.org/3850]

Paper to be presented at the seminar
Russia: Economic turmoil and policy options 2015
Oesterreichische Nationalbank,
Vienne (Autriche)

Russia has known a troubled year, and not just on economic issue. But it seems to emerge from the dark situation where it was plunged by high speculation against the rouble in December. However this does not mean that all problems are solved. Even if the IMF is now reshaping its forecasts on Russia and if the near future seems to be rosier than what was expected, the legacy of 2014 will be felt for some years. The open conflict with the West (or what is pretending to be 'the West") is shaping to a large extent the economic and monetary policy of Russia.

I. Surviving speculation

Russia has been facing by last weeks of 2014 a strong speculation against the Ruble. However, this speculation could take place because of the specific context created by Western sanctions following the Ukrainian crisis, and more so financial sanctions. These sanctions could be summarized as:

So-called "political" sanctions targeting individuals known or supposed to be close to Vladimir Putin. They are more gesture than substance in such sanctions.

Industrial sanction, remembering what the old COCOM was against war and oil industries. These sanctions seem to have hurt much more the EU economy than the Russian one.

The extension of the SSI statute targeting war and oil industries but also part of the Russian banking system, and making them harder to find new funding, at least in USD. These sanctions were enhanced by what is claimed to be "BNP-Parisbas" jurisprudence.

These sanctions have created a shortage of US Dollars on the Russian market. They had however few concrete results before September 2014. The exchange rate of the Ruble against the USD has stabilized from April 2014 to September after a first depreciation of about 15% which could well have corresponded to what Russian authorities wanted as the overvaluation of the Ruble, by December 2013 was fairly obvious. But after September 2014 a shortage of US Dollars appeared on Russian markets cumulating with large redeeming of the private debt.

In the second half of 2014 no less than 126 billion USD were coming to redemption. But, because of financial sanctions Russian enterprises and banks could not rely on to western financial markets to roll over part of these debts.

This shortage has opened a window of opportunity for high speculation by December 2014 when the official exchange rate (at Central Bank level) reached around 70 RR for one USD.

The high speculation was fought with two instruments, a huge interest rates jump (to 17%) and a swap agreement with the Central Bank of China, which allowed the CBR to inject massively USD on the market generating a huge, even if short-lived, appreciation of the RR. This appreciation took a lot of speculators off guard.

At his Press conference some days after this event Mr Putin's speech was rather supportive for the CBR. He stressed that the current Ruble depreciation was a result of speculations and called the CBR to act against this trend team as the President reaffirmed the CBR focus on improving the banking sector stability and the importance of the inflation-targeting policy. But this could well have been dressing the issue. Actually, by early 2015, the complete CBR monetary policy was largely in doubt. By early February, the Ruble began to appreciate for different reasons, one being size of redemption for the 1st and 2nd Quarters 2015; another one was an increase of oil prices. The CBR began to lower its interest rates, going down from 17% to 12%. It also increased rates of REPOs. But this was not enough to slow down the process of appreciation which, if unchecked, could well have moved the Ruble into hot waters, cancelling the effect of January 2014 depreciation. The CBR began then on buy some USD, and made this policy official by a May 14th statement.

The important point to understand here is that we have "equilibrium" exchange rates of the Ruble both from an economic point of view (where an overvalued RR will put Russian industries in a bad corner on the internal market and prevent them to sell there products on exports markets) but also from a financial and fiscal point of view. If the oil prices are falling so do have to do the Ruble if the Russian government want to keep more or less intact its revenues and if he wants to keep oil and gaz industry profitable. Actually, we have different critical exchange rates for different oil prices.

We could see that with a critical exchange rate of 50 RR for 1 USD, which seems to be value where the CBR want to stabilize, we have a Ruble, which is slightly overvalued from a fiscal point of view but quite under-valued form an economic point of view. It looks like the government and the Central Bank have admitted this trade-off. They are accepting a budget deficit (which could reach 3% GDP for 2015) for the sake of redynamising the industry and local production.

One important point to be figured out is what will be in this context the inflation rate. Quite obviously with the high speculation and the high exchange rate depreciation in December the exchange rate has jumped forward. Currently, mostly driven by a huge import inflation effect, it reached 16,4% on 12 consecutive months for April. But, with the cumulative effect of the current appreciation and of the switch from imported products to Russian produced ones, which is happening we are to see the inflation rate to progressively go down. Inflation is to progressively go down to 9-11% by the end of 2015 and will probably be between 7% and 9% for 2016. With such an inflation rate, the real exchange rate of the Ruble is to be highly favourable for internal producers till the 3rd quarter of 2016. If Russia has committed itself to a Real Exchange Rate strategy, this is something extremely important. Russia could have nominal stability for at least 18 months, which would rebuild progressively household and enterprise confidence and still have a large reserve for real exchange rate depreciation, an important point from Russian based enterprises.

Another reason for this trade-off could have been the situation of Central Bank reserves. These reserves have been quite depleted during the high speculation phase.

Now, with the Central Bank defending an exchange rate off 50 RR to 1 USD, it could by buying between 200 millions to 1 billion USD a day. Actually, we are seeing the situation of CBR reserves, which never was in a situation of real difficulties, beginning to improve.

In the end it seems that Russia has weathered most of the storm created by financial sanctions and by high speculation.

II. Prospects for the near future.

If Russia has not collapsed this winter, as predicted by some analysts, it is true that its economy has been under a serious shock. The durability of this shock is to be estimated as well as prospects for the second half of 2015 and 2016.

The shock seems to have been of a lesser magnitude than what was expected, including by the Russian Ministry of Finance. Quite certainly the internal consumption has fallen quite abruptly, more or less in a similar way to what has been the case in 2008-2009.

However, it would be extremely un-cautious to derive from retail trade figures future projection of the production index. Retail trade figures are aggregating all the retail trade, both for imported goods and for locally produced ones. But only the latter are relevant if we come to production. So far we don't have any direct information about a possible import-substitution effect, induced the huge price raise of imported products linked to the previous Ruble depreciation. The sharp drop in imports Russia has known by the end of 2014 year is a possible indication of what is happening. Another important point is the behaviour of the Railroad Freight index. It is a quite reliable indicator of what happens in the production sphere, not affected by oil and gaz movement as railroad freight is largely driven by other productions than hydrocarbon.

It seems, through looking at these statistics that Russia could be rebounding already by the 2nd quarter 2015. Actually, the rate of production (and GDP) drop has been much lower than expected (-2,9% against -4,5%). But, this could have been an effect of the delay of the crisis hitting actual producers. The argument favouring such a view is mostly based on investment. Investments have been severely affected by the huge, if short lived, hike of interest rates in December-January. Inquiries here are demonstrating that effectively the interest rates hike had a deleterious effect in agriculture and in the agro-industrial branch. Such an effect could well have been replicated in others activities. An additional point is the impact of interest rates hike on to consumption credit. This would have deterred households to buy large goods or to invest into flats. Actually, both retail and corporate loan portfolio kept declining in March, being down 4% YTD in retail and down 1% since the beginning of the year in the corporate segments (cleaned from the FX revaluation effect in both cases).

But, countering this argument are several factors:

Investment is production activities, but for very large companies, is largely funded be self-funding or by borrowing to other enterprises and not banks.

This is mitigating the impact of a huge rates hike. By the way, small and medium sized enterprises are extremely sensible to the exchange rate, which translates very quickly into gains or losses.

The number of households using consumption credits, if far larger than in the early 2000, is still quite low by comparison with Western standards. Consumption credits are used by 23% of households.

The Central Bank if maintaining its intervention rates quite high is actually injecting since mid-April huge quantities of Ruble in the economy. If the weekly injection is around 4 billion USD, it will translate into 200 billion RR. This is, more or less the equivalent of a huge quantitative easing done certainly by other means, but still done. In such a situation we could expect a sharp drop in bank rates and will boost investment.

The government has committed itself to an aggressive support of economic activity including tax break, tax and inspection shelter for small and medium enterprises, but also large budgetary support, be it at the federal level or at the regional one. Off course translation of economic orders into the actual life could be a quite protracted process.

The unemployment rate is actually decreasing in April.

All these information are indicating that the 2nd quarter of 2015 would see consumption bottoming up, investment very probably on the rise, and production slowly increasing. By comparison to 2014, the 2nd quarter will still be in negative waters but the probability to see an aggravation by comparison to the 1st quarter seems to be low. The economic situation will then improve with growth resuming quite probably by the end of the 3rd quarter.

In the end, year 2015 is to see a drop of -1,5/-2,0% GDP, and by 2016 growth will resume in Russia. However, its intensity is still a very open debate. What can be said is that without any expansive government policy the rate of growth could fall between 0,5% and 1,5%. But, if the government support to economic activity is strong, the rate of growth could climb up to 4%. Actually, the rate of recovery in the industry, but also governmental support to some activities, is indicating that the probability for a more than 1,5% rate of growth is quite high. It is quite obvious that the government has done a choice toward an economic policy strongly biased in favour of industrial production. The real issue is to know what will be this policy effectiveness and to what extent lower administrative hierarchical levels will successfully implement this policy.

III. Lessons for the monetary policy.

Some clues for the future of Russian economic policy could be found in the change the monetary policy has recently taken. It is to be known that Russia has always had an explicit or "official" monetary policy but also an actual one. To some extent from 2008 to 2013 there was a trend of making the "actual" policy close to the explicit one.

In October 2008, the Central Bank of Russia (CBR) announced a change in its explicit policy. An important feature of this change was the switch to an inflation-targeting strategy[1]. The change was an important one, and looked more like a progressive adaptation than a radical turn. But, this change explicitly brought the CBR's strategy into line with the strategies of other central banks like the Fed, the European Central Bank (ECB), and the Bank of England. This policy is a result of the so-called "New Monetary Consensus" (NMC), which spread and became dominant among central banks from the end of the 1980s and the beginning of the1990s on.

The cornerstone of the NMC was Fama's theory of efficient capital markets[2]. But this theory has been subjected to some powerful criticism, both internal and external. From an internal point of view, Grossman and Stiglitz have demonstrated the impossibility of efficient markets[3], and Shiller has extended this result to what he calls the "irrational exuberance" that we are seeing in finance and on some capital markets[4]. From an external point of view, the principal tenet of the NMC, the so-called theory of the "rational agent"[5], has also been invalidated. There have been many examples of what has been called "irrational" behaviour in situations close to ones we can expect on capital and financial markets[6].

The most important thing was that the new CBR strategy made interest rates the main anti-inflation weapon for attempting to control monetary mass aggregates. This change was progressively introduced into actual practice and, by end December 2013, the switch to this "new" strategy was complete. But, the inflation-targeting strategy needed a free-floating exchange rate to use the interest rate as its main tool. We can now see the contradiction in the CBR policy. The switch to inflation targeting was linked to the free-float, but the free-float opened up the door to the possibility of massive speculation in some special conditions.

This switch has been described as ill-advised and even utterly dangerous for Russia since 2010[7]. To a large extent inflation in Russia seems to have been much more structural than monetary induced[8], something which was calling in doubt the use of New Monetary Consensus based policies[9].

We had several attempts to rescue part or the totality of this policy[10]. By the end of 2014 official statements were still firmly committed to inflation targeting: « Starting from 2015, the monetary policy will be conducted under the inflation targeting regime. The Bank of Russia influences pricing processes with a certain time lag, therefore the inflation target should be set for a medium run. The monetary policy goal is to lower inflation to 4% in 2017 and keep it close to this level [11]».

But, by the beginning of 2015 the CBR actually switched to a new one. It did so however on an informal basis. Certainly, the CBR didn't adopt a policy of capital controls, which arguably could have been implemented by late November or early December and would have spared Russia the shock of high speculation in December. Quite silently the CBR dropped "inflation targeting" and switched, from February 2015 on to a new strategy. With the official return of the CBR on the FOREX and a stated policy of buying USD to avoid appreciation of the Ruble (May 14th) we can see five targets or more specifically "priorities" in the Central Bank policy.

The first and most important priority seems to be a support to the manufacturing industry through an undervalued change rate. As explained before the 50 RR to 1 USD guarantee that such an undervaluation could stay for at least 18 months (and even longer would productivity gains in Russia be faster than ones in the US economy and in the Eurozone). Not only would such an exchange rate boost competitiveness of Russian-based producers on the internal and external markets, but through the increase in profitability (enhanced by tax breaks and tax shelters) would be of a great help for self-funding of investment.
The second priority seems to be a fiscal one. The government seeks to reach an exchange rate corresponding, more or less, to an oil price of 66 USD a barrel (for BRENT prices). The Russian government can accept a level of deficit relatively important for 2015 as it knows that the debt burden will still diminish because of high inflation.

A third priority seems to be the stability of the banking system (the classical "lender of last resorts" task) but also a steady alimentation of Russian economy in liquidity, amounting to a kind of Quantitative Easing implemented "Russian way". The impact of such a policy on to the spread of interest rates and on lending rates provided by banks (and specifically large State-owned banks) is still to be seen but would be very positive from an investment point of view.

The fourth priority is the stabilization of the nominal exchange rate to rebuild confidence and enhance both economic and political stability.

The fifth priority is a residual willingness to reduce the inflation rate to a tolerable level. To some extent that would explain why the critical exchange rate has been fixed around 50 RR to 1 USD and not to 55 RR or even 60 RR. This would also explain why interest rates are still pretty high. It seems that the government and monetary authorities have targeted non-conventional tools to fight inflation and mostly is some appreciation on the change rate and the fast development of import-substitution industries.

The turn from inflation targeting to a strategy supporting the economy could hardly have been more complete. The use of budget deficit as a more permanent tool for macroeconomic policy is also to be highlighted.

IV. What are permanent changes in the Russian economy?

The sanction regime, even if softened or may be lifted in the near future has had a quite strong impact on the Russian economy but probably not the kind of impact that had been expected at its introduction. This is a clear example of unintentional consequences of an intentional action.

The prevalent development "model" of Russia has been the result of compromises, which have been evolving since 2000. These have allowed for the strong growth of the years 2000 to 2008. Their major traits have been preserved, including during the 2008-2010 crisis. Yet these compromises seem to have reached the limits of their potential. Witness to this is the slow-down in growth, noticeable since 2013, which occasioned some reflections at the time.[12] Moreover, the present situation characterized both by a strong decrease in oil prices and by a showdown between the Western countries and Russia, renders these compromises largely inoperative.

Following the transition of the 1990s, we have seen the emergence of new configurations between private and public actors in Russia[13]. The crisis of 1998 had brought about a shift in favour of public actors and a compromise around the stabilization of these configurations and a consolidation of the role of the State were implemented when V. Putin took power. If the government kept the upper-hand over some sectors, it nevertheless opened up Russian economy to foreign capital as far as the other sectors were concerned, and it accommodated itself with the rules of financial globalisation.[14] This compromise rested on the idea that Russia would be able to use the international financial system to its own profit, in order to finance its development. It also corresponded to the wish of big Russian companies, whether in the domain of fossil fuels or of metals, to resort to external growth (by the means of acquisitions) in order to reach the size required to confront world competition.[15] But it is clear that other reasons, less avowable, tied in with exporting the industrial patrimony of Russia, were also at play. One might have grounds, too, to question a model in which Russia produced commodities only in order to later import manufactured goods produced from these same commodities.[16] The compromise included an understanding on the measured use of financial means stemming from the income from commodities. The " National priorities" as defined by end 2004 made it possible to channel part of the investment desired by the "interventionists," without provoking sizeable macro-economic unbalances. So far that Russia has been able to avoid the trap of the « Dutch syndrome » and to preserve as diversified an economy as possible[17].

This strategy paid up initially. The productivity of the workforce registered a spectacular increase, particularly in the industry of manufactured goods.
 
This increase is linked as much to investment (which was high at the time) as to the introduction of new technologies through the development of plants belonging to Western companies, or through an effect of diffusion in the Russian industry.

Yet national priorities were required to be compatible with rules established by Alexey Kudrin and German Gref. Alexey Kudrin, then Minister of Finances, continued to oppose any massive use within the Russian economy of the funds accumulated by means of exports, pretexting risks of macroeconomic unbalances. The fight against inflation remained the cornerstone of the economic credo of the authorities, a fact not in keeping with the economic situation in Russia after 2002[18]. The monetary policy implemented in Russia retains the imprint of the memory of the crisis of 1998.

Yet, one could already see cracks begin to appear in this compromise. Alexey Kudrin's declaration at the end of January 2008 about the role of Russia as a « haven of stability, » when worries were mounting in relation with the crisis of the subprimes, was witness to the illusion that this strategy was durable[19]. The indebtedness of large companies and of Russian banks on the international financial markets would reveal itself to be a real problem when the Ruble decreased strongly in value during the financial crisis of 2008. The world economic crisis (2008-2009) constituted indeed the first challenge to this strategy.

The State had to rush to the help of companies too dependent on international liquidities or having underwritten sizeable loans, which they could no longer repay. The years 2010-2013 were characterized by the « illusion » that a return to such an equilibrium would be possible. But this illusion has at present dissipated.

From this resulted a new increase in indebtedness of industrial companies and of banks. Of course, this indebtedness also corresponded to the purchase of sizeable assets, and the structure of assets and liabilities of companies was balanced. Still, the difference in temporalities between assets and liabilities exposed banks and Russian enterprises to considerable difficulties in the case of an important decrease in the value of the Ruble. The Russian government has indeed deployed much effort in order to re-orient the international trade of Russia towards Asia and to develop a free-trade zone with some of the countries of the former Soviet Union. The principle of a diversification of trading partners is a judicious one. It is clear that Russia, of which Europe is the first trading partner, has partly "imported" the recession or stagnation that the European continent has been undergoing since 2012. This situation has been acknowledged only progressively among the Russian economic elites. But it has brought about an important change in the strategy of the government. From this point of view, one can talk of a pragmatic readjustment of the economic policy of Russia[20]. In fact, it raises the problem of a possible « de-globalization » of the Russian economy and, through this very fact, a re-examination of the balances perceptible in the development strategies. If one wants to reorient the development model towards a more « self-centered » economy, it is obvious that the growth in real income of the population, of consumption and of savings, will become more relevant indicators in steering the economy than classical macro-economy indicator including the inflation rate. This will imply a more "social" turn of the political economy, for the repartition of income will in time become as important as the evolution of its mass if one wants Russia's economic growth to be fostered by internal consumption.

The economic change was then cumulated with a geopolitical one. Relations between the United States, the European Union and Russia have degraded considerably since the beginning of 2014 with event in Ukraine and Crimea. Not that they had been good before. The contradictions among foreign policies have been flagrant for about three years. Yet the Russian initiative on chemical weapons in Syria had shown that collaborations were possible and badly needed. These collaborations were also necessary, be it for the United States, who cannot disengage from Afghanistan without the implicit support of Russia, or for France, who is largely tributary of Russian means of heavy air-transportation for its operations in Africa. The responsibility for this degradation is to be sought more with the United States and with the European Union[21]. The mechanism of sanctions and counter-sanctions, which is presently operating at full stride weighs heavily on the anticipations of the various economic actors, particularly in Western Europe. Losses in growth could reach 0,5% of GDP in Germany, 0,25% in France, but, too, 0,8% in Hungary and 1% in Poland. Considering the current low rate of growth in some of these countries this is quite a significant impact.

The various stages in the sanctions process, as well as the answers it elicited from the Russian government, are building a particular psychological context, the importance of which goes way beyond the real effects of the measures taken on either side. On the side of the United States and of the EU countries, we have a set of measures including the domain of industrial cooperation as well as the one of financial transactions. The United States have decided during the month of July to extend the sanctions to the defence sector, affecting the state company of ship-building (OSK) and the state company of airplane construction (OAK). We have then the sanctions that fall under the SSI regime of sectorial sanctions.[22]

The Russian reaction was then to enlarge and widen its cooperation with China, but also with emerging countries. This cooperation embraces not only economic and financial aspects but military and strategic ones too. Quite clearly this move was not one favoured at first by Vladimir Putin, who still is probably one of the more "pro-Western Powers" politician in Moscow, but he accepted the challenge and had no alternative. This, coupled to the remarkable resilience displayed by the Russian economy has given birth to a new discourse in the West, one about Putin's "victory"[23]. But results of this move are to go well farther a simple success of Russia and will be extensive. The recent creation of the AIIB[24] ant the concretisation of the reserve monetary pool for BRICS countries[25] are just examples of the powerful trend emerging now. Not only the Russian economy is turning its back to Europe, a process which have predated the sanction regime but which was certainly accelerated by it, but we could well see rebuilding of strong geopolitical "blocks" in international affairs and these "blocks" could dominate international relation for at least 20 years. May be are we witnessing the end of the second globalization, an end brought forward much more by tactical motives than by a large vision of the future.

 [return to Contents] 

 #16
Russia Direct
www.russia-direct.org
May 21, 2015
US foreign policy needs to take into account how Russia views the world
The U.S. can only repair relations with Russia if it takes steps to understand Russia's legitimate security interests in the world. By doing so, the U.S. will realize that it shares many global security concerns with Russia, including counter-terrorism and a peaceful Iran in the Middle East.
By Steven Luber
Steven Luber is a student of Intelligence Studies and Russian Studies at Mercyhurst University in Erie, Pennsylvania. He currently serves as a deputy editor and Eurasia analyst for Leksika.org.

Russia sees itself as a country under increasing attack in a rapidly destabilizing world. Russian foreign policy is first and foremost intended to protect itself from potential threats, especially from bordering countries.

Miscommunication between the United States and Russia has led to mounting geopolitical tension, tension which is both avoidable and counterproductive. It is possible to use shared security concerns to repair U.S. relations with the Russian Federation, but only once U.S. policymakers understand how Moscow views the world.

This worldview can be summarized by the following five points:

1. Russia's legitimate national security interests are at best not considered by the West, and at worst, are actively exploited.

2. Russia has a special sphere of security interest in the post-Soviet space, as this is where direct threats to the Russian state will most likely arise.
- This is comparable to the Monroe Doctrine, which once guided U.S. foreign policy.

3. Western interventions in Afghanistan, Iraq, and Libya have left the Middle East in ruin and chaos.
- The crises that prompted Western intervention have become worse as a result.

4. Western civilization has increasingly become detached from its Christian roots, falling prey to degeneracy and corruption.
- In President Putin's own words: "Many Euro-Atlantic countries have moved away from their roots, including Christian values... policies are being pursued that place on the same level a multi-child family and a same-sex partnership, a faith in God and a belief in Satan. This is the path to degradation."
- The Kremlin's appeal to traditional values has won Russia friends both among European conservatives and in the Islamic world.

5. The world's civilizations each developed under unique historical circumstances and have a right to exist without undue foreign interference.
- Respect for state sovereignty is a driving force behind Russian foreign policy, be it towards Libya, Syria, Egypt, Iran or elsewhere.

With these in mind, the United States and the Russian Federation have a number of shared, and very real, security concerns. Cooperation in key geopolitical hotspots can be the basis to restore positive U.S.-Russia relations, and have them last long into the future. Two key areas in which to increase cooperation with Russia are:

1. Counter-terrorism
- Threats from Islamist hotspots of traditional concern to Russia, namely the North Caucasus, can have a direct effect on the United States, as was seen with the Boston Marathon bombing.
- Radicals both from Russian-speaking regions and from Western countries play a prominent role in terrorist organizations such as the Islamic State and Jabhat al-Nusra.

2. Iranian negotiations
- It is in our mutual interest to turn Tehran into a partner nation in a rapidly disintegrating Middle East.
- Shi'ite Iran is threatened by the same militant Sunni Islamism as the United States and Russia.
- Iranian and American allies are already cooperating in the fight against the Islamic State in Iraq.
- Iranian society is far more moderate than its neighbors are, and far friendlier toward the West.
More important than understanding the problem, however, is knowing what to do about it. The following are a series of concrete steps that the United States can take both to improve relations with Russia and to tackle some of the greatest security dilemmas of our time, to answer the eternal Russian question Что делать? ("What to do?")

1. Counter-terrorism
Step 1: Increase cooperation in the fight against the Islamic State
- Both the United States and Russia should arm the Iraqi government and provide logistical and intelligence support to the same.
Step 2: Work to counter terrorist financing
- Sources of terrorist financing, regardless of form or origin, should be targeted by both the United States and Russia.
- This will involve a degree of intelligence cooperation, which could be used to develop greater trust in the future.
Step 3: Increase relevant intelligence collaboration
- The trans-national nature of Islamist terrorism means that American officials must be informed about terrorist threats emerging from the former Soviet Union.
- It also necessitates that Russian officials be informed about terrorist threats emerging from Western societies and regions where the West has historically been more active, such as Africa.
- Limited intelligence cooperation will serve both to mitigate these threats and to remind American and Russian officials that they have shared interests in counter-terrorism.

2. Iranian negotiations
Step 1: Meet with Russian officials to identify shared interests
- What do both the United States and Russia want out of these negotiations?
Step 2: Work with Russian officials to ensure compliance with P5+1 decisions
Step 3: Begin limited US-Russia-Iran cooperation to combat the Islamic State in Iraq
- This should be in the form of micro-level intelligence sharing and overall strategy formation.
- Offer Saudi Arabia and the Gulf States a chance at involvement so as to avoid isolating them.

These measures are practical steps that the administration can take to simultaneously improve relations with the Russian Federation and better ensure American national security over the long-term. Engaging with Russia will provide the United States with a major security partner in an increasingly chaotic world.

Isolating Russia will only help foster a genuinely anti-American coalition, a geopolitical problem the U.S. neither needs nor desires. Russia has already proven willing and able to cooperate in U.S. national security efforts, there is no reason why this should not continue to be the case.

 [return to Contents] 

 #17
Kyiv Post
May 25, 2015
US hawks ready to fight Russia to last Ukrainian
By Alexei Bayer
Alexei Bayer is a New York-based economist and writer. His detective novel, Murder at the Dacha, set in the U.S.S.R. in the 1960s, was published in 2013.

Editor's Note: This is the second of three articles on the 2016 U.S. presidential campaign and how the nascent election campaign will affect U.S. policy toward Ukraine.

Ukrainians often imagine that if John McCain, rather than Barack Obama, were now in the White House, their situation would have been quite different. Russian President Vladimir Putin simply wouldn't have dared to annex Crimea, and even if he had, the American response would have been so overwhelming that the Russians would have promptly withdrawn with their tail between their legs.

Indeed, the Republican senator from Arizona, a former Navy pilot, a prisoner of war in Vietnam and a son of an admiral, is one of the leading hawks in the American political establishment. He has never met an international problem he didn't propose to bomb. He's a staunch supporter of Ukraine - as he was of Georgia in the 2008 Russian invasion - and one of the harshest critics of America's cautious response to the Russian aggression in Ukraine - in particular, of the U.S. president's reluctance to give Ukraine lethal weapons.

McCain is too old, but his best friend in the Senate and a close ideological associate Lindsey Graham is running in the 2016 presidential elections. Other leading candidates for the Republican nomination - Senators Ted Cruz and Marco Rubio and Governors Chris Christie and Scott Walker, and even Senator Rand Paul, the son of famously isolationist Texas Congressman Ron Paul - have all staked out hawkish positions on Ukraine. The Capitol Hill, which is now controlled by the Republicans, has voted to provide arms to Ukraine and has exhorted the Obama Administration to act more decisively.

American hawks are surely ready to fight Russia to the last Ukrainian. Behind their insistence on supplying weapons to Kyiv there is absolutely no military commitment and no Plan B - no idea what to do if Putin raises the ante in response and starts a full-scale war. One thing is clear, however: no American troops will be sent to confront the Russians. In this case, my Ukrainian friends, you're on your own.

America's recent attempts at muscular foreign policy should be scaring the living daylights out of all Ukrainians. Just look at Iraq. Saddam Hussein was a brutal dictator, but twelve years after its liberation by American troops, Iraq is an unmitigated disaster. Half a million dead, millions of displaced persons inside the country and refugees abroad, political disintegration and the rise of ISIS are the heavy toll already paid by Iraqis - and the bill keeps adding up.

The Bush Administration embarked on its misadventure in Iraq combining supreme ignorance of the realities of that country with supreme confidence that Iraqis will greet American soldiers with flowers and promptly embrace Jeffersonian democracy. While calling themselves conservatives, the Republicans in the United States has become right-wing radicals whose domestic and international policies are driven by ideology, not reality. When things go wrong - as they did in Iraq - ideologues tend to find fault with everybody else, not their ideology.

Of course, the situation in Ukraine is very different from Iraq. What is similar, however, is the American hawks' willingness to try the military solution first, without any idea what to do if the military solution fails or gets out of control.

The scariest thing for Ukraine in the upcoming U.S. presidential election is the fact that the current Republican front-runner in the battle for nomination is former Florida Governor Jeb Bush, the brother of George W. and, as it turns out, an advocate of his brother's Iraq policy.

There is one other reason why Kyiv should be wary of the Republicans. Ukraine's future lies in modern Europe, both culturally and economically. This entails not only democracy - which Europe shares with the United States - but other values which make Europe different, such as social democracy, an economic safety net and the enlightened role of the government. The previous Republican administration was at loggerheads with Brussels and it even tried to split the former Warsaw Pact "new Europe" from the supposedly tired "old Europe."

During the eight years of Obama's presidency the Republicans, if anything, have become even more radicalized. If the next US president is a Republican, relations between the United States and its European allies are likely to worsen once more.

Putin, meanwhile, is looking forward to a Republican in the White House. And not only because he has good memories of George W. looking into his eyes to take the measure of his soul. The Kremlin believes that historically it has gotten along better with a Republican president than with a Democratic one. Democratic presidents tend to be high-minded and moralistic, and less open to Realpolitik arrangements Moscow favors. Republicans, on the other hand, start out with tough rhetoric but end up being more pragmatic.

It is true that Richard Nixon initiated detente with the Soviet Union and Ronald Reagan worked closely with Mikhail Gorbachev, and that both could afford to strike deals with the Soviets having previously built up their credentials as ardent anti-communists. But it is also true that the Democrats, who were often seen as soft on communism, had to be more decisive in responding to communist aggression. The wars in Korea and Vietnam were started by Democratic presidents.

All this could lead to an ironic political twist. Republican intransigence - and Hillary Clinton's own role in developing the stillborn "reset" policy with Putin while she was Obama's Secretary of State - could actually make her tougher on Russia in her election rhetoric, and to develop a comprehensive - and hopefully more effective - strategy of assisting Ukraine if she becomes the next US president.

 [return to Contents]